In recent years we have been witnessing events that compromise openness to international trade, among which the protectionist policies of the current American administration stand out in a striking way, the vote in favor of Brexit and the advance of national-populist movements in the countries of the Continental Europe. In reality, if we look at non-tariff measures, there has been a constant increase already following the financial crisis of 2008. And, on the other hand, there is no doubt that the recent sovereign authorities want to be a response to the effects produced from globalization. As emerges fromSACE analysis, the most obvious failure comes from the distribution of income: the growing polarization of wealth has produced "winners" and "losers". Among the former, the current middle class of emerging markets and those who, anywhere in the world, belong to the wealthiest segments.
Instead, those who paid the most for the costs of globalization and the progressive regional integration of markets were the middle class of advanced countries. In this context, the factors to be taken into consideration are naturally multiple and in some cases geographically specific, however always attributable to the lack of efficient mechanisms (at national and/or supranational level) for the protection of the middle class, wrong production strategies and the strengthening of position benefits. Analysts point the finger at the structure of the labor markets, with limited retraining programs and purely passive social security systems, without forgetting the waste of resources destined for unproductive sectors and bankrupt companies, which only feed the national debt at the expense of those opportunities which could generate added value.
However, despite the re-emergence of attitudes of closure, the idea that we are heading towards the end of globalization at SACE appears rather exaggerated. Why not instead see recent developments as a transformation in 20st century capitalism? After all, analysts remind us how much the markets are increasingly interconnected: foreign direct investment flows between the G2005 countries have doubled compared to 25 levels; global supply chains account for one in five jobs; trade between emerging markets has increased rapidly from 1995% in 40 to XNUMX% last year.
At the same time, the establishment ofAfrican Continental Free Trade Area today it represents one of the largest free trade blocks in the world. It therefore seems likely to foresee a new form of globalisation, always starting from regional level integrations, driven by the growth of digital technologies. This will be particularly relevant for services which, for some time now, have been assuming ever greater importance in the world economy (from 58,6% in 1991 to 67% in 2015) and in global trade (the share of exports of services out of the total is increased from 15,3% in 1980 to 23,1% in 2016).
As already mentioned, in the current historical moment there are numerous commercial barriers to trade and they represent an impediment to the development of services, the weight of which is estimated at between 30 and 50%. At the sectoral level, according to the Services Trade Restrictiveness Index elaborated by the OECD, “professional services” and “logistics, the most affected sectors are transport and related services”, while the most open ones in the “distribution” and “insurance” sectors. Hence, both advanced economies, particularly competitive in sectors such as finance and legal consultancy, and emerging economies, competitive in communications and business services, could benefit from greater trade openness. Christine Lagarde recently cited the Trans-Pacific Partnership (TPP) as a virtuous example of this which, for the first time in a far-reaching trade agreement, will ensure the free flow of data across borders for service providers and investors.
In the future, the tertiary sector could at this point become the main engine of international trade: the protectionist measures aimed at restricting trade do not seem to be able to stop the effects that digital technologies and innovations produce and will produce, since the current attitudes of closure will only temporarily and to a limited extent stem the flows of data and services. To get an idea, just think that the cross-border bandwidth used grew 90-fold between 2005 and 2016 and is expected to increase 13-fold by 2023. And this is not just about streaming services, calls via Skype and social media posts, but also data that makes services more marketable: from engineering to communications to transportation.
In this scenario, the goal of the current US administration Trump administration is well defined: to change the rules of the game of global trade by weakening the multilateral governance of trade and to weaken the role of international arbiter of the WTO, in such a way as to make the weight prevail of the USA in bilateral negotiations by leveraging the concrete possibility of unilaterally imposing tariffs and other trade barriers. The boycott of the international body is still ongoing through the blocking of the renewal of the judges of the Appellate Body, the appeal body of the dispute resolution mechanism: of the seven judges envisaged, four are currently in office and will remain in December 2019 only one, interrupting all activity of the organ.
The critical point, however, is connected to the emergence of China and the attempt to conquer world leadership at the expense of the USA, which last year found itself having to face a trade deficit with Beijing of approximately 376 billion dollars , more than 47% of the total deficit. When China entered the WTO in 2001 it was thought that within a few years it would transform itself into a market economy, but it has not been considered that, to date, the intervention of the The state remains widespread and subsidies distort the export prices of numerous products (dumping). Furthermore, from the US perspective, the unfair practices are much broader and concern the treatment of intellectual property, particularly in high-tech, with various tools, from joint venture requests to FDI restrictions, used for the purpose of transferring technologies USA in local hand.
If at first analysis the US trade barriers therefore appear as a zero-sum game, historical experience actually demonstrates how the negative effect falls on the productive activities of those who impose the duties, through the increase in production costs and therefore of prices: this in turn fuels inflation, reducing the purchasing power of households and slowing down consumption. Not only. Such measures are capable of producing effects on a global scale, even in the short term. In fact, even if there are no clear signs of an economic slowdown, the context of uncertainty is already having an impact on investment decisions. This particularly affects advanced economies such as the US, Germany and Japan where the growth rate of capital goods orders overall fell from around 10% in mid-2017 to around 5% in the first half of this year . But it is in the long run that the most profound effects will manifest themselves, namely a change in the structure of trade on a global level. In fact, tariff barriers also damage commercial partners: in addition to the immediate effect determined by a reduction in export flows from suppliers, there would also be significant indirect effects: through global value chains, a company that sees its sales of steel or aluminum in the US would also cut purchases of domestic goods from its suppliers.
A protectionist escalation against the EU would obviously also affect our country, whose growth from 2010 onwards was strongly supported by the dynamics of exports. According to SACE estimates in Export Report 2018, in the wake of tariffs and the decrease in global demand, international trade volumes would slow down to 4,2% in 2018 (in spite of +5,2% in the baseline scenario) and would collapse in 2019 to 2,4% (from 4,4%), with inevitable repercussions on Made in Italy. Exports would slow down this year by almost 2 percentage points and by over 3,5 points in 2019. And the lower demand for Italian products would concern all the geographies most affected by this phase of trade tensions, in particular the USA and Mexico; at the sectoral level, those sectors most affected by the measures adopted would be most affected: means of transport and metal products are the sectors most at risk. The negative effect for Italian exports would not end here, with the reduction in investments associated with the greater uncertainty which would also impact foreign sales of instrumental mechanics, one of the main Made in Italy sectors.
The introduction of tariff and non-tariff trade barriers is then a negative-sum game in which all participants lose. These losses, above all, grow strongly over time, provoking equal and opposite reactions from affected countries. But if the USA can afford a certain protectionism because it is economically solid, and the same can be done by China because it is politically strong, the European markets, which are more dependent on exports, would suffer the greatest consequences of an escalation. Even if economically robust, in this clash of the titans the EU risks finding itself "between a rock and a hard place", primarily because it lacks the political cohesion that would allow it to speak with one voice.
And, even if the multilateral system holds, the EU would risk in any case, since the US is less and less inclined to absorb the global demand for goods and services, with negative consequences on the European offer. Here then is that, in a historical context that, at Walter Wriston, we could define as the "Information Standard", it becomes more fundamental than ever to proceed with even more decision in the integration process: therefore reshaping (with political and structural reforms at a supranational level if necessary) national welfare programs without harming financial stability, thus stimulating those businesses and productive activities that support internal (Community) demand and investments with the creation of added value. Before the course of history turns us into extras.
