Trade dispute – farewell to the world economy

Protectionism Farewell to the world economy

The era of globalization is coming to an end. Despite all criticism, she has increased prosperity to an unprecedented degree. Now world regions are threatened by a downward spiral.

Jan Willmroth works as a financial market correspondent for the Süddeutsche Zeitung in Frankfurt am Main. Grown up in the South Eifel, studied economics at the University of Cologne with a focus on energy and environmental economics, graduate of the Cologne School of Journalism. After stations at Spiegel Online, Reuters and the Wirtschaftswoche he wrote as a freelance author for several newspapers and magazines and came in 2014 to the SZ. Since then he writes about financial and commodity markets and economic policy topics. In 2016, he was awarded the Friedwart Bruckhaus Prize for his work.

These are the first signs of the end of a glorious age that people would not have known otherwise until the mid-40s, and whose benefits many of them take for granted. An age in which international flows of goods and global value chains have increased prosperity to an unprecedented degree. An age in which the advocates of free trade set the rules, many barriers disappeared and you could travel around the world with more and more ease.

This epochal development called globalization has now passed its peak, now it is leveling off – and it could start an era in which we will experience exactly the opposite development: less openness, less trade in goods, less exchange between countries, nations, people – and am End also less prosperity. There is a great danger that this will soon have to be formulated as a brutal certainty.

The symptoms already bear brand names. Harley-Davidson is such a brand name, a symbol of that part of the American dream where endless highways appear and the boundlessness of the land of the founding fathers. The EU has imposed retaliatory tariffs on the motorcycle company, and these continue to apply after the meeting of EU Commission President Jean-Claude Juncker and US President Donald Trump. Essentially, the two just agreed to talk to each other and formulate some vague intentions; the trade war is only postponed, not ended. Harley-Davidson had previously reacted to the consequences of the policy of the unpredictable president: Motorcycles for European customers will be built outside the United States in the future. Also in the balance sheet of the company, the trade dispute leaves traces, the profit has fallen significantly.

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And Harley-Davidson is not alone. Aircraft manufacturer Airbus is questioning its investment in Great Britain because of Brexit. Bombardier, a Franco-Canadian manufacturer of trains and aircraft, plans to flee US tariffs from Canada with part of its production to the southern United States. Corporations around the world are working on plans for emergencies, in which protectionism becomes one of the dominant political concepts.

Ostensible is the individual news about strategic decisions of individual companies, which adjust to the best of their knowledge to changing signs in world trade and adjust their value chains; They act as rational agents in the economic system of globalized markets. Detached from the individual enterprise, the sum of these decisions is a change that is at least problematic, but may even become catastrophic – because a development is coming to an end that has completely changed the world.

The dull power of a baseball bat meets the complexity of the flow of goods

The German-American Harvard professor Theodore Levitt named this development in the Harvard Business Review in 1983: Globalization; his essay made the term popular in the economic sense. The ever-increasing interconnectedness of world trade has since transformed multinational corporations into global corporations that standardize their products to serve them worldwide. China gradually opened, South Korea became an industrial nation, many developing countries transformed into so-called emerging markets, into emerging markets. Protected by common rules and driven by falling tariffs, the volume of world trade multiplied and grew by six percent a year in the quarter century, according to Levitt’s essay – creating a true world economy.

The danger that globalization in its present form could end now is closely linked to the presidency of Donald Trump, in whose foreclosure policy the dull power of a baseball bat hits on the decades-long grown complexity of global flows of goods. The possible damage to his policy is gigantic, but not precisely calculable. The progress of the looming trade war is largely determined by what “deals” this President negotiates and how the rest of the world reacts to them.

Three theses

The symptoms: There are first signs of de-globalization.

The medical history: At least since the crisis grew the protectionist danger.

The prognosis: A catastrophic upheaval: It is not just about trade, but about the future of international cooperation.

A reaction principle has become reliable with the presidency of Trump. Whenever the US administration threatens new protectionist measures, lawyers approach open markets, business representatives, politicians, lobby groups and economists warn of the consequences of an escalating trade war. Sometimes this becomes very metaphorical: “You can imagine, if we get a cold in the German-American or European-American relationship, then many get around us pneumonia. That is why it is a high-risk thing,” said a few days ago Federal Minister of Economics Peter Altmaier.