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Is an Economic Divorce Possible? - Coggle Diagram
Is an Economic Divorce Possible?
Is it desirable/possible?
Where will companies go? Will there be a restructuring of global supply chains?
The political and transportation costs of dealing with China - esp IP theft - are rising
Lot of capital costs involved in moving supply chains - both US and Europe heavily invested in China
Stuff like semiconductor fabrication - very capital intensive, things like clean water are difficult to achieve
Some things will move, but not to developed countries
Mexico, Eastern Europe (for auto industry), and Vietnam have been big beneficiaries
China has systematically moved to capture resources crucial to producing clean energy products such as batteries
India's Opportunities
"The War Against Protectionism"
India's moment to benefit the greatest from a WTO
Embrace the lowering of trade barriers
Plurilateralism is suboptimal compared to a multi-country rules-based system
Like-minded countries can reach agreements in an open manner and integrate them into the WTO corpus
"Atmanirbhar Bharat"
The Govt is spending a lot of money on R&D for cheap goods that India used to import at scale
This serves little to no purpose - counterproductive - increases opportunity costs etc. at a time of national crisis, esp for daily consumer goods
Might work for strategic goods, but nothing else. Bilateral trade is fallacious
What can we do?
What can we do with the size of our market?
Don't be complacent about it - operate within a system that encourages capital to show up and don't impede the flow outwards
High growth will be very attractive - esp in the situation of slow decoupling
Systems integration - especially 5G - is a big opportunity
Non-arbitary laws and taxes, low probability of regulations changing - comprehensive reform of business environment needed
Note that abolition of regulation is not regulation. It's the Wild West.
De facto vs De Jure - no point having the right laws if the situation on the ground is just a variant of crony capitalism
All the big corporations here have grappled with the inconsistency of the system - esp Vodafone with retroactive taxes
What's been happening?
There was already a trend towards looking inward and "reciprocity"
Growth in sentiment towards "national champions", incentivise companies to come back
China's "economic colonisation" of Central and SE Asia and Africa
Mindset of a "separate sphere"
China unlikely to be a responsible global actor and integrate even into a reformed WTO
Americans have been criticising European bilateralism
New WTO rules will be needed - esp regarding China's subsidising digital conglomerates
Doubtful whether China will work with the global trading system
The Future of Trade
Slowbalisation, China's Rise, and Climate Change will be the key elements of a new order
Transparency and dispute resolution in the WTO is dominated by the EU. Needs reform
Fairness and balance - political negotiation between different systems
Rate of growth will slow drastically