Let’s revive global free trade
Raghuram Rajan
Financial Times
Instead of pushing for a better kind of globalisation, too many of today’s elites are hedging it with “enough caveats” for it to become “rank protectionism”, says Raghuram Rajan. For example, in the US security concerns are now being used as justification for banning Chinese electric vehicles while “strategically inconsequential” takeovers are subject to “serious scrutiny”. “Once open borders are no longer the default, new impediments to competition proliferate.” Tariffs and subsidies abound. The latest elite project – a result of market failures during the financial crisis, concerns about national security and “drawing the wrong lessons from China’s state capitalism” – is creating “national champions”. A current focus is to subsidise chip manufacturers, even though it will neither buy security (controlling the entire supply chain is very hard) nor deliver a viable modern industry (a glut is likely). Meanwhile, all of this activity is slowing cross-border investment, trade and growth, especially in emerging markets and developing countries. A far better alternative would be to start talking about a new kind of globalisation able to “accommodate geopolitical rivals, subsidies and new information-intensive products without breaking down”.
Germany needs a shake-up
Wolfgang Munchau
The New Statesman
The great age of German manufacturing and engineering excellence is “drawing to a close” and, although Russia’s invasion of Ukraine certainly damaged the country’s energy-intensive industries, the decline started years ago, says Wolfgang Munchau. Industrial production in Germany has fallen by a cumulative 8% since 2015, despite rising by 4% in the rest of the eurozone. Digitisation, more than geopolitics, has been the major disruptor. Car firms, for instance, used to make big profits on engines and after-sales service. With electric cars (EVs), the profit comes from batteries and software, and China and the US “own most of that supply chain”. Oldfashioned manufacturing still matters. Germany leads Europe in producing ammunition for Ukraine and even EVs have mechanical parts. Ultimately, a “well-trained workforce” will adjust and a generation of start-ups is springing up. However, the infrastructure for a start-up economy doesn’t exist and despite the “lively economic debate going on in Germany” the story is “all about competitiveness” rather than diversification. It’s not that German EVs are t
