How do we make sense of the trade war? We heard from Charles Li, CEO of HKEX Group at the London Metals Seminar, who talked of globalisation as a train, the key carriages, countries, and implications.
The trade war is very challenging. People try and make sense of it, but it’s always difficult to frame. It’s been thought that globalisation has been a huge success, we assumed this would continue, but it hasn’t. There is a such a huge conviction of this that when the trade war started, it took almost everyone by surprise, and it’s still confusing to people today.
The Poison Pill
Just yesterday, the US said that they were going to insert into the Mexico-Canada-US trade agreement that if somehow in the future, those countries do anything with China, they have the right to know. If that gets followed through, it’s another low and challenge for China.
The pace and ferocity and extent to which countries were able to engage in respect of the trade war has been surprising. Is it rhetoric or just temporary, or an irreversible momentum – it’s difficult to know. For the longest time since the Second World War, our history has been defined by the Cold War and globalisation. The two seemed to be neck and neck in an arms race.
We all thought that we were on a globalisation train – the US was leading, Europe and Japan not far behind, but China has gradually gained tremendous momentum – China started to get everything right and get to the front end of that train.
At the front of the train was the US dollar and the US military. Financing and Wall Street drives this train forward, followed by manufacturing and the supply chain, and then the service economies. This hypothetical globalisation train has dynamic capabilities, where countries and sectors are moving backwards and forwards on the train.
Now we’re experiencing a big fight, potentially about China being at the front of that train. It appears as though people are fearing China’s global dominance. Is China moving too much towards the front of this train, and how should we consider this? China has ultimately created a stronger state, with stronger determination, planning and perseverance. China is building world-class global infrastructure, systems and manufacturing. America is the biggest beneficiary of this.
However, President Trump has certainly been pulling the reset buttons, pushing emergency brakes, resetting the AC and lighting. We don’t know what’s going to happen. Why is America trying to disrupt this global train? It seems as though Americans that are upholding the brakes are the guys sitting at the back and are seeing much movement.
On this train, we’ve developed a division of labour – the train is much better and faster than 40 years ago. But the Chinese have made this happen. The train is much more comfortable and spacious for everyone but the complaint seems to be that the improvement in first class is much better than the improvement at the back. Every country is going through this issue domestically. As we explore the greater role the state plays in the economy, domestic politics come into the global order. America took a big proportion of the benefits of globalisation. Was it too much?
At the end of the day, Americans need to ask: what do they want to achieve out of this?
The globalisation train has allowed people and markets to diversify. We need stronger and more active governments to define how progress can be made. determine progress, make choices and prioritise.
So, how do we stop this train derailing? I’m convinced that the train will keep going, but we can fix the problems and fix the train whilst it’s moving, but by hitting the reset button, tampering with the brake, or pushing people into one carriage, we won’t progress and it won’t help.