This month's featured article
Intelligent Unilateralism is the Right Response to Geopolitical Rivalry
Simon J. EVENETTProfessor of International Trade at University Of St Gallen
As geopolitical rivalry sharpens, many governments are looking for safety in numbers—that is, by forming alliances and strengthening certain commercial ties and, in some cases, weakening others. This search for friends and distancing from foes overlooks a strategic option to all governments—namely, to improve their business environments so as to enhance the capacity of local firms to respond to geopolitically-inspired disruption. Australia and Lithuania’s response to economic coercion in recent years highlights the importance of supply side resilience.
As geopolitical rivalry has intensified, the siren song of insular, zero-sum thinking gains in prominence (Strain 2024). This flies in the face of decades of experience where our standards of living have been enhanced by doing business with foreign buyers and sellers (Irwin 2024). Exports augment national sales and make jobs more secure. Import competition keeps local firms on their toes—complacent local oligopolists tend to rip off citizens (Levinsohn 1993). No country in the past half a millennium has become an economic superpower by its firms hiding behind borders (Zakaria 2024).
Yet, even for economies as large as Japan, there is still the question: how best to react as China and the United States vie for primacy? For better or for worse, at least since the Global Financial Crisis, the world is in an era of trade policy unilateralism. The painstaking monitoring of commercial policy by the Global Trade Alert has shown this (Global Trade Alert 2024). Sadly, there remains no appetite for pathbreaking multilateral opening of markets. Sushi-sized reform is what the WTO has on the menu, and likewise, regional trading agreements. Recently, World Bank analysts reported that the number of newly signed regional accords has been falling as this century unfolds (Kose and Mulabdic 2024). Reciprocal approaches to trade reform are out, alas. Unilateralism is in.
To read the full text:
https://www.rieti.go.jp/en/special/p_a_w/207.html
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