Deglobalization and decoupling risk causing more global damage

The Russia-Ukraine conflict has rekindled the debate on economic dependency and deglobalization, something that haunted the world when previous US president Donald Trump launched trade wars against China and other US trading partners a few years ago. Like some others at the time, Trump also blamed US economic woes on other countries, from China and India to Mexico and Germany.

In recent months, the European Union has taken measures to reduce its dependency on Russian gas and oil through six rounds of harsh sanctions. But the sanctions are not working well, as Russia's current account surplus, which usually shrinks in the summer months when the EU does not need gas for heating, jumped for the first time to $28.2 billion in June. The EU is still the top buyer of Russian gas and oil.

The current debate in the EU has prompted some to ask whether the bloc has a dependency issue with China since China is the EU's largest trade partner of goods, as well as the largest trade partner of Germany, the EU's largest economy.

Such paranoia is unjustified, for China, too, depends heavily on EU countries for both technology and high-end manufactured goods, and yet Chinese leaders have never fear-mongered about the country's "dependency" on the EU.

Facts speak louder than anything else. While the EU and the US restricted exports after the COVID-19 pandemic broke out in early 2020, China has been acting in a responsible way in keeping the global supply chains open and running. Among other things, it has been a key global supplier of personal protection equipment and COVID-19 vaccines.

The iPhone, which uses technologies and components from more than 40 economies, is just one example of how interconnected the world has become. Making iPhone entirely in the United States may not be impossible but would make no economic sense, because it would raise the price of iPhone to at least $4,000 a piece.

Western multinational companies are drawn to China because of its comparative advantages, improving business climate, fast-growing middle-income group, and because it is home to a fifth of the global population. Besides, China's participation in the Regional Comprehensive Economic Partnership and its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership reflect its unwavering policy of deepening reform and widening opening-up.

Not everyone is easily fooled by the false deglobalization narrative. Volkswagen CEO Herbert Diess said last month that "Germany would look completely different" if it turned away from China, and warned that such a move would harm Germany's economic growth and employment.

In fact, the few who are fear-mongering about China in Europe should be more concerned about a possible return of Trump to power in the US in 2024, for he could again declare that the EU is worse than China when it comes to trade with the US.

Douglas Irwin, a nonresident senior fellow at the Peterson Institute for International Economics, argued in a June 16 analysis that globalization has enabled nearly all countries to grow richer in recent decades. In contrast to populist sentiments, Irwin defended globalization as a race to the top, saying that the vast economic gains made by least-developed countries over the past few decades have not come at the expense of advanced economies.

Many economists say many of the US' problems can be attributed to a lack of training programs for laid-off workers, programs that are available in many other countries.

Shang-Jin Wei, former chief economist at the Asian Development Bank, and Tao Wang, chief China economist and head of Asia economic research at the UBS Investment Bank, have argued in a Project Syndicate article on Wednesday that globalization made it easier for major central banks to pursue and maintain low inflation but deglobalization risks having the opposite effect.

Wednesday was also the day when the US announced that inflation in June hit 9.1 percent, the highest in four decades.

True, we should address the problems associated with globalization, but continued globalization, instead of deglobalization or decoupling, is a far better way to tackle global challenges, boost global growth and ensure world peace.

The author is chief of China Daily EU Bureau based in Brussels.

chenweihua@chinadaily.com.cn

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