The World’s New Business Model

Why is global trade slowing down? Martin Wolf on advanced technologies, left-behind communities, and economic warfare with China. Recently from The Signal: Jan Leighley on [who votes in America](. … Today: Why is international trade slowing down? Martin Wolf on advanced technologies, left-behind communities, and economic warfare with China. … Also: Gustav Jönsson on how working with establishment conservatives has been transforming the nationalist right in Sweden. … & now live: Your invitation to become a [founding member of The Signal](. Subscribe to The Signal? Share with a friend. … Sent to you? Sign up [here](. Remodeling globalization William Navarro On September 23, the U.S. Commerce Department proposed a ban on imports of Chinese and Russian cars, trucks, and automotive electronic components that connect with external technologies and could potentially be used to spy on drivers and passengers. U.S. officials said adversaries could use the components—including Bluetooth, cellular, satellite, and Wi-Fi systems—to collect data on people and even remotely manipulate the vehicles. The proposal covers cars and trucks from Japan, South Korea, or Europe, if they were made with Chinese or Russian electronic parts. This move is certainly news, but it also belongs to a deep transition that’s been happening for years now—a transition away from unfettered free trade, by way of tariffs, domestic subsidies, and, increasingly, national-security policies. From the outset of the Ronald Reagan and Margaret Thatcher era more than 40 years ago, international commerce had been shaped by greater and greater liberalization, deregulation, and globalization. The fall of communism in Central and Eastern Europe in 1989, and then China’s admission into the World Trade Organization in 2001, helped global trade reach a record high in 2007—just before the Great Recession in 2008. But things have since started moving the other way. In 2018, referring to himself as “Tariff Man,” Donald Trump provoked a trade war between the United States and China. The United Kingdom’s departure from the European Union, meanwhile, upended Britain’s longstanding commercial ties with the continent. In 2020, the Covid-19 pandemic disrupted supply chains worldwide. And in February 2020, after Russia invaded Ukraine, nearly all European countries broke off trade relations with Moscow. Data shows that the world’s 20 wealthiest countries have dramatically increased barriers to trade, including import quotas and subsidies to domestic industries. What’s going on here? Martin Wolf is the chief economics commentator for the Financial Times and the author of the 2023 book [The Crisis of Democratic Capitalism](. As Wolf sees it, the world has entered a new era—with the U.S. having decided to abandon globalized free trade and America’s economic power impelling the rest of the world to adopt the new model. Washington’s strategy, Wolf says, is driven by a mix of economic and security concerns centered on its great-power competition with Beijing. It’s an approach that looks to move supply chains from China to friendlier countries—and to repair the damage done to U.S. industries by China’s rise and by global trade generally. This shift could lead to a decline in global growth, Wolf says—though developing countries could see gains, as they become alternative production locations to China. Still, we can’t entirely yet say how other countries will respond to the new dynamics of global trade—or, more specifically, how China will react to a system intended to damage its economic standing. [Read on]( The Signal is a new current-affairs brand for understanding democratic life, the trend lines shaping it, and the challenges confronting it. Learn [more](. And [join](—to be a valued member, support our growth, and have full access. Advertisement From Martin Wolf at The Signal: - “The new U.S. perspective is that it’s now vulnerable in a way it wasn’t before. There’s a peer competitor—China—which is a superpower on multiple dimensions. It’s the first time Americans have confronted this kind of situation in historical memory; the Soviet Union wasn’t an economic or technological superpower, and the Europeans and Japanese were allies. This is unique.” - “The Biden administration say it’s not about ‘decoupling’ the two countries’ economies. Which is true. They’re calling this new approach de-risking, and Treasury Secretary Janet Yellen has used the term friend-shoring. It’s a system to manage the security and economic risks associated with the rise of China. That’s what this new model is really about.” - “The main problem will be increased hostility with China, which will have many ramifications. We can’t predict the ultimate consequences of that increased hostility. But they could be significant, because many Chinese officials now think—and have said this to me—that America is dedicated to stopping their growth. That’s an act of warfare by economic means, and that has consequences.” [Read on]( The world is highly complex, rapidly changing, and inherently uncertain … That’s why we look at it the way a detective would: Everything The Signal does starts with good questions, and every answer leads us to more of them. Become a [member]( to unlock this full conversation and explore the archive. Advertisement Why is democracy struggling so much around the world? Read The Signal’s first print extra, The Long Game. Limited copies available now. [Learn more]( NOTES Sweden’s old-new right Raphael Andres Last week, the government in Stockholm presented its budget proposal for the coming year, which includes significant tax cuts for the wealthy. That might not be surprising or even noteworthy, given that the government is composed of a conservative coalition. Only that coalition depends in turn on the support of the Sweden Democrats, a right-wing nationalist party that was until recently promising to reinvigorate the Swedish welfare state. Now, they’re endorsing the same kind of tax cuts they used to oppose. Also until recently, Sweden’s more traditional right-wing parties shunned the insurgent SD—which was founded in the late 1980s by members of various fascist groups, [including the Waffen-SS](. But over the last few years, they’ve started to work closely with it—despite the current prime minister having once promised he’d never “collaborate, converse, cooperate, or co-govern” with SD. So, what’s behind this rapprochement between the new and old right? Back in 2022, Sweden’s traditional right-wing parties needed SD’s support in order to keep the left out of power. So they struck a bargain, and now we’re seeing the outcome: The new right has been thoroughly integrated with the old—even on economic matters. Which is to say, SD now look like old-style Swedish conservatives, though without the old-style politesse. Of course, Sweden is a small country; its population of 10 million is comparable to London’s or Dhaka’s. But the political merger on the country’s political right, though perhaps not of much significance globally, echoes [events in capitals]( from Paris to Washington. As many liberals feared, SD have changed Sweden’s conservative mainstream, making it much more hawkish on immigration. Yet in turn, cooperation with the conservative mainstream seems to have changed the Sweden Democrats. True, every once in a while, one of their representatives still makes a [racist statement](. But it’s hard now to call them fascists and feel serious about it. —Gustav Jönsson [Explore Notes]( Want more? Join The Signal to unlock full conversations with hundreds of contributors, explore the archive, and support our independent current-affairs coverage. [Become a member]( Coming soon: Victor Shih on what’s wrong with China’s economy … This email address is unmonitored. Please send questions or comments [here](mailto:concierge@thesgnl.com). Find us on [Linkedin]( and [X](. To advertise with The Signal, inquire [here](mailto:advertise@thesgnl.com). Add us to your [address book](mailto:updates@thesgnl.com). Unsubscribe [here](. © 2024 [unsubscribe](