Why a US-China trade war is self-defeating in a connected world
Liu Jun says most goods and services rely on a vast network of trade relationships benefiting people worldwide, and technological breakthroughs will bring disruptions that require societies to work together to find solutions
Although globalisation might not be a buzzword any more after the backlash of populism and nationalism, the trend of being more global than local is still in motion, in spite of some hitches along the way. So how could a trade war take place in this era of a digital economy and the “internet of things”?
A trade war is definitely a misnomer. Here are some reasons why.
First, the world economy has become an intertwined system. The theories of comparative advantage and value chains were based on outdated experiences of the past millennium. Today, the value system has replaced the value chain and stretches to almost every corner of the globe, weaving together various industries, diverse factors of production and an enormous pool of human talent. People find it very challenging to identify the country of origin of a product or service, along with the capital and labour embedded within it.
The resources and even risks from economic activities are allocated and dispersed worldwide, and people move all over the place. To be sure, a few things are still too localised to be exported overseas, but they are very few these days, given that even traditional foodstuffs such as sushi and tofu have made it abroad.
