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How know-how shapes globalization | The hill

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How know-how shapes globalization | The hill

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In the pre-COVID-19 pandemic era, global economic worries often centered on issues such as trade disputes and the threats posed by an increase in populist rhetoric and protectionist measures. President TrumpDonald TrumpAOC said she doubted Biden’s victory would have been certified if the GOP had controlled the arrangement drafted by Trump’s aides to invoke the Insurrection Act during the Floyd protests: Night Defense Report: Intel Releases Highly Anticipated UFO Report | Biden meets with the Afghan President | Conservatives attack Milley MORE‘s “America First” approach signaled a clear break with a decade-long US-led multilateral agenda that focused on promoting cross-border trade liberalization. The Trump administration reinforced its rhetoric by exiting the Trans-Pacific Partnership (TPP), renegotiating the North American Free Trade Agreement (NAFTA), and through a number of trade disputes (involving tit-for-tat tariffs, sanctions, and other forms of trade barriers ) with major trading partners including the European Union and China. The pandemic shock has raised new concerns about the over-reliance on China-centric global supply chains for critical goods such as pharmaceuticals, medical equipment and supplies, and electronics. The coincidence of these recent developments has led some to wonder openly whether we are entering a new era of deglobalization, or at least an era of slowing down.

To many economists, the never-ending struggle to convince politicians and the general public of the general benefits of international trade often seems like a Sisyphean task. While many in the public are aware of Comparative Advantage as the foundation of trade and are somewhat confused, it is often more intuitive to think of international trade as a form of technology.

As with any major technological breakthrough, there will be a decline in labor demand in some quarters, but overall net gains in productivity and production at the macroeconomic level related to international trade. Those who oppose new technologies are referred to as Luddites, while those who seek and support trade protectionist measures are often referred to as populists or nationalists. Rather than denigrating those who hinder trade liberalization and the cross-border movement of goods and services (the arguments for free capital mobility are actually less clear), the public would be better served and the discourse on international trade (as well as technological changes) reinforced if economists Highlight the extraordinary intertwining of globalization and technological revolutions and their shared role in influencing key historical trends.

In two recent books, “The Great Convergence: Information Technology and the New Globalization” and “The Globotics Upheaval: Globalization, Robotics, and the Future of Work,” the economist Richard Baldwin offers an excellent overview of the past, present and future of globalization. Baldwin suggests that the cost of transporting goods (trading costs), the cost of transporting ideas (communication cost), and the cost of transporting people (face-to-face cost) are three constraints that work to limit the separation of production and consumption as barriers to globalization itself.

From the early 19th century onwards, steam-powered ships and railroads drastically reduced the cost of transporting goods across borders. According to Baldwin, this led to the “first unbundling”, since people could now consume goods produced in distant countries relatively easily, since production and consumption of goods could be geographically separated. This first modern era of globalization led to the “great divergence” between the industrializing north (today’s G-7 states) and the raw material-supplying south (today’s developing and emerging countries).

Another era of globalization began in the 1990s when the information and communication technology (ICT) revolution triggered the “second unbundling” – the cost of ideas and knowledge transfer fell dramatically and it became possible to move complex activities out of the Coordinate remotely. The resulting offshoring / outsourcing phenomena and the emergence of global supply chains led to the rise of China, India and other so-called emerging countries and enabled the “great convergence” (the gap between the western world and the emerging countries even narrowed as domestic inequality almost increased everywhere to) phase of globalization.

Since the trade wars and the pandemic are forcing global supply chains to rethink, the sun could go down in this phase of globalization. Nearshoring and greater supply chain resilience are likely to change the patterns of commodity manufacturing and trading in the years to come. Diversifying away from China, however, is likely to be a challenge in the short term.

Meanwhile, Richard Baldwin and other economists suspect that we are on the cusp of a new revolution that could spark another phase of cross-border networking. With the advent of digital technology, artificial intelligence, and remote intelligence, a “third unbundling” is unfolding – telepresence, telerobotics, and telemigration will radically lower the cost of personal interactions and enable the ability to remotely perform service functions from anywhere in the world. The pandemic shock may have given this process additional momentum.

Given that technological innovations have largely sparked new waves of globalization over the past two centuries, policymakers and the public need to focus more on managing the labor market and the societal impact of these revolutions, rather than trying to limit fundamental forces that drive our modern productivity is shaped by -driven economies. As knowledge requirements evolve rapidly and the demand for certain types of labor shifts rapidly, the need for well-designed shock absorbers and social safety nets becomes apparent.

Unfortunately, the mostly seventy-year-old political leaders in the US are still debating the challenges of the 20th century and arguing over largely irrelevant bilateral trade balances, even as the US and the world economy move into a new and radically different phase of technology-driven globalization. The historical perspective on globalization will help citizens and future policymakers acquire the knowledge necessary to plan the inevitable upheavals that are likely to pose challenges to workers and society at large.

Vivekanand Jayakumar is an Associate Professor of Economics at the University of Tampa.

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