Technology and trade
25%, 20 the fracturing of our unified global trading system into allied blocks will diminish the threat of economic sanctions and the pain felt if these trading relationships are ruptured in a conflict. Thus, much of the western anti-globalization rhetoric reflects an anti-China mindset, as we endeavour to limit our exposure to an increasingly aggressive trading partner which currently supplies 17.9% of US imports 21 and 35% of the EU’s imports of manufactured goods . 22 Moreover, there is now an increasing recognition in the west that the national security gained from self-sufficiency, or at the very least having a baseline domestic industry in key strategic sectors, outweighs the economic gains to be made by removing trade barriers. The most stark example is the USA’s inordinate IRA that seeks to reduce reliance on imports through vast subsidies, loans and tax breaks, amounting to $369bn 23 that is only available to domestic manufacturers, typified by how electric cars assembled in North America will receive a tax break of up to $7,500, while those even part-made in Europe will not qualify. 24 The west may claim that if developing countries pursue protectionism, it will impair the maturation of their domestic industries by shielding them from the fierce international competition that will drive efficiency, innovation and prosperity. 25 However, there is a growing narrative that western trading structures entrench western dominance. Tariffs and quotas are arguably a necessary step for developing countries to break a cycle of over-dependence on manufactured imports from developed countries. The Prebisch-Singer Hypothesis highlights the need to industrialize to develop by demonstrating the long-term decline in the price of primary goods, the main export for many developing countries, relative to the price of manufactured goods. 26 Not only does this price disparity entrench inequality and poverty, the monopoly power of developed economies over advanced manufacturing enables them to subjugate developing countries to political manipulation, especially in the terms of trade, which have declined by a cumulative 50% for the least developed countries over the past 25 years. 27 Thus, as outlined by Infant Industry Theory, 28 protectionism delays rather than permanently nullifies the benefits that international 20 Tax Foundation, 20/3/23: https://taxfoundation.org/tariffs-trump-trade-war/. 21 US Department of Commerce, Bureau of Industry and Security, 1/6/23: https://www.bis.doc.gov/index.php/country-papers/2971-2021-statistical-analysis-of-u-s-trade-with- china/file#:~:text=China%20was%20the%20United%20States,trillion%20were%20imported%20from%20China. 22 Eurostat, 1/30/23: https://ec.europa.eu/eurostat/web/products-eurostat-news/-/edn-20220401-1. 23 The Economist, 4/4/23: https://www.economist.com/europe/2022/12/01/americas-green-subsidies-are-causing- headaches-in-europe. 24 Epicenter Network, 8/4/23: https://www.epicenternetwork.eu/blog/inflation-reduction-act-how-protectionism- affects-us-eu-relations/. 25 Adam Smith Institute, 24/4/23: https://www.adamsmith.org/blog/protectionism-the-infant-industries-argument. 26 Tutor2u, 18/5/23: https://www.tutor2u.net/economics/topics/prebisch-singer- hypothesis#:~:text=The%20Prebisch%2DSinger%20hypothesis%20is,of%20manufactured%20goods%20over%20t ime. 27 Economics Discussion, 5/5/23: https://www.economicsdiscussion.net/international-trade/terms-of- trade/prebisch-singer-thesis-assumptions-and-criticisms-trade- economics/30398#:~:text=Despite%20all%20the%20objections%20raised,a%2Dvis%20the%20developed%20cou ntries. 28 Corporate Finance Institute, 26/4/23: https://corporatefinanceinstitute.com/resources/economics/infant- industry-argument/.
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