Multipolare Weltordnung: Droht das Ende des Freihandels?

"Economic Challenges" - the Handelsblatt Economy Podcast. Bert Rürup, the head economist of the Handelsblatt, discusses with Michael Hüter, the director of the Institute of German Economy, weekly current economic challenges for Germany and for the world economy. Good day, ladies and gentlemen. Hello, Michael. Hello, Bert. Later, after the First World War, the USA became the one, which the French economist François Peru referred to as "economy dominant". So, as a Volkswagen, following its size and strength and power of innovation, it has a significant influence on the world economy, the dynamics and the world trade and its national value, the world value. Since, as I said earlier, the USA, just since the end of the First World War, was a great Britain. At the height of power, the USA had, in my opinion, after the collapse of the Soviet Union in 1990. On the contrary, I have the impression, not only since Donald Trump, but also since Donald Trump, that the USA, from the role of world policemen, retreated a little bit and the world became more and more multipolar. China is already militarily, economically, the second world power and India is trying to get over it. On this background, I think the question is that the world's multipolarity is an end to the idea of free world trade. And that would be especially for Germany, who lives on that. I can't bear the impression that we are running in an increasing decentralization and sub-block education and that's not what a free world trade is. I would like to say a good word. How do you see that? Yes, I am basically talking to you about that. We had in 1990 what is described as a multipolar momentum by the politicians. So, from this old system conflict, only the USA remains with the transatlantic west. And since then we have seen that in Russia, we don't have to talk about it. It is the rise of China. And what China is doing is not just the question of what is happening in the USA, how to explain the transatlantic west but what China is doing and what is the interest of China. You have always pointed out that China has the goal to become the largest economy in 2049, 100 years of communist power. But there is a second motif of China. Demographically, everything is going away from the USA. So, so fast aging. I mean, at the end of the century, let's say, more or less, from the 800 million pro-people remain 400 million after the prognosis of the Chinese themselves. So, I think you can bring a lot back what you experience in China. What is the pressure? What is the question? How do you show yourself? For about 10 years, we have continued initiatives at a global level where you try to set standards, where you try to become the anchor of the world economic perspective. That was, first of all, Belt and Road Initiative 2013, this infrastructure story. Then Global Development Initiative 21, Armutsbekämpfung, 22, Global Security Initiative, 23, Global Civilization Initiative and now, in September of this year, Global Governance Initiative, Fair World Order Multilateralism. What's interesting is the Chinese, and there lies the the termination, which they use, take the same terms, free trade, self-determination. But actually, there is a defense of criticism of internal conditions, which are connected with anti-democratic patterns, with the destruction of civil society, and so on. That is, in my opinion, this slightly larger frame and the USA does everything. So they actually play the Chinese game. They play, so they ultimately promote what China denies. And India, let's put it this way, in everyone's opinion, is not that far. It is not that far, and it wouldn't like to only trade with China, but under the drug list and drug policy measures of Trump, it is driven there, because there are big threats, and then they tell you, well, he doesn't want to go with us, let's take a look at this BRICS initiative, to mix this long-distance core of the global south with it. Yes, and of course, also individual statesmen of Europe are picked out by the big hits that you see in Beijing. That means, the idea of free trade of course has less connection with it. Because China can have no interest in free trade. India can't have that either. Well, let's put it this way, individual statesmen, already have an interest, they want to place their products. And they also notice when the valve is closed. So, the USA is closed. Now the question is, what does the European Union, for example, extend with certain sources, steel and similar contingent, because you can also signal to the Chinese, it can't be that what can't be placed in the USA comes in with us and with some dumping prices, so that the structures are completely... You have now, interestingly in Chinese, in China export controls are introduced. That means, it's no longer in the business, the company, how much they export. That is also a sign for me, that the free world is being castrated. Yes, that in a country that has a high standard of steering and central planning in itself has suddenly said, now we have to take a look. We hear from many conversations whether you are on your way in Brussels or in companies that the Chinese side is much more understandable. Because it also looks that I can't drive with all the full confrontation and I have to somehow get to the right with the USA. So, the perspectives move a bit towards Europe. Then, let's take a look where we can close free trade agreements and so slowly it seems to be that you have to jump there. So, Mercosur is one topic. With India there is also a topic. Which strategy has the European Union to move towards that? I think that these are topics that belong to that. You always have to say one more thing. I mean, what the American administration does under Trump, when it comes to the debt history, the distance from an almost 80-year-old history since the Second World War is the opening of markets. I mean, that was connected with forward and backward movements. But always the big line, if you look at it from the perspective of the GATT at 47 years old, knows the round, the Tokyo round, the Uruguay round. It always had negotiations. It always went down to trade agreements and then the BTO came out in the next few years. It didn't add up that much. But this business foundation is gone when it comes to trade. The Second World War is gone. We have already discussed it during the capital crisis. You are somehow at the point of view of the debt function of the dollar. We have already discussed it. We just want to say that. And now there comes the migration, the history to it. With the H1B visa, it is actually in the country. You have to say that the American politics is also consistent in no way. It is inconsistent. I wanted to say that. But the goal, and you shouldn't forget that, is the USA of the year 1900. That was a closed economy. That was a closed economy. The country was huge and rich and had an incredible import tax. And that made the country rich. And he wants to do that again. For example, the cell that Reagan introduced has led to the decline of the American automobile industry. But he has built a gigantic Japanese and worked there. That means that he wants to create jobs for his lower middle class. And he thought about it. Then it is better to get it in from foreign investment than to sell it. Of course, investments have to be made. Technologically attractive. And then it is the case that I have to bring the experience with me. Because we have a massive education problem in the broad and deep states of America. The education economists say we should not let it blend from the West Coast. But they also have the worst education system for 320 million Americans. They take the rest out and dominate it in the coastal areas. And then it is the Ivy League. And that's all great with the eight largest and most traditional universities in the US. And they are also older to some extent than the United States themselves. They were founded in 1976. And that's all one thing, but it only shows the politics that he's staging there. There is no summary. And they don't just give no clarity, but they don't give any expectation security. Because we also report the trading partner on the European side in the talks with the USA. There is a lot to say about every readiness. So what we are now trading is also valid for the next three years. And there won't be any trash on top of it. Now there will be no clarity about what is going on with pharmaceutical products that are now valid for the European Union. Does he have an attitude? I'm not going to let him smoke but I'm going to let him lie on the table. But the fact is of course that he is not so successful with it. That means that if you see how our business leaders are making a cut there, you have to see that, of course, production cities are lagging. Is this natural? Does he achieve what he wants? For his... So he really doesn't achieve that. In the meantime, he wants to create working places. And there are industrial working places actually the most attractive, especially because we have these educational cases. But then Bert actually had to continue the inflation reduction act. That was the best strategy. That was the best strategy, but the idea that was behind it was exactly the same from both. It was exactly the same. Yes, that's true, but I can do that cooperatively. And what he does is not for the purpose. At the end of the day, it won't contribute that many working places are created. We don't see any current direct investment in the USA. We see more the opposite, that direct investment streams towards Europe and Germany are oriented. Because they say, I might have a different reliable framework. We have to remember that. We have here after 2022 as the inflation reduction act then in power, talked about it many times. What does that mean for the American economy structure? How attractive is that for foreign investors? In the end, you always have to say, people on a ten-year perspective, on a tax benefit alone to make a decision there is maybe a little bit less. But it was still cooperative. It was set in competition. That is now an announcement economy. It is actually a state capitalism that does a lot of things, as he intervenes. And I don't see a framework that says that it is really great that I want to do it. And when I still hear it, we just talked about it with the educational topic in the area of the USA. Where exactly are the jobs that you would like to have? Or would you like to have? Yes, I'll try it again. Where did it come from to industrialisation of France? Through the barriers of British import. That has led to industrialisation of France. I think that is ultimately also a hindrance behind Trump's idea. Yes, but Bert, that is also not a good example. The continental barrier led to the fact that France has never been industrialised in the depth and width as in Germany. We have to remember this. But it was from an agrarian country where it was a half-modern industrial state. Yes, but that was in the German federal government and later in the Zollnion too. But the problem is that the French were never industrialised in this way. In the year 1970, where we were waiting for almost 40% industrialised in the Brutualandsburg. The French were 25. Even at that time when the structural change for the industry was there, they were not a strong industrial country. They always had a much higher agrarian approach and it continued. You can write the story with the continental barrier left and right. In any case, in the year 2025 I will not make any policies. I will also make a master plan for the industry. We have also discussed this. If there was an idea at all, I think it would be a false idea. But you can assume that behind Trump there is a certain ratio and a barrier. That's it. That's the real thing. I mean, basically we have to focus on that. Sorry, Bert. What are they telling us? They tell us economically in a metaphor that the water flows out of the mountain. Yes. That doesn't work. The water doesn't flow up the mountain but down the mountain. They tell us that the water flows up the mountain. You wonder what it is for economic thinking. I can't see an entire structure that would be consistent with the modern economy. There is nothing. There is always the hint that we have talked about industrial policy and other interventions. You can reason from the climate policy and you can reason from the resilience but what is told there all culminates in the view that the trade balance is not convincing in any way. I don't think it leads to a wide discourse but it had its early professional approach. There is this quote that says "The Daimlers rumble and this Audi is in New York on the streets. Why don't I have our cars?" And obviously in this wave he collected this Navarro, the one previously unknown, this Steven Myrne, who sits at the FET, who has said that the climate is actually not connected. There is no debate about the perspective of the world economy. I think you just have to see what he is doing right now. That is the big side story to China and another topic that we can take up again. Basically he is weak but he also destroys the transatlantic west. And with that... We are actually there. I just wanted to point out that if this really were the case the action markets wouldn't be that bad. Well, but first of all, they didn't run well. This year they are getting a little bit of the international action markets. You will see that inflation is coming back in a different way. I wish that you were right. Yes, me too. I wish that you were right. But let's say at least he has advisers. He has to have an intention. If you look at it from the outside you think what a fool he is. What a fool he is. But with that I think it is a little bit too easy. I don't know. Sometimes there is some kind of effort in certain actors to search for a rational argumentation pattern. I mean, it is about power. It is about stabilizing power. And it is obvious that the Vela clientele that has led to its majority are historically low. We have to see that. What he is suggesting has nothing to do with what is really being seen in the country. But we find that there is no broad, socially articulated opposition to that. There is no opposition. There is no opposition. But then the question is are you then, if you were to judge it from the point of view, let's say the political mistakes of the country, of our perception, our theory of understanding, that the mistakes he makes are ultimately the weaknesses of his organization and his personality. Yes. I don't think he is really ready for advice. You can see that everything that is accepted by his opinion is under threat of sanctions or something else. It is also very surprising. But I would like to make this one point briefly. Transatlantic West is not just the end of this 80-year history of opening, of markets and more cooperation, more border crossing structures and dependencies. That is what we actually observe. On the other hand, it is also an statement of the European modernity. And that is a longer term. Europe no longer sets the standards. We spoke about China at the beginning. Others are now setting the standards and the global south also likes to go there. They say why should the conflicts, the standards, the thinking of the west are still stupid, if you move along with each other. And if we have to think about our things from very different actions, I don't want to press the positive light with China. But I just want to say, China uses these gaps that the transatlantic west offers. That is what we see here. By the way, we see that today, when we are at the Donnerstag, where we have a big weekend event in the trading board about the technology boom in the Gulf. And I mean, it becomes clear that they do it because they recognize that the business model is also in question. Namely, the perspective of a winning oil boom leads to that in this United Emirates that is being looked at. What can we do to put the business model at its place? So make it an open technology, artificial intelligence, you have low electricity costs, cloud computing, all these things. Of course, you have a problem. These are small markets. There are not so many people living there. So they are not worldwide. So you have to see that they are then connected with others. But it just shows that it is not just changing things and the view of Europe and the transatlantic West is changing completely. But on the other hand, in the Gulf, our business model is changing. We have a lot of money. The view ahead is called technology. And we read the Tragi report, which says that the gap of productivity, the EU, the USA is operating in the essential tech sector. So that's where the whole story for global change is visible. It is not just in some places but in some places. And this is what we focus on today. If China is going forward so bravely, bravely, or forcefully, say with this global governance, we define what sovereign equality, human-centric globalization is. Then it only shows that we can no longer tell stories about the transatlantic West. And the European story, Burt, is only one where our government goes to Brussels and says right, build the bureaucracy back, build the bureaucracy, but where is the previous story? Where is the story for a European full-end of the domestic market? Where is the whole talk about the capital market union? That's nice. And I always wonder about the naivety of the CEOs and the German banks. They think that this is coming now. No, as long as they don't make it clear themselves, that's part of the European growth story that we write with, if we have a European capital market union, deep and broad capital market and so on. Where is the European lead that fills the gap? I don't know if you see it somewhere. No, I don't see it, but in the core, you give my input analysis right. That means we had a boom period when the Washington Consensus passed. That's where the globalization began. In the 1980s. In the 1980s, a new salary began and that is collapsed. That's right. That's collapsed. And with that, of course, the perspectives for the old and the Europe in general, especially the old Germany are dilapidated and not improved. Especially when we have this multi-polarity of the world trade. In this respect, do you give my skepticism in my opinion? I don't have a problem to give you the right. No, but let's leave it at the end for the last few minutes about literature development. In 2005 Thomas Friedman had the book "The World is Flat". The idea was I don't have any barriers and both in the financialization and in the trade I have to take into account the credibility of the trade. Let's leave it at the front. That's a different story. And then five years later "The World is Curved". For the background of the financial crisis, he said, "Well, it's all on a market, but that's not just per se good, but we also have to control it, because if we have a lack of allocation of capital, it leads to coordination disorder in the markets." We have also seen that. Both books always had the foundation of this opening perspective in the world. Today, if you have to write a book, we can always do it. "The World is Fragmented". And that's the actual message. That's the actual point. And with that, of course, we have fundamental difficulties to let the free trade ideology live up. Unfortunately, that's the way it is. Thank you. Thank you too. 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