- Faisal Islam
- BBC Economics Editor
photo source, Getty Images
The security of the Davos Forum
The atmosphere in the Alps region this winter was quite different. It’s not just because it finally snowed following an unusually warm December.
The World Economic Forum (WEF, Davos Forum), where political and business figures from around the world gather, was held on the 16th (local time).
Entrepreneurs and ministers gathered in Davos, Switzerland, also a popular skiing destination, to focus on how to respond to the major shocks that have hit the global economy over the past three years.
From the seafood market in Wuhan, China, to the madness of the Russian Kremlin, COVID-19 and war have left the world struggling with record inflation and skyrocketing debt. It is estimated that a third of the global economy will fall into recession this year.
However, there is no light at the end of this dark tunnel.
And even if a ‘ski resort full of leaders’ feels a little distant, the Davos Forum is a place where you can get a hint when the storm that has been raging for three years will start to subside.
First of all, there are some signs that inflation-related indicators around the world are starting to normalize. The supply chain for parts and raw materials used in the goods we consume was unstable during the COVID-19 pandemic, but is now returning to normal.
For example, Elon Musk’s Tesla announced a price cut for electric vehicles, citing supply chain mitigation as the cause.
In addition, transportation costs around the world are also on a downward trend.
In addition, China abolished blockades and various regulations due to the so-called ‘zero corona’ policy, which was strict, and “opened the door wide once more.” This is theoretically a boon to the global economy. Of course, this may not be the case due to the burden of medical expenses caused by the current surge in infections in China.
Globally, prices are still high, but the peak appears to have been reached. Surprisingly, most European countries have significantly reduced their reliance on Russian natural gas in the past year. The construction of an LNG terminal capable of handling liquefied natural gas (LNG) carriers eliminates the need to rely on natural gas pipelines from Siberia.
photo source, Getty Images
A green trade war?
However, a new tension factor has also appeared, and it remains a question how much the price will fall.
Meanwhile, voices are raising concerns regarding Britain in a world that has changed so much.
First of all, the green trade conflict between Europe and the United States across the Atlantic Ocean is a matter of great concern.
The bill recently announced by US President Joe Biden to revitalize the US green economy promised 300 billion pounds (regarding 45 trillion won) in subsidies for electric vehicle purchases, but it was conditional that the electric vehicles mainly produced in North America.
These ‘Inflation Reduction Acts’ (IRAs) affect many other manufacturing and production sectors, and some European companies are contemplating relocating their factories to the United States. In this situation, even fertilizer companies are questioning European leaders why they are not introducing similar laws.
The US authorities explain that the new bill aims to prepare for competition with China.
However, the European Union (EU) strongly opposes the inflation reduction law, and is expected to respond with various subsidies along with the stance of ‘By Europeans’ rather than ‘By American’.
If the three major trade blocs compete for subsidies, what should the ‘Global UK’ (the banner that the UK put up following leaving the EU) do?
The ‘global world’ that former Prime Minister Boris Johnson called Britain “re-engage” following Brexit and the ensuing rupture with the single European market has changed a lot from the past. to be.
Does the EU’s ‘by European’ regulatory policy include the UK?
The British government expressed some concerns in a letter to the White House, but it is unclear what the UK’s strategy is, or whether a strategy exists.
It is not simply a matter of low-carbon manufacturing. The US and EU clearly show the possibility of division in relation to semiconductor manufacturing reshoring from East Asia.
This divided international atmosphere surrounding the economy can have a profound impact on where the goods we use are made and at what price.
Unlike the general consensus and consensus of the past decades, the atmosphere at Davos today is quite the opposite.
Meanwhile, entrepreneurs are shocked by the possibility of cost reduction of the interactive chatbot AI ‘GPT 3’ produced by the artificial intelligence research institute ‘Open AI’.
Opinions are emerging that the ripple effect of the next ‘GPT 4’ model may be so enormous that it may shock the world economy.
In terms of technological advances, it would be a quantum leap, but it might destroy millions of existing jobs.
At a time when war in Europe, China’s reopening and the long-anticipated technological revolution are happening at the same time, this week in Davos we will see policy and investment decisions that will reshape the global economy that will have a profound impact on all of us.
