Key Western markets are adopting protectionist trade policies, but the rise of Asia, automation, digital technologies and AI could make that difficult.
The world is going through a turbulent time. The policies of the new US presidential administration, potential trade wars and the rise of Asia are together going to have a fundamental influence on the world’s development, yet they are underpinned by longer-term changes in the world’s power dynamics. When examining paradigm changes, it’s important to separate the long and short term, since both may have different winners and losers.
Maybe the most pressing question regarding global policies is whether the aim is to find win-win solutions or return to zero-sum policies. Technological development and grassroots globalization are forces that no political leader can halt. The current situation with competing globalization and anti-globalization forces make it more important for companies to really take a closer look at their international strategies. New global finance services (FinTech) and the fourth industrial revolution are important parts of this development.
For example, last year Chinese companies completed the most international M&A transactions in the world. Asian Infrastructure Investment Bank was a Chinese initiative, but it has now representation from dozens of countries, even though the US had an initially negative reaction to it and saw it as an attempt by China to challenge the positions of institutions like the World Bank and IMF. The US has accused China of protectionism and currency manipulation. At the same time, however, most countries or regional markets, including the US and EU, protect their own markets through various restrictions, customs policies and requirements for local market approval.
Of course, Asia is far larger than only China. ASEAN countries have for decades worked for economic cooperation and integration. They were a key coalition in the Trans-Pacific Partnership (TPP) which President Trump has decided to abandon. ASEAN countries have disagreements with China regarding the South China Sea and especially China’s desire to expand its influence in the region. Now the Trump administration is seeking to challenge China’s position, while opening the door for China to lead economic policy in the region.
Automation, digitalization and artificial intelligence (AI) are having an increased impact in world markets, even to the point of fundamentally changing jobs. Self-driving cars are a tangible example of this shift, which is expected to happen rapidly, but this shift has been underway in industrial segments for years. It will start with blue-collar jobs, but white-collar jobs are next. For example, it’s expected that AI will transform and replace many jobs in the finance services sector.
Digitalization also changes the face of the economy. It allows the rapid creation of global business with minimal equity. Software and Internet service companies are well known examples where a small number of people have been able to create businesses worth billions. The international market for physical goods is also changing, with eBay and Alibaba having become significant sales channels for small and medium size businesses.
The protection of American jobs will surely be a central theme for the US politics for the next few years. However, the reason these jobs are disappearing in the first place is complex – it’s not simply because of unfairly negotiated trade agreements or currency manipulation by a foreign state. It has been suggested that if globalization and technological adoption proceeds at the current pace, no one – not even the leading governments in the world – can stop it. In that case, we are in fact bearing witness to the final battle for the western middle-class position which – like all changes – will cause various types of uncertainty.
This article is based on the Grow VC Group Research Report, “Machines, Asia And Fintech – Rise of Globalization and Protectionism as a Consequence.” It is available here. You can also download it direct from Disruptive.Asia by clicking the download button right below this sentence.