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Nick Spencer: Frictionless trade has hidden costs

27 August 2021

It has created a world that is more fragile, says Nick Spencer

Alamy

Ningbo-Zhoushan port, in eastern China

Ningbo-Zhoushan port, in eastern China

AFTER waiting an inordinately long time for a book that I’m going to review, I asked the publisher, jokingly, whether I should be blaming Brexit or the Suez Canal blockage. The answer, apparently, was neither. Both had caused supply-chain problems, she told me, but, on this occasion, the delay was caused by the closure of a massive container terminal in China.

This was news to me. Apparently, a cargo terminal at Ningbo-Zhoushan in eastern China was shut on 11 August after a worker there was found to have been infected by the Delta variant of the coronavirus. Ningbo-Zhoushan is the third busiest cargo port in the world, handling (in normal times) somewhere around a billion tonnes of goods a year. The partial shutdown reduced the port’s capacity by a quarter.

This is hardly a standard response: cargo mega-ports do not normally close because a single worker goes off sick. The Ningbo-Zhoushan shutdown came on the back of Covid and the surreality of a ship getting stuck in the Suez Canal. Nevertheless, the reason still made me shiver. An illness detected in a single person on the other side of the world could, it seems, retard and destabilise global trade patterns for weeks, possibly months. This is fragility in extremis.

The dream of a world of globalised, frictionless trade has animated politics for 30 years. In 1991, India abandoned its commitment to self-sufficient socialism, and the USSR crumbled, and between them they added about 1.2 billion people to the liberalising global economy. The following year, Deng Xiaoping made his famous tour of southern China, which is credited with saving the nascent Chinese economic reforms, after the instability following the Tiananmen Square protests. Another 1.2 billion were added. The result was unprecedented economic growth, and, if that came at the price of growing inequality in some parts of the world, enthusiasts pointed to the fact that, as a whole, the world was growing richer and more equal.

And yet, there were two major hidden costs to all this. The first, known about in 1991 but only now being felt (or treated) seriously, was the climate. It seems that nature was picking up the friction that our trade was no longer experiencing. The second was fragility. When everything is connected to everything else, problems over there — whether in Suez, Ningbo-Zhoushan, or Wuhan — became problems over here. We really are all in it together, for good or ill.

This would not be a problem if we trusted one another, had reasonably aligned values, or had a robust sense of solidarity which could weather the everyday tribulations that come with trade. But we don’t. The paradox of the past 30 years is that, as the world has grown economically closer, it has grown politically apart. The geo-political convergence envisaged at the end of Francis Fukuyama’s book The End of History and the Last Man proved illusory.

Greater political trust would do much to stabilise the world economy, but it looks rather unlikely right now. In its absence, when it comes to global trade, we will be faced with the choice between fragility and friction. Neither is appealing, but, while friction will slow things down and make us poorer, fragility could mean something much worse than a delayed book.

Nick Spencer is Senior Fellow at Theos.

Paul Vallely is away.

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