Green trade: Davos elite are divided

Photo credit: DepositPhotos
Photo credit: DepositPhotos

Green trade has been a big issue at the World Economic Forum in Davos.

Last summer, when the US Congress passed Joe Biden’s Inflation Reduction Act, it was a good idea. The act gave billions of dollars in tax breaks to people who buy electric cars and other products that are good for the environment. The goal of these subsidies was to help grow the green economy in the U.S. and fight climate change. However, they could lead to a dispute over green trade.

But many European countries are upset that these subsidies will only be available to people who buy products made in the United States. They think it’s a thinly veiled attempt to get a piece of the high-tech manufacturing market in Europe and Britain by getting European companies to move factories to the US.

The weather in the Alps has changed this winter, and it’s not just because it snowed for the first time after December was warm.

Every year, CEOs and government ministers from all over the world come to Davos, Switzerland, for the World Economic Forum (WEF). In the last three years, the world economy has been hit by a lot of shocks, and much of the focus has been on how to deal with them.

From Wuhan’s wet market to the Kremlin’s crazy math, pandemics and wars have led to record inflation and rising debts. This year, a third of the world is expected to be in a recession.

But there are signs that things will get better. Even if a ski resort full of world leaders sounds far away, WEF is where you can get a sense of whether a storm going on for three years will start to calm down.

Some signs show that the first signs of rising inflation in the world economy are now starting to return to normal. After getting clogged up during the pandemic, the supply chains for the parts and ingredients that go into the things we buy have been fixed.

For instance, because of this change, Elon Musk’s company Tesla cut the prices of its electric cars last week. As a result, the price of shipping is going down. And China’s “great reopening” after the pandemic, which means the end of strict zero-Covid lockdowns and restrictions, should, in theory, help the world economy. But the costs to the health of widespread infections might be so high that it doesn’t matter.

Even though inflation is still high worldwide, it has reached its peak. Yet, incredibly, most of Europe has been able to stop relying on Russian gas in less than a year by building temporary terminals to process liquid gas shipped from Siberia, so it doesn’t have to depend on pipelines.

Is a green trade war imminent?

Green trade war?

But now, new tensions make people wonder how much inflation will fall in the end and worry about where Britain fits in a world that has changed a lot.

The big shadow here is the possibility of a green trade war across the Atlantic. Joe Biden’s new bill to boost the green economy in the United States includes subsidies of £300 billion for buying electric cars, but only if most are made in North America. The Inflation Reduction Act also affects a wide range of other manufacturing and production, and it is getting some European companies to move factories to the US. Fertilizer companies are scratching their heads and wondering why European leaders don’t pass similar laws.

The US says that its new laws are meant to compete with China. But the leaders of the EU are angry and are getting ready to respond, possibly with big subsidies of their own, which will probably also have “Buy European” clauses.

What should “global Britain” do if the three biggest trade blocs try to out-subsidize each other? After Boris Johnson’s break with Europe’s single market after Brexit, Britain tried to “re-engage” with the “globe.” However, the “globe” is now quite different from what it was.

Would the UK follow the EU’s “buy European” rules? In a letter to the White House, the government voiced some concerns, but it’s unclear what Britain’s plan is or if it has one. It’s not just about making things with less carbon. The recent push to bring microchip production back from east Asia shows that the US and EU are also trying to split up.

This new split at Davos could affect how much things cost and where they are made. It is the exact opposite of what everyone has agreed on for decades at the World Economic Forum. So things are very up in the air right now.

Read Also: Government borrowing touches highest in 30 years

And finally, many business leaders have spent Christmas shocked by how much money the new artificial intelligence platform ChatGPT 3 could save their companies. Some people think that the next version of this technology from OpenAI, called ChatGPT 4, could be so big that it would cause a shock to the world economy. It will be a huge step forward for technology but will also make millions of jobs obsolete.

This week, policy and investment decisions will be made at Davos that could change the direction of the world economy and have a big effect on all of us. This is because of the war in Europe, China’s reopening, and a long-awaited technological revolution.