In geopolitics and international trade policies, developing nations are treated as if they were just a trivial appendage. Yet, the rest of the world is inseparably interconnected with them. The surviving WWII veterans still living across Africa, for example, are evidence of the extent to which global events can affect developing nations. The recent recession also provides another reminder.
- What are the implications of the US-China, US-EU trade wars for developing economies?
- Which proactive measures should governments in developing economies take before any nasty awakening?
Intra-African trade, BRICS power...anyone? Your thoughts are more than welcome.
The US-China, US-EU trade wars have direct and indirect consequences that negatively affect the economies of developing countries. Inflation as well as the cost of living is steadily rising in these countries whose quality of life represented in the domains of health, education and GDP per capita is deteriorating (for example, Turkey, Iran and Egypt among other countries). The governments of the developing countries are facing a serious threat. A country like Iran that tries to be economically independent faces grave sanctions. BRICS and Intra-African trade might succeed in fixing some domestic issues, but need to work hard at the global level.
The US-China, US-EU trade wars must have negative impacts on developing nations specially, nations that have strong economic integration with either EU or China. More specifically, developing nations of which China or EU is a large trade partner, they must suffer from the trade war you mentioned.
A wild guess is that it is necessary to separate pure trade from other geopolitical effects.
On the trade side, shifting supply chains out of China back to the USA or to another labour abundant developing country like Vietnam should not affect demand for primary inputs. But if the prices of such goods increases or if the global economy slows-down because increased trade tensions, then demand for bothe the consumer goods and the primary inputs needed for their production will also decrease.
For exporters of food products, they are expected to gain market share in CHN (for example Brasilian and Argentinian soya).
Because US exporters of food and other black-listed products have to sell their stuff somewhere, you can expect a drop in the price of US exports as US exporters redirect to EU. Same should happen for Chinese exporters who will have to find other markets. Here, the impact of lower prices on developing countries will depend of their net importer/exporter situation. If they exports the same redirected products to the EU, they will suffer from the lower prices and increased competition on the EU market. If they are net importers of, e.g, food or steel and aluminium, then they gain.
On geo political aspects. We should also expect a return of OECD countries to more politically-oriented official assistance, to counter and mimick China’s foreign investment policy in developing countries. This means more string attached (projects implemented by firms belonging to the donor country, political conditions as far as the recipient country’foreign policy is concerned, etc). And more corruption...
This is just a wild guess, it is still too early to say.
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