Deglobalisation tops the agenda for world leaders

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Good evening,

Is the three-decade run of globalisation going into reverse? That is the concern for world leaders gathering in the Swiss city of Davos for the first time since the Covid-19 pandemic was declared.

The blame is being shared between the Ukraine invasion, disruption to supply chains caused by coronavirus lockdowns, recent market turmoil and the worsening economic outlook worldwide, according to company executives and investors interviewed by FT reporters.

FT columnist Rana Foroohar identifies another reason for deglobalisation, quoting from a paper by the economist Dani Rodrik: efficiencies created by trade coincide with a much larger redistribution of wealth — $50 for every $1 of greater trade efficiency — to the already rich.

“Globalisation isn’t inevitable, despite what we were told by politicians in the 1990s,” Foroohar writes. “In order for any political economy to work, it has to serve domestic needs.”

The world does appear to be forming into tighter alliances, reflecting the greater tensions between the US and China, and Russia and the west in general. Yesterday, President Joe Biden pledged to deploy US military support to defend Taiwan if China were to invade. He also agreed to strengthen America’s security co-operation with Japan against “China’s increasingly coercive behaviour” and the nuclear threat in North Korea.

Taking a different view, Kristalina Georgieva, IMF managing director, used her speech at Davos to defend global trade, urging countries not to “surrender to the forces of geoeconomic fragmentation that will make our world poorer and more dangerous”.

However, she did admit that international structures were being tested, particularly by the Russian invasion of Ukraine and warned that the global economy faces perhaps its “biggest test since the second world war”.

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Need to know: the economy

Joe Biden has signed a trade agreement with 12 Indo-Pacific countries aimed at boosting economic co-operation in the region while countering a more assertive China. Biden unveiled the Indo-Pacific Economic Framework, which includes nations that represent 40 per cent of the global economy, in Tokyo after meeting Prime Minister Fumio Kishida on his first visit to Asia as US president.

Latest for the UK and Europe

The European Central Bank’s eight-year experiment with negative rates will end within months, according to comments made in a blog by its president Christine Lagarde. She wrote that “based on the current outlook”, the institution was “likely to be in a position to exit negative interest rates by the end of the third quarter”. The deposit rate is now minus 0.5 per cent and has been in negative territory since 2014, when the region was facing a sovereign debt crisis.

The war in Ukraine, the refugee crisis and rising inflation have been such that EU member states are now bracing themselves for demands from Brussels for more cash, diplomats from the bloc have told FT reporters. The latest budget plans for spending of more than €1tn over a seven-year period.

The British government must “come clean” about the impact new nuclear plants will have on their energy bills, Sir John Armitt, chair of the National Infrastructure Commission, has said in an interview with the FT. Constructing such facilities would “inevitably add cost to bills” in the short term and would take “a long time” to deliver, Armitt warned.

Global latest

China’s ambition to become self-sufficient in chipmaking is being hampered by its lack of appropriate infrastructure, according to the head of one of the world’s largest suppliers of a material critical for semiconductor production. Eric Johnson, chief executive of JSR, a rare American leader at a Japanese semiconductor company, said it would be “very difficult” for China to develop cutting-edge chipmaking technology without such support.

Need to know: business

HSBC has suspended a senior executive pending an internal investigation over a speech he gave at an FT conference last week, according to people with knowledge of the matter. Stuart Kirk, who is global head of responsible investing at the bank’s asset management division, accused central bankers and policymakers of overstating the financial risks of climate change in an attempt to “out-hyperbole the next guy”.

JPMorgan Chase has updated its guidance on how much it will earn in 2022, anticipating that it will benefit from rising interest rates. The Wall Street bank now expects its core lending business to increase to more than $56bn, from at least $53bn previously.

American drugmaker Pfizer is seeking emergency authorisation in the US for its Covid-19 vaccine for children under the age of five after interim results from its clinical trial showed the jab is safe and highly effective. An approval would open up the last large market for the coronavirus vaccine.

The World of Work

Legislation giving workers the right to digitally disconnect from work is being introduced in countries across Europe. However, in France, which pioneered such laws in 2017, the “right to disconnect” has so far had a limited impact. Indeed, the pandemic has raised expectations that employees should be “always on”.

One of the things that made Covid lockdowns bearable was the decline in nuisance calls. But the cold call is back and appears to be worse than ever, perhaps because we were all enjoying its absence during the pandemic, says FT columnist Pilita Clark.

Covid cases and vaccinations

Total global cases: 519.1mn

Total doses given: 11.8bn

Get the latest worldwide picture with our vaccine tracker

And finally . . . 

A montage of transport options, including the Elizabeth Line
© FT montage

There has been much excitement about tomorrow’s opening of London’s Elizabeth Line, a £19bn east-west express underground rail route. But with passenger numbers falling on the capital’s existing network and working patterns in flux, could large-scale investment in metro rail become a thing of the past? The FT’s Big Read team investigates.

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