International Economics: IB Economics

Part of the geopolitics of trade, with the Dutch government announcing that it is going to restrict chip exports on national security grounds. The move is thought to be part of a US-led series of measures to restrict Chinese access to semi-conductors. 

The prospects of an end to the US-China trade war is unlikely, with the Americans strengthening curbs on China's ability to buy certain computer chips, in the hope of limiting its access to so-called "sensitive technology". 

In studying protectionism, we've looked at national security arguments and economic nationalism and the general view is that both offer shallow, if any justification for intervention. But is this case different? 

Protectionism v legitimate national security concerns? You decide...

The President is at it again - having threatened Chinese social media giant TikTok, it seems that one of his supporters, Oracle's President, Larry Ellison, is part of a group looking to buy TikTok's operations in North America and Australasia. And no doubt at a knockdown price too. 

Just remember - "We're All in This Together"...

Protectionism takes many forms, and the 'national security' argument is one of the most insidious. Is Huawei really a threat to national security or is this another prong of the US-China trade war?

It seems that the US isn't the only country with national security concerns dictating its trade policy: New Zealand has chosen to block the use of Huawei's telecoms equipment in its domestic telephone network. The Head of New Zealand's security services has suggested that this could compromise national security and a new provider of equipment for the 5G network is being sought.   

President Trump puts forward another "national security" argument - this time in an attempt to provide a reason for blocking China Mobile in the US.

The Dutch government are going to introduce restrictions on some microchip exports because if fears that they can be used by foreign powers in a way that imperils national security, following the US example. 

Observers think that this will have a marked effect on US-China relations and, in reducing trade will also impact the global economy. 

And you thought the US-China trade war was over? Another example of how the Biden administration have, in some senses, continued to hold the Trumpian position as regards China. This time, the Chinese tech firms are being excluded on national security concerns, rarely a strong 'economic' argument.

Interesting EU-based story, in response to the global computer chip shortage, the EU is planning on a more interventionist industrial policy to try and increase the number of chips produced in the EU to 20% of the global total.

It might seem that this runs contrary to the the principle of comparative advantage, but increasingly things like chips and super-conductors are being seen as strategic resources. 

And here's the rhetoric getting in the way of the economics.

The fact that President Trump mentions Huawei in this context somewhat invalidates the 'national security' arguments that have been advanced so far. It seems as though Huawei is a 'test case' to see how much China is prepared to compromise to allow one of its largest, and well-known, firms access to global markets.

It seems that the UK too, is looking to limit Huawei's access to its 5G network, in keeping with the precedent set by the US and New Zealand.

A reasonable action, designed to protect national security, or another example of unjustified protectionism? If the latter, this sort of intervention is unjustified, and among the most pernicious forms of protectionism, if only because it seems to be unpredictable.