Already 43 Countries Ban Exports... 'Economic Iron Curtain' Descends [Ukraine Shockwave③]

Professor Simon Evenett of University of St. Gallen
"Protectionist measures surged to 43 after the war"
Prioritization of national interests spread after 2008 financial crisis
UK Brexit and President Trump's 'America First'
Emphasis on economic security, revival of protectionism

U.S. President Joe Biden (left) and Russian President Vladimir Putin
[Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The discussion held on the afternoon of the 25th at the World Economic Forum (WEF) in Davos, Switzerland, was titled "An Economic Iron Curtain: Scenarios and Their Implications."

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), stated, "More frightening than the war in Ukraine or China's economic slowdown is the reality of increasing economic and political fragmentation."

Since Russia's invasion of Ukraine, an iron curtain has once again descended over the global economy. The West, including the United States and the European Union (EU), imposed strong economic sanctions against Russia immediately after the outbreak of the war.

The United States has already stopped importing Russian crude oil and gas, and the EU plans to halt imports by 2027. Russia is expanding trade with China, India, and others instead of the EU. After the collapse of the Soviet Union in 1991 ended the Cold War, global supply chains expanded worldwide without ideological distinction, but the COVID-19 pandemic followed by the Russia-Ukraine war has pushed these supply chains to the brink of collapse. The world is choosing self-reliance, and protectionism is making a comeback.

Kristalina Georgieva, IMF Managing Director
Photo by AP Yonhap News

◆ Surge in Protectionism = Malaysia will ban chicken exports starting next month on the 1st. India, the world's second-largest wheat producer and largest sugar producer, banned wheat exports from the 13th and limited annual sugar exports to 10 million tons. Indonesia, the world's largest palm oil producer, halted palm oil exports on April 28 but resumed exports from the 25th.

The United States and Saudi Arabia, traditional allies, are experiencing subtle tensions over increasing crude oil production. Despite repeated calls from the U.S. to increase oil production, Saudi Arabia remains indifferent. Italian Prime Minister Mario Draghi proposed an oil-importing countries cartel to counter the Organization of the Petroleum Exporting Countries (OPEC) during a meeting with President Joe Biden at the White House on the 10th.

Jennifer Granholm, U.S. Secretary of Energy, said on the 24th that President Biden does not rule out restricting energy exports to curb rising energy prices.

The IMF reported that more than 30 countries have restricted exports of food, energy, and other key raw materials since the outbreak of the Ukraine war. This is close to the 33 countries that imposed export restrictions during the severe global food crisis in 2008.

Simon Evenett, a professor at the University of St. Gallen in Switzerland, who separately compiles statistics on protectionist trade measures, stated that protectionist measures surged sharply this year following the Russia-Ukraine war. Professor Evenett noted that there are 47 export restrictions related to food and fertilizers this year, 43 of which were announced after the war began, indicating that protectionist measures were very few before the war but exploded afterward.

[Photo by Reuters-Yonhap News]

Voices of concern from companies worried about the spread of protectionism are also growing. In a survey conducted last month by the U.S. think tank The Conference Board and the European business interest group European Round Table of Industrialists (ERT), 80% of large European companies expected national security to become a top priority in more and more areas. They expressed concern about the spread of protectionism aimed at protecting their own countries.

Ilaria Maselli, senior economist at The Conference Board, pointed out, "Supply chain disruptions caused by Russia's invasion of Ukraine are strengthening protectionist tendencies worldwide," adding, "China, Europe, and the United States are reducing their interdependence."

◆ Globalism vs. Patriotism = In fact, since the 2008 global financial crisis, the tendency to prioritize national interests and resist integration has been strengthening amid repeated economic crises.

After the global financial crisis and the Eurozone debt crisis, the United Kingdom decided to leave the EU through a referendum in 2016. In the same year’s U.S. presidential election, the strong conservative Donald Trump, who advocated "America First," was elected president against all expectations.

In a UN speech in September 2019, Trump said, "The future belongs not to the Globalists but to the Patriots." The patriotism Trump referred to meant those who prioritize American interests.

The British daily Financial Times diagnosed last month that the French presidential election landscape had shifted from the traditional left and right to a confrontation between globalists and patriots. In the actual runoff election, Marine Le Pen, the far-right candidate of the National Rally who faced centrist President Emmanuel Macron, said, "There is no longer left or right," adding, "Now it is divided between patriots and globalists."

It was ironic that the terms left and right, symbolizing progressives and conservatives, originated from the French Revolution in 1789. President Macron advocated strengthening EU integration, while Le Pen insisted that France should leave the EU like the UK.

This trend is no exception in the United States. President Joe Biden declared upon his inauguration in January last year that America had returned to the international community. As the importance of economic security and securing supply chains has increased through COVID-19 and the Ukraine war, analysts say the U.S. cannot fully revert to the past.

Biden has strengthened cooperation with traditional allies, even hosting the Democracy Summit in December last year. He is also pushing to cut dependence on China and build a new supply chain centered on the U.S., launching the Indo-Pacific Economic Framework (IPEF) as part of these efforts.

China’s state-run Global Times criticized Biden’s international economic policy as a Democratic version of "America First," essentially the same as Trump’s policy.

◆ War Adding Fuel to Division = The Russia-Ukraine war can be said to be adding fuel to this divisive trend. On the 22nd, the IMF expressed concerns about global economic fragmentation in a blog post.

The IMF emphasized that over the past 30 years since the end of the Cold War, the flow of capital, goods, services, and people, powered by the spread of new technologies, has greatly transformed the world, improving quality of life, tripling the global economy, and lifting 1.3 billion people out of extreme poverty.

However, Russia’s invasion is dividing and fragmenting the global economy, making it harder for developing countries to build wealth by selling goods to advanced countries, the IMF analyzed.

Advanced countries will also have to pay more to purchase products, leading to inflation, it added. The IMF estimated that global division and the halt of technology exchange alone could reduce the GDP of many countries by 5%.

The United Nations World Food Programme (WFP) estimated that due to the prolonged Ukraine war, the number of people suffering from severe hunger will increase by 47 million, from 276 million to 323 million.

This content was produced with the assistance of AI translation services.