International expert who analyzes: This is how Israel can earn from the War of Trade

Irwin, who teaches in the prestigious pesica college, previously worked in Federal Reserb and was even a member of President Ronald Reagan’s economic council. He arrived in Israel as part of the Friedberg Institute of Economics Institute, which promotes economic freedom in Israel and the “Abraham agreements”. As someone who is also considered a leading economic historian, but it is natural that in order to explain how significant the globalization period that ended, he returns in time until 1815 – then Napoleon who led France to the occupation of most of the Western Europe and its center, was finally impaired among Waterloo.

“In the following years, there were a host of relevant inventions such as steam and telegraph ships, along with extensive movement of employees and capital,” he says. “In those years there was a slow but constant immigration in trade, but his penetration was not deep, and did not come to the most of the world.” In doing so, he means what is known today “Third World”, a term that refers mainly to low -development countries, whose entry into the global trade world was late – and the economic effects of it are still noticeable.

From the fall of communism to the subpragive crisis

Irwin returns to the first period of globalization, which ended with World War I, followed by global trade. “In the 1920s, it was re -construction, but it was stopped following the Great Depression, which began in 1929.

Immediately afterwards, Irwin explains, World War II, which again caused the states to convene within themselves, and did not allow global trade on a widespread scale. “Then, global trade recovered dramatically, but most of the world trade was still split between two blocks: liberal and communist. Third World countries were even more closed, with a concept that world trade is exploitative – but it hit their growth.”

The really big change came in 1989, when the communist bloc collapsed: “The Berlin Wall fell, Europe moved to a more economic model, and even China became more capitalist. India began to open, and it seemed that free international trade in ‘consensus Washington’ unite the world and linked all the ends of the year. Once, in the gap. ”

But as of the global recession that began with the U.S. subofaries, the increase in international trade was stopped. Today, the global trade rate is quite similar to that of 2006, in terms of the product. International, but definitely his stop. ”

In the previous interview of Irwin to Globes, in 2020, he has already admitted that the economists discuss whether we have reached the height of globalization. “There has been a huge expansion in trade for the past 20-30 years, which has been pushing, among other things, by a policy that has encouraged trade, and enabled the supply chains to develop,” he said. “But when you look at the extent of global trade as a percentage of global product, you see that it has been declining since 2011. This means that we may have reached a point of upside down.

Already at the same interview, which took place at the height of the inquiry of the Corona epidemic in the world and in Israel, Trump, who was the US president at the time, claimed “encouraged this development” – though Irwin Siege that she started before. “Even if there was no Trump, if the supply chains are diverted as injuries, trade would go down anyway,” he said.

On Trump’s steps: “It doesn’t look good”

As in the Cold War, the world begins to split into two separate blocks of trade, and according to Irwin the largest and most important factor is the US -China trade crisis.

In an interview with you in Globes in 2020, another warning of Trump could bring a real trade crisis. How do you see it today?
“It doesn’t seem good. Nor does there seem to be a significant change in China. In order to recreate global trade integration, we will need one of the two: or a policy of economic liberalization and free -trade orientation, or a great innovative technology, such as the standard container at the time that pushes the international trade very much.

And here’s a hard question: What trump is trying to get?
“The Trump has a relatively many destinations, and it also often changes them. He says customs will allow the US money to bring in tax download. He wants to bring back industries and manufacturers to the US, which previously moves to other countries.

The commercial deficit is the difference between exports, that is, goods and services that a state is recognized, as opposed to imports, that is, how much it buys. “The meaning of a commercial gap is an attraction of capital from the rest of the world. Trump doesn’t really see it,” Irvin explains. “For him, if countries do not buy from the US, they take advantage of it. He comes from a businessman’s perspective: no business can exist if he buys more than he is selling, and he sees the US as a business, but it doesn’t work. Because the difference is investment. ”

stage? In preparation for exports in the future, as well as the American government debt sold around the world. In fact, his reduction will also reduce the commercial deficit.
“Another topic that Trump promotes in his trade policy is to reduce other states on the US, and he uses counter -cover to push it. But on the other hand, he is also unhappy with the trade agreement with Mexico and Canada, which he himself signed, and he is a free trade agreement for all intents and purposes. He is also threatening to border, but it is unclear whether it is serious or just excuses in a trade war. ”

“The poor will pay much more than the richest”

Trump’s supporters face us to the 19th century, for a period that the US Federal Government revenue was mainly from customs.
“Indeed, capsules were 90% of the federal government’s revenue until the civil war, and about 50% of them until World War I. Is it relevant today? Just don’t. ”

why?
“The rule for achieving high income to the government is to collect a low tax on a wide basis. When you admit customs customary, the import of that product will simply decrease. Trade is very sensitive to it.

The choice of what to impose cover is not obvious, he says. “Trump chooses to impose cover on vehicles, for example, mainly because it is an iconic American industry. Still, Americans buy a lot more foreign vehicles than strangers who buy American vehicles. Trump sees it as fair,” he explains.

Who supports these goals?
“Of the industries, it is difficult to find support for the quota policy. It is true that the steel industry is supportive, although they are almost always anchored. The unions of the automotive industries also support, but honestly there is not much ‘bottom’ support in these programs. There is no broad movement from the bottom that supports the direction of closing trade.

The decline in international trade will make the world more poor? Who will mostly suffer from that?
“It should be borne in mind that customs are very regressive. Therefore, poor people will pay a lot more enrichment. Each country involved in trade will be affected, and we will all be poor as a result. Especially. ”

Another predictable effect that Irwin notes is that the tariffs will bring prices: “This is not inflation, which is a continuing price increase over time, but a one -off jump. The effect on growth will be smaller, and the US can ‘afford a’ trade war than other countries’.

But already, you can see dramatic changes in the capital market: the S&P 500 has dropped in more than 8%in the last month, and according to Irwin it happens “because the markets look forward.

How Israel will reduce risks and increase trade

How should Israel deal with a more protocard world? Are there ways we can earn?
“Israel has free trade agreements with the US and the EU, which is a very good basis, but not enough. You have to sign as many trade agreements as possible to diversify, especially with East and South Asian countries, and Latin America. And if there are options for signing peace agreements, it will open many more doors. ”

Indeed, a free trade agreement with Vietnam and South Korea were signed several years ago, and the Minister of Economy Nir Barkat is working to sign a similar agreement with India, though it is not yet on the horizon. “The more such agreements, the more it can reduce risks and even increase trade.

Regarding options to earn, Irwin says Israel can deepen its grip on industries with a global demand whose supply will be more difficult to achieve: “Israel as a high -tech center, both in the toilet and in production, can create great advantages. At least reliability. Israel can stand out for the better in this regard as a source. ”

Could a situation happen in which a trade war becomes kinetic, a war when it is simply?
“This is a difficult question, because the historical evidence is involved. In the West, it will make it difficult to invade Taiwan.

He also adds that “one of the reasons why democratic countries do not go to wars, is that they are committed to their citizens and their financial situation.” In doing so, he also refers to the USA of the United States, who are the main victims of the trade war: “Alliances are relationships. And a relationship is a long -term business. If Trump takes advantage of these relationships for short -term achievements – he puts the US in the position with fewer benefits in the future. ”

The future look is inconclusive, but the world seems to be facing a historic economic intersection. The trade wars leading to the US and withdrawing China into itself threatening to change the world. For Israel, the opportunity lies in its ability to adapt to the changing world.