{"id":8634,"date":"2024-09-27T09:26:46","date_gmt":"2024-09-27T08:26:46","guid":{"rendered":"https:\/\/blogs.sussex.ac.uk\/uktpo\/?p=8634"},"modified":"2024-09-27T09:27:31","modified_gmt":"2024-09-27T08:27:31","slug":"do-developing-countries-have-a-say-what-the-green-subsidies-race-tells-us-about-the-future-of-geoeconomics","status":"publish","type":"post","link":"https:\/\/blogs.sussex.ac.uk\/uktpo\/2024\/09\/27\/do-developing-countries-have-a-say-what-the-green-subsidies-race-tells-us-about-the-future-of-geoeconomics\/","title":{"rendered":"Do developing countries have a say? What the green subsidies race tells us about the future of geoeconomics."},"content":{"rendered":"Share this article: <\/em> \"Facebook\"<\/a>\"twitter\"<\/a>\"reddit\"<\/a>\"pinterest\"<\/a>\"linkedin\"<\/a>\"mail\"<\/a>

\"\"27 September 2024 – Ana Peres is a Lecturer in Law at the University of Sussex and a member of the UKTPO.<\/em><\/p>\n

Lawyers, economists and political scientists are increasingly using a new term to frame discussions on current trade relations and policies: geoeconomics. This means that countries are intervening in strategic economic sectors not primarily for profit but to ensure autonomy, build resilient supply chains and secure access to valuable capabilities. Such approach contrasts with the ideals of free trade, market access and interdependence that shaped international trade for decades. These traditional ideals, even when supported by a so-called \u2018rules-based system\u2019, always posed challenges for developing countries to meet their objectives. So, what does geoeconomics mean for developing countries? Unfortunately, it threatens to sideline them even more.<\/p>\n

Consider one of the main areas where geoeconomic strategies are at play: the development of clean technologies. Governments are implementing industrial policies<\/a> to secure access to critical raw materials, an input for electric batteries, and to protect domestic production of electric vehicles (EVs). Such policies often require substantial subsidies. Recent discussions at the WTO Public Forum highlighted that a clear distinction between \u201cbad\u201d and \u201cgood\u201d subsidies is not only desirable but essential to deal with many of the new and standing issues in the organisation. Beyond the question of their legality, we need to consider which countries have the financial resources to engage in this new wave of industrial policies \u2013 and what happens to those that do not. For instance, the UK’s former Conservative Secretary of State for Business and Trade, Kemi Badenoch MP, stated that the UK government would provide \u201ctargeted support (\u2026) looking at what we can afford (\u2026)\u201d<\/a>. If the UK, as a G7 economy, is concerned about affordability, developing countries face even greater challenges in this context.<\/p>\n

An analysis<\/a> of the proposed \u201cClean Energy Marshall Plan<\/a>\u201d suggests that a Harris administration in the US could use industrial policies to make developing countries dependent on US exports of clean technologies. Chinese foreign direct investment (FDI)<\/a> to Latin America is shifting to \u201cnew infrastructure\u201d sectors, such as energy transition. The EU signed a memorandum of understanding with Chile<\/a> to promote sustainable raw materials value chains. All these developments reflect the geoeconomic trend, by prioritizing autonomy, resilience and access for wealthy countries, at the expense of those objectives for poorer countries.<\/p>\n

Resource-rich developing countries are not defenceless in this geoeconomic world<\/a>. For instance, Chile is one of the world\u2019s largest suppliers of lithium (around 80% of all EU imports<\/a>). The Chilean government\u2019s response, creating the National Lithium Strategy<\/a> to strengthen control over its reserves and maximise their benefits, offers a glimpse of one path resource-rich developing countries may follow. Similarly, Southeast Asian countries<\/a> like Indonesia and Malaysia are trying to capitalise on the EV industrial policies of the US and China.<\/p>\n

These examples show the power dynamics underlying international trade flows. While geoeconomics brings power and politics to the fore of current trade relations, it does not introduce them to the existing trade order. The process leading to the creation of the WTO and the surge of free trade agreements during the 1980s and 1990s reaffirmed the rule of law as central to promoting trade liberalisation. A rules-based framework should favour the stability and predictability of the global trading system, enabling countries to negotiate new topics and settle trade disputes. However, even in this \u2018traditional\u2019 WTO-led approach, law and power are closely linked. Restricting the role of power in trade agreements and institutions does not eliminate it from trade rules and negotiations. Developing countries have long struggled to have their voices heard in trade rulemaking and negotiations. For them, it has always been political.<\/p>\n

The novelty of the geoeconomic framework is the recognition that economic and geopolitical powers are intertwined in policymaking. Governments are implementing policies beyond trade, covering areas like environmental protection, defence, health, and digital technologies. Geoeconomics shows how states use their economic and political power to achieve domestic goals and assert or maintain global leadership.<\/p>\n

While geoeconomics is useful for describing the current context, it has not yet adequately addressed the position of developing countries. Like many frameworks applied to international trade, geoeconomics explains trade relations and trends from the perspective of the main players. In this case, the US, China and, to a lesser extent, the EU. Tensions between the US and China are driving a new division between allies and adversaries. This raises important questions: who decides which countries are friends or foes? Can \u2013 or should \u2013 developing countries take sides? What are the potential consequences? Could developing countries leverage the conflict between the world\u2019s two largest economies to strengthen their positions? What will happen to developing countries that are not resource-rich? These will become defining questions for developing countries in the era of geoeconomics.<\/p>\n

During the Cold War, the polarisation of global powers led third world nations to advocate for a New International Economic Order<\/a>. They understood that their interests were sidelined in the global debate driven by ideological and political conflicts between the two superpowers. At the WTO Public Forum, the possibility of \u201cthird nations\u201d or \u201cmiddle powers\u201d guiding multilateral trade efforts was raised, as an alternative to overcome the stalemate created by the clash between the US and China. However, such a heterogeneous group will have to find common ground if they move forward without the two biggest world economies. That is no easy task. This is why including developing countries in discussions about the geoeconomics of trade is so important today \u2013 to ensure their concerns are not overlooked or marginalised as they once again risk being caught in the middle of power struggles that threaten to leave them powerless. \u00a0<\/p>\n

\n

Disclaimer:<\/em>
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.<\/em><\/p>\n

Republishing guidelines:<\/em>
The UK Trade Policy Observatory\u00a0believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement.\u00a0For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons\u00a0license. This means you CANNOT republish our articles online or in print for free.<\/em><\/p>\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Share this article: 27 September 2024 – Ana Peres is a Lecturer in Law at the University of Sussex and a member of the UKTPO. Lawyers, economists and political scientists are increasingly using a new term to frame discussions on current trade relations and policies: geoeconomics. This means that countries are intervening in strategic economic sectors not primarily for profit but to ensure autonomy, build resilient supply chains and secure access to valuable capabilities. Such approach contrasts with the ideals of free trade, market access and interdependence that shaped international trade for decades. These traditional ideals, even when supported by a so-called \u2018rules-based system\u2019, always posed challenges for developing countries to meet their objectives. So, what does geoeconomics mean for developing countries? Unfortunately, it threatens to sideline them even more. Consider one of the main areas where geoeconomic strategies are at play: the development of clean technologies. Governments are implementing… Read More<\/a><\/p>\n","protected":false},"author":401,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[129970,130195],"tags":[148044,133698],"_links":{"self":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/8634"}],"collection":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/users\/401"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/comments?post=8634"}],"version-history":[{"count":2,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/8634\/revisions"}],"predecessor-version":[{"id":8637,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/8634\/revisions\/8637"}],"wp:attachment":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/media?parent=8634"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/categories?post=8634"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/tags?post=8634"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}