Bruegel 72d ago

❓ Why are global imbalances rising, and why does it matter? 🔴 "Even if China were to do all these things, advanced countries, and particularly Europe, would still face enormous Chinese competition, particularly in international markets, but everywhere, simply because China has moved up the value chain. It now knows how to do the stuff that it didn't 15 years ago. 🟠 And so, in that sense, China is the new Germany. And that's going to be a problem for Germany regardless of whether China plays fair or doesn't play fair. It’s going to be worse for Germany if China doesn't play fair. And so, by all means, the G7 should push China to make these adjustments. But the important thing to remember is that the G7 in general and the European G7 in particular that are most exposed to this direct competition with China in international markets and to an increasing extent in the EU market, they need to do adjustments. It’s not just a matter of building protective walls. You also have to change the structure of your industry. And of course, the problem is that if you protect a lot inside the EU, you will probably slow and distort this necessary adjustment. 🟡 So, the whole art is going to be how to balance protection, some degree of protection, which we do believe is necessary. And we talk about how you do it. You should do it in a WTO consistent way with this adjustment. And unfortunately, the entire discussion in the EU right now is only focused on protection. It's all about, to quote a recent report by the French Commissariat for Strategy and Planning, it's all about slowing down this Chinese steamroller. 🗣️ Jeromin Zettelmeyer in conversation with Rebecca Christie and Beatrice Weder di Mauro discussing "The New Global Imbalances", a new joint @cepr and Bruegel Paris Report. 👂 Listen to the podcast now!