The pandemic, with its sharp deregulation of production and international trade, and the war in Ukraine that disrupted the global energy supply, signal that “the game is changing the rules of the game” on many levels. In the past, energy crises and even wars disrupted the global economy, but after the storm subsided, the world was back to normal, with the dividing lines intact. Now the workings are acquiring the features of tectonic changes.

The era of protectionism is back. America, following Trump’s tariffs on Chinese imports and Biden’s law to restrict high-tech exports to China, is pushing ahead with a plan known by the initials IRA. It is allegedly aimed at providing subsidies for the development of green technologies. This is where any resemblance to the policies more or less adopted by most advanced economies stops. The IRA plan states, without asterisks or exceptions, that it subsidizes any manufacturing activity to be carried out in the US and additionally subsidizes the repatriation of US businesses. This policy returns to the old practices based on protectionism and productive self-sufficiency.

Next comes the European Union. He proposes to create a special fund for state aid to industry. It is aimed, like America, at the development of renewable energy technologies, as well as strategic sectors of industry. This is a blatant attempt to encourage industry to invest in the EU. and offer incentives for repatriation from third countries. Australia, Canada, Japan and South Korea are moving in the same direction. The size of these programs is dizzying. According to preliminary estimates, they amount to 2% of the GDP of these countries – almost the same as their defense spending.

It is noteworthy that the plan of EU Competition Commissioner Margrethe Vestager provides for a proportional distribution of resources and subsidies to ensure the most balanced development within the EU. Ms Vestager has now been joined by Single Market Commissioner Thierry Breton, who has demanded the creation of a special European fund that will finance state aid to businesses in the EU-27, wherever they are. It also opens the door for Member States that do not have the financial capacity to help their industries, such as Greece. German Chancellor Olaf Scholz supports these measures with all the ensuing consequences.

China is reacting. He expected a complete restart of his economy after the pandemic. What he really wants, he stated most forcefully at the recent successive meetings of the largest seven (G7) and largest 20 (G20) economies of the planet, as well as at the Asia-Pacific Economic Cooperation (APEC) summit. Summit), in which 21 countries take part. It emerges as a new global force, a force that offers cooperation, development of economic and trade relations, respect for the political and ideological characteristics of each country.

EUROPEAN UNION. and the United States, defenders of free trade, are increasingly becoming “protectionist.”

Obviously, it realized that at this stage any form of economic separation from Western economies would be disastrous for its economy. He knows that interdependence with the West is both beneficial and dangerous.

This is how tectonic shifts are fixed. The United States and the EU, champions of free trade, are increasingly acquiring the features of “protectionism”. China is moving in the opposite direction. It selects and promotes the open horizon economy. He counts on free competition and reconstructs his production using advanced technologies and improving product quality.

Will China withstand a frontal attack by the US and the EU? The answer must be yes. The Chinese model has decompression valves. It can maintain the strong economic momentum it has shown in recent decades. China is protected by its huge domestic market, which offers unlimited potential and business opportunities for autonomous growth. President Xi Jinping at the last CCP Congress spoke about the policy of redistributing wealth. Not necessarily as a return to socialist principles, but as a need to increase the income of a significant percentage of the population so that it has the conditions for moving into the ranks of the middle – consumer – class. This is a policy that ensures the stability of the system from the inside. Within ten years, China is expected to become more like the economy and society of the West. Let’s not forget that despite economic progress, China’s per capita income is just over $10,000 a year, which is about 1/6 of the US and 1/4 of the EU.

Finally, there is also an epimyth about Greece. We must understand that the EU, in the context of the changes we have described, is gradually moving from income subsidies due to the pandemic and the energy crisis to subsidizing production. In this context, Greece should claim a share in the European distribution of production in order to use European resources for production units with medium and high potential.

Mr. Giorgos Stoumpos was Professor of Political Economy and Executive Director of the Bank of Greece.