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The World Economic Forum is Davos has been awash with a green trade row.
Last summer, when the U.S. Congress passed Joe Biden’s Inflation Reduction Act, it was a good idea. The act gave billions of dollars in tax breaks to people who buy electric cars and other products that are good for the environment. These subsidies are aimed at helping grow the green economy in the U.S. and fight climate change.
But many European countries are upset that these subsidies will only be available to people who buy products made in the United States. They think it’s a thinly veiled attempt to get a piece of the high-tech manufacturing market in Europe and Britain by getting European companies to move factories to the U.S.
The weather in the Alps has changed this winter, and it’s not just because it snowed for the first time after December was warm.
Every year, CEOs and government ministers from all over the world come to Davos, Switzerland, for the World Economic Forum (WEF). In the last three years, the world economy has been hit by a lot of shocks, and much of the focus has been on how to deal with them.
Pandemics and wars have caused record inflation and rising debts, from Wuhan’s wet market to the Kremlin’s crazy math. As a result, a third of the world will likely be in a recession this year.
But there are signs that things are going to get better. Even though a ski resort full of world leaders sounds far away, WEF is where you can find out if a storm going on for three years will start to calm down.
Some signs show that the first signs of rising inflation in the world economy are starting to get back to normal. The supply chains for the parts and ingredients that go into the things we buy have been fixed after getting backed up during the pandemic.
For example, because of this change, Elon Musk’s company Tesla cut the prices of its electric cars last week. The price of shipping is going down because of this. And China’s “great reopening” after the pandemic should, in theory, help the world economy because it means the end of strict zero-Covid lockdowns and restrictions. But widespread infections are so bad for health that it does not matter.
Even though inflation worldwide is still high, it has reached its highest point. Yet, it’s amazing that most of Europe has been able to stop using Russian gas in less than a year by building temporary terminals to process liquid gas shipped from Siberia, so it doesn’t have to rely on pipelines.
Green trade war in Davos?
But now, new tensions make people wonder how much inflation will go down and worry about where Britain fits in a world that has changed a lot.
A green trade war across the Atlantic is a big worry in this situation. Joe Biden’s new bill to boost the green economy in the United States includes subsidies of £300 billion for buying electric cars, but only if most are made in North America. The Inflation Reduction Act also affects a wide range of other manufacturing and production, and it is causing some European companies to move factories to the U.S. Fertilizer companies are scratching their heads and wondering why European leaders don’t make similar laws.
The U.S. says that its new laws are meant to give China a run for its money. But the E.U. leaders are angry and ready to respond, possibly with big subsidies of their own that will probably also have “Buy European” clauses.
What should “global Britain” do if the three largest trade blocs try to out-subsidize each other? After Brexit, when Boris Johnson left Europe’s single market, Britain tried to “re-engage” with the rest of the world. But the “globe” is not the same as it used to be.
Would the U.K. follow the “buy European” rules set up by the E.U.? In a letter to the White House, the government expressed some worries, but it’s unclear what Britain’s plan is or if it even has one. It’s not just about using less carbon to make things. Recent efforts to bring microchip production back from East Asia show that the U.S. and E.U. are also trying to split up.
This new split at Davos could change where things are made and how much they cost. It is the exact opposite of what everyone at the World Economic Forum has agreed on for decades. So, right now, a lot is up in the air.
And finally, many business leaders spent Christmas shocked by how much money the new artificial intelligence platform ChatGPT 3 could save their companies. ChatGPT 4, the next version of this technology from OpenAI, could be so big that it would throw the world economy for a loop. It will be a huge step forward for technology but will also make millions of jobs obsolete.
Read Also: Amazon workers claim robots are treated better
This week, policy and investment decisions will be made at Davos that could change the direction of the world economy and have a big impact on all of us. This is because of the war in Europe, the reopening of China, and a long-awaited technological revolution.
