Political Issues to Watch in 2018 Throwback

The business backstory for 2017 is that geopolitics did not seem to matter—at least not the way they have in recent years. Major political tremors have rattled the United States, Europe, the Middle East, and Northeast Asia; the geopolitical balance of power between 카지노사이트 China and the United States is shifting; fake news has become a buzzword in many countries; and political polarization and fragmentation seem to be on the rise globally. Despite of all of this, the world’s economic outlook is the rosiest in years and global markets are flying high. Loose monetary policies and record borrowing have helped paper over political risks.

While the economic outlook is better, the global political risk super-cycle will persist into 2018. The United States, the United Kingdom, Saudi Arabia, North Korea, Brazil, Mexico, and Venezuela will be notable hotspots. More global governance challenges such as inequality, populism and extremism, truth in media, cybersecurity, free trade, and climate change persist as well.

Here are seven key country-level issues that investors and business leaders will need to pay attention to in 2018 in dealing with politicians and policymakers, stakeholders in society, and local business partners and competitors.

Globalization: Made in China

Consumers worldwide have become accustomed to seeing “Made in China” labels on everything they buy. This ubiquity was achieved largely by China becoming the world’s order taker, but the government is undertaking several changes to turn the country into an order maker.

First, Beijing is investing in sunrise technologies such as the internet of things, artificial intelligence, robotics, aerospace, and new energy vehicles. Its “Made in China 2025” blueprint aims to promote domestic innovation and brands, setting out to have Chinese firms control 80 percent of the domestic market in these priority technology areas within eight years. This coordinated and well-funded drive pushes the limits of trade rules and presents a competitive threat to multinationals. For example, the rapid expansion of solar power generation around the world over the past decade is due in large part to China’s development incentives, easy access to capital, and innovation in manufacturing that have led to the country’s overcapacity and falling prices for panel making. Western manufacturers that pioneered solar technologies are getting crushed. 바카라사이트

Second, China is exporting its prodigious engineering and construction capability across Asia and into Africa and Europe with its Belt and Road Initiative and the Asia Infrastructure Development Bank, with the intent of knitting its part of the world together and doing so on its terms. As such, Belt and Road should not be seen as market driven, but as an intensely political and geopolitical venture that has significant implications for multinational infrastructure and logistics firms, as well as changing the governance expectations of large infrastructure projects.

China’s reach into global commercial real estate is also expanding: Its outbound investment in massive real estate ventures is transforming the urban cores of cities such as Los Angeles, Vancouver, Brooklyn, and Sydney.

Finally, Beijing is repositioning itself as a superpower. President Xi Jinping no longer downplays the country’s global influence by asserting that China is a developing nation. At Davos in January 2017 and during the Communist Party congress in October, Xi presented China as a nation with strong, unified leadership and a well-defined plan for the future that will drive global growth and integration as well as play a more active role in multilateral institutions.

Brexit: Mind the gap

Brexit Day is March 29, 2019. London’s priority in 2018 will be to minimize disruption and downside for both sides—a tall order. The tight deadline severely limits how much and how quickly the U.K. can diverge from its current relationship with the EU and its other trading partners. Many issues will be deferred by hasty stop-gap measures that preserve much of the status quo ante for 3-5 years while permanent arrangements can be negotiated.

For example, setting up systems on both sides of the Channel to clear thousands of customs declarations per year will require hiring, training, and positioning thousands of inspectors—tasks officials have admitted will take several years to implement. In any event, the May government’s stumbles so far suggest that the coming year will continue to be punctuated by dire warnings from businesses and investors of gaps and impending trouble. 온라인카지노

Although the British have asserted that they are not European, their political leaders have no clear vision for what they want their country to be in the future.

According to a recent RAND Corporation assessment, every post-EU relationship option for the U.K.—Canadian, Swiss, Norwegian, Turkish, or WTO—promises to depress Britain’s long-term economic outlook. But economic dislocation is not the only challenge Britain faces. There is a diversion risk as well: Policymakers will be preoccupied with the transition for at least five more years, crowding out other important issues such as healthcare, housing, education, inequality, and innovation.

The bigger picture is that although the British have asserted that they are not European, their political leaders have no clear vision for what they want their country to be in the future. Should the public become disenchanted with it all, the Tories will face an existential crisis and the business community may also have to contend with a hard-left Labour government on top of a costly Brexit in a few years’ time.

Europe: Pulling together

Europe in 2017 was marked by the specter of nationalism and fragmentation, but growth across the EU accelerated. While the far right progressed in Germany and Austria and had a strong showing in France, voters and politicians largely chose the path of pragmatic leadership. Going into 2018, policymakers want to get past Brexit as soon as possible so they can focus on their own grand projects to remake the continent.

Rather than expecting the EU to fall apart in 2018, expect it to pull together, which will support investor and business optimism. Angst voiced during the last few weeks over Chancellor Angela Merkel’s difficulties in forming a government has been overblown. Pragmatism and responsibility, not grandstanding and polarization, underpin Germany’s political culture. A key difference is that Merkel will be looking to cement her political legacy and the new government is likely to support closer Franco-German cooperation to address European challenges. Tighter eurozone integration will be on the 2018 agenda.

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