A12 EZ RE THE WASHINGTON POST.MONDAY, MARCH 7 , 2022
war in ukraineIndeed, the United States since
2018 has been limiting the flow of
high-tech g oods to China and rais-
ing tariffs on Chinese imports.
Chinese authorities, watching the
United States and its allies delib-
erately shove Russia into a deep
recession, are expected to intensi-
fy their efforts to become more
self-sufficient in production of
goods such a s semiconductors.
The United States, too, is mov-
ing in that direction with Presi-
dent Biden’s “made-in-America”
initiative designed to spur domes-
tic manufacturing.
China’s economy, however, is
10 times the s ize o f Russia’s and is
far more intertwined with the o ut-
side world — making it unlikely
that Beijing or its trading partners
would seek a complete divorce.
The war’s i mmediate impact on
the U. S. recovery is likely to be
limited. Total U. S. two-way trade
with Russia and Ukraine last year
amounted to $40 b illion, and Wall
Street banks have less than
$15 billion at stake in loans to
Russian borrowers.
But there will be collateral
damage from the sweeping U. S.
and allied sanctions that have
slashed most of Russia’s links to
global trade a nd finance. Gas pric-
es in the United States, which n ow
average a nine-year high of $3.
per gallon, may soon smash $4,
according to Capital Economics.
Russia also is a major producer
of other commodities, including
wheat and industrial metals. The
price of palladium, which is used
to make catalytic converters, is up
more than 60 percent this year for
automobiles.
Renewed supply chain disrup-
tions also will put upward pres-
sure on inflation. Both Federal
Express and United Parcel Service
have halted shipments to and
from Russia. Maersk, the giant
ocean cargo carrier, stopped ac-
cepting new bookings this week
for Russia-bound goods, causing
cargo to begin piling up at termi-
nals across Europe.
“Cargo is getting delayed and
our already congested transship-
ment hubs are getting more pres-
sured,” Maersk said in a customer
advisory. “This is a global impact,
and not only limited to trade with
Russia.”financial flows have virtually stag-
nated even as the global economy
grew about 30 percent larger since- Top banks have $31.1 tril-
lion in foreign exposure today,
little more than the $30.4 trillion
in early 200 8, according to data
from the Bank for International
Settlements in Basel, Switzerland.
Financial markets that once
rose and fell in near lockstep are
increasingly going their own way,
according to MSCI research. A
decade ago, markets in different
regions moved together about
80 percent of the time. Today, the
correlation is a bit more than
50 percent, reflecting “less of a
globalized economy,” a ccording t o
Peter Zangari, MSCI’s global head
of research and product develop-
ment.
It’s not that globalization is
over. But it will b e different.
“It’s closing the door on a c hap-
ter that never had a strong intel-
lectual basis,” said economist Jo-
seph Stiglitz of Columbia Univer-
sity. “It won’t be the same. What
we’re going to see is a process of
delinking, disengagement. B ut it’s
going to be slow, particularly in
the case of China.”
more than two decades, global
poverty increased, according to
World Bank data. Russia’s reces-
sion will intensify that trend, in-
cluding in the Central Asian re-
publics that once were part of the
Soviet Union. Remittances from
migrant workers from Central
Asia who work in Russia make up
about 30 percent of the economy
in both the Kyrgyz republic and
Tajikistan and are almost certain
to plummet as Russia plunges into
a deep recession and the ruble
sinks.
“We moved out of that benign
era a while a go. But this [war] h as
brought it home very forcefully,”
said Carmen Reinhart, chief econ-
omist for the World Bank. “The
golden era for globalization e nded
with the global financial crisis in
2008.”
Global trade and f inancial l inks
also h ave plateaued.
World trade volumes would be
nearly twice as high today if they
had continued on their 200 0-
2008 path, according to data from
CPB Netherlands Bureau for Eco-
nomic Policy Analysis, an inde-
pendent research institute.
Likewise, major cross-bordering to import one of democracy’s
most cherished values: economic
freedom,” Clinton said at t he time.
“The more China liberalizes its
economy, the more fully it will
liberate the potential of its people
— their initiative, their imagina-
tion, their remarkable spirit of
enterprise. And when individuals
have the power, not just to dream
but to realize their dreams, they
will d emand a greater say.”
Hopes for a steady forward
march of free markets and free
people have proved unrealistic.
Globally, d emocracy is down. Pov-
erty i s up.
The number of countries con-
sidered “ not free” by the nonprofit
Freedom House and those with
annual average economic growth
of less than 3 percent have risen in
tandem.
Even before the pandemic
drove the developing world into
deeper poverty, about 70 percent
of the world’s countries were ex-
periencing subpar growth, rough-
ly three times the figure in 2008,
according to the World Bank.
Nondemocratic rule similarly
spread across much of the globe.
In 2020, for the first time inmore than a decade of erosion in
globalization, beginning with the
2008 financial crisis and continu-
ing through the rise of Xi in 2012,
the U. S.-China trade war that be-
gan in 20 18, and diplomats’ re-
peated failures to agree on trade
liberalization. The coronavirus
pandemic, which highlighted the
risk of ocean-spanning supply
lines and restricted international
travel, further thinned cross-bor-
der links.
Together, Russia and Ukraine
account for 3 percent of global
output, according to JPMorgan
Chase. Putin’s brutal invasion of
his neighbor, however, will have
broad economic repercussions,
economists and government offi-
cials said.
“There’s a chance — which in-
creases with every human rights
outrage that Putin commits —
that Russia is shut out of the
global economy for a long time. ...
You are removing this big chunk
of the global economy and going
back to the situation w e had i n the
Cold War when the Soviet bloc
was pretty much closed off,” said
Maury Obstfeld, an economics
professor a t the University of Cali-
fornia at Berkeley. “But that
doesn’t mean the rest of the world
can’t be tightly integrated in
terms of trade a nd finance.”
Expectations for an enduring
era of peace and prosperity were
high in the early 199 0s. After the
Soviet Union ceased to exist in
December 1991, Russia embarked
on a helter-skelter series of eco-
nomic reforms, including estab-
lishment of the country’s first
stock market, and welcomed for-
eign investors.
China, meanwhile, was also
moving along a market-oriented
path that relied upon access to
foreign technology, capital and ex-
ecutives.
From the o utset, many U. S. offi-
cials saw a link between political
and economic freedom. By 2000,
when Congress was debating Chi-
na’s entry into the World Tr ade
Organization, President Bill Clin-
ton saw trade ties heralding “very
profound change,” including in
the country’s political system.
“By joining the WTO, China is
not simply agreeing to import
more of our products; it is agree-under President Xi Jinping co-ex-
ists with extensive commercial
ties to the United States, Europe
and Japan. But governments, cor-
porations and investors all are
adjusting to a new reality.
“It’s the end of one era and the
beginning of another, which is a
less complete form of globaliza-
tion than we had ambitions for in
the immediate post-Cold War
era,” said Michael Smart, manag-
ing director of Rock Creek Global
Advisors. “We have to think differ-
ently about what we mean by the
global trading system. There are
certain requirements that, if you
don’t meet them, you’re not part of
it. You can’t b e in the club.”
With t he United States, E urope,
Canada, Britain and Japan unit-
ing to punish Russia w ith unprec-
edented financial sanctions, the
war has triggered a “major geopo-
litical realignment” akin to the
aftershocks from t he 9/11 terrorist
attacks, according to Citibank
analysts.
Virtually overnight, most ma-
jor Russian banks were blocked
from moving money across bor-
ders. Moscow’s stock market has
been closed for a week. Russian
customers are cut off from much
of the world’s most advanced t ech-
nologies.
On Friday, Russia’s isolation
deepened as the country’s com-
munications regulator blocked
access t o Facebook, one o f the few
sources of information that the
government already did not con-
trol, saying it had discriminated
against Russia media.
In Washington, top Democrats
and Republicans have begun de-
manding that the United States
stop importing oil from Russia, a
move that would intensify Mos-
cow’s financial plight if European
nations followed suit. Meanwhile,
the International Monetary Fund
warned Saturday that the war and
rapidly accumulating sanctions
on Russia would “have a severe
impact on the global economy.”
“This event does seem to be one
that is a game changer and will be
with us for a very long time,”
Federal Reserve Chair Jerome H.
Powell told C ongress last week.
Russia’s financial exile caps
ECONOMY FROM A
Soaring gas prices, shifting trade choices after invasion suggest a lasting impact
ANDREY RUDAKOV/BLOOMBERG NEWS
Customers wait a t a currency exchange kiosk in Moscow on Feb. 2 8. Most major Russian banks were
blocked from moving money across borders, and Moscow’s stock market has been closed for a week.Thursday, March 10 at 10:30 a.m.The Treasury Secretary discusses the COVID-hiteconomy, Russian sanctions and the geopoliticalramifications of the Biden Administration’sbroader economic agenda.To register to watch, visit:wapo.st/yellenmarch202 2 orscan code below using asmartphone camera:Listen wherever podcasts are available.@POSTLIVE #POSTLIVE