Shanghai FORUM 2019丨Paulo Portas:

Author: Release date:2020-01-10 16:47:27Source:+Add to My Favorites

Paulo Portas, Former Deputy Prime Minister of Portugal

Good Morning, everybody,

Dear Chairman of the University Council,

Dear President of the Fudan University,

Dear President of Korea Foundation for Advanced Studies,

Dear President of Fudan Development Institute,

Dear ambassadors, councils and diplomats,

Distinguished guests,

And if you will allow me, my dear former colleague of government, Miguel Poiares Maduro,

I will be a little bit back to the US-China issue, with a mix of history, economics and geopolitics. Actually, I teach geo-economics because I think it's the best approach to modern geopolitics. International relations are more economic than ever.

Yes, the world changed radically in the last 40 years. We have a new economic order. But 40 years were not sufficient to build a new political order, so we have a new economic order, and for the moment, a global political disorder. So we have to make an intense effort to re-think, to reshape the global political rules of our world. I will try to show why China, specifically, and Asia, generically, serve globalization better than any other country or region of the world, and why China surprise the world on digitalization. I want to underline that globalization and digitalization are frequently used as one single concept. They have parallel lives but these are different concepts. You can stop for some moment globalization, but you cannot stop digitalization. That's the main difference.

First of all, I want to call your attention to what happens in this 40 years. Asia is now in charge of 45% of global growth; 40 years ago, it was around 20%. So if we have a problem in Asia, we will have a consequence in the rest of the world. If you want to focus on China itself, the rise is apparent with the last one. China, if you consider the IMF recommended GDP adjusted by PPP, is now responsible for something like almost 19% of global growth and it was less than 10% 40 years ago. I insist 40 years are nothing in humankind's history, but they were enough to provide this change.

If you consider all the continental economies, the regional economies that are exposed to the trade of goods and services, to the core of globalization—globally selling and globally buying goods and services, you will understand why Europe is very exposed to a global trade war because Europe is a top exporter economy, why, on the other hand, China is more exposed, namely on goods, to attention than the United States. It's a matter of fact that the fuel of globalization was trade and is trade. Not only in 40 years, the trade volume of goods grew 10 times, in 40 years 10 times, but more significantly, I want to ask some of your attention to this, not evolution, but revolution. In the 80s, China had 0.9% of global share of trade of goods. Last year, 12%. China becomes the No.1 exporter of goods of the world, nothing less than No.1 exporter of goods of the world. That's why I always try to teach my students that they should understand that, yes, Mikhail Gorbachev, Ronald Reagan, Margaret Thatcher and John Paul II changed a part of the world in the 80s last century, but in the other side of the world, Deng Xiaoping changed China. Changing China, he changed Asia. Changing Asia, he changed the world.

I also underline that this is not only the rise of China. This is also very solid, if you consider Asia as a bloc. And then, some in the streets of Paris, may be discomfortable with this new world. Some people in some factories in the United States may be discomfortable with this new world. But pay attention, it's a much more balanced and fair world. Now the economic influence are not only North-North, or West-West. It's North-South, West-East, and East-South, and North-South.

I also want to call your attention to what I could define as a scale impact. If you consider the largest top ten companies of the world, 30 years ago in 1990, all the flags were American. The first difference thirty years later, you have more diversity in the flags. In my opinion, that's not a bad thing. But what impresses me more is not exactly the question of the flags. It's that the first company in the 90s in terms of the revenue, wouldn't be in the top ten now. Just compare the revenues. So that's why the process of fusions and acquisitions are growing organizations in such a dimension that probably one day we will regret this kind of scale because it's very difficult to control and very difficult to leave. If it is obvious that China serves very well globalization, if we go to digital, it is even more impressive. And this is impressive, first of all, to Europeans. In the top ten digital economy, Europe is for the moment out of the Champion's League. This is a competition between China and the United States. Year after year, you will have six American or seven American companies and three or four Chinese companies. The first European company—it sounds very good for music—Spotify, however, is not in the top ten. That should worry Brussels, not exactly where to tax Apple, but why the European capitalism is not being able to build and provide a global player on digital economy.

And by the way, the resentment against globalization and new economy, I insist, is a little bit an American-European resentment. I never heard a serious discussion against globalization in Africa, in Asia, or in Latin America, because these regions of the world are net beneficiaries of globalization, of a more fair and balanced world. This line was sent to me from an African friend with hope in globalization and digital world. Our Africa will change very quickly, namely in terms of migration, with seven hundred million smart phones in 2020 and free trade agreement between 54 African countries.

Try to find the place of China 20 years ago in data traffic. Can you find it? I think you can find it in 2016. So the potential growth in the digital market is very large in Asia and in China itself, as you know. But what I want to underline is the last world intellectual property organization register of patents in 2018. The reason why I say China surprises the world is exactly because China is very close to overcome the United States as the first register of patents in the world. If you look at this not by countries but by companies, who is the largest investor in R&D in the world? Huawei. From the 53,000 patents of China, 5,000 are from Huawei. Guess why you have this technological war. That being said, this is just a measure of speed on even the e-commerce. Can you imagine in less than 10 years, in a decade, our China become the real challenger of the United States in unicorns, in e-commerce and mobile payments? So I would just call your attention to just one consequence. With this change in the geo-economics, obviously geopolitics change. You cannot imagine the world of this more recent slides with the same balanced organization 20 years ago. This is the first thing I want to show you.

The second is why in my opinion—it's a friendly opinion—Portugal is one of the most friendly allies of the United States in the Atlantic. We are also a country that opens our economy a lot to Chinese investment. We know the exact differences between alliances and friendship. And we diversify our economic obviously because we want to live in globalization. We want to benefit from the multiple opportunities of globalization. But why is America so discomfortable with this world changing? I would say that it's just an external opinion. America is finally understanding that the world is less American and American is less WASP—less White, Anglo-Saxon and Protestant. But don't blame just the current President of the United States. Protectionism has a long story in the United States. Nativism has a long story in the United States. And isolationism has a long story in the American pendulum. Just two items about the United States. A migration policy excessively restrictive will damage seriously the competitiveness of the United States, namely on the digital economy. What do you need in Silicon Valley? You need to contract brains. Brains don't depend on flags, religions or continents. I need to be free to contract the best. If the government is too restrictive on migration policy, it will lose something very interesting and distinctive, and, in my opinion, very positive sign of American economic history. 40% of the five hundred biggest companies of America were founded by immigrants or sons of immigrants. If you go to Silicon Valley, it's not 40%, it's 58%.

And then the second reflection is that we know all about financial crisis. We know about it in the United States, in Europe, in Asia, in Latin America. We know all about financial crisis. What do we know about global trade crisis? What do we know about crisis determined by global trade war? We have to be back to the 30s in the 20th century to remember the last global trade war after the Great Depression in the United States. The world was very different at that time. The United States decided to impose tariffs on 20,000 foreign goods. The consequences were not immediate but there were more inflation, more employment, less trade and less growth. So what we can say for the moment is that trade crises are not so immediate as the financial one that cut credit and money from one hour to another, but they last for a long time. And that's one of the reasons why I am very worried. The impact of a trade war lasts for more time. It's harder to recover. And by the way, if you see the financial crisis from Europe, the United States did the job of recovering much quicker than we did, in a very decisive way.

So I want to just finish by calling your attention to some possible conclusions. I would say, first of all, we are in the paths of living in a new political world polarized between the United States and China. It's probably inevitable. Facts are facts, and normally facts have consequences. We don't know when, but this is the world we are going to live in.

Second, Europe has its peculiar dilemma. Europe can be united as a major bloc. If Europe splits, it goes to irrelevance. But if Europe wants to be an international player, it has to be responsible for its own security defense with not only soft power but hard power. For the moment, Europe has them.

The third thing is what are changing in the globalization will change even more with digitalization. Digitalization accelerates all the phenomena of globalization. But don't take it for granted. It's one of the fantastic things in digital world. 50 years ago, the life expectancy of a great company was 50 years. Now it's 15. In a global and digital world, if you have a good idea, you can transfer the good idea in a good contract in a good business very quickly, but pay attention, the next good idea that will replace your good idea is already being created.

The fourth thing is that in a global world, there is no empty space. Look at what happened with the Trans-Pacific agreements. The United States withdrew. I don't know why. The United States withdrew. One year after, Japan, Mexico, Canada, 11 countries of the Pacific decided to sign the new Trans-Pacific without the United States. In this kind of world, to have a global economy without global institutions or at least a minimum of global rules is very dangerous. It can be chaotic. So the path is to reform institutions, namely the United Nations and WTO, not to destroy institutions, not to eliminate international institutions.

Finally, I want to also add that in globalization, the unpredictable can prevail. Who predicted Trump? Who predicted Brexit? Who predicted the challenge of national separation in Spain? Two populists ruling Italy? Who predicted all the recent political phenomena? In globalization, the unpredictable may prevail. So my advice to everybody is to be flexible. Don't be rigid. Someone who is rigid can crash with such dynamic change and evolution. In my perspective, both the United States and China, at the end of the day, regardless of the tweets, the divorce, the crash, have interests in a compromise, because—I don't know if it is a new agreement or a new truth—it's the only possibility to avoid escalations where both China and the United States can lose control. It is an escalation, not only about trade, but about a very relevant good trust. The problem of this kind of crisis is the impact of trust, and trust is the most difficult thing you can build and the easiest you can destroy.

Thank you very much.


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