Hello, welcome to visit Shanghai Forum
GoodMorning, everybody,
DearChairman of the University Council,
DearPresident of the Fudan University,
DearPresident of Korea Foundation for Advanced Studies,
DearPresident of Fudan Development Institute,
Dearambassadors, councils and diplomats,
Distinguishedguests,
Andif you will allow me, my dear former colleague of government, Miguel PoiaresMaduro,
Iwill 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'sthe best approach to modern geopolitics. International relations are moreeconomic 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 anew economic order, and for the moment, a global political disorder. So we haveto make an intense effort to re-think, to reshape the global political rules ofour world. I will try to show why China, specifically, and Asia, generically,serve globalization better than any other country or region of the world, andwhy China surprise the world on digitalization. I want to underline thatglobalization and digitalization are frequently used as one single concept.They have parallel lives but these are different concepts. You can stop forsome moment globalization, but you cannot stop digitalization. That's the maindifference.
Firstof all, I want to call your attention to what happens in this 40 years. Asia isnow in charge of 45% of global growth; 40 years ago, it was around 20%. So ifwe 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 nowresponsible for something like almost 19% of global growth and it was less than10% 40 years ago. I insist 40 years are nothing in humankind's history, butthey were enough to provide this change.
Ifyou consider all the continental economies, the regional economies that areexposed to the trade of goods and services, to the core ofglobalization—globally selling and globally buying goods and services, you willunderstand why Europe is very exposed to a global trade war because Europe is atop exporter economy, why, on the other hand, China is more exposed, namely ongoods, to attention than the United States. It's a matter of fact that the fuelof globalization was trade and is trade. Not only in 40 years, the trade volumeof goods grew 10 times, in 40 years 10 times, but more significantly, I want toask 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 becomesthe No.1 exporter of goods of the world, nothing less than No.1 exporter ofgoods of the world. That's why I always try to teach my students that they shouldunderstand that, yes, Mikhail Gorbachev, Ronald Reagan, Margaret Thatcher andJohn Paul II changed a part of the world in the 80s last century, but in theother side of the world, Deng Xiaoping changed China. Changing China, hechanged Asia. Changing Asia, he changed the world.
Ialso underline that this is not only the rise of China. This is also verysolid, 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 theUnited States may be discomfortable with this new world. But pay attention, it'sa much more balanced and fair world. Now the economic influence are not onlyNorth-North, or West-West. It's North-South, West-East, and East-South, andNorth-South.
Ialso want to call your attention to what I could define as a scale impact. Ifyou 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 havemore diversity in the flags. In my opinion, that's not a bad thing. But whatimpresses me more is not exactly the question of the flags. It's that the firstcompany 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 andacquisitions are growing organizations in such a dimension that probably oneday we will regret this kind of scale because it's very difficult to controland 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, firstof all, to Europeans. In the top ten digital economy, Europe is for the momentout of the Champion's League. This is a competition between China and theUnited States. Year after year, you will have six American or seven Americancompanies and three or four Chinese companies. The first European company—itsounds very good for music—Spotify, however, is not in the top ten. That shouldworry Brussels, not exactly where to tax Apple, but why the European capitalismis not being able to build and provide a global player on digital economy.
Andby the way, the resentment against globalization and new economy, I insist, isa little bit an American-European resentment. I never heard a seriousdiscussion against globalization in Africa, in Asia, or in Latin America,because these regions of the world are net beneficiaries of globalization, of amore fair and balanced world. This line was sent to me from an African friendwith hope in globalization and digital world. Our Africa will change veryquickly, namely in terms of migration, with seven hundred million smart phonesin 2020 and free trade agreement between 54 African countries.
Tryto find the place of China 20 years ago in data traffic. Can you find it? Ithink you can find it in 2016. So the potential growth in the digital market isvery large in Asia and in China itself, as you know. But what I want tounderline is the last world intellectual property organization register ofpatents in 2018. The reason why I say China surprises the world is exactlybecause China is very close to overcome the United States as the first registerof 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 53,000patents of China, 5,000 are from Huawei. Guess why you have this technologicalwar. 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 realchallenger 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 changein the geo-economics, obviously geopolitics change. You cannot imagine theworld of this more recent slides with the same balanced organization 20 yearsago. This is the first thing I want to show you.
Thesecond is why in my opinion—it's a friendly opinion—Portugal is one of the mostfriendly allies of the United States in the Atlantic. We are also a countrythat opens our economy a lot to Chinese investment. We know the exactdifferences between alliances and friendship. And we diversify our economicobviously because we want to live in globalization. We want to benefit from themultiple opportunities of globalization. But why is America so discomfortablewith this world changing? I would say that it's just an external opinion.America is finally understanding that the world is less American and Americanis less WASP—less White, Anglo-Saxon and Protestant. But don't blame just thecurrent President of the United States. Protectionism has a long story in theUnited States. Nativism has a long story in the United States. And isolationismhas a long story in the American pendulum. Just two items about the UnitedStates. A migration policy excessively restrictive will damage seriously thecompetitiveness of the United States, namely on the digital economy. What doyou need in Silicon Valley? You need to contract brains. Brains don't depend onflags, religions or continents. I need to be free to contract the best. If thegovernment is too restrictive on migration policy, it will lose something veryinteresting and distinctive, and, in my opinion, very positive sign of Americaneconomic history. 40% of the five hundred biggest companies of America werefounded by immigrants or sons of immigrants. If you go to Silicon Valley, it'snot 40%, it's 58%.
Andthen the second reflection is that we know all about financial crisis. We knowabout it in the United States, in Europe, in Asia, in Latin America. We knowall about financial crisis. What do we know about global trade crisis? What dowe know about crisis determined by global trade war? We have to be back to the30s in the 20th century to remember the last global trade war after the GreatDepression in the United States. The world was very different at that time. TheUnited States decided to impose tariffs on 20,000 foreign goods. Theconsequences 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 tradecrises are not so immediate as the financial one that cut credit and money fromone hour to another, but they last for a long time. And that's one of thereasons 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 fromEurope, the United States did the job of recovering much quicker than we did,in a very decisive way.
SoI want to just finish by calling your attention to some possible conclusions. Iwould say, first of all, we are in the paths of living in a new political worldpolarized between the United States and China. It's probably inevitable. Factsare facts, and normally facts have consequences. We don't know when, but thisis the world we are going to live in.
Second,Europe has its peculiar dilemma. Europe can be united as a major bloc. IfEurope splits, it goes to irrelevance. But if Europe wants to be aninternational player, it has to be responsible for its own security defensewith not only soft power but hard power. For the moment, Europe has them.
Thethird thing is what are changing in the globalization will change even morewith digitalization. Digitalization accelerates all the phenomena ofglobalization. But don't take it for granted. It's one of the fantastic thingsin digital world. 50 years ago, the life expectancy of a great company was 50years. Now it's 15. In a global and digital world, if you have a good idea, youcan 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 isalready being created.
Thefourth thing is that in a global world, there is no empty space. Look at whathappened with the Trans-Pacific agreements. The United States withdrew. I don'tknow why. The United States withdrew. One year after, Japan, Mexico, Canada, 11countries of the Pacific decided to sign the new Trans-Pacific without theUnited States. In this kind of world, to have a global economy without globalinstitutions or at least a minimum of global rules is very dangerous. It can bechaotic. 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. Whopredicted Trump? Who predicted Brexit? Who predicted the challenge of nationalseparation in Spain? Two populists ruling Italy? Who predicted all the recentpolitical phenomena? In globalization, the unpredictable may prevail. So myadvice to everybody is to be flexible. Don't be rigid. Someone who is rigid cancrash with such dynamic change and evolution. In my perspective, both theUnited States and China, at the end of the day, regardless of the tweets, thedivorce, the crash, have interests in a compromise, because—I don't know if itis a new agreement or a new truth—it's the only possibility to avoidescalations where both China and the United States can lose control. It is anescalation, not only about trade, but about a very relevant good trust. Theproblem of this kind of crisis is the impact of trust, and trust is the mostdifficult thing you can build and the easiest you can destroy.
Thankyou very much.
