From Adam Tooze's Chartbook
The IMF is worrying about global fragmentation…
In their latest World Economic Outlook, the IMF highlights some signs of much-discussed “deglobalization” and its geopolitical causes. This figure shows largely protectionist interventions by states in commodity markets like minerals:
They explain:
In 2022, Russia’s war in Ukraine caused a major spike in new trade restrictions for commodities: there were more than six times more new restrictions affecting trade in commodities in 2022 than the 2016–19 average. In contrast, trade-restricting measures on overall trade increased 3.5 times.
Source: IMF WEO, chapter 3, pp. 76-7
…but others are not so worried
Alan Beattie on why commodity markets are unlikely to segment on geopolitical lines, writing in the FT:
You hear a lot more from politicians about geoeconomic fragmentation than you see it in commodity markets and value chains. Of course, these are early days: governments can go a lot further to break up markets, and companies take time to adjust to new realities. But there’s thin evidence so far that we’re back in an era where great powers are carving up the world’s food and mineral riches between them.
In practice, commodity exporters are generally following an entirely sensible geoeconomic strategy of ruthless pragmatism. Governments that commit to one customer on political grounds leave themselves open to dependency and exploitation. Playing one off against another produces dividends. Chile, the world’s second-biggest producer of lithium for electric batteries, was assigned to the US-Europe club in the IMF simulation. In reality, it sells much of its minerals to China. But the Chilean government has dangled the prospect of more exports to Europe to gain concessions in an EU-Chile trade deal, with the result that Brussels softened its usual hard line against favouring local producers to let Chile sell lithium cheaply to its own domestic processing industry. Indonesia, courted by both China and the US for its nickel, has used its strong negotiating position to compel trading partners to invest in processing plants. In any case, the power imbalances behind geopolitical fragmentation are nothing like those of the first cold war. The US does not have the overwhelming financial or military power to help topple inconvenient governments in commodity-producing countries, as it notoriously did to Guatemala’s president Jacobo Árbenz in 1954 over his plans for land reforms in US-owned banana plantations.