“USA-EU” vs “China-Russia”
© RIA News Alexey Druzhinin
A landmark APEC summit is being prepared, other bloc summits and forums have been held, Russia recently announced an almost conceptual program “from North to South” in Beijing, it was decided to strengthen energy cooperation in Central Asia, which, however, was not determined by the current negotiations, but was laid out in the first quarter this year.
Before the APEC summit, the IMF decided to update the discussion about the future of the so-called. “bloc economies”, re-launching the provisions of the report “Costs of Geo-Economic Fragmentation” in the press.
The essence of the report is the disclosure of scenarios for dividing the world economy into geo-economic zones, the number of which was reduced to two by the IMF: “Chinese-Russian” and “American-European”. In fact, in these works (and this is a series of works), not two or three such blocks were considered within the framework of theoretical stress tests. The fact that we settled on two means certain starting positions from which the West will talk on the sidelines of APEC about future rules of coexistence.
Over the past five years, the phrase “dividing the world into currency zones” has firmly entered into circulation, but the problem is that economic clusters are actually being formed, but currency clusters are not.
The fact is that behind the word “currency” in the assessments they forgot about a more serious category - “cost”. One can debate for a long time about the reasons for dividing the previously truly highly globalized world economy into separate value clusters, but first it would be nice to describe their boundaries. Then, by the way, the logic of such players as India, the EU, the USA, and China will be clear. With Russia, as usual, everything will be more complicated.
The fact that the discussion around “dedollarization”, “currencies” and other elements of payment systems has gained such momentum only hinders the assessment of such clustering. The value generated within economies through international trade is national, and the system of payments is fundamentally supranational.
Emissions in general do not depend on the national policies of a particular economy, since the central banking system is very indirectly related to the control of national governments. Within this system, there is no difference in what currencies the calculations are made.
The second indicator that, perhaps, everyone knows today is the notorious Gross Domestic Product (GDP). This is how “clusters” are compared - the US has GDP = X, China = Y - “who will win”?
But the problem is that GDP is a financial indicator, the third in the system of international accounting reporting - the System of National Accounts (SNA).
It characterizes the generation of added value in the economy. Another thing is that due to how and why such reporting functions, it does not contain physical indicators. It can be increased or decreased using accounting methods (albeit according to an agreed methodology).
You can generate an increase in nominal added value through the revaluation of assets, you can include what was previously called the “shadow sector”, etc. You can revise depreciation schemes, revaluate fixed assets, etc. Why is it needed then?
And it is needed because these quarterly, semi-annual and annual reports, just like at an enterprise, are submitted to international financial institutions, where they confirm them (or ask for corrections), compare them with their calculations and render a verdict on the stability of a particular economy, its creditworthiness in terms of government and corporate debt, and also (alas, for many) assess how much investment funds should be added to the economy or, conversely, withdrawn, left in funds or redirected to other countries or sectors.
There is also the so-called GDP at PPP, which is needed as a reference for macro-financial institutions, but is often presented as something “achievable”. However, this indicator is also accounting. For example, the fact that GDP according to PPP in Russia grew by 40% does not make the consumer and the average person feel hot or cold.
Although it seems that “there will be more nails now.” No, this is the added value of assets that can, in theory, produce nails; in theory, it has become greater relative to exchange rate fluctuations in relation to the basket of reserve currencies. That is, the number of nails may have increased, or maybe not.
But for a macro-financial institution like the World Bank, a trade surplus combined with GDP growth at PPP means that the country has certain “surpluses” that can be redirected from region “A” to region “B”, which will be taken into account in the “recommendations” "
Again, in theory, it is possible to link the volume of foreign trade and GDP, but the trouble is that for this you need to have the entire database of accounts, and even in dynamics and taking into account methodological recommendations. Including in terms of inflation.
For example, if your actual inflation is 7%, and the calculated one is 6%, then the difference will eventually be included with adjustments in the calculation of the so-called. “real GDP”, and it will be included as a plus, like “economic growth potential”. Or maybe everything is correct and corresponds, but there is a re-evaluation, or maybe all together and at once.
In principle, this accounting should be used very carefully, checking the data logically and cross-checking, and it is better for the average person not to pay attention to it at all, so as not to rack their brains over the discrepancy between what he sees around him and what he receives in the information field.
It turns out that in terms of assessing economic clusters, considering currency calculations or “GDP” aggregates is essentially pointless. How then to evaluate them?
Through international trade in goods and services, and not only final ones, as prescribed in the SNA, but also intermediate ones, that is, through the totality of all actual trade flows. Their intersection can show how, through each other, national economies form their value as such, and not just added value.
This method cannot be considered as absolute, but as a basic one, through the prism of which one can see the vectors of such foreign economic clustering, it is quite suitable. And the results presented below may surprise many. Whether it’s pleasant or not is another question.
Since the IMF itself has decided to consider such macroeconomic clusters through the dichotomy of “USA-EU” vs “China-Russia”, we will also try to describe foreign trade flows and cross-flows according to this principle.
Apparently, we should start not even with the United States, but with such an economic monster as the European Union, which is not only a “Commonwealth of 27”, but also covers a much wider economic geography. Actually, even in terms of European statistics, records are kept not only for the “27 countries”, but also for the pool of integration trade agreements - a special circle, near, far, etc.
Accordingly, the European cluster includes not only the “EURO zone” or the European Union, but also countries such as Serbia and the Southern Balkans, Switzerland, Norway, a separate pool of agreements with Great Britain, which has left the European trading sphere, and also with its beloved or Turkey, not loved by many.
The foreign trade turnover of the European Value Area is $8,76 trillion, of which $5,52 is in the EU itself, $2,5 trillion in the trio (Norway, Britain, Switzerland), $0,62 trillion in Turkey and a modest $0,13 trillion in the South. Balkans. Russia closed last year with a final “chord” of 0,319 trillion. Taking into account 0,067 trillion turnover with Turkey.
Here we must immediately make two necessary remarks, since the reader himself will reach out to combine the foreign trade of Russia and the EU of ±0,320 trillion with the total turnover of this zone, and 3,7% will seem like something insignificant. But here we still need to take into account that deliveries are based on basic resources, where conventionally 1 dollar ultimately turns into complex goods with a different value.
As a distant example, bottled water costs pennies in the city, but what will happen if at one point it disappears from sale? The total foreign trade turnover of oil and gas in the world is about 2 trillion dollars, which is a percentage of total trade, but for some reason everyone is very stormy from the fluctuations of these markets. We will take this nuance into account in the future, but now the question is about relationships in general.
As usual, let’s look at the turnover with China and the USA and compare them. China - 1,167 trillion (13,3%), USA - 1,032 trillion (11,8%).
Now let's distribute the revolutions in descending order. Southeast Asia and Taiwan - 0,552 trillion (6,3%), African countries - 0,412 trillion (4,7%), Russia described, Latin American countries - 0,220 trillion (2,5%), Arabian Peninsula and Israel - 0,144 trillion (1,6%), India-Pakistan-Bangladesh - 0,138 trillion (1,6%), Central Asian countries - 0,047 trillion (modest 0,5%).
Even taking into account “other countries” with 0,5%. The question arises: where did another 50,2% of foreign trade turnover disappear?
The turnover did not disappear, just half of the so-called foreign trade. The “European zone” sells and buys within its own boundaries and boundaries. Relatively speaking, each country conducts half of its foreign trade through its immediate neighbors in the economic bloc. This also means that in production chains, local trade deficits and surpluses are redistributed between neighbors. Including energy shortages.
50% of foreign trade within one economic bloc, in fact, means that we have that same “macroeconomic cluster” or value cluster. Moreover, such an association economically has a completely unique vitality and margin of safety. Moreover, even the exit of a participant from the sphere of political EU, like Britain, in no way removes it from the cluster as such. This is what Britain successfully demonstrates to us. And theses that the United States is “striving for the collapse of the EU”, “the EU will soon collapse”, etc. are also thought-provoking.
Where will it fall apart if the cost is common? And the fact that politically the United States has put such a piece of the pie at its service should not be surprising. But why should the States cut this piece if it is a colossal source of manageable income? Reducing economic activity and drowning development indicators is, of course, absurd to destroy.
Actually, that’s why the EU remains so popular both within it and our careless neighbors strive to get there as if they were in paradise. Paradise, not paradise, garden, not garden, but the structure is surprisingly durable. And the position of IMF research tells us so: “a common American-European economic bloc.” The trick here is that the bloc is controlled by the national economy, which participates in only 12% of total trade.
Seeing an example in front of you, you can look for similar examples in other places. For example, in Southeast Asia. Let's see how foreign trade is shaping up there.
China's total foreign trade is described by figures close to $6,3 trillion, the total turnover of other Southeast Asian countries is $7,07 trillion. At the same time, the turnover of the countries of the region with China is 1,55 trillion (22%), among themselves - 1,87. 26,5 trillion (0,87%). The share of the USA is 12,7 trillion, in Southeast Asia (0,73%) and 12 trillion in China (12%). In general, the US share will be the same XNUMX% in the region.
The EU’s share is, as we have already seen, 0,55 trillion, or 7,8% in Southeast Asia, and 1,167 trillion for China (18,5%). In general, for the region, turnover with the “Eurocluster” is almost the same percentage as in the US plan - 12,8%.
These are not just clusters, we have before us 27,21 trillion dollars or 85% of all global foreign trade, distributed almost equally. However, we also have the United States, which forms up to 65% of the foreign trade of countries such as Canada and Mexico, which together with the United States de facto constitute one cost zone. The USA and Brazil have large turnover, but the latter's foreign trade is more diversified.
Both countries show significant turnover - Mexico - $1,19 trillion, Canada - $1,17 trillion. At the same time, trade between Mexico, the USA and Canada is 1,152 trillion. The European zone takes a rather modest 5% - 0,12 trillion, China and Southeast Asian countries are already showing up significantly - 0,39 trillion, or 16%.
So, what final picture do we have based on the results of assessing the cross-trade of the three largest value zones in the world, which already occupy 92% of all global trade on the planet? Despite the fact that 43% of all trade is an exchange purely between these cost zones. The result is the following, if we again turn to the distribution that the IMF pleased us with.
The “American-European” value zone is 16,2 trillion in world trade with a turnover within its zone of 7,43 trillion. Or 43%.
The “Chinese” cost zone, taking into account Southeast Asian countries, has a turnover of 13,37 trillion. With a turnover within the bloc as a whole of 3,42 trillion (26%), but at the same time the share of domestic trade in Southeast Asian countries is as much as 48%.
In the American sphere, the depth of mutual trade is greater, but Europe’s dependence on the United States and its zone is lower, and in the Chinese sphere, the opposite is true - the depth of mutual penetration is lower, but the dependence on China is overwhelming.
Russia, Central Asia and Iran will add another 1,1 trillion in foreign trade to the Chinese value cluster with a penetration depth of up to 50%.
The most interesting thing here is not even that Russian foreign trade risks simply getting lost against the background of these values. This is not true, since energy carriers cannot be considered with one “weight”. But it’s still worth thinking about the fact that if we remove the indicators of India and several countries of the Arabian Peninsula from foreign trade, then all other countries will be left with total foreign trade of $1,5 trillion.
We see that if anyone can be blamed for the lack of common sense and a real assessment of the situation, it is definitely not the “evil ones” from the IMF’s analytical departments.
This clustering into two poles could take years to develop, but the United States has completely crushed the entire subjectivity of the EU and is not going to let it go back. And the functionaries in the EU are not particularly resisting this. The Ukrainian crisis actually consolidated this American-European tandem. But in theory, the trade sphere of countries such as Australia and New Zealand should also be added there.
Now we can understand why D. Trump’s ideas about a “separate America” were perceived by American functionaries and conceptualists as the feverish ravings of a madman. A single value zone between Europe and the USA means life for the USA, the collapse of European markets or the lack of governance in Europe - if not death, then almost. In general, we love Trump’s ideas, they promote him everywhere, speakers cheer for him on TV, they worry - maybe this is a “cunning plan”, who knows. While the media is explaining to us that the IMF and other organizations are at a minimum of amateurs, and at a maximum of infantile lunatics.
But if this is a cunning plan, then one should also think about some other plans for what this most special Russian geopolitical pole, about which they talk so much, ultimately is. How does it ultimately look in numbers, how can 1,1 trillion, albeit a trillion in turnover, significantly enhanced by raw materials, balance the clusters of 16 and 14 trillion dollars? Moreover, despite the fact that the system of issuing world reserve currencies is supranational. Why does the IMF make a kind of curtsy by calling the Chinese cluster Sino-Russian? And once again it’s worth thinking about why the United States is so persistently promoting the idea of linking India and the monarchies of the Arabian Peninsula into one economic community.
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