Transatlantic Trade and Economic Outlook for 2021-2022
Expect bumps, but overall outlook is good…
In addition to our client work which spans the globe, the Clark-Esposito Law Firm, P.C. routinely participates in cross-border discussions, conferences, and trade seminars which provide us with something of a consensus view on trade and economic outlook. After such a challenging year, we thought we would share our takeaways on the coming year in transatlantic trade following a busy spring and early summer of discussions with our partners across the Atlantic.
First, right to the point – the outlook is very good, according to virtually everyone in transatlantic trade we have spoken with in recent weeks. The US-side economic numbers coming into summer have been unprecedented and signal an overall strong comeback for the US economy. Notwithstanding some ongoing pressures (a labor shortage, lagging logistics networks and supply issues), CEO confidence is high with a pandemic that is increasingly in the rearview mirror. While Europe is not in quite as strong a position as the US in shaking the pandemic, signs of EU progress are materializing.
With that being said, there are some factors causing more significant long-term drag on our progress which will need to be addressed but are not necessarily pandemic-related. First, while media has focused considerable attention on the near-term labor crunch, less attention has been given to the longer term issue of shrinking US and EU workforces. Contrary to popular belief, industry will need to ramp-up automation, and fast, to outrun a dearth of labor on both sides of the Atlantic.
Additionally, there is widespread industry consensus that the new US presidential administration needs to dispense with EU tariffs on steel and aluminum, which is adding to already immense raw materials issues for manufacturers. The US-EU trade ecosphere is the largest economic entity on the planet, and many market participants are (loudly) advocating for more streamlined trade to facilitate recovery.
There are some additional US-EU barriers which will need to be addressed – energy being one, and perhaps most importantly, the technology sector. As systems continue to integrate, the US and EU will need to collaborate more and achieve a better equilibrium on security, privacy, and innovation, among other concerns.
Lastly – China is a major influence in western markets now. Western economies will need to do their part to encourage China to become a more collaborative participant in the economy – a stakeholder in global prosperity. The US-China relationship is currently far from ideal, but accepting this as the status quo is not a viable option. With electronic vehicle production expected to become a US economic centerpiece, the US must bear in mind that it has no control over the world’s mineral reserves – China does – lithium and cobalt are both primary components of EV batteries and the US is heavily dependent on Chinese supplies of both. In fact, in 2018 the US Department of the Interior published a list of 35 critical minerals for the aerospace, defense, energy, electronics, and transportation industries. China is the leading source of almost all critical minerals.
What this all suggests is that among the globe’s major economic players, namely the US, EU and China, none are positioned to forge a unilateral path forward – a prosperous 2021-2022, and beyond, will rely on constructive, collaborative relationships where each participant plays a role in the others’ success.
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