Question

Appraise in today’s world of trade and non-trade concerns, why issues in health, environment and safety (HES) and sanitary and phytosanitary (SPS) standards are rising again. Is China in particular, emerging as a challenge to the US after displacing Japan by GDP size contributory to this new international economic development?

Answer 1

Economic development, across the globe has been hit due to various business cycles and financial troubles, as in the case of the 2008 recession, which largely changed how business was conducted across the globe. However, all these financial troubles were systematic and had a reasoning which could be financially corrected. For example, the 2008 crisis was the result of structural failure of the banking system and over exposure to credit. Such issues tend to reduce the GDP of a country but are still manageable.

The recent trend, however has been different. Factors such as Healthcare, Environmental safety etc were previously regarded to be local in nature and were handled in a manner that kept economies running. Pandemics do not happen so often and countries have not prepared economically for the same.

Therefore, these concerns are now raising difficulties and are being focussed upon due to the recent pandemic issue which has taken the global economy by storm. These issues now gain equal weightage and sight by economist who believe it to be a bigger problem than any cyclical variations.

Cyclical variations can be controlled by injecting money into the cyclical flow. However, problems such as health care deterioration and environmental or sanitary issues need to be tackled in a positive manner if the government wants the Aggregate Demand to not halt as is the present case in most countries effected by the pandemic.

Countries are beginning to realize that this problem could be worse than any other economic situation. Further, as far as the working of China is concerned, it is indeed emerging a problem for the United States and other countries. It is well known that the Corona Virus originated in this country and it has been the epicentre of numerous other outbreaks such as the SAARS virus also.

China on the other hand is the manufacturing hub which countries including the United States have always preferred due to its low-cost operations. Due the recent outbreak, it is indeed emerging as a challenge to the United States due to this new economic development which is causing aggregate demand to fall on one hand, and on the other supplies from China are reducing as countries are finding difficult to open establishments during this time period.

Thus, the general feeling among people is that diseases are a bigger economic problem than cyclical variations and require active control by the government. Further, China is emerging as the epicentre of numerous issues and a shift in strategy may be required for US to partner other countries and stop its reliance solely on China respectively.

Please feel free to ask your doubts in the comments section.