In his recent, excellent analysis, Roberto Savio has probably rightly brought to our attention the quickly growing issue of the social costs of robotisation (see Robots, unemployment ... and immigrants). Nevertheless, however alarming the issue, the risks of automatisation probably did not find their fair place among the top most likely and the highest impact “risks” as perceived by the those surveyed ahead of this year’s Davos World Economic Forum [1], but instead, much more, towards those least expected and the least severe risks. Whilst automatisation hovered somewhere among other, mostly human-caused and the state institutions nowadays, usually, well manageable risks, such as deflation and inflation, the most severe was deemed danger from WMD [2] (although deemed similarly unlikely) and, the similarly severe but very likely variety of climate and natural disasters.

However, this very high-level audience oriented and a pretty clearly illustrated warning is not perfect. One problem with its analytical side, is that it strikes me that the report was based on a survey of the key “stakeholders" in the world financial business and their perceptions using so-called Global Risk Perception Survey (GPRS), and that it, therefore, could possibly suffer from one of the risks it listed at the - Cognitive Bias. Such bias is often brought about by more recent events, especially if covered by audacious media reports. The series of devastating storms around the Gulf of Mexico throughout 2017, with their highly tragic consequences, left hundreds of dead and many still without basic facilities or home. The intensive media coverage however, may have at least brought about more awareness of the possible consequences of the climate and its possible changes all the way to the usually quiet village of Davos and World Economic Forum, (well, possibly more than just this cold winter and those unusually snowed-down, blocked roads leading to it.).

However, their mutual, time and relative spatial closeness to the key figures taking part in the survey, may have more than a bit over-exaggerated the danger and the likelihood of such weather risks, comparing, for example to more than 100,000s of dead and to millions still being affected in the aftermath of yet another, though more distant Gulf tragedy. This one however, being that of the 2nd (Red Sea) Gulf War, the Iraq invasion of 2003 and the still ongoing conflict in Syria affecting more than just those two, oil-rich countries.

Credit to R. Savio and many others raising the issues of technological unemployment, high unemployment did figure somewhere in the middle of the WEF risk scatter-chart, thus, at higher levels of impact and likelihood than that of automatisation, and closely together with many other socio-economic and socio-political risks and issues including that of interstate conflicts despite their potential severe consequences.

One risk that seems to have failed to be perceived despite all the media noise and warnings, and, thus, ranked, has been collapse of international trade and its order, particularly, one caused by increased protectionism [3]. One of the recent examples, though not so widely reported, would be the recent decision of Indian state to facilitate its own smart mobile phone industry by imposing 20% import tax on import of similar foreign ones. It cannot be categorised and sub-summed under the notion of “interstate conflict” since it is rarely explicitly directed against any one another state (despite it often being perceived to do exactly so), and although it often leads to one… or more of such conflicts.

And whilst such market protectionist measure affecting final goods such as smart phones may have pretty clear effect and may gain rather large political and business support, a much more controversial and audacious has been very recent decision of US President Trump’s administration to seek to impose high import tariffs imports of aluminium and steel. Being a semi-final industrial product, the high tariffs were well received by US steel makers but had a rather opposite reaction among its main users and buyers- the US car, machinery and construction industries, which now may have to face re-optimisations of their industrial inputs between potentially lower quality or higher price materials from the domestic producers. However, more affected are expected to be relatively smaller economies who are major contributors to the US import. Among the top five such steel exporters to the US that may be affected:

“1. Canada 16.7 percent
2. Brazil 13.2 percent
3. South Korea 9.7 percent
4. Mexico 9.4 percent
5. Russia 8.1 percent” [4]

Thus, the most affected are likely to be the relatively small, neighbouring Canadian and Mexican economies, and the, not very distant, Brazilian one. Over 80% of Canadian steel export goes to its only land neighbour and, hence, the tariff’s hike triggered rather audacious if not angry reaction from Canadian leaders including Premier Trudeau [5] himself.

Despite its wide reaching effect across US industry which uses steel as input, there seems to be a consensus that the economic effect of the increased tariffs would be very small for the US economy as whole, around 1%. However, this state policy created economic shock and the associated, news-media noise are likely to trigger a higher, short-term financial effect on both US and the smaller foreign suppliers. For example, it is likely to shift the long term balance of prices of shares of both sets of the affected steel and aluminium producers, those within the US and those in foreign, smaller economies in addition to the US manufacturers using those materials as input, from food can to car manufacturers, hence:

“At the close of trading in New York, the S&P 500 had fallen 1.3 per cent and the Dow Jones Industrial Average was off 1.7 per cent. Steel-makers rallied on the news, however, with US Steel gaining 5.8 per cent and AK Steel closing up 9.5 per cent” [6]

This, state-led trade war may potentially also open a watershed for hostile takeover bids led by those suddenly enriched, e.g. US manufacturers, against those, similarly suddenly, down-valued, foreign ones. It may also act as a negotiation card in the current NAFTA trade agreement review, pressing the US’s North American neighbours to accept demands by the US in return for exemption from those import tariffs. In addition, it may also create an additional political pressure on the South Korean policymakers to comply with the US demands,… whatever they may currently be. And this is also where a state-driven protectionist policy may be geared more than just towards protecting domestic economy from the foreign markets, but also (if not mainly), towards facilitating its overseas expansion or influence, be-it by the purely economic, or be-it by other, e.g. political means.

Notes:
[1] See: reports.weforum.org
[2] Weapons of Mass Destruction
[3] I.e. this is when a state comes into a role of the protector of a particular industrial sector from international competition, aiming to maintain that sector of domestic industry amid higher prices demanded or lower quality provided by domestic producers even in the long-run.
[4] Ranking cited from Reuters and also, from Global Steel Trade monitor, published by the US gov. International Trade Administration, Dec. 2017.
[5] www.ctvnews.ca
[6] Financial Times