This explains to a large extent the opposition to globalisation and international cooperation. The current trade tensions are also about power and influence. Many Asian countries are emerging as important drivers of the digital economy. In Europe, we have long looked to the United States for new technology trends. China is now sailing forth as a competitor. The country is rapidly adopting artificial intelligence and using big data. 5  Exports are shifting from simple to more complex products (Chart 4). Coloured pencils and textiles are being replaced by mobile phones and advanced MR scanners. Chart 4 China exports more advanced products. Share of China’s exports1) 100  ECONOMIC PERSPECTIVES 14 FEBRUARY 2019  100  Less advanced products Advanced products  80  NORGES BANK  80  60  60  40  40  20  20  0  0 2000  2015  1) The data are from Chapter 2 of the OECD Economic Outlook, June 2017. Sources: OECD and Norges Bank  China is now the world’s next largest economy1 and is competing with advanced western countries in many arenas. This has prompted discussions about market access, intellectual property rights and trade balances. Global economic integration is not straightforward, but the shortcomings in today’s framework for global trade must be dealt with through reform and not increased protectionism. New barriers will not help poor regions or those that have been left behind in western economies. For Norway, exports of goods and services account for more than a third of GDP.
For example, the Basel Committee published a framework to identify optimal levels of bank capital and used that framework as an input into the calibration of Basel III capital requirements.10 This approach considered how the probability of a financial crisis varies with bank capital, the social costs of banking crisis, the link between bank capital and bank funding costs, and the impact of higher loan spreads on economic activity. Moreover, this efficient frontier is not fixed and is likely to vary over time as technology, official sector tools, and bank business models evolve. For example, technology-driven innovations that rely on bigger datasets and more sophisticated predictive algorithms might change the risk/return opportunities associated with certain intermediation services. Similarly, supervisory innovations like stress testing or more sophisticated horizontal assessments could make official sector oversight more effective. Finally, changes in business strategies like a shift to a more diversified business model might change the overall risk of certain activities. One can think of these changes as shifting the efficient policy frontier where there is more intermediation for a given level of risk. Alternatively, constraints on supervisory authorities or practices could shift the frontier in the opposite direction if use of effective tools is prohibited. Given the complexity of these relationships, it is not surprising that there is a wide range of estimates and theories about the optimal type and level of oversight of financial institutions. Nonetheless, we need to understand better these relationships in order to make policy choices more effective.