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Will the world have to choose between US and China?

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As the US-China trade war heats up, more and more experts tend to believe that the world may be heading into a breakup again, just like it did during the years of the Cold War. This time – into two conflicting trade and economic camps, pro-US and pro-China, with almost every state apparently having to choose which side to join. How realistic such forecasts really are?

When the specter of an unfolding trade war between the United States and China loomed at the end of 2017, most analysts doubted that this rivalry could reach Cold War intensity. Still, a world split along economic lines poses a serious threat to global economy and finances and could bring about dramatic changes in relations between the world’s leading powers.

As a result, companies of countries representing the rival camps would find themselves largely isolated, if not entirely cut off, from sources of funding and new technologies available on the other side of this divide, thus sending  commercial enterprises’ revenues down and unemployment up.

In today’s world any country, which claims to be a sovereign one, faces the hard choice of either trying to establish its own order, integrate with other states and seek an adequate status as part of a certain collective order, or just refuse to change. At the same time, attempts to build a new world order are hampered by the increasingly inefficient and inflexible nature of many existing institutions of international politics. And, finally, no “world order,” either current or new, exists or emerges all by itself, without decision-making centers and mechanisms of implementing decisions.

Such an “order” should also meet the needs and requirements of the countries and their people as well as ensure efficient means of monitoring compliance with its fundamental principles. Since foreign policy and economy are all-important for any country, achieving a high degree of necessary cooperation is extremely difficult and fraught with conflict.

It looks like all of the world’s leading powers now anticipate a possible collapse of the modern world order and Donald Trump’s moves to destroy many international institutions only serve to exemplify this foreboding.

Whether new chaos, or even a war of all against all, is really what Trump is going for is hard to say, even though this is a conclusion one could make after reading his National Security Strategy, published in December 2017. Or, maybe, Trump is using such threats as blackmail meant to extract concessions from America’s rivals.

A new pyramidal system of global dominance with the United States at the top, would certainly suit both Donald Trump, his supporters and also many of his political opponents in Washington. However,common sense is prompting many rationally-minded politicians elsewhere in the world to realize that a new balance of power in the global economy, namely a dynamic equilibrium between the two financial and economic centers – the US and China – could be the lesser evil.

Ideological prerequisites for a new bipolarity are already there with the US political establishment already viewing China as a “strategic rival.”

The US Senate accused Beijing of “imposing” itself on the world “as an alternative model … without a democratic system of governance” and trying to “undermine the free and open order” based on the rules that the United States helped establish after World War II . Simultaneously, officials in Europe, Japan, Australia, Canada, and a number of other traditional US allies are worried by a lack of “clarity” about the true nature of China’s global initiatives.

The logic of the new economic bipolarity is already going beyond the realm of academic discourse. In November 2018, Brussels started considering a proposal for exercising coordinated control over foreign, primarily Chinese, investments in strategic sectors of the EU countries’ economy, as well as their logistical and technological infrastructure. During the second half of last year, the Western countries ramped up coordinated pressure on a number of major Chinese high-tech companies, primarily Huawei, which is the world’s largest maker of high-tech equipment. Despite the lack of direct evidence, a number of EU countries have significantly limited the import of Huawei products. The United States, for its part, has completely banned the purchase of Chinese-made equipment for public institutions, and is going to extend the ban to the private sector. This pressure culminated in the December 2018 arrest in Canada at Washington’s request of Huawei’s chief financial officer, Meng Wanzhou. In January 2019, a Huawei employee was arrested in Poland on suspicion of espionage.

In addition to the trade war, the US and China spent most of last year waging a diplomatic battle over bilateral trade issues. In autumn, Donald Trump initiated new trade talks with Japan, the EU and Britain. He also announced plans to ink new agreements with the Philippines and Vietnam as part of his policy of signing bilateral accords, which contain a provision preventing the signatories from concluding trade agreements with China.

This is exactly the provision that already features in the new trilateral free trade agreements the US has signed with Canada and Mexico. What remains to be seen, however, is just how far Ottawa and Mexico City are ready to go to stick to these provisions in practice.

Beijing, in turn, is staking on multilateral trade deals in order to use the size and competitive edge of its economy to expand its foothold in the countries it is working with. Moreover, instead of trying to destroy the existing international and regional institutions of collective management, China is working hard to constructively reform them.

The result is a paradoxical situation where America blames China for threatening “freedom of trade” and “values of an open society,” while President Trump is accused by his opponents both at home and abroad of doing exactly the same thing.

As a result, the idea of geo-economic flexibility is now gaining traction in the world. In 2018, in response to Washington’s increasingly hostile policy, the EU came up with its own rules of the game whereby any two parties are free to conclude or reject virtually any agreement. It was intentional bluff on the part of European politicians and diplomats aimed at offsetting Donald Trump’s “escalation – getting concessions” tactic. When in Washington, European Commission officials supported the US against China, while in Beijing they sided with China against the United States. A graphic example of this tack was provided by Britain, which, while supporting the ban on the use of Chinese equipment in its IT infrastructure, still allows China’s CGN Company to participate in the construction of the Hinckley Point NPP.

This reflects a great deal of interest on the part of the European “West” in a multi-polar world order where, according to many European experts, the EU could lead the camp of supporters of liberal norms of international trade, which are embraced, one way or another, by all the leading nations of the world, with the notable exception of the current US leadership. With the economic potential of the EU being commensurate with that of the United States, it is exactly the area where the EU could implement its “strategic autonomy” plan where a united Europe is now able to act on a par with, and even independently, from the United States. In 2017, the European Union signed a raft of important trade agreements with Canada, Singapore and Vietnam. In the summer of 2018, it concluded a free trade zone deal with Japan and intensified similar parleys also with Mexico, the South American trade bloc MERCOSUR, Australia and New Zealand.

The Asian countries are equally eager to pursue a multi-vector economic policy. Following Trump’s withdrawal from the Trans-Pacific Partnership Agreement (TPP), the 11 remaining participants quickly revived the project. Moreover, the US exit gave them greater freedom of hand in choosing a strategy for further development of the trade pact. No longer instrumental in Washington’s policy of “deterring” China, the TPP can be more flexible in its relations with the world’s second largest economy, all the more so since almost all TPP members have close trade ties with the People’s Republic. Meanwhile, some European countries have been showing interest in the TPP, and negotiations on a 16-state Asian agreement on regional trade that will cover half of the global economy – the Regional Comprehensive Economic Partnership (RCEP), have also received a new boost. Unlike the United States, China is also involved here. At the same time, some of Washington’s traditional allies in Asia, such as Australia, New Zealand and Japan, are actively building up ties as part of both forums.

Finally, Donald Trump’s two-year tenure in the White House has significantly exacerbated the financial and economic differences between the leading Western economies. According to the Austrian newspaper Der Standard, by the mid-2018, direct cross-border investment in the world’s affluent countries had dropped by more than a third. Even if individual economies could benefit from restrictive measures, this won’t last long. Globalization as a whole is losing momentum. Although this may somewhat mitigate the countries’ discontent with developmental imbalances, it will not be enough to rectify the general structural problems the global economy is facing today. What is needed is a long-term strategy, and this can only be implemented through dialogue and multilateral interaction.

Meanwhile, economic multi-polarity is fast becoming a fait accompli. Wall Street and the London City are no longer the sole sources of investment as money could also come from China, the Persian Gulf countries and Europe even though there certainly are some nuances and conditions to have in mind here. Many countries are now openly playing on the contradictions existing between the world’s economic powerhouses, now counterweighing Beijing with Washington, now portraying both as powers others are wary of.  Central Asia is actively maneuvering inside the Moscow-Beijing-Washington triangle, and Canada announces plans to further develop trade and economic ties with China despite, and possibly, because of the stuttering negotiations with Washington about changes to the NAFTA treaty.

The future of the ongoing trade wars will be determined by the world’s growing financial and economic interdependence on the one hand, and by most countries’ desire to guard against the dangerous impact a protracted, and, possibly, escalated US-China standoff could have on the global economy.

Amid the growing rivalry between Washington and Beijing, a sort of an economic nonaligned movement could become even more popular than its political counterpart of the Cold War era. After all, the liberal economic ideology was very popular even then, as neither the West nor the East was able to impose strict bloc trade discipline on its allies. Therefore, many countries of the so-called “golden billion” may eventually join the less affluent developing nations in such a nonaligned coalition.

If, in the foreseeable future, the global economy is bound to split into supporters of Washington and Beijing, this will most likely be about the choice of technologies and infrastructure projects vital for the security of states and societies, namely IT, artificial intelligence and payment systems. In most of the other, more traditional sectors of international trade, customary competition will continue, just like it has always done before.

First published in our partner International Affairs

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Americas

Trump’s New Wall? Mexico’s Southern Border

Lisdey Espinoza Pedraza

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For much of modern history, Mexico defined itself in opposition to the United States. In recent years, the two countries stepped up cooperation on almost all relevant issues, and the two nations are now deeply intertwined politically, economically and culturally. This is bound to change. After months of ignoring Donald Trump’s provocations, López Obrador reacted rapidly to Trump’s shakedown and agreed to a number of resolutions of extraordinary scope and urgency: the new Mexican administration agreed to deploy the country’s federal police to its southern border to crack down on immigration; and opened the door to the controversial “Remain in Mexico” policy that would turn Mexico into a Third Safe Country in less than a month from now.

As stated in the agreement, Mexico would take in all the refugees that the US decides to send back to Mexico to await resolution of their asylum process. This could take years, given the substantial immigration backlog in American courts. The agreement goes further: Mexico is responsible for the provision of education, health care and employment for such refugees. This could easily lead to a serious humanitarian crisis that Mexican institutions will be unable to deal with.

This approach contradicts previous Mexican presidential vows for regional development and humanitarian relief rather than confrontation and enforcement. Conditions on the ground in Mexico are far harsher than the Mexican Foreign Affairs Minister, Marcelo Ebrard and the President, Andrés Manuel López Obrador, would like to admit, and this is partly due to the current administration’s miscalculations: López Obrador has dramatically cut the budget for governmental agencies responsible for managing refugees and processing removals. Mexican border towns are also ill-equipped for handling transient migrant populations; and Mexico also faces other more systematic challenges, such as corruption and lack of rule of law enforcement. The new policy agreed with the American government is likely to result in a significant increase in claims filed for asylum in Mexico. Mexico’s immigration bureaucracies are utterly overwhelmed, and López Obrador’s misguided budget cuts have exacerbated their failings.

Mexico’s immigration policy is now bound by an immoral and unacceptable deal that will effectively turn Mexico into Trump’s border wall. The global system for the protection of refugees is based on the notion of shared responsibility among countries. It is very dangerous for the US to use Mexico as a pawn to set an example and ignore its international responsibility. This agreement also violates international law on refugees: Mexico is a life-threatening country for undocumented migrants. Human trafficking, recruitment for organised criminal organisations, abduction, extortion, sexual violence, and disappearances are some of the issues migrants face in Mexico. Finally, Mexico’s National Guard, the agency that will be in charge of monitoring the southern border, was created by López Obrador to tackle domestic crime. Its members have no training nor knowledge on immigration matters. It is an untested new military force that could end up creating more problems than the ones it is trying to solve.  Deploying agents to the border could also have a high political cost for the president.

The agreement with Trump gives López Obrador 45 days to show progress. If Mexico fails, Mexico will be forced to set in motion some version of Safe Third Country agreement, or face further tariff bullying from the US. This deal has been sold by the new Mexican administration as a victory over the US. More migrants, less money, extreme violence and a recalcitrant, unpredictable northern neighbour are the ingredients for a potential, impending refugee crisis, not a diplomatic victory.

Could Mexico have taken a different approach? Yes. Trump’s decision to impose tariffs would exacerbate the underlying causes of immigration in the region and do nothing to address it. His bullying to force Mexico to crack down on immigration was a cheap electoral ploy to mobilise its base with a view to winning the 2020 elections. This is nothing new. Trump is not seeking a solution; he is seeking a political gain. He built his first presidential campaign on an anti-Mexico and an anti-immigrant rhetoric. It worked in 2016, and he is planning to repeat the same formula.

The Mexican administration lack of knowledge on diplomatic matters, and their inability to play politics let a golden opportunity go. Using trade to bludgeon Mexico into compliance with an immigration crack down makes no sense: Mexico is not responsible for the increase in migratory flows. Central America’s poverty and violence trace back to American policies in the 1980s. Mexico is not responsible either for America’s famously dysfunctional immigration system. Trump’s economic threats against Mexico may not even have been legal: both the North American Free Trade Agreement (NAFTA), and the newly agreed US-Mexico-Canada Agreement (USMCA) require most trade between members to be tariff free.

Mexico could also have hit back with by levying tariffs that would have hurt swing-state voters, and in turn hurt Trump. This was the golden opportunity Mexico let slip from its hands. Mexico could have responded by hitting Trump where it hurts: Tariffs on American goods heading south. Mexico responded in a similar manner in June last year in response to the steel and aluminium tariffs. Mexico could have raised those tariffs each month in tandem with American levels.

This retaliation would have highlighted the gap between Trump’s anti-Mexican rhetoric and the underlying interdependence of the US and Mexico with stark consequences for the US presidential elections of 2020. Many of the biggest exporters to Mexico such as Arizona. Florida. California, Michigan and Illinois are swing states. New tariffs could have thrown Texas into recession and put its 38 electoral votes into play. It is all too late now, Mexico could have inadvertently helped Trump to get re-elected. Mexico has less than a month left to show some backbone and demand real American cooperation on the region’s shared challenges and rejecting Trump’s threats once and for all. The relationship between Mexico and the US could have been an example of cooperation under difficult conditions, but that would have required different American and Mexican presidents.

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Scandinavia Veers Left plus D-Day Reflections as Trump Storms Europe

Dr. Arshad M. Khan

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Mette Frederiksen of the five-party Social Democrat bloc won 91 of the 169 seats in the Danish parliament ending the rule of the right-wing Liberal Party group that had governed for 14 of the last 18 years.  The election issues centered on climate change, immigration and Denmark’s generous social welfare policies.  All parties favored tighter immigration rules thereby taking away the central issue dominating the far-right Democrat Freedom Party which has seen its support halved since the last election in 2015.

Ms Frederiksen promised more spending to bolster the much loved social welfare model and increased taxes on businesses and the wealthy.  A left wave is sweeping Scandinavia as Denmark becomes the third country, after Sweden and Finland, to move left within a year.  Mette Frederiksen will also be, at 41, the youngest prime minister Denmark has ever had.

Donald Trump has used the 75th anniversary of D-Day commemorations to garner positive publicity.  The supreme promoter has managed to tie it in with a “classy” (his oft-chosen word) state visit to the UK spending a day with royals.  It was also a farewell to the prime minister as her resignation is effective from June 7.  Add a D-Day remembrance ceremony at Portsmouth and he was off to his golf course in Ireland for a couple of days of relaxation disguised as a visit to the country for talks — he has little in common with the prime minister, Leo Varadkar, who is half-Indian and gay.

Onward to France where leaders gathered for ceremonies at several places.  It is easy to forget the extent of that carnage:  over 20,000 French civilians were killed in Normandy alone mostly from aerial bombing and artillery fire.  The Normandy American cemetery holds over 9600 soldiers.  All in all, France lost in the neighborhood of 390,000 civilian dead during the whole war.  Estimates of total deaths across the world range from 70 to 85 million or about 3 percent of the then global population (estimated at 2.3 billion).

Much has been written about conflict resolutions generally from a cold rational perspective.  Emotions like greed, fear and a sense of injustice when unresolved lead only in one direction.  There was a time when individual disputes were given the ultimate resolution through single combat.  Now legal rights and courts are available — not always perfect, not always fair, but neither are humans.

It does not take a genius to extrapolate such legal measures to nations and international courts … which already exist.  Just one problem:  the mighty simply ignore them.  So we wait, and we honor the dead of wars that in retrospect appear idiotic and insane.  Worse is the attempt to justify such insanity through times like the “good war”, a monstrous absurdity.

It usually takes a while.  Then we get leaders who have never seen the horror of war — some have assiduously avoided it — and the cycle starts again.

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To Impeach Or Not To Impeach? That Is The Question

Dr. Arshad M. Khan

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Robert Mueller let loose a thunderbolt midweek.  Donald Trump had not been charged, he said, because it was Department of Justice policy not to charge a sitting president.  Dumping the issue firmly into Speaker Nancy Pelosi’s lap, he reminded us of the purpose of the impeachment process.  According to Mueller there are ten instances where there are serious issues with the president obstructing justice adding that his report never concludes that Trump is innocent.

So here is a simple question:  If Mueller thought the president is not innocent but he did not charge him because of Justice Department policy, and he appears also to favor impeachment, then why in heaven’s name did he not simply state in his report that the preponderance of evidence indicated Trump was guilty?

Nancy Pelosi is wary of impeachment.  According to the rules, the House initiates it and when/if  it finds sufficient grounds, it forwards the case to the Senate for a formal trial.  The Senate at present is controlled by Republicans, who have been saying it’s time to move on, often adding that after two years of investigation and a 448-page report, what is the point of re-litigating the issue?  They have a point and again it leads to the question:  if Special Counsel Mueller thinks Trump is guilty as he now implies, why did he not actually say so?

Never one to miss any opportunity , Trump labels Mueller, highly conflicted, and blasts impeachment as ‘a dirty, filthy, disgusting word’,  He has also stopped Don McGahn, a special counsel at the White House from testifying before Congress invoking ‘executive privilege’ — a doctrine designed to keep private the president’s consultations with his advisors.  While not cited anywhere in the Constitution, the Supreme Court has held it to be ‘fundamental to the operation of government and inextricably rooted in the Separation of Powers under the Constitution.’  Separation of powers keeps apart the executive branch, the legislature and the judiciary, meaning each one cannot interfere with the other.

Nancy Pelosi is under increasing pressure from the young firebrands.  Rep Alexandra Ocasio-Cortez has already expressed the view that it is time to open an impeachment inquiry against Trump given the obstruction of lawmakers’ oversight duty.

Speaker Pelosi is a long-time politician with political blood running through her veins — her father was Mayor of Baltimore and like herself also a US Representative.  To her the situation as is, is quite appealing.  Trump’s behavior fires up Democrats across the country and they respond by emptying their pockets to defeat the Republicans in 2020.  Democratic coffers benefit so why harm this golden goose — a bogeyman they have an excellent chance of defeating — also evident from the numbers lining up to contest the Democratic presidential primaries, currently at 24. 

Will Trump be impeached?  Time will tell but at present it sure doesn’t look likely.

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