The common European currency – the euro – came into being 20 years ago. Since January 1, 1999, the euro has been widely used in cashless money transfers. On January 1, 2002, banknotes and coins were introduced into circulation. How did the European countries benefit from the single currency? How many profited from its introduction?
In the early 1990s, the European Community entered a new stage of development which was characterized by a transition to a higher level of integration within it and expansion to include more members. This was provided by the Treaty on European Union, which was signed on February 7, 1992 in the Dutch city of Maastricht and entered into force on November 1, 1993. The Maastricht agreements and the subsequent decisions of the EU’s governing bodies – the European Council and the Council of the EU –formed a groundwork for a gradual, stage-by-stage creation of a monetary union and the introduction of a single currency, the euro.
At the time the decision on the introduction of the euro came into effect it was believed that the main objectives of the transition to a single monetary policy and the replacement of national banknotes with a single European one were the following. First of all, a monetary union was supposed to put the finishing touches to the formation of a common market and was to transform the EU territory into an economic space with equal opportunities for all players. A single currency was expected to facilitate the transition of the EU to a common economic policy, which, in turn, was seen as indispensable for moving to a new level of political integration. Many also viewed a single currency as vital for cementing European integration and a symbol of the economic and political integrity of the region. It was assumed that the euro would keep European countries “in the same harness” even in times of crisis and would help them to overcome differences and even resist outbursts of nationalism.
The second goal was to prevent losses caused by continuous fluctuations in the rates of Western European currencies. Once the euro was established, risk payments for possible losses in different-currency transactions became a thing of the past. It was assumed that stable and low interest rates would bring down inflation and stimulate economic growth. Thirdly, it was thought that fixed exchange rates within the euro zone with no more fluctuations would boost investment activity and, as a result, would improve the situation on the labor market. In addition, a better economic performance was to make it easier for countries to enter the EU and adapt to the new reality. A better economic performance was supposed to make European products more competitive in world markets.
Fourth, a single currency was supposed to significantly cut circulation costs. At the end of the 1990s, the existence of various national currencies cost the EU countries 20-25 billion ECU (26-33 billion dollars) annually, including the cost of keeping records of currency transactions, insuring currency risks, conducting exchange operations, drawing up the price lists in various currencies, etc. Finally, fifthly, the initiators of the single currency hoped that the euro would become one of the international reserve currencies. The introduction of the euro was supposed to change the balance of strength between the United States and united Europe in favor of the latter. In the long run, it boiled down to ensuring more independence of the EU economic policy since interest rates on long-term loans would be less dependent on American ones.
What is happening at present? Not surprisingly, the greatest difficulties emerged while grappling with the most pressing and large-scale agenda involving the ambitious plans of the political and economic transformation of the EU and the strengthening of its global geo-economic role. Indeed, since the late 1990s, the economic and financial spheres of the EU have undergone dramatic changes. In 2004 and 2007, the majority of Central and Eastern European countries joined the Union (an increase in social dumping). The current EU “bears little resemblance” to that of 20 years ago. “Not only the currency has become different, but the entire European economy has changed.”
Nevertheless, as predicted by those who criticized the approved version of transition to a single European currency, chances for meeting the criteria of eurozone membership in case the global economy followed an unfavorable scenario are pretty slim for most countries of the eurozone. As economic and financial crises sweep Europe one after another, the presence of the euro and the unprecedentedly high level of the European Central Bank’s autonomy and its extensive powers are restricted by the “possibility of influencing the economy” of separate states. Since inflation rates vary from country to country, the interest rate suggested by the ECB (about 2%) turns out to be too low for countries with high inflation (which leads to financial bubbles) and too high for countries with low inflation (which has a negative impact on investments).
As a result, the economic slowdown in European economies in the 2000s through 2010s led to increases in budget deficits. According to the requirements of the eurozone, governments have to raise taxes or cut spending, even if it damages national economy. Formally, there exists a procedure to tackle economic upheavals in this or that country of the eurozone to minimize their consequences for other members. From the point of view of abstract macroeconomic indicators this procedure is functioning well. But, judging by what happened in Spain, and then in Greece and Italy, its social, economic and subsequently, political costs are too high. In the first place, we talk about social upheavals, which became one the main reasons for the rise of “right-wing populists” across Europe.
The euro is running into problems mainly because it hinges on politics, rather than economics. On the one hand, it is this that largely keeps it from the collapse. The EU leadership is ready to sustain any financial or economic losses to preserve the single currency. However, from the economic viewpoint, the ECB’s readiness for currency interventions has ruined market discipline. In March this year the German Wirtschafts Woche stated that the euro had failed to become either an effective currency or an EU stability enhancing tool. What proves it is the fact that without “billions and billions in financial injections on the part of the European Central Bank and European governments to save the euro the single currency would have long sunk dead”. The 2008 financial crunch quickly triggered the crisis of the eurozone which culminated in the Greek debt crisis of 2010. As a result, “the dispute over how to save the single currency laid bare purely political differences across Europe”.
As skeptics forecast, membership in the eurozone, sought by countries with different levels of economic development regardless of the tough requirements and selection criteria, resulted in a situation in which a setback in the global economic performance hit weaker members the hardest. Citing the IMF, Le Figaro points out that “the euro exchange rate is too high for France and Italy (which deals a blow on their competitiveness), and is too low for Germany (by about 20%)”. This provided the German economy with a clear edge over other EU members and secured a “huge foreign trade proficit”. Moreover, in the course of the eurozone crisis in 2009 there emerged a vicious circle: Germany’s domineering position in the EU enabled Berlin to dictate its policy of austere budgetary measures to the greater part of the rest of Europe, which, in turn, gave rise to an outburst of anti-German sentiment in a whole range of countries, including Greece and Italy.
Therefore, in 20 years of its existence the euro has made Germany yet more powerful economically than it used to be. Simultaneously, it has become a major factor that contributed to Germany’s isolation in Europe. Critics say that while drafting the euro project its authors meant to weaken Germany. Instead, the single currency “strengthened it, providing it with competitive advantages through a “weak” euro”. Central Europe has become a supplier of spare parts for German businesses thereby putting into practice the Mitteleuropa Doctrine in the 21st century. The rest of the EU countries have become a market for German goods. Meanwhile, Germany has to pay for economic failures of an ever greater number of its EU partners. In such a way, Germany’s economic might has all but become a major threat to European integration. Pessimists fear the current economic and geopolitical trends will sooner or later push the Germans into pursuing a more “egoistic” and “aggressive” policy, in every sense of the word. Everyone remembers what this kind of policy ended with in a period from the mid19th to the mid20th century.
As for the second and third points of the objectives of a single currency, the results are contradictory. Inflation in the eurozone is indeed at an all-time low. There has occurred a unification of the common market of goods, capitals and workforce. At the same time, measures which are being taken by the European Central Bank to fight low inflation have more than once driven a number of EU countries into recession and sovereign debt crises. Living standards in EU countries have not been growing steadily over the past few years. A rise in wages has turned out to be much smaller than predicted in the late 1990s. Most European banks still prefer holding debt obligations of their countries only, which, in case of financial crisis, is fraught with banking problems and could ruin national economy. As for competitiveness, the appearance of a single market “in the first place, aggravated competition between EU countries”. Simultaneously, the introduction of the same standards and requirements for all countries of the eurozone “cemented their differences, rather than brought them together”.
The fourth point can be considered fully implemented. Economic transactions have been simplified, cost less and have got rid of exchange-related risks. According to the British The Economist, three out of five residents of eurozone countries consider the euro useful for their country. And 75% of Europeans are sure that the single currency benefits the EU. Meanwhile, the removal of barriers to capital movements has led to a significant imbalance in investments, especially in the industrial sector. The main benefits went to countries located in the center of the EU while the geographical “periphery” of the eurozone has lost some of its former investment attractiveness. But the presence of the euro makes it impossible for the less fortunate countries to stimulate the economy by bringing down the currency value.
As for the fifth point, some of the ambitious plans have been implemented. The euro has already made a significant contribution to the weakening of the position of the US dollar in the global economy. According to the European Commission, one-fifth of the world’s currency reserves are denominated in the single European currency. “340 million citizens use it daily, 60 countries and territories link their currency to it”. On the other hand, 10 years of 20 years of its history the eurozone has devoted to the struggle against an “unprecedented crisis”. By now, experts say there has been a “fragile recovery.” Nevertheless, unlike its main competitors, the dollar and the yuan, the euro has no solid foundation. The EU budget is used mainly for paying subsidies to member countries, while the years-long disputes over prospects for creating a common EU ministry of finance all but fuel differences between 19 eurozone governments.
Thus, according to optimists, criticism of the euro is first of all the result of profound differences on the fundamental issues of European economic policy. The single currency consolidated the leaders of Europe, provided them with the common goal of creating a more integrated, a more attractive for trade and business, and a globally competitive, economy. However, a further stable existence of a single currency mechanism in Europe calls for urgent reforms, which European politicians are either not ready for or are not capable of. According to critics, the single currency has driven the different economies of the EU countries into the Procrustean bed of all-fitting standard format. The single currency mechanism completely ignores, if not completely denies, the geographical, historical and cultural specifics of the member states. Overall, the current model of economic and monetary integration in the EU mindlessly forces countries whose national economies do not match the general format “to carry out endless reforms,” which all but aggravate their long-standing inherent problems.
First published in our partner International Affairs
Long trends and disruption: the anatomy of the “post world” of the COVID-19 crisis
What will be the economic architecture of the world after the COVID-19 crisis? This question involves understanding the major trends at work for twenty years now.
The world that will emerge from this crisis will be marked by these major trends, which, for some, will be reinforced by this crisis. However, this crisis has created too specific disruptions, in particular in the field of transport and energy. It has also provoked an awareness of the centrality of sovereignty, and in particular of economic sovereignty. Finally, the economic and monetary policies that have been put in place to combat the economic effects of the epidemic and of containment will have long-term consequences on international financial balances.
An acceleration of the change of the world?
Since 2000, we have witnessed the rise of an “Asian bloc” to the detriment of what we might call the “Western bloc”, that is to say the United States, the European Union and the United States. Japan. This Asian bloc is heterogeneous, as is the Western bloc. In each of these bloc politics is the main factor of homogeneity. But, these blocs also correspond to an economic reality: that of the countries of old industrialization against the countries, which it is better to call new industrialization than emerging ones.
In 2000, the China-India-Russia combined represented only 15% of world GDP, while the United States, the European Union and Japan combined weighed more than 47%, or three times as much. In 2020, the two blocks are tied at around 31.5%. If we take into account the immediate effects of the COVID-19 crisis, this movement is even expected to grow. The IMF has made forecasts which indicate that China and emerging countries should recover much faster from the shock of this crisis than the so-called “advanced” countries, ie countries of former industrialization. The world should see the shift to Asia amplify in the coming years.
The death of oil has been greatly exaggerated… (bcc, Mark Twain)
The COVID-19 pandemic has had a profound influence on the energy market and on oil production. The persistence of the pandemic means that air transport, among other things, will not return to its 2019 level before, no doubt, 2024. This implies a weak demand for kerosene as estimated by the International Energy Agency Forecasts of global oil demand and post-crisis economic growth are determined by different assumptions. In the optimistic scenario, there is a rapid economic recovery in a more or less flattened “V” shape in the first half of 2021, but the demand for oil does not fully return to the pre-pandemic trend. In the more pessimistic scenario, oil demand will not reach 2019 levels until 2023, and its growth will remain well below the pre-pandemic trend. The current evolution of the pandemic suggests that we are closer to this pessimistic scenario. These two scenarios also assume that zero-emission vehicles will represent 60% of new vehicle sales by 2040, because investments are high in these technologies. Therefore, they both forecast a slowdown in demand for oil to peak in the mid-2030s at around 105-108 Mb / d. What will be the consequence?
In the medium term, OPEC will have to manage the probable return of part of the 5.7 Mb / d of unused production in OPEC countries (Venezuela, Iran and Libya) and non-OPEC countries (Syria and Yemen). OPEC will also have to deal with the resumption of US hydrocarbon production (particularly shale oil), a recovery that may be slow due to falling investment, as demand and the price of oil rise. US production of hydrocarbons has fallen by more than 2 million barrels / days, due to the closure of existing wells, reduced storage capacity and reduced demand.
The impact of COVID-19 on oil demand will therefore be profound, particularly in the event of a deep and long recession associated with a protracted pandemic. Without aggressive intervention by OPEC, the average crude oil price could thus remain below $ 50 / barrel until mid-2022. During the second half of this decade, supply and demand are expected to move closely towards equilibrium as non-OPEC production, especially from Russia, begins to decline and US hydrocarbon production reaches a low. tray. The price of oil is expected to rise to around $ 80-90 / barrel (optimistic scenario) or $ 70-80 / barrel (pessimistic scenario), even without OPEC intervention.
As we can see, however, despite all voluntarist proclamations one can hear here and there, oil will remain a major source of energy for at least the next thirty years.
The return of economic sovereignty
A more direct change brought about by the COVID-19 pandemic is the realization of the importance of economic sovereignty. Of course, a number of countries, China, Russia, but also the United States and India, were acutely aware of the importance of this sovereignty. The European Union, for its part, had adopted a very negligent attitude on this subject. The strong disruption of international trade caused by the pandemic caused a real shock on this point. Of course, there is no question of returning to more or less self-sufficient economies. But, the economic, social, and even strategic damage caused by free trade policies are globally more taken into account today.
This will accelerate the return of nations and the crisis of multilateralism that we could already observe. The economy is once again becoming a breeding ground for strategy. Through the policy of economic sanctions, which the United States has used and abused since well before the election of Donald Trump, we are witnessing an acceleration of the fragmentation of the world economic space. American pressure on Huawei, or on the Chinese social network “Tik-Tok” is an example. De-globalization had passed from the stage of possibility to that of concrete fact; with the effects of the pandemic it will pass from that of fact to that of major fact.
This return to economic sovereignty induces the great revenge of politics over “technology”, the triumph of decisions over the automaticity of standards. However, ” technology” is embodied today mainly in economics and finance. The pandemic heralds the return of sovereignty, and being sovereign is above all having the ability to decide. The countries will then be referred to logic of bilateral relations, or even to regional logic. It will then be necessary to seek allies.
The questioning of the “global” character of the companies linked to the INTERNET, the desire of several countries to build their “digital sovereignty” is an example of the struggle that is looming for economic sovereignty. This resurgence of politics does not mean that, in our societies, certain spaces are not governed by the technical order, and that there are spaces dominated by technical legitimacy. But, these dimensions will now become second in relation to the political, which will recover its rights. The economic and the financial will once again become instruments at the service of politics. What the political will do with it remains to be determined.
A Debt apotheosis or an end of debt?
A final point remains the explosion of both public and private debts due to the pandemic. In most countries, the COVID-19 crisis has resulted in the collapse of various barriers to the expansion of public debt.
The latter has therefore increased to finance the fall in tax revenues during the confinement period but also the considerable additional public expenditure generated by the crisis. In addition, there are liquidity facilities, consisting of guaranteed loans, equity investments and the like. The result of all this is that the indebtedness of states (especially in the Western bloc) and that of companies will increase considerably by 2021. This debt will not be covered by an increase in taxes because it would imply a deep recession. Reducing public spending beyond 2022 will hardly be a possible solution, for the same reason.
These debts will therefore be absorbed by central banks, in one form or another. The same will be true of a large part of corporate debt. What will then be the consequences for the currencies (mainly the US Dollar and the Euro) of these policies? What will also be the medium-term consequences on the equity and bond markets?
One of the most striking consequences will be the influx of liquidity as a result of central bank action, while production will remain relatively depressed and the outlook for investment will be uncertain for several years. Currencies should therefore experience significant fluctuations. The current downward trend in the share in central bank reserves and the US dollar and the euro in favour of the group of “other currencies” (Sterling, Yen, Australian and Canadian dollars, Renminbi) should therefore accelerate.
Its to be noted that the Euro share went down significantly under the level of older currencies included in the Euro and that the group of “other currencies” significantly increased their share since 2010.
The economy of the “world after” the COVID-19 epidemic will therefore present both the characteristics, in a more accentuated form, of that of the world before but also a certain number of ruptures linked to this epidemic. This combination of strong trends and ruptures will result in a “de-globalized” world which will reorganize itself on the basis of bilateral alliances or regional groupings.
From our partner International Affairs
Flattening the Eastern Hemisphere through BRI: The Geopolitics of Capitalism
The Pivot of Asia: Conceptualizing the Peaceful Rise
The Belt and Road Initiative is a trans-continental multibillion-dollar infrastructural network linking China to what Bernard Cohen called the ‘Eurasian Continent Realm’ and the ‘Atlantic-Pacific Maritime Realm’. This economic expansion is diametrically opposed to the US hegemonic expansion. China with its economic and military development claims a peaceful rise which is non-aggressive and multilateral in its nature. Its policy of peaceful rise and development conveys to the international and the regional community, the willingness to endorse other state’s sovereignty, peace, and stability.
The BRI is considered as the ‘Project of the Century’ encompassing around 70 states, stretching around 3 continents, and affecting 60% of the world population. It is a global development agenda on the part of China to address the infrastructural gap, capacity gap, and technological gap. It is aimed at re-routing the inter-continental trade through China as a pivot. This economic saturation of China is being materialized by two of its mega-projects as indicated in figure. 1.
Overland SilkRoute Economic Belt (SREB): Consisting of six corridors for the trade of goods and services in and out of China.
Maritime Silk Route (MSR): Consisting of a chain of seaports also known as the string of pearls to the guard shipping routes.
These two projects of the BRI indicate the scope and size of its socio-economic implications for the region and the security-based ramifications for the international community.
The BRI Development Agenda: From Globalism to Regionalism
The process of globalism has been effective for the developed world however, the benefits of development and modernization have not trickled down equally in the peripheral regions of the world. That is why the world is witnessing the rise of new regionalism based on a multidimensional approach to deal with the global transformations which negatively affect the political economy of the developing and underdeveloped states. And this system is very aptly backed by China. With a history of the tributary system, China can integrate the regional states is a system of loose diplomatic relations based on shared benefits, mutual trade agreements, and interconnectivity.
The old tributary system of China is in a state of revival through the BRI. The cardinal principles of these two asynchronous simultaneous developments are indicated in figure.2
This system of new regionalism holds China as its central state through a spherical worldview rather than a vertical view purported by the US. The prospects of this system for the socio-economic prosperity of the eastern hemisphere are imminent. It is the reincarnation of the Flying Geese Model of development utilized in the development and modernization of the East Asian economies. According to this mode, wages increase vis-à-vis economic development causing industries to lose their comparative advantage. And China appears to be mitigating this through ‘going out’ for cheap labor. This new system shall reshape the following spheres which were previously dominated by the entrenched center-periphery discrepancies of West imposed structural imperialism.
|Domain of Influence||Prospects of BRI-led Regionalism|
|Social||The BRI led regionalism can increase the societal viability through redistribution of wealth and sharing of technology The investment pattern can show a shift from security funding to a development-based expenditure It will revamp the employment opportunities in the region and the net incomes will rise to threefold to fourfold Would lead to cross-cultural understanding in solving collective action problems within the regionThe infrastructural development will reinvigorate the interest of the regional community on the issues of environment and sustainability|
|Economic||Conflict prevention through comparative advantage-based development A move away from dependency culture systematically induced and maintained by the international financial regions of the World Bank and International Monetary FirmWould enhance the collective bargaining leverage of the developing and the underdeveloped statesWould ease and emancipate the terms of trade which have mostly been disadvantageous to the marginalized statesEconomic development strategies and projects will become stable, consistent, and acceptable due to regional continuities|
|Security||The regional security regimes can be consolidated Collective anti-terrorism and counterterrorism strategies can be devised and implemented Regional monitoring bodies can provide effective security input to the already exiting international organizations like the FATF, UN, etc.|
The shift from the globalism to regionalism offered by China is both comprehensive in its nature and appealing to the states of the Eurasian region and even extending to other regions including Africa. However, a study by Brantley Womack uses a rational choice rather than a cognitive psychological approach to understand the Chinese nuanced tributary system in form of the BRI. To him, not the Confucian morality that dictates the Chinese foreign policy of win-win approach and peaceful rise but the security dilemma which leads to a relative accommodation of the underdeveloped states to avoid the coming of the new anarchy.
Reshaping the Regional Value Chains: The SRM Mechanism and Spatial Fixes
The entire functioning of the BRI which targets the socio-economic advancement of the Eastern hemisphere is based on Surplus Recycling Mechanism (SRM) and Spatial Fix Mechanism. The underlying logic of the BRI and its investment initiatives is indicated in these two processes. These are targeted for three major purposes of growing industrial output, increasing labor employment, and accumulating financial capital. Though highly effective, both the BRI mechanisms for infrastructural development indicate intricate fault lines which can roll-back the major socio-economic gains of the mega-project by raising international skepticism. They indicate a move towards the geopolitics of the infrastructural development with little regard to the regional states. This criticism has been echoing in the US and the regional skepticism is also on the rise. So, the adverse socio-economic ramifications of the BRI based on the fault-lines of these two mechanisms are given below and there is a need that China becomes more transparent about the strategic connotations underlying its benign investment initiatives.
Some of the adverse impacts these mechanisms of the BRI could have on the socio-economic aspects of the region of the Eastern hemisphere are stated below:
- It will wage a new war of capital accumulation between the Eastern hemisphere led by China and the Western hemisphere led by the US. This dichotomous rise will affect the marginalized states of the region drastically as also indicated by the US-China trade war where the financial market came on the verge of collapse.
- The peripheral states of the region might not wholly benefit from the development as it might appear as a way of China’s debt-trap diplomacy and the states might turn assertive in refuting China’s role in the region.
- The flattening of the region based on capital accumulation needs bringing down barriers which can lead to a contagion effect even the Chinese economy falters.
- The policy gaps in the inter-regional network can only work through a highly transparent, robust, and monitored system, which lacks inmost states of the region.
- The regional contagion can also spread pandemic conditions as observed during the coronavirus crisis.
- Unlike the South East Asian region, there is no cultural emulation in other parts of the Eastern hemisphere and China’s cultural assertiveness might raise national and cultural opposition to China’s enhancing role in the region.
- The eastern hemisphere might just end up being a captive market if the productive capacities are not utilized in the peripheral region. This will end up in neo-colonialism the global inequality will take nuanced shape but shall persist.
- The intermingling of the workings with weak governance structures can lead to gender-disparity, sexual-based violence which can only end with the grassroot level reforms are set as a precondition for development.
These impacts of BRI can drastically revamp the social mobility of the citizens, increase interconnectivity and raise inter-cultural tolerance however, the downside of it can have major blowbacks to the projects as a whole and to the region it covers. Thus, it is high time that China addresses such issues on mutual understanding and cooperation to mitigate the negative socio-economic ramifications.
Regional and Extra-regional Dynamics:
All the infrastructural development projects for decades are accompanied by geostrategic and geopolitical motives. Such developments in a highly politicized world are determined by geopolitical constraints. The BRI is no different, it offers avenues for advancement, but it goes in hand with China’s geopolitical and geostrategic goals of ensuring capital development and security in a volatile political environment. Hence, the mega project of BRI is under intense scrutiny from both the states within the BRI and those outside of it.
The BRI project takes around 82% of the total gain and a big chunk of which goes to the high-income states of the region including China and East Asian states. This trend might increase inter-regional discrepancies with uneven globalization with some benefiting more and others remaining mostly stagnant. These unequal benefits will lead to negative spillovers feeding inter-regional skepticism.
The impact of the BRI led flattening of the region holds negative consequences if the links with the non-BRI states are not properly maintained. The internal trade of the region shall show consumer cost reduction, lowered trade barriers, and trade facilitation. However, the non-BRI region will face increased trade diversion which might become the reason they rebut the BRI led development.
The BRI project is a new mode of regionalism with a different means to the geopolitical ends. It identifies the flattening process to be a derivative of the geopolitics of globalization and capitalism. Though the socio-economic impacts of the project of the century are vast and all-encompassing yet the risks like debt sustainability and governance can adversely lead the project in another dimension if not addressed through a system of communication, coordination, and transparency. Though the menaces of capitalism cannot be completely mitigated due to its structurally enmeshed nature. But the BRI shows the alternative mode of its practice based on authoritarian capitalism of China. The world awaits what benefits it will reap. How equitable will the ‘equitable globalization’ be and how peaceful will the ‘peaceful rise’ be?
Protectionist headwinds in the US Trade Policy under Trump Administration
At the end of the First World War, US led internationalism was initiated by the then President Woodrow Wilson. When we look deeper into the origins of the first Great war, it clearly shows signs of deep rooted animosities, triggered by culture, race and delusioned nationalism. Once the war ended, Woodrow Wilson embarked on a utopian idea to make the world truly an international place. The breed of politicians in America and its allies the British Empire and France, supported the idea and laid the foundations of world’s internalist movement, Never in the history of mankind a world sets sails on such an ambitious project to make the world a global stage for commerce where every aspect of human life will governed by a certain set of rules, which will form the basis of rule based order. A journey of rule based system was not smooth and its first test came in the form of a second world war, a war which was again fought on the basis of rogue nationalism and race. The victors at the end world war II was committed to forward the idea of globalism, United States was the only country which rose from the ashes of the world war II with minimal damage, it first supported a war ravaged Europe with a Marshall Plan, and then they together embarked on a path to liberal internationalism. The United States journey in making the world truly a global place is unique and unprecedented, with all the allegations of doublespeak and forwarding its own agenda of undisputed global power, United States global project was indeed a sincere effort to govern the world through supranational democratic institutions, early examples of such bold agenda were United Nations and Bretton Woods institutions.
Journey in and after the cold war
Obama Presidency : At the end of Bush Presidency, the protectionists were bracing for an extreme stance on new winners in the Global economy and especially China, commonly denoted as Frankestien at that time. President Bush in 2001 granted China PNTR a permanent normal trading relation status. Many trade hawks in the US think that this decision was a turning point, which helped China to become so big. President Obama was an overt globalist and He in his presidential campaigns regularly highlighted the importance of globalization, that how and why we need to appreciate new winners in the global economy, he cited computational technology as the main driver behind a dispersed value chain rather than concentrated one. Obama in his presidency supported the Trans pacific partnership TPP deal, and supported the idea of equal opportunity in the global economic system. He repeatedly highlighted the importance of globalization and termed as the force which can never be rolled back.
Trump Presidency and a wave of non stop protectionism
President Trump in an his election campaign termed TPP trade deal as a “rape of America”. When he won election, he issued endless warnings to trade partners and threatened to eliminate NAFTA the North American Free Trade Agreement, NAFTA now USMCA, United States Mexico Canada Agreement was later rescued at last minute negotiations, which took place in several rounds spanning over many months. Trump launched a full blown trade war against China, and its allies in Europe accusing them of using America to their advantage and stripping the US of billions of dollars. He is now pursuing a most hawkish policy in the trade realm to disband the world trade court also known the World Trade Organization. This anti trade policy is aimed at reviving the US industrial base, which according to many experts is a lost cause in the era of global value chains.
Panda, A., 2020. Bush Gave China Permanent Normal Trade Relations Status With The US 15 Years Ago. What Did That Change?. [online] Thediplomat.com. Available at: <https://thediplomat.com/2016/12/bush-gave-china-permanent-normal-trade-relations-status-with-the-us-15-years-ago-what-did-that-change/> [Accessed 4 June 2020].
Nytimes.com. 2020. Trump Says He Plans To Withdraw From Nafta. [online] Available at: <https://www.nytimes.com/2018/12/02/us/politics/trump-withdraw-nafta.html> [Accessed 30 June 2020].
BBC News. 2020. No Way Back From Globalisation – Obama. [online] Available at: <https://www.bbc.com/news/world-europe-38006937> [Accessed 1 July 2020].
Foreign Affairs. 2020. Reconsidering Woodrow Wilson: Progressivism, Internationalism, War, And Peace. [online] Available at: <https://www.foreignaffairs.com/reviews/capsule-review/2009-05-01/reconsidering-woodrow-wilson-progressivism-internationalism-war> [Accessed 1 July 2020].
Wrap.warwick.ac.uk. 2020. Globalisation And Ideology In Britain : Neoliberalism, Free Trade And The Global Economy – WRAP: Warwick Research Archive Portal. [online] Available at: <http://wrap.warwick.ac.uk/49332/> [Accessed 1 July 2020].
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