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The new African currency

Giancarlo Elia Valori

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On June 11, 2019, during a meeting held in Abuja, the federal capital of Nigeria, the fifteen members of the  Economic Community of West African States (ECOWAS) decided to coin – most likely within 2020 – a new African currency, whose name has already been chosen: “ECO”.

 The fifteen States of ECOWAS –  the association that  deals above all with part of the implementation of the CFA Franc – are the following: Benin, Togo, Burkina Faso, Cap-Vert, Ivory Coast, Gambia, Ghana, Guinea, Guinea-Bissau and Liberia, which founded ECOWAS in 1964. Later, with the further definition of the Lagos Treaty in 1975, also Mali, Niger, Nigeria, Senegal and Sierra Leone joined it.

 It should be noted that while Mauritania withdrew from  ECOWAS in 2000, since 2017 the Alawite Kingdom of Morocco has officially requested to join.

 However the “ECO” project, which has been lasting – at least programmatically -since 2015 and much echoes the “EURO” project, was born within a more restricted association of States than ECOWAS, namely the West African Monetary Zone (WAMZ), which is composed of Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone.

 As can be seen, said States also belong to ECOWAS, but they intend to reach an economic and monetary union very similar to the EU’s, considering that their economies are less different than those of the whole group of countries belonging to ECOWAS.

 It should be recalled that the ECO launch has been  postponed as early as 1983 and is currently expected to take place in 2020, but again only on paper.

 Using an old formula of summer media jargon, France defines it as a “sea snake”, but we must always be very careful about oversimplifications and low esteem for friends and foes.

 Hence, certainly eight ECOWAS countries shall abandon the CFA Franc, while the other seven countries their national currency.

  As the final communiqué of the last meeting held by the fifteen Member States, a “gradual approach” is required for ECO, starting from those countries that show a more evident “level of convergence”.

 As we all know, in the case of the EU and its Euro, the convergence criteria were price stability – which is seen as the only sign of inflation, although we do not know to what extent this idea is correct – and “healthy and sustainable” public finance, which means nothing but, within the EU, means a deficit not exceeding 3% of GDP and public debt not higher than 60% of GDP.

 From this viewpoint, things are not going very well in Africa.

 Africa’s debt has just slightly exceeded 100 billion euros, after Ghana recently taking out a 2.6 billion Euro-denominated loan, in one fell swoop.

 In 2018 alone, African countries reached a total debt of  27.1 billion euros, but in 2017 Egypt, Ghana and Benin had borrowed 7.6 billion euros.

 Nigeria will reach 17.6 billion euros of debt at the end of this year.

 Ten African countries have already issued Eurobonds and  there will soon be 21 of them.

 It is equally true, however, that the African countries’ debt-to-GDP ratio is on average 53%, while in the 1990s and in the first decade of 2000 it had reached 90-100%.

 The obvious reasons underlying the recent increase in the African countries’ Euro-denominated (and dollar-denominated) debt are the following: the consequences of the global financial crisis and the structural decrease in the price of raw materials.

 Moreover, considering the very low interest level in the United States and Europe, many investors have also begun to operate in Africa.

 Currently Egypt is the most indebted country, with a total of 25.5 billion euros.

  It is followed by South Africa (18.9 billion euros), Nigeria (11.2 billion), Ghana (7.8 billion), Ivory Coast (7.2 billion), Angola (5 billion), Kenya (4.8 billion), Morocco (4.5 billion), Senegal (4 billion) and, finally, Zambia with only 3 billion euros.

 The analysts of international banks predict that, in the future, the Euro- and dollar-denominated debt will not be a problem for African countries.

Quite the reverse. According to the World Bank, the debt-to-GDP ratio is expected to fall by up to 43%, on average, in all major African countries.

 The worst standard in terms of share of Eurobonds on total debt is Senegal (15.5%), while Tunisia remains the best standard, with 6.3 billion euros of debt issued through Eurobonds.

 As can be easily imagined, other variables are the cost of debt service, which has doubled in two years up to reaching 10%, and the uncertainty of the barrel price on oil markets, considering that all these countries, except Nigeria, are net oil importers.

 Therefore, it is certainly not possible to talk about “sustainable” finance, even though many ECOWAS countries have a debt-to-GDP ratio that currently make us envious.

 As is well-know, also the exchange rate stability – required for entering the Euro area – is one of the primary “convergence” criteria.

 A 6.3% average annual GDP growth is expected for the 15-member African association, considering the expansion of oil extraction in Ivory Coast, Sierra Leone, Burkina Faso and Ghana, while fiscal stability -which is, on average, about 1.7% higher in 2019 – is acceptable.

 Hence, if we apply the usual Euro criteria, the new ECO currency appears very difficult, but not impossible, to be created – at least in the long run.

 ECOWAS has repeatedly advocated its single currency project: it was initially theorized as early as 1983, then again in 2000 and finally in 2003. As already seen, currently there is much talk about 2020 as the possible date for its entry into force.

 Certainly there is already an agreement between ECOWAS countries for the abolition of travel permits and many of the fifteen Member States are entertaining the idea of  economic and productive integration projects.

 Nevertheless, as far as the budget deficit convergence is concerned, only five countries, namely Cap-Vert, Ivory Coast, Guinea, Senegal and Togo can currently comply with the single African currency project, since they record  a budget deficit not higher than 4% and an inflation rate not exceeding 5%.

 Hence we cannot rule out that there will be convergence in reasonable time, but it is unlikely it will happen by the end of 2020.

 Moreover, the levels of development in the fifteen Member States are very different.

 It is impossible to even out the differences in the levels of debt, interest rates and public debt in the short term, considering that the share of manufacturing in Africa is decreasing and the economies that operate on raw materials have always been particularly inelastic.

 Furthermore, Nigeria alone is worth 67% of the whole ECOWAS  GDP – hence  the ECO would ultimately be an enlarged Naira.

 With the same problems we have in Europe, with a Euro which is actually an enlarged German Mark.

 The inflation rates range from 27% in Liberia to 11% in Nigeria, with Senegal and Ivory Coast recording a 1% “European-style” inflation rate.

 Certainly the CFA Franc is a “colonial” instrument, but it has anyway ensured a monetary stability and a strength in trade that the various currencies of the former French colonies could not have achieved by themselves.

 It should be recalled that the mechanism of the CFA Franc, envisages that the Member States must currently deposit 50% of their external reserves into an account with the French Treasury.

 However, the Euro problem must be avoided, i.e. the fact it cannot avoid asymmetric shocks.

 The Euro is a currency which is above all based on a fixed exchange rate agreement.

 We should also consider the adjustments made by Nigeria in 2016-and, indeed the inflation rates of the various ECOWAS countries are stable, but not homogeneous.

 They range from 11% in Nigeria to 1% in Senegal.

Between 2000 and 2016, Ghana had an inflation rate fluctuating around 16.92%.

 The fact is that all ECOWAS countries, as well as the other African States, are net importers.

 Furthermore the West African countries do not primarily trade among themselves.

 While single currencies are designed and made mainly to stimulate trade, this is certainly not the case.

 The CFA Franc, however, was a way of making the former French colonies geopolitically and financially homogeneous, with a view to uniting them against Nigeria – the outpost of British (and US) interests in sub-Saharan Africa.

 Furthermore, none of the ECOWAS governments wants to transfer financial or political power to Nigeria, nor is the latter interested in transferring decision-making power to  allied countries, which are much smaller and less globally important.

 The region could be better integrated not with a currency -thus avoiding the dangerous rush that characterized the Euro entry into force – but with a series of common infrastructure projects or with the lifting of tariff and non-tariff barriers.

 The largest trading partner of sub-Saharan Africa, namely the EU – with which the ECO would certainly work very well -currently records a level of trade with the ECOWAS region equal to 37.8%.

 Nigeria exports only 2.3% to the other African partners and imports less than 0.5%.

 However, if ECO is put in place, this will be made possible thanks to a possible anchorage to the Chinese yuan.

 This would avoid excessive fluctuations – probable for the new currency – but would create ECOWAS African economies’ greater dependence on the Chinese finance and production systems than already recorded so far.

 Certainly it would be a way of definitively anchoring Africa to the Chinese economy.

 From 2005 to 2018, Chinese investment increased everywhere, but in Africa it totalled 125 billion US dollars.

 Africa is currently the third global target of Chinese investment.

 17% of said Chinese investment has been targeted to Nigeria and its ECOWAS “neighbours”, especially to railways and other infrastructure.

 Moreover, in 1994, thanks to its liquidity injections China rescued the African wages from the CFA Franc devaluation, which had halved all incomes.

 Those who govern Africa will control globalization. India is now the second major investor in Africa, after China. The EU takes upon itself the disasters of African globalization, but not the dividends.

 Whoever makes mistakes has to pay. There has not been a EU policy that has “interpreted” Africa intelligently, but only as a point of arrival for ever less significant “aid”.

 Therefore China will bend the African economic development to its geostrategic aims and designs.

 China offers interest rates on loans that are almost seven times lower than Western markets, which never reason in geopolitical terms, as instead they should do.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

Economy

Long trends and disruption: the anatomy of the “post world” of the COVID-19 crisis

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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

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Economy

Flattening the Eastern Hemisphere through BRI: The Geopolitics of Capitalism

Rida Fatima

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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 InfluenceProspects of BRI-led Regionalism
SocialThe 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
EconomicConflict 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
SecurityThe 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:

Economic Ramifications

  • 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.

Social Ramifications:

  • 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.

Intra-regional discrepancies

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.

Extra-regional refutations

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.

Conclusion

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?

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Protectionist headwinds in the US Trade Policy under Trump Administration

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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.

References :

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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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...

Environment10 hours ago

Climate Heat Maps Show How Hot It Could Get for Today’s Tweens

Climate-related impacts such as the wildfires in the western United States will only become more severe if we allow the...

Middle East12 hours ago

Arabs-Israeli Peace must be Well-Anchored, not Neatly Fantasized

Watching a few Emirati and Israeli citizens dance in Chabad House, Dubai to celebrate normalization may give the impression that...

Africa14 hours ago

Mali Opens its Doors to Russia

With strict pressure from the African Union (AU) and the Economic Community of West African States (ECOWAS), the August coup...

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