The EAEU–Singapore Free Trade Agreement was signed at the EAEU summit in Yerevan on October 1, 2019. The document constituted the first step towards the creation of a comprehensive free trade zone between the Eurasian Economic Union (EAEU) and Singapore and, in addition to trade in goods, it will also regulate trade in services and the terms of investment.
The agreement pays due consideration to the experience of working on previously signed documents and also covers possible trade risks in more detail. During the negotiations, particular emphasis was placed on goods that are sensitive for the EAEU market. EAEU Minister for Trade, Veronika Nikishina, stressed that goods such as “beef, cheese, spirits, baby food, dairy products, cars, planes – all these will be exempted from the agreement, we will not be reducing duties on these goods.”
The agreement with Singapore was the third such document the Eurasian Union has signed with third countries.
The Agreement with Vietnam
The EAEU signed its first ever free-trade area (FTA) agreement with Vietnam on May 29, 2015. The agreement entered into force on October 5, 2016. From the outset, the agreement was concluded in the FTA+ format, which stipulates both duty-free trade rules and other interaction formats. Simultaneously with this agreement, the bilateral Russia–Vietnam and Belarus–Vietnam intergovernmental protocols on supporting automotive manufacture in Vietnam entered into force. These agreements established a preferential regime for implementing investment projects for the industrial assembly of Belarusian and Russian automotive equipment in Vietnam.
Since the national economies of the EAEU states need to adapt to the free trade regime, transitional periods of five and ten years were stipulated for certain goods so that import customs duties could be gradually reduced.
According to Nikishina, the EAEU’s trade turnover with Vietnam has grown 40 per cent since the agreement went into force. “Some feared that our exports would remain the same, that we would not be able to take advantage of the Vietnamese market opening up to us; some feared that we would only open our market for Vietnam. These fears proved unfounded: our exports grew by 40 per cent, while imports from Vietnam grew by 34 per cent.” By 2025, duty-free imports of Vietnamese goods will account for 90 per cent of the EAEU’s Common Customs Tariff headings.
For Vietnam, the average customs duties on goods imported into EAEU member states are being reduced from 9.8 per cent to 2.5 per cent over 10 years. Additionally, there is a scale of duty rates for various goods. For instance, the duty on agricultural goods will be reduced from 9.9 per cent to 5.6 per cent, and the duty for industrial products will go down from 8.0 per cent to 1.2 per cent. By 2025, Vietnam’s average customs import duty for EAEU states will have been reduced from 10 per cent to 1 per cent. In particular, import duties on agricultural goods will have been reduced from 16 per cent to 0.2 per cent, and duties for industrial products will have dropped from 8.9 per cent to 0.1 per cent.
Vietnam’s trade with Russia and Kazakhstan is developing with particularly intensity. According to WTO data, the share of Russian exports into Vietnam has been growing dynamically over the past three years: +19.9 per cent in 2016, +34.0 per cent in 2017 and +12.9 per cent in 2018. This growth was due to a sharp increase in exports of grain, mineral resources, iron and steel, fish and seafood, as well as organic chemistry products. Kazakhstan significantly increased its exports to Vietnam in 2017–2018 by 39.0 per cent and 3.6 per cent, respectively. This is due in part to the fact that Kazakhstan started exporting iron and steel, grain, and lead and lead goods into Vietnam.
Vietnam’s exports to Russia grew at an even faster pace: by 53.2 per cent in 2016; 17.8 per cent in 2017; and 58.0 per cent in 2018. Vietnam mostly exported electrical and mechanical machinery and equipment, coffee and tea, shoes, textile goods, and fruits and nuts. Vietnam’s exports to Kazakhstan grew six-fold in 2016 before falling by 13.6 per cent in 2017 and then growing by 20 per cent in 2018. The growth was due to exports of electric machinery and equipment, fruits, nuts and dried fruit, and timber and timber goods.
At the same time, Vietnam would like to increase its trade with the EAEU. Speaking at the Eastern Economic Forum in September 2019, Deputy Prime Minister of Vietnam, Trịnh Dinh Dung, proposed a further reduction of customs barriers in order to improve the opportunities to realize his country’s economic potential.
Provisional Agreement with Iran
The second agreement was signed with Iran in May 2018 and entered into force on October 27, 2019. This is a limited agreement valid for three years. One year after its entry into force, the parties will enter into talks on a full-fledged FTA. The agreement is limited due to a low level of liberalization. Reduced customs duties cover only 50 per cent of the total volume of trade between the two countries. In terms of goods, this translates into 502 HS codes for the Union and 360 HS codes for Iran.
The parties agreed to reduce average customs import duties on industrial goods (Iran undertook to reduce such duties from 22.4 per cent to 15.4 per cent, while the EAEU agreed to cut duties from 8 per cent to 4.7 per cent) and agricultural products (from 32.2 per cent to 13.2 per cent in the case of Iran, and from 9.6 per cent to 4.6 per cent in the case of the EAEU).
The tariff preferences granted to the EAEU by Iran extend to meat and fat-and-oil products, certain types of confectionery products and chocolate, mineral water, grains, tobacco, metals, cosmetics, timber, and individual types of electronic and mechanical equipment. Iran will be granted tariff preferences on many types of foods (including vegetables, fruits and dried fruit), as well as on construction materials, kitchenware, carpets and certain products made of non-ferrous metals.
Armenia stands to benefit most from trade with Iran, as the country is under the economic blockade of Turkey and Azerbaijan and has no common borders with EAEU member states.
The Armenian leadership considered building a third high-voltage power line between Iran and Armenia, as well as the North–South highway, the Meghri hydroelectric power station, and the Meghri Free Economic Zone as the main incentives for Armenia–Iran trade relations. But these projects have stalled in recent years due to economic and domestic political reasons.
Expanding trade and economic cooperation with Iran is also beneficial for Russia. Trade turnover between the two countries totalled USD 1.741 billion in 2018. Russian exports into Iran are estimated at USD 1.208 billion, while Iranian exports into Russia totalled USD 533 million. Deputy Prime Minister of the Russian Federation, Dmitry Kozak, estimates that Russian business will earn additional USD 150 million annually when the provisional agreement is ratified. Other Eurasian countries are also interested in expanding their trade and general economic cooperation with Iran. Given the upcoming signing of the Agreement on Cooperation in Transport in the Caspian Sea and the emergence of a major transportation and logistical hub there, trade with Iran may continue to grow.
At the same time, the agreement with Iran entails certain political risks. In September 2019, the United States imposed sanctions on the Central Bank Iran and 25 Iranian companies. The United States also demands that its allies and the entire global community accede to these sanctions. Mostly likely, sanctions against Tehran will continue to expand.
Agreement on Trade and Economic Cooperation with China
The Agreement on Trade and Economic Cooperation between the Eurasian Economic Union and the People’s Republic of China was signed on 17 May 2018, and will enter into force in late October 2019. This is not an FTA agreement, but it does define a single format for trade cooperation between the EAEU and China. The agreement covers a broad range of issues, including simplified trade procedures (such as the availability of electronic customs declarations, clearing goods within the shortest possible time), which accords with changes enshrined in the EAEU’s new Customs Code: increasing transparency and working on the mutual recognition of standards, technical regulations and compliance assessment procedures; regulating e-commerce; and cooperation in public procurement.
The most important export items in the EAEU’s trade with China are crude oil, including natural-gas condensate (18.6 per cent of the EAEU’s exports), rip-sawn timber (48.3 per cent), coal (12.7 per cent), refined copper and copper alloys (26.3 per cent), turbojet and turbo-propeller engines, gas turbines (62.5 per cent), unprocessed timber (76.4 per cent), and ores and copper concentrates (68.6 per cent). The most significant imports include communications equipment and spare parts for such equipment (China accounts for 64.5 per cent of the imports of EAEU states), computers for automatic information processing (63.4 per cent), equipment for the thermal treatment of materials (47.6 per cent), car and tractor parts and accessories (15.3 per cent), toys (80.3 per cent), and shoes with rubber or plastic sole and top (84.9 per cent).
We can see that EAEU export to China is dominated by natural resources. Consequently, the EAEU as a whole faces the task of both increasing and diversifying the trade turnover. The only way that this can happen is if the production of high value-added products is increased and mechanisms of introducing them to China’s market are found. Connecting the EAEU and China’s “One Belt – One Road” programme should promote economic cooperation.
The agreement exceeds the scope of a mere trade arrangement. It also defines promising areas for developing cooperation, such as agriculture, energy, transportation, industrial cooperation, information and communications infrastructure, technologies and innovations, finance and the environment.
The issue of establishing an FTA with China has been discussed for many years, since 2006, when Beijing first proposed it to SCO states. The EAEU has adopted a cautious stance, since “the principal risk lies in the fact that China’s economic power will make China the main beneficiary of reduced duties; therefore, we want to see how non-preferential agreement will work first.”
The Prospects of Developing the FTA Format with other States
Negotiations are currently are underway on the establishment of FTAs with several states. Serbia will be the next country to sign an FTA agreement with the EAEU (the FTA Agreement was signed on October 25, 2019 – Ed.). Deputy Prime Minister of Serbia and the Minister of Trade, Tourism and Telecommunications, Rasim Ljajić, said that the EAEU–Serbia Free Trade Agreement is scheduled to be signed in Moscow in late October 2019. In May 2019, the Supreme Council of the EAEU issued the mandate to sign the agreement.
Nikishina also commented on negotiations with Egypt, which were launched in 2019 and are nearing the final stage.
Talks with Israel are progressing at a slower pace. The first round of negotiations was held in late 2018. It focused on trade protection measures, the rules for determining the origin of goods, customs cooperation, dispute resolution, technical barriers to trade, sanitary and phytosanitary norms, public procurement and commodity trading issues. The main problem is reconciling the positions of the parties. The political differences with Tehran, which already has an agreement with the Eurasian Union, have not significantly affected the course of the talks.
We can thus see that the Eurasian Union is working diligently to sign FTA agreements with interested countries. Such agreements bolster the EAEU’s positions in the regional and global economy and are conducive to expanding the markets for national economies. However, signing such documents is not the EAEU’s goal as such. The point is that they provide mutual advantages. The experience that the Eurasian Commission has gradually accumulated allows it to articulate the interests of its member states more clearly and neutralize the risks for national manufacturers when signing preferential trade agreements. This practice will continue.
From our partner RIAC
Pandemic Recovery: Upskilling Government Saves Nations
Urgently needed are “scientific-based-econo-political-thinking” with proven pragmatic capabilities to execute, because embossed degrees, old-fashioned election expertise with “political-science” studies now appear Machiavellian rhetoric. What works on the election podium is often useless will applied towards pandemic recovery. Nation-by-nation, during pandemic recovery, uplifting midsize business economy is now a number one challenge. Nation-by-nation the absence of hardcore expertise in Public Sector is adding to global crisis. In certain regions, the commonalities of calamities may create a domino fall. For the first time during the last century, the ‘commonalities of calamities’ now shared by the populace of the world. Now, this creates a rare opportunity to demonstrate national and continent wide tactical deployments towards recovery, collaborate by saving the prolonged agonies of humankind. Billion displaced, billion to starve and hundreds of millions in serious quandary. This is far more intricate what any Tik-Tok upgrades and Teleprompter shows can handle.
Understanding ground realities: Those who recently attended many dozens of national or global zoom events on government programs and ideas on economic survival often witnessed serious lack of contents, expertise or experiences, most importantly inability of most presenters to debate or question existing broken down systems. Observe the 75th United Nation meetings, outside very few countries, most nations are only reading the laundry list of the problems without any specific solutions. It is also true, all are waiting for vaccines and this moves the date of ‘global normalcy’ to 2025. As economies start to crumble, seen as almost a national emergency by dozens of the 200 nations, the lack of special skills-sets and high-speed performance labeled a new crisis. A quick test of any top frontline leadership on any 10-government agencies, in any nation mandated to foster economic growth will provide the real picture to this challenge. Upskilling is about expected performance levels and for smart nations to adapt, survive and save nations now mandated nation-by-nation by pandemic recovery. There is no escape. Ask Augustus Caesar.
Understanding Simultaneous Synchronization: The art and science of upskilling frontline government teams to tackle pandemic recovery and economic survivals are normal progressions, but only once deployed with an agenda. Furthermore, to resuscitate fatally wounded economies special global age skills mobilized, like creating digital platform economies where entrepreneurialism dances, creating upskilling and innovative excellence mobilization in simultaneous synchronizations, where exports fly, creating a vibrant globally attractive economy where investments rain. Such upskilling of Public Sectors deployments are often not new funding dependent but rather execution hungry and mobilization starved. Study Expothon Strategy on Google for models.
The Facts: The world can easily absorb unlimited exportable ideas in unlimited vertical markets. Fact: The well-designed innovative ideas are worthy of such quadrupled volumes. Fact: The entrepreneurial and dormant talents of a nation are capable of such tasks. Fact: The new global age skills, knowledge and execution are now the missing links. Fact: fear of change is a false state of mind now corrected with upskilling mobilization.
The Warnings: The Shape of Pandemic Recovery is W: Depending on country, recovery spanning a year, a decade or even longer. Speed will save economies and avoid restless citizenry magnetized by populism. Study the specificity of your own regions and nations, identify voids on small medium business economy sectors and open debates. Follow the trail of silence and it may lead you to hidden conclaves and robed bureaucracies all afraid to change. Upskilling is a bright light in those dark tunnels. Discover the art of transformation and power on enlightenment. Start with high-level zoomerang events and encourage dialogue.
Understanding Upskilling of Public Sector: Across any single nation, Public Sector upskilling models work in simultaneous synchronization and can manage from 1000 to 100,000 participants. How local grassroots manufacturing uplifts small medium enterprises for sharper productivity and exportability? How foreign investments turn around economic performances. How ‘soft-power-asset-management’ the art of imagining things over ‘hard-asset-centricity’ where staying deeply stuck to old routines on old factory floors rewarded. This is when forbidden are the bicycle makers to dream of ‘drones’ or flying cars. Some 500 millions small and large plants and businesses around the world are badly stuck in old groves of decades old mentality, unable to transform, optimize to grow to new heights with new global age thinking and execution. Imagine all that wasted potential, talent and machinery, infrastructure under the dead weight of old concepts still logged into hard-assets based mentality. Pandemic recovery shows no mercy, therefore, understanding of the core proposition of any entrepreneurial venture is “extreme-value-creation” as a prime objective. Running wild on “extreme value manipulations” only creates hologramic economies and ponzy schemes. Quick study of any major financial publication will eliminate the need of any further proof.
The world just changed, the pandemic recovery will change the world repeatedly and do it very quickly. Upskilling at all levels of frontline economic development teams anywhere around a world critically missing link. What is needed are bold and open discussions with diversity and tolerance and national goals to turn around the economy; explore national mobilization of entrepreneurialism as new thinking, explore master upskilling agenda as savior towards stability and superior performances to stand up to new challenges.
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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?
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Did Russia-China Relations Successfully Pass the “COVID,” “Hong Kong,” “India” and “Belarus” Tests?
Russia-China relations have been steadily improving since at least 2013, when the leaders of both countries presented a joint statement...
Coronavirus and the EU Vaccines Strategy
On 17 June, the European Commission presented a European strategy to accelerate the development, manufacturing and deployment of vaccines against...
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