People tend to look for watersheds in history that mark the end of an era, that unique juncture when there is no going back and the future looms disconcerted. As a new decade begins, pundits are still trying to reconcile when the US fractured to a point of no return. The turbulent 2020s certainly provided fodder for the heated debates. Some looked at the 2007-2008 financial crisis as a symbol of capitalism’s unbridled greed and lack of government oversight. Others, taking a longer-term view, blamed the increasing inequality of US society over more than half a century, or the growing polarization of politics and society in recent decades. The more philosophically inclined felt that American exceptionalism and hubris were culprits; more cynical minds felt it was more like complacency and presumption.
Those who needed numbers to understand loss looked at the dismal US performance in combating the Covid-19 pandemic. Some say the day of reckoning came when the number of deaths from COVID-19 passed the 620,000 mark -the number of fatalities in the US Civil War- and then the roughly 675,000 Americans that died from the Spanish flu in 1918-1919. In any case, the numbers kept on growing as the vaccines took longer to develop and distribute than previously thought.
Historians, though, mostly tend to agree that a pivotal moment in US history occurred in the 2010s when a perfect storm of creeping developments began to converge. A widening divide between a wealthy class that became politically adept at promoting and preserving their privileges and low and middle-income Americans whose wages stagnated became more conspicuous. Globalization and deindustrialization played a role in the largest wealth inequality gap among the most developed nations, but so did skewed policies that largely favoured the rich.
Increasing political polarization and hyper-partisanship made decision-making intractable; whereas in past decades Democrats and Republicans would cooperate on major policy issues, and even displayed camaraderie, the situation deteriorated to the extent that outlooks became irreconcilable and politics faded into trench warfare in which the opposing party was perceived not as an opponent but as enemy and traitor.
Parallelly, societal polarization also deepened as personal political identities increasingly transcended ideology to encompass topics as diverse as climate change, healthcare, gun control, the pro-life or pro-choice divide, and even the response to the Covid-19 pandemic. In broad terms, two Americas emerged: one liberal, racially inclusive and egalitarian, the other socially conservative, white-dominated, occasionally prone to nativist and xenophobic overtones, that increasingly overlapped with the party system.
The US might have survived this toxic cauldron of developments if it weren’t for the whirlwind persona of Donald Trump and his tempestuous presidency. His constant attacks on US institutions and the deep-rooted system of checks and balances at such a consequential historical juncture did irrevocable damage to the country. Trump weakened America’s democratic legitimacy and standing abroad by siding with autocrats of all stripes and deriding long-standing alliances and trade partnerships. The US has a long history of disruptive populist leaders: Huey P. Long, Joe McCarthy, George Wallace and Pat Buchanan stand out in the twentieth century. But none of them became president. Trump was the first one that reached the pinnacle of political power. He contributed more than anyone or anything else to the polarization of politics and society, all to serve his narcissistic persona.
Historians and sociologists still ponder on how a significant majority of less-educated white Americans, desperate to preserve their eroding prerogatives, could unconditionally condone his self-serving meanderings, so contrary to their own needs; ironically, they ended up strengthening Trump’s plutocracy. More worrying was the opportunistic subservience of the Republican Party to his whims and authoritarian tendencies. Some wondered whether Trump was a symptom or a cause of the unravelling of the US. It didn’t matter; his single, contentious mandate proved to be a harbinger of the fracture to come.
A most dysfunctional election
Trump lost the November 2020 presidential election by a wider margin of the popular vote than in 2016, though nobody knows the exact count as there was no official final tally, at least not one accepted by both parties. On Election Day his call to supporters – the self-proclaimed ballot guardians– to protect the votes in critical swing states led to abuse, violence and irregularities. The situation was aggravated by the presence of armed members of far-right vigilante groups. “Suspicious” voters and election adjudicators were harassed under the guise of preventing voter fraud; some voting centres and post offices were rampaged as sympathetic law enforcement officers looked on.
Though the results coming in on Election Night slightly favoured Trump, the expected blue-shift phenomenon as mail-in ballots were progressively counted began to give the Democratic candidate Joe Biden a commanding lead. There was no legal precedent to the mayhem that ensued. Soon thereafter, Trump reiterated the election was rigged against him; without any proof, he stressed that due to massive voter fraud in the mail-in votingthe count should be suspended and tabulation be based on the results of Election Night. The conflict went from the streets to the courts; it was no less ugly.
The elimination of the decades-old consent decree in 2018 had given the Republicans ample tools to again intimidate voters and suppress votes. Litigation ensued tabulation. Republican legal teams questioned the validity of many of these overwhelmingly Democratic mail-in ballots in an attempt to disqualify as many Biden voters as possible. Under the pretext of rampant voter fraud and political and civic chaos, Republican-majority state legislatures in the six crucial battleground states appointed their own electors to the Electoral College.
It was the most dysfunctional election in US history. To all effects, the Republicans attempted to stage a coup against the will of the majority of voters. The Democrats pushed back insisting that the electors should reflect the vote count. The Interregnum came and went, besmirched by political haggling and massive street protests that sometimes turned violent. Two separate Electoral Colleges chose two different presidents. The stalemate continued beyond Inauguration Day. Trump’s refusal to accept defeat plunged the country into the worst constitutional crisis in US history; actually, it was a series of constitutional crises.
Joe Biden was eventually declared the 46th President of the US, though the situation continued being tense and confounding, even though in the mid-term elections of 2022the Democrats won a majority in the Senate and kept the one in the House. Trumps insisted in his denunciations and called on his supporters to defend him, liberty and the Constitution, in that order. There was a certain irony in all this, as the white supremacy groups that mostly heeded his calls denounced the tyranny of the Biden government, while conveniently overlooking the authoritarian nature of Trump himself.
Proceedings began to arraign Trump on grounds of criminal and civil wrongdoing. It was the first time in US history that a former president would go to trial; ample evidence was presented. The majority of the American public, fed up with Trump’s railings and hoping for catharsis, supported prosecution; his supporters went ballistic. But President Biden eventually decided to grant a pardon on the grounds of national reconciliation. It was later discovered that a secret “deal’ had been made in which Trump promised to refrain from further destabilizing actions in return for a full pardon from prosecution. Even though Trump’s self-promotion as a master dealmaker rang hollow, as evidenced by his multiple bankruptcies and accusations of financial wrongdoings, this was one deal that actually worked out well for him.
In the end, the furor didn’t matter much. Trump’s empire eventually withered amidst a massive debt load and the enormous losses many of its businesses were incurring. Trump’s offspring and associates were accused of protracted criminal conduct involving bank fraud, tax and insurance fraud. When proof emerged (through a Russian source) of questionable financial dealings with Moscow and links to shady Russian oligarchs linked to Vladimir Putin, his credibility further eroded.
A tumultuous decade
Kamala Harris lost a close election in 2024 to a tech billionaire who ran as an independent and on a platform of discontent with the political system; the Republican Tucker Carlson came in third. The victory was inconsequential, as was the one in 2028 of a retired naval officer, a hero in the “skirmish” three years earlier with Chinese ships in the South China Seas. Neither president was able to reconcile the deep fractures in American society, the ones Trump had so ably and cynically exploited.
Republican Senator Lindsey Graham’s unfortunate comments in October of 2020 that African Americans and immigrants can live in his home state of South Carolina as long as they were conservative were prescient of developments to come. Even though the metamorphosis began long before Trump’s presidency, throughout the 2020s the Republican Party became increasingly radicalized and intransigent.
The decade was pounded by profound transformations. In the early 2020s Americans worried that the increasing and seemingly irreconcilable polarization of society would lead to civil war. It’s true that following the controversial 2020 election, violence did increase throughout the country. Political polarization evolved into societal intolerance and went from resentful to vindictive. The US lost its common identity, its moral compass. The melting pot crumbled as neighbour turned on neighbour and families broke apart.
White supremacist groups and ANTIFA members fought pitched battles in the streets of cities. Other groups from across the political spectrum sometimes joined in, though less vehemently. The abundance and easy availability of arms, even automatic weapons normally used in wars, facilitated the carnage. Scores of thousands of Americans lost their lives. There were violent attacks on Democratic politicians in Republican bastions, and several members of state legislatures, mayors, and even two Governors were killed. Some more radical Democratic factions responded in kind. The police were unable to stop the spread of civilian violence as they too sometimes fractured and identified with one side or the other. The same occurred with the National Guard. Many Americans watched in disbelief and wondered how did it come to this. The liberal democracies of the world watched aghast.
But there was no civil war. Instead, there was a great migration. As the decade progressed, tens of millions of Americans left their homes seeking a better life in regions more in tune with their beliefs, aspirations and political identities. In some cases, harassment and intimidation contributed to forced departures. White educated, liberal urban professionals, blacks, Hispanics and Asian Americans left the Midwest and South towards the Pacific, or to the northeast. Meanwhile, less-educated, conservative working-class whites fled these bastions of liberalism to find solace in Middle America- some nostalgically called it Trumpian America.
With states purging themselves of ideological opponents, violence has gone down. Very different territorial entities are emerging. The great reckoning is having an irrevocable impact on US society. Some say it’s almost inevitable the US will fracture into two or even three different countries. The exhaustion and deep mistrust on either side diminished the will to unite.
The Great Divide
The United Western States of America (UWSA), an area that includes the Pacific states but also Arizona, Colorado Nevada and New Mexico, are strengthening their common identity and increasingly challenging central authority. They no longer recognize the decisions of the Supreme Court, whose conservative majority rulings are overturning the liberal foundations of the country on everything from abortion and education to immigration and health care. They have taken paradiplomacy to the next level, opening up Economic and Cultural Offices throughout Asia, Latin America and other parts of the world that for all practical purposed function as embassies.
The UWSA has unilaterally joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and have intensified their economic and political relations with Canada and Mexico, as well as with the economies of the Pacific Alliance, a Latin American regional integration initiative. There’s even hearsay of a more formal agreement with Canada, maybe even a confederation, as that country defends and promotes the values that once made the US so exceptional. The interest is buoyed by the lobbying of millions of highly skilled Americans that moved to Canada during the tumultuous 2020s, and that contributed to Making Canada Great.
The UWSA has also welcomed talented immigrants in large numbers, predominantly from Asia, and mostly from China and India -these two countries are confronting their own existential dilemmas. The immigration and the higher domestic fertility rates in the UWSA have contributed to demographic growth and an economic boom. By the mid-2030sthe region will not have a single racial or ethnic majority. The heavy toll of climate change and water shortages have made the UWSA a global leader in mitigation and adaptation. They are rapidly transitioning away from fossil fuels and towards renewable energy. Interestingly, shared challenges have increased cooperation with the increasingly autonomous Chinese coastal regions. The UWSA is the fifth largest economy in the world.
The Eastern American States, encompassing most of the Great Lakes region, New England and Virginia, though more geographically constrained and scattered is also pursuing an active paradiplomacy, focused mostly on Canada, Europe and Latin America. In the late 2020’s they unilaterally signed a Transatlantic Trade and Investment Agreement with the European Union.
Middle America has not fared that well. Whereas in the UWSA the Democratic party splintered and new parties emerged that are transforming the region into a vibrant multiparty democracy, in Middle America the Republican Party became the dominant, sometimes the sole political force. The party that erstwhile advocated free-trade and fiscal discipline -whose Congressmen shared with Democratic colleagues a sense of institutional patriotism– became withdrawn and mistrustful of the world, hostile to immigrants, and incredulous of climate change.
The message of Donald Trump resonated among the fervent populists who took over the party and used his playbook to stoke mostly imaginary fears and sow tribalist viewpoints. They pandered to the reactionary evangelicals and white supremacists that constituted the party’s core militancy. Its adherents, though, were mostly white Americans unwilling to accept a changing country and acquiescent of the party’s backsliding into chauvinism to keep their historical prerogatives. An ugly legacy of racism that goes back generations resurfaced, reassured by Trump’s earlier attacks on a liberal, inclusive society.
The country’s de facto dismemberment has weakened Middle America. Segments of white Americans continued suffering from a devastating opiate epidemic that reduced their productivity and life expectancy. The epidemic grew as the economy stagnated. Such was the heavy human toll that some compared it to Russia’s demographic decline in the 1990s. The refusal to transition towards renewable energy sources is impacting its fossil-fuel-based economy, whereas climate change is curtailing agricultural production in the Midwest and damaging vital infrastructure throughout the Gulf of Mexico.
The resilient hegemon
There was nothing predetermined about the decline of the US. Quite the contrary; no other major power is so blessed by providence. The US had considerable strategic and competitive advantages over foes and allies alike that would have allowed it to be a key 21st-century global power. Its privileged geographic location shielded it from immediate rivals and made it both an Atlantic and a Pacific power. It had more navigable waterways -and major ports- than the rest of the world combined, with the Greater Mississippi Basin overlaying the largest contiguous piece of farmland in the world. The US became the largest fossil-fuel producer in the world, and with the proper policies and incentives could have led the global transition towards renewable sources.
As opposed to most other major powers who in the next decades will experience demographic declines, its population was due to grow steadily in large part due to immigration -thus guaranteeing economic growth and military preparedness. In addition, it held sway over the global financial and monetary system and had consistently dominated each new generation of technology. Its capacity to project hard power and the appeal of its soft power was without rival. Though the US had embarked on a process of global strategic retrenchment long before Donald Trump’s solipsistic resolve, it was still an energy, agricultural, economic, financial and military powerhouse, and could have continued being so. Few foresaw the fracture that was to come.
A world bereft of leadership
Alas, no country or region could muster the will, nor had the capacity to take the helm. The Union European (EU) mostly stumbled in the 2020s, as demographic decline set in and right-wing populism further encroached on the region’s politics. The governance challenges of such a heterogeneous block led to a multi-tier structure of interactions in which different members cooperate on matters of common interest. Economic divergence, anaemic growth and political squabbling limited the EU’s global ambitions, though the region maintained its allure as the world’s foremost cluster of freedom, prosperity and peace.
Japan’s economy fell from the third biggest in the world in 2020 to ninth place in 2030, due largely to sluggish economic growth, and a rapidly shrinking population and workforce. Automation and innovation, though, helped maintain the country’s high quality of living. Despite US retrenchment from the world and particularly from Asia, Tokyo actively maintained its commitment to an open rules-based international system. However, its diminished economic and geopolitical heft limited its global influence.
By 2030India had the third largest economy in the world and had overtaken China as the country with the biggest population. Despite arbitrary attempts at imposing Hindutva nationalism on the country’s mosaic of religions and ethnicities, it remained the world’s most populous democracy, albeit a flawed one. New Delhi has struggled to provide employment to its huge youthful working-age population, leading to social discontent. Large demographic imbalances, regional disparities and alarming levels of pollution and groundwater depletion have dampened India’s prospects, forcing it to cast its gaze inwards.
Russia is still governed with an iron fist by Vladimir Putin. Its raw commodity-based economy has been unable to modernize and transition. Russia is suffering from a fast-aging population and rapid demographic decline that’s affecting its industries and armed forces. There was an exodus of young talented professionals fleeing the stagnant economy and the stifling regime. Popular uprisings against personalist, authoritarian rulers in its near abroad left Moscow even more forlorn. The country never recuperated the Soviet-era geopolitical grandeur that Putin so vehemently promoted.
No did China become the global hegemon many had forecasted. The sum of its challenges exceeded the sum of its accomplishments. With its demographic dividend over, China faces a fast-shrinking population, one of the reasons it could not transition from an export-led economy towards a focus on domestic consumption. The extent of its Orwellian surveillance state reduced China’s appeal as an alternative governance model. There was a global backlash throughout the 2020s at Beijing’s systematic repression of its Uighur and Tibetan minorities and the emasculation of Hong Kong; developing countries sometimes criticized its economic policies as neo- colonialism.
The decoupling was not only with the US, as the more prosperous, historically outward-looking coastal regions demanded greater leeway from Beijing and the Communist Party’s suffocating rule. As the US reduced its presence in the Indo-Pacific, the Quad expanded its scope to include not only Australia, India and Japan but also Vietnam and South Korea, with some Southeast Asian countries showing interest. This reduced Beijing’s quest for strategic depth.
Even countries that were previously critical of America’s hubris look back in nostalgia and grief at its decline, and what became of the global community. For all its failings and moral contradictions, the much-vilified Pax Americana contributed to an unprecedented era of economic growth, as well as one of relative stability and peace. The globalisation it helped spur lifted more than one billion out of poverty and improved the lives of billions more. For decades democracy around the world flourished.
The waning of the US came at the worst possible time. The 2020s proved to be a ruinous decade. The liberal, rules-based international order is fraying; no alternative has yet emerged. Multilateralism in its many forms weakened. Globalisation, already in retreat, further receded as the wide-ranging consequences of Covid-19 led to a fractured and regionalized world and economic nationalism brought a decrease in global trade and investments. The world went rudderless. Prosperity and stability are frail things. There is no greater pain than to be aware of what was and what was lost.
Possible Directions for U.S. Policies in the Biden Era
Authors: Chan Kung and He Jun
On January 20, 2021, a new page will be turned in the history of the United States when Joe Biden becomes the 46thPresident. What will happen to U.S. domestic and foreign policy as a result of the transition from the “Trump Era” to the “Biden Era”? What will be the impact of this on the U.S., the world, and China? After the tumultuous Trump Era, we believe that this is an issue of great concern to international governments and markets.
The “ANBOUND 100+” high-end discussion platform and the macro team have been continuously tracking the news of the imminent Biden Era and possible policy changes. To this, we have made a number of key predictions. In the historic moment when Joe Biden is about to take office, it is important to review and summarize the relevant research to understand the changes that the new U.S. President will bring.
First, we shall look at the American political landscape in the Biden Era.
An overall judgment is that Democrats are taking control, but “Trumpism” is still unlikely to disappear from U.S. politics any time soon. The ANBOUND team had judged on November 11, 2020, that Donald Trump’s various policies had in fact left Biden with a number of political and diplomatic “legacies”, and that Biden actually had considerable autonomy over whether to “inherit” these “legacies”. Objectively, whether inherited or not, these “legacies” can be used as a bargaining chip for the Biden administration. On the issue of Trump himself, ANBOUND once said on December 20 that Trump will be in trouble because he had “gone too far” and that the future Biden team might carry out a complete reckoning with Trump and his team. Judging by the fact that Trump is facing a second impeachment and the investigation into the storming of the Capitol, such a reckoning is happening. In this regard, ANBOUND has summed up Trump’s influence remains and its trajectory to be: Trump -> Trumpism -> Trumpism without Trump.
In the Biden Era, the two-party political landscape in the U.S. will be unbalanced, with the Democrats dominating U.S. politics and rapidly gaining the upper hand, and the Republicans facing an internal split, as ANBOUND judged on January 10, 2021. On this basis, we believe that there is a clear trend towards “bipartisanship”, with the Democrats becoming the dominant party in this cooperation. In this context, the Biden administration is likely to complete domestic integration faster and turn its focus to foreign policy sooner. It is also possible that with less resistance at home, the Democrats will give more focusat home, and the U.S. society will become more integrated than in the past, with some of the major domestic issues, such as welfare and environmental protection, to likely make significant progress over the next four years.
Then, there are the U.S. economic issues and economic policies in the Biden Era.
The United States faces many problems in the economy, but the core problem lies in the distribution of wealth, which is the cause of many social problems. The research team of ANBOUND pointed out in November 2019 that the wealth of the United States is still in the process of being accumulated in large quantities, and the real problem of American society lies in the distribution of wealth. Part of the backlash against globalization in the U.S. is also related to the distribution of wealth in American society. On this basis, we believe that welfare will be an important aspect of U.S. economic policy that needs to be addressed in the future. On November 22, 2020, we further pointed out that the transition to a welfare state could usher in a new super-boom for the United States. Contrary to the view of many that welfare is a “simple spending” policy, we believe that welfare, if properly used, will create new consumption space. In terms of health insurance, education, and consumption in the United States, we expect that a full-scale welfare transition in the U.S. would create a USD 10 trillion mega-consumer market that would potentially bring the U.S. into a new phase of rapid development while resolving social tensions.
Based on the above analysis, we believe that the core of the so-called “Bidenomics” is about the distribution of wealth and the “welfarization”. From what has been observed so far, the basic logic of “Bidenomics” is to solve the public health crisis, save jobs, reconfigure the industrial chain, overhaul infrastructure, promote an environmental agenda, build a better social security system, and promote social equality. This logic is likely to be the “core” of economic policies in the Biden Era. There were similar signals that emerge before Biden officially took over the presidency. Biden has proposed USD 1.9 trillion stimulus package to deal with the impact of the pandemic on the U.S. economy and society. Biden’s Treasury Secretary nominee Janet Yellen also called on the U.S. Congress to act more aggressively to deliver economic aid without worrying too much about the debt. “Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen said. “I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time,” Yellen added. Yellen also stressed the need to rebuild the U.S. economy “so that it creates more prosperity for more people and ensures that American workers can compete in an increasingly competitive global economy.”
Concerning the foreign policy issues in the Biden Era, as mentioned above, Biden will not completely abandon Trump’s diplomatic “legacies”, rather he would build on it with some kind of “pullback”. In this process, institutionalization and systematization will be the most prominent characteristics of American diplomacy in the future. A top foreign policy priority for the Biden administration will be to rebuild relations with its allies, particularly Europe, restoring stability to the transatlantic alliance and healing the rifts that have emerged over the past few years. We believe that such rapprochement will certainly play a role and the U.S.-EU strategic alliance will not change, but it will be difficult to fully restore to the levels of the past. On many issues, such as economy and trade, market space, security, and digital sovereignty, the EU will have a stronger “sense of autonomy”. As for U.S.-China relations in the Biden era, we have argued that we should not expect the U.S. government to adjust its hardline position on China, but that the Biden administration would be more predictable in its approach to policy games, returning to the character of “the establishment”. In fact, as early as October last year, the ANBOUND’s research team pointed out in its outlook on U.S.-China relations in the Biden era that the Biden administration’s approach to several aspects of domestic and foreign affairs would generally differ from that of the Trump administration, and that while its strategic positioning of China and the policy of inhibiting the rise of China in the long term would remain unchanged, in terms of specific approaches, the Biden administration would seek a certain degree of order and geopolitical discipline to implement and enforce its policies.
In regard to the Korean Peninsula issue, we believe that in the Biden Era, it is possible for the United States and North Korea to reach a phased nuclear abandonment agreement. On Iran, the main concern is still the Iranian nuclear issue. We believe that the United States will amend Trump’s extreme policies on the issue of the Joint Comprehensive Plan of Action (JCPOA), or the Iran nuclear agreement, and some adjustment will take place. However, even if the United States can return to the Iran nuclear agreement, Iran may have to make certain concessions on the 2015 version. One of the key points may be that Iran needs to further restrict its support to the militia in the Middle East on the basis of the original version. This means that Iran’s influence in the Middle East will be significantly reduced. Regarding the issue of returning to Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), we believe that returning to CPTPP is quite attractive to the Biden administration, but it is also quite difficult. Fluctuations in U.S.-China relations will affect the process of the United States returning to CPTPP; the worse the U.S.-China geopolitical relationship gets, the less resistance the United States will have to return to CPTPP.
In addition, ANBOUND’s researchers also believe that looking from the standpoint of historical development, the Biden administration may be a transitional period for the United States to return to “normal” from the Trump Era. From Biden’s personality, age, situation and environment, we tend to think that the Biden administration is likely to be a “presidential accountability system under the leadership of Secretaries”. In such a government, it is the Secretaries of various departments, the Department of State, and the new cooperation pattern of the two parties in Congress that play a key role, rather than relying mainly on the President. In particular, Janet Yellen, the new Treasury Secretary who had served as the Chairperson of the Federal Reserve, could very well have crucial impact on the U.S. economic policy in the Biden Era.
Final analysis conclusion:
With the transfer of executive power, the United States will bid farewell to the “Trump Era” and usher in the “Biden Era”. The United States under Joe Biden will undergo considerable adjustments and changes, which are reflected in many aspects of the United States’ domestic politics, international geopolitics, economy, and foreign policy. The world will watch the new changes in the United States, and China will see a new pattern of U.S.-China relations. Changes in the United States will not only affect the world but also China’s development strategy.
Removed Diplomacy: Why U.S. Sanctions Against Russia Have Gone Stale
Since 2014, Russian and American diplomacy has been defined by economic sanctions. This has become the default, expected option for U.S. policymakers—but Russia has refused to concede, repent and ask for forgiveness. The U.S. had hoped Russia would experience just enough economic hardship that they would revert their course, retract their reunification with Crimea, and end any involvement in Eastern Ukraine. Almost seven years later, there is no evidence to suggest that Russia has any intention of buckling under the pressure and denying its national interests.
What the United States has failed to realize is that sanctions work on highly dependent countries. Russia is an independent country and has become more economically autonomous as a result of U.S. sanctions. The Russian domestic industry has flourished since sanctions were first imposed. Sanctions imposed by the United States are predicated on some combination of the following: either the United States has enough of an economic relationship prior to sanctions, so the loss of the United States as a trade partner alone is hugely detrimental to the target economy, or the United States can influence other countries who share a more extensive economic relationship with the target country to carry out the same policies.
Venezuela is a country that has been grievously affected by U.S. sanctions, as one would predict, given the country’s dependence on the exportation of crude oil, particularly to the U.S. With oil comprising roughly 95 per cent of exports and their petroleum industry making up 25 per cent of overall GDP, Venezuela is considered very resource dependent when engaging in international trade. Venezuela has also been plagued by Dutch Disease, which has largely prevented its economy from diversifying for the past century. In 2013, the United States brought in 29.5 per cent of Venezuelan exports and delivered 23 per cent of the county’s imports. Strangely, despite the sanctions imposed in 2014, Venezuela has grown more dependent on the United States. By 2018, 39.2 per cent of Venezuelan exports and 52.9 per cent of Venezuelan imports were in trade with the U.S. With this increased dependence on the United States after the implementation of U.S. sanctions. It is no wonder that Venezuela has been increasingly devastated beyond comprehension since sanctions were first imposed in 2013. Venezuela’s trade balance through this period has consistently been in surplus. However, the volume of trade has shrunk USD 101.9 billion, from USD 143.76 billion in 2013 to USD 41.86 billion in 2018. The country has been rocked by astronomical inflation, reaching as high as 344 509 per cent. Is it the same case for Russia? No, which is due, in part, to Russia’s Soviet legacy. The vast territory and harsh climate have also helped the Russians develop a much more diverse and independent economy. Additionally, the United States is simply not one of Russia’s main trade partners.
As illustrated by data from the Observatory of Economic Complexity, Russia and Venezuela couldn’t be more unalike. Russia’s largest trade partners for the past 20 years have been Germany and China. In 2014, when the sanctions were first imposed, Russia’s economy and international trade figures were at an all-time high. In that year, Russia exported USD 454 billion and imported USD 296 billion, a trade surplus of USD 158 billion. This year, the United States only accounted for 5.58 per cent of Russia’s imports and 3.87 per cent of Russia’s exports. In 2018, with even stricter sanctions imposed, Russia exported USD 427 billion and imported USD 231 billion, increasing the trade surplus from USD 158 billion in 2013 to USD 196 billion in 2018. Russia’s trade balance from 2013 to 2018 still experienced a shrink of USD 92 billion. A key difference between Russia and Venezuela is that from 2014 to 2018, Russian trade decreased by just 12 per cent, compared to Venezuela’s loss of 71 per cent. What does Russia have working to its advantage that Venezuela is lacking? Remember, for sanctions to work, they require high economic dependence from either the country issuing the sanctions.
Russia and Germany have an interesting codependency on one another. The Nord Stream project has been a source of tension between the U.S. and Germany; a recent Bloomberg article points out that there is an anticipated clash between newly elected president Biden and German Chancellor Angela Merkel. The German chancellor openly supports the completion of the second pipeline because the project is a means for securing German influence over Western Europe, as they will maintain their status as energy distributors once the pipe project is complete. Merkel also understands that the German economy depends on Russian energy. Nord Stream has become the only option since the Ukrainian pipelines have gone cold. Merkel has received criticism from those close to her, including from Norbert Röttgen, the head of the foreign affairs committee in German parliament. In September of 2020, he is quoted saying, “We need to respond with the only language that Putin understands, the language of natural gas,” Meaning the one thing that Germany has at its disposal is the ability to back out of the Nord Stream deal to pressure the Kremlin into correcting their behaviour to satisfy western leaders. The only problem is that Germany is dependent on Russian natural gas. Germany has been falling behind other European countries in environmental efforts and has grown more dependent on coal power to supplement energy demand when renewable sources fail to meet the needs of the German people.
It’s important to consider is the continuation of oil trade between the Netherlands and Russia. If the West is so concerned about preserving its ideals, why hasn’t this trade been pressured? Likely because Nord Stream 2 is a relatively recent development, but the arrangement between the Dutch and Russia has been around for some time. What is odd, however, are the numbers. Between the Netherlands and Russia, there is hardly a difference in the dollar value of Russian exports in various petroleum products. It has maintained an average of about USD 33 billion for the past decade. This spans time both before and after sanctions. How does the West expect itself to be taken seriously if it is hyper selective about the battles it chooses to fight even when concerning sanctions. What is more comical about this particular deal is that the Netherlands supplies much of Western Europe’s oil. Henceforth, further defending the point of Western Europe’s dependence on Russian energy.
In conclusion, Russia has proven to be very resilient over the past six years. It shouldn’t be implied that the sanctions have not affected the Russian economy. However, Russians have faced pervasive negative externalities, such as inflation and decreased average national income, despite the sanctions having been designed only to affect a select group of individuals. Even so, the Russian economy is growing and proving to be insulated and resilient against increased trade barriers. At first, the sanctions appeared to have a tremendous effect on the Russian economy, shrinking it by 44 per cent from USD 2.292 trillion in 2013 to USD 1.272 trillion in 2016. Since 2016, however, the GDP has steadily stabilized and gained back 42 per cent of losses from 2013 figures at USD 1.7 trillion as of 2019. It can be surmised that if the U.S. continues to impose sanctions on Russia for years to come, the Russian economy will continue to grow, develop, and become more independent.
From our partner RIAC
The World Should Get Rid of “Trump Inertia”
Authors: He Jun and Chan Kung
A new chapter is about to begin for the politics of the United States as the “Trump Era” will soon give way to the “Biden Era”. As the United States still has major global influence, any shift in the American politics would therefore inevitably change the global geopolitical landscape as well as international investments and the trade environment. After four years of extreme policies in the Trump Era, coupled with the impact of the COVID-19 pandemic, countries around the world hope to see change and a return to relative normalcy.
However, the end of the Trump Era does not spell the end of “Trumpism.” The many marks, characteristics, and ideological trends brought about by Donald Trump will continue to influence the world for some time. However, in the real economic field, countries may need to startridding itself of the environment characterized by unilateralism, America First, and the politicization of economic issues. Researchers at ANBOUND call these remaining Trumpist characteristics and their effects on countries’ behavior “Trump Inertia”.
“Trump Inertia” has many specific manifestations. The deterioration of the relationship between Australia and China is a clear example of this. Australia followed the Trump administration’s side by choosing and adopting many extreme politicization practices against China despite China being Australia’s largest trading partner, largest export destination and largest source of imports. In 2019, Australia-China trade volume totaled approximately US$158 billion; Australia’s trade surplus with China was approximately US$48.83 billion, and its exports to China totaled US$103.90 billion, accounting for 38.2%
During the Trump Era, Australia followed the United States in adopting antagonistic approaches against China, which is understandable. Yet, though the Trump Era is coming to an end, Australia’s attitude towards its largest trading partner is still considerably arrogant and hostile. While it is true that there are differences in ideology and values, such paranoia is still unreasonable and there is a lack of political insight in recent shift of international exchanges.
China too, has retaliated against Australia. On the one hand, it has adopted countermeasures in economic and trade, and imposed trade restrictions on the import of coal and a variety of agricultural products. On the other hand, China has also adopted tit-for-tat approaches against Australia in diplomacy.
With the withdrawal of Trump from the political arena, it is puzzling as to why there are lingering disputes between Australia and China as theirrelationscontinue to deteriorate. Trump might even feel proud if he sees that the two countries are still at odds even after he steps down. For China and Australia, this means that they have fallen into the quagmire of “Trump Inertia”.
Though being a member of the Five Eyes alliance (FVEY) like Australia, New Zealand’s approach is far different. Damien O’Connor, New Zealand Minister of Trade and Export Growth and Minister of Agriculture, stated that strong global demand for dairy products, especially in the Chinese market, will offset the adverse effects of weak dairy prices. It is estimated that in the year ending June 2022, New Zealand’s dairy products export revenue is expected to reach NZ$ 20.1 billion. At the same time, forestry exports are showing a recovery trend. The New Zealand Government’s Situation and Outlook for Primary Industries (SOPI) report predicts that in the year to June 2021, the export revenue of primary industries will exceed NZ$47.5 billion; in the year to June 2022, this figure will reach the NZ$ 49.2 billion record. It is worth noting that New Zealand’s Foreign Minister Nanaia Mahuta also publicly stated that New Zealand is willing to help China and Australia achieve peace talks.
The policies and flexibility shown by New Zealand which differs from Australia’sreflect a normal response of a rational country. This is also something that China should learn from. In the current situation, geopolitical relationship between China and Western countries is tense, and this is seen as the most “successful” part of the Trump administration, all due to “Trump Inertia”. For both Western countries and China, it is necessary to get rid of “Trump Inertia” as soon as possible.
Though the attitudes of other countries cannot be controlled by China, China is able to adjust and change its own actions. As the Biden Era is approaching, all countries need to adjust to the new changes and find new consensus points in terms of diplomacy, trade, multilateral cooperation, and global climate change. China is a major power with huge national interests. For that reason, it should have long-term visions and goals. China will need to adjust certain foreign policies and practices in accordance with the overall national situation and long-term interests to pave the way for its future development.
Final analysis conclusion
The Trump Era is about to end, but Trumpism will still linger for some time to come. In the face of the “political switch” in the United States, China and many Western countries need to adjust their strategies, get rid of “Trump Inertia” as soon as possible, and return their diplomacy to a rational and normal track.
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