Could Reshaping the World Order Usher in the Return of Economic Globalization?

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Russia’s war in Ukraine has accelerated trends toward a new world order, in which China will be a key player, argues Dr. Wang, President of the Center for China and Globalization (CCG) and former senior advisor to the Chinese government at both central and local levels, in this take on the emergence of a post-Western world. For him, the West must not seek to ‘contain’ a rising China but rather learn to coexist with it – especially from an economic standpoint. This article is part of our series Ukraine Shifting the World Order.

Globalization is at a crossroads. The Russia-Ukraine conflict that broke out in February challenged the post-WWII world order. However, in a broader sense, the reshaping of the current world order is an inevitable result of global economic development, advancements in technology and the natural evolution of the global power landscape. Under the "center-periphery" system, the globalized flow of resources, technology, capital and personnel has enabled emerging economies, to grow stronger while developed countries at the center have weakened. The cost of maintaining their current power position by suppressing competitors is rising. This has resulted in damage to their own credit while also creating shockwaves throughout the world economy and global geopolitical order.

The world order after the Russia-Ukraine conflict

The Russia-Ukraine conflict, in the wake of the COVID-19 pandemic that plunged the world economy into recession, has shaken US hegemony and has become the biggest challenge to the international order since World War II. Globalization, as we have known it for the last 30 years, is coming to an end. Larry Fink, CEO of BlackRock, the world's largest asset manager, declared in his 2022 shareholder letter that the Russia-Ukraine conflict will reshape the global supply chain and drive up global inflation. A New York Times article titled "Globalization Is Over. The Global Culture Wars Have Begun" echoed similar views.

Changes in the Sino-US relationship, combined with the development of other regional powers and new national alliances have weakened US influence. Regional powers such as Turkey, South Africa, Egypt, India, Indonesia, Brazil, and Mexico play a more unique and important role on the global stage. The ongoing development of national alliances such as ASEAN, the African Union, and the Arab League has strengthened regional unity and given them greater leverage to maintain their independence. After the outbreak of the Russia-Ukraine conflict, only 40 countries sanctioned Russia. This decision was motivated by trade reasons: two-thirds of the world's countries have China as their main trade partner, causing them to opt for non-alignment. This trend indicates that today developing countries tend to be more multi-polar than bipolar. Meanwhile, as the United States tries to strengthen old alliances with partners and allies, Argentina, Iran, Saudi Arabia, Turkey, and Egypt are preparing to join BRICS, which may play a more active role in reshaping the global order.

The outbreak of the Russia-Ukraine conflict accelerated major restructurings in the international landscape and increased multi-polarization. Intensifying domestic issues in the US and whether the country has the will, confidence and ability to continue to maintain its status as a superpower, have increasingly come into question.

The outbreak of the Russia-Ukraine conflict accelerated major restructurings in the international landscape and increased multi-polarization.

Zbigniew Brzezinski, President Jimmy Carter's National Security Adviser and renowned geostrategic theorist, once predicted in his book The Grand Chessboard: American Primacy and Its Geostrategic Imperatives that "in the long run, global politics are bound to become increasingly uncongenial to the concentration of hegemonic power in the hands of a single state. Hence, America is not only the first, as well as the only, truly global superpower, but it is also likely to be the very last".

Today, the decentralization trend of world politics is basically a foregone conclusion. As the power of peripheral countries increases and the power of the center weakens, the power in the "center-periphery" world system will become more decentralized, resulting in a more equal and inclusive multi-polar world order.

Changes in the world order and China's role

A reshaping of the international order would mainly affect mainstream values, norms and institutional arrangements. As major powers play an important role in the transformation of the world order, Sino-US relations, and China's rise, are key elements. Singapore's former Prime Minister Lee Kuan Yew once called China "the largest player in history" - highlighting how it is impossible for a country as large as China to not have an impact on the world system. So what impact is China having on the world order?

Binary power structures, historical concepts of dominance, as well as ideological and nationalistic sentiments, make it easy for the West to regard China as an enemy. However, China's traditional concepts of "harmony", its mission to create a new era of common prosperity, and the goal of building a community with a shared future for mankind all demonstrate that China, which is committed to achieving a peaceful rise, is inclusive and harmonious. In terms of economic development, China has achieved in 30 to 40 years what it took Western countries nearly 200 years to accomplish and is gradually narrowing the gap with the US economy. However, a poverty gap remains between the rich and the poor. China still counts 600 million people with an average monthly income of no more than ¥1,000. China's per capita GDP is just over US$ 10,000, half of the standard average income in developed countries, and lags far behind the US in key areas. In geopolitical terms, China has neither the will to replace the US as the world's policeman nor the ability to provide public goods to the world despite its rising overall national strength. But China's willingness and ability to safeguard its own national interests and assume responsibility as a major power are also on the rise.

Over the past three decades of rapid globalization, general prosperity masked the injustice in the international system and world order, which became more apparent as the world economy slowed down. China has benefited greatly from globalization and continuously worked to open itself to the world, providing institutional international public goods to the global community, while also working to promote new concepts of globalization and governance to guide it toward a more inclusive, fair and just direction.

China has benefited greatly from globalization and continuously worked to open to the outside world.

And in the past decade, China has proposed the concept of a community with a shared future for mankind and advocated the implementation of the Belt and Road Initiative (BRI). In terms of economic development, China has promoted the creation of the Asian Infrastructure Investment Bank (AIIB), joined the Regional Comprehensive Economic Partnership (RCEP), signed the China-EU Comprehensive Agreement on Investment (CAI), and applied for joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Digital Economy Partnership Agreement (DEPA).

In his May 2022 Speech outlining the Biden administration's policy toward China, US Secretary of State Antony Blinken's regarded China as "the most serious long-term challenge to the international order". From Obama’s "pivot to Asia" policy to the Quadrilateral Security Dialogue (Quad), the Australia-UK-US Alliance (AUKUS), the Five Eyes, and the Indo-Pacific Economic Framework for Prosperity (IPEF), the US strategy to contain China in the coming decades is very clear. With the relative decline of American influence, regional powers will become more ambitious and there will be more intense military engagements between countries as well as increased national alliances. Such scenarios imply we will face a more fragmented, turbulent and divided world before a new multi-polar world order can be established.

China, the US and Europe must create space for cooperation.

Some Europeans may regard China as a challenge to the existing international order and feel distressed by the decline of the West, but Europe will remain an important player in the construction of any new world order.

China, the US and Europe must create space for cooperation. In terms of the scales are their economies, China, the US and Europe are the world's three main economic pillars.

In 2021, the total GDP of the United States exceeded US$ 23 trillion, while the GDP of the EU reached US$ 17 trillion (US$ 20 trillion if we include the UK and other European countries outside the EU). Meanwhile, China's GDP reached US$ 17.7 trillion. China, the US and Europe are also the main players in most of the global conflicts and divisions that we face today. This is why the creation of a "G3" that includes China, the US and Europe is relevant. A high-level platform for dialogue and coordination that can be used to coordinate differing positions on major international issues could help avoid unnecessary misunderstandings and conflicts, and play a positive role in the promotion of world peace and common development.

China and Europe share consensus in many areas, such as climate change and the digital economy. Europe may not be as strong militarily, but it still has significant advantages in terms of economy, soft power, and cultural influence. Many international organizations are also located in Europe. If a China-US-EU "G3" concept is established, Europe will act as a mediator between China and the US, instead of completely siding with the US and maintaining relative independence. At present, China established a third-party market cooperation mechanism with many countries including France. In the future, China and Europe may also consider deepening third-party market cooperation in Africa and other places to jointly promote investment, trade and infrastructure development in Africa, establishing a new direction in South-South cooperation.

Restarting economic globalization and reshaping the world order

Peter Schiff, a veteran Wall Street forecaster, who accurately predicted the 2008 financial crisis, warned in early July 2022 that the United States would face an economic crisis more severe than the "Great Recession" of 2008. IMF President Kristalina Georgieva also publicly stated on July 13^th that the state of the global economy would be dire in 2022, and possibly even worse in 2023. It is fair to say that a global economic depression has arrived. Clearly, we have not hit the bottom of this economic recession as global inflation, food crises and energy crises continue to ferment. The economic downturn in the United States and Europe is worsening, while China's economic recovery is also slowing down.

The Bretton Woods system after World War II formed the cornerstone of the post-war world order and brought decades of peace, stability, and prosperity to the world. Today, the Covid-19 pandemic and the Russia-Ukraine conflict have brought mankind to a new Bretton Woods moment. Economic globalization is facing a more complex international environment with world peace, openness, connectivity, diversity, and fair development severely damaged.

Today, the Covid-19 pandemic and the Russia-Ukraine conflict have brought mankind to a new Bretton Woods moment.

As a result, all parties should focus on creating a new economic order and institutional basis, while at the same time hedging against military expansion and the insecurity it brings to the world.

Below are a few recommendations for a path forward:

First, World Trade Organizations (WTO) reforms should be a priority. This institution is among the most important ones in world trade today. The package agreement reached as a result of the 12^th WTO Ministerial Conference (MC12) boosted the confidence of the international community in the multilateral trading system. In the future, we hope that all parties will promote WTO reforms and that the WTO will once again give full play to its role in maintaining and mediating international multilateral trade.

Second, smooth implementation of the China-EU Investment Agreement (CAI) is needed. China-EU relations have reached an impasse on CAI over the past two years so the resumption of communication may allow both sides to negotiate and lift sanctions, enabling the CAI to go into effect as soon as possible, which would be a boon to Chinese and European enterprises.

Third, a multilateral development bank cooperation framework could be created. In the future, the AIIB could work with the World Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, European Investment Bank, Islamic Development Bank, African Development Bank, Inter-American Development Bank, and others, to promote a platform for global infrastructure development driven by international multilateral development banks.

Fourth, promoting economic, trade and investment cooperation is key. Given the increasing demand to jointly respond to challenges, it may be possible to hedge the insecurity by enhancing economic and trade investment cooperation between China, the US, and other regional countries within the "Indo-Pacific Economic Framework for prosperity". It is difficult for ASEAN and other Asian countries to distance themselves from China in economic and security terms, and they are unwilling to take sides between China and the US. A politically and militarily divided Asia is not in line with the further rise of Asian countries.

Fifth, stimulate regional and world economic vitality to promote Asia-Pacific economic integration. The CPTTP has already reached 90% and in some instances even 98%. In the future, if the economic pie becomes bigger and everyone returns to the multilateral negotiation mechanism, it may reduce the risk of direct conflict between countries and reduce geopolitical risk.

Sixth, a new framework must be established to promote the global digital economy's normative agreements and regulations. The United States should also allow Huawei, TikTok, WeChat and other companies to operate in the United States, while China should also consider opening up its market to Google, Facebook, Twitter and other American digital companies. The establishment of an "International Data Alliance" (D20) composed of the world's 20 largest digital economy companies should also be considered to enhance the G20's ability to better promote global governance in the digital economy.

In conclusion, to bridge divisions induced by Covid-19 and the Russia-Ukraine conflict, avoid the outbreak of larger regional wars, and guide the development of the world order to operate more moderately, we must enhance economic cooperation. Reshaping global economic governance and promoting a new round of economic globalization is the best path forward.

Copyright: GREG BAKER / AFP