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Decoupling, Deglobalisation and Democracy

Excluded China Rages

On Tuesday 27 July, the Indo Pacific Economic Framework for Prosperity (IPEF) met via a video conference co-hosted by US Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo. IPEF was launched by President Biden in May 2022 with four wide-ranging aims: fair and resilient trade; supply chain resilience; infrastructure and clean energy; and tax and corruption cooperation. IPEF has 14 member nations: Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, the US and Vietnam. The US says that it openly invites other nations to join.

IPEF has made China angry, not least because it says it has not been invited to join. IPEF is “the US selfishly using member countries as vassals” the state mouthpiece The Global Times wrote on 26 July. He Weiwen, an executive council member of the China Society for World Trade Organization Studies, told The Global Times, “it has become increasingly apparent that the IPEF has nothing to do with the economy, but is purely a geopolitical strategy to contain China but is dressed up as an economic framework…The US' IPEF aims to engage countries in the region to marginalize China in economic fields. But Washington will be disappointed because any economic framework in the Asia-Pacific without China won't work.”

The Global Times also reported Wang Huiyao, president of think tank the Center for China and Globalization as saying that it is absurd that China, the Asia-Pacific's largest economy and second largest in the world, is not invited to participate in a regional economic initiative.

There is good reason for the US to grow its non-China trade in Asia. A report jointly produced by Third Way, a US think tank, and Trade Partnership Worldwide, a trade analysis firm, says that US exporters could save $88 billion and gain nearly a million jobs by cutting trade barriers with IPEF members.[1] Joining the Trans-Pacific Partnership could help too, but Mr Trump took the US outside that tent.

Does IPEF betray America’s anxiety about having to compete with China economically? WTO trade data for 2019, before the pandemic disrupted trade, shows China was the top trading partner of seven of the IPEF countries – Australia, Indonesia, Japan, South Korea, Malaysia, New Zealand and Singapore. WTO data also show that China is a bigger exporter to all 13 non US countries than the US is. America meanwhile imports more from China than any other single country – $542 billion in 2021. (Combined imports from the EU at $503 billion would be way second placed).[2]

Influential voices believe that the US is trying to contain China and that this is the main cause of China’s tetchy diplomatic tone. Michael Shoebridge, director of defence, strategy and national security at think-tank the Australian Strategic Policy Institute, says that two “decoupled” energy blocs were emerging, with China and Russia on one side, and Europe, North America and the Indo-Pacific democracies on the other. “Decoupling is real and growing. China and US decoupling has now been joined by EU-China decoupling, and we’re facing a common strategic challenge of Russia and China that unifies European actors with Indo-Pacific actors. The decoupling started in high technology, but it’s broadening now. I think it’s going to broaden to energy decoupling.”[3]

Charles Freeman, ex-US diplomat, now senior fellow at Brown University’s Watson Institute for International and Public Affairs thinks the US and its allies are making a strategic error in decoupling because of strategic competition. “The problem is that the American emphasis at the moment is on competition, confrontation and on cooperation only on a selective basis….We are not dealing with China but with the China of our imaginations, not the China that exists….. [China’s] response to the various aggressive moves by the United States to choke off their access to the technology and the product has been to double down on a drive for self-reliance. It’s very unfortunate because it basically produces conflict where there was cooperation. It disrupts trade. It menaces supply chains.”[4]

In fact the West has been building a trade wall around itself since the Global Financial Crisis began, ironically in the US, in 2008. It has done this by raising barriers to trade and weakening the very global institutions it established, based on a fatal misinterpretation of globalisation as the cause of the GFC and thus the root of the impoverishment of blue-collar voters: the left-behind of America’s opiate crisis; the malnourished food-bank dependants of the UK’s ‘Red Wall’ towns; the loss-making small business owners of La France Profonde; Hungary’s Catholics.

Weakened Global Institutions

The United Nations has been unable to prevent any of the major conflicts of the 21st Century – the second Congo War, Afghanistan, Sudan, Iraq, Ukraine, Yemen, Libya, Syria / Islamic State, or Islamic State and its allies in West Africa. The UN has generated much goodwill in its humanitarian efforts or for the promulgation of the UN Sustainable Development Goals, but it has failed repeatedly in its role as a power broker and peace maker. If the current round of conflict in Ukraine evolves into a wider European war, or if China invades Taiwan, then the UN will be as defunct as the League of Nations was by September 1939. Its founding charter which enshrines national borders would be obsolete.

The World Health Organisation (WHO) has been sidelined in the global reaction to Covid-19. In particular it was not allowed unfettered access within China, which has also imposed trade restrictions on nations it considers to have asked impertinent questions about the origins of the virus. Most notably this has included a ban on imports of a number of Australian goods of which coal has been the most visible. The WHO has been unable to enact an agreement to share vaccines because a waiver on intellectual property law that would be required in a number of countries has so far been denied it. The virus meanwhile continues to mutate and to spread faster than politics or vaccines can adapt.

The WTO’s last attempt at a global trade negotiation began in Doha, Qatar, in 2001. In 2015 the US called for an end to the fruitless negotiations and by 2018 most observers and many participants had declared the negotiations over after the 11th round of talks in Buenos Aires failed to achieve any agreement on trade issues or even the continuance of talks. With no active trade negotiations ongoing, the WTO can be said to be fatally weakened.

In the WTO’s place have sprung up bilateral and club trade deals. Some have been successful, including the ASEAN-China Free Trade Area (2010) which has cut trade tariffs to less than 1% on average. Since 2009, mainland China has overtaken the US and Europe to become ASEAN’s largest trading partner. According to the ASEAN Secretariat, the total value of trade in goods between China and ASEAN in 2020 reached $516.9 billion, accounting for 24.7% of ASEAN’s foreign trade, up from 15.3% in 2009. In 2019, ASEAN overtook the European Union for the first time to become China’s largest trading partner, accounting for 14.7% of the mainland’s total trade in 2020.

It may be then that decoupling is not a symptom of US-China strategic competition, but more properly a symptom of the disintegration of the world order established by the liberal democracies and now undermined by them, encouraged by China and Russia. The very epithet ‘liberal’ has become a term of abuse in the culture wars. A new political class of socially conservative and economically nationalist post-liberalists is establishing itself. This class includes the pro-Trump wing of Republicanism, the Brexiteer entryists who have subverted the previously economically liberal Conservative Party in the UK, and politicians across the world’s nominal democracies including Viktor Orban, Marine Le Pen, Jair Bolsonaro, Recep Erdogan, Narendra Modi, Imran Khan, Nicolas Maduro, and General Prayat Chan-o-cha.

Another of the characteristics of these individuals is that they ape the imperiousness of autocrats such as Xi Jinping, Vladimir Putin or Mohammed bin Salman of the House of Saud, by blurring the lines between the executive, the judiciary, the apparatus of state (the civil service and police) and the military, bending laws and conventions on trade to their own political agenda. They don’t play by the established rules which makes it harder for their democratic opponents to play against them. It also makes it easier for the West’s strategic competitors to prefer them, as it increases the chances of a divided and declining West leaving soft power vacuums for its competitors to fill.

The Kremlin Complexity

As Vladimir Putin assembled his forces around the Ukrainian border, EU member nations squabbled among and between themselves and with their new offshore irritant, the UK. The US appeared to be mired in its culture war. When in February Putin visited Xi Jinping ahead of the Winter Olympics, Xi declared their friendship to be without limits, an ominous remark overlooked by distracted Western politicians. When Putin’s tanks rolled into Ukraine, it seemed that Xi would regale their success amid meek acceptance from the West before launching his own assault on Taiwan. Regaining the renegade province would give him unassailable domestic authority and credibility to begin his constitution-busting third term from October 2022. This was to be the year that the post-war world order collapsed into a new order based on imperial great powers and their spheres of influence.

2022 hasn’t gone to plan for Vladimir and Jinping. Putin’s problem is not what to do if he loses but what to do if he wins. He will be toe-to-toe with a rejuvenated and rearming NATO on Ukraine’s western border (or across the Dnieper perhaps) but he will have lost his European and North American markets forever. Xi is left with shrill threats and the prospect of being frozen out of China’s lucrative western markets if he moves on Taiwan. On July 27, China threatened a “firm and strong” response if Speaker Pelosi visited Taiwan, setting out its position before the direct bilateral call between Presidents Xi and Biden on July 28. The US administration reiterated that there is no change in its ‘One China’ policy, trying to defuse the situation.

While Europe decouples itself from Russia, China’s support for the Kremlin means that Europe has started asking itself difficult questions about its relationship with China. Amid calls from the English-speaking nations to reconsider commercial relationships with China, European governments have to accept that the theory which stated that China would democratise as it grew rich is now dead, at least as long as Xi Jinping remains in power and perhaps for longer. That alone requires a reconsideration of the norms of interaction with China.

Whether Russia and China have or have not actively interfered in western democratic processes including elections, their autocratic leaders have enjoyed clear political gains from a disunited and inward facing West. Their problem now is that the West has reunited around the principle of democratic self-determination in favour of nations like Ukraine and Taiwan which want to be globalised, not shuttered into spheres of influence run by mafia overlords.

Not only have Russian and Chinese foreign policies been turned against them, but the same post-liberal, economically nationalist politicians they have hoped to see in the West have promoted trade policies that run counter to Russian and Chinese economic interests. The US and the EU represent the largest and richest trade blocs on the planet. Russia and particularly China need them. Russia can perhaps survive trading with the former Soviet Union and China, but China cannot. China cannot rely on domestic demand to supplant the West, especially as its population has probably now peaked and will age faster than it enriches itself. China also needs Asian customers, which is why it bristles at US economic practice in the Indo-Pacific.

Hoist by their own Petard

Kent Lassman and Iain Murray, respectively president and senior fellow of the Competitive Enterprise Institute (CEI), a free-market public policy organization based in Washington, wrote in The Hill in July this year: “Decoupling from China is an unserious political slogan, not based in reality unless political leaders are willing to impose large and visible costs on Americans. Consider the multilateral web of supply chains. The manufacturing of an iPhone crosses an international boundary some 600 times. Components are manufactured in Taiwan, Vietnam and Malaysia, put together in China, further processed in Japan, packaged somewhere else, and so on. We could decouple from China only by decoupling from the world.”[5]

What Lassman and Murray don’t acknowledge is that the kinds of politicians who advocate decoupling are exactly those anti-globalists which China (and Russia) have spent years promoting, not anticipating that a West divided against itself would unite in support of the principles of nationhood and self-determination. Lassman and Murray recommend that the way to deal with an ascendent China is to use the WTO against it – to work via the global institutions which the West has derogated. “What we have to do,” they say, “is impose real penalties when they cheat and create a sphere of influence that offers both information and incentives for China to move our way.”[6] In other words, they recommend engaging with China on our traditional terms, via multilateral institutions, in support of the few common principles the West still holds

The bottom line is that decoupling is a real if unintended consequence of Russia and China’s actions. You can tell, or we would not have had the consequences of the Ukraine war, and we would not hear China’s irate squealing over feeling excluded from IPEF. China and Russia, like HL Mencken’s unsuspecting common people, knew what they wanted, and got it – good and hard.

[1] [2] [3] [4] [5] [6]

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