07/07/2020

THE CHALLENGE OF FINDING BALANCE FACING A MORE BIPOLAR WORLD

 

The pandemic that has been striking the world in recent months has had and will have significant economic and geopolitical consequences. As time passes, not only do many questions arise regarding the impact and recovery trajectories of the economies at the global, regional and national levels, but also on the geopolitical balance, particularly between the two great economies of the world (United States and China).

A preliminary conclusion is that COVID-19 seems to have accelerated the trend towards bipolarity and the deepening of rivalry between both countries. On the one hand, the United States is going under a process that Richard Hass [1] has named "withdrawal diplomacy". The United States, a pillar and defender of the post-Bretton Woods multilateral system, is giving increasingly clear signs of a withdrawal. The abandonment of the Paris Agreement, the Nuclear Pact with Iran, the Trans-Pacific Agreement, and its distancing from the United Nations, the World Trade Organization and, more recently, the World Health Organization, are all a clear signal towards this direction.

On the other hand, China is in the midst of a process that I have been pointing out over the years as a “globalization with Chinese characteristics” [2]. In recent years, China has gone from being only a great country in economic terms to becoming a more assertive actor in international politics and a strong defender of multilateralism and economic openness. Currently, it not only has a more leading role in the existing multilateral forums, but it has also created its own institutions and forums through which it unfolds its new role in the multilateral system. The “Silk Road Initiative” (launched in 2013 by President Xi), the Silk Road Fund founded in 2014, the Asian Investment and Development Bank created in 2016 (which currently has more than 100 full members [3]), the holding of the Silk Road Forum in 2017 and 2019, the China International Import Expo (CIIE) that takes place annually since 2018 in the city of Shanghai, as well as the Hongqiao Economic Forum, are examples of an institutional architecture that characterizes this new globalization with Chinese characteristics.

These different ways of approaching globalization and multilateralism by China and the United States bring consequences for the rest of the world.

In the first place, and beyond the American institutional withdrawal that has already been mentioned, it is worth highlighting the "confrontation" as in a chess game between both countries. The outpost of the United States by the Trans-Pacific agreement (TPP) in 2008 -from which the United States withdrew in 2017- was opposed by the initiative of the RCEP (Regional Integral Economic Association) in 2012 (whose negotiations were concluded at the end of 2019), where China participates and the United States does not. The negotiations for the TTIP (Transatlantic Association for Trade and Investment) between the United States and the European Union, started in 2013 and unfinished by 2016 [4], are opposed by the announcement made by President Xi in Astana, Kazakhstan, the same year as the land corridor that would link China with Europe via Eurasia (later part of the "Silk Road Initiative") was launched.

This geopolitical confrontation not only refers to physical infrastructure but also involves the technological sphere and, given the acceleration of the fourth industrial revolution, it allows the prediction of a sharpening of the conflict. China launched a MIC2025 “Made in China 2025” plan, which emphasizes ten technology sectors -including robotics, information technology, clean energy- with the aim of increasing Chinese know-how and increasing domestic content of vital and material components (on average 40% by 2020 and 70% by 2025) tending to be self-sufficient in order to achieve a better position in global markets. This program is, in fact, the origin of the trade war between the two countries, since forced technology transfers and state subsidies that would give an uneven advantage to other companies in the foreign private sector are the main American claim.

This type of "geopolitical game" also manifests itself in our region. China is currently one of the main trading partners of all countries in the region. In terms of investment, the Chinese presence is increasing. At the "First Silk Road Forum" held in Beijing in 2017, Xi Jinping announced that Latin America was the "natural extension" of the initiative. As mentioned, 19 countries in Latin America have already signed this initiative. However, China is not the only benchmark in terms of investment in our region. At the end of 2019, the United States launched an initiative called "America Grows", through which energy-related investment projects are promoted -although it has now been extended to other sectors- in clear opposition to the Chinese initiative [5].

The impact for our region is increasing. Therefore, maintaining a balance in our relationship with both countries is essential, prioritizing national as well as and regional interests. In this sense, strengthening the dialogue and deepening the regional cooperation will be essential for Latin America.

 

Carola Ramón is PhD in Economics, Undersecretary for Multilateral and Bilateral Economic Negotiations at the Ministry of Foreign Affairs, International Trade and Worship. She is also Member of the Executive Committee and Director of the Latin American Committee of the Argentine Council for International Relations (CARI). @CarolaRamonB​

 

 

 

[1] Hass, Richard (2017),“America and the Great Abdication: Don’t mistake Donald Trump’s withdrawal from the world for isolationism”, The Atlantic, December 28, 2017, https://www.theatlantic.com/international/archive/2017/12/america-abidcation-trump-foreign-policy/549296/

[2] Ramon-Berjano, Carola (2019), “Globalización con “características chinas”. El creciente rol de China en América Latina y el Caribe y sus principales desafíos”, Pensamiento Propio 49-50, CRIES, http://www.cries.org/wp-content/uploads/2019/08/007-Berjano.pdf

Ramon-Berjano, Carola (2018), “La Iniciativa de la Ruta de la Seda: Crisis del multilateralismo y globalización con ´características chinas´” en “China, América Latina y la Geopolítica de la Iniciativa de la Ruta de la Seda” editado por Sabino Vaca Narvaja y Zou Zhan y publicados por las universidades argentina Nacional de Lanús (UNLa) y china de Ciencia y Tecnología del Sudoeste (SWUST)

[3] Uruguay y Ecuador are the only two countries of the region that are full members, while Argentina, Brasil, Bolivia, Chile, Perú y Venezuela are still not.

[4] The negotiations were declared obsolete on April 2019 by a decree by the European Union Council

[5] This can also be noted in other domains, such as the recent American candidature for presidency at the Inter-American Development Bank (IADB), of which China is a non-regional member since 2008. As a matter of fact, one of the first issues between the United States and China at the IADB appeared in 2019 when China was to host the annual meeting, being it the first time it took place in China, at the city of Chengdu, to commemorate the 10 years of its incorporation to the institution. Given the disagreement on the acknowledgement of the Venezuelan representatives at the Assembly, it was cancelled.

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