The third wave of globalisation has started (2)

Not easily discernible hitherto, even with the disequilibrium from the Covid-19 pandemic, the Russia-Ukraine war has forced a couple of measures on countries, especially Western ones, that will be long-lasting.

For instance, Europe has determined it would wean itself off Russian gas permanently, with a US-EU gas deal signed in late March 2022; albeit Russia continues to supply gas to the continent. Europe has also begun to approach Middle Eastern and African countries like Qatar and Nigeria to fill in a potential gas supply gap owing to likely stopping its custom with Russia in the near future.

There is also talk in America of rapprochement with top crude oil producers, Iran and Venezuela, as realpolitik makes nonsense of erstwhile slights.

A re-militarisation of hitherto largely pacifist Germany and Japan, the antagonists of the previous world wars that heralded the second wave of globalisation is also afoot, as the two countries realise their growing vulnerability in a world heading towards multipolarity.

In a world of precision medicine, medication that rely on genomics will not necessarily rely on the cumbersome global value chains that add to cost and exclusion

African gas pipelines to Europe from much further south, Nigeria, say, hitherto considered prohibitively expensive, may increasingly not seem so implausible as this third wave evolves.

Certainly now, the beneficiation of Africa’s mineral resources will increasingly have a stronger business case, as its fits with the expected trend of regionalised global value chains (GVCs).

New technologies are also why, as they disrupt and displace the institutions of the existing global economic order. Over time, electric vehicles will reduce the need for fossil fuels and the toxic geopolitics associated with it.

The new internet, blockchain and cryptocurrencies will overcome needless restrictions on the flow of capital, even as national governments seek to place borders around them.

Satellite internet will allow individuals to circumvent government restrictions on current internet infrastructure, as the case of Ukraine shows, which has been able to stay online despite Russian bombing of its internet infrastructure.

In a world of precision medicine, medication that rely on genomics will not necessarily rely on the cumbersome global value chains that add to cost and exclusion. These are just the trends we see now. But no one really knows how these things will eventually pan out.

Play nice

Inevitably, the third wave of globalisation will primarily be about China, as it is the main challenger to the existing Western-based global economic order. How it approaches it will determine whether it continues to be a major beneficiary or would be restricted to its territories and those within its sphere of influence in Asia, some parts of Africa, and perhaps a few Latin American countries.

In her testimony before the American Congress in March 2022, Katherine Tai, the US trade representative, asserts a new approach to trade relations with China is imperative.

A hitherto focus on changing the behaviour of China towards compliance with the largely liberal Western-dominated global trade norms and institutions have not been successful, Ms Tai says.

Instead, she advocates the ramp-up of domestic American capacity. This tilt towards self-sufficiency is not a sustainable route, The Economist avers in an article in mid-March 2022. It is expensive and would be elusive.

What is probably more efficient is to have stopgap measures in place to fall back on during a global crisis, like the ongoing Russia-Ukraine war and the Covid-19 pandemic hitherto.

Read also: The third wave of globalisation has started (1)

Incidentally, China already expects some fallout from America owing to the Russia-Ukraine war. In a recent publication, the Centre for China & Globalisation, a Beijing-based think tank, expects “some collateral sanctions from the US” in the short-term, but believes China would prove resilient owing to its large size and quite advanced industrial economy.

The CCG believes an Asian pivot by Europe, especially towards China, is inevitable over the long-term. While this is somewhat presumptous, it is probably going to be vindicated.

But only if China plays nice. China cannot afford to continually be at odds with the west, as a stable global economic order favours China as much as it does America and Europe.

And China will hardly reach its fullest potential without bending like the proverbial bamboo when the winds blow hard so it can stand straight when they subside. So yes, I agree with The Economist’s view that “the West and China can thrive by agreeing where possible and agreeing to differ where not.”

Trust is key

Thankfully, China increasingly recognises this. In early April 2022, China signalled it might give America full access to audit reports of Chinese firms listed on the New York Stock Exchange, for instance.

Quite frankly, it is ridiculous that this was allowed at all in the first place. This is also evidence of how America has been bending over backwards to woo China over the years. So, this is a welcome development. Worries about the integrity of Chinese technology are justified.

If it truly aspires to displace the West or compete to win against it, then it must replicate or improve on the trust capital the West has built over the years. Otherwise, its numerous global ambitions, from its desire for the Chinese yuan to displace the American dollar as a global reserve currency, to being able to market and sell its technologies in the west’s backyard, will remain elusive.

In other words, the onus is on China to prove that these concerns about the security of its technlogies are needless. And it should not become the norm that agreements reached with China could be breached ex-post if the authorities have a change of heart about something.

In this regard, American complaints about the cherrypicking in the implementation of the Phase One Agreement by China have a strong basis. China should not make deals that it would or plans to renege on. And China should be keen about this, otherwise it will continue to lose custom.