Owing to the punitive Smoot-Hawley tariff regime and the global reprisals that followed, global trade declined by 66 percent in the six-year period of 1929-1934. Not too long thereafter, another world war broke out that lasted for about seven years from 1939 to 1945, which many agree heralded the precipitous fall of the British Empire, with America becoming the unrivalled global hegemon of the post-1945 globalisation order.
So, when some global commentators like Mr Fink say the end of globalisation as we know it is near, what they are perhaps really saying is that America’s decline has begun.
My view is that Mr Fink et al. are in needless haste to make the call. Barring another world war, America’s towering place in the world will remain, with the rapidity of its decline or stasis dependent on how well it adapts to a future multi-polar world of regional hegemons with heft to challenge its leadership. Insular measures like Trump’s America First will surely make it lose ground. But a realisation by America that some changes to the Bretton Woods post-1945 global architecture is exigent might save the day.
In these early stages of the third wave of globalisation, the geo-economic narrative will be the dominant face of Roberts & Lamp’s (2021) six faces of globalisation. Domestic politics will remain a constraint. But not for long
Many are sceptical that America will take the initiative on time. In its stead, China has a chance to show the world what a better alternative to the Western order can be. And it need not be mutually exclusive or disorderly, as some aver.
To the credit of the skeptics about a future China-led or China-strong global order, however, the evidence thus far does not suggest the world will be any better than the status quo. China has to show it will be a force for global good and prosperity. Because how long it will hold on to the potential leadership of the third wave of globalisation that may be thrust upon it will depend on how deftly it wields its power. If China cannot be trusted, it will remain no more than a regional hegemon.
Coming to fairer economic terms with America will be a good first step. In this regard, America’s trade war with Japan in the 1980s is instructive; for China and those who wonder about the end-game of the current turbulence between the two largest global economies.
Japan addressed all of America’s key concerns at the time, with its private sector leveraging on American pressure to push domestic economic and business reforms; a win-win. While China is not as heavily dependent on America as Japan was, especially on security, the current portion of its global trade with America of 13% is significant. Besides, America’s demands on China are not particularly outrageous.
In the phase one trade agreement between the pair in early 2020, China agreed to increase imports of American goods by as much $200 billion by end of 2021. How much incremental American goods did China buy?
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According to the Peterson Institute for International Economics (PIIE) in Washington DC, which has been tracking the implementation of the agreement, “China purchased only 57% of the total US goods and services exports over 2020-21 that it had committed to buy under the agreement.”
In other words, “China bought none of the additional $200 billion of US exports committed under the deal,” the PIIE adds. Surely, this was a meagre task for a China that does global trade worth at least $6 trillion annually. Thus, there are many areas for which both hegemons will find common ground if they are willing.
In these early stages of the third wave of globalisation, the geo-economic narrative will be the dominant face of Roberts & Lamp’s (2021) six faces of globalisation. Domestic politics will remain a constraint. But not for long. The protectionism that birthed the second wave of globalisation was largely motivated by a desire to calm antsy electorates. Short-term political considerations also underpinned Trump’s trade tariffs and restrictions on Chinese goods; albeit the Biden administration is not particularly in a hurry to give them up.
America’s refusal to ratify the Trans-Pacific Partnership (TPP) trade agreement during the Trump administration was a grave error and a huge missed chance. But the United States still has a chance to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that replaced it. Naturally, America will want its imprint on the trade deal to water down the Sino-dominance of the pact in the event it chooses to do so. This should not be a great matter for China. In fact, China must champion the effort. America and China would hardly benefit from being at odds on trade.
