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Will China and India Lead The Next Wave of Globalization?

Written by Monish Tourangbam and Pawan Amin.
Read the original article on The Diplomat.

Image credit: Flickr / Narendra Modi

On May 14, while addressing the gathering of 29 heads of state and other high level representatives attending the Belt and Road summit, Chinese President Xi Jinping projected the Belt and Road as a “road of opening up.” He went on to stress that “opening up brings progress while isolation results in backwardness.” Whether this was a jibe at the current protectionist dispensation in the United States or not, Xi did not hold back in comparing the initiative to the Western model of development assistance. While making it clear that China does not intend to interfere in other country’s internal affairs, export its social system or development model, Xi laid out the plan for a new model of win-win cooperation. He also announced new projects in the area of emergency food aid, poverty alleviation, health care and more; areas traditionally the mainstay of development assistance provided by the United States and other western countries. While there remains an ambiguity in the shape of things to come, it is largely acknowledged that Xi’s China has come out of the era of “hide and bide” to an era marked by a “New Type of Great Power Relations,” as Beijing phrases it, when China realizes the “Strong Army Dream.”

In the United States, Donald Trump won the presidency in part on the promise of saving American workers from the onslaught of globalization. He promised to kill the Trans-Pacific Partnership (TPP) and followed-through by withdrawing the United States from the agreement.

Meanwhile, the Chinese president has been championing globalization. At this year’s World Economic Forum, President Xi said, “Whether you like it or not, the global economy is the big ocean that you cannot escape from. Any attempt to cut off the flow of capital, technologies, products, industries and people between economies, and channel the waters in the ocean back into isolated lakes and creeks is simply not possible. Indeed, it runs counter to the historical trend.”

Until recently, Western leadership of the globalization era has been taken for granted. So, will the next stage of globalization be led from outside the West, by countries like China and India? Is this the beginning of the much-debated Asian century, where two Asian countries, outside the Anglo-Saxon world, redefine and reshape the future of globalization? While the United States under Trump seems to be pulling inward, at least in terms of global economic leadership, China under Xi and India under Modi, seems more intent than ever to face the brave new world.Indian Prime Minister Narendra Modi, speaking at the Raisina Dialogue this year, said, “The world needs India’s sustained rise, as much as India needs the world. Our desire to change our country has an indivisible link with the external world. It is, therefore, only natural that India’s choices at home and our international priorities form part of a seamless continuum.”

Do these speeches have any real impact on the way these countries conduct business?

For instance, Trump scrapping the TPP and reviewing multilateral trade agreements might signal a retrenchment from global economic leadership and a fillip to his “America First” sloganeering. However, the jobs that the United States has been offshoring to China are on the lower end of the value chain and mostly in assembling products which are designed and made in the United States. Returning these jobs to the United States would either mean convincing American workers to accept lower minimum wages or risk increasing the price of American products, thereby affecting their competitiveness. The real threat to employment in the United States is not China’s labor market, but increasing automation in manufacturing and other sectors. Moreover, as in the case of Apple, it has been proven that U.S. firms gain most out of offshoring low value manufacturing to China. On the other hand, onshoring high value manufacturing jobs, like Samsung’s chip plant for Apple, might provide high wages but does not contribute significantly to reducing unemployment in the market. Thus, U.S. tech and aerospace giants would be the biggest losers in a trade war with China. The question is, whether these companies could lobby successfully for a course correction.

On the other hand, China has been one of the biggest beneficiaries of globalization. With the support of China’s policy banks and sovereign wealth fund, Chinese firms have been able to outbid competition in the telecom, railways and infrastructure sectors globally. High speed railways is one example where foreign companies are finding it difficult to compete with the lucrative financial terms provided by Chinese companies. China gained expertise in this technology by opening up the sector for foreign investment, preconditioned on technology sharing. In a process which China likes to call “digestion and re-innovation,” it learnt from the technologies of different manufacturers investing in China. India wishes to do the same through the “Make in India” program promoted by Prime Minister Narendra Modi. While the initiative created a lot of interest overseas, transportation connectivity and legislative bottlenecks in land acquisition do not allow India to benefit completely from the forces of globalization.

While the Trump administration focuses on renegotiating trade agreements in order to reduce trade deficits, China has been emphasizing the jobs being created in the United States from investments made by Chinese firms. An editorial in Xinhua, China’s state run news agency, blamed Washington for job losses in China. Since Xi’s Davos speech, China has been taking measures to promote itself as the global leader of globalization. Soon after the speech, China’s State Council declared that it will open its economy for investments in banking, securities, investment management, futures, insurance, credit ratings and accounting sectors.

The banking and insurance sector in India can hope to benefit from these reforms if and when they do take place. However, the present threat to globalization does not come from China’s ability to attract jobs from United States. It comes from the possibility of an eventual trade war between Beijing and Washington. The Trump administration recently decided to drop the category of “re-exports” from its overall calculation of U.S. exports. This is important because the removal of re-exports will inflate the U.S. trade deficit, thereby providing the administration additional leverage to renegotiate trade deals. In light of the impending danger, the Associated Chamber of Commerce and Industry of India suggested that India build bridges with the Trump administration in order to avoid being caught in the crossfire. Soon after, China’s Global Times published an article asking India to not overestimate its economic ties with the United States, but rather focus on boosting domestic manufacturing capacity to become an integral part of the Asian supply chain.

India should indeed be wary of choosing sides between China and the United States. India’s own economic and security interests are intertwined with that of both the countries. While the A recent bill in the U.S. Congress to increase the minimum salary of H1-B visa holders hurts India’s IT sector by making it less lucrative to hire Indian workers, a healthy relationship with the United States remains of strategic significance to India. The importance is further amplified by the increasing economic influence that China stands to gain in Pakistan on successful completion of the China Pakistan Economic Corridor (CPEC). More importantly, it is the economic influence that China will gain across Eurasia as the One Belt One Road (OBOR) project gets underway (of which CPEC is a part), that requires India to prioritize its own economic interest and play its cards prudently.

Monish Tourangbam is Assistant Professor at the Department of Geopolitics and International Relations, Manipal University based in Karnataka, India

Pawan Amin is a Research Scholar at the Centre for East Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi

ASEAN is no NATO

 

Lee II Woo

Lee II Woo


Amid the global attention on the uncertainties of the global economy, if not the global order as we know it due to Brexit, commentaries and forecasts are left in a frenzy, leaving some to wonder whether the United States has now reaffirmed—if not been given the incentive—to act on its deepest desires to focus more on Asia as opposed to the West. Looking to adjust to a new reality while at the same time wishing to give assurances to old friends, public statements made—and not made—by elites have set a tone in which it has become common to question the validity of the “European project” if not the Western appeal at large.

Whatever one’s opinion may be regarding this milestone, perhaps it would serve us better had we muted the predictions about Asia now before they even reach such outlandish levels. With emotions and guesstimates running high, from China’s actions on the high seas to “terrorist refugees” and now Europe’s uncertain future, it has yet to be seen what in fact has actually changed or likely will change regarding the “Old World”, in addition to the one that apparently matters more for this century’s success—Asia.

The Same Old Song

To start, the overriding structures that have shaped the Far East have remained unaffected despite all the white noise from the West. As Donald Emmerson jokingly put it, when it comes to this place, the dynamics boil down to the Americans making the peace, soon followed by Asians making the money. Such crude generalizations remain intact especially when looking at the security nexus of this vast region. Looking beyond minor successes, such as American advancements between the Philippines and the Vietnamese, to partially-buried hatchets between the Japanese and South Koreans, U.S. presence and specifically its military presence, has continued to be the one constant for which nearly all parties—except the Chinese—can more or less agree upon.

Of course, it would be too naïve to think that this “pivot”, or “presence” or whatever else you want to call it was not without its faults. Obama’s economic centerpiece for the shift, the Transpacific Partnership, intended to bolster more inclusion in Asia, has only now entered the ratification process in an all but dysfunctional Congress. Not surprisingly, skeptical estimates have already begun; Barack Obama, like David Cameron, has just started his lame-duck session in office.

The West By Default?

Still, peering deeper into the security machinery America provides and for which Asia benefits, one would easily notice that ASEAN is nowhere near to becoming a NATO, and historical, if not territorial baggage remain across the board. Such hurdles would only distract from the commitments needed to increase complicated missions no doubt. Even with voluntary actions taken by those who talk a bigger game, such as Japan’s “upgrade” of its military to Indonesia’s uptick in peacekeeping missions, all may still find themselves out of sheer domestic constraints if not a profound risk aversion that has yet to be tested.

Would full-fledged American allies such as the Japanese and South Koreans be willing to put their troops in genuine harm’s way and for the long haul when operating in hot spots? Would they along with ASEAN members be willing to move beyond the supportive, hence politically safer roles they normally opt for? Apart from trying to dampen Chinese belligerence, what other meaningful commitments have Southeast Asian partners truly made for security assurances elsewhere? Common sense dictates that Asia, though important, is not the only vital area for which the world needs extra protection.

Though detractors would be right to point out that even the West has demonstrated its own failure to step up, such nitpicking of lower defense budgets and the West’s own version of risk avoidance would only miss out the bigger issue. If anything, when it comes to managing the global “public good”, potential partners in Asia appear to contribute when the circumstances align with their interests and not much more. Even if selfishness defines Western action, if not all action, what separates the Transatlantic connection as opposed to others is a storyline that underpins it all and for which the participants pay considerable respect. Call it “humanitarian-capitalism”.

This creed, foolish or not, is undoubtedly an essential ingredient in which the United States, Britain, France and other European partners have conditioned themselves for how they should function and should the opportunity arise. There’s just one problem. The Asia-Pacific has welcomed the latter with no guarantees on the former.

Of course, to give credit where credit is due, there have certainly been far-flung global assistance here and there. And yes, joint exercises and relief missionsthat should be applauded. But it is still open to discussion whether Asia as a whole, or even a specific nation within it is ready to take on that “special relationship” with America; to share that vision of not just what the world is, but what it ought to be while putting risky chips on the table for a cause beyond their own. This lack of impulse, to not just donate but to literally shape the world, regrettable to its disciples and delusional to its critics, is what differentiates the West and America in particular.

The Devil You Know

In the end, alarm bells will go off for some time as they always do when there is a perceived shakeup in world events. Whether the Brexit merits such a platform has yet to be fully known. What is known however is that the U.S.–British and European alliance, though imperfect, has been and will likely remain the more “reliable” partners in seeing through what Michael Ignatieff calls America’s burden: a global hegemony whose grace notes are free markets, human rights and democracy.

Putting into context such grandiose and perhaps fanciful ideas, Asian associates would no doubt welcome America’s partnership—meaning protection—along with the prosperity it provides. It’s just that in this neighborhood, its own contribution to such an agreement should assist its own residents as opposed to a zeal to seek out progress for others—and that of course would be un-American.

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