The victory of Democrats in the US elections has raised hopes that international trade tensions will substantially subside, the world would see less of political confrontation and more of economic cooperation.
US President-elect Joseph Biden, in the views of eminent analysts, is an experienced politician who is likely to pursue a realistic foreign policy that in tune with current international ground realities that have changed since he was the US vice-president. Washington’s unilateral approach including that of President Donald Trump to build a world in its own image has met with unprecedented challenges in an emerging multipolar world.
On November 17, Biden told a news conference that the United States needed to renegotiate with allies to set new trading rules to counter China’s growing influence. He said the US makes up 25 per cent of the global economy… and ‘we need to be aligned with other democracies, another 25pc or more, so that we can set the rules of the road instead of having China and others dictate their terms because they are the only game in town.” He emphatically said we should stop ‘poking our fingers in the eyes of our friends.’
Nationalist and populist governments establish an authoritarian rule, suppress freedom of expression and curb organic growth of citizen-based democracy
The President-elect was responding to media questions relating to the China-led Regional Comprehensive Economic Partnership (RCEP) agreement signed by 15 Asia-Pacific countries on November 15 which was a setback to America. It is the largest free trade pact with its members accounting for 30pc of the global gross domestic product. The China-led RCEP includes Japan, South Korea, New Zealand and Australia. In 2017, Trump had quit the RCEP while India has opted out of it. The Chinese success lay in pursuing a policy of multilateralism.
On the same day Biden addressed his press conference, Chinese President Xi Jinging told an online summit of Russia, India, China and South Africa (BRICS): “history teaches us that multilateralism, equity and justice can keep war and conflict at bay, while unilateralism and power politics will inflate disputes and confrontation.”
Trump will also leave behind a legacy on the US domestic scene which the incoming President may find difficult to deviate from. The incumbent revived sinking manufacturing to protect as well create jobs for white working-class and blue-collared labour. Biden told the news conference that Washington would invest in workers, make them more competitive and make sure that the labour and environmental interests were represented in any new trade negotiations.
Apparently, to protect domestic manufacturing, advisors of the President-elect say he would not immediately remove tariffs on Chinese goods. To quote a newspaper report a toxic stew of disputes with China awaits Biden. Political analysts say he was showing ‘some respect’ for 72 million people who voted for the incumbent. Jobs, wages, small businesses and housing stability are stated to be major concerns of the majority of common citizens.
Trumpism was a backlash against growing fault lines of financialising economies which led to an international financial crisis, contributed to highly disproportionate inequality among and within nations including the US as elsewhere, and resulted in the Great Recession 2007-08.
Globalisation has been largely debt-driven as many countries are now trying to tackle chronic trade and balance of payments deficits with unsustainable external and domestic debts despite the drastic cut in imports by states like import-dependent Pakistan. Trillions of dollars stored in safe heavens deprive both developed and developing countries of funds that could be invested in national social and economic progress. There is a huge flight of capital from developing states to industrially advanced countries.
Aware of the grave global debt problem, the G-20 agreed in mid-November on a common framework for clear and orderly debt restructuring that aims to treat creditors equally and negotiate debt relief on a case-by-case basis. The decision comes a month after the Group decided to suspend $14 billion debt payments for additional six months up to June 2021 to support 73 countries in their fight against Covid-19.
The coronavirus crisis has exacerbated debt problems of poor countries, 50pc of which are in or at risk of debt distress or showing an early sign of its impact. Pakistan is also a candidate for further debt relief. The State Bank (SBP) data shows that Pakistan’s external debt and liabilities climbed up to $113.8bn in September with a net borrowing of $6.8bn added in the past one year by the federal government, SBP and private sector.
To address foreign debt sustainability concerns, Islamabad is changing its borrowing strategy to make foreign-funded projects bankable. For example, Pakistan will initially seek Chinese funding of $2.7bn for the construction of the first phase ML-1 railway project.
Prompted by the Ministry of Finance, the Project Financing Committee headed by the deputy chairman of Planning Commission has decided that Pakistan would acquire the $6.1bn total Chinese debt in three tranches subject to Beijing’s endorsement.
The problem with Trump’s America’s First policy was that he pursued a retrogressive nationalist policy in order to shut off the US domestic market for foreign goods, investment and manpower while pressuring other countries to open up their markets for American products and investment.
Critics say that nationalist and populist governments establish an authoritarian rule, suppress freedom of expression and curb organic growth of citizen-based democracy.
Progressive nationalism is required to put globalisation on a correction course. Whether nations live independently or together in a country, in both cases, they have to deal with each other. The more nations band together under a federation or union the more power and resources they are able to pool together to trigger social and economic progress.
European Union envisioned that sovereign members states would jointly take decisions to work for the collective welfare of the European nations and people. The Europeans did not choose to form a federation in which sub-nationalities voluntarily surrender part of their sovereignty to the federation. And yet national currencies were abolished when a regional currency, euro, was created to facilitate trade within the Eurozone. Its adverse impacts particularly during the global financial crisis faced by the EU are too well-known to be repeated here.
The major EU states like Germany and France were focused on a transactional approach to optimise their national interests. The EU also did not opt for the transformational relationship that could advance each others (EU members) strategic goals. But hopes are being raised after the Democrat’s victory in the US that major powers may now start taking a strategic correction course.
Published in Dawn, The Business and Finance Weekly, November 23rd, 2020