The start of the 1990s, in many ways, marked the beginning of the era of globalisation and economic liberalisation. Over the years, they came to be accepted as the economic ideals to aspire to.
Things came to a head with the Global Financial Crisis of 2008, with the desirability of these perceived ideals being called into question; we began witnessing a paradigm shift of sorts. The election of populist leaders across the globe who decry the features of the economic system and pin glaring socio-economic inequalities at its doorstep was the next step.
In the recent past, this sentiment has gained currency. And fast. Much of the political commentary on Unravel in the past six months reflected on developments in this context.
The US-China trade war triggered a series of adverse economic impacts across the world, but also resulted in a few economies benefitting. Regardless, protectionism and isolationism have become popular across regions, particularly given populist governments and their vocal supporters.
The trade protectionism rhetoric gained steam further after the pandemic’s onset, with many countries such as India choosing this as an opportune moment for domestic political gamesmanship, adopting a ‘vocal for local’ position in the quest for self-reliance. India was not alone. Many countries tightened exports as global supply chains were thrown into disarray.
Unfortunately, this happened at a time when COVID-19 called for collaborative effort to not only bring the pandemic under control, but also re-emerge from the economic downturn it caused. An effective global response would have to be rooted in strong leadership, swift execution and earned legitimacy. Unfortunately, there was little of that on display.
US-China tensions escalated amid the pandemic, compounding matters further. At a time when the world’s two superpowers ought to have been cooperating to address the greatest threat we have collectively faced in generations, they were busy slapping tariffs on one another and winning brownie points among their constituents. Big tech companies, in particular, were caught in this geopolitical crossfire.
Ongoing regulatory measures (and pressures) will, no doubt, lead to repercussions for Chinese companies on foreign shores as well as on western companies operating in China, who are already preparing for increased regulatory scrutiny. The ByteDance/ TikTok saga played out in front of a global audience and provided a reminder about the power of the state.
While the wheels of protectionism and isolationism were set in motion by US and China, this rhetoric is expected to grow and tech multinationals will have to take these shifts in their stride. Growing tensions between China and India resulted in India banning several Chinese mobile apps, for instance.
But as the US-China trade war continues unabated, a third alliance of middle powers may well establish a new world order. This is due to the West’s reluctance to assume global leadership, coupled with China’s economic fragility and ‘Wolf Warrior diplomacy’. This makes both powers ineffective in establishing a global order that can function smoothly. As the US and China have lost much credibility through the pandemic, an alliance of middle powers might be the best bet for new global leadership, is one view that has gained momentum.
In the years following the Cold War, the US assumed the mantle of global leadership. However, in the three decades since, it has made a giant mess of much of its foreign policy. As a result, it now finds itself in a geopolitical quagmire of its own making. It must envisage a comprehensive new deal with Russia that embraces the current complexities and new institutions, and attempt at fixing relations with China.
China’s popularity, meanwhile, has also waned across much of the world, and particularly in Australia. A Lowy Institute poll found most Australians have lost trust in China and would like to see Australia diversify its economic dependence away from it. China’s increasingly aggressive and assertive stance on geopolitical and economic issues, coupled with its perceived role in covering up the coronavirus outbreak, is responsible for this perception.
However, much as talk around deglobalisation comes in vogue, China will remain a dominant player. In fact, it has quietly (and of late, rather vocally) emerged as the strongest proponent of globalisation and free trade. Its leadership has repeatedly underlined its commitment to a free and open trading system.
That said, that the old globalisation model is being considered less and less acceptable is also true. Therefore, some degree of decoupling and disentangling of supply chains is now inevitable, and possibly, desirable. This pandemic has, in many minds, reinforced the idea of staying in greater control of supply chains, which in many cases really means either nearshoring or onshoring.
China may find less favour among many countries globally, but it remains a critical partner for Southeast Asia. The region’s relationship with China does not seem affected due to the pandemic. ASEAN stands to further leverage this partnership by capitalising on a China+1 strategy and promoting itself as a Southeast Asian production hub. In a trend contrary to elsewhere, the pandemic is likely going to result in greater China-ASEAN cooperation and collaboration. The closeness of China-ASEAN economic ties will help support their political relationship too in the years to come.
At a domestic level, one of the prominent developments that played out in the past few months has been the relationship between China and Hong Kong. Protests that lasted months eventually culminated in the passing of the national security law, which has thrown questions around the political and economic future of Hong Kong, Asia’s most important financial hub.
Elsewhere, in South Asia, India’s farm bills have turned into a bone of contention. These farm bills were initiated with an intent to liberalise and modernise the Indian farming sector but they remain controversial with critics arguing they will only benefit large Indian corporates at the expense of the farmer. Protests have gathered steam, and it remains to be seen whether the government will make any amendments to the bills.
In a similar unfolding of events, Indonesia’s contentious omnibus bill also sparked widespread protests across the country. Supporters of the bill expect it will boost Indonesia’s economy and kickstart its recovery. Critics argue it will harm labour and the environment. The impacts of the bill can be transformational, one way or the other.
There is a commonality that resounds in this entire post-COVID narrative and that is the need to collaborate and reorganise. The pandemic has deepened cleavages within societies and among countries. When it was actually time to arrest the impacts of the virus through cooperation, international relations headed south. Multilateralism was sacrificed in the interest of often narrow political agendas.
Countries must forego their differences and work towards rebuilding a better future for all. And what better way than to look towards the biggest democracy to lead the way, with a new President who will hopefully reverse America’s isolationist approach to global relations and engage more with Asia.
In the coming year, we will continue to bring you interesting insights on global political affairs. Here’s wishing a fantastic 2021 to all our readers, and to hoping that 2021 Unravels in better ways than the year gone by.