During the recent G7 summit, the president of the European Council – a subsidiary of the EU – sent out the warning that Donald Trump’s trade and diplomatic initiatives may end up bolstering attempts to put in place a ‘post-West’ international order. Do such apprehensions hold water?
Some recent developments have driven a wedge between the US and its Western allies, which together with Japan make up the G7 – the rich, industrial nations’ club. These include imposition of punitive tariffs by the Trump administration on the import of steel and aluminum from some European countries and Canada, allegedly in contravention of international law; the US decision to unilaterally walk out on the Iran nuclear deal in the face of considerable opposition from its allies; and Washington’s overtures towards Moscow, including the suggestion that Russia may be re-admitted to the G7.
China’s steady march on the road to becoming the globe’s top economy along with the resurgence of Russia as a formidable military power have raised the hackles of the West. Not only that, the fissures that have appeared in the Western world – both within the EU, reflected by Brexit and the discord over the immigration issue, and between America and its European allies – offer a contrast with the Sino-Russia relations, which are going from strength to strength. The recent successful Shanghai Cooperation Organization (SCO) summit hosted by Beijing, which ran almost concurrently with the rancorous G7 meeting, lends credence to the East-West contrast.
Economists steeped in the liberal tradition agree that in the long run, trade doesn’t affect in any significant way the distribution of income because it enables the nations to realise their comparative advantage – that is, to capitalise on their strengths. Hence, temporary job losses and income erosion aside, all trading partners gain from trade. By arguing that the US has been taken for a ride in the name of free trade by its trading partners, Trump has turned the familiar liberal logic upside down.
Instead of free trade, his watchword is ‘fair’ trade. If America continues to play by the rules while its trading partners go on with their ‘chintzy’ tactics, it will end up as a loser. This logic implies that the only rational policy course available to Washington is to punish the nations that give it the shaft. The principal significance of the new logic is that it is being advanced by none other than the paterfamilias of liberalism.
Before committing ourselves to making a definitive statement about the birth of a new international order, it is imperative to look at the genesis of the current order, which goes back to the end of the Second World War. After the fascist threat had disappeared into thin air, liberalism came face-to-face with another more powerful adversary: communism. The liberal world’s strategy to see off the new antagonist was simple: with generous assistance from the US, Western Europe will single-mindedly focus on economic reconstruction and integration while its security will be underwritten by Washington.
Thus were born two of the most conspicuous blocs or alliances of the contemporary world: the EU and the North Atlantic Treaty Organization (Nato). The US was not a part of the EU, but it orchestrated its evolution. The seed money for the European Payment Union, which was the first step towards European integration, was provided by Washington under the Marshall Plan.
Multiparty democracy, market economy, free trade, and collective security formed the pillars of the liberal order. The strategy paid off when the USSR – the paterfamilias of communism – collapsed. After fascism, liberalism had its second scalp. In the absence of another rival doctrine, the demise of communism was seen as the irrevocable triumph of liberalism (read: the West) and hailed as the ‘end of history.’ Oswald Spengler’s apocalyptic prediction, made during the 1920s, with regard to the inevitable decline of the Western civilisation was seen to have been conclusively confuted.
The rise of China, which started almost concurrently with the fall of the USSR, in a way held up the liberal thesis since Beijing had made a successful transition from a planned economy to a market-oriented one. Post-communist Russia also put its faith in liberal economics. But China, as well as Russia, thwarted attempts to open up its political system.
It remains a one-party state where the Communist Party leads all the institutions by the nose. The decision to lift the ceiling on the number of terms for the president will make China’s political system even more authoritarian. The discrepancy between economic and political liberalism in China makes it a doubtful leader for a liberal global order.
As the hegemonic stability theory suggests, a world order or regime needs a hegemon to create and sustain it. The regime goes down if the hegemon is no longer in a position to hold it together. As a result, communism went down with the USSR. Likewise, if the US, which has sustained the liberal order over the past seven decades, declines or walks away from liberalism, the liberal order will fall apart – unless another country is willing and has the capacity to uphold the regime. Is there a potential hegemon for the liberal order?
China and the EU are suitable candidates in this regard. However, in the wake of the UK’s withdrawal, the EU is facing an existential crisis. Even otherwise, sustaining the global order is too heavy a cross to bear for any EU member. We may also rule out Beijing picking up the role of the hegemon as that would entail a fundamental shift in the Chinese political system – which is, at best, a distant possibility. Such a gloomy situation prefigures the demise of the liberal or the West-dominated world order.
Be that as it may, the current international order may survive for at least three reasons. The first reason is that America’s departure from free trade may be temporary and Trump’s successor may put his country back on the liberal path. However, if the Trump administration is able to scale down the massive trade deficit and shore up job creation, his successor will be hard-pressed to upend his policies.
The second reason is that the liberal regime may continue to exist on its tod in the absence of a hegemon by drawing sustenance from the institutions of global economic governance. Whether these institutions are strong enough to keep the current international order intact is debatable. One of these institutions – the WTO – has already been rendered irrelevant by the recent unilateral actions of the US.
The third and arguably the most compelling reason is that China has strong stakes – higher than any other country – in preserving the existing order. Over the last three decades, China has been the capital beneficiary of liberalism. In the absence of free trade, Beijing would neither have made the economic strides that it has made nor would it have accumulated trillions of dollars as trade surplus. It is these massive funds that underpin China’s regional and global ambitions. Not surprisingly, China has no alternative economic doctrine to espouse. Besides, for all the warmth in their bilateral ties, Beijing will not trust Moscow with its enormous capital stock. The US will remain the preferred market for Chinese foreign investment.
This suggests that in foreseeable future, liberalism – albeit in a diluted form – will continue to provide the basis for the world order, with an increasing role for China and a diminishing one for Western nations.
By: Hussain H Zaidi