In retreat…Javid Husain
THE current international scenario is marked by ongoing competition between the process of globalisation and power politics, and economic competition based essentially on nationalism.
Globalisation in the form of instantaneous communications thanks to the internet, the global reach of mass media and MNCs, fast transportation, growing international trade, transborder environmental and health concerns, and the evolution of international norms and organisations is bringing down cultural and national barriers.
Whereas globalisation brings countries closer together and encourages international cooperation, power politics and economic competition driven by national and civilisational differences reinforce barriers to international cooperation and sow the seeds of discord and conflict.
In the aftermath of the disintegration of the Soviet Union and the end of the Cold War, the US emerged as the sole superpower dominating the global landscape politically and economically. Globalisation, while promoted by high-sounding ideals of world peace and free trade, in this scenario facilitated the dominance of the world economy by the US because of its economic and technological superiority. American firms and MNCs took advantage of the easy access to world markets and sources of raw materials offered by globalisation to expand their businesses all over the world.
The situation, however, began to change to America’s disadvantage because of China’s dramatic economic rise, especially in the last two decades. China’s GDP in purchasing power parity terms surpassed that of the US in 2014. It may overtake US GDP even in nominal dollar terms within the next six to seven years. Chinese firms offered tough competition to their American counterparts globally and even in the US. Consequently, China overtook the US as the biggest trader in goods in the world with its total trade in goods estimated at $4.16 trillion in 2013. The US-China trade balance turned heavily in favour of China. US exports to China were estimated to be $154 billion as against imports from China amounting to $536bn in 2022.
China’s rapid economic growth and increasing weight in international trade enabled it to raise its military expenditure and modernise its armed forces, besides expanding its power and influence at the regional and global level. It has thus posed an increasingly potent geopolitical challenge to US global superiority. It is generally believed that if these trends continue, China will emerge as the most powerful economic and military power in the world by 2050. These prospects have understandably caused alarm in Washington which has adopted the policy of containment of China as its top priority.
In pursuit of this policy, the US is strengthening its strategic cooperation with Japan, South Korea, India, the Philippines and Australia, both bilaterally and through such forums as the Quad and AUKUS. It has also imposed economic and technological restrictions to slow down China’s growth, besides heavily investing in infrastructure, semiconductor chips and green technologies domestically to enhance US productivity and competitiveness. In the past two years, the US Congress has passed three bills to provide $2tr for investment in these sectors to reshape the American economy.
Growing geopolitical and economic fragmentation globally and regionally, because of the increasing US-China rivalry, an assertive Russia and the emergence of other centres of power like EU, India, Brazil, Indonesia, Turkiye, Saudi Arabia and South Africa has delivered a severe blow to the process of globalisation. Washington’s proclivity for imposing economic sanctions on other countries on political and security grounds has further aggravated this trend. The coming years will, therefore, witness an increasing resort to economic and trade restrictions by countries to protect their national interests at the cost of globalisation and free trade.
Pakistan’s policymakers should take into account these developments in the formulation of national and regional economic policies. We should be particularly mindful of the possibility of our economic and regional trade partners being guided by realpolitik and narrow national economic interests more than anything else. This is particularly true in the case of our economic and trade relations with India which poses an enduring threat to Pakistan’s security. We should be guided by the principles of mutuality of benefit and a level playing field while considering any scheme of regional economic cooperation, keeping the focus on enhancing the vitality and development of our economy.
Curtsy DAWN