Geopolitics: Making the case for multilateralism
The US-China relationship, termed the most important bilateral relationship of this century, plays an outsized role in determining the global world order and fueling economic growth. Now, as the world looks to rebuild in the pandemic’s wake, the stakes are higher than ever for the two countries to mend ties and work towards the common good.
The future is no more uncertain than the present, Walt Whitman, one of America’s most influential poets, once said. It sounds like the kind of conclusion one might reach after gazing into the murky crystal ball of global geopolitics.
It’s natural in times of crises for people and nations to turn inward, and protect their own interests first. Yet it’s also a time when the world must come together, especially when dealing with a pandemic that has claimed millions of lives and devastated large parts of the global economy. But can a world riven by trade conflicts, opposing political viewpoints and competing economic agendas set aside its differences and pull together for the benefit of humankind? Can there be a revival of diplomacy and multilateralism?
The good news is that there is a recognition of the need and the will to do so. Naturally, the burden of moving the world towards this cooperative and collaborative future falls mainly to the United States and China – the world’s two largest economies – whose on-again, off-again relationship has been described as the most important of this century.
New age ping-pong diplomacy
Guangyao Zhu, former Vice Finance Minister, Ministry of Finance of the People's Republic of China, speaking at the 2021 Credit Suisse Asian Investment Conference (AIC), voiced hope that ties between the two countries would improve under the new US administration led by President Biden. However, he cautioned, the recipe for a friendly and collaborative relationship must be based on mutual respect and reciprocity while recognizing each other’s prerogative to uphold their values, principles and interests.
“The lessons of the past show that we have to rebuild an effective mechanism for communication and exchange. This is extremely important, strategic and about time that teams on both sides put it into action,” Zhu said, adding: “We’re living in a globalized world and should not resort to small circles,” referring to America’s regional alliances.
Mike Froman, former US Trade Representative; Vice Chairman and President of Strategic Growth, Mastercard, agreed on the need to enhance cooperation before proceeding to highlight some key sticking points from America’s perspective.
“The relationship with China is multi-dimensional so you will find areas where the two countries will look to cooperate – like climate change or other transnational issues. There are also areas that will need to be managed, such as trade,” he said, and pointed to the bipartisan consensus among US policymakers about “the nature and challenge of integrating an economy as big and complex as China’s into a global rules-based system.”
Broken, but fixable
Further highlighting the barriers to a genuine rapprochement between the two countries, both Froman and Zhu spoke of promises that did not materialize.
At the same time, there is a clear recognition and acknowledgment of the many areas where the two sides have collaborated in the past and continue to do so, suggesting a broader decoupling is not on the cards.
Climate change is one such area with Froman acknowledging China’s “remarkable progress on EVs, solar, renewables,” while Zhu spoke of working together to tackle the pandemic and “defeat Covid for good.”
Financial services is another area that is seen offering scope for cooperation with global investors continuing to benefit from China’s market reforms. “There’s so much at stake, so much positive interest in seeing further integration and further sharing of best practices across markets. This is one of the positive dynamics that we see still underlining the US-China relationship,” Froman said.
Zhu pointed out that market reforms are key to Chinese policy but added that the government will progress according to its own pace. “China has made huge strides…but we also have to guard against financial crises and systemic risks. This will help create an even better investment environment for everyone.”
So, what’s next for the US-China relationship? For starters, the focus for the Biden administration, according to Froman, will be to ensure the first phase of the trade deal is fully implemented before moving on to the next one, which will tackle topics such as technology transfer, intellectual property rights and state subsidies. “These are the next areas to get right if we are going to normalize the trade relationship. Only when there’s progress on these do I see tariffs changing fundamentally.”
Zhu pointed out that while benign competition is expected, indeed desirable, it was vital for the two countries to cooperate in the economic, technological and cultural spheres.
Clearly there are many unresolved aspects between the two countries and most will likely take years to be resolved, if ever. But one thing is for certain, according to Sir John Major, former British Prime Minister and Senior Advisor to Credit Suisse, who put the dynamic in context by noting that China’s rapid and unprecedented ascent to global superpower status means the US is now in an unaccustomed position of having to deal with an economic and political rival. He further predicted that both countries will continue to influence global affairs for decades to come.
But what of the current state of affairs? Sir John struck a pragmatic note summarizing the situation thus: “Common sense should prevail because it’s in both their interests to do so.”
The ASEAN factor
While the US, UK and Europe will continue to maintain their historic ties, these Western nations are increasingly turning to Asia and the ASEAN bloc, both for their immense growth potential as well as its strategic location on China’s doorstep.
However, the region must focus on “riding the next wave of economic opportunities together,” according to Heng Swee Keat, Deputy Prime Minister, Coordinating Minister for Economic Policies and Minister for Finance, Singapore.
While expressing hope that the US and China would continue to cooperate on common challenges, DPM Heng called on Southeast Asia to enhance relationships with both countries as well as with other nations around the world, while showing a united front and maintaining ASEAN’s unique identity.
“For Southeast Asia, we must continue to work with all parties – not just the US and China but with any country that wants to work with us. We must continue to work as one ASEAN and to advance our collective interest. It is not a question of choosing sides, but of retaining our ability to make choices for ourselves. This is what ASEAN Centrality is about.”
In order to stay relevant and advance in a world shaped by the US and China, ASEAN must play to its strengths, Keat urged, noting the potential of fast-growing emerging markets such as Indonesia and Vietnam, as well as Singapore’s strengths as a regional leader in global trade, technological innovation and sustainable development practices. “There are many opportunities in Asia, especially Southeast Asia, and, in order to continue to thrive, we must remain an open and inclusive destination for investors around the world.”
Indeed, opportunities abound for global growth and transformation but a significant part of the effort to rebuild in the wake of the pandemic will depend on whether the world’s two largest economies can come together for the benefit of the greater good.
While only time will tell if and how that will come to pass, there is enough optimism in the air to hold out hope, for now. As Froman noted: “I’m an eternal optimist and so I’m hopeful that a year from now we’re actually on firmer and collaborative footing in the bilateral relationship.”