Trade war marks pivot in global power shift

Zhou Bajun predicts US-sponsored conflict over international commerce will fail and says a much better policy would be to reform global governance

The Trump administration has insisted on waging a trade war against China despite the latter offering to take $200 billion in extra imports from the United States to narrow the bilateral trade imbalance. Washington has also increased tariffs on certain imports from some traditional allies, including the European Union, Canada, Mexico, Japan and South Korea.

These actions have US President Donald Trump’s personality written all over them. But they also reflect the common desire of the bi-partisan US Congress in terms of national strategy. By Trump’s personality, I believe his “America First” obsession is pushing the country into isolation. That is why I do not expect Trump’s personalized US national strategy to last long; while the nation’s major strategic adjustment, reflecting the common desire of the bipartisan Congress, will likely continue until the middle of the century.

The terrorist attacks on the World Trade Center in New York on Sept 11, 2001 and China’s World Trade Organization admission marked the beginning of an unprecedented, all-round and profound paradigm-shift in the global economy, finance and politics in the 21st century.

By “unprecedented” I mean the center of gravity in global affairs is shifting from the West (Europe and the US) toward the East (Asia) for the first time in 500 years; at the same time different civilizations are shifting from being somewhat connected but generally on their own in the past few thousand years to realizing the need to build a shared future for mankind.

By “all-round” I mean the Western economic, political and social systems are now at the mercy of an unprecedented, comprehensive crisis of their own making. The international order formed since the end of the World War II and symbolized by the seemingly multilateral United Nations and similar institutions was in fact centered around the Western bloc; developing nations were on the fringes or underneath. Moreover, a multi-polarization of the global economy which occurred in the post-cold war era of the 1990s, with the US remaining the dominant political and military superpower, all began to change.

By “profound” I mean the combination of “unprecedented” and “allaround”.

The “9/11” attacks of 2001 were the result of protracted conflicts between Western modern civilization and nonWestern civilization combined with centuries of oppression and exploitation of non-Western nations by Western nations.

China’s acceptance into the WTO in December 2001 is a milestone that marked the end of the era when Western powers dominated global economic affairs; it also meant the rise of emerging markets who could now communicate with Western economies on an equal footing. That the two events happened only two months apart in the same year reflects the beginning of the end of the post-cold war global power balance and a positive shift toward a new era.

The unprecedented, all-round and profound paradigm shift in the global economic, financial and political structure came into full play in 2008. The “9/11” attacks and China’s acceptance into the WTO in 2001 did not substantially affect global finance, the Western politico-economic system or the international order seemingly managed by the UN and other multilateral institutions, but the financial crisis in 2008 did all that in a significant way.

The widening wealth gap and split of finance from the real economy are inherent flaws in the Western economic system; democracy becoming veto politics and the inability to overcome structural fiscal deficits are birth defects of the Western political system. The Western social system, in the meantime, lost its ability to regulate class conflicts, as the social structure morphed from “pyramid-shaped” to “olive-shaped” and now a polarized one with a missing middle (class).

In July 2008, 35 major members of the WTO met in Geneva, Switzerland in an attempt to rescue the collapsed Doha Round of WTO talks but failed. This indicated the global multilateral trade structure was in serious trouble.

In 2009, the world economy as a whole deteriorated into a recession but emerging economies led by China and India remained robust. Between 2008 and last year, China became not only the second-largest economy in the world but also the top goods-trading country and second-largest servicestrading country in the world, with the biggest foreign currency reserves and its renminbi included in as the Special Drawing Rights currency basket to boot. The great rejuvenation of the Chinese nation stepped into the phase of being “stronger” after “standing on its own feet” and “doing better than ever”. Meanwhile — symbolized by Britain’s referendum decision to “Brexit” and Trump’s presidential election win in 2016 — Western society struggled to recover from its political, economic and social crisis or disorder by pursuing a so-called liberalist international order characterized by unilateralism.

In October last year the 19th National Congress of the Communist Party of China adopted a “grand development program”. Two months later, on Dec 18, Trump signed off the first National Security Strategy Report in his presidency and in a public speech afterward described China and Russia as the US’ main competitors. That can be seen as the latest confirmation that the unprecedented, all-round and profound paradigm shift in the global economic, financial and political structure has entered the decisive stage this year. It is against this general backdrop that the Trump administration has declared a trade war on China and begun restricting investments by Chinese companies in the US.

However, no one can stop the advance of time. The US is still the most powerful nation in the world but China needs and has every right to pursue its own national development. The flaws in globalization require a reform of the global governance mechanism without abandoning the existing multilateral coordination mechanisms such as the UN. The shifting of global development focus from West to East does not signal the rise of Asia and fall of Europe by any stretch of the imagination, but rather a call for joint efforts to build a shared future for mankind.