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International Economic Cooperation After the Pandemic

16 Oct 2020
By Bilahari Kausikan
United States Trade Representative Ambassador Robert Lighthizer, senior staff and cabinet members meet with Chinese Vice Premier Liu He and members of his delegation for the U.S. – China trade talks Wednesday, Jan. 30, 2019, in the Diplomatic Reception Room in the Eisenhower Executive Office Building at the White House. Source: White House/Andrea Hanks

The disruptions to international economic cooperation that we have experienced are not all due to the pandemic. The pandemic and US-China strategic competition accentuated dysfunctionalities and tensions that were evident before the pandemic, but they did not create them.

Problems don’t always have solutions, even if the solutions seem obvious, and even obvious solutions don’t always get implemented. The logic of domestic politics does not always automatically align with economic logic, and both do not always neatly align with the logic of international relations.

The open international economic system of trade, investment, and cooperation we have come to call the “liberal international order” is not the natural order of things. During the Cold War, that order was internationally and domestically contested, sometimes violently, for more than 40 years. It was only relatively uncontested for less than half that time – about 20 years from 1989 when the Berlin Wall came down to circa 2008, when the global financial crisis broke out. That was a short and exceptional period. We are now back to a more historically normal situation in which the liberal international order is again domestically and internationally contested. That those two exceptional decades were very good for most countries – China included – should not blind us to this hard fact.

This is nevertheless not a “New Cold War.” That is an intellectually lazy trope that distorts the essential nature of US-China relations. The US and China are both vital components of a single system entangled in a web of supply chains of a scope, density, and complexity never before seen in the global economy. These supply chains distinguish the current type of interdependence from previous periods of interdependence. Neither the US nor China are particularly comfortable with the situation because interdependence exposes their vulnerabilities. Some fragmentation in specific domains has occurred as they and their businesses try to mitigate the vulnerabilities and hedge against overdependence on each other.  But the very complexity of the supply chains, especially in the technology domain, makes total, across-the-board decoupling of the US and its friends and allies from China highly improbable, as improbable as China creating an entirely new alternative system or becoming totally self-reliant. Semi-conductor supply chains, which are the main American focus because they are a major Chinese vulnerability, are particularly complex.

The international economic order is not self-organising. It requires leadership. Leadership consists of two key attributes. The first is strategic weight, by which I mean military and economic power and both hard and soft power. You cannot have soft power without hard power, and either soft or hard power alone is inadequate; you need both. The second is the will to lead in a particular way. Leading an open international system requires a leader that is prepared to be open. By my definition, there is going to be a serious deficit of international leadership for the foreseeable future. I don’t see any major country or group of countries meeting both these conditions for leadership. Irrespective of who wins in November, the US will be more transactional than in the past, China will remain essentially mercantilist and widely distrusted, and the EU will lack both strategic weight and strategic coherence.   

Thus, the current state of affairs is likely to be prolonged, and irrespective of who wins in the US November elections, there is no going back to a pre-pandemic or pre-Trumpian status quo ante. Nor should we imagine that the status quo ante was some prelapsarian state of grace and idealise it. So we all had better get used to and adapt to the current situation or something very much like it.

While the open international order is going to remain under stress – perhaps severe stress – and will fragment and turn inwards in some domains, it is unlikely to collapse entirely. The most extreme form of collapse, war, is not merely unlikely but highly improbable. The open globalisation that we used to enjoy was driven by two key factors: politics and technology. The political conditions, whether in the domestic politics of key countries or in international geopolitics, will remain unfavorable for some time. How long I do not know. But the technologies that drove globalisation cannot be unlearned and will move globalisation forward, albeit at an uneven pace in different domains and different countries.

The future is not in the recreation some real or imagined universal multilateral order. Let’s not idealise the past. Existing international institutions will not disappear, but I see very little prospect for meaningful reform of them or the creation of meaningful new institutions. To deal with a future  in which there is a deficit of global leadership and in which US-China strategic competition is a structural feature of international relations, countries with compatible interests will coalesce around specific issues to form ad hoc, domain-specific, and fluid coalitions. Such coalitions will continually arrange and rearrange themselves in variegated patterns in different domains as interests and circumstances change. These coalitions will exist as an overlay to existing international institutions and will modify the way in which they function. These coalitions will span geographic regions, crossing and criss-crossing the axis of US-China strategic competition. Compatibility of interests in one domain does not imply any obligation to align interests across all domains. To successfully navigate such a future will require great agility of mind and policy. It will require domestic institutions capable of quick adaptation. It will also require the courage to resist the pressures that both the US and China will bring to bear on us.

Bilahari Kausikan is currently chairman of the Middle East Institute, an autonomous institute of the National University of Singapore. He has spent his entire career in the Ministry of Foreign Affairs. During his 37 years in the Ministry, he served in a variety of appointments at home and abroad, including as Ambassador to the Russian Federation, Permanent Representative to the UN in New York, and as the Permanent Secretary to the Ministry. Raffles Institution, the University of Singapore, and Columbia University in New York all attempted to educate him.

This article is an adaptation of a Webinar presentation to the Trilateral Commission on 12 October 2020.