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Healthy China-US relations needed to sustain globalisation

Shakeel Ahmad Ramay
Monday, Jan 13, 2025

Globalisation has revolutionised the economy, growth and development. It has fuelled innovation, technological development and development of new means of communication and transportation. Since 1970, the process has been accelerated and modern connectivity tools played a leading role in further strengthening globalisation.

Now, digitalisation process has put globalisation on the fast track and brought the world market to the fingertips. There is a consensus among experts and policymakers from the West and East Globalisation has given exceptional impetus to global economy, and now, the world is reaping the benefits. World Bank data shows global GDP increased from $3 trillion in the 1970s to $105 trillion in 2023.

Globalisation has helped world dream about prosperity, tackle challenges and live in peace. While it has helped every country, the US, China, Europe, Japan, South Korea, ASEAN and GCC are the most prominent countries and regions that have benefited the most.

The US is first and top on the list of countries that benefited from globalisation, rather than the US has built its empire on the back of globalisation. The US dreamed of accessing the global markets and expanding its business and reach.

Therefore, it was one of the major points of contention between the US and the UK during the 1930s and 40s because Britain was not ready to give access to US in certain markets. The institute built at the end of World War II helped US realize its dream and dominance. The UNCTAD further helped, and World Trade Organisation consolidated the US role and dream of global business and reach.

On the other hand, China is the latest and best case study for understanding importance of globalisation. China was developing quickly after introducing reforms, but joining World Trade Organisation (WTO) changed everything. China developed by leaps and bounds. The statistics indicate at the time of joining WTO, total size of Chinese economy was $1.3 trillion, and the total trade of China was $0.51 trillion. It was ranked 6th in both categories.

However, joining WTO changed the whole dynamics, and now China is the second largest economy (GDP $18, 2022) trillion and the biggest trader ($6.2 trillion in 2022).

Globalisation has become increasingly important today. We live in the age of global supply and value-added chains, which are major drivers of global business and growth. The OECD estimates over 70 percent of global trade is routed through global value chains. Hence, the situation demands strengthened globalisation. However, it is impossible without close cooperation between the world’s two biggest economies and trade partners — the US and China.

Unfortunately, once a leader and forceful advocate of globalisation, the US is dislodging its globalisation policy. The process kicked off with the financial crisis 2008, and rising debt further complicated the situation. Instead of fixing its domestic problems, the US launched a campaign against China. President Obama introduced the pivot of Asia policy to contain China. He also excluded China from Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership Agreement, among other things.

President Trump raised the slogan “America First” and unleashed a vicious cycle of trade barriers, tariffs and sanctions. He started by targeting China and expanded the circle to other countries, including Turkiye, India, etc. The US specifically focused on China and Chinese companies, and Huawei had to face the negative consequences, among others. With the 2020 election, it was hoped President Biden would reverse the process and reinstate old globalisation policy. Unfortunately, he opted to accelerate anti-globalisation drive further. He specifically focused on and targeted China and Chinese companies. He introduced CHIPS and Science Act to strengthen American companies and demoralise or undermine other companies.

After Covid-19, Biden administration pushed anti-globalisation. Dollar 5 trillion was spent on pandemic relief and a major chunk of this money was given to American companies to out-compete other countries’ companies. This amount was more than the US spent on New Deal and World War II combined. Moreover, to discourage investment in other countries and attract their resources, the US increased interest rate to 5pc. It attracted more than $10 trillion from global markets, negatively impacting countries. It unleashed an inflation wave, damaging many countries, and the least developed and poor countries are the worst victims of this policy.

Now, President Trump is back in office, and it is feared he will start a new trade war and anti-globalisation drive, as he has already started threatening countries with tariff hikes. Anti-globalisation policies negatively impacted the world.

However, the most important pillar of globalisation, infrastructure, has been impacted the most. The Global Infrastructure Hub estimated the world needs to increase investment by around $1 trillion to bridge the investment gap (data was used from 56 countries and seven sectors).

The SDGs report estimated investment gap for developing countries to meet the SDGs needs is around $4 trillion. China foresaw this situation much earlier, and to avert the worst consequences; it started constructing new mechanisms to sustain the globalisation process.

First, it launched Belt and Road Initiative (BRI). According to latest data, 153 countries and 32 international organisations have signed cooperation agreements with BRI. China has invested almost $1 billion, which helped mobilise $249 trillion from partners while implementing 3,220 joint projects. Trade between China and BRI countries increased from $1.03 trillion to $2.07 trillion.

Second, China launched Asian Infrastructure and Investment Bank to contribute to bridging investment gap. The bank was started with $100 billion and 57 members. Now, it has 109 members. AIIB also supports non-regional projects, which must support global trade, economic integration and linkage with Asia.

Third, China launched China International Import Expo to promote globalisation. President Xi proposed, planned, deployed and promoted idea of China International Import Expo to fulfill his promise of high-level opening-up.

The data shows during the first five events of CIIE, 131 countries and international organisations attended the event. They introduced 2,000 products. They also shared ideas for new products and services. It generated accumulative revenue of $350 billion.

Fourth, China invests in infrastructure and trade linkages under development programmes like GDI, Six-100 Development Programmes, and South-South Cooperation. Under the South-South Cooperation Assistance Fund, China has implemented projects in 50 countries, benefiting more than 20 million people. Moreover, the GDI has a special area for promoting global trade.

Now, imagine a world where China did not invest in infrastructure and globalisation and created avenues for financial support and trade linkages. The picture would be very scary. However, the challenges are numerous, and the investment gap is huge. China alone cannot fill the global gap. The same is true for the US. Therefore, China and the US need to cooperate to strengthen globalisation.

However, cooperation and globalisation must be based on a human-first approach, not my country first. Cooperation for globalisation should lead the world to achieve sustainable development goals and build a community with a shared future.