From Globalization to Regionalization?

From Globalization to Regionalization?

From Globalization to Regionalization?

The world after the coronavirus pandemic is likely to be a very different place.

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Like all else, the global political-economic order will be profoundly altered by the coronavirus pandemic. In an era past, major natural disasters have toppled empires and dismantled dynasties; this current calamity is on course to produce comparable outcomes. It may be some time before the full impact of Covid-19 can be determined, but it is not too early to begin mapping out the post-pandemic order.

The coronavirus will not, of course, constitute the sole cause of the global transformations looming ahead. Powerful trends that were already underway will be amplified and preexisting fault lines will be further extenuated.

But if the worldwide developments now being seen are any indication, we can expect, among other things, an accelerated retreat from globalization (and its concomitant, American global leadership), along with the hastened emergence of semi-autonomous regional blocs—one consisting of China and its client states, another centered on Europe, and a third linking North and South America. Transnational institutions that span the continents—think, for example, of the World Health Organization—will atrophy or perish.

Within this broad canvas, many other significant outcomes can be expected. Regimes and governments that manage the virus effectively may enjoy an upsurge in public support; those that do poorly will lose support and may be ousted. The Communist leadership of China, for example, has come under withering criticism from ordinary citizens over its failure to act swiftly in Wuhan and then attempting a coverup of its malfeasance; in Japan, more than a million posts on Twitter have called for Prime Minister Shinzo Abe’s resignation because of his clumsy handling of the virus outbreak. Iran’s clerical regime may also face a popular backlash for concealing the extent of the outbreak and then responding in a haphazard fashion. Eventually, every government will be judged on its performance in addressing the coronavirus.

The Segmentation of Global Capitalism

Probably the most consequential outcome of the Covid-19 pandemic will be the invigoration of centrifugal forces within global capitalism. The process of deglobalization has, of course, been underway for some time, as exemplified by Donald Trump’s rejection of the Trans-Pacific Partnership trade pact and his subsequent initiation of a trade war against both allies and adversaries; Brexit is another expression of this trend. The Covid-19 pandemic will lend added momentum to this process, by encouraging businesses in Europe and the United States to shift their critical supply lines away from Asia and toward local suppliers.

The globalization project—scorned by many on both the left and right—aimed to enrich giant multinational corporations by erasing borders to the swift movement of capital, raw materials, parts for assembly elsewhere, and finished products (but not, of course, labor). After China joined the World Trade Organization in 2001, it rapidly became the “world’s factory,” producing parts and products for multinational corporations in Europe, Japan, and the United States. Manufacturers in those countries found it advantageous to move entire factories to China or to obtain parts from abroad for products assembled at home. The resulting loss of manufacturing employment in those countries—and accompanying public discontent—helped fuel Donald Trump’s 2016 election campaign and the rise of populist forces in Europe.

Once in office, Trump has sought to “decouple” the US economy from China by imposing stiff tariffs on Chinese goods and by forcing American companies to dismantle the supply lines they had established in China and move them home, or to more reliable countries elsewhere. Apple, for example, began last summer to prod its suppliers in China into moving 15 percent to 30 percent of their production capacity to Southeast Asia. Now, as a result of the coronavirus, US-based multinational corporations like Apple are accelerating plans to establish alternative supply lines outside China or to move them back home. Pressure is also building in Washington for the adoption of tough measures aimed at reducing US reliance on China for security-related technologies, such as advanced computers and electrical gear, and for their expanded production at home.

China, for its part, is likely to diminish its reliance on the American market and place greater emphasis on clients in Africa and in South, Central, and Southeast Asia. The Belt and Road Initiative, Beijing’s primary vehicle for expanding trade with and investment in these areas, is now experiencing a slowdown as a result of the pandemic, but will no doubt be accorded fresh emphasis once Chinese factories are back in operation. As part of this endeavor, China is likely to demand greater use of the yuan in trade and development agreements, progressively edging out the dollar and euro.

Europe, already drawing away from the United States because of Trump’s hostility to NATO and punitive tariffs on European goods, is bound to feel even more isolated. The president’s March 11 decision to ban entry by Europeans into the country for 30 days infuriated European leaders, who were not informed beforehand of the decision and were unable to coordinate with Washington over its ramifications. The European Union, in an unusually strong statement, said it “disapproves of the fact that the US decision to impose a travel ban was taken unilaterally and without consultation.” When the current crisis recedes, European leaders are likely to increase their distance from Washington and seek greater autonomy in both economic and political affairs.

Out of all this, we can expect a more segmented world, with three major blocs or trading zones operating more or less according to their own rules and employing the same currency—the dollar in the Western Hemisphere, the euro in Europe and Africa, the yuan in Asia. Within these zones, capital and goods will be able to move relatively easily, but outside them, it could prove increasingly difficult. International rules and regulations, such as those overseen by the WTO, will be abandoned in favor of regional governance frameworks, each shaped by the dominant power within the system.

As this process of segmentation proceeds, countries not automatically positioned within a given bloc will be forced to align with one or another. Japan and Australia, now militarily allied with the United States but highly dependent on trade with China, will be obliged to choose between them. Russia will have to reform itself and join Europe or become a satellite of China, trading its oil and weaponry for yuan and consumer goods. Poor England: No longer part of Europe, it will be left to fend for itself in an increasingly segmented world. And Saudi Arabia, long beholden to the West for markets and protection, may be drawn increasingly towards Asia as the West’s guaranty of both disappears.

The Unraveling of American Military Strategy

Accompanying these global shifts, we can expect many other significant geopolitical consequences of the Covid-19 pandemic. Among these is the progressive unraveling of the overarching strategy that has governed the US military since the end of World War II. Encapsulated in the terms “forward deployment” and “coalition warfare,” this strategy holds that American forces should fight the nation’s enemies on their borders, not ours. This means the permanent deployment of massive US military detachments in such locations as Germany, Italy, Japan, South Korea, and the greater Persian Gulf region—a stance that naturally requires the acquiescence and support of the countries involved. The strategy also requires that American troops be reinforced with those from coalition partners, whether from the NATO countries or under bilateral arrangements, like those with Japan and South Korea. But now, with Covid-19, all of this is in jeopardy.

Given that the current pandemic is unlikely to prove an isolated event, and that the health and safety of American troops stationed in a foreign country is only as secure as those of the surrounding population, it is questionable how much longer Congress and the American public will want to station substantial US forces in places like Italy, Japan, and South Korea, where the virus has been raging and some American military personnel have become infected. At even greater risk are troops now deployed in Iraq and Afghanistan, where communities adjacent to US bases have seen an outbreak of Covid-19 as pilgrims arrive from hard-hit Iran. Already, some lawmakers, including Wisconsin Democratic Senator Tammy Baldwin, have raised concerns about the continued safety of American troops in the Middle East.

The future of coalition warfare is also endangered by the risk of contagion posed by the frequent intermingling of US and allied troops. This danger has already been witnessed in Norway, when 23 US soldiers participating in a multinational Arctic exercise were quarantined after coming in contact with a Norwegian soldier who later tested positive for Covid-19. That exercise, “Cold Response 2020,” was then suspended, as were several other major joint exercises in which American troops were scheduled to participate. A strategy of coalition warfare is unlikely to survive in a world of recurring pandemics and withering alliances.

For Pentagon officials, this will require a complete overhaul of US strategic planning. If the forward deployment of American forces can no longer be assumed, greater reliance will no doubt be placed on an “offshore” strategy, involving greater reliance on air and naval forces and on bases wholly under US control, such as those in Guam, Hawaii, and Alaska. With this prospect in mind, the new (fiscal year 2021) defense budget released in February places a high priority on the acquisition of additional planes, warships, and long-range missiles of a type previously banned by the Intermediate-Range Nuclear Forces treaty, which the Trump administration abandoned last August.

The Accelerated Decline of Oil?

Many industries will be hard hit by the Covid-19 pandemic, but nowhere is the suffering more likely to produce geopolitical ramifications than in the case of petroleum. Oil is the most vital and valuable commodity in international trade, and its sale on international markets is critical to the economies of such oil-exporting states as Angola, Iraq, Nigeria, Russia, Saudi Arabia, and Venezuela. When oil prices are high, the leaders of these countries can undertake major infrastructure projects and bolster social services, thereby reaping public support; when prices are low, they must cut back on government expenditures, causing pain for the masses and inviting revolt. With the Covid-19 pandemic collapsing economic activity around the world, we can expect a long period of low prices—with severe and possibly fatal consequences for the current leadership of major producers.

Oil prices had stabilized at about $60 per barrel in 2019, higher than some recent lows but much lower than the peak of about $115 per barrel achieved in mid-2014. That they were even this high—despite efforts in Europe and elsewhere to encourage increased reliance on electric cars, bikes, and public transit—is largely the result of rising demand in Asia and an agreement between Russia and members of the Organization of Petroleum Exporting Countries (OPEC) to take some oil off the market. With the outbreak of the coronavirus, however, people have stopped traveling and the demand for oil has nose-dived. Prices have now fallen by more than half, and, with the severe work and travel restrictions now being imposed in Europe and the United States, oil demand will plunge even further. To make matters worse, Russia has backed out of its agreement with OPEC, and the Saudis, in retaliation, have boosted their production and lowered their prices, adding to the downward momentum.

Even if prices eventually recover when the pandemic has finally dissipated, the current low-price regime is likely to pose significant challenges for the leaders of many oil-exporting countries. The Maduro regime in Venezuela is already having difficulty making payments for essential goods, and a further drop in oil revenues could dry up all government income and spark a leadership crisis; Maduro’s key ally, Vladimir Putin, is less likely to come to his rescue as Russia’s own oil revenues plummet. Putin, in turn, will face increased pressure from his domestic constituencies to spend more money at home and less on foreign policy adventures, such as those in Syria and the Middle East. The leaders of Angola, Nigeria, and Saudi Arabia could also come under popular pressure as state revenue declines.

At this moment, it appears that most people will be doing a lot less driving for some time to come. In the meantime, they will become much more adept at telecommuting and other forms of web-based interaction. When the crisis does pass, it remains to be seen how many people will rush back into their cars for that 30- or 60-minute commute to the office. By then, moreover, electric cars are likely to be more affordable and government incentives to buy them more appealing. The demand for oil, no doubt, will rise again. But there can be no guarantee that it will reach pre-pandemic levels—and so oil-producing states that fail to diversify their economies could be in for some very rough times ahead.

These are just some of the changes we can expect from the Covid-19 pandemic. No doubt other outcomes, equally significant, will also materialize. But one thing is certain: The post-pandemic world is not likely to resemble that of 2019.

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