As the trade war has heightened tensions between China and the United States to an unprecedented level, two unexpected results have surfaced with regard to globalization and interdependence. When it decided to engage China, the U.S. did not expect that China would become stronger through participation in the globalization process and actually surpass expectations. Nor did China expect that someday the U.S. would use the high level of interdependence between the two economies as a weapon.
On the surface we’ve seen strategic competition. But at a deeper level, one must ask whether globalization and interdependence bring about peace and prosperity or conflict and war. Reflections on this question will help us analyze the future of globalization.
There have long been debates over the consequences of globalization and interdependence in theories of international relations. Liberals believe that a convergence of interests at a high level in interdependent relations reduces the probability of conflicts in international relations while others more realistic argue that the asymmetric interdependence of globalization will lead to vulnerability, and thus intensify conflicts.
From the end of the Cold War to the financial crisis of 2008, the mainstream opinion in the world favored the previous view, that globalization, interdependence and integration were consistent with historical trends and would bring about peace and prosperity. This benign expectation was dominant and underpinned the globalization process in the twenty years after the end of the Cold War.
On one hand, developed Western economies led by the U.S. were immersed in the joy of winning the Cold War. An absolute confidence in their own soft and hard power fueled an optimism that globalization would absorb the developing countries into the West-dominated international system and make them more like Western democracies.
On the other hand, for emerging economies like China, which suffered an absolute disadvantage in the international economic structure, interdependence meant funding, technologies and markets essential to development. They also believed that interdependence on the whole would be good for development even when imbalances became visible in trade, finance, currency, technology and other fields.
Between the developed and emerging economies, there was a balance, and a tacit understanding. In this sense, the globalization in the first twenty years after the end of the Cold War was “unguarded.”
However, the global financial crisis revealed to emerging economies that there were problems with the U.S.-dominated economic system. China began to realize that huge risks came with simple participation in the America-led globalization and international order, such as an overdependence on the U.S. New propositions such as the Belt and Road Initiative and the Asian Infrastructure Investment Bank have to a certain extent served to counter the concern. But the rapid rise of China has led to a growing belief in the U.S. that its open trade, capital and technology markets have been “abused” by China and pose an extremely large risk to the U.S. The ongoing trade war, and even the high-tech war and recent reports of potential exclusion of Chinese enterprises from the capital market, all reflect the U.S. concern that China may use increased American dependence on China as a strategic tool.
It seems that the realists’ predictions about the results of globalization are gaining an upper hand. Vulnerability has, at a time of tension in state-to-state relations, increasingly become a point of leverage in the strategic game, or even a trigger for confrontation. Globalization has already moved into a new phase, in which countries will start building walls — transparent ones at the least — and try selective decoupling to avoid or reduce the risks created by a potential adversary’s attack on its vulnerabilities.
Attacking the other party’s weak points by way of economic sanctions, export controls or even rhetoric was once taken as the prerogative of developed countries. The great majority of developing countries called upon others to prevent the negative impacts of globalization, worried about diminished sovereignty and endeavored to prevent “peaceful evolution.”
The situation seems to have been reversed. With the changing balance of power in the world, attacks on vulnerabilities will become bidirectional. For example, because China had a one-sided dependence on the U.S., it had neither the capacity nor the will to counter it. Things are now very different.
If countries in the world were to give up the benign expectation of peace and prosperity based on interdependence and turn to looking for each other’s vulnerabilities while reducing those of its own, globalization would be fundamentally changed. Countries may well act proactively to decouple in areas of asymmetric vulnerabilities while advocating integration and convergence in areas that are advantageous. This type of globalization will be hard to sustain.
Fortunately, as a highly interdependent network has already been developed in the previous round of “unguarded” globalization, a Cold War-style decoupling will be extremely difficult to achieve. As a matter of fact, the U.S.-Soviet Cold War occurred when there was absolutely no economic interdependence. Globalization is expected to continue, but in ways quite different form before. “Unguarded” globalization will become a “guarded” one.
To avoid excessively guarded globalization and prevent interdependence from becoming a tool of vicious strategic competition, mutual restraint in the new round of globalization should be constructed on the basis of a multilateral framework and consensus.