The strategic choices before us today are similar to the ones U.S. President Donald Trump and Chinese President Xi Jinping are facing: in a fast-changing world, national interest is not served by avoiding problems left over by a previous order. Prime Minister Narendra Modi needs to challenge long-established convictions on whether the elements of power in the next world order will revolve around diplomacy, force, or trade as the primary tool.
Moving to a multipolar world
In the last 20 years, incomes of 80% of the population in the West stagnated while per capita income in China quadrupled, and India’s more than doubled. Society is ageing; technology is disrupting labour markets and business models. The digital economy is expected to provide one-quarter of global productivity by 2025 and will have the U.S., China and India reinforcing the multipolar order.
The functioning of the global economy has affected the economic and political relationship between the large and small economies, reducing and increasing the leverage exercised by the U.S. and China, respectively. The China-led Asian Infrastructure Investment Bank, which former U.S. President Barack Obama failed to weaken, and the New Development Bank of the BRICS could provide the required $8-15 trillion, marginalising the World Bank. China is projecting the One Belt, One Road (OBOR) initiative as a replacement for the U.S.-led post-1950 multilateral institutions.
Mr. Trump is understandably questioning the relevance of the United Nations for the U.S., favouring bilateral deals and forcing others to rethink the nature and role of international cooperation. He is resetting priorities away from peacekeeping, environment and human rights to trade.
His ‘America First’ strategy has broad support within the U.S. Other rich countries like Japan and the U.K. are likely to adopt this new template doing away with concessions to others. There will be consequences for the World Trade Organisation, in particular if the WTO dispute resolution panels rule against the U.S., leading to a questioning of the rule-based system itself.
Mr. Trump recognises that he cannot stop global trends and the diminishing returns from a reliance on diplomacy and force, exemplified by the failure of the U.S. ‘pivot’ in containing China. Mr. Obama’s response to the entry of three billion Asians into the global economy was to attempt setting new trade rules outside the WTO. Mr. Trump has rejected this approach, favouring an employment-oriented deal around specific sectors much like the Obama-Xi understanding on climate change. The difference is that Mr. Trump is prepared to limit imports and boost exports even at the cost of upsetting long-standing agreements and allies.
Mr. Trump is “willing to find new friends and to forge new partnerships where shared interests align”, rejecting the Cold War logic of containment, reliance on foreign bases and alliances. He sees China as the greatest threat, as the combination of military and economic strength creates a strategic situation where, like in the Cold War, the U.S. will need to seek a “constructive relationship” in Asia rather than dominance and may join the OBOR.
Asian connectivity and India
Mr. Trump is moving for a political deal with Russia and a trade deal with China. Chinese exports to the U.S. are already declining, the shift to a consumption-driven economy will open markets for U.S. goods, and the RMB is now a global reserve currency. India is more vulnerable with two-thirds of the exports of the $150-billion IT industry to the U.S. and the ‘Make in India’ strategy colliding with Mr. Trump’s priorities, requiring India to make strategic choices.
As the multilateral order fragments into spheres of influence, we first need a bold vision on Kashmir and must not just seek to isolate Pakistan. We should join the OBOR, while maintaining our reservations on its branch passing through Kashmir, and become part of the growing Asian market.
The nature of conflict is changing from direct clashes to disruption of critical infrastructure through remote attacks. With world-class cyber-space-biotech capability, we should reconsider large-scale purchases from abroad for massive investment in cybersecurity and the related digital economy that will make the ‘Digital India’ initiative into ‘Digital Asia’. India expects nothing less from Mr. Modi.
Mukul Sanwal is a former UN diplomat and currently Visiting Professor at the Tsinghua University, Beijing, China
