Development and Cooperation


	Contributions from the Column Focus In pursuit of Global Public Goods “A failure of US and EU leadership” “Analytic culture” Self-serving giants in a multipolar world Back to San Francisco Strategic partnership 05/2006		Self-serving giants in a multipolar world China and India are shaking up the established structures of the world economy and global politics. It is in Europe’s interests to involve these aspiring Asian heavyweights in a fair and rule-bound system of global governance. [ By John Humphrey and Dirk Messner ] Given their size and their rapid economic growth, China and India are in a class of their own. Relations with these two countries will be as important for Europe in future as trans-Atlantic ties are today. Research on global governance has been dealing with the drivers and consequences of globalisation since the early 1990s. Nonetheless, the relevance of these two Asian countries as drivers of global change has only been recognised recently. The increasing significance of China and India has also been ignored for some time by influential experts in the USA. In 2004, Zbigniew Brzezinski still argued that China, as a developing country, was no serious political challenge for the USA yet. In a similar vein, Joseph Nye had earlier emphasised that China still had a long way to go before it would be able to play a global role. In their 2004 study on international politics after the terror attacks of 11 September 2001, Ivo Daalder and James Lindsay concentrated on challenges for transatlantic relations, without considering whether China and India could alter the entire scenario. Incomplete analyses Since 1990, six scenarios have dominated in the discussion of the world order after the end of East-West conflict. - Francis Fukuyama (1992) perceived an international trend towards democratisation. The major conflict line in his map of global politics was the struggle between democratic and non-democratic states. - John J. Mearsheimer (1990) forecast that the era after bipolar confrontation would see the re-emergence of conflicts between nation states. The proliferation of weapons of mass destruction was at the centre of his conventional analysis of power and security affaires. - Samuel Huntington (1996) focussed on culture-driven conflicts between the Christian-Jewish culture of the West and other cultures. - Paul Kennedy and Robert D. Kaplan described the socio-economic asymmetry between “the western world and the rest of the world” as the most dangerous international challenge. - The global governance discourse looked at what effects globalisation has on the reach of nation states. Its core argument is that there can be no solution to an increasing number of trans-border and global problems without new forms of internationally shared governance (Kennedy et al, 2002). - Robert Kagan and other authors described a long period of “unilateral dominance” by the USA, sole super power, after initial US successes in the Iraq war. The rise of China and India puts all scenarios outlined above in question. A realistic seventh view emerges if we include China and India in the global-governance perspective. Drivers of global change The sustained high economic growth of the two Asian giants and their huge populations are the reasons for their particular relevance. These are the world’s two most populous countries, and they are integrating into the global economy, changing the basic patterns more thoroughly than other successful Asian countries have done in the past. Their economic weight has an effect on the political balance of power. We therefore regard China and India not simply as “emerging markets”, but as “Asian drivers of global change” (Kaplinsky, 2006). China has moved on from being a marginal economy to becoming a central player on the world market in less than two decades. Its share of total US imports rose from virtually nothing in 1985 to almost 15% in 2004. Its share of global demand for key metal commodities rose from five per cent in the early 1990s to 25% last year. In late 2005, China held the world’s second largest foreign exchange reserves ($819 billion) and, with an export volume of more than $770 billion, it has already become the third biggest trading nation. Along with the USA and the EU, China is one of the biggest emitters of CO2, whose energy consumption is crucial for both global energy availability and climate change. China and India are having an impact in the global economy in multiple areas. For decades, prices for commodities have been declining, but this trend has reversed since 2001. The main reason is China’s huge demand. India’s use of resources is also increasingly playing a role. although it is more than a decade behind China. India’s upturn began in the late 1980s. If it continues at its recent pace, India could play a similar role in 2020 as China does now. At the same time, China is voicing demands in the World Trade Organisation, the United Nations and in climate talks. There is no doubt that the Chinese government wants to influence global governance processes. India is on a similar track, Together the two countries will leave their mark on both the global economy and world politics. The rise of China and India is de facto leading to a multipolar power constellation. By 2025 at the latest, Washington, Beijing and Delhi will be the most important centres of power in world politics. In comparison, all European nation states are merely small actors with limited sources of power. Europe will no longer play a key role, unless it comes up with a coherent EU strategy shared by all members. The interaction of the crucial global actors will largely determine whether – and, if so, how – global and trans-border problems of the 21st century are addressed. The competition for power and influence in the multipolar constellation that is emerging will define international affairs for the coming five decades. It will be as dominating as the East-West conflict was in the Cold War era and as endless conflicts between various European powers were in the decades leading up to the First World War. The question is whether the old and new heavyweights can be gradually integrated into a system of effective multilateralism, or whether their competition will result in rampant disputes. The latter scenario would create new instabilities, conflicts and turbulences. Such tensions would also tie up resources needed instead to correct the downsides of globalisation (such as poverty, environmental damage or failing states). There can be no doubt about Europe’s huge interest in working towards a rule-bound system of multilateral decision-making, which could deliver constructive solutions. Pressure to adjust The rise of China, and increasingly India, is putting other regions of the world under enormous adjustment pressure. China’s industrial sector currently employs about 83 million people, roughly as many as the 14 largest OECD countries do combined. A further 100 million Chinese have the skills to take over industrial jobs meeting global standards of competitiveness. This fact makes it unlikely that labour costs in China will increase rapidly. Moreover, it is certain that the dynamics of China’s labour market will be felt globally. Chinese exporters are putting companies in North America and Europe under growing pressure. This is even increasingly the case for value-added and technology-intensive sectors. In the developing world, there are potential winners and losers. Industry in Latin America is suffering because competition has become tougher. At the same time, however, agricultural and other commodity exports to Asia are booming. The future of Latin America could lie in the export of primary goods, after decades of not entirely successful attempts at industrialisation. It nevertheless seems questionable whether the standard of life typical of middle income countries can be maintained on the basis of commodity exports. Wages are predominantly falling in Latin America, and this trend may yet destabilise democracies. Some African economies are also benefiting from the Asian giants’ rising demand for petroleum, minerals and agricultural products. On the other hand, Chinese and Indian textile and clothing exports pose a threat to the only industry which has gained ground in Africa. Does Africa have any economic prospects beyond the export of primary products? Further development of resource-based rent economies would have severe political repercussions, however, because that trend would probably undermine attempts at gradual political liberalisation in Africa, as well as weakening the economies that are not rich in natural resources. Prospects are more favourable in Asia. China and India, which each have populations of more than one billion people, can become engines for growth for other economies there. However, the growing competition is also being felt in Asia by manufacturers of industrial goods (such as metal-processing firms in Thailand). Given their increasing economic importance, China and India are also becoming more involved in other fields of global politics. Because of their huge demand for energy and resources, they are pursuing strategies to safeguard access to the relevant commodities. In this respect, they are competing with the USA and the EU in Africa, Latin America, the Caucasus, Eastern Russia and Central Asia. Furthermore, China and India must position themselves in terms of climate policy because of their high rates of growth of CO2 emissions. Environmental sustainability is thus again becoming a key issue in global politics, after having been somewhat neglected in the past ten years. According to current estimates, India’s energy consumption will increase by 50 % by 2015. China’s consumption could even double. China already produces 16.5 % of global CO2 emissions. India only produces four percent, but that already exceeds Germany’s share of 3.5 %. So something which is true for the USA is increasingly the case for China and India too: the Kyoto Protocol will fail without their cooperation. Furthermore, none of the world’s environmental problems can be solved without their help. China, for example, is one of the biggest importers of tropical timber. The challenge is to support the legitimate desire of India and China to grow and to reduce poverty, but in a way which is sustainable for the world as a whole. Discussion on sustainability and climate has thus flared up again. The flipside is the renaissance of geopolitics. The competition for energy reserves and resources will shape the multilateral power constellation, whether in Russia, Africa or Iran. The more conflict-ridden this process will turn out, the more likely it will become that poverty-oriented development policy falls victim to regional power strategies of major players intending to safeguard their access to vital resources. Such interrelated issues clearly demonstrate how much adjustment pressure there is on the architecture of global governance. Given the new power constellations, it is hardly conceivable that the United Nations, the G8, the World Trade Organisation or the International Monetary Fund will be structured the way they are today in 2015 or 2020. Outdated notion of sovereignty China and India have made remarkable economic and technological advances. The critical question is whether they will prove equally willing to learn in global governance issues. It will also matter which philosophy of global politics they will subscribe to. Conventional notions of sovereignty, power and the nation state dominate among Beijing’s and Delhi’s policy-makers, even though they like to emphasise multilateral rhetoric. In advanced nations, particularly in Europe, decision-makers have been gradually learning that they must cooperate and combine their resources, because stubbornly nationalist approaches no longer do justice to global interdependencies. To some extent, governments have therefore become prepared to hand over sovereignty – for instance, to the European Union – in order to maintain their ability to act and solve problems in the globalised world. They no longer dispute that the notion of non-interference in domestic matters must be modified, for example when protection of human rights or the environment are at stake. The notion of sovereignty prevalent in China and India is, in contrast, more consistent with the current US administration’s line of thought. Influential persons in Asia’s rising powers share the view that “multilateralism is for weak players”, as the neo-conservative Robert Kagan wanted to expound to Europeans in the Iraq debate. India’s re-awakened interest in nuclear power as a supposedly environment-friendly energy technology is supported by the USA. This is an example of how trends in the Asian giants can send out dangerous signals to other developing or newly industrialising countries. Of course, Bush’s decision to implicitly recognise India as a legitimate nuclear power in spite of multilateral conventions goes along with strategic risks, too. If such unilateral action were to become typical of US, Chinese and Indian diplomacy, that would have tremendous repercussions for the international community as a whole. Turbulent multilateralism History shows that the adjustment pressure felt in the world economy and international politics may lead to instability and conflict. Transfers of global power need not be conflictual, but can be. It is conceivable that waves of protectionism occur as a reaction to China’s and India’s export success. Moreover, there may be rivalry between the super power and the emerging powers. In global affaires, the West must prepare itself for the fact that China and India are increasingly pursuing independent strategies of their own. When Japan wanted to establish a regional monetary fund for stability purposes during the Asian crisis of 1997/98, Washington could still clearly signal that the IMF was going to take care of the matter. However, conflicts are imminent in the competition that is going on between Japan, China and India over hegemony in Asia. Such tensions may well affect the rest of the world too. Who will defuse and moderate these instabilities and establish parameters for coordination? Important tasks are awaiting the EU. It will only be able to manage them if it does not focus its attention mainly on itself, as it is currently doing. It is conceivable for the USA, as the sole remaining super power, to attempt to rise to the challenges on its own. However, such attempts will only succeed if the USA modifies long-cherished notions. The title of Brzezinski’s latest monograph is telling: “Global Domination or Global Leadership?” Washington will have to get used to sharing and pooling leadership in the context of multipolar power constellations. It is a historical novelty that China and India, as developing countries, are emerging as powerful actors in global governance. On the part of Western decision-makers, this aspect may slow down their ability to response, if they underestimate the two Asian Drivers, where about 50 % of the world’s poor still live. India and China will perhaps attempt to act as “advocates” for developing countries, possibly triggering new North-South tensions. Alternatively, they may primarily pursue their own interests which, as already stated, must not always coincide with those of other developing economies. Furthermore, China and India are headed for difficult political and social transformation processes. Internal tensions may yet result in aggressively nationalistic strategies. It is very clear that, against this background, Europe is interested in modernisation consolidating in both countries. There is much to suggest that the societal changes necessary will prove easier for India than China in the medium term. India has a relatively stable democratic system. In China, the difficult transformation to a liberal society has not taken place yet. Nowhere else in the world is social polarisation increasing as rapidly as it is in China. This dynamic implies risks for political stability. In contrast, the process of growth in India has so far not produced any comparable centrifugal forces, in large part because of the Indian government’s awareness of the potential dangers. Moreover, China’s population is rapidly ageing, which creates problems for social security. India, in comparison, is a relatively young society. If India remains a democracy and China also moves in this direction, then the world will be a safer and more stable place in 2030 than it is today. However neither trend is guaranteed. On the contrary, China is rising in the world economy and in the global-governance hierarchy as an undemocratic, authoritarian nation. This will have implications for the legitimacy of global governance processes which, at the end of the day, depend on the legitimacy of their most important players. Chances are that it will become even more difficult to reach international agreement on – or even enforcement of – human rights, social standards and environmental protection in this context. China’s close cooperation with authoritarian regimes in Sudan, Myanmar, Uzbekistan and Zimbabwe are an indication of such conflict lines. The same applies to Iran’s energy partnerships with China and India. Furthermore, high foreign exchange reserves mean that China is able to offer other countries credit on favourable terms – without the kind of conditions in matters of human rights, governance, poverty reduction and environmental protection as have become the norm in Western-funded development cooperation. In fact, it is apparent the “Chinese model” of authoritarian rule with a guided market economy is admired in other developing countries. In this sense, the (Post-) Washington Consensus is challenged by the Beijing Consensus (Ramo, 2005). China is gaining the “soft” power that societal models enjoy when considered worth copying. In any event, the new constellation puts at risk the sustainability of all international development efforts to encourage democracy and the prevention of conflict. European perspective Europe risks to end up on the fringes of world politics if it does not systematically enhance its global relevance. The starting point for strategic considerations should not be whether China and India will become powerful players, but how they will use their growing power. To avoid a conventional and conflict-prone balance-of-power situation, which would be completely inadequate for the challenges of globalisation, China and India must be involved in international initiatives to limit risks in our networked world. Global issues that demand cooperation include the stabilisation of failing states in Africa, poverty reduction, climate change and the proliferation of weapons of mass destruction. The global governance system must be enhanced for these goals to be achieved. Its institutions must stabilise the existing multilateral power constellation and ease the reconciliation of interests. It is also a matter of gradually developing joint principles, standards and interests between Germany, Europe and the Asian drivers. This will not be easy – one need only think of the disputes with China over respect for human rights. Nevertheless, there is no reasonable alternative to embarking on such a policy of integration. References: Brzezinski, Z., 2004: The choice. Global domination or global leadership, New York: Basic Books Daalder, I.V. and J.M. Lindsay, 2004: America unbound, Washington: Wiley and Sons Fukuyama, F., 1992: The end of history and the last man, New York: Penguin Huntington, S.P., 1996: The clash of civilisations and the remaking of world order, New York: Simon and Schuster Kagan, R., 2003: Paradise and power. America versus Europe in the twenty-first century, New York: Knopf Kaplan, R., 1994: The coming anarchy, in: The Atlantic Monthly, Vol. 274, No. 6, 1–8. Kaplinsky, R., ed. 2006: Asian drivers. Opportunities and threats. IDS Bulletin, Special issue, Vol. 37, No. 1 Kennedy, P., D. Messner and F. Nuscheler, 2002: Global trends and global governance. London: Pluto Kennedy, P. and M. Conelly, 1994: Must it be the rest against the west?, in: Atlantic Monthly, Vol. 274, No. 6, 61–83; Mearsheimer, J.J., 1990: Back to the future: instability in Europe after the Cold War, International Security, Vol. 15, 1, 5–56. Ramo, J., 2005: The Beijing consensus. London: Foreign Policy Centre Prof. Dr. Dirk Messner is director of the German Development Institute in Bonn. dirk.messner@die-gdi.de Prof. Dr. John Humphrey is team leader of the “Globalisation Team” at the Institute of Development Studies at the University of Brighton.