Restoring Faith in Globalization
Can China push against the tide of anti-globalization?
By Kerry Brown  ·  2017-01-06  ·   Source: | NO. 2 JANUARY 12, 2017


Premier Li Keqiang attends a dialogue session with members of the International Business Council of the World Economic Forum in Davos, Switzerland, on January 21, 2015 (XINHUA)

2016 was a bad year for globalization. No one can doubt that much now. The decision in the UK to exit the European Union—the outcome of a referendum vote on June 23—was the first major shock. The fact that former British Prime Minister David Cameron, the chief architect of the event, resigned immediately after the vote and ended his political career a few weeks later was a powerful sign of just how badly political elites misjudged and misunderstood public sentiment.

All of this was duplicated on an even bigger arena with the wholly unexpected success of Donald Trump in the U.S. presidential election in November 2016. Trump appealed to a group in the U.S. electorate who felt they had been marginalized and let down by global trade deals and the ways in which these seemed to have taken their jobs and opportunities from the local economy.

China figures in this narrative of international dissatisfaction with globalization because, alongside India, the other largest emerging economy, it is a country that has seemed to benefit the most from trade deals and the flow of trans-border business. On the surface at least, China has managed to produce double-digit growth for much of the last four decades because of its ability to out-compete its manufacturing competitors through low wages and production costs. Jobs have shifted to factories in China, rather than staying in the old industrial bases of the U.S. Midwest or European countries. That, at least, was the narrative that Trump kept referring to during his campaign.

Blunt anger at globalization, however, is likely to prove unsatisfying in the long term. In the end, despite the desire to restore manufacturing capacity which led Americans to vote for Trump or British people to vote for Brexit, there is very little likelihood that production will move back to the United States or the UK. Already, many of these jobs are leaving China, where costs have risen in recent years, to places like Viet Nam and Indonesia. The story of globalization is a very dynamic one. It rarely offers neat returns to the way things once were. And nostalgia for a golden age in the past, while comforting, is unlikely to solve the hugely complex problems that the world now faces.

Winds of change

The one thing that unites countries across the planet at the moment is the acknowledgment that the hunt for good quality, sustainable growth—though it might have to take another track—is not something that anyone can give up on. The public continues to expect good living standards, and good public welfare provisions. But they are asking this on the back of more and more restrictive conditions—aging populations, shifting demographic patterns, and the rise of inequality. French economist Thomas Piketty was not the first to point out just how grave this issue has become in his book, Capital in the Twenty-First Century, published in 2013. He nonetheless produced the most comprehensive data. In developing and developed countries, the imbalance between the wealthy and the poor has become sharper, producing increasingly difficult political challenges.

Brexit and Trump are just two of the most striking outcomes in 2016. With French and German elections coming up in 2017, we may well see more examples in which the public punishes their leaders for problems they blame on globalization but which have much more profound roots and are much more challenging to deal with.

For 2017, the key task is to ensure that the good things about globalization—the creativity, openness and new opportunities for growth it provides—are not jettisoned. Political leaders need to demonstrate like never before that trade deals, open borders, and the free movement of capital, labor and goods are more positive than negative. However, they do have to acknowledge concerns about how globalization can best be managed.

China's role in this is very critical. It has to spell out much more clearly the ways in which its growth and prosperity are good things for the rest of the world, and not problems. With the almost certain demise of the Trans-Pacific Partnership (TPP) under Trump, China has an opportunity to develop its own regional free trade agreements. With the Belt and Road Initiative and the Asian Infrastructure Investment Bank, it has in place new but developing entities that can carry some of the benefits of interacting and working with China to create growth beyond its shores.

Paradigm shift

In 2017 China will begin to assume a position of international leadership that it has never really occupied before. This is not just about the trade agenda, where it, rather than Europe or America, will be championing free trade deals. It also involves climate change, where Beijing has made it clear it has a much stronger commitment to action against human-influenced climate patterns than the incoming Trump administration in the United States.

China's leadership role will also be important in creating stability in the Asia-Pacific region, where Trump may well either review, or simply downgrade or recalibrate, some of the U.S. commitments there. Trump, for instance, has simply said that the North Korean problem is one that China alone can properly address. He has also questioned the non-proliferation deal with Iran, something that China was deeply involved with. In this space, as never before, China will need to play a leadership role. It will not want to see the Iran agreement terminated, and will need to use all of its influence in Washington to preserve this deal in ways which it has never had to in the past.

Because of the uncertainties in Europe and North America, this is a moment of huge opportunity, but also risk. China's current leadership will have prominence and status on the issue of globalization that Chinese leaders have never had before. Their input and views will be prominent, and will be listened to. A simple example of this is the decision to ban all ivory products by the end of 2017. As China accounts for 70 percent of this trade, the adoption of this decision in late December 2016 was greeted with international enthusiasm. There will be other areas too, where China will carry big expectations.

The risk, of course, is that for a country which has an enormous number of domestic issues it still needs to address, this will be a mixed blessing. China's economy is in the midst of a tricky transition. Its environment still needs lots of attention. Its need to develop new forms of growth is also a priority, with the outside world able to play a less prominent role than expected because of sluggish economic growth. At the heart of this are expectations that Chinese urban, middle-class consumers will spend more and generate more growth for everyone. Their performance will be a source of great attention and importance.

For all these reasons, 2017 will be a crucial year for globalization and its future, but it will also be an immensely important one for China. The two stories are intrinsically interlinked. If anything, China's role in defending and developing globalization at a time of great threat toward it is perhaps the most powerful demonstration of its importance as a global power. That is something that would have barely been conceivable at the start of 2016, but is now proof of the extraordinary times that we now live in.

The author is an op-ed contributor to Beijing Review and Director of the Lau China Institute at King's College London

Copyedited by Bryan Michael Galvan

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