While there are signs of optimism in global trade – such as the support behind the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that the UK just voted to join – there’s also a great deal of uncertainty, said GeoPol Asia founder Andrew Staples.
“We are looking at the emergence, the birthing, of a new world order. The old one hasn’t fallen apart quite yet, but it’s looking a bit rocky,” he told the National Press Foundation’s International Trade Reporting Fellowship.
Staples sees a range of possibilities, “from global war to settling down and getting on a path to economic development … and everything in between. But the crucial thing is we are moving into a new environment where previous assumptions, norms and values are changing and reshaping our global political economy.”
How Did We Get Here
By the 1990s, after the evolution from World War II through the Cold War to the collapse of the Soviet Union, the world faced competing economic models: the Western market democracies and liberalism versus state-directed economies exemplified by the Soviet Union. The West won.
“You get this idea that we’ve come to the end of history,” Staples said. “Everybody else wants to become an open market liberal economy. Free trade – you make this thing, we trade it, we ship it around the world – makes sense, everybody benefits.”
Trade dramatically increased and the world as a whole became more prosperous, especially Asia. If a country wanted to trade in this system, they needed to open the economy and let foreign firms come in. Countries became more interlinked and created the rationale for global supply chains. It was a period of a U.S.-led global order and the rise of globalization.
“We have countries around the world sitting down together hammering out the next deal, how they’re going to reduce barriers to trade, increase access to their markets. Everything focused on this multilateral approach. We all come together, we all join a club, we all agree together to lower our barriers, we all benefit from that.”
Another key byproduct? Relative peace.
“We’ve had world wars, we’ve had the Cold War, we’re into this period now, where would we go to war? We’re all trading and invested in each other. So, peace actually comes from economic interdependence.”
With the 2008 global financial crisis the system began to crumble, marking the start of a new world order. Inequality, climate change, populism and discontent with global economic systems played a part.
With the rise of the global south BRICS (Brazil, Russia, India, China, South Africa) economies, non-G7 countries were more economically and demographically important.
“The question here,” Staples says, “is who gets to set the rules – how we trade, how money is moved around, the regulatory regime, how your data governed and digital. Who has power to influence?”
Nationalist backlash began to rise.
“If I’m a nationalist leader, I can pick up the playbook and say, ‘oh yes, it’s not your fault, it’s somebody else’s fault. Vote for me, give me power and everything will be fine. I’ll put tariffs over here. I’ll kick the foreigners act of our country.’ There’s a harder, nasty edge to some of this nationalism that we’ve seen around the world.”
Now the cadence of activities in the second Trump presidency is “unrelenting,” he said. There is a retreat of democracy and erosion of rules and norms in the U.S. and around the world.
A Pre-War Period? ‘This Could Easily Tip Into Something Very Nasty’
Things are now at a boiling point. Geopolitics is at the top of the agenda along with geo-economic tools, like tariffs and import or export restrictions to achieve political aims.
“Rather than the U.S. or the G7 holding all the power and setting the rules, it’s China, it’s India, it’s a global south, the European Union. It’s much more dispersed, A multipolar world, not the unipolar world that underpinned globalization before,” Staples says.
Yet pessimists say this could be a pre-war period. Studies in international relations show when one system gives way to another, invariably there’s “kinetic energy” around the change.
“There’s no shortage of geopolitical flashpoints,” Staples said, noting conflicts in Europe, the Middle East, India and Pakistan. “There’s a cloud hanging over us. This could easily tip into something very nasty.”
Concerns about nuclear proliferation and proxy wars are at the forefront. There is a focus on economic security and a nervousness about “unacceptable dependence” on others from rare-earth elements to supply chains to who builds your technology. Geo-economic security is at the heart of the new world order.
Rise of Regionalism
Now supply chains are less efficient and more focused on resilience, having multiple suppliers rather than just one. With that comes “fragmented globalization” and a rise of regionalism. This – along with trade friction, tariffs and the politicization of business and technology has led most forecaster to downgrade their outlook for global GDP, Staples says.
Stalled growth means hundreds of millions of people globally will remain in poverty. Countries will spend less on infrastructure and more on defense.
Trade relations are shifting, and trade corridors may change in the coming decade with more trade between Asia and the EU or Gulf nations. China has become the world’s biggest trading partner and its links with the global south are much stronger than the United States’. Many of the countries where the U.S. has a trade deficit are in Asia and are facing the full blast of the tariff regime announced April 2.
Given the uncertainty of tariffs, multinationals are halting capital expenditures and “collectively holding their breath and waiting for some clarity. They’re not going to make a new investment in that chemical plant in Indonesia or that distribution center in Malaysia until they get a better understanding of what the tariff regime is.”
Technology is at the heart of the new economy and of the tensions. Ownership of the next generation of technology and the rules surrounding AI are critical questions and crucial to how the global economy unfolds.
— News Original —
Trade Tensions, Geopolitics Threaten Global Stability – National Press Foundation
While there are signs of optimism in global trade – such as the support behind the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that the UK just voted to join – there’s also a great deal of uncertainty, said GeoPol Asia founder Andrew Staples. n n“We are looking at the emergence, the birthing, of a new world order. The old one hasn’t fallen apart quite yet, but it’s looking a bit rocky,” he told the National Press Foundation’s International Trade Reporting Fellowship. n nStaples sees a range of possibilities, “from global war to settling down and getting on a path to economic development … and everything in between. But the crucial thing is we are moving into a new environment where previous assumptions, norms and values are changing and reshaping our global political economy.” n nHow Did We Get Here n nBy the 1990s, after the evolution from World War II through the Cold War to the collapse of the Soviet Union, the world faced competing economic models: the Western market democracies and liberalism versus state-directed economies exemplified by the Soviet Union. The West won. n n“You get this idea that we’ve come to the end of history,” Staples said. “Everybody else wants to become an open market liberal economy. Free trade – you make this thing, we trade it, we ship it around the world – makes sense, everybody benefits.” n nTrade dramatically increased and the world as a whole became more prosperous, especially Asia. If a country wanted to trade in this system, they needed to open the economy and let foreign firms come in. Countries became more interlinked and created the rationale for global supply chains. It was a period of a U.S.-led global order and the rise of globalization. n n“We have countries around the world sitting down together hammering out the next deal, how they’re going to reduce barriers to trade, increase access to their markets. Everything focused on this multilateral approach. We all come together, we all join a club, we all agree together to lower our barriers, we all benefit from that.” n nAnother key byproduct? Relative peace. n n“We’ve had world wars, we’ve had the Cold War, we’re into this period now, where would we go to war? We’re all trading and invested in each other. So, peace actually comes from economic interdependence.” n nWith the 2008 global financial crisis the system began to crumble, marking the start of a new world order. Inequality, climate change, populism and discontent with global economic systems played a part. n nWith the rise of the global south BRICS (Brazil, Russia, India, China, South Africa) economies, non-G7 countries were more economically and demographically important. n n“The question here,” Staples says, “is who gets to set the rules – how we trade, how money is moved around, the regulatory regime, how your data governed and digital. Who has power to influence?” n nNationalist backlash began to rise. n n“If I’m a nationalist leader, I can pick up the playbook and say, ‘oh yes, it’s not your fault, it’s somebody else’s fault. Vote for me, give me power and everything will be fine. I’ll put tariffs over here. I’ll kick the foreigners act of our country.’ There’s a harder, nasty edge to some of this nationalism that we’ve seen around the world.” n nNow the cadence of activities in the second Trump presidency is “unrelenting,” he said. There is a retreat of democracy and erosion of rules and norms in the U.S. and around the world. n nA Pre-War Period? ‘This Could Easily Tip Into Something Very Nasty’ n nThings are now at a boiling point. Geopolitics is at the top of the agenda along with geo-economic tools, like tariffs and import or export restrictions to achieve political aims. n n“Rather than the U.S. or the G7 holding all the power and setting the rules, it’s China, it’s India, it’s a global south, the European Union. It’s much more dispersed, A multipolar world, not the unipolar world that underpinned globalization before,” Staples says. n nYet pessimists say this could be a pre-war period. Studies in international relations show when one system gives way to another, invariably there’s “kinetic energy” around the change. n n“There’s no shortage of geopolitical flashpoints,” Staples said, noting conflicts in Europe, the Middle East, India and Pakistan. “There’s a cloud hanging over us. This could easily tip into something very nasty.” n nConcerns about nuclear proliferation and proxy wars are at the forefront. There is a focus on economic security and a nervousness about “unacceptable dependence” on others from rare-earth elements to supply chains to who builds your technology. Geo-economic security is at the heart of the new world order. n nRise of Regionalism n nNow supply chains are less efficient and more focused on resilience, having multiple suppliers rather than just one. With that comes “fragmented globalization” and a rise of regionalism. This – along with trade friction, tariffs and the politicization of business and technology has led most forecaster to downgrade their outlook for global GDP, Staples says. n nStalled growth means hundreds of millions of people globally will remain in poverty. Countries will spend less on infrastructure and more on defense. n nTrade relations are shifting, and trade corridors may change in the coming decade with more trade between Asia and the EU or Gulf nations. China has become the world’s biggest trading partner and its links with the global south are much stronger than the United States’. Many of the countries where the U.S. has a trade deficit are in Asia and are facing the full blast of the tariff regime announced April 2. n nGiven the uncertainty of tariffs, multinationals are halting capital expenditures and “collectively holding their breath and waiting for some clarity. They’re not going to make a new investment in that chemical plant in Indonesia or that distribution center in Malaysia until they get a better understanding of what the tariff regime is.” n nTechnology is at the heart of the new economy and of the tensions. Ownership of the next generation of technology and the rules surrounding AI are critical questions and crucial to how the global economy unfolds.