The current economic Cold War is different from the Cold War of the 20th century but its influence is surely bound to be negative. Everyone will lose from a dispute between the US and China. Renunciation by the West of the former model of economic globalization will put the Asian countries in a new, unusual situation. The weakening of the Chinese economy will inevitably reduce demand for raw materials and finished products. A search for new markets will not be easy and the hopes for a substantial increase in supplies to Western markets may prove to be an illusion, writes Alexander Lomanov, speaker at the second session of the Valdai Club’s Russia-Vietnam conference, titled “International Cooperation in a Troubled World.”
The China-US trade war, which has quickly gained momentum, has prompted analysts to consider its potential influence on the development of the regional and global economies.
Some forecasts suggest that the US policy of deliberately reducing economic ties with China will lead to the transfer of some foreign investment and production capacity from China to ASEAN countries. Considering the uneven development of ASEAN countries, there are grounds to assume that the distribution of this limited gain will be very lop-sided.
On the whole,the region and the world will lose from a dispute between the US and China. Renunciation by the West of the former model of economic globalization will put the Asian countries in a new, unusual situation. The weakening of the Chinese economy will inevitably reduce demand for raw materials and finished products. A search for new markets will not be easy and the hopes for a substantial increase in supplies to Western markets may prove to be an illusion.
The current economic Cold War is different from the Cold War of the 20th century but its influence on the region is surely bound to be negative. It will be difficult for Southeast Asia to preserve and enhance its achievements in economic integration. Demands by the strong economies to many Asian countries to side with one of the parties will trigger development problems. In this scenario this is not a choice between capitalism and socialism, but, for instance, a choice between a US or a Chinese supplier of G5 national telecommunications equipment. In any case, it will be increasingly difficult to follow the principles of neutrality, inclusiveness and multi-polarity.
Even if the promotion of an anti-Chinese US Indo-Pacific strategy is accompanied by an increase of US investment in the region’s infrastructure, the ASEAN countries could find themselves in the position of today’s Europe that has become a passive tool for anti-Russia policy. This policy has not brought big economic dividends to European business. Losses from the sanctions and economic blackmail may turn out to be unacceptable in Asia where development issues are much more urgent than in Europe.
Russia consistently opposes the use of economic cooperation as a lever of political pressure. Efforts to form a common European economic space are becoming especially important against the backdrop of attempts of external force to split the regional economy and divide it into two confrontational camps. Russia’s interest in ensuring the unity of Eurasia’s economic development meets the interests of the ASEAN countries.
Russia’s integration initiative on Greater Eurasia is based on the values of international law, openness and transparency. An order based on someone’s rules is increasingly becoming an alternative to legal standards. The source of these rules is unclear but everyone is supposed to observe them for some reason. The expanding influence of the Four – the US, Australia, India and Japan – in Southeast Asia will further intensify attempts to impose “an order based on rules” as an alternative to international agreements, including those on investment and trade. The triumph of “the rules” over law threatens to seriously increase the losses of the developing economies.
There is a noticeable gap in the economic development levels of the ten ASEAN states; compare the prosperous, ultra-modern Singapore with agrarian countries that have just begun the industrialization process. Some experts warn that this uneven development makes the unity of ASEAN unstable and, coupled with external shocks, could engender the risk of the community’s collapse. In Asia the problem cannot be resolved by EU methods of transferring money from wealthier members to the poor states that are lagging behind. To move forward, it is necessary to improve one’s own tools for government management, to build effective institutions and to develop foreign economic ties.
Many ASEAN economies are facing the “medium income” trap where after the advantages of cheap labor are exhausted, a developing country fails to reach a new level of international competitiveness in the production of science-intensive innovation. Russia understands all these problems. It is also interested in developing new technology, commercialization and sales in external markets for the sake of building up exports of cutting edge products with high added value. To develop cooperation it is necessary to understand the goals of a partner’s industrial policy, as well as its plans for developing production capacity and accessing foreign markets.
Vietnam’s Chairmanship in ASEAN in 2020 may become a major step in developing the partnership with Russia and the EAEU. This is a favorable opportunity to remove barriers that are in the way of cooperation, establish and develop cooperation institutions and achieve mutual understanding. It is impossible to completely avoid the negative consequences of “the economic Cold War” but they can be reduced to a minimum with a concerted effort.
One more important area is integration with China’s Belt and Road initiative. Russia admits that by promoting this concept China is making a large contribution to the development of Eurasia. China considers Southeast Asia to be a priority in developing “peripheral diplomacy” and building Belt and Road. Chinese-oriented new production chains are emerging in the region. Transnational industrial zones are being built in ASEAN countries with China’s participation. In 2015 the Chinese leaders said that China and Vietnam make a “community of destiny of strategic significance.”
Vietnam has achieved tremendous economic success by conducting seamless economic transformation and expanding cooperation with the outer world. Its experience of simultaneous participation in numerous formats of international economic partnership deserves attentive analysis. Russia and Vietnam are brought closer together by the diversification of ties in the region and the rest of the world.