Global De-Coupling: The Map

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Op/ed by Chris Devonshire-Ellis 

  • De-Coupling Would Usher in a New Cold War Split
  • Warnings From Xi and Putin Against This Concept

There has been a great deal of discussion concerning the concept of a “global de-coupling” with an apparent trade and technical development divide occurring between East and West. More precisely, this global trend – if it exists – is geared towards symptoms of a dividing gap between China and the United States, with countries aligned with each being swept up in a redrafting of a ‘New World Order’.

The mechanisms driving this divide are three-fold: Trade, Security & Techology. We can examine each of these as follows:

Technology

The world is changing at a rapid pace, with a new era of digital interconnectivity coming into place. This impacts upon nearly all aspects of life, from digital currencies ushering new global finance corridors, communications, and infrastructure. All interconnected, from your iphone signal instructing your remote home to switch on the central heating, to operating your bank account, to driverless cars and ever-more powerful and speedy data transmission. The question is, which technologies will gain the upper hand – and which nation will control these?

Trade

The advent of the Belt and Road Initiative is a symbol of diversifying trade patterns, not a direct instigator. It is not unreasonable for China to wish to secure its supply lines – and to do that it has embraced the capitalist tools of Free Trade. Many of the mechanics within the Free Trade toolkit are being actively utilized – trade agreements, tariff reductions and tax incentives. China is deploying these around the world, while adding on top of that a slightly different form of global infrastructure financing than has been seen before – BRI deals being agreed with less political strings attached. While I am sure that over time (as we are currently seeing with Australia) promises made will be expected to be kept, and later conditions attached, yet China has been creating a partial free trade world that sees all roads lead to Cathay.

Security

Global Security is also changing, with a number of separate aspects to this. In order to deal with future pandemics, China is building the Health Silk Road (an excellent overview of that can be found here) to better protect citizens from diseases. Trade security to protect shipping lanes and railways are being developed, with new military bases being established. The responsibility for conflict security is also changing, as we are seeing with the US planned withdrawal from Afghanistan.

Then there is commodities security, where nations are vying for future resources – the South China Sea disputes are a case in point. These will spread as certain resources, such as access to fresh water, diminish. Territorial disputes are tending to be resolved, but for political and historical reasons remain on the agenda, as is the case with Taiwan.

All these are altering the global map of the world.

The United States Democratic Axis

This bloc includes the United States as a driver, coupled with Canada, the United Kingdom and European Union in addition to Australia. All represent well-known ‘democratic’ values – although crucially it remains a political unknown whether such values remain the better governing method in the face of a growing global population, the stresses and demands being placed upon this, and the development of new technologies.

The Eurasian Liberal Axis

This includes all of Asia (except Japan) in addition to the Middle East and Africa. Much of this is due to the influence of the Belt and Road Initiative as well as Russia. Both have significant interests in, and support for Iran, while practically all the Asian nations, including India, are heavily tied up in trade agreements with ASEAN, China, the EAEU, GCC and RCEP. Others are coming into effect. Both China and Russia have significant investments and increasing trade deals in Africa, with China involved in building a string of pearls around the entire African continent in port operations. Both China and Russia have built many SEZ throughout the African continent. Also heavily involved in this is the Shanghai Cooperation Organisation, which covers much of the Asian region and continues to expand.

Mutual Loyalties

There are regions and countries developing who are remaining open to both East and West and who will move from one to the other as political and trade winds ebb and flow. This includes for example Japan, moored next to China in trade, yet remaining close to the US in security. All Latin America is part of this group at present, with the US a not always popular nearby presence but China distant and reluctant to tread on Washington’s toes so close to its orbit.

It remains to be seen how this will develop – the map and my comments aim to add some clarity and debate to the concept of De-Coupling. Perhaps others can add in trade flows and GDP relativity between the blocs I describe or hone them down even further.

Nevertheless, while the discussion continues, those who lobby for a division of East and West may wish to be careful of what they wish for. Those who feel it ‘inevitable’ may wish to consider the implications, even preparing for them.

There are those in China and Russia who feel it a bad idea – including statements made by both Chinese President Xi Jinping and Russian President Putin. Both have warned against the development of a ‘new Cold War’. Personally, I agree with those sentiments. However, the map appearing here showcases the world as it could quite easily appear in the wake of De-Coupling. Let’s hope it never has to be entered into classroom textbooks.

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About Us

Silk Road Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Asia, and assists foreign investors into the region. For strategic advisory and business intelligence issues please contact the firm at silkroad@dezshira.com or visit www.dezshira.com

 

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