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14 February 2017, Gateway House

A new, consensual world order

The era of globalisation is drawing to a close and a new one is emerging—an era of bilateralism over globalisation, of domestic over foreign focus, and reality-based policy-making

Director, Gateway House

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This feature was originally written for Where Geopolitics Meets Business, Vol. 2, the compendium for The Gateway of India Geoeconomic Dialogue. 

Prime Minister Narendra Modi was voted in with a big majority in 2014 on the agenda of development and job creation. Brexit came about because of shrinking job opportunities in the United Kingdom. And Donald Trump became the President of the U.S. on the promise to bring back jobs to America.

Across the world, the creation of employment at home now supersedes the earlier discourse of democracy promotion and the Washington Consensus of free markets and free trade that has, for many decades, under-written globalisation.

That era of globalisation is drawing to a close, and a new era is emerging—one of bilateralism, domestic focus, and ground reality-based policy setting. It’s the opposite of the general theory of physics, which seeks one universal explanation. Instead, the visible diversity is finding political acceptance.

This is apparent in the emergence of a new U.S. foreign policy doctrine—bilateralism—evident in the flurry of executive orders that Donald Trump issued in the first weeks of his administration. These are calling into question the post World War II order—military alliances like NATO, mega trade agreements like the Trans-Pacific Partnership (TPP), political unions like the EU and the Association of Southeast Asian Nations (ASEAN), and financial frameworks, like the World Bank-IMF. It is significant because the U.S. championed these initiatives. Since it remains the world’s leading policy-setter with economic, military and scientific might, the new, more collaborative order will still be largely determined by the U.S.

The obligation to create jobs necessitates an inward focus that is expressed in a nationalistic vocabulary. While the globalisation narrative was led by the edifice of Bretton Woods, it was actually the multinational corporations that benefited the most. Profits multiplied as jobs were sent to low-cost centres, new markets were pried open and taxes efficiently avoided through the mushrooming global tax havens. Recreating jobs for Americans was at the heart of Trump’s presidential campaign, and Brexit was a move to protect jobs from the influx of migrants, primarily from East Europe.

It was an ironic situation. A call for de-globalisation decided the outcome of an election, in a country that evangelised and led the charge for globalisation, free trade and open markets in the last seven decades.

There are two major indicators of the direction the New Order will take. First, trade partnerships will change. Instead of mega agreements, bilateral negotiations will prevail. Technology encourages this. For instance, 3D manufacturing does not require the current global supply chains, and keeps manufacturing jobs at home. Similarly, the adoption of modular renewable energy technologies like solar, reduces the need for massive transport of fossil fuels. And in every country’s GDP, services is a growing component—53% in India, [1] and 78% in the U.S. [2]—and many are necessarily local.

The shift to bilateralism comes none too soon as the existing trade framework is fast becoming irrelevant. Major economies like China and India were excluded from the TPP. The World Trade Organisation is paralysed, regional trade blocs like the EU and NAFTA are being challenged and India’s own experience of the trade agreement with ASEAN has been lopsided in favour of the latter. India’s imports increased sharply while its exports languished. In contrast, in the context of a moribund South Asian Association for Regional Cooperation, India’s bilateral trade agreements with Sri Lanka and Bangladesh have been more successful in increasing Indian exports.

Second, geopolitical alliances will change. NATO was created to fight communism—which no longer exists. Trump’s characterisation of NATO as obsolete and unfit to fight the current global threat of terrorism has already shaken the edifice of security alliances. His overtures to Russia, which dismayed the European Union, is overturning the Nixon-Kissinger tilt to China. China not only does not confront terrorism, but is the peer competitor to the U.S.

For India, a U.S.-Russia rapprochment creates strategic space because Russia will no longer be obliged to be a junior partner to China as a buyer of fossil fuels and advanced military hardware. This will put some substance into the India-U.S. aim to create a multipolar Asia.

The more countries like the U.S. turn inward, the less they will inflame situations around the world, like the crises of West Asia within which fundamentalism has become such a destructive global force. This will force regions to work for co-existence, rather than to perpetuate conflict. It was, after all, the absence of jobs that began the Arab upheavals.

Emerging giants like India know that the ongoing flux in the world is an opportunity to advance their position commensurate with their current heft and aspirations. India is already a $2 trillion economy [3] and the fastest growing large economy in the world. It has one of the biggest and youngest workforces on the globe, that is entrepreneurial and skilling itself up.

But to take advantage of the recasting of power hierarchies, India needs to stop acquiescing to pronouncements that its growth and prosperity are an outcome of the liberal trade order alone. Instead, it needs to propagate that the foundations of its re-emergence have largely come from its own efforts—efforts such as building infrastructure and educational institutions, and most of all, its entrepreneurial culture, even while the Washington Consensus worked to force open markets to western trade and finance.

Seventy years ago, at the Bretton Woods Conference, India had no voice or leverage. Today, India has the leverage of already being the seventh largest economy, [4] a non-confrontational power which is working to create a fairer, more flexible and inclusive global framework, more accommodative of local aspirations. This can bring about the new, more consensual world order.

Neelam Deo is Co-founder and Director, Gateway House: Indian Council on Global Relations, Mumbai and is a former Indian Ambassador.

Manjeet Kripalani is Co-founder and Executive Director, Gateway House: Indian Council on Global Relations, and is the former India Bureau Chief of Businessweek magazine.

The Gateway of India Geoeconomic Dialogue was co-hosted by Gateway House and the Ministry of External Affairs on 13-14 of February 2017. For more details on the event please click here. 

This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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