Hello, I'm Adrian Finnegan, and this is Counting the Cost on Al Jazeera, your weekly look at the world of business and economics. This week, the U.S. has dominated the global economy for decades, but the world is fractured by geopolitical tensions and globalization is facing a backlash. Is the economic order changing? Is it the US versus China? The trade war between the two nations is heating up.
The competition between Washington and Beijing could accelerate the collapse of the old system. So what's the alternative? Developing nations have formed economic alliances like BRICS to counter the dominance of the West. But will it work?
Economic integration and globalization, the free flow of trade with the US at the helm. That's the economic order the world has known for decades. Today, though, the disintegration of the rules-based world order is evident for all to see. Countries are becoming more inward-looking, regulatory fences have been erected, the World Trade Organization is in limbo, nations are racing to build the industries of the future, and trade restrictions are increasingly being imposed.
Now, the system that's governed the global economy since the Second World War is at a tipping point now more than ever. So... Is a new world order emerging?
We'll discuss that with our guests shortly. But first, let's listen to what some leaders had to say about the old one. The poor countries have been and are being oppressed and terrorised by the rich countries.
Naturally, the poor are bitter and angry and have lost faith in justice and honor. Global political and economic governance created more than six decades ago have not kept pace with the changing realities of the world. BRICS remains the one dynamic element in the global economy, and as such they will account for a significant share of trade. The development of the emerging market and developing countries is not intended to move the cheese, but to make the pie of the global economy bigger.
We should push forward the establishment of governing models and rules, which are more balanced and inclusive. We should push forward the reform of the global economic governance system to reflect the current structure and realities. I ask myself every night why should every country have to be tied to the dollar for trade? Why can't we trade in our own currency?
And why don't we have the commitment to innovate? We are against any kind of hegemony or exclusivity propagated by some countries and the new policy of ongoing colonialism, neocolonialism, based upon this assumption. We have to reform global economic, financial and political as well as the multilateral trading system so that we can create a conducive environment for fair trade. Let's introduce you to our panel of experts and get a quick reaction from them.
From Singapore, we're joined by Danny Khoa, who's Dean and Li Ke-hsing Professor in Economics at the National University of Singapore. From Johannesburg, we're joined by Irina Murusan, who's a Senior Researcher at the Institute for Global Dialogue and a specialist on the BRICS bloc. And finally, in London, Philippe Legrand, who is a political economist and former Special Advisor to the Director General of the World Trade Organization.
Danny, is the world older? The old world order close to collapse. I don't think it's so much as close to collapse, but it's certainly being questioned from all sides. The clips that you showed, the clips that we heard a few minutes ago, were ones that were from what sometimes we think of as the global south, and they were critical of the international economic order. One of the interesting turnarounds is that today...
The advanced economies, the rich economies, are also critical of the international economic order. And how this comes out is going to be really interesting going forward. I don't think that we're going to have to be thinking about how we rethink categories.
It might no longer be BRICS or Global South or West versus East, but more... Groups of countries that have an adherence to economic performance that's dynamic and forward-looking, keen to emphasize trade, keen to think about building out economic fundamentals, keen to continue to work with a level playing field. And on the other side, a group of nations that might have historically had the upper hand, but for whom now growth is anemic. And so that, it seems to me, is the increasing confrontation that will be a challenge to the international economic order. Irina, would you agree with that?
If the old world order is not collapsing right now, the economic centre of gravity is shifting, isn't it? Absolutely. And I mean, part of the BRICS geostrategic intention is to use their partnership to create windows where they can also change the world and whether the suits everyone should not... be the focus because countries are pragmatic for the forces themselves.
But if we look at the institutions specifically from the post-World War II order that we characterize the world order by, multilateralism is and has been under attack. And if you look at the BRICS and their values and the sense that they advocate for a rules-based order governed by international law and celebration of multilateralism. Many take for granted that this may be interpreted from one's own value systems. And so the criticism is that the world is in a constant state of stable anarchy and the institutions like your WTO should be instilling these relevant boundaries to mitigate your strategic interests. And it's really the rest, the smaller countries, the emerging and middle powers that need to uphold institutional values to build this kind of critical mass. that is needed to create a culture of accountability that people that they all want to see.
Philippe, what's gone wrong with the institutions that were designed to safeguard the old world order? Are they now defunct? I think what's changed is the old order, which is the one that prevailed since the end of the Cold War in the early 90s, was based on four pillars, four pillars that have now crumbled. The first is Western economic dominance. And as Danny has said.
The West has declined and the rest have risen. The second was an exceptional period of U.S. geopolitical hegemony. And we now live in an increasingly multipolar world, which is characterized by geopolitical conflict between a still dominant U.S. and a rising China. Thirdly, as Daniel also noted, before there was a belief in open markets, which trumped pretty much everything. And now increasingly that is usurped by national security concerns and indeed industrial policy priorities, not just in the West, also in China indeed has always been the case.
And last but not least, a US willingness to support international rules and to abide by them most of the time. And that's exceptional for a hegemonic power. And now that is no longer the case.
It's no longer the case in the United States. It's not the case in China. Neither of them are willing to accept significant constraints on their economic policymaking.
And the upshot is in the old economic order, the big question policymakers asked was, is it going to make us richer? And now the key priority is, is it going to make us more secure? OK, before we go any further, trade and investment flows are settling into new patterns built around.
The top two economies, the US and China, who are racing to shape the norms and rules of the world's economic and political order. Washington is raising the heat on Beijing with investment curbs and trade restrictions, and China is redirecting large parts of its economy away from the West toward the developing world. Katia Lopez-Jodayan reports.
The world is changing fast, and so is the global economic order. Trade wars between the U.S. and China are fueling much of the shift, forging new alliances and fracturing old ones. U.S. President Joe Biden recently issued a new round of tariffs on Beijing, affecting about $18 billion worth of Chinese products, including electric vehicles, batteries and semiconductors. Bottom line, I want fair competition with China, not conflict.
And we're in a stronger position to win that economic competition in the 21st century against China than anyone else. China has repeatedly accused the U.S. of bullying and of market protectionism. If the United States persists, China will take resolute and forceful measures to firmly defend its sovereignty, security and development interests. Rising tensions between the U.S. and China are not new.
I heard it was going to be terrible. They first escalated during Trump's presidency and have continued since. Much of the focus now turns to the European Union and who it will choose to do business with in the long term.
China's industrial policy may seem remote as we sit here in this room, but if we do not respond strategically... And in a united way, the viability of businesses in both our countries and around the world could be at risk. China is capitalizing on divisions.
In a recent visit to Serbia, President Xi Jinping established stronger ties with the Eastern European country, which has been waiting for EU membership for over a decade. With the joint efforts of both countries, the China-Serbia Free Trade Agreement formally begins in July. Beijing is also building stronger ties with Iran, a longtime rival of Western governments. The war in Ukraine is another factor.
It's disrupted energy supplies across Europe. And it's also weakened ties between Russia and the West. But it's strengthened them elsewhere, including parts of Africa. Zimbabwe is open for business. And welcomes investments, partnerships, and collaboration.
It's a battle between two superpowers, with the U.S. and China looking to dominate one economic order, while the race for artificial intelligence, digital technologies, and geopolitical influence plays out on the world stage. Katia Lopez-Odoian, Al Jazeera, for counting the cost. New alliances are part of the changing world.
Countries with similar agendas and priorities have clustered into clubs, among them the BRICS nations. Let's take a closer look at the bloc. The leaders of Brazil, Russia, India and China founded the group in 2009. South Africa joined a year later. BRICS is designed to be a new global voice, supposing what it sees as a unilateral approach to geopolitics.
BRICS nations want to change the imbalance by creating an alternative to US-led financial institutions. In 2015, they founded the New Development Bank to counter organisations such as the World Bank and the International Monetary Fund. They also aim to reduce their reliance on the US dollar.
BRICS represent nearly a third of the global economy and nearly half of its population. Their total GDP... purchasing power parity terms is actually bigger than that of the G7. The bloc is growing too.
The UAE, Iran and Ethiopia and Egypt joined this year. Saudi Arabia was invited to join. Its membership is pending, but its addition will only amplify the BRICS ambition to become the champion of the global South. Irina, to what extent are the BRICS nations, countries like India and Brazil, who are trading their way to prosperity right now?
Reliant upon the old world order remaining intact, or is it holding them back? So what's interesting about these two countries is that Brazil and India are able to leverage their relationship with the old world order. And they've also proven to be more flexible and adaptable powers in the international system. So with BRICS coming into play, the success of BRICS is really dependent on the strength of bilateral relationships, as well as the...
country as an individual power, of course. But as we've seen, BRICS hosts something like 200 meetings a year. And so you have an accelerated growth in political and economic cooperation, this constant meeting, which is definitely contributing to their success. Danny, with more nations joining clubs, clubbing together to make the most of their economic clout, ask...
What's the future for the US dollar, do you think? Will it remain the dominant currency? The future of the world reserve currency, the US dollar in this case, is going to depend on a whole range of factors.
But likely high on that list is sentiment and confidence. And often that does not run parallel with or hand in hand with facts on the ground. Who's got the greatest coalition? So that is definitely a space to watch.
But I would also be maybe a little bit averse. to suggesting that the whole world wants to dive into an alternative world order headed by you know the BRICS nations or whichever other nation. 80% of the world lives in countries that are not a great power and for many of us outside of that circle what we want to see are principles that go into thinking about how world order can be constructed. rather than simply who is where in that coalition.
On this front, I think that we should be not so anxious to so quickly ditch the all-world order of globalization and capitalism. There were grand ideas there that arguably the most successful of the BRICS nations, China, leveraged and leveraged successfully. The grand ideas included...
the notion of how you wanted to organize things in an economically efficient way. You needed to leverage comparative advantage. And countries like China and smaller nations leverage these ideas powerfully in the process, lifting hundreds of millions of their citizens out of poverty. I don't think that the world needs to so quickly rush into an alternative world order.
until we've really thought through how we can save the current rules-based one. I suspect that many of the BRICS nations, when they come down to think about it, are not averse to actually holding on to this old world order, but there are many who are trying to pull away from it. Philippe, I'll come to you in just a moment, but Irina, I see you nodding there. Absolutely.
I mean, the BRICS definitely do not want to throw everything out the window, but in terms of... pushing for more, especially in terms of trade, you see this big conflict between, you know, the inertia that the world finds itself in. And when you look at the WTO going with this moment, you have moments of promise, especially in how countries want to work together for progressive causes, and how momentum sometimes for broader reform seems just to fizzle out.
But countries are still trying to understand how... to understand global supply chains. China has a major role in this and how it's going to be reconfigured and how the future of global commerce is also going to settle, especially in the context of environmental concerns and sporadic geopolitical changes and challenges and all while being faced with the failure of development amongst the WTO discussions.
And... The system is clearly not working for everyone, especially because the system suffers from this trust deficit we've been talking about. But this really drives home the desire for global reform while trying to really hang on to institutions that mitigate existing formats and existing platforms.
Philippe, who... Brings about this global reform then. I mean, how will it be done? Do you see the future being dealt increasingly by clubs like BRICS, like-minded or geographically grouped nations, instead of this global rules-based order? I wanted to ask you about the IMF.
With alternative creditors like India and China available right now, does the IMF have a future? I think it's important to make a distinction between a desire for a fairer global order, which is what many of the interviewees at the start of this program expressed, and indeed our other panelists have also expressed, and whether that's likely to happen as a result of the breakdown of the existing order. And I'm all in favor of a greater fairness. I'm skeptical that the moves currently in play towards geopolitical conflict between the US and China and the breakdown of international institutions like the WTO is going to lead to that fairer world. The BRICS, remember, started off as a Goldman Sachs marketing slogan.
It was then adopted by the leaders of those countries. It's not clear to me that they have a hell of a lot in common. You know, India and China are geopolitical rivals. Some are commodity exporters and some are commodity importers.
Some, as Irina said, have closer ties to the West as well as ties to China. Others are clearly in an anti-Western camp. Economically, the ties between them aren't that significant.
And in any case, they're only a small number of countries. in a very large world. So I'm skeptical that the BRICS itself.
In terms of reform of the international institutions, I think the WTO was probably the most successful institution of the old world order. It was created on a wave of multilateral liberalization. There was the huge success of bringing China in in 2001 and since then basically its ground to a standstill.
It's increasingly ignored by the US and China who go their own way. The dispute settlement mechanism, which resolves international disputes, is largely in abeyance. And I think that's a tragedy.
I don't think that's leading to a fairer world. I think that, you know, the WHO rules, which were not perfect, but which were applied largely impartially, guaranteed equal voice. to small players. They guaranteed fairness for pretty much everybody. And going to a world of might makes right and small clubs isn't going to make things better.
Philippe, a brief answer, if you can, please. How likely is a full-blown economic war? As you say, with the WTO being toothless right now, how likely is a full-blown economic war between the US and the West and China?
Well, there's a possibility of a full-blown... a hot war if developments in Taiwan degenerate. I think that we are moving to a different world order.
It's a second Cold War. And I say a second Cold War because it's a world in which geopolitics trumps economics. And therefore, while of course, if you're Singapore, you want a world based on open markets from which...
Singapore has prospered. And of course, if you're in South Africa, you want a fair economic system from which you can benefit. But if the large powers increasingly say, well, actually, our industrial policies, our national security concerns come first, you need a smaller power to accommodate yourself to those positions. And some will choose one camp, some will choose another, and some will try to straddle both and hopefully not be forced to choose.
Tony, are we... In a new Cold War, are we in an era of nationalism, isolationism, de-globalizationism? Well, I hear that language a lot, and obviously Philip has made a very compelling case for this.
I happen to disagree. I think that we need to pull back from the language that says this is a Cold War and maybe focus on the idea that really the art of contention here is economic. And that we conflate the issues when we talk about Cold War, or even indeed when we talk about security.
During the original Cold War, Americans were genuinely worried that the Soviets were building a political and economic system that would undermine their American way of life, destroy the American way of government. Now, today, however much one looks at the bullying behavior of the Chinese, aggressive exporting, Actions in the South China Sea, military buildup. I don't think anyone in their right minds would accuse China of trying to build an economic system that is a plug-in replacement for Western-style liberal democracy.
Truth be told, I don't think Xi Jinping really cares at all what kind of political system the West wants to run. What he wants to do is to bring about economic prosperity in a way that hews as much as he can to the original rules-based order. And right now, the nations that are most pulling away from that system are not the emerging countries, are not the ones that felt previously challenged by the international economic system, the Washington Consensus type of economic system, but instead, the rich countries. And the language about it being now a security competition, unfortunately, rings a lot of an early era, not of competition with the Soviet Union, for which the competition was not economic, but of US competition with Japan. A lot of the language about Japan's economic superiority threatening, undermining U.S. security is echoed today.
And the peculiar thing in all of that is that Japan in all of that time was firmly a liberal democracy. Japan in all of that time was a strong partner of America in America's strategic alliance in the Pacific. So my own sense is that.
But when we give in to talk about security, talk about the Cold War, we might be taking our eye off of the real competition, which is an economic one, which is that there are some countries in the world feeling that China is undermining, dismantling the industrial structure, stealing their jobs, engaging in a program that will lead to their taking control of technologies of the future. And in economics, the right way to deal with that is not to shout wolf and then rattle a saber of security, but to pick oneself up, raise your own productivity, train your people, get to a point where you can compete. I'm sorry to cut you off, but time is against us. I want to hear one last time from Arena.
Are you optimistic about the future, Arena? Can the huge reductions in poverty brought about by... globalization and imperfect though it was the the old world order continue without it i think it's always possible to be optimistic about the future um especially it depends who's viewing this kind of future if we look at the call for alternative anything alternative finance sources alternative payment systems there is a demand for an economy that presents all you advocates for different values and if we were just to to look at at chinese loans as an example or india's loans as an example um it's it's interesting to note that in the long run maybe they're not as cheap as your imf and world bank but they're attractive because i mean especially with the chinese like they come with a grace period five to seven years where countries can start repaying then uh politically this is where it's high be practical for a sitting government since repayment doesn't begin until the end of the term possibly and so here the desire to have something different to have an alternative and leverage that in terms of who is fighting whom I think that is that is an interesting time we find ourselves in and it is more about the smaller powers finding a way to leverage this moment for themselves.
to find their agency in that. And there, we must leave it. We're out of time.
Many thanks indeed, Danny Kwa, Irina Murosan and Philippe Legrand. And that's our show for this week. If you'd like to comment on anything you heard in our discussion, I'm at afinigan on X. Use the hashtag AJCTC if you remember, or you can drop us a line.
Counting the cost at aljazeera.net is our email address. As always, there's plenty more for you online. at Al Jazeera.com slash CTC. That takes you straight to our page and there you'll find individual reports, links and entire episodes to catch up. But that's it for this edition of Counting the Cast.
I'm Adrian Fenigan from the team here in Doha. Thanks for being with us. The news on Al Jazeera is next.