Surviving the post-Covid world order

For political science professor Khong Yuen Foong, the pandemic could not have come at a worse time, inflicting a geopolitical “triple whammy” on US-China relations that is already hurting from the trade war. And while the ideological differences between Republicans and Democrats are more pronounced than ever, both see China as a strategic rival. America’s political Right moreover blames China for the pandemic. Such rhetoric will only grow more strident as campaigning heats up ahead of US presidential elections in November.

“The main danger of the blame game, however, is not that it will lead to a direct military confrontation between the US and China. Rather it will make relations so tense and trust so low that it could spark a larger conflict,” says Khong, who is vice dean (research) at the Lee Kuan Yew School of Public Policy (LKYSPP), part of the National University of Singapore (NUS). While Republicans will likely be China’s chief accusers to divert attention from the policy failures of the Trump administration, Democrats will likely come under immense pressure to censure China also.

“We signed a trade deal where they’re supposed to buy, and they’ve been buying a lot, actually. But that now becomes secondary to what took place with the virus. The virus situation is just not acceptable,” Trump blustered at a press conference on May 4. “The most effective way to meet [the China] challenge is to build a united front of US allies and partners to confront China’s abusive behaviours and human rights violations,” agreed his opponent, presumptive Democratic candidate Joe Biden in a Foreign Affairs article.

“Certain countries that are now hurling groundless accusations against China were actually applauding China’s combat against the epidemic not long ago... Is it because of anything wrong on China’s part, or just because they want to hide or fudge anything?” said Chinese foreign ministry spokesman Geng Shuang at a April 30 press conference. “The US should know that its enemy is the virus, not China.”

Politics of envy
Khong believes the main culprit for the conflict is the bipolar structure of the international system. “China is catching up very quickly with the US on the military, economic, technological and even cultural front. That has raised very serious fears in the US...The structure of the international system is the dynamic that seems to be driving the competition between the superpowers, especially in Asia,” he says.

This analysis echoes Harvard Professor Graham Allison’s influential “Thucydides’s Trap” theory, which argues that rising powers and established powers are more likely than not to go to war due to the latter’s fear of losing hegemony. “It was the rise of Athens, and the fear that this instilled in Sparta, that made war inevitable,” he quotes from the Greek Historian Thucydides, using the geopolitical conflict between the Greek city states of Athens and Sparta during the Peloponnesian War as a model for great power rivalry up to the present day.

Today’s dire state of affairs has deep roots in Washington’s failure to develop a comprehensive strategy to deal with China, says Kishore Mahbubani, former dean of LKYSPP, referring to an insight given to him by former US Secretary of State Henry Kissinger. Grappling with internal instability and misapprehending its declining global standing, the US has failed to account for China’s imminent return to its historical position as the world’s largest economy.

“There is some very fundamental social problem within US society. So the wisest thing the US should do is to bring that money home and use it to help the American people...The primary focus of the American government — perhaps only temporarily — should not be to preserve American primacy as it is making the American people pay a big price,” says Kishore, who is now Distinguished Fellow at the Asia Research Institute. Citing US Cold War statesman George Kennan, he urges Washington to adopt an attitude of humility and cultivate ties with both allies and strategic rivals.

Khong puts forward a more controversial suggestion: “Analysts have raised the question whether the US would be willing to share power in Asia with the rising power. I don’t think China is in any hurry to replace the US as the regional hegemon.” A white paper issued by China’s State Council Information Office last September stated that China would eschew hegemony, expansion or spheres of influence no matter the geopolitical circumstances.

Death of the liberal world order?
Unfortunately, modern US foreign policy does not tolerate “peer competitors” capable of displacing US global hegemony. With Washington increasingly seeing China as a strategic and ideological threat, there is an increasing rollback of the liberal world order that has underpinned the post-Cold War world.

The Covid-19 outbreak has reinforced, especially to China, the notion that economic decoupling is unavoidable, says Alicia García-Herreo, chief economist at investment Bank Natixis. Nevertheless, she acknowledges that “full decoupling” is probably impossible to achieve in a globalised economy.

“We are going to see increasing difficulties in the way we run US-China interdependence. We have moved from the very obvious trade war, which was basically dealing with the surface (meaning import tariffs) to the more complex impacts of that trade war and increasingly Covid-19 on the global value chain,” she adds. China, for one, will be less central to these trading networks as states look to “ring-fence” their value chains to preserve their security.

States are already raising barriers to trade to protect “national champions” from a “China threat”. Nicholas Grace, equity portfolio manager at Capital Group, observes that India has passed new legislation limiting FDI to frustrate Chinese investment. Germany and Spain have also tightened FDI rules, imposing a 10% limit for strategically important companies to prevent Chinese firms from acquiring them cheaply.

García-Herreo also warns of a global de-globalisation of people-to-people relationships — a phenomenon she says she could not have imagined in her worst nightmare — as well as growing technological bifurcation. More dangerously, she highlights the potential acceleration of US-China financial decoupling as both sides look to withdraw investment from one another’s economies while delisting companies from their respective stock exchanges.

In the face of this growing retreat from globalisation, the helplessness of the World Trade Organization (WTO) is particularly stark. Yet, this body is seen as one platform from which the tide can be turned. “Long before Covid-19 and the collapse in trade, I always thought that the WTO was already history to be frank. What we would need to foster trade would be liberalisation, and that was something we have been waiting for since the Doha Round,” says García-Herreo.

Beyond economic ties, international institutions have also come under strain. On April 14, the Trump Administration slashed crucial funding to the World Health Organization (WHO) while accusing it of being beholden to China.

“De-funding the WHO makes absolutely no sense during a pandemic. We need a global coordinated response,” said Bill Gates on April 15. The Microsoft founder, who has reinvented himself as a philanthropist, quickly directed the Bill and Melinda Gates Foundation to contribute an additional US$150 million ($212.5 million) to the WHO to bring its total contribution up to US$250 million. This is nearly double the US$115.8 million the Trump Administration has recommended for WHO funding in February, which remains the largest state contribution despite cuts to existing funding.

While 62% of WHO funding initially came from compulsory mandatory contributions from member states, this has since come down to just 18%, limiting the organisation’s ability to conduct long-term planning for global health crises.

Critically for the US, it is undermining its own global standing with such decisions. “It is very sad that the United States has decided to attack and detach itself from the World Health Organization at a time when we are in the midst of a global fight against Covid-19,” says Mahbubani, a former UN Security Council President. “In the past, whenever the US took an initiative, everybody would rush to support it. This time round, when the US, for example, attacked the WHO, no one, not one country, joined in.”