Dr. Parag Khanna is a leading global strategy advisor, world traveller, and best-selling author.
Sometimes crises put history on fast forward. What would you expect to be the geopolitical fallout/aftershocks that will shape the post-coronavirus world? To what extent is Covid-19 accelerating some of the trends that were discernible even before the pandemic?
For me the biggest geopolitical and geoeconomic trend under way for quite a few years is regionalisation. It is an organic process given the growth of the Asian regional environment, given the renegotiation of the North American trade relationships, but also because of the US-China trade war. In the post-COVID world regionalism will accelerate because it is very difficult to travel outside of one’s region for an indefinite period of time, as the supply chains are going to be more entrenched within the regions; it will accelerate because of the growing suspicion of outsourcing to China across long distances. In short, there are many reasons why we will see this emphasis on the region, instead of the global. This is a very significant geopolitical trend that began before the pandemic.
There is no West…
You are a researcher of globalisation and connectivity. What will change in the pattern of globalisation? How will globalisation be restructured and recalibrated? Especially in a context shaped by pressures for decoupling and fears of deglobalisation.
It is very important to emphasise that decoupling and deglobalisation are different things. Deglobalisation is if all globalisation stops. But Europe and China are both trading more with Asia, therefore you do not have deglobalisation. Decoupling simply means that the US might invest less in China, it might buy less from China and the reverse. Some connections are weaker and some connections are getting stronger. But when it comes to trade, the United States is not nearly as important as Asia. We should be looking at the globalisation of trade from the Asian standpoint, not the American standpoint. Trade between Europe and Asia is much larger than trade with America. There is not necessarily deglobalisation, but we can identify sectorial decoupling.
In the post-COVID world regionalism will accelerate because it is very difficult to travel outside of one’s region for an indefinite period of time, as the supply chains are going to be more entrenched within the regions; it will accelerate because of the growing suspicion of outsourcing to China across long distances.
We can talk about increasing globalisation or decreasing globalisation by sector. In the energy sector, you have deglobalisation because oil is abundant, but consumption is down, so you have less trade in oil. You have some slight deglobalisation of finance, as some portfolio capital has been removed from some emerging markets. In digital services there is an increase of globalisation – everyone is using Skype, Zoom and Netflix. We have an increase in trade in digital services, which is a very high value-added component of globalisation. It is more important and more valuable than oil. We usually see the oil tankers as the embodiment of globalisation, but they are not. Internet is a better embodiment of globalisation.
To what extent is this phenomenon of decoupling reinforcing the trend of regionalisation? In both United States and Europe we can hear calls for reshoring some strategic industries and creating some sort of Western resilience from this perspective. Should we expect massive shifts in this direction?
When we talk about infrastructure, supply chains and resilience we should not be talking about the West. The West is a cultural concept and it has nothing to do with supply chains and resilience, which are essentially geographical concepts. We must focus on North America and Europe completely separately. For example, Europe is moving towards some degree of decreasing the dependence on fossil fuels, therefore it is not competing for global oil supply. When you look to North America – United States, Canada and Mexico, all are major energy powers. North America has energy self-sufficiency, a large labour force, it has industrial potential, it has technology, labour, land. All of these potential inputs for self-sufficiency and resiliency are present in North America. Europe does not have its big software companies, but it has more people than North America, it has enough land, it has renewable energy, it has financial capital. It still needs to import some energy, it is still importing food from different parts of the world, but it is trying to be more self-sufficient. If Google were to stop Internet access for Google in Europe, that would be a problem for Europe. But there is no particular technology where you would say that if Europe switches off that access to America, then America is in trouble.
Time for Europe to take itself seriously
I also want to discuss a bit the dynamic that you see inside the Atlantic system. The COVID crisis that started in China hit the West dramatically, right at its core. Is COVID an opportunity for the Atlantic system, for reinventing the strategic unity & solidarity of the Atlantic system? We see a lot of calls from the other side of the Atlantic trying to persuade Europe to align with the U.S. in the broader great-power competition.
Europe has no interest in decoupling from Asia. Europe is much more export-dependent than America is. Europe still needs to trade and export to Asia. That is why you can see that while the US is trying to block the Asian Infrastructure Investment Bank (AIIB), the Europeans were joining the AIIB. There are different perspectives on this issue. In terms of a strategic community, you can still argue that there is a cultural West, but in terms of geo-economics, you cannot argue that there is a common West. America’s geopolitical allies are also its geo-economic rivals. They are competing with each other to gain market share in Asia.
How would you see the EU faring in a post-COVID international system where we see so much internal fragmentation, between North and South, Old Europe and New Europe, but at the same time a world in which the “return of history” and Machtpolitik, not multilateralism define the new normal?
I don’t believe in the language of Robert Kagan. It is reflective of a trend focused on measuring capabilities in a way that is very different from the way sophisticated people measure capabilities today. In the XXI century, there is no particular reason to privilege the size of a nuclear arsenal over market access. Europe’s strength derives from areas where a) it acts coherently, and b) where it demands reciprocity and where it insists on high standards. This is a very important source of European influence. Europe has to actually act on these capabilities in trade, in regulations, in human rights. What we are seeing over the last couple of years is Europe trying to be tougher on China in terms of reciprocity, demanding to have a greater share in the BRI projects, demanding reciprocal market access, it has declared China as a strategic competitor, it is working to develop a big fund to support strategic industries. All of these are indications that Europe does want to be a more coherent strategic player, but this will require of course that Europe evolves towards a common fiscal policy as well.
When we talk about infrastructure, supply chains and resilience we should not be talking about the West. The West is a cultural concept and it has nothing to do with supply chains and resilience, which are essentially geographical concepts. We must focus on North America and Europe completely separately.
In the recent past, the way China has been rising has created a lot of resentment in Japan, in Australia (as we’ve seen in the last few weeks) in the whole East Asia, because of Beijing’s aggressive push in the South China Sea. Does the US have the ability to create a balancing coalition to check China’s strategic ambitions there? Or is that a role to be played first and foremost by local countries (like the TPP-11)?
The answer is definitely both. The most important thing to remember is that Japanese, Indian, Korean and Australian interests have been aligned for a very long time. As neighbours of China, they’ve been concerned about China’s rise for much longer than anyone else. It is important not to argue that the United States are leading the effort to balance China. That is not true. Japan and India really are leading the effort. America has the most powerful capabilities and it is wisely supporting efforts like the Quad arrangement (Australia, India, Japan and United States). The four navies are working together to maintain a free and open Indo-Pacific region. The aim is to prevent China from dominating the South China Sea, from dominating the Indian Ocean. This is going to shape Chinese behaviour. It is not a formal alliance, as in Asia alliances are very rare. It is a coalition of countries based on a very strong structural agreement on the desire to contain China.
In the book (“The Future is Asian: Commerce, Conflict & Culture in the 21st Century”) published last year you point out that “Russia and China are today closer than at any point since the heyday of their 1950s Communist alliance”. Do they learn from each other in challenging the status quo? Are they coordinating their movements?
It is more an axis of convenience than a real alliance. Russia remains very suspicious of China, but Russia is also accepting a lot of investment from China. What will happen over time is a China that is being very careful not to alienate Russia, as it could potentially cut down on the amount of the Chinese investments in the country, even though it needs it desperately. In the long term, China has significant interests in using Russia for access to Europe and the Arctic, but it has to be careful not to appear too dominant. I can see that right now Russia is the country that is most compliant with the Chinese interests, but in the medium term it could be the country where there is a substantial backlash against China.
In a shifting global landscape where we will see a change in supply chain patterns, will the Belt and Road Initiative remain a comparative advantage for China or could it become a liability?
The Belt and Road Initiative is an integral part of China’s grand strategy. A lot of people are discussing whether China is going to speak less about BRI or de-emphasise it. We should focus less on what they say in speeches and more on following the money. This is the bigger issue. What we will see is that China will talk less about BRI as it has become controversial, but I think it is still a strategic priority to achieve the supply chain diversification, to build these infrastructure corridors, to access West Asia and access Europe through infrastructure. There will still be BRI, but China will talk less, it will try to multilateralise more and it will have to make concessions on issues of debt relief in the wake of the pandemic.
In terms of a strategic community, you can still argue that there is a cultural West, but in terms of geo-economics, you cannot argue that there is a common West. America’s geopolitical allies are also its geo-economic rivals. They are competing with each other to gain market share in Asia.
Lessons from Asia in managing COVID-19
South Korea and Taiwan were at the forefront in managing the pandemic. What lessons in terms of resilience and effective governance should be learned from their example, including by the West?What is crucial to remember is that these are democratic states (South Korea, Taiwan, Singapore, Japan) that performed very well during the pandemic. The key aspect is that they are democracies, but they are also technocracies. They have democratic elections, independent branches of government and separation of powers, but they have a very strong civil service, really competent and professional bureaucracies that know how to get things done to meet the basic needs of the people to deliver high quality medical care. It is very important to appreciate that countries can be democratic and technocratic at the same time. Very often that is something that we ignore.
The experience of Singapore
Singapore is a country that embodies a lot of hesitation and concern about China, even if it is a majority Chinese country. You have Chinese people in a country that is not China, but they are very worried about China. In a way, the more Chinese Singapore has become demographically, the less comfortable it has become with China geopolitically. I believe there have been times when, even though Singapore was suspicious about China, it was also naïve, as they hoped that China would have a peaceful rise. That has not been the case. Now, Singapore has been very clever to make sure to emphasise to China that it will maintain its strategic relationship with the United States, that it will not back down from allowing American naval forces to have a presence on its territory. It is a strong sign of Singapore’s independence and neutrality. When it comes to the US and China it is much more of a binary. But countries like South Korea, Thailand and Singapore have been very good at maintaining good relations with both. This is tricky because there is very strong US pressure on one side and very strong pressure on the other side.
Short-term vs. long-term trends
“The Second World: How Emerging Powers Are Redefining Global Competition in the Twenty-first Century” is about the competing efforts of the United States, of Europe and of China to develop spheres of influence in emerging regions and ‘swing-state’ sort of areas like Eastern Europe, Arab world, Latin America, Central Asia or Southeast Asia. In each of those regions you see a very different landscape of influence. In the short term you hear people saying that Russia calls the shots in Syria, that it is very influential in the Middle East. In the long term that is nonsense, because Russia cannot be influential in those regions. Through the 2000s we thought about Central Asia as part of the American dominion because U.S. invaded Iraq and Afghanistan and had a very large military presence there. In 2020, American presence has declined to almost a symbolic one and American influence is almost zero. Geopolitically we have to make a distinction between a very artificial and short-term situation like the occupation of Afghanistan, versus the long-term reality that countries like China and Iran will be much more influential in countries like Afghanistan.
Parag Khanna is Founder & Managing Partner of FutureMap, a data and scenario-based strategic advisory firm. Parag’s newest book is The Future is Asian: Commerce, Conflict & Culture in the 21st Century(2019). He holds a PhD from the London School of Economics.