G7 and SCO summits: Retrenching US amid China's expanding hegemony in trade points to new world order

The world witnessed unique scenes on Sunday as leaders of some of the largest economies gathered at two opposite ends of the globe to iron out their political and economic differences. That the hegemony of the United States is now facing stiff competition from an ever-rising China was stark in the proceedings of the two summits.

As news from the G7 proceedings in Canada began to trickle out, the infighting in the group — read US president Donald Trump versus all — made itself all too evident. On the other hand, despite all their differences, leaders from Eurasian economies came together to improve their regional ties and boost cooperation in several fields through the China-led Shanghai Cooperation Organisation. While the substance of the two summits were different, the manner in which the US and China approached them is symbolic of the unrest in the world order.

US President Donald Trump at the G7 Summit in Canada. Reuters

US President Donald Trump at the G7 Summit in Canada. Reuters

The US-led order — developed after the end of World War I and strengthened during the post-cold war era — was based primarily on the principles of market openness, governed by rules-based institutions and driven by the strength of the US hegemony. Some of the most significant transformations in the global architecture, including the development of the Bretton Woods system, security alliances, globalisation and strengthening of multi-lateralism, among other sectors, have taken place under the careful watch of the US.

In the entire process, the US acted like, what many refer to as, a 'benevolent hegemon' — protecting the interests of its allies and ensuring free trade across the world. This liberal hegemonic order it championed saw the rise of some key organisations such as the United Nations, International Monetary Fund, World Trade Organisation, North Atlantic Treaty Organization and the G8 (now G7) and G20. Despite their shortcomings, some of these were not only pivotal in addressing important politico-economic issues, but they were also able to rapidly adapt to a changing world and look at a broader spectrum of concerns pertaining to human rights, environment, climate change and gender justice, among others.

They were also significant in creating and diffusing global norms on several of these concerns. These institutions derived their legitimacy partly from their global membership but largely from the fact that they were led and supported by the US as a global leader. Today, as the world looks at a retrenching US, the base of these institutions is gradually eroding, which in turn is chipping away at the very foundation of the world order.

The announcement of steep import tariffs by the US president and the consequent infighting among the developed economies threaten to increase trade protectionism around the world. That the champions of free trade may now be looking to erect barriers against imports can prove detrimental to countries, more significantly to the developing economies that have been able to push their growth numbers over the years on the back of a free trade system. This kind of protectionism being championed by Trump also threatens the legitimacy of institutions such as the World Trade Organization, which are increasingly unable to implement rules effectively, much to the chagrin of the other member states. It is evident from the failure of these institutions to bring the US to book that these global organisations will always need the strong, steady hand of a hegemon to function smoothly.

File image of Chinese President Xi Jinping. AP

File image of Chinese President Xi Jinping. AP

Developing parallel to the fragmentation of this old world order has been the rise of a new — albeit a different — world order championed by China. Although still contained within Asia, the China-led order is largely driven by its economic hegemony. While it has yet to take up the role of a net security provider in the region, China's economic baits in the form of its Belt and Road initiative and massive infusion of capital to spur infrastructural growth in the region has begun to provide it with a legitimacy nearly identical to what the US gained after the Marshall Plan in the 1950s.

The rise of regional financial institutions, cooperative platforms and security initiatives in Asia with China at the centre has pushed the country into believing that it is the next rule-maker in waiting. This is evident from the manner in which President of China Xi Jinping has addressed the global community on issues pertaining to free and open trade, multilateralism, climate change and collective security, among other concerns. China has sought to build its legitimacy on the deteriorating authority of the US.

While China may still have a way to go before gaining the status the US has enjoyed for decades, Chinese hegemony in a larger part of the world will have several consequences. It is important to note here that the political system in China, unlike in the US, is based on the principles of authoritarianism. Therefore, it may now pretend to be the champion of free markets and open trade, but there will always be a risk that China may reverse the gears as and when its interests are fulfilled. The Chinese territorial quests, coupled with the country's aggressive pursuit of hegemonic control of the seas, has served to spark fear in the hearts of its neighbours, which raises serious questions about the rise of China and the nature of its hegemony.

A world order with limited US involvement, increasing Chinese clout and stranded middle powers will see the making and breaking of several alliances. The middle powers will find themselves increasingly stuck in the middle — unable to find common ground with the US and unwilling to jump onto the Chinese bandwagon. Although an alliance of middle powers may be on the cards, sustaining it may prove difficult in the absence of a great power.


Updated Date: Jun 11, 2018 13:52 PM

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