We live in a world that is changing, and changing fast. There is hardly any aspect rooted in permanence. The world order is in constant flux; and subsequent changes are both encouraging and inciteful. If we traverse back to the 15th century, a multipolar world order, which implies that multiple powers controlled and regulated economic and political narratives, was prevalent. From the 15th century onwards, the world has been in a continuous shift from multipolarity to bipolarity to unipolarity, eventually returning to a multipolar world order.
The first change of order was witnessed after the peace of Westphalia 1648 when power was shifted from the Church to the State. The emergence of the nation state system incurred changes to the world map along notable in the newly demarcated boundaries of states in Europe. All these changes were brought about with the shield and sword.
During the course of the past few decades, high rate of geoeconomic competition, technological revolution, globalization of finance and increased interdependence has upset the traditional world order that had been sustained for centuries.
During the course of the past few decades, high rate of geoeconomic competition, technological revolution, globalization of finance and increased interdependence has upset the traditional world order that had been sustained for centuries. This change in the very nature of the concept of power can be divided into the principles of hard and soft power; wherein the former refers to the use of force for achieving national interest in contrast to the latter which calls for cooperation through institutions. In the 21st century, nations have begun to resort less to the realist approach because it is costlier and less effective. The acquisition and use of power is manifested more robustly in modern times, in the form of economic warfare.
The concept of economic warfare is not new. Its significance was perceived as early as the 19th century. Its contemporary form may be traced back to the immediate period after the World War; and more explicitly to the GATT (The General Agreement on Tariffs and Trade) in 1947 that established and normalized multilateral competition with the aim of promoting liberalization of world trade. The power blocs in conflict during the Cold War followed limited traditional rivalries to ideological and military conflict, placing more emphasis on internal stability.
The fall of communist bloc in 1991, gave way to capitalism as the dominant economic model. Economic globalization began taking root in the 1970’s when all nations integrated into or set their financial models in accordance with the global economy. However what the world saw as a peaceful unification of nations under the banner of free exchange eventually gave way, to the start of a new dimension to conflict; the economic war.
The United States (US), because of the establishment of a unipolar world order, continued to enjoy ‘the world’s superpower’ status in the absence of a strong competitor. However as the world moves towards multipolarity yet again, the dynamics of conflict have changed as rising powers are economically ambitious; the most important among them being China which is giving the US a run for its money.
The United States (US), because of the establishment of a unipolar world order, continued to enjoy ‘the world’s superpower’ status in the absence of a strong competitor.
Set as a major exponent of economic globalization, international trade is considered to be an engine for economic growth; as liberalizing international trade is the most notable standard that the neo-liberals have historically called for. Developed countries and international organizations promoted trade openness while calling for elimination of protectionist policies, also recommended in the ‘Washington Consensus.’
In this era, as the world embarks on yet another shift in the nature of international governance, the founder of all things ‘global’, the US, is adopting protectionist policies that is alarmingly disturbing the balance of the international economic system. President Donald Trump, after taking office in 2017, ushered such a narrative into American economic policymaking to revive domestic industrial production and decrease the value of imports flowing in the country.
China’s economic miracle that brought it in direct competition with the US, was seen as a national security threat by the newly elected President who, resultantly, waged war with China that neither has a tangible battleground nor the use of hard power but is purely based on economic competition; specifically on trade. It is for this very reason that it is commonly known as the ‘Trade War’. His foremost purposes for waging this war is to increase domestic industrial production aimed at creating jobs, to boost US steel and aluminum production and counter high innovation Chinese strategies.
Trade wars have adverse economic and political ramifications on both the global economy and international trade as it leads to diplomatic rows in addition to straining the balance in the internationals market. Trump’s insistence on correcting unfair trade deals and decreasing the trade deficit vis à vis China provoked him to withdraw from all agreements he believes to be taking an unfair advantage of the US. Therefore, in the period after taking office, he pulled the US out of numerous agreements like the Trans-Pacific Partnership (TPP), Iran nuclear deal, NAFTA (North American Free Trade Agreement) and the Paris Peace conference, by declaring them the worst deals ever signed. These gestures show how much he is persistent in his declaration to ‘Make America Great Again.’
By pursuing policies of such a nature, it becomes possible for great powers to harm rival states without even firing a single shot.
On the other hand, China, for whom the conflict is in full swing, is reciprocating the American narrative while still maintaining the importance of negotiations. Since January 2018, the US has imposed tariffs on aluminum and steel imports from China, in response to which China has imposed retaliatory tariffs on American products like; automobiles and aluminum waste, but its response was proportionate. Similarly, tariffs on steel and aluminum from Canada, Mexico and the European Union (EU) have intensified global tensions and have caused a rift between traditional allies. In response to the tariffs, Canada imposed billions worth of countermeasures, while Mexico also imposed tariffs on food and steel. The EU has vowed retaliation as well; as French President Emmanuel Macron mentioned in a speech that the US tariffs would mean ‘war.’
By overviewing challenges and obstacles, it can be established that in the 21st century, the traditional battle of conquests is no longer a policy that can be officially pursued in the new geoeconomic world order. In this nuclear world, when major powers work around the principle of MAD (mutually assured destruction), starting a total war is suicidal. So, what great powers are pursuing in alternative to MAD is MAED (mutually assured economic destruction). By pursuing policies of such a nature, it becomes possible for great powers to harm rival states without even firing a single shot. This is exactly what the US is doing, not only to China but also to Europe and other states for the attainment of its economic interests. Hence, it is believed that further escalation of this economic war could lead the world to a new cold war; an economic cold war.
Hafsa Dar previously worked as an intern at the Centre for Strategic and Contemporary Research.