Between the surprise Brexit vote and the unexpected rise of Donald Trump, it would appear that the world is turning populist and isolationist, with regions fracturing and trust declining.
But that narrative is false. Many regions of the world — including Europe — continue to expand and integrate.
In the coming years, all of the former Yugoslav republics will have become EU members, increasing the union’s membership and completing its geographic contiguity to Greece. Indeed, Greece has yet to leave the monetary union or the European Union.
There hasn’t been, and won’t be, a “Grexit.” Britain has left the European Union, but not Europe itself; it remains deeply functionally connected to the Continent in almost every meaningful way, especially as a strategic ally.
Outside of Europe, the leaders of North America’s three states just held a major summit outlining their next steps in trade and energy cooperation.
The mega-continent is becoming a North American Union — and even a freak Trump election wouldn’t undo the surge in U.S. exports to Mexico or the fact that the U.S.-Mexico border is by far the most heavily trafficked international crossing in the world.
From Southeast Asia’s 650 million people — who have just ratified an ASEAN Economic Community with free labor mobility — to the East African Community of 250 million across a half-dozen countries, post-colonial regions are burying the hatchet and growing together, not apart, to achieve greater economies of scale and bargaining power.
Most fundamentally, China is physically binding together the more than one dozen countries on its periphery and beyond into Central Asia through the Asian Infrastructure Investment Bank (AIIB), further enlarging the functional integration of the world’s most populous and economically dynamic regions.
All of this is very much to the good. But it is also a reminder that in a world of more powerful regional blocs, the West needs to regroup.
Whatever the aftermath of the Brexit or the U.S. election, the trans-Atlantic community needs to get its houses in order and remember that to remain the greatest force shaping global order, it needs to put its money where its mouth is.
America Jeopardizes Its Own Opportunities
Let’s start with the Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (TTIP) agreements. European politicians score points with the public for denouncing the provisions of TTIP, even though it would reduce many unnecessary frictions in trans-Atlantic commercial cooperation. And yet when the United States and Europe team up in World Trade Organization cases against China (or others), they stand a far greater chance of gaining favorable rulings.
Despite the strategic imperative of uniting Western economies for greater efficiency and scale, the bigger picture is currently lost in the narcissism of minor differences.
In the case of the TPP, which Hillary Clinton and Trump now both publicly oppose, Obama’s signature trade pact with Asia is in jeopardy.
Today’s presidential candidates forget that building bonds of trade and commerce with a rival’s neighbors is a pillar of extending influence across the vast Pacific Ocean.
Most of the Fortune 500 generates greater profits from exports to high-growth markets such as Asia than from their home turf.
South and East Asia are precisely where the West should be deploying its deep capital markets and massive foreign direct investment stock to improve corporate governance, combat corruption and urge greater infrastructure investment so that the Asian middle class continues to rise and consume Western goods and services.
With both the TPP and TTIP, rest assured the struggle for economic influence will be lost unless the West puts its money where its mouth is.
China Pays to Gain More
Despite its current economic rough patch, China shows little sign of abating its quest to smooth the supply chains that are its principal source of geopolitical and economic leverage. It is pushing for a Regional Comprehensive Economic Partnership, knowing that as labor is offshored to other Asian nations, it can benefit as a capital owner of offshore industrial and financial assets.
And with the AIIB, China is doubling down on what has already been a quarter century of infrastructure investment in its Central Asian and other neighbors, helping to unlock their resources while paving its own way to the Middle East, Indian Ocean and even Europe.
By putting its money where its mouth is, China has even elevated infrastructure to the status of a global public good on par with America’s historical provision of military security.
More than 70 countries have lined up to join the AIIB, including America’s closest allies, such as Britain. Some now call it the “NATO of the East” — a new kind of infrastructure alliance.
The United States urged European nations to withhold their membership to the AIIB in the name of nudging the new bank to promise higher social and environmental standards, but the AIIB has too much capital and clout among poor countries to be shaped from the outside.
Indeed, it has just announced that the World Bank will co-invest with it. The only way to actually implement better governance beyond nonbinding paper agreements is to get inside such bodies as an investing partner on the ground.
The AIIB’s projects will construct a new set of iron Silk Roads that will smoothly reach Iran.
Now that the West has moved toward lifting sanctions, China and other trading nations simply want the United States to get out of the way so they can get on with the business of accessing Iran’s fast-growing, urban and youthful society.
South Korea now leads the pack among large new investors in Iran. The longer the West waits to ease restrictions on its own companies investing in and trading with Iran, the bigger the lead other countries and their corporations will get in gaining a foothold there.
There are many weak or small countries around the world that depend on China for nearly two-thirds of their foreign investment and to purchase most of their commodities exports.
Myanmar has been through a democratic transition hailed by the West, but its companies are still hamstrung when it comes to reducing Myanmar’s dependence on China.
Sri Lanka’s new government was elected on a platform of revisiting huge infrastructure contracts given to the Chinese, only to determine that it has no commercial alternative, not even India.
China’s grand port in Colombo and other projects have restarted. Ecuador and Zambia are two poor commodities exporters mortgaging their economies to China, taking on ever-larger debts to Beijing, which is collecting a greater share of upstream assets.
Geopolitics has become less about ideology and more about supply and demand, with policies shaped by the highest bidder. In such a world, the West must do more than host summits and pontificate about values. It has to get its act together and put its money where its mouth is.
Author: Parag Khanna
Disclaimer: The opinions expressed within this article are the personal opinions of the author and StratScope does not resume any responsibility or liability for the same.