The Global Issues program examines themes that lie at the intersection of global political trends and Australia’s interests, specifically US foreign policy, global migration & multilateral institutions.
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Kishore Mahbubani's latest book, The Great Convergence, offers political, strategic and economic analysis on the grandest scale. The book was inspired by FT columnist Martin Wolf's opinion piece from 2011, which argued that 'far and away the biggest single fact about our world' is that developing economies are catching up with the developed world.
The Great Convergence is a strikingly optimistic book about the massive strides humanity has made since World War II to improve all aspects of human welfare. But it's also a warning that our global governance arrangements are worryingly out of step with these advances, and are holding back progress.
Below is the first installment in a short interview series I am conducting with Mahbubani, formerly a senior Singaporean diplomat and now a sought-after writer and commentator on international affairs.
SR: I'd like to begin with the Obama-Xi summit in California last weekend, and ask you about how you interpret this event in light of the arguments you make in your latest book. On one level, the summit felt very retro – it had a similar sense of occasion and historical significance to that which once surrounded US-Soviet summitry. There was also the inevitable 'G2' symbolism and Xi's call for a 'new kind of great power relationship', all of which combined to create the sense that these two leaders were gathering to move the chess pieces of world order around in much the same way that European statesmen of the 19th century did.
But I gather from what you argue in The Great Convergence that you would see this as an excessively realist reading of the summit. How would you interpret the events at Sunnylands?
KM: The Sunnylands Summit between Obama and Xi confirmed that a great convergence is happening in the world.
Very soon we will see a major symbolic shift of power. In 1980, in Purchasing Power Parity (PPP) terms, the US share the global GNP was 25% when China's was only 2.2%. By 2017, the US share will diminish to 17.6% while China's will rise to 18%. Hence, in PPP terms, China will become the number one economy and the US will become the number two economy.
Traditionally, for almost two thousand years of history, when one great power is about to surpass the number one power, there has always been rising tension between the number one power and the emerging power. Hence, we should be seeing rising tension between the US and China today. Instead, as the Sunnylands Summit demonstrated very clearly, we are seeing diminishing tension. Why?
The simple answer is that the converging common interests between the US and China are actually greater than the competing interests. Both Obama and Xi want to focus on economic growth and development as their legacies will be defined by the amount of economic growth that they deliver and not by the number of wars that they have won with each other. In short, there has been a fundamental change in the grain of human history.
Geopolitical competition will continue between the US and China in the coming decades. Each will take advantage of the mistakes made by the other. Yet, there will be no direct wars and indeed there will be rising collaboration in many areas. For example, they have agreed to work together on North Korea and on climate change. All this is part of the great convergence that the world is experiencing.
SR: So are you arguing that the world has outgrown traditional power politics? China and the US disagree on a number of issues, perhaps most important being that the US seems to want to retain its predominant military status in the Pacific, while China would presumably want a role in Asia Pacific affairs commensurate with its size and strategic weight. Will these status considerations be subsumed by converging economic interests?
Geopolitics has been around for over two thousand years. It will be around for a long time more, as long as we have great powers. The geopolitical games will continue but the nature of the games will change. I can predict with great certainty that no two great powers will go to direct war with each other. The Great Convergence explains why. However, while there will be no wars, there will be competition. Let me cite an obvious example. The US is pushing the TPP process. China is pushing the RCEP process. In theory, they are pushing trade agreements. In practice, they are competing for influence. Such competition will continue.
Dr Daniel Woker is the former Swiss Ambassador to Australia and now a Senior Lecturer at the University of St Gallen.
For his first trip abroad as Chinese premier last month, Li Keqiang went to India and Pakistan and then continued to Switzerland and Germany before heading back home.
Germany, the EU's economic powerhouse, was a logical choice. Li's main business was to lobby his hosts against the EU trade commissioner's biggest ever investigation into alleged dumping. He found sympathetic ears in Berlin, though as we now know, the EU Commission went ahead with its punitive import duties on Chinese solar panels regardless.
But why Switzerland? Two reasons stand out. First, the two countries are in the final stages of signing a bilateral FTA, only the third Beijing has been willing to conclude with a developed country, after New Zealand and Iceland.
For the first time, China is ready to substantially lower its duties (84% of all Swiss imports will be exonerated from custom duties over time) on manufactured products, as opposed to the mainly agrarian exports from New Zealand and Iceland. The treaty will also contain some language on human rights and worker protection, presumably setting a standard for other such treaties.
It is important to underline that an FTA with Switzerland (a major European economy which ranks 19th globally), which is linked with the EU through a bilateral free trade agreement but not a customs union, will not allow for automatic entry of Chinese goods into the EU.
However, FTAs with two non-EU European countries, coupled with an aggressive recent move into ownership of Greek shipping terminals, will give China something of a bridgehead in view of the big prize, an FTA with the EU. Last year China exported goods worth US$377 billion to the EU, its number one economic partner ($20 billion of this total was solar panels).
Telecommunications are another area of contention. Here it is only partly a question of export dumping being claimed by the EU, but also the conduct telecoms giant Huawei, subcontracted by a number of European telecom companies for local work. Huawei is practically barred from doing business in the US due to fears for sensitive national security data.
The second reason for Li's visit to Switzerland was financial. As is well known, Beijing is working on the internationalisation of its currency. The very international Swiss market offers good prospects for the sale and trade of financial products issued in renminbi as first step to establishing it as an international reserve currency. The fact that all the bigwigs of the Swiss banking scene were present at a lavish Zurich reception for Li was not lost on observers.
Ironically, quite a number of these banks are in deep trouble these days. The hallowed Swiss banking secrecy is actually all but gone, mortally wounded by Washington's FACTA obligation for full information exchange on accounts of US citizens abroad and finished off by the subsequent request from EU countries to get no less for their respective fiscal authorities. Add to that the incredible imprudence of quite a number of these banks, which continued aggressively marketing their private wealth management services towards tax cheating clients abroad long after it became crystal clear that this would be treated as money laundering with stiff penalties for accomplices, too.
The world's largest private wealth manager, UBS, after having already paid stiff penalties in the US and in Germany, and with individual bankers facing prison sentences, is rumoured to be threatened by a similar indictment in France, with potentially more to follow.
The irony thus lies in Beijing coming to town at a point when the Swiss financial market appears to be on the way to slowly shrinking towards something more in line with the real economy of the country.
Photo by Flickr user FriendsofEurope.
Darryl Daugherty writes from Bangkok:
In her comments published 12 June 2013, it seems Janet Magnin may be under some misapprehensions concerning the American electoral system.
Owing to the constitutionally mandated role of the Electoral College, Americans voting for president do so at the state level with the expectation that the vote of the Electors from that state will faithfully represent the popular vote.
If an American wishes to lawfully escape taxation by certain states which collect aggressively from individuals overseas — California among them — he often must let his voter registration lapse as a part of abandoning residency in that state and exempting himself from that tax obligation. This effectively precludes participation in national as well as state elections.
The only reason law enforcement can afford to act against drug users, or prostitution, or gambling, for example, is because only 1% of those crimes are detectable. If police could magically know every time someone violated a drug or prostitution law, the volume would be so high they would end up ignoring the entire class of crimes for purely practical reasons. And that's where we're heading.
Ironically, the more the government clamps down on individual privacy, the more freedom the residents will have. When the government can detect every sort of crime, it will be forced by public opinion and by resource constraints to legalize anything it can detect but can't stop...
...Consider the gay rights movement. The genius of the gay rights pioneers is that they increased their freedom by voluntarily reducing their privacy. By coming out in large enough numbers, gays took from the government the ability to vilify gay sex acts and gays in general. There were simply too many gay citizens to ignore or to jail. Society necessarily started to adapt, and continues to evolve...
...In the long run, privacy is toast. But what you will get in return is more personal freedom and less crime. That's a trade that almost no one would voluntarily make, but I think the net will be good.
Michael Green served on the US National Security Council staff from 2001-2005 and is now Senior Vice President for Asia at CSIS and a non-resident fellow at the Lowy Institute.
The pundits gave a variety of bad advice to President Obama going into the Sunnylands Summit with Xi Jinping. One prominent commentator from Down Under said it was the 'last, best chance' for the US and China to reach a grand strategic bargain and avoid war, a prognosis echoed by some American China-hands and feared by observers from Tokyo to New Delhi.
In fact, the White House played the summit just about right. In background briefings before the meeting, senior officials downplayed expectations that there would be 'breakthroughs' on any of the problems vexing US-China relations and instead emphasised that the summit was focused on creating a chemistry between Obama and Xi that would pave the way for more confidence-building and productive problem-solving down the road.
For an old Bush guy like me, this was quite interesting. For one thing, Bill Clinton and the two Bushes were much better at building personal chemistry with foreign leaders than Barack Obama, who is famous for his lawyerly, transactional, and often cool meetings with foreign heads of state.
The relaxed setting and 'walk in the woods' dynamic achieved at Sunnylands was exactly what we had wanted to do with Hu Jintao during the Bush years. The problem was that Hu was just not comfortable being comfortable in front of the media. For Hu's staff, the summits were all about the pageantry, flags and protocol and ensuring that the Chinese public saw Hu get whatever Jiang Zemin got in his summits (hence endless negotiations over the 19-gun salute etc).
Xi is obviously more confident in his own skin and better at playing his own media than Hu was. Given how much of the US-China relationship hangs on the personal trust between the two nations' leaders, this informal and extended dynamic was precisely what was needed.
I was also struck by the change in President Obama's description of US-China relations. From the beginning of the Bush Administration we characterised the relationship with Beijing as one that should be cooperative, constructive and candid. The Obama team dropped 'candid' and replaced it with 'positive' in describing their framework for relations with China.
After unsuccessfully experimenting with a US-China joint statement in 2009 promising to respect mutual 'core interests', the Obama Administration is now back to the pragmatic declaratory policy towards China of the Bush years. Or as the President put it at Sunnylands, he and Xi were not trying to negotiate 'what's acceptable and what's not' but instead needed a 'candid and constructive conversation and communication' to ensure stronger relations in the future.
Xi was upbeat, but for his part reiterated his theme that the US and China should build a 'new model of great power relationship'. I strongly suspect that Xi has in mind a model of strategic reassurance, respect for core interests, and agreed upon spheres of influence – precisely what Beijing thought it was receiving in the November 2009 joint statement and that President Obama appeared to reject this time.
So well done on the summit, Mr President, but there will be further tests ahead.
Photo courtesy of the White House.
Many readers know the lines from the 19th century fable about Goldilocks and the three bears: 'not too hot, not too cold, just right.' Those lines come to mind when reading the mostly positive initial reports of the informal summit between presidents Obama and Xi. These two leaders needed to get it 'just right' if this summit and the opportunity for the two to get to know each other are to have any substantive effect on US-China relations.
Now and in the future, Obama needs to ensure that he is not perceived as having conceded too much to China. Xi must ensure that he is perceived as having gotten enough for China. It's a fine line to walk if both are to be viewed as winners.
Economic interdependence between the two countries is deep, and both acknowledge the need to cooperate with each other. Yet the fundamental strategic goals of Beijing and Washington are at odds. The US is the world's only superpower and wishes to preserve its dominant position. Beijing, the rising power, wants control over what it sees as its core interests in its periphery, especially the East China Sea and South China Sea.
Will a personal connection between Obama and Xi make a difference? It won't remove the tension in the two countries' strategic intent. But it could help iron out misunderstandings and contribute to problem-solving on pressing issues of mutual interest, like North Korea.
But it would be unrealistic to expect too much from one summit. Both leaders, especially Xi, are constrained by pressures from elites back home which have very diverse views of how to deal with the other.
China would like to see the 'new kind of great power relationship' (the term Xi promotes to describe China-US relations) as being one between equals. Some Chinese commentators already insinuate that the summit did indeed cement that definition.
From Washington's viewpoint, this is not getting it 'just right'. The US remains the dominant, established power, while China is the rising power. Tensions between Washington and Beijing are bound to continue, whether or not Obama and Xi get along at the personal level.