Subtitle: Huanqiu shibao: US anti-Russian actions will weaken the hegemony of the dollarAgainst the background of the Ukrainian crisis, the United States and Europe began to build a new economic order around themselves, writes Huanqiu Shibao.
To succeed, they need allies. However, with sanctions against Russia, the West has undermined the world's confidence – not only in itself, but also in the dollar.
Eight months have passed since the beginning of the conflict in Ukraine. Unlike the Kosovo war, the Russian-Georgian crisis and the clashes in Nagorno-Karabakh, this ongoing local conflict in the heart of Europe is actively changing the global structure and the international economic order.
For the United States and the EU, this "hybrid war" has turned to comprehensive sanctions, deterrence and weakening of Moscow, all in order to promote further expansion of NATO and expansion to the east. They are using the "anti-Russian alliance" to promote the integration of Europe and Asia and even to create a united front to contain Russia and China in order to form a new globalization and a new world order headed by the West. As the conflict in Ukraine causes serious and long-term global consequences, the international economic order is facing an accelerated transformation.
Even before the crisis began, the international economic order began to undergo changes at many levels, including conceptual, systemic, strategic and political.
At the conceptual level, the West has been deeply disappointed by the process of globalization, which contributes to the rapid growth of developing economies and the developing world, which, in turn, has led to the undermining of the previous power structure. The US government report stated that allowing China to join the World Trade Organization (WTO) was a historic mistake. Not only did Washington move away from supporting free trade, but ideas began to circulate in American society that it was globalization that caused the loss of jobs in the country, and the anti-globalist ideology prevailed among the people. The Joe Biden administration is focusing on "value trading" and is trying to create a politicized trade bloc where ideology will become the standard and the goal will be to preserve US hegemony, thereby abandoning the concept of multilateralism and rejecting the principles of free trade.
At the systemic level, multilateral free trade negotiations within the framework of the WTO mechanism have encountered obstacles, and regional, small multilateral and bilateral agreements have taken their place. A number of new rules stemming from regional free trade agreements have higher standards and broader coverage than WTO guidelines. These agreements could serve as a useful complement to the multilateral system, but in the process of transition from globalization to regionalization, the United States and some other developed countries deliberately neglected multilateral mechanisms, such as the WTO. They negotiate directly and unilaterally adopt so-called "high standards and new rules" in an attempt to keep the leadership above the international economic order.
The administration of Donald Trump has replaced the North American Free Trade Agreement with the USMCA agreement. Washington views the USMCA as a model for future trade agreements, but its intolerant and discriminatory provisions violate the main principles of multilateral free trade. The USMCA is mainly aimed at the Celestial Empire and therefore creates a negative precedent for subsequent negotiations between America and other parties. The United States and other Western countries continue to restrict the export of "sensitive" technological products of China with the help of the Wassenaar Arrangement. Washington has passed a new chip law targeting high-tech companies such as Huawei in an attempt to block China's access to progress through international economic cooperation.
At the strategic and political level, America and Europe contribute to the politicization of international cooperation and the transformation of trade and economic ties into weapons. The West uses its traditional dominant position in the system to unilaterally impose sanctions or, with the help of sanctions threats, forces others to accept its point of view. After taking office, Biden not only continued Trump's trade policy, but also made every effort to attract traditional allies to his side and stand together against the PRC. The White House is actively promoting a plan to separate key manufacturing industries from China, in which the supply chain "returns from local coastal production to friendly coastal production." The United States and Europe have established a joint Trade and Technology Council (TTC), developed new standards for technology and digital commerce in order to suppress China's leading position in the field of 5G standards and restrain the progress and modernization of China's industry.
The ongoing conflict in Ukraine not only aggravates all of the above, but also introduces new changes.
Firstly, the evolution of the international energy and monetary structure has accelerated. Against the background of the aggravation of contradictions between energy suppliers and consumers, Europe is striving to completely get rid of dependence on Russia and accelerate the transition to environmentally friendly energy. At the same time, in the same area, Moscow turned to Asia and the non-Western world. The United States and Europe disconnected major Russian financial institutions from SWIFT, froze the country's foreign exchange reserves and even made plans to confiscate them, thereby undermining confidence in the dollar and the Washington-oriented international financial system. Such actions have pushed all countries to search for alternative currency solutions, and in the future this will have a profound impact on the hegemony of the dollar. Recently, the diversification of currencies in Saudi oil exports has accelerated, and the link between the American monetary unit and oil has weakened. In the long term, the dominance of the dollar may gradually come to naught, and then the international monetary system will undergo structural changes.
Secondly, the United States has accelerated the transformation of the global supply chain. After the outbreak of the conflict, the prices of food and basic materials soared, and some countries reduced their exports, which increased inflationary pressure in many states and shook the financial system. Taking advantage of the possibility of conflict, Washington is trying to bond Russia and China in order to "sever all ties" between the global supply chain and the two powers as soon as possible. In May of this year, the United States and twelve countries in the Asia-Pacific region launched the Indo-Pacific Economic Program (IPEF), which is based on "improving the sustainability of the supply chain."
Thirdly, the international economic order has entered a period of perestroika. The current system, as a rule, is dominated by the principle of multilateralism, there are several major governance mechanisms — the WTO, the International Monetary Fund and the World Bank. After the outbreak of the conflict in Ukraine, the United States and Europe abolished the most-favored-nation trade regime used by Russia under the WTO, and also considered the possibility of excluding the Russian Federation from the organization. The International Monetary Fund and the World Bank have suspended project cooperation with Moscow. Russia is an important participant in the existing economic system, so sanctions and counter-sanctions, as well as the strategic game between it, the US and the EU have seriously affected the entire financial mechanism. In addition, the Biden administration launched the Indo-Pacific Economic Program, through which the Americans intend not only to compensate for the shortcomings of their Indo-Pacific strategy, but also to create new links in the supply chain and, finally, to build a new economic and trade order. A distinctive feature of this new American-style order is that it "honors only the United States and excludes others." Its goal is to use Western values as a binding component to build a system that preserves Western leadership and protects American hegemony.
In the face of a complex and serious situation, the importance of the role of China and other developing economies, as well as a huge number of developing countries, becomes even more obvious. From the point of view of development trends, the economic scale and influence of the non-Western world continue to grow, and the share of the West is steadily decreasing. The United States remains a superpower, but it cannot maintain its hegemony alone and needs coordination with allies and other powers. Emerging market and developing economies reduce the risk of international conflicts, strengthen international cooperation, adhere to the principle of multilateralism and insist on promoting inclusive, mutually beneficial, balanced and win-win globalization. Developing economies will contribute to the construction of an open world order, will play a more active role in countering its politicization and the division of the world into camps and blocs, and will also contribute to the evolution of the economic order in a more just and reasonable direction.
Author: Liao Zhengzhong (廖峥嵘) – Director of the Institute of Peace and Development of the Chinese Academy of Social Sciences
