It is a multipolar, divided world.
After the collapse of the Berlin Wall in 1989, major political and economic commentators from the West declared total victory in the Cold War against communism, in particular against the Soviet Union and its “socialist” allies in Eastern Europe. Francis Fukuyama, a Rand Corporation Soviet analyst, proclaimed the arrival of one global capitalist liberal order in his celebrated book The End of History (1992). The end of history means the rise of a unipolar and stable global capitalist order based on harmonious relations among nations and a shared ideology of marketization and free markets.
Today, Fukuyama and his ideas are receding in history. And so is the ambitious goal of the neo-liberal economic globalists: a borderless, seamless economic arrangement among nations that allows the free flow of goods, services and capital.
The Cold War has been replaced by the war against terror and the Islamic jihadists. Brexit is dividing not only Great Britain but the whole of Europe. And the United States, the presumed leader of the post-Cold War era, is waging a trade war against China and openly airing trade complaints against Europe, Canada and Japan. The World Trade Organization (WTO), the global trade arbitrator, has become a passive onlooker, an ineffectual trade policeman, in all these conflicts.
Meanwhile, China, Russia and other formerly socialist countries have embraced marketization with gusto. But they have transformed the policy of free-market economic opening into state-led capitalism. The Chinese Communist Party is presiding over the world’s biggest experiment in the transformation of a collectivist command economy into a market-oriented but State-controlled one. These countries have also discovered that they can compete with the big multinationals of the West by developing their own multinationals or state-assisted corporations. The old state-owned enterprises (SOEs) are crumbling, and yet, new state-funded corporations are covering the world.
It is abundantly clear that we are now in a new stage of global capitalist development. This is a stage that is very different from the one originally envisioned by the globalists or neo-liberal economists in the 1980s-1990s, at the height of the globalization frenzy among economic planners and advocates of untrammelled privatization such as Margaret Thatcher and Ronald Reagan.
Today, big powers unilaterally ignore the so-called rules of free market competition that they themselves helped develop in earlier decades. In particular, the rules laid out by those who engineered the establishment of the WTO in 1994-1995 and who have been pushing for the universalization of the triple programs of liberalization, deregulation and privatization (collectively called the Washington Consensus) are routinely being ignored by the strong men and women who have won the hearts of their electorates through populist rhetorics against migration, weakening jobs markets and so on.
Thus, we have an ironic situation: both the United States and China are calling each other protectionist. However, instead of directly parrying the protectionist charge, Donald Trump simply ignored the accusation by bluntly proclaiming his protectionist “development agenda” – America First, jobs at home first. Thus, No to the Trans-Pacific Partnership if America’s interests are not served first. Regional and global free trade talks have been transformed into bilateral one-on-one negotiations, with America holding all the aces.
As to China, it shares the same “nationalist” goals — China First, jobs for the Chinese workers first. However, China’s position is more subtle and nuanced. It is using all global platforms, e.g., Davos and G20 meetings, in appealing for support for globalization and free trade rules. China as the global champion of free-trade globalization? And yet, the very issues being raised by Trump against China – poaching of technology, protection for Chinese industry – are not being sufficiently answered.
So what should the Philippines do?
First, it is time to acknowledge that the “national interests” of a country always come first. In a multipolar and divided world, defining our own development priorities, like what the United States and China are doing, is a must. In the first place, globalization means competition. Well-organized national teams naturally win.
Second and relatedly, the Philippines should indeed have a balanced and independent foreign policy. We cannot and should not be seen as favoring one major trading partner at the expense of the other. Nor should we be beholden to any of the big powers.
Third and finally, trade is a means to achieve development, not an end in itself. The problem is that the government, under the various administrations, has reduced trade policy into a narrow program of simply opening up the domestic market by lowering tariffs and deregulating various sectors of the economy. Growing domestic industries and strengthening domestic agriculture were neglected. Look how past unilateral trade liberalization measures adopted by the Philippines had injured so many domestic industries such as textiles, shoes, tire, etc. And contrast this with how the United States today is loudly protesting how American industry is being harmed by the imbalances in trade and protectionism of other countries.
In this context, the trade and economic realities in the present multipolar and divided world require not only a clearer definition of our own national interests and development priorities but also the formulation and implementation of strategic measures needed to secure these interests and priorities.
Hopefully, the 18th Congress shall be an ally in the review and overhaul of the existing trade-economic policy regime, a policy regime that is not new for it is, according to DOF Secretary Carlos Dominguez, merely a continuation of the past. But is this the trade-economic policy regime working? Is this what the country need in a divided, multipolar world?