A new distribution of the strategic, geoeconomic, military and political potentials is currently taking place in the world.
Hence we must orient these new mechanisms towards a peaceful, homogeneous and stable development of the world market and the world system.
Otherwise – and once again there are signs of a possible war – our global system will collapse without producing practicable alternative options.
The fault lines of this new world order – much different from the one set by the United States after the end of the Soviet hegemony over the Third World – are mostly shaped by the large regional alliances.
Currently war is waged to conquer fault lines, border areas, the Rimland.
Suffice to think of the Asia Pacific Economic Forum (APEC), set up in 1989 and now joining 21 countries, including China and the United States, in addition to Japan, which is the gateway for the economic integration of the Asian-Pacific region – an area with a very high economic and strategic potential at world level.
Or we can mention the Association of South East Asian Nations (ASEAN), founded in 1967 and now counting eleven members, which is the main bridge between Asia and Europe and partly overlaps with APEC in terms of membership.
Nor can we forget the Council of Arab Economic Unity (CAEU), created in 1964 by eighteen African and Arab countries to foster regional economic integration.
We must also mention the Caribbean Community (CARICOM), established in 1973 and based on the European Single Market model, which may even be turned into a political union, according to the plan already adopted by the Member States, which will be implemented between 2018 and 2020.
Nor should we forget the Economic Community of West African States (ECOWAS), founded in 1975 and currently turned from an economic integration instrument into a mechanism of institutional and political reform – in this connection, suffice to think of the role played by ECOWAS in the recent coup in Ghana.
We should also mention NATO, but this topic will be analyzed later. Finally it is worth recalling the Southern African Development Community (SADC), founded in 1992 as regional common market for its eleven Member States, but currently also turned into an instrument for the political transformation of the region.
These are economic alliances established to take advantage of globalization by offering cheap labour and a series of infrastructure and, at the same time, resist globalization by blocking the inevitable attempts of each State to resort to the “beggar thy neighbour” rule.
They are all regional alliances established in previously dishomogeneous areas in terms of geopolitical loyalty, type of development, economic potential, as well as relations with the European countries or the United States.
This means that all the abovementioned alliances are alliances of the Rimland, of the peripheral areas surrounding the real geopolitical masses: the Sino-Russian Heartland, with the Indian and Iranian appendices towards the Greater Middle East, and the Eurasian appendix towards the European peninsula; Africa, and the Pacific peripheral areas, not surprisingly with many crossed economic alliances; finally, the United States and Canada with the Latin American appendix.
China wants to achieve hegemony over the Pacific, but it has difficulties in having access to that ocean. The Russian Federation records economic and strategic differences among its wide regions. Europe is deciding to fall apart, by favouring both the United States and Russia at the same time. India is planning a geopolitical future as hegemonic power over the Himalayan region and as global power broker on all Asian seas, in connection with the Mediterranean.
The Mare Nostrum, the future global hub, is in the hands of the most radical destabilizers, torn between jihad and counter-jihad, between increasingly weak nation-States and mass Islamic militants of “the sword jihad”.
Finally, a new sequence of trade and economic wars is shaping within this classic geopolitical system.
In the recent Davos Forum, Xi Jinping rightly said that “no one has to gain from trade wars.”
China exports to the United States more than the latter exports to China.
Hence none of the two has to gain from a trade war, but it is likely that the United States would lose more.
And China mainly controls the global chains of components, which are currently worth 80% of the whole global flow of goods.
Suffice to consider the fine electronics sector.
In fact, it was the quick fall in transport prices which enabled the large global companies to split the supply chains among various countries, many of which belonging to networks and associations of which we have already spoken.
Therefore the Rimland is no longer such and it is creating relations with the countries which define their primary productions: the South East Asian network reaches up to China and partly to India; the Middle East is joining the Sino-Russian axis (Iran) or the North-African one; Latin America will find itself divided between the United States, the European Union and China, which wants to unite the two Pacific shores.
A trade war between China and the United States, with the creation of symmetric trade barriers, would generate strong inflationary pressure in the United States, followed by a Federal Reserve’s policy which shall gradually raise interest rates more than the US economy needs.
The solution could be a new bilateral commercial treaty between the United States and China, which would enable the US companies to gain access to the huge Chinese market and would also enable China to increase its direct investment in the US market.
It is worth noting that America has large trade deficits with most of its trading partners in Asia – the Vietnamese surplus with the United States alone accounts for 15% of the Vietnamese GDP.
Probably, in the near future, President Trump will decide to revise trade relations also with India, Indonesia and Malaysia, but certainly a country that currently runs so large trade deficits, such as the United States, is highly vulnerable to any kind of economic warfare attack.
The Euro and the European Union have suffered – and are still suffering – from monetary and trade wars which are easy to predict: Greece’s persisting crisis, which will lead the European Union to lose its strategic Southern flank, to the benefit of Russia, China, Saudi Arabia and Turkey; “the spread war” between France and Germany – not to mention Italy’s decline and the new Spanish autonomy, halfway between Latin American temptations and North African plans.
Even in the Balkans, Croatia is imposing non-tariff restrictions on Macedonia, while there is a clear trade war going on between the United States and Germany.
While the Americans rightly think that the Euro is an undervalued German Mark, enabling Germany to take advantage both of the EU countries and the United States.
Therefore, in America, the Europeans attack some technology platforms, such as Apple or Google and, in response, the United States attack European and especially German car-making companies on the issue of emissions.
Today’s trade wars are waged with indirect strategies and are soft wars, although they are often heavily defamatory.
On the financial side, many multinationals buy the huge public debt of some smaller and weaker States (and this holds true also for Italy) and securitize it by hiding its origin and source; finally they sell it thanks to the shelter of their tax havens.
This, too, is a trade war – a new type, but even fiercer than the traditional one – possibly with the “Black Ships” of Commodore Perry for the opening of Japan to US trade, as happened in 1853.
Not to mention tax dumping which attracts major investors to a country, but leaves the others without a penny, compelled by their public debt or the bad valuation of their public debt securities to keep corporate taxes high.
Furthermore austerity policies make taxation regressive: those who earn less pay slightly more.
Hence markets shrink, with obvious knock-on effects on taxation and development rates.
Furthermore, the purely geopolitical and military crisis points are well-known, but basically they are all attempts to acquire peripheral territories to achieve the goal of controlling commercial networks, the comparatively more efficient production areas, the extraction of raw materials and public debt.
Ukraine, for example, could be invaded by the Russian Federation and force NATO to a counteroffensive.
It is also worth recalling the issue of the Senkaku-Diaoyo islands, a point of tension between Japan and China for controlling the Pacific – islands which are a very rich fishing area and a possible oil field.
The fact must not be neglected that the military treaties signed in the aftermath of the Second World War oblige the United States to support, with its Armed Forces, Japan and the other countries which would be certainly threatened by the Chinese operations in the Senkaku-Diaoyo archipelago.
Finally we must analyze the future tension between China and Russia on their Eastern border, which could increasingly mount due to China’s demographic characteristics and Russia’s weakness in this regard.
Iran does not yet know whether it wants to challenge the Saudi Sunni power with weapons and the “indirect strategy” of the Shiite Islam’s unification or to expand into the Shiite region of Central Asia, up to Afghanistan and well beyond.
He cannot wish both but, whatever Iran decides, it will have military relevance.
North Korea wants the stability of its regime and the security of its borders, as well as foreign investment to stabilize its economy.
Here again there will be a point of tension that China has no intention of supporting in the long run – and this is a further factor of instability in the region.
What can be done? We must immediately stabilize monetary balances, with a currency defined – in set percentages – by the US Dollar, the Chinese Yuan, the Euro, the Rouble, the Indian Rupee and the Japanese Yen.
This will automatically redesign the world trade trends and routes, thus avoiding the trade wars which persist in peripheral areas to conquer them.
Later we shall think of a sort of “Register of financial securities” at global level.
As the Land Register and the accurate measurements of plots led to the creation of modern taxation in nation-States, the integration of the various databases for the transactions of all kinds of financial securities will enable to have such a new taxation system as to avoid many of the current failed States.
GIANCARLO ELIA VALORI
Honorable de l’Académie des Sciences de l’Institut de France