Developing global diplomatic and trade war brings immense dangers

Contributed by Joe Montero

The diplomatic tiff between the United States, United Kingdom and the European Union with Russia has been grabbing headlines. It began with accusations of Russian involvement in the last American presidential election and has continued over the alleged poisoning of a former spy in the United Kingdom.

Alongside this, have been the emerging trade and diplomatic tensions with China. The official line coming from the western powers and echoed by those under their influence, is that these two countries are interfering in the internal political affairs of other nations. This charge is also being made in Australia.

The political reality of the world is that most of the political interference in other countries comes from the United states, United Kingdom and the European Union. A tradition that is rooted in a colonial past and still practiced today.

Economic and political dominance has been in the hands of the western powers for hundreds of years and this dominance is now being seriously challenged, and it is this that is driving the present tensions. They emerge out of a battle over who is going to dominate globally in the coming era. In other words, the era of dominance by a handful of western powers is coming to an end, and ground is not going to be willingly ceded.

The traditional western powers are disadvantaged by the dwindling of their manufacturing base, stagnated economies and the loss of legitimacy of their political institutions. Nations within their traditional spheres of influence, born out of colonial history, are asserting greater independence.

There are a few exceptions. Australia, whose political leaders remain willing to play follow the master, is one of them. Even our neighbour New Zealand, has grown up some and asserted its own voice. This is the trend today and Australia is out of step with it.

Although Russia is a target, it remains that China is the main game. The reason is that this country has become the main centre of global manufacturing, holds the largest portion of the planet’s key trading currency reserves, is the engine of the global economy and is at the centre of an emerging Asian trading block not dominated by the west. China and Russia are also expanding their bilateral economic and political links.

Top this off with both countries growing their relationships with African and Latin American nations. Relationships that have been much more beneficial to these countries than their old relationships with the western powers.

A large part of the investment put into these countries has been devoted to the development of infrastructure and growth of new industries. Recently, Russia cancelled debt owned by African countries. China has previously done the same for Africa and and provided a high level of foreign aid to Latin America, the Caribbean and other regions.  Growing relationships extend to the volatile Middle East and Persian Gulf. Russia and China are winning friends.

The two countries are also asserting themselves more strongly in military terms. Russia around is own borders and Syria. China is building what it sees as the defence of its own borders.

These changes in the balance of forces are not being accepted by the western powers, which are increasingly showing their preparedness to use all and any means to maintain their dominant position. This is what is shaping the global politics of today. And it is unleashing a new cold war.

This war has taken sharper diplomatic form, including a rise in the use of gunboat diplomacy, and this now moving into the field of economic war. Trade sanctions have already been imposed on Russia. Donald Trump has announced the intention to move against a list of Chinese products, and China has immediately hit back with its own list of American products.

The Australian government has failed to distance itself from this, caught between its desire to remain in the American camp and wary of threatening Australian exports to China. This is not good enough. It invites Chinese retaliation.

Unlike the west, economic growth for China is not dependent on the exploitation of the people and resources of other countries. Its economy is being driven by its internal development, which is far from being exhausted. It is an important advantage.

China’s greatest weakness is holding an excess of foreign reserves. This is not favourable to China, and the cost of holding them  has been considerable. This is capital lying idle and not capable of being put to work. A consequence of this has been a major trading imbalance with the west in terms of the flow of capital. It means that in effect, China is being paid for a part of the trade with these countries with currency that must be held idle and not re-entered into circulation. By doing this, China has prevented the meltdown of the global economy.

But it cannot continue indefinitely, and the pressure is on to rely less on international trade, increase the volume of the export of goods and finding foreign avenues in which to invest the excess currency.

This has become a target for retaliation, using the China threat, mixed with a good dose of xenophobia. No one exemplifies this more than American president Donald Trump., whose, “make America great again,” is flavoured by salvos against China.

Creating foreign enemies serves to find someone to blame of for existing problems, while denying that they are domestically grown. To put it in its most simple terms, the west’s economic performance is running out of steam.

Its preeminent position arose out of the colonial conquest of foreign lands and the industrial revolution. When the capacity for internal growth was used up, reliance shifted to dependency on the export of capital (investment) to other parts of the world, as the new engine for growth. In the long run, this dependency unleashed productive forces that could not be controlled, led to over investment and this transformed into stagnation and the rise of a parasitic economy.

A parasitic economy is one where profitability is maintained by one part, through feeding on the whole, by swallowing rivals, as well as growing dependency on speculation, the creation of debt and raiding state assets. This is what has been causing the decline of the west.

Russia and China may have their own challenges, but they do not have these ones. Whether they put this advantage to good effect only time will tell.

In the longer run, the ongoing failure of Australian governments to take an independent position, means being tied to a declining power, and missing out on opportunities to build better relationships with a range of nations within our Asian region and around the world. It also brings the prospect of increasing involvement in military conflicts.

Asia is turning towards greater cooperation with China. So are the small Pacific nations around us. And they are building closer relationships with Russia. If Australia continues the same course, we will end up being an isolated enclave in our part of the world.

A major trade war risks the collapse of the global economy, and this will pull down every country with it.

History has taught that trade war tends to develop a life of its own and can easily become the precursor to a shooting war. Humanity has nothing to gain from this and a lot to lose. A war against Russia and China would be catastrophic for the whole world, and everything should be done to prevent it.

Peace can only be secured in a world not dominated by a few powers, and where economic and political relationships are built on the foundation of equality and mutual benefit.

Australia has the responsibility to contribute to bringing this about.



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