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Coronavirus diary – Part 21

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The debate concerning the trajectory of the post-COVID-19 world order has begun in earnest. The pandemic constitutes a significant shock to the international system, leading many governments to re-evaluate their global health, trade and security policies. International politics will not be the same… –Michael W. Manulak.   

In the geopolitics of COVID-19, the tools employed so far are the traditional tools of rhetoric, economic sanctions, and alliance building. Rhetoric took the front burner when the COVID-19 crisis began. There was a dose of conspiracy theory and ill-fated moves to accuse the US of being responsible for the outbreak of COVID-19 to destabilize its rivals, China, Russia, and Iran. The matter was expected to make the agenda of the Security Council of the United Nations. From then on, it was an uncanny silence. But a worried Trump, unable to cope with the scale of the pandemic in the US ramped up rhetoric against China. He blames China’s “Wuhan virus” for the countries predicament. To be sure, China was accused of cover-up and in connivance with the World Health Organisation (WHO).

The US went further to halt its contribution to WHO put at about $400 million. A miffed Tedros warned the US against politicizing the pandemic because COVID-19 was a global calamity that requires a global solution. China would consequently pledge further assistance WHO in the sum of $20 million. Equally, it deflated US accusations. The US took more economic steps to strengthen its self-reliance. He urged American producers to produce all foreign components of their essential infrastructure to be replaced by those produced in the country. Recently, Steve Bannon, a Trump strategist conveyed the depth of US disappointment over China and WHO when he noted that “We are in the most extraordinary crisis in modern American history, more than Vietnam, the Cold War, even the Second World War. A global pandemic and an economic inferno. I have no faith in the WHO, the leadership should face criminal charges and be shut down.”

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The rhetoric war is being fought partly under the conspiracy theory about the origin of the virus. The tag-all phrase, ‘Wuhan virus’ or ‘Chinese virus’ is key in US official rhetoric. A trump strategist, Steve Bannon has indicated that the virus is for sure a Chinese virus. It is alleged that defected scientists from the Wuhan Institute of Virology and other labs are turning in corroborative evidence that supports the claims of the Chinese origin of COVOD-19 but challenges the Wuhan wet market narrative. It is claimed that the Intel from the French (who originally started the building of the lab before being shut out in 2017), MI5, and MI6 among others are enough to build a thorough legal case against the Chinese. This can be juxtaposed to the arguments of Judy Merkovits that supports US involvement in the outbreak of the virus articulated in Part 7 of this diary.

The Economist captures the economic element of the rivalry between the two countries in two related analyses. One is titled, “The Trump administration wants a US-China commercial split” and the other is “How America might wield its ultimate weapon of mass disruption” both published in the August 15, 2020 edition. Two related economic actions have been taken so far by the US which experts fear might boomerang. According to the Economist, on August 6th Mr. Trump employing two executive orders gave American firms 45 days to wind up all commercial relations with Chinese firms such as ByteDance, TikTok, and WeChat. This was further reinforced by a “Clean Network” policy to protect America’s telecoms complex against “aggressive intrusions by malign actors, such as the Chinese Communist Party”

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These actions have been further complemented by the one stripping Hong Kong of its special status on immigration and trade and that would require unfettered access to the books of Chinese companies that wish to trade in the American stock exchange as a consequence of Chinese new security laws on Hong Kong. These actions regarded as an escalation of the economic war between both countries would have serious consequences. As the economist puts it, “The fallout could be gargantuan.

Deutsche Bank reckons that lost revenues in China, the expense of moving factories out of the country and compliance with the Chinese and American technospheres’ diverging standards could cost global technology firms $3.5trn over the next five years. A large chunk of that burden would fall on American firms. The question is, how bad can things get?” Given the depth of economic relations between the two countries despite outwards expression of enmity, these actions could lead to a serious economic backlash on the two countries. It will surely impact on Chinese Foreign Direct Investment. So far both rhetoric and follow up executive orders have led to a decline in FDI and venture capital flow into the US. In the view of the Economist, a further stricture on the inroad of Chinese capital into the American economy would lead to a flight of about $1 trillion Chinese market capitalization to safer climes.

This is a quid pro quo of sorts. American firms with businesses in China generate about 5% of global sales and there is an upward growth of US FDI in China. General Motors has a market boom in China where it sells more cars than the US. With about $700 billion in assets and a corresponding turnover of about $500 billion annually, perhaps only a few American companies will be receptive to the idea of a pull-out.

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Such a vacuum occasioned by economic war could be filled by Europeans, South Koreans, and Japanese. In the analysis by the economist, the US may turn out to be the loser in the unfolding economic war. It avers that “The biggest victim of decoupling would be America’s tech giants, many of which rely heavily on Chinese demand, as well as on Chinese suppliers”. For example, Qualcomm, a chip giant, earns about two-thirds of its worldwide revenues in China and is averse to sanctioning Huawei, its client. Secondly, 15% of Apple’s global revenues come from china; the executive order would mean a plummet in iPhone sales.

However, the US ultimate economic bomb described as a “weapon of mass disruption” if wielded would cripple the Chinese financial system. According to the economist, “Freezing China out of the global payments system could have unthinkable consequences…Mr. Trump has three main ways to constrain another country financially. He can refuse its banks, access to CHIPS, a New York-based clearinghouse through which 95% of all dollar transactions are routed.

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He can try to force SWIFT, a Belgium-based messaging system that 11,000 banks worldwide use to make cross-border payments, to expel members from the offending state. And he can slap an embargo on its financial system, threatening to punish any foreign or domestic financial institution that uses dollars—as virtually all do—but continues to transact with the embargoed firms.” According to the Economist, China has alternatives. One will resort to COPS which those countries, including the US allies sensitive to US irrational behaviour will subscribe. Two, China could shut its market, natural resources, infrastructure projects, and basic goods to Western businesses.

Three, it could wield “a last-ditch deterrent: selling its $1.1trn stock of American treasury bills, equivalent to 4% of the total outstanding”. It is in this sense that Navin A. Bapat and Bo Ram Kwon in their 2015 article titled, “When Are Sanctions Effective? A Bargaining and Enforcement Framework”, published in International Organisation, argued that the imposition of sanctions could create “a strategic dilemma for senders” in a situation that senders have disincentives to enforce their sanctions policies because the restriction on economic transactions of targeted states could also undermine their firms’ competitiveness. It by no means limits imposition of sanction even when expected outcome could boomerang.

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The COVID-19 geopolitics might affect globalisation because “The process of regional globalization will speed up as leading countries in different regional locations see the creation of regional supply chains under their leadership more vital to their national interests than ever. While the coronavirus epidemic has shown that holding a lower status in global supply chains is quite dangerous for national economies, having interdependent economic relations with the countries of the same region might be a life-saver”. Oguzlu, a professor at Antalya Bilim University, is of the view that globalisation will continue at the regional level and China stands to gain more than the US despite the latter’s broad network of allies some of whom have become skeptical of the US. Its intervention with aids to East and Southeast Asia underlines its indispensability to wealth and prosperity in the region. And since global dominance requires both soft and hard powers, China stands to gain from its economic and medical diplomacy.

In a seeming stricture on globalisation, COVID-19 geopolitics is unleashing many contradictory dynamics in the knowledge pathway. Although the landscape is yet unmapped, academic experts think that the strained Sino-US relations would affect academic relations/ mobility with the pendulum swinging towards Europe. According to Yojana Sharma of the University World News, “The COVID-19 crisis and pre-existing China-United States tensions exacerbated during the pandemic will mean a rebalancing of cross-border academic relations, student and academic mobility, and in the pattern of research collaborations with China.”

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As Simon Marginson, Director of the Centre for Global Higher Education at the University of Oxford has observed, “We have a situation where previously collaborative researchers who were encouraged to work together are now seen to be security risks…There are pressures recently within Europe and the UK also to treat these academic and research and science links with China with more caution than before.” Marijk van der Wende, a professor of higher education at Utrecht University, the Netherlands, gives a deeper insight, “The scientific response in search of a coronavirus vaccine at first seemed to introduce an unprecedented effort of global open science. But it may well become overshadowed by competition, protectionism and a blame game about the origin of the virus.” The emerging scenario is not helped by what is seen as growing restrictions on social sciences and humanities with implications for academic freedom.
 
To go back to the forecast of Martin Wolf to the effect of a possible armed conflict, I ask: Will all these lead to a global conflagration like the run-up to World War II? Are there deterrents to a hot war? Next week, I shall look at the war games.
Akhaine is a Professor of Political Science at the Lagos State University.

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