martedì 19 marzo 2019

Is the leadership of the US and the West within the international community coming to an end? And some comments on China's changing role within the international community


As of December 31, 2018, debt held by the public was$16.1 trillion and intragovernmental holdings were$5.87 trillion, for a total or US "National Debt" (or Gross Federal Debt) of $21.97 trillion.
$20.66 trillion(Q3 2018)
Gross Federal Debt to GDP ratio was 104.2% in the third quarter of 2018, and estimated to be 105.4% in the Q4 2018
In the long-term, the United States Gross Federal Debt to GDP is projected to trend around 109% in 2020.
Given the difficulties its economy has faced recently and its huge and growing public debt, some commentators argue that the US has now begun an inevitable decline as the dominant superpower, a decline that may soon erode not only its economic position but also impact its military dominance. However, according to other experts the relative decline of US power is at least partially exaggerated and can better be seen as an opportunity for Washington to redefine its strategic commitments, renegotiate alliances with its partners and free up resources to relaunch its economy.
While the global and US economies are recovering from the economic crisis a decade ago, the credit rating agencies continue to show concern about the size of the US debt and the future prospects for the recovery in the US (and much of Europe) given the likely future expansion of the US public debt due to President Trump's program of tax cuts.
The debate between pessimists and more sanguine observers has grown. The former predict a serious and rapid decline in US influence and the growth of a much more multipolar world strongly influenced by China, while the latter are confident that for the foreseeable future the US will be able to maintain its leadership role in international relations. Moreover, they argue that if we consider the West as a whole, rather than the US alone, then, despite Europe’s continuing economic difficulties, China cannot really hope to achieve dominance in terms of economic and military power. In addition, the world’s principal global institutions are all expressions of the West’s value system and China seems basically to be in the process of joining this system, adapting to it and trying to gain more influence within it, rather than wanting to overturn it or see it collapse as the Soviet Union did.
In spite of the economic crisis in 2008, which hit the US hard, forecasts of absolute decline seem premature. The US economy continues its economic recovery. GDP growth was 3% at the end of 2018
and the US remains the principal power at the center of the international stage. In 2018, according to the INF, China’s GDP in nominal terms was $13.46 trillion, still much less than that of the US ($20.51 nominal), although China's was bigger than it in terms of GDP Purchasing Power Parity (2018 IMF figures China $25.31 trillion est. against US $19.40 PPP). In 2018 the EU stood at $18.80 trillion nominal /$20.85 PPP in 2017).The American economy was still much larger than those of its other closest competitors, India (2018 $2.69 nominal/$9.50 PPP) and Japan (2018 $5.07 nominal/$5.43 PPP) even in PPP terms. US GDP represented about 23.3% of global nominal GDP in 2018 and 15.1% of global GDP PPP. China's was 16.1 /18.7% respectively (the EU stood at 22.0% /16.3%).https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
China is forecast to overtake the US in nominal GDP terms by 2030 if not sooner.
As for military power, the US military budget still represented 36% of total global military spending, $610 billion in 2017. Global spending was $1.73 trillion. The US still spent more than China, Britain, France, Germany, India, Japan, Saudi Arabia and Russia combined in 2016. Moreover, NATO, the US-led alliance, accounted for more than $936 billion (54%) of global military spending in 2017 (down from 60% in 2013). However, if the military spending of other US allies (e.g. Japan, Australia, South Korea etc…) is added, this figure rises and suggests that the US easily remains the dominant power in international relations.** The US has 38 major military bases around the world compared with: Russia 9, France 13, Britain 16 and China 1.
So the 2017 figures show the US military budget still over 2.5 times bigger than that of China even before Trump's proposed defense spending increases in 2017 (the final Senate version of the bill includes a base budget of $640 billion and another $60 billion for the so-called Overseas Contingency Operations war funding, which includes money for the wars in Iraq, Afghanistan and other locations).
Finally, the US is still the world leader for investment in research (although China is starting to challenge seriously), and in the list of the top 20 universities worldwide, between 11 and 15 are American, according to which list you choose to believe.Many others are European and only one or two Asian.
https://www.timeshighereducation.com/world-university-rankings/2018/world-ranking#!/page/0/length/25/sort_by/rank/sort_order/asc/cols/stats
However, over the last decade, the US share of global GDP (PPP) fell from 23% to 15.1 %, while China´s share of global GDP PPP increased from 7% to 18.7% ( however the EU also accounts for 16.3% of global GDP PPP). Moreover, at this pace of growth China may overtake US nominal GDP by as early as 2024. So, although US strength is evident, its relative decline is real. In fact, at the start of the 21st century, the country´s reliance on imports, combined with low taxes and the then high cost of borrowing (in order to fund the public debt), together with Washington’s soaring military expenditure after 9⁄11 as it expanded its military and counter-terrorism operations around the world, inflated its annual budget deficit which stood at 8.6% of GDP for the 2011 fiscal year. After significant spending cuts it returned to its historical average relative to the size of the economy (around 3% of GDP) registering 2.4% in 2015. Since then the annual budget deficit has begun to rise again, 3.1% in 2016 and 3.4% in 2017. The Trump tax cuts are forecast to cause the annual deficit and public debt to rise in the next few years.
The annual growth rate of the US economy was 2.2% in 2012, 1.7% in 2013, 2.6% in 2014, 2.9% in 2015, 1.5% in 2016 and 2.6% in 2017. 3.0% in 2018https://tradingeconomics.com/united-states/gdp-growth
The US trade deficit for 2012 was -2.7% of GDP, -2.4% in 2013, -2.2% in 2014, -2.6% in 2015 and -2.6% in 2016, -2.4% in 2017, -2.4% in 2018 (nearly half of this with China alone)https://tradingeconomics.com/united-states/current-account-to-gdp
https://piie.com/research/piie-charts/us-trade-deficit-china-keeps-growing-even-tariffs
https://www.thebalance.com/u-s-china-trade-deficit-causes-effects-and-solutions-3306277
On the other hand, GDP PPP per capita clearly indicates that American citizens are still far richer than their Chinese counterparts (nearly 3.5 times richer).https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita
Per capita income is a good indicator of how much money governments can generate in taxes for government projects at home and abroad. Meanwhile, in China growth remained strong in 2018 at 6.5%. However, the Chinese authorities may face some obstacles as they try to steer their economy away from a model where growth is based on exports to one where domestic consumption plays a much greater role. These problems include growing debt within the Chinese economic system, potential domestic unrest, continuing high levels of savings and fast-growing but relatively low domestic consumption, an aging population (which will become a significant factor in the next 20 years), a still relatively weak health care system and widespread corruption. As China moves to respond to these challenges its labor costs are likely to begin to rise.
China holds very large foreign exchange reserves, particularly in dollars. China held about 5.5% of the US national debt in December 2018, Japan about 4.5% ( China about $1.14 trillion, Japan about $1.02 trillion).
The US has long accused China of currency manipulation, keeping the Yuan/Renminbi at a low exchange rate value in order to boost exports. It appreciated against the dollar in 2017 but fell in 2018 as the US/China trade war began.
Meanwhile, China is the principal stake-holder in the BRICS’ New Development Bank and the Asian Infrastructure Investment Bank (AIIB). China is also the main trading partner for Africa and an important investor in Africa (but behind the EU and US),
And with the its Belt and Road Initiative China is set to become a major investor and source of investment capital for many developing countries, which will increase both its economic and political leverage with these countries.
The pace of domestic consumption accelerated recently as China shifts to a an economic model involving more domestic demand
but it has moderated with the effects of the trade war
High levels of personal savings are thought to represent one of the most striking characteristics of the Chinese economy but this may not be accurate.
https://www.bloomberg.com/opinion/articles/2018-07-08/chinese-savers-won-t-save-the-chinese-economy
While consumer spending still only amounted to 39.1% of GDP in Dec 2017, compared with more than 68% in the US (June 2018) and 57.8% in India (June 2018)
investments stood at a level estimated at about 43.45% of GDP (IMF for 2018). The US stood at 20.59%.
https://www.quandl.com/data/ODA/USA_NID_NGDP-United-States-Total-Investment-of-GDP
Along with massive investments in industrial infrastructure (a good indicator of future competitivity) there has also been a continual rise in property prices in urban, industrial areas with significant social consequences. Moreover, the Chinese government is now having to to try to cope with the rising demand for social services by shifting resources from other kinds of investments to welfare.
China is rapidly increasing investment in technology, particularly in IT, and education. US companies operating in China have registered very high productivity levels while benefiting so far from much lower labor costs. However, there are now signs that as labor flows from rural areas begin to slow and demand for skilled workers rises, labor costs in China are now beginning to rise though they obviously remain below levels in the US and Europe.
And if the US chooses not to lead?
This is a more difficult question to respond to, especially given the role of isolationism in US history.
The US may or may not be retreating from world affairs. President Trump's foreign policy stance sounds isolationist at times (the Paris climate agreement, the Mexican border, comments about NATO partners, withdrawal from the Iran deal, the ban on Muslim visitors to the US from some Islamic countries, US withdrawal from the Trans-Pacific Partnership Agreement,“TPP”, the reintroduction of tariffs on a wide range of goods, plans to withdraw more troops from Syria and Afghanistan) hard-line at others (position on China, supporting Israel, against terrorism, against Iran, against Maduro in Venezuela, withdrawal from the Intermediate Nuclear Forces Treaty). So the long-term position of the US on any particular international issue is difficult to predict as it will be the Trump administration that will decide what 'America first' means in practice and what US interests are in any situation that arises. The main characteristic of the administration's foreign policy seems to be its rejection of multilateralism in favor of a stricter concentration on perceived US interests and greater attention to avoiding 'unnecessary' commitments and expenditure.
A re-evaluation and reduction in US strategic commitments in some areas in order to exercise more influence in others seems likely. After the fall of the Berlin wall and the collapse of the Soviet Union, the European continent lost relevance in the eyes of America as the threat level was reduced. However, recent events in Ukraine and growing tension with Russia have forced a review of this policy and the launching of NATO's Enhanced Forward Presence mission. However, Mr Trump's ambivalence towards Mr Putin remains a concern for America's European allies.
The US formally withdrew its last 'combat troops' from Iraq in December 2011and from Afghanistan in December 2014. However, in December 2018 it had 14,000 soldiers in Afghanistan. The US plans to withdraw 7,000 of these troops in the next few months.
In January 2019 there were around 2,000 US troops in Syria. Claiming thar Islamic State has been completely defeated on the ground in Syria and Iraq, the US announced that it would withdraw its troops in the coming months.
In December 2018 there were 5,200 US troops in Iraq and in February 2019 President Trump said he wanted to maintain a military presence there in order to “watch” Iran , despite thinking the invasion of Iraq was ‘one of the greatest mistakes’
The future of Obama's pivot to Asia is unclear but there has been a build-up of US naval forces in the Western Pacific in response to earlier North Korean threats and perceived Chinese 'expansionism' and Trump has talked of a 'free and open Indo-Pacific ' region with the US not seeking domination but rather a partnership with strong, independent nations willing to play by the rules.
China is aware of the policy being adopted by the US and clearly sees it as an attempt to undermine its growing influence in the region. Tensions over developments regarding Taiwan are also indicative of the frictions which are perhaps inevitable as a rapidly growing regional power challenges a global power whose resources, while vast, are now limited. If China continues to grow at current rates but fails to democratize and develop towards the Western model then a strengthening of security ties between China’s neighbors, many of which are democratic states is a likely response to safeguard independence and shared values.
More importantly, the combined economic resources (in terms of GDP) and military resources of the West (NATO in its narrowest sense, perhaps the OECD in its widest sense) as a whole is and will remain far beyond the capacity of China to challenge. US military spending alone is two and a half times that of China (2018). Certainly China’s power and influence is going to grow both regionally and globally, perhaps in partnership with Russia at the UN and through the BRICS group. However, there is a more likely scenario than confrontation. China is a major stakeholder in the current liberal international order, as a permanent member of the UN Security Council, an important WTO and IMF member, and, above all, as a state holding vast foreign currency reserves (e.g. US Treasury bonds) estimated at around 1.14 trillion dollars, and one which also has growing overseas investments (estimated to reach $1-2 trillion by 2020). So even though China may continue to stand on its sovereignty and use nationalist rhetoric that defines international comment (on issues such as human rights in China, its lack of democracy and the situation in Tibet) as interference in its domestic affairs, it is probable that its stake in the existing global order will continue to grow and that, although it may try at times to make the liberal order rather less liberal, it will, nevertheless, have good reason to adopt a policy of accommodation and cooperation rather than one of confrontation.
In the end perhaps it is the definition of what we mean by the ‘West’ that is of paramount importance in today’s world. Once that meant Europe and North America, plus countries like Australia and New Zealand. It would be difficult today not to include Japan. And then there is the OECD. More importantly, it is the core liberal democratic values enshrined in the main global institutions from the UN down which best define the West. These are values which many countries (Brazil, India, but many more in Latin America and Africa and Southern Asia) and not only the richer, developed ones but developing ones too, have invested in, or are investing in, and which increasingly represent the normative political expectations (how things should be) for ordinary people all over the world. The wave of democratization since the 1990s and at least part of the political hopes expressed in the early days of the Arab Spring suggest that the West in this sense is very much alive and flourishing, with or without US leadership. And a ‘West’ which is global and multipolar, rather than simply a US-led NATO, may be a very positive evolution. Strangely, al-Qaeda and Islamic State, in describing the UN and other international agencies as agents of Western cultural imperialism may simply be acknowledging the extent to which once-Western values are now becoming universal.
Those who doubt the attraction of the West’s cultural model should perhaps pay more attention to the vast number of migrants and refugees for most of whom the West remains the preferred destination in terms of their hopes for prosperity, security and freedom.

Note – the West in modern English is not normally used as a synonym for European colonialism (I think this is mainly because European colonialism – often based on slavery and doctrines of racial superiority – is now seen as something clearly in contrast with many basic, modern Western values) . It is mainly used in international relations to refer to those countries evolving towards liberal democracy and a free (today usually mixed) market economy, from the late 18th century, through the 19th century and up to 1945. Since the end of the Second World War it has been used to describe first NATO and other allies outside NATO (like Australia) and then gradually to include all those countries which generally embrace Western values.
Longer term background
On January 26, 2016, the debt held by the public was $13.62 trillion or about 75% of the previous 12 months of GDP. Intragovernmental holdings stood at $5.34 trillion, giving a combined total gross national debt of $18.96 trillion or about 104% of the previous 12 months of GDP. $6.2 trillion or approximately 47% of the debt held by the public was owned by foreign investors, the largest of which were the People's Republic of China and Japan at about $1.3 trillion each for the two countries as of November 2015 Source: http://en.wikipedia.org/wiki/National_debt_of_the_United_States
http://www.treasurydirect.gov/NP/debt/current
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
Washington’s fiscal position is even more alarming if viewed as an ongoing trend. Over the last few years, the US public debt as a percentage of GDP rose rapidly, from 56.4% in 2001 to 100.8% in 2012, 100.9% in 2013 and 103.2% in 2014. As indicated before, it stood at 103.8% in the third quarter of 2017.
US economy

How is the relationship between China and the West developing?

A few aspects of China’s changing role in international relations
Signs of a trend towards stronger cooperation
That China is starting to get more involved in international relations is demonstrated by various diplomatic initiatives launched by the Chinese government in the economic field. First of all, China joined the a project aimed at establishing a free trade zone with various Asian-Pacific countries, namely the Free Trade Area of the Asia-Pacific (FTAAP). The goal is to increase its exports in the Asia-Pacific area in order to boost its economic growth and forecasts suggest that this initiative could lead to an increase in China’s GDP of one percentage point. This initiative was seen by some as an attempt to counter the Trans-Pacific Partnership initiative, backed by the US and Japan and signed on 4th Feb 2016 (from which the Trum administration has now withdrawn), but China publicly backed the Trans-Pacific Partnership showing itself to be a promoter of free trade agreements. Simultaneously, China is carrying out a diplomatic initiative in Central Asia with the goal of reestablishing the old “Silk Road”.
This initiative has led to wider cooperation with many countries, such as Kazakhstan, Uzbekistan, Turkmenistan and Kyrgyzstan, aimed at creating a safe-area for international trade and at ensuring gas and oil supplies to China, which are extremely important to China’s industrial production. This initiative has also led to competition between China and the EU for influence in the region and for gas and oil supplies. However, this competition may actually lead to cooperation between China and the EU in Central Asia, in terms of building new pipelines, which could have both Europe and China as final delivery points.
As China has become more involved in the international community from an economic point of view, political cooperation has followed. In recent years, Chinese military personnel have taken part in UN missions in Cambodia, the Republic of the Congo, Liberia, Sudan and Lebanon. In 2015, a combat deployment was sent to South Sudan, where China has significant oil investments. In addition, China’s navy is actively participating in the anti-piracy mission of the UN in the Gulf of Aden.
Basically the expansion of China’s economic interests around the world has led to growing political awareness among the Chinese leadership of the need to protect those interests and engage on international issues, especially those closely related to international security. This has resulted in China playing a more active role within the international community. This trend culminated with the agreement signed with Djibouti concerning the creation of China’s first real military base abroad in order to secure trade between China and Africa. China’s concerns about international security, aggravated by the participation of Uyghurs in the campaign waged by the self-proclaimed Islamic State, could be an opportunity for Western countries to persuade China to take on an increasingly active role in sharing some of the international community’s responsibilities, especially in the security domain. However, in the Middle East region, China has taken a carefully balanced position in the dispute between Sunni and Shia Muslims and between their main sponsors, namely Saudi Arabia and Iran. In fact, the recent publication of China’s Arab Policy Paper shows that the China wants to adopt a global approach to the Islamic world without taking sides. Such a policy will makes it possible for China to deal with both Saudi Arabia and Iran to obtain from both parties an agreement on oil supplies agreement, which is fundamental for China’s economic growth. It also explains China’s willingness to act as a mediator between the US and Iran (which resulted in the 5+1 Nuclear Agreement with Iran and in the lifting of economic sanctions) and in the Syrian civil war.

Potential areas of disagreement between China and the West
As mentioned above China’s neighbours are worried about its expansionist ambitions in the East Asian area e.g. the dispute over the Senkaku Islands, located in the South China Sea and claimed by both China and Japan.
China is the world’s biggest polluter in terms of CO2 emissions. Although China took part in a series of international conferences and welcomed the agreement at the Climate Conference, CoP21 in Paris in December 2015, some countries remain doubtful about China’s commitment to making real changes, given that the agreement is not binding in any practical way.
China’s domestic human rights record, including the use of the death penalty and repression of political and religious opposition leaders, critics and dissidents and discrimination against minorities (e.g. Tibetans and Uyghurs).

Global Defense Spending and by country
https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures
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