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Valdai Club Session. Globalization Revisited: Is Every Country on its Own Now?

May 26, 16:56 UTC+3
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Globalisation has reached a point where transformation is inevitable. It can be a minor retreat, a shift in the centre of gravity, or a split of the global economy into regional domains. Russia advocates the harmonisation of regional economic formats sharing common and transparent principles for the benefit of all stakeholders.

Over the recent 30 years, globalisation has been actively promoted by the world community, and today, most segments of the global economy are part of a shared universe. However, 2016 became a turning point. Drivers of the coming change are:

  • Brexit;
  • Donald Trump’s presidency and protectionist steps of his administration;
  • China’s call for maintaining an open global economy announced at the Davos Economic Forum;
  • Russia’s advocacy for harmonising regional economic formats.

The election of Donald Trump as president of the United States has fit the bill of those looking to build up US domestic demand. His election agenda was effectively anti-globalist, including significant toughening in the US posture towards China.

  • As a presidential candidate, Donald Trump promised to introduce an up to 45% tariff on Chinese imports and take protectionist measures to offset the effect of the undervalued renminbi.
  • In the days following his inauguration, he signed a decree to withdraw from the Trans-Pacific Partnership, which had opened the US market for member countries' imports and their territories for production capacities transferred from the US.

The first official talks between US President Donald Trump and Chinese President Xi Jinping in April 2017 showed that China was taking a low-key stance on the tough steps of the new US administration. Without seeking to exacerbate relations with the US, China is ready to take on leadership in the globalisation process.

Earlier in his Davos keynote, Xi Jinping proclaimed Beijing’s commitment to an open global economy. Further to this statement, China’s State Council promised foreign investors greater access to major segments of the Chinese economy.

  • Registered capital amount requirements for foreign companies will be lifted.
  • Same standards will be adopted for foreign and local companies in managing foreign debt.
  • A dedicated registration system will be set up for oil and natural gas overseas cooperation projects.

Xi Jinping believes that the world should not write off globalisation altogether, but instead countries must adapt to it.

The UK’s Brexit vote has thrown the differences between winners and losers of globalisation and free trade into sharp relief. The same division is found in continental Europe. The UK’s withdrawal from the EU is an attempt to address the issues caused by the pursuit of global concepts.

While transformation of the globalisation processes is seen inevitable, its direction is yet to be defined. Expert opinions have divided into two camps.

  • The globalisation is over and will go into reverse. Individual economies will turn back inwards. International cooperation will deteriorate giving rise to multiple growing controversies.
  • The globalisation trend will shift from the US to Asia.

Russia’s stance on globalisation was set out by President Vladimir Putin at a Sochi meeting of the Valdai Club in October 2016. “Essentially, the entire globalisation project is in crisis today. I think this situation is in many respects the result of mistaken, hasty and to some extent over-confident choices made by some countries’ elites a quarter of a century ago.”

Russia believes that “economic cooperation should be mutually lucrative and rest on universal principles” in order “to put an end to the division of the world into permanent winners and permanent losers,” said the President. This should underpin the harmonisation of regional economic formats, which seem to be inevitably emerging. That is how Russia arranges the work of the Eurasian Economic Union and conducts negotiations with partners.

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