SPIEF 2019: Xi, Putin, International Institutions Begin Pushback Against US Trade Impositions

Posted by Reading Time: 8 minutes

Moves to deconstruct global structures to impose US might on world trade condemned.

US geopolitical ambitions will instead spur the development of an integrated Eurasia.

Op/Ed by Chris Devonshire-Ellis

Attending the St. Petersburg International Economic Forum (SPIEF) last year, the overall theme was “Building an Economy of Trust”. That tagline was partially in response to Washington-based sanctions having been placed on Russia, Iran, and Turkey at the time. Those had been imposed for a wide variety of reasons – the re-integration of Crimea into Russia, US disagreements over Iran’s nuclear treaty (despite Washington having recently signed off on it), and punishments for Turkey’s government for winning an attempted coup against US wishes.

While the unhappiness at the role of the US 12 months ago was relatively limited, and Russia somewhat demonized over its occupation of Crimea – which led to an essential push back of the event – SPIEF 2018 did manage to put out a message about the “United States as a global betrayer of trust. At the time it seemed more a regional, quasi-political disagreement as a complaint. A year on, it is anything but.

SPIEF 2019, in the wake of another 12 months of regional turbulence now becoming a global issue, had a rather different theme: “Creating a sustainable development agenda.” Again, it was the US, despite Washington refusing to send any officials to the event, that was the elephant in the room. And it was the US at whom fingers were very much pointed as being the major obstacle to the aim of “sustainability”, and this year with far more wide reaching, global concerns.

While it was the attendance of Russian President Putin and Chinese President Xi that gained the headlines, the event was also attended by the United Nations Secretary-General Antonio Guterres, in addition to high profile officials from the World Bank, International Monetary Fund, and leaders from a sprinkling of smaller EU and EAEU nations. The EU, currently involved in a leadership shake-up following recent elections, did not send a high-level candidate.

However, the consensus that the US has been responsible for introducing a new, and now global, period of uncertainty and deliberate attempts to demolish “sustainability” within global mechanisms was very strongly pushed, and generally accepted as fact – not just by Russia and China but also by the United Nations. From being largely regional complaints against US behavior in 2018, threatened or imposed tariff increases, attacks on institutions, and a pretty full-on assault by Washington on the established global order has now been recognized. That has been hammered home by Washington’s trade war with China and recent threats towards Mexico, just months after Mexico and Washington had agreed to a trade deal (USMCA).

Both Presidents Putin and Xi, together with the Bulgarian President Rumen Radev, Armenian Prime Minister Nikol Pashinyan, and Slovakian PM Peter Pelligrini elaborated on the same theory that global development has changed over the past few years due to the US. Previously in a position of dominant authority, they see that as beginning to erode as new nations (such as China) have begun to rise and provide unwelcome competition. As Russian President Putin said, “The United States has always preached free trade and democracy. Now that is changing as new, stronger economies are emerging. So United States restrictions to prevent this are now coming into force. Mechanisms for global growth are starting to fail and a simplistic approach has set in.”

President Xi stated, “The current US-China trade war is actually about globalization versus anti-globalization. China wants globalization. But globalization needs managing, and it needs protecting. We need to think about how to improve the current trading system as it is breaking. There needs to be more respect when settling differences, only when there is respect will we be able to arrive at common ground and settle differences.”

What was interesting at SPIEF 2019 was the attitude of both Presidents Putin and Xi. In their speeches at the Plenary Session, both claimed that neither party wanted any changes “to the already established world order” and both asked for concerted global efforts to be put in “to protect global mechanisms and institutions, and to strengthen them”.

That was not surprisingly echoed by UN Secretary-General Guterres, who was stark in his assessment of the current position of an increasingly polarized world with the US and its allies on one side, and everyone else on the other. “There is danger in the development of two blocs, with separate trade, military, and technical capabilities. This is very dangerous and we must fight against this. We must respect international laws. There is no one solution, no single country has all the answers. We must cooperate and overcome the possibility of walking into a new Cold War.”

Both China and Russia have had similar experiences of the new trade attitude of the US towards the development of their countries. President Putin: “The old Western system was based upon keeping the West dominant and everyone else could come along for the ride. But now, new competitors have arrived and this is leading now to trade wars. Nordstream is an example. This (gas pipeline between Russia and Europe) would create energy, security and jobs across Russia and Europe. But the United States wants to sell its own gas to Europe despite it being more expensive, a dirtier product and technologically inferior, let alone the logistics and distance issues. Huawei is another example of a company being pushed out of the global market. A US based monopoly exists which includes restrictions on developing technologies. This means there is a desire to impose technological inequality, a desire to create two worlds, one prosperous, one with no access. Meanwhile, environmental and climate changes are also hastening inequality. We see attempts to create global divisions.”

Russia also sees this manifesting itself in the breakdown of global laws. President Putin again: “International laws are being removed and replaced by the imposition of laws imposed by powerful economies. This is not in the interests of the global economy. The United States is already imposing its laws at the expense of world order. Sovereignty is being diminished. We need to harmonize international dynamics in a democratic and open fashion. There is no need to break old systems but existing ones such as the World Trade Organization do need more support.”

The issue over the deterioration of global governance was also touched upon by Chinese President Xi, who also stated that China intended to uphold commitments that the US had not. In his opening speech, Xi stated, “China needs to have trusted partners with like minds. The Chinese and Russian drivers are mutual. China will create an open market to permit honest competition, based on the principles of mutual respect and equality. We will provide further opportunities for developing countries and will link the Belt and Road Initiative to become a sustainable development and economic environment. We will stick to the course of green development – as Dostoyevsky said, ‘Beauty will save the world.’ China intends to implement the Paris Agreement (on climate change). Countries are integrating as never before, but new problems are emerging. Sustainable development requires common agreement and cooperation of all countries, and we need to improve global governance.” 

The Bulgarian President Rumen Radev echoed those sentiments, saying “We need to re-invigorate the United Nations. We need more global harmony”, while the Armenian Prime Minister Nikol Pashinyan also said, “The world faces global issues but multilateralism is under attack. Multilateral institutions need to be protected and not withdrawn from.” Slovakian Prime Minister Peter Pelligrini took up the EU’s own position with the US, saying that the proposed US tariffs on the German automotive industry was “Very difficult. Tariffs on autos in Germany will impact on many EU countries. The United States is supposed to be our friend. President Trump has postponed the tariffs for six months, but we still don’t know what will happen. This is bad for the EU and is bad for the United States. It will damage economic growth. But we believe a healthy brain will provide a good solution.”

The US’ use of the US dollar as a weapon was also mentioned. President Putin had this to say: “Since the 1970’s, the US dollar has dominated but now new currencies are becoming stronger. The US dollar is fine as a reserve currency, but it should not be used as a trade weapon. This behavior diminishes trust in the US dollar and is not to the United States’ longer term advantage”. Again, Putin also stressed that the United Nations needed re-enforcing to protect against “The move towards militarization of key sectors of global trade. Global energy, utilities, and the medical sector need protecting and should not be used by weaponizing them.” 

The pushback against the US and the increasing recognition that it has become US policy to steer the world into a US-dominated society has also been picked up by Pascal Lamy, a previous director-general of the WTO from 2005 to 2013, who told Reuters that President Trump’s actions over the last week in threatening tariffs against Mexico went against the spirit of diplomacy. He stated, “If there’s a rule of law, it’s because people believe it’s better than the law of the jungle. And many people don’t like the law of the jungle because some are strong, some are weak, and they don’t want the strong to always step on the weak.”

The implications of not just China, Russia, and a handful of smaller nations demonstrating unhappiness with Washington and the path the US establishment is taking can now no longer be boxed off as political and competitive gripes. Global institutions are also taking note – and siding with Beijing and Moscow, although the EU, it appears, is currently sitting on the fence. However, the fact that the US has slid in just 12 months from being considered as regionally disruptive to being the root cause of global disruption – with a sound theory to support why this is the case – is now being taken as a call for global systemic change.

Those changes will happen, although the outcome remains far from certain. In the immediate 12 months, we are likely to see exactly what Presidents Putin and Xi mean by “Strengthening the United Nations” and presumably other global institutions as well. China has for example long been frustrated by its efforts to have a larger say in global affairs, not least within the World Bank. It will also call for Russia to be re-admitted into the G8 and other global discussion forums. How the US will react is anything but certain, again reinforcing that issue of unreliability. President Trump will remain in power until early 2021 and possibly longer if he wins the next election, taking this status to 2025. That will not be tolerated by Beijing or Moscow who will act to take remedial steps.

This means that China and Russia will press on with their global and regional ambitions, China with its Belt and Road ambitions. I have recently covered Africa, Central America, South America, the Pacific and Caribbean islands, in addition to the United Kingdom and will continue this series on our Silk Road Briefing portal.

Russia, meanwhile, will be arguing that it has received enough punishment over the reintegration of Crimea into Russia and will be looking at having some of those sanctions lifted. Fingers will be pointed at the continuing conflict in East Ukraine between Ukraine and Russia as one reason not too, although the US also has its fingers in that as well, in terms of financing and supplying the Ukrainian military in a region that is mostly pro-Russian. Russia will point to that as one reason the conflict remains on-going, but also to its success of rehabilitating and redeveloping Crimea, an issue Kiev failed to resolve (hence the take-over) as Crimean residents were pro-Russian and considered not Ukrainian.

The lifting of sanctions will not be a short-term development though the current situation concerning Russia is also not sustainable from the EU trade perspective either. Should the US push the EU further as concerns Nordstream, auto tariffs, or any other trade issues, Russia could be the beneficiary. Moscow will also be looking to develop mutual technologies and artificial intelligence (AI) with Beijing as well as the Eurasian Economic Union.

From the Asian perspective, there will be trade and development benefits as China and Russia look to move together both in geopolitical as well as trade and development terms, with this being especially true in AI and implementation of new technologies, such as 5G, blockchain and fintech. One had the sense at SPIEF this year of obtaining some clarity on the role of the United States and the options for push back over recent US hegemony.

SPIEF 2019 could in the future be seen as a pivotal moment in global trade and recognition of the issues facing China, Russia, and Eurasia as a whole. There will continue to be significant bumps yet significant opportunities as this all becomes re-organized and remodeled in a manner that will see an increase of recognition of both China, and a lesser degree Russia as major players with a real shout in how the global economy is run – with or without the blessing of Washington. The emergence of an integrated Eurasia into a powerful geopolitical bloc is very much in the cards.

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China Briefing is produced by Dezan Shira & Associates. Chris Devonshire-Ellis is the Practice Chairman. The firm assists foreign investors into the China, ASEAN, India, and Russia trade arena and provides business intelligence and professional services to clients. These include business intelligence reports, legal, incorporation and licensing, in addition to on-going accounting, tax, HR, and payroll administration issues. Please contact the firm at china@dezshira.com or visit us at www.dezshira.com.