West is fighting futile war against global trade’s inevitable shift east

While certain countries are trying to entrench the current world order, there is a vast transition taking place that will alter the global balance of power and efforts to stop it are akin to putting a finger in the proverbial dyke

Anthony Rowley

Published: 5:30pm, 30 Dec 2023

Why you can trust SCMP

Thinking of the world as being divided into economic and financial hemispheres – one headed by the United States and the other by China – is a regular occurrence these days. This is common but oversimplified thinking as something much bigger and more complex is happening.

This involves developments on the Eurasian continent, which in turn reflect fundamental changes in the direction and dynamics of world trade. It is an epoch-making transition that is likely to alter the global balance of power.

Such transitions are not easy to discern when seen up close, but the approach of a new year is a good time to step back and take stock of what is happening. We might need to stand back a long way to get things into perspective.

In one such recent analysis, Hong Kong-based economic research firm Gavekal traced back the origins of the fractionating process we are seeing now nearly 600 years to the fall of Constantinople to the Ottoman Empire in 1453. This, they say, was “bad news for the then-Christian world” as it meant the Ottomans came to control most of the Mediterranean Sea and the Silk Road. If Europeans wanted silk or spices, they had to pay high prices for them.

That was, unless another route could be found to link Europe with India and China, Gavekal Group founder Louis-Vincent Gave noted in the report. Such routes were indeed found – directly via Vasco da Gama’s voyage around Africa to India and indirectly through Christopher Columbus’ exploration of the Americas. With these voyages of discovery by Spanish, Portuguese and Italian navigators, the world’s centre of economic gravity shifted from the Mediterranean to the Atlantic.

As the report observes, “if trade gets blocked in one place, it may reappear in another one and be that much more powerful”. The Ottomans could not have known it, but by blocking Silk Road trade they ended up giving impetus to the modern era and gradually transformed the Mediterranean Sea into an economic backwater.

It is easy to see parallels between this shift and what has been happening during the past six or so years with the launch of China’s Belt and Road Initiative. The scheme is designed to link China and East Asia with Europe and beyond via Central Asia, through a vast network of highways and sea routes which could threaten Atlantic maritime dominance.

As Kent Calder of Johns Hopkins University argued in his book The New Continentalism, the New Silk Road will strengthen the multifaceted relationship between East Asia, the Middle East and Europe to emerge eventually as one of the world’s most important multilateral configurations.

Seen in this light, it is easier to understand opposition in North America and parts of Europe to the belt and road strategy. China’s various infrastructure projects have already found their way into geographically wider initiatives, however, not least in the Indo-Pacific region.

02:48

Chinese President Xi Jinping unveils 8-point vision for nation’s Belt and Road Initiative at forum

According to the Gavekal report, the next decade “will see the broader Eurasian continent integrated as an economic whole. In that spirit, hardly a month goes by without the announcement of some new road, railway, canal or free-trade deal linking the economies of the Istanbul-to-Jakarta axis.”

The global trade revolution that is under way now is not, of course, only about improved transport access between countries and continents. The composition of international trade is changing dramatically, not least because of China’s move into more sophisticated and higher-added-value manufacturing and hi-tech areas.

China’s role in linking countries to its own economy and with one another through the medium of manufacturing and logistical supply chains has also helped develop the arteries of the Global South and alter trade patterns dramatically in the process.

All this does suggest that the centre of gravity for global commerce and industry has shifted, if not irrevocably then perhaps for the coming centuries. It also suggests that defensive attempts by Western nations to turn back the tide are akin to putting a finger in the proverbial dyke.

Amid US-China rivalry, Vietnam’s sweet spot diplomacy is a master class

Meanwhile, the trade-driven dynamic of change that has already unfolded or is in the process of unfolding is much stronger than the forces of political and nationalistic opposition that are attempting to thwart it. Those behind such opposition do not understand the strength and historical inevitability of the forces they are dealing with, any more than the Ottomans did.

Equally futile are the attempts to stem the tide of economic history by opposing change in trade and supply chain networks. The Gavekal report makes mention of moves to “encourage domestic producers to repatriate production from China, which is a non-democratic Communist country. Or, alternatively, to move production to countries that happen to not be non-democratic and nominally communist – for example, Vietnam. The result? China’s trade surplus has essentially tripled over the past few years.”

Meanwhile, the futility and small mindedness of East-versus-West thinking is blinding us to the existential challenges posed to the overall sphere – Planet Earth – by climate change and other environmental damage.

If wishing the world a happy, healthy and prosperous new year is to have any real meaning, the wish has to be predicated on an acknowledgement by world leaders of the futility of our current course. New Year’s resolutions are, to quote Shakespeare, often honoured more in the breach than the observance, but they can and must be made and kept in 2024.

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs