OPINION:
We can safely say that the coronavirus pandemic has radically reshaped the world. In the United States, it accelerated digitization trends; wreaked havoc on entire industries, forcing companies to adapt and compete in new landscapes for survival; and laid bare the radical divides of inequality that have been silently stratifying society in the U.S. for generations.
However, while the U.S. faces the very real challenges of recovering from a black swan event, the pandemic has hastened a global realignment of alliances, trade partnerships and geopolitical influence. As President-elect Joe Biden faces down a post-pandemic world, he faces a new state-of-affairs in which the United States’ allies have formed agreements that broadly exclude it, and in which China is stronger than ever.
China is the only major economy set to show growth in 2020. An aspiring hegemon that has silently shaken off its guise as a developing country, it is no longer just a developing trading partner, but rather, a serious competitor and a national security threat. China has used recent uncertainty to heat up territorial disputes with its neighbors; in the South China Sea, the Himalayas, its border with India, and by tightening its grip on Hong Kong, imposing a new security law that brings an implicit status quo of greater regime control over the institutions, financial markets and identity of the most important financial center in Asia.
However, not all of China’s actions involve conflict. China has also been strategically building out its economic partnerships and investments, with global investment totaling $1.8 trillion in the past decade.
Most prominently, China along with 15 countries comprising members of the Association of Southeast Asian Nations (ASEAN) and five regional partners announced the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), one of the largest set of free trade agreements in history, including approximately 30% of the global population and one that is projected to add $428 billion in trade among its members while reducing trade with non-members by $48 billion.
Notably, this agreement excludes the U.S., while including Canada, Mexico, Japan, Australia and South Korea. China has taken advantage of the United States’ withdrawal from various regional trade partnerships and cooperative agreements to actively court new alliances and agreements, broadly excluding the U.S. from a seat at the table.
While the Trump administration has correctly identified China as a threat and a competitor, the administration’s withdrawal from trade agreements and tensions with allies such as the EU and Mexico will have long term effects on economic growth in the U.S. and in its position among the rest of the world.
While the driver of many of the Trump administration’s policies, stark inequality and a disenfranchisement of much of America’s working class, should not be ignored, it is important to note that the competitiveness of America’s economy and companies on a global level has been one of the main sources of the prosperity that has marked the United States’ economic trajectory over the past century.
While tariffs and a hawkish stance on trade can benefit some industries and workers, it comes at a cost of broader economic growth, something that has a very real and tangible welfare effect, costing jobs and reducing wages in the short-, medium- and long-term.
To face the challenges of a post-pandemic world, the U.S. should focus on rebuilding its partnerships, building new trade agreements that shore up the West and its democratic allies while creating an avenue for American firms to innovate and compete on a global scale. Most importantly, the U.S. should focus on remaking its supply chains, taking care to evaluate its own dependence on China, a dependence that very nearly led to significant drug shortages, for antibiotics and even insulin.
The U.S. should also focus on its regional alliances, including Taiwan, Japan and Australia, as a check, and offering an alternative to, dependence on the Chinese economy and the many strings that come with it. However, when approaching trade and foreign policy, the U.S. should not ignore the inequality that exists at home. Rather, domestic and foreign policy should carefully balance a greater focus on cooperation with a careful and sober assessment of the stratification and inequality that currently exists in the U.S.
The coronavirus pandemic has forever changed the trajectory of domestic and global affairs. This realignment could present an opportunity for the next administration to rebuild the United States’ position in the world and set the stage for a rising and dynamic economic engine, the same dynamism and competitiveness that built the world’s largest and most innovative economy.
• Hugo Dante is a Young Voices contributor, D.C.-based banking policy analyst and doctoral student in economics at George Mason University. Follow him on Twitter @hugodantejr.
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