It is an underlying belief in global trade that economic incentives are disconnected from political sentiments. The point is that every decision is motivated by both material and political interest. As Samuel Bowles wrote in his book The Moral Economy, economic motivations and political sentiments complement each other. And disconnecting the two can lead to a bizarre situation that compromises self-interest. However, global trade is the only factor that brings nations together and eases their geopolitical tensions.
It is important to recognize that a nation’s economic interests are hampered by explicit or implicit political motives. While engaging in trade relations with different countries, one should keep in mind the existing political tensions within this region. Despite existing international reforms that seek to motivate new capital and investment to resuscitate dead and struggling economies, there are still issues that are hugely sabotaging the global economic outlook.
The question arises: why should businesses be worried about geopolitical conflicts? To begin with, each government is concerned about its national security and sentiment that can influence both that nation’s imports and exports. And despite the intensive globalization of companies, they are required to follow the local rules and regulations of the different countries in which they do business.
The philosophy of each political structure affects the business cosmos and the local economy. It seems ideal that companies around the world aim to operate in free and democratic regions. However, despite recent changes in democracy, still more than a third of the world lives under authoritarian governance. China is de facto seen as one of the explicit examples with its strong governance and limited individual rights. Chinese governance portrays its ideal version of merging an authoritarian system with a market economy and targeting nascent nations for its trade and expansion.
The call for a tiff with the superpower is a great example to start with. China is the primary target of US trade war activity, due to its strong growth rates over the past two decades and the greater trade imbalance with the United States. Tariffs are the emergence of bilateral and multilateral disputes, hampering global economic integration and intensifying technological rivalry. The dispute between the United States and China has already disrupted IT industries in both countries, affecting major computer hardware manufacturers, designers of computer chips, even social media platforms, and more. Despite a complex economic relationship, the superpower chooses to maintain peaceful trade relations with China as trade with China creates and sustains nearly a million jobs in the United States.
Focusing on the geopolitical literature of South Asia and Southeast Asian countries, regional wars have always been cooked up but settled in peace in the name of economic prosperity. For example, the Galwan Valley conflict between India and China has left the two nations with internal regional tensions and the deaths of several army soldiers. Understanding the deep trade relationship of India and China where India depends on China for many things such as heavy machinery, electronic equipment, active medicinal components, etc., the current set of investments and China’s forecast in India amounts to at least $ 26 billion. India has banned nearly 200 Chinese apps due to the India-China standoff. However, India is the biggest foreign market for Chinese mobile phone companies. And the fact that India depends only on China for trade, the two countries with coordination agreed to defuse tensions.
Countries have no permanent allies or enemies. A relationship between two countries is based on cardinal, powerful and economically attractive needs for essential markets. For example, China’s ban on the export of Australian coal has shown a shift in world trade. Coal exporters in Indonesia have benefited from this ban where a $ 1.5 billion deal was signed between China and Indonesia. However, due to China’s ever-growing vision to control every region and expand its trajectory, Indonesia has issued a diplomatic protest against China for entering 100 kilometers into Indonesian waters. However, China realizes that Indonesia is the world’s largest exporter of thermal coal and the main exporter to China, and any serious conflict with Indonesia can lead to a significant downfall in Chinese steel plants.
Likewise, Taiwan and China have been at political disagreement for more than 70 years. China claims ownership of Taiwan, but Taiwan rejects the continent’s desire for unity. The United States has aligned itself to support Taiwan in its fight against China. Significantly, Taiwan is the world’s largest producer of semiconductor chips. And the majority of Taiwanese exports are complex electronic products, especially advanced semiconductors that China cannot manufacture.
Another important scenario was when countries began to claim islands and various areas of the South China Sea as early as the 1970s. However, satellite photography shows China’s intensified efforts to reclaim the territory of the South China Sea. Southern China by physically increasing the size of islets or reefs or by building new islands entirely in recent years. A Chinese Coast Guard vessel crashed into and destroyed a Vietnamese fishing boat in the Paracel Islands. The Philippines has also expressed concern over the deployment of Chinese Maritime Militia ships near the disputed Pentecostal Reef in the South China Sea. Without forgetting the international criticisms unfavorable to the Chinese initiative “the Belt and the Road” which affected the countries in the long term. Several countries have defaulted on related payments that would eventually allow China to leverage its economic and political power.
One can understand the gravity of the geopolitical stakes of a nation by studying its history, its geography and its culture camouflaged by colonial paradigms. However, what remains unchanged is that economic interests still rule over political confrontations. Global commerce or the global market operates in sync with ever-changing geopolitical alignments. Wherever economic interests lie, every nation appeases political rivalries and tries to play the game of commerce cordially. And in fact, it doesn’t matter how much bitterness your heart holds against your neighbors, because when it comes to maintaining sanity and prosperity in the building, no one cares about sharing bread.
Srijla Bagai leads global corporate communications and business strategy for the Hemera Group, which is a global leader in supply chain solutions operating in various countries and based in Singapore.