Abstract
Since 1991 there has been a reinforcement of the World Market Economy, not least since China and the, then new Russian Federation have joined the World Trade Organization and because of EU Eastern enlargement and ASEAN integration deepening, while the Transatlantic Trade and Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP) negotiations seemed to indicate stronger regional integration dynamics. With the Trump Administration, the situation has changed dramatically as President Trump is supportive of neither multilateralism in general nor of the EU, which is weakened through BREXIT, in particular. Trump’s focus on the US merchandise trade balance deficit is ill-placed and import tariffs imposed on China seem to be excessive as the optimum tariff rate is miscalculated on the basis of the traditional formula – while a new adequate formula would include the role of sectoral US outward FDI stocks. Asia, the EU and the US could define fighting the Corona World Recession as a global public good, but the United States is weakened in the corona pandemic crisis; the EU is facing serious problems in avoiding a Euro Crisis 2 problem and the €750 billion EU loan package could undermine the Eurozone’s stability while being inadequate to minimize the risk of a Euro Crisis 2. At the same time, the prospects for EU cooperation are declining due to political disappointment concerning the national corona pandemic policy in some member countries. An effective anti-corona pandemic policy would mean to organize a consistent EU-ASEAN cooperation or a G20 cooperation with a later extension to UN Organizations, including the IMF, the World Bank and the WHO. Post-corona, global governance could change strongly because of the long-term political scarring effects of the pandemic shock which could undermine EU and Western stability. Networked international leadership in support of multilateralism is an innovative – but difficult - option for EU-ASEAN-Mercosur.
Highlights
The world economy has greatly changed since the end of the Cold War – the rise of China since the 1980s, the expansion of the digital economy worldwide since the 1990s, and a rising wave of populism and the declining political cohesion of the Western world since 2016 are visible as new traits of the new global order, while systemic competition among Western countries and the role of climate policy at a global scale has been reinforced; at the same time, multilateralism and the role of International Organizations, respectively, seem to have weakened
In Brussels, the Juncker Commission did not understand the challenge of the British EU referendum of 2016 and it is unclear whether the von der Leyen Commission will be able to keep the EU27 together in the face of a difficult COVID-19 public health and economic shock in 2020 – EU policies suggested by mid2020 were not likely to be adequate to avoid a new Euro Crisis 2 which will become acute once Italy should lose its investor grade ratings
The analysis has shown that the Western world is facing a serious crisis as the populist policies of US President Donald Trump and the populist BREXIT project in the UK stand for an internationally destabilizing overlap – less free trade in the world economy; as the Trump Administration has seriously undermined the WTO and other international organizations (e.g. World Health Organization (WHO), World Postal Organization) and follows a protectionist trade policy, directed mainly against China, and a broad anti-multilateral policy agenda
Summary
The world economy has greatly changed since the end of the Cold War – the rise of China since the 1980s, the expansion of the digital economy worldwide since the 1990s, and a rising wave of populism and the declining political cohesion of the Western world since 2016 are visible as new traits of the new global order, while systemic competition among Western countries and the role of climate policy at a global scale has been reinforced; at the same time, multilateralism and the role of International Organizations, respectively, seem to have weakened. In Brussels, the Juncker Commission did not understand the challenge of the British EU referendum of 2016 and it is unclear whether the von der Leyen Commission will be able to keep the EU27 together in the face of a difficult COVID-19 public health and economic shock in 2020 – EU policies suggested by mid2020 were not likely to be adequate to avoid a new Euro Crisis 2 which will become acute once Italy should lose its investor grade ratings Such downgrading in OECD countries is likely in a transatlantic environment in which the Trump Administration’s decisions set the course for a raising of the debt-GDP ratio from 100% in 2019 to about 160% in 2025. Narrowing per capita income differences imply better prospects for political cooperation as political preferences become more similar
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