Power dynamics shift between the West and the East

The past decade has not been profitable for Europe and the U.S.  The image and influence of these two Western powers have been deteriorating gradually. They have faced several crises, not only economic, but also political and social.

The West under threat

Firstly, the subprime crisis greatly weakened the US and European countries and marked a sudden decline in international trade. The U.S was violently criticized and blamed for causing the financial bubble to burst. This served as a reminder that excessive financial deregulation and inter-dependency do not only come with benefits but also risks of financial contagion and instability.

Secondly, the Syrian refugee crisis and the increase in terrorist threats changed the European dynamic concerning border control. After repeated terrorist attacks in France, UK and Belgium the core philosophy of the European Union relating to the freedom of mobility was questioned. As a result, the influence of nationalist parties has been increasing all over Europe and seen during the French, Dutch and Austrian presidential elections. Also, Brexit and more recently the Catalan independence are prime examples of people starting to think about self-preservation and individualism over unity. The growing fear from outside threats such as immigrants, terrorism and China led to Americans wanting change and can be seen in the election of Donald Trump. His protectionism policy resulted in anti-immigration executive orders and the withdrawal from the Trans-Pacific Partnership.

By doing so the U.S has taken a step back from the Asian market, leaving China with wiggle room over the Asian-Pacific region. This could be the perfect opportunity for China to affirm its leadership on the world economy due to the upcoming free trade agreement in the region.

Coalition within the East

Since 2012, the Asian-Pacific countries have been working on a free trade agreement called the Regional Comprehensive Economic Partnership (RCEP) that can be roughly described as an Asian version of the TPP.  The RCEP would be the largest free trade agreement in the world, representing 3.5 billion people (45% of the world population) and a GDP of 17.23 trillion U.S dollars (1/3 of the world economy)[1] and will include all the following countries.

(Source: http://www.clearias.com/rcep/)  

The EU, in comparison, represents not even 7% of the population and its 2015 GDP was about 17,000 million U.S dollars[2]. Although Europe and the U.S are not directly concerned by this free trade agreement, there is no doubt that it will impact the western world on several fronts.

The RCEP could indeed be the first step that would lead to a new world order.

By reducing tariff barriers and intensifying trade within the Asia-Pacific region the RCEP could make the economic flux shift from the West to the East. Plus, this new world order does not only concern international trade, but also financial exchange. Emerging countries, unhappy with the western orientated institutions, such as the Bretton Woods system, decided in 2015 to create the “New Development Bank” and the “Asian Infrastructure Investment Bank”[3]. This decision shows that if Western institutions do not adapt to emerging economies new ones will be created. Countries such as China are speaking out about their desire to help shape the world on new terms and stop bending the knee to the Western standards.

Changes within the military budget

On top of economic and political change there is an increase regarding military expenditures in the East. For example, the Chinese military budget has increased by 132% in the last 10 years. Although not as substantial, there are also increases seen in South Korea and Japan due to the growing threats from North Korea. This increase can also be explained by wanting to depend less on the Americans and therefore ensure national sovereignty.  

However, the U.S is unlikely to be overtaken on a military level anytime soon. Even though the American military budget has decreased for the last decade[4], it is still the largest military force in the world. In addition, European leaders have expressed their desire to increase the military budget in the future.  So, it does not seem that the military balance is going to shift but level out.

Where does this leave us?

In this time of crisis, the West is not responding to these issues well and are divided among themselves. This brings opportunities that the East is taking advantage of as shown through the creation of new institutions, beefing up military budgets and becoming key players in international trade. If this pattern continues it could be worth considering imagining a more balanced world where the former forgotten countries would appear on the same setting as Western countries in the international scene.

Angélique Louis

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[1] http://asean.org/

[2] https://europa.eu

[3] L’économie mondiale 2018, CEPII p69

[4] L’économie mondiale 2018, CEPII, p66