Sunday, November 5, 2017

Beware globalisation’s new champion

When United States President Donald Trump lands in Beijing during his marathon Asian tour we can expect (as much as we can expect anything from this mercurial leader) for his talks to centre around North Korea, terrorism in general and attempts to win back jobs to the US.

It is unlikely there will be much reference to Chinese President Xi Jinping’s signature project, the so called One Belt One Road (OBOR) — a plan to put a 21st century slant on the medieval Silk Road trading network that once connected East Asia with Europe. Protectionist Trump simply won’t be interested.

In promoting the OBOR, Xi has styled himself as a sterling supporter of globalisation at the same time as the US seems to sinking back into it its pre-war isolationism under Trump’s America First slogan.

Earlier this year Xi became the first Chinese leader to speak at the summit of capitalism, the World Economic Forum in Davos Switzerland, where he attacked protectionism as “locking oneself in a dark room in order to defend oneself, but in doing so cutting off all light and air”.

All this sounds like manna from heaven for supporters of globalisation who in recent years have taken a great deal of flak from a variety of pressure groups who argue it is creating wealth for the already rich West at the expense of the poor — but on closer inspection, the devil is very much in the details.

The OBOR Belt consists of three overland routes, or economic cooperation corridors, through 25 countries. The Road is actually a trade route connecting China to Europe through the South China Sea (which China claims as an integral part of its territory) to the Indian Ocean in one direction and from China though the South China Sea to the South Pacific in another.

In all, the initiative will involve 64 countries and 15 Chinese Provinces.

However, as Lindsay Hughes, of the Indian Ocean Research Program, points out in his analysis, the infrastructure required to support these routes is going to come at great cost and Beijing will take steps to ensure to bears as little of the burden as possible.

He says the OBOR will require massive investment in transport and port facilities along its length.

“One of the criticisms of the Silk Road plan is that host countries may struggle to pay back loans for huge infrastructure projects being carried out and funded by Chinese companies and banks,” Hughes says.

In fact the initial enthusiasm from countries such as Pakistan and Bangladesh is beginning to wear thin as they count the cost of picking up much of the tab.

The feeling was summed up in a report in the Asia Times which stated the $56 billion China-Pakistan Economic Corridor had yet to translate into a game-changer for its sponsors.

“Worse than that, the unparalleled tax breaks and mounting security costs involved have already saddled Islamabad’s Exchequer with a hole in its finances of more than $2.5 billion,” the report states.

China is offering loans to cover the amount, which is great business for its banks at six per cent interest, while all but the most menial tasks involved in building these corridors is going to be done by Chinese workers, keeping the jobless rate down at home.

One country that is staying aloof is India, long suspicious that the whole project is part of a plan to encircle and neutralise it as China’s main rival in Asia.

That aside, New Delhi believes it is simply a bad deal for everyone except China, a point made by Minister for External Affairs, Sushma Swaraj when she emphasised the need to first build trust in the region.

In this she was echoing Prime Minister, Narendra Modi who said economic growth in the region could occur “only when there is a climate of mutual trust and confidence, respect for each other’s sensitivities and concerns, and peace and stability in our relations along our borders.”

A warning to all that President Xi’s new status as the champion of globalisation should be treated with the utmost caution.

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