The United States is attempting to disrupt the global trade order, with the main objective being to restrain China's economic growth. This is because the U.S. cannot accept the reality that it is not the world's only superpower. China does not pose a security threat to the United States, but the U.S. government cannot accept an equal competitor.
Block politics refers to a situation where countries with political and economic interests form blocks and exhibit mutually exclusive political stances. In particular, economic block formation occurs when multiple countries create a regional or multilateral cooperation system to reinforce economic interests and competitiveness. While countries within a block become closer, there may be side effects of intensified competition between blocks.
Jeffrey Sachs is a prominent economist and policy researcher in the United States. He has mainly worked in sustainable development, poverty alleviation, and international economic policy. His views on global economic block formation are critical. He emphasizes cooperation and integration between countries but warns that severe block formation can deepen inequality and create geopolitical tensions. He has cautioned that the hegemonic competition between the U.S. and China is dividing the global economy, and polarized economic block formation could threaten peace and prosperity in the international community. Below is a question-and-answer session.
+ Countries participating in the Regional Comprehensive Economic Partnership (RCEP)
─What competition has existed between major powers in the past? How did the current conflict between the U.S. and China begin?
"During the Cold War, there was competition between alliances led by the United States and the Soviet Union. This competition was framed as an ideological confrontation between state-led economies and market economies. However, it was, in fact, traditional great power competition. Currently, competition between the U.S. and China is intense. China is not an ideological competitor of the United States. China does not seek to propagate its unique governance model to other countries. The problem lies in the U.S. trying to maintain its top status in all regions. This confidence of the U.S. is actually driving the world into a larger crisis."
─What are the differences between the economic cooperation frameworks led by the U.S. and those led by China and ASEAN?
"The Indo-Pacific Economic Framework (IPEF) launched under U.S. leadership and the Regional Comprehensive Economic Partnership (RCEP) led by China and ASEAN share the commonality of being economic cooperation frameworks centered on the Asia-Pacific region. However, they are very different in terms of composition, objectives, and frameworks. These two agreements emerged amid the hegemonic competition between the major economic powers, the U.S. and China, and play a vital role in reshaping the economic order in the Asia-Pacific region. RCEP serves as a free trade agreement (FTA) that is very useful in promoting market access for its 15 member countries. On the other hand, while IPEF is presented as an alternative by the U.S., it is not an FTA and will likely remain so in the future. Considering the protectionist tendencies of the new U.S. administration, IPEF is unlikely to play a significant role."
─Korea is participating in both IPEF and RCEP. What opportunities and challenges does Korea face in the current conflict between the U.S. and China? What strategy should Korea adopt?
"Korea must avoid entering into an adversarial relationship with China by aligning with the U.S. The anti-China sentiment fostered by the U.S. within Korea could be detrimental to all involved. China should, of course, be a major trading partner for Korea and can provide growth opportunities in the long run. As major countries in Northeast Asia, China, Japan, and Korea must be wary of the U.S. trying to divide them and strengthen their relations as the most dynamic and innovative manufacturing hubs in the world."
─Amid IPEF emphasizing supply chain resilience, how do you foresee competition in key industries like semiconductors and batteries?
"The U.S. will seek to sever trade relations between China and the United States, as well as between China and U.S. allies. However, this could harm not only the U.S. but also the global economy. Especially if Korea disconnects trade with China under U.S. policies, it will suffer significant economic damage. As the U.S. ally, Korea needs to demand the U.S. to reconsider this situation."
─How is China responding to the U.S. efforts to reshape the global supply chain?
"China is responding by building strong alliances through the RCEP, BRICS, and the Belt and Road Initiative, among others. Most countries wish to trade with China, which serves as a low-cost supplier of crucial technologies such as electric vehicles, renewable energy, long-distance power transmission, and 5G (fifth generation)."
─Korea and Japan support U.S. strategies while trying to protect their independent economic interests. Do you see this dual strategy as sustainable in the long term?
"The U.S. is attempting to drive Korea and Japan into a more antagonistic position in relation to China. However, has China ever caused significant harm to Korea or Japan? The anti-China sentiment in Japan is mostly influenced by the U.S., and considering Japan's history of invading China, this phenomenon is somewhat unusual. There is no reason for conflict among China, Korea, and Japan in the present or future. If the three countries cooperate, East Asia will prosper rapidly, positively impacting the rest of the world."
Glossary
* 1) Economic framework (IPEF·Indo-Pacific Economic Framework)
Launched in May 2022 under U.S. leadership, it is an economic cooperation framework aimed at enhancing economic prosperity and supply chain resilience, digital economy, and green economic transition in the Indo-Pacific region. Unlike traditional FTAs, which primarily aim to eliminate tariffs and open markets, it focuses more on strengthening economic norms and expanding cooperation.
* 2) Regional Comprehensive Economic Partnership (RCEP·Regional Comprehensive Economic Partnership)
A free trade agreement (FTA) involving the 10 ASEAN countries, as well as China, Japan, Korea, Australia, New Zealand, totaling 15 countries. The agreement was signed on Nov. 15, 2020, and went into effect on Jan. 1, 2022. It aims to liberalize trade and expand economic cooperation in various sectors such as goods and services, investment, intellectual property, and e-commerce.
※ This article was published in the February issue of 'Commerce'. Please search for 'Monthly Commerce' on Naver.