New World Order conference: integration and multipolarity

PAIGEO’s New World Order international conference was held for the second time this November, and on this occasion it examined the issue of integration and multipolarity. Geopolitical reality has changed in the 21^st century: whereas during the previous decades the world had been unipolar with the US as the leading power, today its dominance is being questioned in many aspects by various actors – such as China, India or the ASEAN countries – who all seek to play a larger role in global affairs. The conference aimed to find answers to the following questions: can the bipolar world order return (with new actors), or are we witnessing the rise of a multipolar world order? Can smaller countries become rivals of the US by forming integration blocs? We summarize the event’s most important thoughts.

The conference was opened by Norbert Csizmadia, president of the Pallas Athene Innovation and Geopolitical Foundation’s board of trustees. He explained that there is a new geopolitical reality in the 21^st century, and instead of the previous unipolar world, we are witnessing the rise of Asia. In order to get to know the new world, we need new maps and new viewpoints.

The first keynote speech of the conference was given by Yukon Huang, senior fellow in the Carnegie Asia Program and formerly the World Bank’s country director for China. In a compelling presentation supported by a wealth of data, he examined what the trade war between the US and China is really about.

He refuted claims that form an important part of the US government’s reasoning in the economic confrontation between the two countries. One of his main arguments was that, despite the widespread belief, there is no relationship between America’s trade deficit and China’s trade surplus – in other words, the former is not the consequence of the latter –, since the American trade deficit is currently increasing, but the Chinese trade surplus is decreasing (and will become a deficit over time). Huang asserted that the real cause of the US trade deficit is America’s enormous budget deficit, while the real cause of the Chinese trade surplus is Chinese household savings – and the two are not related.

Huang also refuted another widespread claim: that there is too much American investment in China, which hurts the US economy. In reality, only one per cent of American foreign investment goes to China. On the other hand, European investment in China is much larger, which is due to European export to China, since European companies invest in China in order to expand the country’s market. At the same time, American export to China is comprised mainly of products and product groups (such as waste or agricultural products) whose consumption might not be possible to increase even with local investment.

Huang said the trade war is part of a geopolitical contest between the world’s two leading powers. One aspect of this relates to global finance: in contrast to trade, China’s power in terms of the global financial system is nowhere near that of the US; America is the sole dominant power in this field. This could change if China could make its own currency (the RMB) global, but this is not realistic in the near term.

What is realistic, however, is for China to become a powerhouse in R&D, and this is indeed its stated aim. One of the US government’s grievances is precisely that China is not going about this ethically, since it steals technology from foreign companies. This is a further important cause of the trade war.

There is also a subjective side of the hostility, namely the Western world’s irrational uncertainty regarding China. According to a poll, America is considered the world’s leading economic power everywhere in the world – except for the US and Europe, where China is. However, China is decades away from becoming a real great power, which is clearly illustrated by the fact that the gap between American and Chinese income per capita is not decreasing but increasing – and this index is more important in terms of being a great power than the size of the economy.

The second keynote speech of the conference was given by János Martonyi, former foreign minister of Hungary. At the beginning of his comprehensive presentation, he explained that the main driver of history is culture, which is the major influence on demographics and technology, the two most important factors in terms of geopolitics.

In addition, human nature’s competitiveness greatly affects the development of history, which is true on the level of individuals and collectively as well. As a result, competition is constant in the fields of commerce, economy, technology, politics etc. In contrast to earlier eras, however, numerous previously unrelated fields are now connected. Accordingly, Martonyi described our world with a word stemming from neurology, heterarchy: this means the current world is not characterized by vertical hierarchical relations, but relations without specific rankings.

Martonyi believes the cause of the trade war between the US and China is not trade but geopolitical rivalry, of which trade war is only one dimension. Due to the geopolitical contest between the two great powers, the risk of real wars breaking out in the world is increasing.

An important question for Hungary is how the trade war affects the European Union. There are opinions that the EU benefits from it, but in reality the conflict harms everyone in the long term. Overall, it can be said that in our uncertain world, the EU seeks to present its own vision to the world as an example. This includes, for example, an order based on rules and multilateral agreements, and the EU thereby sets an example of how a world order based on global cooperation could function.

Following the keynote speeches, the topic of the first panel was the geopolitics of integration blocs. The presenters were György Szapáry, advisor to the governor of the Central Bank of Hungary and former US ambassador, Darwis Khudori, associate professor at the University of Le Havre, Anton Bendarzsevszkij, director of PAIGEO and analyst of the post-Soviet region, and Tamás Csiki Varga, research fellow at the Center for Strategic and Defense Studies, National University of Public Service, Hungary. The chair was Viktor Eszterhai, senior China analyst at PAIGEO.

György Szapáry’s presentation examined what factors are required for a country or an integration to become a geopolitical power. According to him, a large enough population, area, GDP, military power, reserve currency and natural resources are indispensable, as is having access to an ocean and the ambition to become a world power.

Taking account of the world’s largest countries and integration blocs, Szapáry stated that while Europe is an economic powerhouse, it could hardly play a role like the US or China since it is not unified; moreover, Europe is more comfortable with supportive roles. Ambition to become a global power is not something Russia lacks, but its economy is too weak for this role. Regional integration blocs like ASEAN, CPTPP and others will remain relevant only at a regional level. Only China meets all the criteria mentioned, therefore it will be the only superpower besides the US in the future. In summary, we can expect a bipolar world order, but one in which the US will keep playing a leading role for a long time.

Darwis Khudori’s presentation sought to answer the question whether the rise of Asia will lead to a new world order. He gave a historical overview of the mechanisms of colonization by Western powers, as well as the principles of the Bandung conference, held in 1955 by countries newly independent from their colonial masters. Khudori outlined how Western domination continues in our post-colonial age in the fields of science and technology, information and communication, financial systems, weapons of mass destruction and access to natural resources. Since Asian countries are following the Western development model, he believes that peaceful development in Asia cannot be expected due to this model’s destructive past and exclusive nature.

Anton Bendarzsevszkij talked about the Eurasian Economic Union’s (EAEU) present and perspectives. Following the collapse of the Soviet Union, several economic cooperation formations were created, but they do not represent a linear developmental arch. There are serious tensions within the customs union which forms a part of the EAEU. In reference to György Szapáry’s presentation, it can be said that Russia is unable to become a world leader even through the integration organized around it.

In the first panel’s last presentation, Tamás Csiki Varga looked at integration blocs from a little examined viewpoint, the perspective of small countries. He examined the benefits and disadvantages of integration for countries with small areas, and found that the benefits can be grouped into the following categories: socialization (e.g. the period after joining the EU), easier articulation of interests, benefits of structural power (the EU is a good example again), defence (e.g. NATO membership), and increased capacity to fill potential power vacuums. An integration will be attractive to a small country if it offers at least one of these benefits. At the same time, small countries must be careful to safeguard their interests when power relations between big countries change – like in today’s changing world order.

The topic of the second panel was the place of the Visegrad Group (V4) countries in the changing world order. The panel included a roundtable discussion instead of separate presentations. The discussion was led by Dániel Bartha, director of the Centre for Euro-Atlantic Integration and Democracy, and the participants were Michal Kořan, president of the board of the Global Arena Research Institute in the Czech Republic, Márton Ugrósdy, director of the Institute for Foreign Affairs and Trade in Hungary, Michal Bogusz, analyst at the Centre for Eastern Studies in Poland, and Tomáš Strážay, senior analyst at the Slovak Foreign Policy Association in Slovakia.

Tomáš Strážay believes the V4 is an ideal formation for Hungary. The Czech Republic, on the other hand, is increasingly turning inwards, paying little attention to its neighbours. Poland has created other regional formations too, which can complement the V4. For Slovakia, the V4 is of strategic importance, since it is the only member state with a shared border with all three other members. As far as cooperation between the V4 and other countries is concerned, cooperation with Russia cannot be expected, since Russia prefers bilateral relations. For China, the V4 is too small, therefore it has chosen the 16+1 formation for cooperation. The V4 has made attempts at unified relations with the US, but the way this will progress is up to America.

Márton Ugrósdy explained that the V4 member states, being small countries, could not accomplish a great deal in foreign relations on their own. A further reason for this is that they have given up a substantial part of their sovereignty with the EU accession. However, the EU’s set of rules results not only in restrictions, of course, but also provides protection. One example is Hungary’s relationship with China: as an EU member state, Hungary is in a better position than if it negotiated with China on its own; furthermore, community rules prevent a potential situation like the Chinese debt trap in Africa.

Michal Kořan stated that the V4 is not competitive globally and its position keeps deteriorating. The countries in the region have lost their economic edge that cheap skilled labour gave them after the collapse of communism, and they are not prepared for the future. Education and technology are crucial for the future, but the V4 countries are not competitive in these fields and the quality of their education is inadequate. Kořan believes it is a misconception that Chinese capital is required for the development of these countries. He argues that the capital is available locally, but it cannot be invested due to the lack of necessary innovation potential and talents produced by the education system. The few technological developments that do take place usually serve the interest of state power, for example through the more efficient surveillance of citizens. While public affairs are dominated by topics such as the EU’s excessive powers and Russian and Chinese influence, we are not discussing and dealing with what really matters: preparing for the future.

Michal Bogusz talked about the relationship between China and the V4, as well as the wider Central and Eastern European region. He believes China wishes to do business in the region according to its own conditions, not to EU rules. The reason it invests heavily in the Balkans is because it can set the conditions there. Bogusz argued that the 16+1 cooperation between countries in the region and China is not working because the member states’ interests are too divergent, and also because for China this region is just a “stop” towards Western Europe. In fact, we attach more importance to Chinese presence in our region than China does. Accordingly, the V4 is not important for China, and we are only fooling ourselves if we believe we can be a bridgehead between China and Western Europe.

Africa was also discussed: Strážay believes the continent may become the battleground for a conflict between the West and China. China seeks to increase its economic and political clout with its Belt and Road Initiative, as well as spread its own business practices. In order to counter that, several West European countries are now paying more attention to Africa. Ugrósdy said the relationship between Africa and the EU will be complicated, since EU member states will leave solving problems in Africa to the EU. According to Bogusz, the EU’s situation is made more complicated by China pointing to Brexit, the presidency of Donald Trump and the various crises besetting the West and saying to developing countries that the Western political model is bad, unlike the Chinese model which works fine and is therefore worth following.

The question arose how the V4 member states could cooperate in various fields. In the case of Africa, this is already given, since the V4 countries belong to the most generous supporters per capita in the EU – however, this should be propagated more widely. On the other hand, Kořan said it makes no difference that there are large-scale plans (e.g. about digitalization in the Czech Republic) if the bases for their realization are missing.

In summary, the audience witnessed an exciting conference this year too, with lively debates about a current topic.

A video about the conference: