An evolving multilateral order

While there is an evolving new China-dominated multilateralism, confidence in existing American-fashioned multilateral institutions has been waning


Xi Jinping at the Silk Road summit in Beijing. In an evolving economic, political and security web, India stands to one side, sometimes wooed, often ignored. Photo: Reuters
Xi Jinping at the Silk Road summit in Beijing. In an evolving economic, political and security web, India stands to one side, sometimes wooed, often ignored. Photo: Reuters

China’s imperial Tang dynasty was established in the seventh century and ruled the country for 300 years. It is generally considered to be China’s golden age, in which territorial expansion and military strength coexisted with the best in poetry, art, music and literature. The Tang dynasty based its capital in Xi’an (famous for its ancient terracotta funerary army) in today’s Shaanxi province in central China. From here, the emperors of the Tang dynasty reopened the ancient silk route(s) to the West through the Fergana Valley in Uzbekistan and Baghdad in Iraq, to Europe through Constantinople (today’s Istanbul).

China is hosting a mega event to showcase President Xi Jinping’s One Belt, One Road (OBOR) Initiative, a vague but ambitious project intended to reopen both the land (One Belt) route and create a new maritime (One Road) silk route. The initiative, more political than economic, is still hazy, but magnificent in its scope of circling Asia by land and sea with tentacles extending all the way to Germany and Russia by land (rail) and the Mediterranean by sea. Take this together with the China-led Asian Infrastructure Investment Bank (Aiib), the New Development Bank (NDB) established by China in conjunction with other Brics (Brazil, Russia, India, China and South Africa) countries, the Asian-dominated Shanghai Cooperation Organisation (SCO) and the Conference on Interaction and Confidence-Building in Asia (Cica), and you will begin to get a picture of an evolving new China-dominated multilateralism.

At the same time, with an inwardly focused Buchanenesque US, confidence in existing American-fashioned multilateral institutions has been waning. From the early part of the 20th century, and accelerated by the end of World War II, the US and other industrialized democracies established an array of global and regional institutions to manage their economic, political and security relations. An America-led alliance system provides the security framework for much of Europe and Asia: with the North Atlantic Treaty Organization (Nato) for Europe and individual compacts with countries of Asia, including South Korea and Japan. President Donald Trump has already created a diplomatic snafu by presenting bills to Germany and South Korea, ostensibly to cover the cost of their protection. In a flip-flop, Trump now says Nato is not obsolete, even though he said the opposite repeatedly during campaigning. In a similar reversal, Trump committed to Japan’s security even though as candidate he spoke vociferously against it. This unpredictability has already led South Korea and Japan to re-examine their security options. Earlier this month, Prime Minister Shinzō Abe of Japan proposed an amendment to Article 9 of the Japanese constitution, which stipulates that “the Japanese people forever renounce war” and that “armed services, as well as other war potential, will not be maintained”. In coming years it appears very likely that Japanese Self-Defence Forces and associated equipment will be fully legitimized. And that is a short step away from a full-fledged army. Despite repeated testing by North Korea, South Korea and Japan have so far remained non-nuclear. It appears likely that if the US becomes an unpredictable ally, then South Korea will either covertly or overtly go nuclear. Some analysts believe that Japan is already actively examining a second-strike nuclear capability centred on submarine-launched ballistic missiles.

Existing multilateral institutions in the trade and economic arena are faring no better. The International Monetary Fund (IMF) and its Bretton Woods sibling, the World Bank (WB), have had an evolving scope of activity since their creation in 1944—as they struggle to combat their irrelevance. In the last few years, there have been many calls for reform of these institutions.

In a seminal paper written in the American Economic Review, Raghuram Rajan argued that the WB and the IMF will have to perform their old tasks in new ways and add some new tasks because both loans and economic advice have become less valuable than before. Given the bureaucratic cholesterol in both organizations, renewal may be easier than reform. As for the World Trade Organization (WTO), its future in an insular world is bound to be subject to significant change.

In this evolving economic, political and security web, India stands to one side, sometimes wooed, often ignored. India’s economic rise comes nearly 50-60 years after this global architecture was put in place. Consequently, India has not been a major player in the old Bretton Woods architecture; it has yet to succeed in its bid to become a permanent member of the UN Security Council. Even as that attempt proceeds, the goalposts are shifting.

Out of self-interest, India has become a member of many of the China led initiatives—Aiib, SCO, Cica and NDB. It is being wooed by China to sign on to OBOR. India would do well to accept these opportunities and maximize its advantage from within rather than protest from without. The multilateral governance structure of the world will continue to evolve in this G2+ (US, China, others) world. In an interesting late twist to the plot, the US is attending the OBOR meeting.

India’s best option is to focus on improving its economic trajectory and keeping its options open as the global power balance yo-yos.

P.S: “It doesn’t matter if a cat is black or white, so long as it catches mice,” said Deng Xiaoping.

Narayan Ramachandran is co-founder and fellow at the Takshashila Institution Read Narayan’s Mint columns at www.livemint.com/avisiblehand

Comments are welcome at narayan@livemint.com

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