When a global hegemon says it is “turning the colonial mindset on its head” in global trade, it does cause incredulity.
In a recent press conference at National Press Club in Washington D.C, United States Trade Representative Ambassador Katherine Tai claimed that Washington is turning the colonial mindset in global trade upside down.
Her statement came days before India’s Prime Minister Narendra Modi was given a red carpet welcome by President Joe Biden.
Though, there is no direct link between these two developments, they seem to suggest something that is in the works.
The increasing Indian dependency on the American technology and chip companies and creation of new tech supply chains appears like a new centre-periphery relationship. Perhaps, this may be a new form of colonialism under America’s weakened leadership as a global hegemon.
At the end of his apparently historic trip on June 24, Modi became one of the biggest purchasers of American defence equipment worth billions of dollars. He offered the Indian market on a platter for American firms to come and invest and grow rich. As Deng Xiaoping once said, when he opened the Chinese market for international investors, to grow rich is glorious.
The two countries – the US and India – seemed to have zeroed in on a common purpose. Modi even coined a clever term: “The future is America-India,” in what clearly seems like a centre-periphery dependency.
It is an open secret that the two seemed determined to contain the Middle Kingdom.
A cursory glance at some of these security-driven trade alliances, ostensibly cobbled together worldwide against China suggests a new form of “colonialism” is on the anvil.
Turning colonial mindset on its head
The USTR Ambassador’s words – “turning the colonial mindset on its head” and partnering together with countries, “where we are all co-owners of different parts of supply chains” – sound like benevolent remarks. In reality, the global trading system is most likely to be dominated by the new security-driven trade alliances.
She said it “makes perfect sense in terms of de-risking and building resilience.” However, she did not explain “de-risking” from whom or which country.
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Ever since the European Commission President Ursula von der Leyen coined the term “de-risking” from China at this year’s Davos World Economic Forum meeting, it has secured official currency at the Group of Seven (G7) leaders’ meeting in Hiroshima last month.
“The key is to offer economies a spot in vertical integration so that developing countries are not perpetually trapped in an exploitative cycle,” the USTR said.
However, what is unsaid and not explained is which countries will dominate the final production and which countries will embark on far-reaching industrialisation with those raw materials in vertical integration.
Ambassador Tai did not explain whether transfer of technology, including sharing intellectual property rights without any royalty-driven hurdles will be available to developing countries that supply the key raw materials – like Chile or Bolivia – who choose to embark on their own industrialisation using the same raw materials.
In her remarks at the National Press Club on June 15, Ambassador Tai said: “In my discussions with foreign counterparts, I have found that, as it turns out, we all aspire to build our economies from the bottom up and the middle out – to provide those at the bottom with a path to the middle, and to build a broad middle class. We do this by collaborating in ways that allow us to create opportunities and build our middle classes together, rather than pitting them against each other.”
Further, she maintained that, “Pursuing this kind of de-risking and resilience in supply chains is about improving our national security and economic security for working people. These are critical to taking down tensions in the world as well as anxieties at home, and also reducing opportunities for economic coercion.”
She refers to “economic coercion” to denote China ever since the US launched a series of sustained sanctions on a scale never recently witnessed against any other country, as was done during the Cold War.
Further, in her remarks, the USTR said: “We are pursuing an ambitious, high-standard agreement that will address our shared commitment to a just green transition” and it will also “tackle the particular challenge to our workers posed by countries that have deliberately produced more steel than they can consume, depressing world prices and devastating our steelworkers and communities.”
Espousing a new vision, she said, “The vision is to combine the US and EU markets to create the leverage for trading partners to meet high standards for fair, market-based, and clean production at the same time.”
Without mentioning the carbon border tax measures, which are already legislated into law in the European Union, while they are being processed within the US Congress, Ambassador Tai has said that trading partners must “meet high standards for fair, market-based, and clean production at the same time,” implying a new form of “green colonialism”.
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Ambassador Tai claimed that “by flipping race-to-the-bottom dynamics on their head to create a race to the top, we are working toward a world with a more diverse set of economies producing steel and aluminum, a world where democracies and open markets can flourish and drive standards that improve over time.”
Under the ostensible banner of “democracies and open markets,” she quoted US President Joe Biden as having said that “we truly are at an inflection point.”
“We are facing multiple challenges at the same time, so our trade policy cannot remain in a silo,” she asserted.
Many questions
There are too many questions that remain unanswered, given the hegemonic role of the US in its pursuit of the “open door” policy since 1898, which was initially meant to allow for all trading partners with China to have equal privileges.
The US’s “open door” policy continued to manifest under different avatars. It wore, for example, a reformist mask since the setting up of the United Nations, the Bretton Wood institutions of the International Monetary Fund (IMF) and World Bank, and followed by the General Agreement on Tariffs and Trade in January, 1948.
During the last seven decades, the US, the most powerful nation in history, went on to refine and perfect the “open door” policy in ways that suited its overall trade and economic interests and strategic considerations, including its immediate military and trade priorities, says Allison.
The creation of the World Trade Organisation (WTO) following the Uruguay Round of Trade Negotiations in 1995 is an apogee of that onward march which began almost a century ago. Although the Uruguay Round started during the reign of the Republican administration in 1986, it was concluded by a Democratic president at the official level in December, 1993. Unsurprisingly, there is always an underlying chain of continuity in the economic and trade policies followed by the global hegemon since the late 19th century.
The US control over these so-called multilateral trade institutions is pervasive in almost all aspects. Barring some minor hiccups here and there, Washington ensured a brutal grip on decisions taken at the IMF, the World Bank, and the WTO.
Hidden goals
To start, the US position seems to conceal its real goal of capturing all the benefits from its alliances while leaving the developing countries in the colonial structure of suppliers of raw materials without sharing or offering its technologies across sectors to developing countries.
Writing in the International Economic Law and Policy (IELP) blog on Ambassador Tai’s remarks at the National Press Club, Simon Lester writes: “However, as things stand now, US trade policy limits the possibilities for imports of manufactured goods from developing countries in a variety of ways, and the Biden administration hasn’t changed those policies, or even talked about changing those policies.”
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He said: “When developing countries start to move up the value chain and produce more sophisticated manufactured goods, they are immediately accused of some kind of unfair trade practice and there are attempts to keep their products out of the US market.”
“That is a big impediment to their industrialization, especially for countries with smaller home markets.”
As to why these policies exist, Lester said, “The lobbying power of corporations and labor unions is a big part of the reason, and the positions of these interest groups are easy to understand in this context: They just don’t want competition.”
Moreover, “there is a widespread view in the United States that manufacturing should be concentrated here, and we should sell our manufactured products to the rest of the world,” he said, quoting as an example, Elizabeth Warren, who had said: “[The United States needs] to supply the world with clean energy products”.
“Along these same lines, when people talk about bringing back manufacturing from abroad, a significant aspect of that is bringing it back from developing countries (some of that involves China, but the argument isn’t China-specific),” he argued.
“Tying all this back to the colonialism discussion,” he said, “my sense is that this nationalist vision of the structure of international production holds that the US government should be promoting a form of vertical integration in which natural resources are extracted in the global south, and then shipped to the US to be used as inputs in goods manufactured here.”
“This industrial structure in the US is then enforced by tariffs and other trade barriers. If developing countries try to manufacture things themselves, the US will impose tariffs to keep those goods out,” Lester pointed out.
He cited the example of Chile and Bolivia which possess a lot of lithium deposits, which is important for making electric vehicle batteries.
The US policymakers, according to Lester, “would be very happy to have US companies use that lithium in battery-making in the US, but if Chile or Bolivia started making electric vehicle batteries with their lithium, would they be able to sell those batteries in the US? The answer is almost certainly no, as they would face significant protectionist trade restrictions, such as prohibitive anti-dumping duties.”
The social scientist Samir Amin, who explored concepts of “core-periphery relations, imperialism and unequal exchange,” recognised “that the global capitalist system is polarising and that the polarisation between the centre and the periphery was a key part of this.”
In short, the US policies in global trade appear somewhat like “old wine in new bottles,” with some semantic sophistry. At least, the Indian prime minister’s decision to embrace Uncle Sam appears somewhat like reinforcing the “core-periphery relations.”
Ravi Kanth Devarakonda is a senior journalist based in Geneva.
