The Coming Clash of Economic Blocs

Will China succeed in carving out a geographically large economic bloc founded on principles and structures quite different from (and challenging to) the liberal international order founded upon the principles and institutions of Bretton-Woods?

Xi Jinping Barack Obama

White House Photo/Pete Souza

With the failure of the WTO’s Doha Round to come to agreement on a global free trade regime, and with the concerted efforts by Russia, China and other BRIC countries to carve out non-Western economic spaces, the world may be breaking into blocs after all — but not precisely the civilizational blocs that Samuel P. Huntington once predicted. Rather, we may have political blocs held together by economic relationships and agreements that harmonize with the political systems that require them. There appear to be three major political-economic groups emerging.

The first is the liberal group: the countries represented in the Trans-Pacific Partnership, which includes 12 Pacific Rim nations, and the Transatlantic Trade and Investment Partnership, which joins together the EU and the United States. The link between the two is of course the United States, which becomes the bridge of a liberal political-economic arc extending from the eastern end of Western Europe all the way to Japan in the Pacific, and which encloses NAFTA at its center. If achieved, this arc will prove to be a powerful engine of world growth for decades.

The second bloc might really constitute a revival of the economic relationships that dominated Asia before the coming of the West, and would be decidedly authoritarian in its politics. This group would have China at its center, an outcome that Beijing is striving mightily to achieve through several initiatives: the Shanghai Cooperation Organisation (SCO), the Asian Infrastructure Investment Bank, the Silk Road Economic Belt, the Maritime Silk Road, and the Forum on China-Africa Cooperation. This bloc, which would feature not free but managed trade, would comprise China, Central Asia, Southeast Asia and Africa, and would reach into South Asia through the SCO, as well as the Middle East, which is the western end of the Silk Road. This would be a major competitor to the American-led bloc. But it is likely to be less successful for a number of reasons, not the least of which would be the serious economic problems China is now facing — problems that will not go away anytime soon.

The third and likely the least successful of them is the Russia-centered Eurasian Economic Union, which comprises Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia, and is seeking to expand over the entire former Soviet Union. There are reasons to doubt that this bloc will ever fully form. If it does, it promises to be the weakest of the three because its economies are basically one-dimensional and dependent on energy exports.

It is unlikely that these trade and financial groups will be completely autarkic with respect to each other. There will be much connectivity between them. Each will continue to maintain broad trade and financial relationships with the others. Nonetheless, these blocs represent challenges to each other. Russian, Chinese and other BRIC efforts at organization are explicitly cast as alternatives to the so-called “Washington Consensus.” Moreover, China and Russia are in competition for influence in Central Asia. Lastly, economic conflicts involve political issues, and fundamental geopolitical interests as well. The future could well bring us a world of much more frequent and sharper conflict between major powers. 

About the author

David Schneider

Dr. David K. Schneider
Wikistrat Senior Analyst
Associate Professor of Chinese at the University of Massachusetts-Amherst

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