How the War in Ukraine has undermined Globalisation
The Russian invasion of Ukraine is in its sixth week now. It has not been the successful Blitzkrieg that Vladimir Putin had hoped for. Ukrainian forces are putting up a brave defence of their country and the Russian army has suffered unexpected setbacks.
An end to this invasion is urgent. It has taken a massive toll in terms of infrastructural destruction and human life. Russian forces have bombarded civilian targets, energy and water supplies, causing a catastrophic refugee crisis. Many civilians, including children, have been killed. The International Committee of the Red Cross has warned of “a devastating humanitarian crisis”. There are indications that war crimes have been committed.
For Russia this war has become a political and economic disaster, at home and abroad. It is now the target of wide-ranging international sanctions and is unlikely to be trusted as a reliable partner under its present leadership. Living standards in Russia will be affected for years to come. Dependence on China, within a bilateral arrangement based on new power realities, will grow.
The entire global economy will feel the effects of slower growth and faster inflation. As the price of fuel will increase sharply, so will those of food and commodities. In many European countries, with high levels of dependence on Russian gas and oil imports, there will be sharp increases in the energy bills of private households. This is one area where the benefits of globalisation and Russia’s integration into the global economy have turned into vulnerability.
There will be commercial, political, and military adjustments across a wide spectrum, including economic arrangements and military alliances. The Members of the North Atlantic Treaty Organisation (NATO) decided to approve large increases in military budgets, while the EU wants to speed up the process of admitting Ukraine as a member state.
This war will accelerate a weakening of the global trade system, which has been under attack for some time now. Concerns about the functioning of the World Trade Organisation (WTO) and the trade practices of China go back several years.
The security concerns that are currently driving de-globalisation are justified, but they will come at a cost. Consumers around the world became used to the substantial benefits from a world of specialisation, comparative advantage, just-in-time shipping, and elaborate supply chains. A poorer world offers fewer customers for everyone’s exports, and a world less economically connected is one in which disruptions and conflict are more likely.
What are the implications for Africa? Just as the continent is recovering from the pandemic, the Ukraine crisis threatens that progress. Many African nations will be directly affected by higher energy and food prices, reduced tourism, and the difficulties in accessing international capital markets. This is likely to intensify socio-economic pressures and public debt vulnerability.
The contrast between the warm welcome that Ukrainians have so far received in Poland, Germany and other EU countries, and the treatment of African refugees will not have escaped Africa’s attention. It comes in the aftermath of the joint vision that the AU and the EU agreed to during their recent summit. It might be necessary for both sides to go back to the drawing board now.
This war may have altered the global economic and geopolitical values and assumptions on which multilateral trade liberalisation has been built. It does not mean that the multilateral forum which the WTO provides for cannot be used as part of the effort to find long-term solutions. However, new configurations and plurilateral arrangements among the like-minded may be the way forward for some. Increased geopolitical tension raises risks of economic fragmentation, especially for trade and technology. Spheres of influence may become part of the international diplomacy vocabulary again. Certain African nations may be put under pressure to choose sides.
There are indications that there might be space for a settlement of some kind in Ukraine, but this will require long and complicated negotiations. The levels of trust and interdependence between Russia and Europe have been shattered. This war will force nations to re-evaluate the extent to which their economies are dependent on value chains and vital resources from others. It could spur economies to develop greater reliance on local manufacturing and sourcing. The West has become more united in its resolve to resist unilateral acts of the kind seen in Ukraine. It will also look at China’s future policies through a different lens.
The multilateral order underpinned by the WTO and related structures has been designed as a rules-based one where it is expected that the Member States will play by the rules and will do so across the board. Acts of aggression committed in violation of the United Nations Charter, even by a permanent UN Member, cannot be ignored. In an ideal world national security and globalisation were viewed as compatible and mutually supportive. The war in Ukraine has shown otherwise; additional values and obligations are required. Ultimately nations must be able to defend themselves. Most will require strong alliances in order to do so when the threats come in the form seen in Ukraine. The belief in globalisation as a comprehensive system will not be the same again.
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