Part II of the Special Series for Global Power and Leadership: a collaboration between WGI.WORLD (World Geostrategic Insights) and CGPS (Center for Global Peace and Security).
By Sunny Lee – Founder and President at CGPS (Center for Global Peace and Security), and Director at IKUPD (Institute for Korea-U.S. Political Development), Washington DC
As each country in international society has focused on its national competitiveness, economic power would be the most fundamental and critical factor confirming the marginal category between a developed and a developing country. For example, economic competence can be the main source to build all the subsequent structures to improve military capability with high techniques.
The Soviet Union collapsed due to an internal economic crisis, although Russia still maintains an unparalleled military power with the largest number of nuclear weapons. Subsequently, the communist bloc was completely demolished by a failed system of government. However, Russia and China have regained world power because Russia possesses huge natural resources and China has succeeded in reforming the economy through a policy of market opening. The increase in their economic leverage has driven their military expansion to become a world power.
The top priority of national competitiveness has been demonstrated in variable and challenging aspects. International society would mainly screw up with such a manic environment of trade war between the United States and China impacting the global economy as world symptoms. The economic war will not end sooner or later because the U.S. will never withdraw its policy of constraint to disrupt China’s bold enterprises unless China surrenders.
Moreover, the U.S. has faced multiple dilemmas in confronting not only China, but also the EU, BRICS and ASEAN, which strengthen economic power by challenging the U.S. for its national interests. These three economic affiliations are strengthening to counter the United States, which controls and dominates the world economy, maintaining its imperialist hegemony as the sole superpower.
The European Union, BRICS and ASEAN compete with the dogmatic policy of the United States by sharing common economic interests. However, each country would not really be free from the ambition and temptation of economic competitiveness as a critical factor in the struggle for hegemony. China’s economic exploitation spreads around the world and squanders global prosperity. Moreover, if China invades Taiwan, the economic environment around the South China Sea will be severely damaged, impacting world systems.
Therefore, economic leadership should be an inevitable prerequisite for global prosperity. The world should find the best way to overcome economic struggles with a win-win policy. Then, from developing country to developed country, economic leadership will go through global society to strengthen national competitiveness.
The United States and the Trade War with China
U.S. national strategy has focused on controlling China’s expansion through sanctions and varying economic regulations. The trade war between the U.S. and China, the two largest economies, involves an economic conflict that goes beyond military confrontation, and its consequences have been worse than real combat that purposefully kills countless innocent people. Such an inhumane war should be extinguished by abandoning the national ambition to gain economic hegemony. However, the trade war between the United States and China will never end and will harm each other as long as it lasts. Their national competitiveness could seriously decline or perhaps be a trigger for economic contraction.
According to IMF estimates, in 2024, world GDP (nominal) will be $109.52 trillion, including $28.78 trillion for the U.S. and $18.53 trillion for China, totaling 45 percent of the world economy. Ironically, while the U.S. and China largely dictate against each other and control bilateral trade flows, third countries are more likely to increase their exports to the U.S. and the rest of the world so that global trade increases overall. In this way, the trade war between the United States and China becomes so ridiculous that it dilutes the economic hegemony of two great powers and, conversely, leverages the trade of other countries.
The leapfrog phase of U.S.-China trade exploded after China joined the WTO in 2001 and China became the largest trading country in 2020. However, the U.S. government was increasingly concerned about the serious risks posed by Chinese government-controlled development. China would intentionally pour subsidies into targeted sectors, resulting in fatal damage to U.S. and foreign companies. Trump, very aggressive and indignant, finally imposed heavy tariffs on Chinese goods by adopting the “trade security theory” in 2018, which kicked off the new cold war; Biden also maintained the same policy with new variable trade restrictions.
However, the main turning point in the U.S.-China trade war occurred as a result of Covid-19, which hindered China’s economic recovery and frustrated Xi Jinping’s “Chinese dream.” In the end, China seems to be losing the war, and having national symptoms of economic collapse, in contrast, the U.S. foreshadows victory in hegemonic competence with China.
There is a critical clue as to how China initially provoked the U.S.-China trade war despite the U.S. trade deficit. China has often violated international economic regulations or norms against moral standards, pushing U.S. companies to hand over their technology or even stealing intellectual property. It would conduct variable criminal and illegal activities to deteriorate the U.S. economy by investing a gigantic amount of trade surplus. China has eroded its national morality and put a serious strain on the world trading system, so much so that most countries are anxious not to trade with China. At this point, China’s defeat in the U.S.-China trade war stems from the lack of global leadership compared to the moral standards of an economic superpower.
The EU and Europower
Since 1993, the EU has been a supranational economic and political union, with currently 27 sovereign states. Its 448 million inhabitants are estimated to make up 5.8 percent of the world’s population and to have generated a nominal GDP of $19.35 trillion in 2024, or about one-sixth of world GDP. The EU has been estimated to be the second largest economy in the world, before the BRICS started, and the third largest in purchasing power parity (PPP) with $26.64 trillion after China and the United States. In addition, social spending as a whole was 19.5 percent of GDP and 39.2 percent of total spending in 2022.
The EU’s outstanding economic performance was demonstrated by the power of the euro, which is the second reserve currency and the second most traded currency after the U.S. dollar. The euro is the official currency of the Eurozone countries and six other European countries and is the main source for strengthening economic affiliation. Euronext is the Eurozone’s main stock exchange, the fourth largest in the world by market capitalization, connecting European economies to global capital markets to accelerate innovation and sustainable growth. The EU’s major trading partners include the United States, China, the United Kingdom, Russia, Korea, India and Canada.
Nevertheless, the EU suffers from multiple disadvantages that hinder economic development.
First, there are different levels of economic advancement among member countries. The economic sacrifice required to equalize economic conditions prevents major countries from improving economic competitiveness. For example, public debt was 83.5 percent of GDP, with an extreme disparity between the lowest level, Estonia 18.5 percent, and the highest level, Greece 172.6 percent in 2022.
Second, member countries have different cultural backgrounds in terms of languages, religions, and racial and ethnic groups. Most member countries are in favor of maintaining their national identity, and the different national background prevents them from pursuing a solid relationship and close communication among members.
Third, each country focuses on its own national interests more than on the common development of members. Critical issues, including the debt crisis of Eurozone countries and increased migration from Africa and Asia, have prompted the UK to leave the EU in 2020, partly to avoid excessive national budget expenditures and responsibilities.
Despite all these obstacles, the EU is still the most idealistic association dedicated to the development of Europe. As a successful process, the EU has fulfilled its mission and role in trade relations with foreign countries and in protecting members from any invasion into European territory. To overcome the devastating economic crisis caused by the COVID-19 pandemic, EU leaders decided to create a common debt to finance the European recovery program, called the Next Generation EU (NGEU).
After Russia invaded Ukraine, the EU imposed heavy sanctions on Russia and agreed on a combined package of military aid funded through the off-budget instrument of the European Peace Facility. Although Ukraine is not a member state in the process, the EU has provided it with more than 88 billion euros in economic, humanitarian and military support and approved 50 billion euros for further financial support in 2024. The European Commission is also planning to use future revenues generated from Russian assets frozen in Europe to repay a €1.2 trillion loan from the seven-year budget.
The EU sends a delegation to the United Nations, WTO, G7 or G20 to drive global prosperity and security. The overall Human Development Index (HDI) among member states is relatively high and satisfactory. This global influence is extending not only to economic performance but also to the political, social and cultural spheres with a positive direction, which led to the award of the Nobel Peace Prize in 2012. The EU has surprisingly produced the second largest number of Nobel Prizes after the United States in the field of economics. It has been regarded as the most important role model for global society as it has successfully conducted its remarkable leadership beyond Europe.
BRICS and the Economic Challenge
Jim O’Neil, head of global economic research at Goldman Sachs Group, made a shocking prediction after the terrorist attack on September 11, 2001: China, Russia, India and Brazil, abbreviated BRIC, will be the most powerful economic countries to lead the world economy in 2050.
These four countries created the BRIC group in 2006, and South Africa joined in 2010, creating BRICS. Such fast-growing economic countries have a top priority in terms of natural resources, population and markets over a huge territory, so much so that they challenge the United States.
Although all BRICS members are developing countries, the members’ total GDP is worth more than $29.53 trillion and 31.2 percent of the global economy in 2023, higher than the U.S.’s $28.78 trillion. The BRICS, as the G20 countries, are keen to surpass the largest Western economy in the G7, leapfrogging it in 2040. Iran, Saudi Arabia, Argentina, Egypt, Ethiopia and the United Arab Emirates have been ratified as new BRICS members in 2023, and in addition, 16 new countries, such as Venezuela and Malaysia, have applied for membership.
As the most potential challenge to future globalization, however, there are insurmountable obstacles among members, which disrupt its prospective strategy and ambitious vision. Russia’s economy is severely damaged after the war in Ukraine, and China is struggling with the consequences of Covid-19. Although China and India have experienced remarkable economic growth rates, Russia and Brazil are exposed to a negative phase. In addition, China and India are long-standing enemies with military and political conflicts.
The worst-case scenario comes from struggles for hegemony, whereby global leadership becomes absolutely lacking compared to the G7, which is composed of countries advanced in economic quality and political system. The average HDI is also very low because the extreme economic development gap and national background based on different cultures and religions stimulate negative responses and conflicts instead of pursuing common outcomes. Despite the worst human rights conditions, pollution and environmental destruction, and corrupt government system, they mainly focus on military expansion through dictatorship.
Ironically, the BRICS group is very ambitious for emerging economies with greater influence in international politics, as the most important developing countries are members. It challenges the economic and political power of the richest countries in North America and Western Europe. For example, Iran, Saudi Arabia and the United Arab Emirates produce 44 percent of the world’s crude oil, which can shake the world economy itself.
Nevertheless, Western countries still dominate global economic groups such as the IMF and World Bank, which lend money to countries in economic crisis. In 2014, the BRICS countries also established the New Development Bank to lend money for the purpose of upgrading economic infrastructure. Surprisingly, it provided $32 billion to emerging countries to build new roads, bridges, railways and water supply projects by 2022.
However, Professor Padraig Carmody of Trinity College criticized this vicious plot that China aims to increase its power and influence in Africa and Eurasia through economic exploitation. Moreover, Russia sees the BRICS as a strategic headquarters against the economic sanctions imposed by the West after the invasion of Ukraine. Putin emphasizes the role of BRICS in the international financial system and cooperation among international banks. But his idea obviously stems from a desperate policy to overcome Russia’s economic crisis through the BRICS.
The BRICS countries strive to create a BRICS currency like the euro to replace the dollar and reduce the dominance of the dollar, which is mostly used for trade between members. However, the creation of a new currency for international trade payments or a cryptocurrency for international trade may be difficult to achieve due to the vastly different economic levels among members. Although the BRICS are larger than the United States in terms of economic size, it will be very difficult to overcome the strong influence of the United States in the world economy without a BRICS currency.
ASEN and Future Prospects
ASEAN is not competitive with the EU and BRICS, but its potential is enough to attract the world’s attention as the fastest growing economy in the world. If China attacks Taiwan and dominates the South China Sea, it will seriously damage the world’s trade-based economic system of ASEAN and surrounding countries. China may block international trade routes or impose additional costs in the South China Sea, eager to increase economic hegemony in this area.
ASEAN was established in 1967 in the Southeast Asian region to accelerate economic growth, social progress and cultural development among its members, as well as to promote regional peace and security and extend its influence and role in the world economy. Currently, however, the world focuses on economic interests rather than regional development as its initial goals. In particular, the United States takes a supportive position to limit China’s expansion into the Indo-Pacific region. If China succeeds in strengthening its influence in this area, the United States will lose the central part of the Indo-Pacific strategy and also reduce its world power.
ASEAN has conducted free trade agreements with many countries through ATIGA and AEC, and the 12 member countries have reached a total GDP of $48 trillion, 50 percent of the world economy.
Economic Power and Global Leadership
With the collapse of the Soviet Union due to the economic crisis, economic power takes top priority in defining a country’s national power. Although the United States has experienced several economic declines, its position as a superpower would not really be harmed or damaged because the United States can control the world economy as a leading country.
The GDP of the BRICS is higher than that of the United States, and that of the EU is higher than that of China, but they still cannot beat the United States or China. The EU and BRICS are economic groups that promote each country’s national interests. If conflicts break out between members, reconciliation may not be guaranteed unless they are willing to adjust the problems.
In addition, the U.S. and China, as a single sovereignty country, have focused on gaining economic hegemony based on their own national interests, so much so that they have entered into strong competition with each other. The United States will continue to fight China until it completely wins the trade war to maintain its superpower position, but the exact end point is still ambiguous.
Therefore, international society should reflect on why the EU received the Nobel Peace Prize in 2012. First, it has contributed to the advancement of peace and reconciliation, democracy and human rights in Europe. This means that the EU focuses not only on strengthening economic power, but is also dedicated to global peace.
ASEAN also focuses on regional prosperity and security through economic development and cooperation. The UN has ratified ASEAN as an observer, and the United States, Korea, Australia, New Zealand and India willingly join and encourage ASEAN’s variable activities beyond economic interests. In contrast, the BRICS have no prospects, despite their size and potential, because the major countries in the bloc try to expand their national power through economic leverage.
Economic power should be a priority for national competitiveness, but if a country tends to exploit it to strengthen national hegemony, it will surely damage global peace and prosperity and ultimately dilute its own national power. This is the case with the failure of China’s “One Belt, One Road” project, which led to China’s economic breakdown.
Sunny Lee – Founder and President at CGPS (Center for Global Peace and Security), and Director at IKUPD (Institute for Korea-U.S. Political Development), Washington DC. Sunny Lee is the author of 115 academic books in politics (original English and in German, French, Russian, Polish, Dutch, Italian, Spanish, and Portuguese). She is a bestseller writer not only in politics but also in literature on Amazon. Her recent book is titled: “The Influence on Humankind’s Peace through Korean Reunification: Creating new paradigm in social science by interdisciplinary research.”
(The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of World Geostrategic Insights).