“Globalization is almost dead. Free trade is almost dead,” said Morris Chang, founder of Taiwan Semiconductor Manufacturing Co (TSMC), where 90% of the world’s most advanced chips are produced.
In October, the Biden administration rolled out extensive restrictions on China’s access to advanced semiconductors that Taiwan makes and, on the equipment, used to make them, which the Netherlands makes. The US also barred the sale of any semiconductor-related tool made anywhere in the world that used any US-made component to China. US citizens and residents were disallowed to work with Chinese semiconductor companies.
This is a complete reversal of post-Cold War ‘globalisation’ that aimed to make the world an integrated global village, wherein interdependence of specialised geographic locations would create a balance of power that would push countries towards cooperation and prevent war. Having semiconductors ‘designed’ in the US, ‘fabricated’ in Taiwan, with ‘tools’ made in the Netherlands, and then sold to China for ‘packaging’ into appliances, was a perfect example of globalisation. Everyone depended on each other, and every link was indispensable for the others — so what would it look like if China was suddenly cut from the equation when China had been purchasing $350 billion worth of chips from Taiwan every year. It would look ugly for China, but the same for Taiwan and Netherlands who are now cut from their key marketplace! The US argument that China has been using advanced chips in its military industry, so cutting it off will prevent it from making advanced military systems that it can use against the US in case of war is legitimate — on the supposition that China will invade Taiwan and the US, and its allies will come and fight a battle for Taiwan! But one might wonder, why would China invade Taiwan, when they’re both in a working relationship, with China buying over 42% of Taiwan’s exports and selling it 22% of its imports. Perhaps it would if Taiwan stops selling that 42% to China at the behest of the US!
And that is something the US is eagerly waiting for and preparing for. US General Mike Minihan, head of Air Mobility Command told his officers a few days ago, that the ‘US will be at war with China in two years’, because ‘China will invade Taiwan by then’.
What does this tell us about neoliberal globalisation that was rehearsed day and night by the Western capitalists; and that is being suddenly abandoned the moment its fruits started hanging low in the east. The US, in its primadonna, has switched to a protectionist, economic nationalism, asking all its allies to pay the price needed to appease it, by severing ties with the world’s fastest-growing economy, so that the US can resume its primacy in a world where it is increasingly being made irrelevant.
The price the allies are paying is high! Ukraine is already at the front, and the allies are forced to send all their ammunition and weapons to Ukraine. Ukraine’s economy shrunk by 35% in one year of the war, and its infrastructure is in ruins with 8 million people displaced, jobs disrupted, and homes destroyed. What will Europe do with such a Ukraine, if and when Russia retreats? Zelensky has hinted to his western allies that Ukraine will need $750 billion to rebuild post-war, but where will an inflation-hit Europe bring that money from? And before that happens, the US would want drained-off Europe to jump into its China War too.
The US might have supposed that by keeping Putin engaged in Ukraine, Russia’s artillery would be consumed by the time they attack China. But it forgot that everybody, friends and foes, are in the same recession pool. The global GDP is projected to be at least US$2.8 trillion lower in 2023.
The US also forgot that whenever it plays a gross move against its opponents, they reciprocate with more moves. This happened after the Gulf War when the US cut off Iraq from its satellite support, and the Republican Guard was defeated in a couple of days. The world was alarmed, and everyone rushed to make their own Global Positioning System systems. The same will be done in the case of semiconductors now. China will be forced to accelerate work on all four specialised components of this industry and will try to defeat US’ idea that China will never be able to catch up with it. This is human nature, the more you squeeze a section of humanity, the more it finds the power to rethink, reorganise and retaliate.
However, this reshuffling and divide will cost humanity four times the cost paid in this previous globalised setup and the world will be more divided and compartmentalised and will be forced to fortify itself more for confrontations. We know that no one wins a trade war, nor does anyone win a military war, the only victory achieved is the destruction and destabilisation of your enemy. And those who seek profits in the destruction of others, are vultures! That is why France’s TotalEnergies holds all oil and gas contracts in Iraq right now, and that is why Italy’s ENI has just struck an $8 billion gas deal with Libya. So, does the new world order mean destroying a country you want to do business with? Can the same formula be tried on Russia and China too now?
It’s not so wise for the US to think so, because if the US can sever the silicon market for China, maybe Russia being a member of OPEC+ can tap the oil and gas market. Saudi-US relations have already been tottering since the US absconding from the Syrian front, but it has simply dropped down like a façade after Ukraine! First, in October, the Saudis led OPEC+ to cut production by 2 million barrels per day, so that the price could be kept high. In December, President Xi visited Saudi Arabia to sign $29 billion worth of trade deals and now, Kremlin has stated that Putin and Mohammed bin Salman have discussed politics, trade, economy, energy, and OPEC+ ‘to ensure the stability of the world oil market’.
Geopolitics seems to be in complete befuddlement at this time, war fever seems to be going up the scale. It seems that humanity never had the chance to reap the fruits of globalisation, because the underlying harmony, goodwill and acceptance needed for that, are things humanity has never been good at!
Published in The Express Tribune, February 3rd, 2023.
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