International Economic Law Symposium: An Epilogue to the Rise of Emerging Powers in the 2010s–The Turn to Geoeconomics in the 2020s

[Henrique Choer Moraes is a Diplomat for the Ministry of Foreign Affairs of Brazil and a PhD candidate at the Leuven Centre for Global Governance Studies. All the views and opinions expressed in this article are the sole responsibility of the author and do not necessarily reflect the views of the government of Brazil.]

The book by Andreas Buser discusses how “economic powershifts toward some countries associated with the Global South” might account for “disruptions” that are part of “today’s crisis of international law” (p. 3-4). He turns his attention, in particular, to identifying “the extent to which rising powers, individually and as a bloc, provide alternative regulatory ideas (norms, principles and paradigms) and whether they are able to convert their increasing power into influence on global regulation” (p. 39).

As international economic lawyers seek to make sense of the nature and magnitude of the challenges redefining the field, Andreas Buser’s research offers a very useful contribution to understand one of the key transformations in contemporary world politics, namely the rise of emerging powers. The book competently explores a number of examples from the recent practice of global economic governance in order to discern whether and to which extent Brazil, China, India and South Africa have used their power attributes to influence the way economic regimes are designed and function.

In pursuing his investigation, Buser deserves credit for not falling prey to facile analyses that overlook the nuances present in the different stories encapsulated within the “rise of the emerging powers” debate. Accordingly, he duly acknowledges the differences of interests and foreign policies across the countries he studies. Furthermore, he does not shy away from casting a skeptical light on cases sometimes deemed successful victories for the “Global South”. At the same time, he rightly points out that there have been instances of genuine influence being exerted by emerging powers. Interestingly, not always have these latter cases gained adequate visibility. One case in point, which complements those alluded to by Buser, is the chapter on intellectual property in the MERCOSUR-EU Association Agreement, which, unlike most FTAs signed by the EU, barely covers the contentious area of patents–a non-negligible achievement in developing countries’ struggle to preserve the flexibilities of the TRIPS agreement.

In this post, I engage with Andreas Buser’s book by looking at what has followed the “rise of emerging powers”. The story recounted in the book has now moved to its next chapters.

I make the following claims: (i) it is by now clear that the most consequential development for global economic governance has not been  the “rise of emerging economies”, but the rise of China; and (ii) the terms in which the debate on the “rise of emerging powers” was organized have focused on aspects that, with the benefit of hindsight, have proved of debatable relevance to understand the way economic regulation evolved to the stage in which we are today.

China’s rise and the change in the logic underlying the global economy

While it is true that the rise of emerging economies is crucial to appreciate the challenges confronting global economic governance today,  this event is no longer the main story. Instead, a significant part of the transformations taking place in economic regulation is a reaction to the rise of China—surely a continuation of the rise of emerging powers, but a development which entails challenges of a different nature, as argued below.

(I recognize up front that the backlash against globalization witnessed in developed economies, with its associated domestic political impacts, is also part of this new chapter. But because it is only indirectly related to the topic of Buser’s book—and also in view of space constraints—I will not address it here).

It has been hard enough for international economic regimes to accommodate the challenges stemming from the increased clout of emerging economies. More often than not the effectiveness of decision-making within international regimes started to require the inclusion of actors whose preferences regularly diverged from those of the incumbents—leading, in turn, to frequent situations of “gridlock” (a notable exception being the first G20 leaders’ summits). In the wake of successive failed attempts to reach consensus in multilateral fora, developed countries opted to branch out international law-making to regional trade agreements; additionally, they have also sought to “de-politicize” decision-making by delegating standard-setting to “transgovernmental networks”, which are informal fora comprised of government and industry experts with limited membership (and limited accountability), in a move hailed as heralding a “new world order” despite its clear intent of bypassing multilateralism. These developments already represented significant hurdles to economic regulation at the global level.

Yet, the rise of China presents a challenge of a completely different nature to global economic governance and to international economic law, more specifically.

The period captured by Andreas Buser is one when, if anything, emerging powers were perceived as economic competitors to the incumbent powers. To be sure, already in this period concerns were being raised with respect to Chinese policies that amounted to discriminatory treatment in favor of domestic companies, in the form of, for example, subsidies or government procurement preferences. But in general these concerns were not of such magnitude as to override the commercial case for doing business with China.

More recently, though, as a result of policies rolled out over the years aimed at, among others, promoting “indigenous innovation” as well as spurring investors to “go global” and acquire assets that support Chinese industrial policies, China has successfully displaced incumbents in a number of industries—from solar panels to high-speed trains—or conquered important shares of the global market in a number of manufacturing or services sectors. The realization that most of the world significantly relies on Chinese supplies of medical equipment to combat Covid-19 is just one example of the crucial node China gradually became in production chains.

The increased transfer of economic capabilities from the incumbent powers to China highlighted vulnerabilities in the former that brought the China question to a new level. The calls by the current Chinese leadership for “self-sufficiency” in specific sectors only reinforced the perception of these vulnerabilities.

From the perspective of the major economies, therefore, China came to be viewed not only as an economic competitor, but also as a “systemic rival” (EU) and a “revisionist power” (US)—many other countries, while not necessarily giving labels to China, are behaving in a manner not dissimilar to the US and the EU.

In short, what followed the “rise of the emerging powers” is a new chapter featuring China as a security and strategic challenge to the incumbent powers. While the other emerging economies still continue to be perceived only as economic competitors, China’s rise is seen as a source of security and strategic vulnerabilities. This change in perception moves the China debate away from the predominantly economic terms in which emerging economies have been framed during the period captured in Buser’s book. This debate now incorporates non-economic elements as well. Reliance on supplies from China is perceived as not only an economic issue, but a strategic one (or a security risk, depending on the good or service in question).

What this means for global economic governance going forward is that, from a theoretical standpoint, international economic relations are likely to veer away from the liberal world of market-led interdependence that has prevailed in the past decades, towards somewhere closer to a state-led realist world. A world of states actively seeking to retain strategic economic capabilities—this is the domain of geoeconomics.

Viewed from the angle of concrete policies, it is this geoeconomic logic that explains, among others, the adoption or reinforcement of investment screening mechanisms in the past years and the calls for rolling out industrial policies in the US as well as the push for the EU’s “technological sovereignty”. Most of these measures are avowedly reactions to China’s own geoeconomic policies (as mentioned earlier). And the result, which is unfolding before our eyes, is that global economic governance is being reshaped in a way which is still not entirely clear. It is understandable that analyses may be distracted by the noise generated by the Trump administration in the US, as Buser does in his conclusions. But the global—albeit gradual—dissemination of geoeconomic measures should serve as a strong signal that the logic underlying economic relations is shifting.

Rethinking the terms of the debate on the rise of emerging powers

The way in which China is rising as a key player in the global economy also invites us to reflect on the debates that took place in the wake of the “rise of emerging powers”. Two debates in particular—both addressed in Andreas Buser’s book—are worth considering, namely the “conformist-reformist-revolutionary” nature of emerging powers; and their capacity to become rule-makers, instead of rule-takers. Did these debates help us better understand the stage in which we are today?

As Buser mentions, China has taken a distinctively low-profile in international economic fora until recently. In general, Brazil and India are the ones depicted as rule-makers. And yet there is no denying that the most significant changes brought about in economic regulation are those arising from China’s policies, either within or without the established international regimes. For instance, China is now the world’s largest subsidizer of agricultural products, despite not having played a key role in proposing rule changes to the WTO’s Agreement on Subsidies nor claiming to be revolutionizing the subsidies regime. As Kristen Hopewell thoughtfully observes, this development is disrupting the dynamic of the debate on agricultural subsidies, traditionally organized along a North-South divide. How much has the “rule-maker” metrics helped us anticipate this kind of transformation?

Similarly, the debate whereby emerging powers were categorized as conformists, reformists or revolutionaries left a number of nuances unaddressed. If one observes China’s positions once again, it does not seem clear whether it seeks to reform or transform the economic order as it stands. In fact, it could very well be argued it is by and large comfortable with the way economic governance is currently set up, by which I mean both the existing rules and institutions as well as their gaps. But the main thrust of the debates and policy proposals today is to assess whether the order as it stands is fit for purpose, and this is a point overlooked when we seek to understand the rise of emerging economies in terms of their conformist-reformist-revolutionary nature.

From the perspective of the incumbents, the economic order as it stands is certainly not fit for purpose—as evidenced, for example, by the proposals of the Trilateral group (US, EU and Japan) on topics such as subsidies, state-owned enterprises and forced transfers of technology. In an ironical demonstration that the conformist-reformist-revolutionary debate might have been a distraction away from other more relevant developments, as we look to the current multilateral agenda it is difficult not to conclude that the “reformists” (or maybe even “revolutionaries”) are now the incumbents, not the emerging powers.

How we got here and what’s next

It is impressive how much world politics has changed since the period of the rise of emerging powers covered by Andreas Buser’s book. China has clearly stood out from the group of countries that successfully carved a more autonomous space to navigate the global economy. Surely it is necessary to develop an understanding of the new geoeconomic logic redefining the economic order. Still, Buser’s research remains a valid contribution to shed light on how we got where we are and what might follow.