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Turkish President Recep Tayyip Erdoğan seems to have changed course on his country’s foreign relations. At the last NATO summit in Vilnius, Lithuania, he finally lifted his veto on Sweden’s proposed membership in the alliance; but his agreement is still incomplete as it requires the approval of the Turkish Parliament. And Erdoğan has apparently made parliamentary approval contingent on the US Congress approving his country’s purchase of F-16 fighter jets, which many assume may now be a done deal. Moreover, during the talks on Sweden’s accession, Erdoğan reiterated Turkey’s desire to join the European Union (EU) and hoped for a revival of the long-dead EU membership process. Prior to the Vilnius summit, Erdoğan further showcased his foreign policy outreach by hosting Ukrainian President Volodymyr Zelenskyy in Ankara, signaling support for Ukraine in its ongoing war with Russia.  On the domestic front, Erdoğan has formed a new cabinet that signals better relations with the West, as the most ardent anti-western member of the previous cabinet, former Interior Minister Süleyman Soylu, has been left out. Additionally, the president aims to instill confidence in western markets by appointing respected figures like Mehmet Simsek as economy minister and Hafize Gaye Erkan as Central Bank governor. These appointments are seen as positive signals of an effort to strengthen economic ties with the West. This series of moves has triggered the hope, especially in western circles, that Turkey could return to the western fold and that Turkish-Russian relations will cool in parallel. However, pessimists, who see Turkey’s departure from the West as a done deal, disagree and are right to believe that Turkey’s relations with both the United States and European countries have fundamentally changed. It is no longer possible to go back to the early 2000s when Erdoğan was steering the country toward EU membership. The EU has no intention of admitting Turkey; but even if it did, the process would not be in Erdoğan’s favor. Nor is it possible to go back to the Cold War era, when Turkey was firmly embedded in the western geopolitical system. Turkey no longer sees Russia as a threat or an adversary in the sense that most western countries do. The fact that Turkey has resisted approving Sweden’s NATO membership for more than a year and that it will only do so in exchange for the delivery of F-16s shows how badly damaged Turkish-European and Turkish-American relations truly are. Therefore, pessimists point out that rather than signaling Turkey’s return to the West, the whole debacle proves how problematic and transactional Turkish-western relations have become. But these analysts overlook the fact that Erdoğan is pushing for a reorientation in foreign policy, and in his relations with the West in particular. This reorientation started long before the most recent presidential elections in May; but the president’s victory gave him a stronger hand to reboot his foreign policy, which is not aimed at bringing Turkey back into the West’s orbit, but rather at building better functioning relations with it. Turkey’s Departure from the West Turkey’s divergence from the West has taken place at the level of both political values and geopolitics. Over the last decade, Turkish democracy has been in serious decline. Especially after the transition to a hyper-presidential system in 2018, which eliminated all checks and balances in the political system, Turkey’s has become an increasingly autocratic regime. Turkish foreign policy has also become increasingly militarized, much to the chagrin of western capitals. Not only has Turkey used its military power in Syria, Iraq, and Libya but it has also deployed its navy to the Eastern Mediterranean, aggressively threatening the sovereignty of two EU countries: Greece and Cyprus. These aggressive policies were backed by an expansionist naval doctrine called Mavi Vatan (Blue Homeland), whose ideology has disturbed western policymakers. The naval officers who created and developed the Blue Homeland concept never concealed their pro-Russian leanings and deliberately propagated an anti-American and anti-western narrative. These officers, and the political circles associated with them—dubbed Eurasianists in Turkey—have become an integral part of Turkey’s ruling coalition. Turkey’s purchase of S-400 missiles from Russia took place in such a context and represents the culmination of Turkish-American tensions. Turkey’s autocratic turn at home and its militarized foreign policy, which often work against the interests of its western allies, were simultaneous and mutually-reinforcing processes. But said foreign policy reached its limits toward the end of 2020. Turkey became regionally isolated with an overextended military, and its aggressive foreign policy, the rise of authoritarianism, and the subsequent decline of the rule of law plunged it into a protracted economic crisis. This economic downturn began to undermine Erdoğan’s meticulously-built power, as evidenced by his party’s defeat in the 2019 local elections. Unable to sustain autocratic rule, anti-westernism, and an aggressive foreign policy all at the same time, Erdoğan began to seek a new direction. The essence of the new approach is to maintain his authoritarian rule at home while becoming a less confrontational actor in foreign relations. Reorientation in Foreign Policy This reorientation began first in the Middle East, where Turkish authoritarianism was never going to be a cause for concern. Turkey began to mend fences with Israel, Egypt, Saudi Arabia, and the United Arab Emirates, while at the same time aligning itself with the emerging Abraham Accords framework in the region. While accommodating western geopolitical interests, Turkey’s relations with Iran began to enter a more confrontational phase. One of the main motivations for this regional restructuring was economic: Turkey continues to receive significant form of foreign investment from Gulf states. Another motivation was geo-strategic: Turkey hoped that normalization with Israel, and to a lesser extent with supposedly pro-western Arab regimes, would help ease tensions with the United States. While reconciling with its Middle Eastern rivals, the Erdoğan administration was also looking for opportunities to curry favor with Washington and increase its own importance in the eyes of the Biden administration. One of the early opportunities came in the summer of 2021 after the US withdrawal from Afghanistan when Turkey immediately stepped in and offered to take over the protection of Kabul International Airport. This initiative earned Erdoğan his first personal meeting with Biden. However, the unprecedented rapid collapse of the Kabul government prevented Ankara from using the Afghanistan front as a base to build its relations with the United States. A second opportunity arose in February 2022 when the Russian invasion of Ukraine began. New Opportunities for Erdoğan The war in Ukraine has had contradictory effects on Turkey’s foreign policy and on Turkish-western relations. On the one hand, it increased Turkey’s strategic value and facilitated its reengagement with the West. On the other hand, it created additional difficulties as western countries demanded that Turkey sever its ties with Russia, a demand that Turkey rejected. Erdoğan ultimately managed to spread the idea that perhaps it would be better for everyone if Turkey remained relatively neutral. Erdoğan’s personal ties with Putin and the complex and highly interdependent Turkish-Russian relations placed Turkey in a special position among NATO countries. Turkey therefore tried to maintain a pro-Ukrainian line without being anti-Russian. So far, Erdoğan has managed to maintain this seemingly paradoxical position. Turkey has given full military support to Ukraine, and especially in the early days of the war Turkish drones were vital for Ukraine’s defense. To be sure, this support was better than that of many European countries. Politically, however, and while condemning Russia’s occupation of Ukrainian territory since 2014, it has not joined in imposing sanctions on Russia, and the two countries have maintained good diplomatic relations. Erdoğan clearly enjoyed his balancing role. His policies during the Ukraine war have earned the Turkish public’s respect and helped, at least indirectly, in his reelection as they contributed to his image as a world-renowned statesman. Turkey also enjoyed the economic benefits of its being Russia’s main economic outlet. Not only did Turkish-Russian trade increase, but Putin lent a helping hand in the run-up to the elections by agreeing to delay Turkey’s natural gas payments and depositing much-needed foreign currency in the Turkish Central Bank. Erdoğan justified this unique position by emphasizing his mediating role between Ukraine and Russia and between the latter and the West. In this context, securing the grain deal was a particularly important achievement that helped Erdoğan justify his balancing act. Now the deal appears to be in tatters, raising questions about his ability to maintain his role as mediator. The Turkish president has also raised eyebrows in Moscow by recently hosting President Zelenskyy and increasing his support for Ukraine’s NATO membership. He even tested the Kremlin’s nerve by allowing Azov fighters to return to Ukraine with Zelenskyy, an apparent violation of a prisoner swap deal brokered by Turkey. Despite all this, Erdoğan wants to stick to his original position and continue to play the role of mediator. He is counting on the fact that Putin currently cannot afford a falling-out. Erdoğan has already indicated that he expects to host Putin in Turkey in August for a one-on-one meeting, although so far the Russian side has not confirmed the visit. Russia’s reaction to Turkey’s recent moves, such as ratifying Sweden’s NATO membership and supporting Ukraine’s NATO membership, has also been rather mute. Therefore, Turkey’s pivot to the West does not mean that it will cool its relations with Russia. Erdoğan realizes that the longer he maintains his balancing role, the stronger his hand will be with both the West and Russia. A Revitalization of Turkey-EU Relations? If there is no going back to the Cold War era, there is also no returning to the early 2000s, when Turkey was pushing for EU membership. Despite surprising everyone by rekindling the dormant EU membership process ahead of the Vilnius summit, Erdoğan’s move is unlikely to breathe life into Turkey’s EU accession aspirations. This is primarily due to the fact that EU membership would not align with the president’s personal interests, as it would necessitate a higher standard of the rule of law that might curtail his currently unchecked and absolute authority in the country. The accession process revolves around aligning a nation’s internal standards with EU norms, known as the community acquis. Consequently, becoming an EU member would demand a transformation of Turkey’s domestic political system, which currently concentrates power in Erdoğan’s hands. Given this, how should Erdoğan’s statements on revitalizing the EU process be interpreted? Part of the explanation has to do with his transactional style of policymaking. A master of brinkmanship and bargaining, Erdoğan often raises demands and stakes just to get a better deal. This is why Turkey’s foreign policy disputes are often resolved at the 11th hour, as is still the case with Sweden’s NATO membership. But these tactical moves also reflect Erdoğan’s genuine desire to improve relations with the EU. It is important to note, however, that Erdoğan does not necessarily want Turkey to be inside the EU; he simply wants to do business with it. The EU remains Turkey’s primary economic partner, and Ankara has long been demanding a modernization of the Customs Union agreement with the bloc to boost its trade. Moreover, better relations with European countries are expected to be instrumental in attracting much-needed foreign investment. Gulf money has only carried Turkey so far, and to solve its deep economic problems it is necessary to attract the financial power of the West. Thus, Erdoğan wants more engagement with Europe on the economy, defense, security, and refugee issues, but not in the context of EU membership. In fact, the refugee deal signed between Turkey and the EU in 2016 was designed precisely around the idea that Turkey is not and will not be part of the EU. Accordingly, Turkey continues to block the movement of refugees toward Europe in exchange for financial assistance from the EU. The bloc has recently concluded similar agreements with North African countries, aiming to externalize its refugee problem. For this cooperation with Turkey to work, Turkey needs to be outside the EU, not inside it. Thus, Turkey’s desire to create better working conditions with the EU is emblematic of the nature of its reorientation toward the West. Furthermore, western capitals seem increasingly willing to respond positively to overtures made by the Turkish President. Western Reaction to Erdoğan’s Moves It is not only Erdoğan who has changed his position; the West has also changed its approach to him. Biden and other western leaders were distancing themselves from Erdoğan in anticipation of his loss in the presidential elections. Biden did not invite him to Washington and did not visit Ankara, despite Turkey’s growing importance in the context of the Russia-Ukraine war. Knowing how much Erdoğan values personal meetings, Biden used them as leverage to resolve stalemates like the one over Sweden’s NATO membership. Moreover, having learned Erdoğan’s style of politics over the years, western leaders successfully avoided becoming his punching bag ahead of the elections, as former German Chancellor Angela Merkel did during Turkey’s 2017 constitutional referendum. To achieve this, they followed a policy of ignoring rather than supporting Erdoğan. But when the elections were over and he was set to rule Turkey almost single-handedly for another five years, western leaders rushed to congratulate him. It is also becoming much easier for the West to work with Turkey on a geostrategic and security level. For the United States, Turkish-American security cooperation is shifting from the Middle East to the Black Sea. Turkish-American relations in the Middle East have inevitably taken on a more political and ideological character, with the two countries’ different threat perceptions and respective approaches to the Kurdish issue and to Kurdish actors in northern Syria remaining the biggest challenge in bilateral relations. In contrast, Turkey and the United States are more in agreement on the Black Sea. Moreover, within the Pentagon, EUROCOM’s approach to Turkey is much more friendly than CENTCOM’s, and has a better track record of cooperation. For Europe, Erdoğan’s commitment to the migration deal makes him a valuable partner, especially given the growing anti-immigration stance of the Turkish and European publics. Moreover, Erdoğan’s preference for working with the EU but for simultaneously not genuinely pushing for membership in it fits well with European policies. The EU and Erdoğan are more in agreement on their common desire to keep Turkey out but to simultaneously build better working relations. Overall, it seems clear that Erdoğan is eying a new reorientation in his foreign policy. At the moment he is at the height of his power at home and does not need to use the West as a punching bag for domestic political gains. Furthermore, economic conditions and regional developments are compelling him to lean more toward western powers. As a result, Turkish foreign policy is poised to take a new direction. Nevertheless, any improvement in relations will likely be limited to the geostrategic and economic realms and will not encompass a realignment of political values. Without common political values, the result will be significantly improved but will remain transactional between Turkey and its western partners. This paper was originally published by Arab Center Washington DC. Republished with permission. © Arab Center Washington DC, October 2023.

Good morning.  I want to thank Speaker Kevin McCarthy, my friend Speaker Kevin McCarthy, for this occasion he gave me. I want to say that I’m very glad to be here in the heart of the American democracy and in the place that Thomas Jefferson, at the time Secretary of State of President George Washington, wanted to call Capitol Hill to commemorate the famous Temple of Giove on the Capitoline Hill, il Campidoglio - one of the seven hills of Rome. And I say it for it is another sign of the incredibly strong ties between Italy and the United States, ties that have become even deeper in recent times after the Russian war of aggression against Ukraine. More than ever, in this international juncture, our relations are essential. More than ever, we must be able to rely one on the other. Today we had the occasion to exchange views on many international issues, from the war in Ukraine and its effects worldwide, in particular regarding food security, to the stabilisation and development in the Mediterranean area, moreover in Africa, the Indo-Pacific, and Italy’s next Presidency of the G7. I was glad to have this debate with representatives of Congress because it gives me a complete picture of the foreign policy landscape from representatives elected by the American people. I’ve been in politics for most of my life and I’ve been a member of parliament for many, many years, so I perfectly know the importance of parliaments in democracies. That’s why I’m so grateful to Speaker Kevin McCarthy, whom I had the pleasure to meet already in Rome a few months ago, and to the representatives I met today, for the time they wanted to spend with me.  And last but not least, I’m happy to be here in a place decorated by these wonderful frescoes of Costantino Brumidi, another Italian, for this place represents and sums up also the stories of all the Italian-Americans who, with their lives, with their efforts, with their dreams, with their creativity, contributed to strengthening the bonds between our two peoples and contributed to make this democracy the great democracy it is. So, I want to say that I’m proud of these Italians, I’m proud of your grandfather too, Kevin, and I really want to thank them for the contribution they brought to the history and the culture and the identity of this nation. Many of them are today representatives and that shows the role Italy has had for the history of the United States, and that is one reason more to continue strengthening our relations, our cooperation, our friendship, particularly in this tough world, in this tough situation.  Many things are changing around us, but there is something others didn’t expect that we should perfectly prove: that the Western world is united and wants to defend the world based on rules, for without a world based on international law, we would live in a world of chaos, in which who is militarily stronger thinks he can invade his neighbour. That’s not the world we want to live in; we want to live in a world in which we can respect sovereignty and freedom. Thank you very much.

President Herzog, Mrs. Herzog, Ambassador Nides and Virginia,and Taylor, and Taylor's boyfriend,Senator Rick Scott,Speaker of the Knesset,Mayor of Jerusalem,and so many dear friends, Tom, you started your words by remembering an evocative moment, when you were 14 years old in Ein haShofet. Well, somewhat younger than that, I had an evocative moment right here, on this hill top. It was barren. There was no Israel Museum. There was the Monastery of the Cross, olive trees. A barren hilltop except one tree, a balut tree. And we, the Jerusalem kids, would band in the valley and we would try to reach, undetected, to the top, to the tree. Reach the target. I say that because right now, well, last night, Israeli soldiers tried to reach, undetected, the most legitimate target on the planet: people who would annihilate our country. And because this Fourth of July in this extraordinary place falls on an extraordinary moment, Ladies and gentlemen, on behalf of the Government and citizens of Israel, I wish to send my warmest greetings to President Biden and the American people as we join in celebrating their Independence Day. And as Prime Minister, I wish to express my deep appreciation and gratitude for America's enduring support for Israel. For 75 years, the United States has been our irreplaceable and indispensable ally. Irreplaceable. Indispensable. Eleven minutes after our birth, and at vital junctures throughout our history, America has provided Israel with moral and political backing against those committed to wiping us out, to wiping out the one and only Jewish state. No less important, for nearly half a century, America has given generous military assistance to Israel, helping provide us with the tools, the tools we need to defend ourselves by ourselves. Decade after decade, our two countries have moved closer together. I'm proud to say that today, security cooperation has never been better, intelligence sharing has never been deeper and our alliance has never been stronger. I have long said that Israel has no better ally than America, and I say to you, America has no better ally than Israel. I'm confident that Israel's importance to the United States will become even clearer in the years ahead, as we work together not only to protect our common security, but also to develop the most advanced technologies that will reshape the 21st century. They will decide who leads the world. And Israel is America's vital partner in that effort. Ladies and Gentlemen, on July Fourth, all democratic countries should remember that the decisive event that ensured the rise of freedom in modern times, has been the rise of the United States of America. Time and again, America defeated the forces of totalitarianism and terror. Yet we should also remember a basic truth: Freedom is precious, and it's never free. It often requires firm and decisive action against those seeking to spread terror and imperil free societies. I remember that truth every Fourth of July, because that is the day my brother Yoni fell, commanding the rescue force at Entebbe. Today, on the eve of another Fourth of July, Israel's soldiers, once again, find themselves fighting forces of terror. Late last night, the IDF launched a comprehensive action against terrorist strongholds in Jenin. In recent months, Jenin has become a safe haven for terrorists. From that safe haven, terrorists perpetrated savage attacks, murdering Israeli civilians, men, women and children, as many children as they could find. As I speak, our troops our battling the terrorists with unyielding resolve and fortitude, while doing everything, everything, to avoid civilian casualties. I have no doubt that as Israel exercises its inherent right of self-defense, the United States will stand firmly by our side. And I also believe that in the months ahead, Israel and America will work closely together to thwart the danger posed by Iran and seize the opportunity to expand the circle of peace. Ladies and gentlemen, tonight is also an opportunity to thank outgoing US Ambassador Tom Nides for his service and for his friendship towards Israel. Thank you Tom. During your tenure here, you've demonstrated that your support for Israel comes both from the head and from the heart. On a personal level, I will say I'll miss your candor, your wit, your humour and your friendship. No matter what you do, what you decide to do in the next chapter of your life, know that Israel will always be your home away from home. And as you've said many times, quoting President Biden, we are mishpuche. So on behalf of your Israeli family, let me wish you a happy Independence Day. Happy Independence Day America.  God bless America and God bless our valued and unshakable alliance. 

Silvio Berlusconi, Donald Trump, and Boris Johnson have recently been in the spotlight. Berlusconi's passing has drawn attention due to his long and controversial personal and political life. Trump is facing a new and potentially perilous legal prosecution. Johnson, on the other hand, has been excluded from a return to the forefront of politics by a committee within his own party, at least in the near future.  All three will be remembered as prominent figures of political populism, a conservative current that primarily but not exclusively offered an alternative to the weakened traditional conservative right. They also presented a challenge, to a lesser extent, to centrist liberalism and social democracy, both of which were undergoing an identity crisis. While there are differences among them, all three were "mass seducers," capable of attracting millions of voters without necessitating trust in their words or actions, regardless of the credibility of their policy proposals. Berlusconi and Trump had scandal-ridden private lives characterized by exaggerated, even exhibitionist, philandering and machismo. Johnson has been somewhat more discreet, but he can hardly be considered a champion of the decency demanded by his conservative base. His actions, even during the pandemic, have led to his current ostracism. Johnson has been the most articulate, educated, and socially privileged among the three, coming from an elite background and rising within the ranks of the Conservative Party. In contrast, Trump and Berlusconi emerged from a state of political obscurity. Trump later colonized the Republican Party, transforming it and, some argue, leading it towards destruction. Berlusconi, on the other hand, disregarded the established post-war party, Christian Democracy, which he deemed corrupt, ineffective, and obsolete. He built something new with highly populist traits, exemplified by the rallying cry of Forza Italia!, appealing to football fanatics. While it maintained its brand for 30 years, its decline appears to have reached its lowest point, as it is now the weakest force within the right-wing coalition, trailing behind Fratelli and Lega with barely 20% of the MPs among the three factions. Each of them has been a product of their respective times, like any political leader. However, all three have also been game-changers, agents of change during their era. Trump upended the political system in the United States, altering the balance within the two-party system, reshaping the dynamics of the conservative electorate, and simultaneously exposing the flaws within American democracy. Berlusconi dismantled the system of the First Republic, which revolved around a binary dynamic between the dominant Christian Democracy (DC) in government and the Italian Communist Party (PCI) as the permanent opposition. A minor game consisted of various companion parties (socialists, social democrats, liberals, and republicans) aligning with the dominant party. Il Cavaliere disrupted the delicate balance of this pentaparty system of the Center-Right with a new political culture or rather, the absence of any political culture at all. He applied show business principles to public administration, treating his party as a personal company, driven by the goal of success. Trump did not go as far as Berlusconi. He lacked the talent, patience, and management team that the Milanese businessman possessed. Both individuals had opaque, suspicious, and potentially fraudulent businesses, but to varying degrees and extents. Additionally, they operated within different legal and political environments, albeit under the umbrella of capitalism. They shared the ability, with the help of pseudo-informational media (owned by Berlusconi in the Italian case and manipulated in Trump's New Yorker case), to obstruct, influence, delay, neutralize, or render judicial investigations ineffective in the medium and long term. Both were or have been elusive figures in the political circus they orchestrated around themselves. Johnson, on the other hand, reshaped the political landscape but relied on an existing base. His intention was not so much to transform the rules as it was to exploit them to his advantage. Even Brexit, which many consider his significant achievement, was not originally his project. He appropriated it, infused it with his personal touch, and made it a pivotal factor in the UK's most consequential strategic shift in 50 years. Berlusconi has now become a part of history, or is on the path to doing so. His state funeral has been deemed inappropriate, and the obituaries, as is often the case, tend to either overly praise or justify his fraudulent political career. He was never a statesman but rather a swindler who knew how to exploit the weariness, fatigue, disbelief, and cynicism of an electorate that was at its wit's end. Few believe that Forza Italia will survive the death of its founder. Johnson finds himself once again in a state of uncertainty (not for the first time), facing reprimand from his own party members and being disregarded by the Prime Minister, to whom he once granted the influential position of Chancellor of the Exchequer, overseeing the Kingdom's finances. Such rough-and-tumble politics is not uncommon within the Tory world. Even someone of greater stature, like Margaret Thatcher, fell victim to similar episodes of apparent betrayal, disloyalty, and abandonment. Trump is inching closer to a return to the forefront, despite facing intense legal scrutiny in various cases related to fraud, tax evasion, mishandling of sensitive public documents, obstruction of justice, political conspiracy, and more. The outcomes of these ongoing court cases are likely to turn into a spectacle with evident electoral implications, provided he can maintain control over them, which is no small feat. The numerous rivals who have emerged in recent weeks to challenge him for the Republican nomination do not seem to possess sufficient substance. Trump's greatest adversary is himself. However, his greatest advantage is also himself, as he possesses the ability to connect with a sizable segment of the population that remains unmoved by the hollow discourse of the political elite on democracy and values. These three great tenors of populism have served as inspiration for lesser local figures, with different backgrounds and similar political styles. It is worth clarifying that not all those who deserve to be labelled populist in the media are similar or assimilable. Confusion is frequent. Within the right-wing political landscape in Europe, several key themes prevail among these figures: - national primacy. - a rather outdated form of patriotism. - almost absolute rejection of immigration. - a very traditional conception of the family - demagogic interventions in the liberal economy. However, they are divided by a fundamental dispute: relations with Russia. Two clear groups emerge:  1. The Identitarians, who have maintained a cooperative and non-confrontational relationship with Putin. This group within the European Parliament includes figures such as Marine Le Pen in France, Lega Salvini in Italy, AfD in Germany, Flemish Vlaams Belang in Belgium, and xenophobic factions in Finland and Denmark, among others. Trump could also be placed within this group, although his ideological formulations are not well-defined.  2. Conservative nationalists, staunchly anti-Russian. This is particularly true for the ultra-nationalists in former communist countries, with Poland's Law and Justice (PiS) party at the forefront (excluding Hungary's Orbán, who maintains a cordial relationship with Putin). This group includes NVA in Belgium, the far-right VOX in Spain, Greek ultra-rightists, Swedish xenophobic factions, and more recently, the far-right nationalists under Giorgia Meloni. Johnson's coexistence with this group was not necessarily his own choice, as the Tories were already integrated into the European Parliament group that brings these parties together, known as the European Conservatives and Reformists, before he became the party leader. Berlusconi, being as flexible on the international stage as he is in business, managed to avoid affiliating Forza Italia with either of the two nationalist currents. Instead, he secured membership in the European People's Party (EPP), which made no secret of its position. The EPP did not make any concessions to Victor Orbán's FIDESZ until it had no choice but to initiate an expulsion procedure against him, which ultimately had no effect as Orbán decided to leave the group voluntarily. If Berlusconi had not been admitted to the EPP, he would have likely aligned with the identitarian faction, which maintains a friendlier stance toward Russia. To provide an idea of the strength of nationalism in Europe, the ultra-conservative branch comprises 66 MEPs, while the identitarian branch consists of 62 MEPs, totaling 125 seats. In comparison, the People's Party has 177 seats, and the Socialists have 143 seats. However, when combining the votes obtained by both nationalist factions in the most recent national elections held in each EU member state, it becomes evident that the two nationalist factions have garnered the largest number of votes, surpassing 48.7 million votes. This total is nearly 700,000 votes more than the conservative liberal or Christian Democrat parties within the European People's Party. The Social Democrats trail behind with over 42.2 million votes. 

Pivot to Asia - The Global South is on the march in their attempt to reshape the international system. How will this new order impact the old world? An increasing number of countries from the Global South, especially in Asia, are pushing to redefine the current global order. Three key trends to watch in this attempt to reshape the international system are the (potential) creation of a new economic order, the expansion of the BRICS grouping, and the transformation of China-Russia relationship after the invasion of Ukraine. In this changing international balance, Europe is losing its influence in the Global South, including in Asia. After centuries of global predominance, Europe’s strongest legacy is its role as a major normative power in global affairs. However, this reputation as a rule-setting power is set to change.   Why it matters 1. A (new) economic order. The debate over a “new Washington Consensus” has gained momentum after US national security advisor Jake Sullivan delivered a speech at the Brookings Institution on April 27th. The final communiqué by the G7 countries which met in Hirosahima on May 19-20 is the result of a similar strategic shift within the group, one that implies a move from economic interdependence to economic security. This shift is coupled with a major change in how the G7 intends to deal with emerging economies, such as their rival China and other partners in Asia that might soon become economic competitors in critical technologies. The G7’s sentiment has moved from promoting globalization and open markets to building industrial capacity in critical sectors, while securing existing and creating new strategic supply chains. Europe’s efforts in this context might not be enough: the investments envisaged so far are too little to reverse Europe’s dependency (often on China) in critical sectors. The EU must focus increasingly on diversifying its supply chains through securing access to rising economies in the Indo-Pacific. Here, joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could represent an opportunity.  2. BRICS+? The BRICS foreign ministers’ summit in June was yet another steppingstone toward enlargement. The countries that expressed a significant interest in joining the grouping are Iran, Saudi Arabia, the United Arab Emirates, Cuba, Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan: all these countries sent their representatives to Cape Town. Egypt, Argentina, Bangladesh, Guinea-Bissau and Indonesia participated virtually. While the membership process might be a long one, the group’s upcoming expansion highlights the Global South’s political will to rise its voice, with a plethora of actors eager and able to leverage the new competition between powers which is shaping up after the Ukraine war. In this framework, Asian countries such as China and India are competing with one another to lead the BRICS.   3. China and the Stans. On May 19, Xi Jinping met in Xi’an with the (leaders of) the five Central Asian “Stan”-countries (Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan). Russia, the region’s traditional kingmaker, was noticeably absent. The meeting kickstarted – for the first time offline – a summit named C+5 and highlighted Beijing’s belief that it can now make deals within the region without Moscow’s supervision. China’s newfound independence in Central Asia and Moscow’s growing dependence on Beijing after the war in Ukraine provides new insights the on China-Russia relationship: although the two countries are united by their common desire to contest the US-led world order, the Sino-Russian relation seems increasingly tilted in China’s favor. This instable relationship could result in a stronger Chinese presence in Central Asia.  4. Loss of strategic centrality. Europe does not only risk becoming increasingly peripheral in world affairs, but also losing its bargaining power with the emerging Indo-Pacific economies. On the one hand, the EU needs to diversify its supply chains away from China and likely towards the ASEAN; on the other, the Global South – and by default its Asian members – is more aware of the current strategic window of opportunity to redesign the global balance of power.   Our take We are witnessing rapid changes in the international arena. In the coming months there will be increasing requests to review global norms. Therefore, the leading event will be the upcoming BRICS Summit in August: the meeting will probably certify the process to accept new members. Among the countries that are voicing their desire to reset the rules, some are considered by the West (mainly) as rivals, such as China, and as partners, like India. Therefore, Washington and Brussels cannot simply accept or dismiss their requests. Asia is claiming its century: the integration of this claim for a renewed global order into the current world order has just started. Its most important implications will be on the economic side, namely the redistribution of industrial capacity and trade relation in the context of de-risking from China.  Spotlight: G7  The G7 Hiroshima Summit has sent some clear messages to the rest of the world. The decision to invite President Zelensky to the gathering was a move meant to reinforce the unity of the members regarding the Ukraine invasion in the face of Russia — and China, too. The West has criticized China’s 12-point position paper on the Ukraine war, since it does not call for Russia to abandon occupied territories. The G7 countries have also announced a strengthening of the sanctions, seeking to curb products that could be used by the Russian military. The other important takeaway of the G7 is the joint statement directed at China, which includes a strong criticism of Beijing’s “economic coercion” and invites the PRC to play according to international rules. The G7 have also reiterated their position on divisive topics such as security in the Indo-Pacific and Taiwan, retreating their commitment to preserve peace and stability in the region. Despite the joint statement and the declarations by the leaders on the challenges posed by China, the G7’s stance on Beijing is still a balancing act. While concerned about being overly vulnerable with China, G7 economies and their industrial base remain strongly interconnected with the Asian country and despite calls for “de-risking”, such as cutting China out from some sectors like raw materials, it is impossible at the time.  Experts’ viewsThe implications of China’s activism among the BRICS countries  The next BRICS Summit will take place at a critical juncture for the Global South. Russia is still at war, Brazil has a new administration eager to flex its muscles globally, and China has reached unprecedented influence across the developing world. Since they are all connected by the same desire of multipolarity away from US and Western hegemony, it is likely that the BRICS will try to offer a roadmap towards a new international order. This roadmap, however, is far from consensual: will Russia embrace the peace dialogues offered by Brazil or African nations – and what role will China play in brokering any such proposal? Will China and the other BRICS be able to cooperate economically to promote development worldwide? Are the BRICS ready for its first enlargement, and who is most likely to join in the coming years? This arrangement will require some mutual concessions and the outcome will help shape the future world order.  Guilherme Casarões, Fundação Getulio Vargas  The push to strengthen and even expand the BRICS, especially by China, should be viewed more broadly through the lens of a pragmatic Chinese foreign policy. It has not only sought to strengthen ties within BRICS but with other regions and countries who are instrumental for its trade and infrastructure connectivity imperatives.  This happens against the backdrop of a shift towards a multipolar world order with China as a rising power and rising geo-political tensions. Given that this bloc advocates for issues that are relevant to the Global South (global governance reform, support for a rules-based international order and multilateralism in times when countries retreat to unilateral measures), it is no surprise that other countries in the South wish to join. Regarding this summit, I see no major implications for the bloc, the core business of the BRICS will continue with South Africa advancing its five priority areas. However, we can anticipate a discussion on its formal expansion. Trading with local currency seems to have found new impetus following the sanctions placed on Russia. All this notwithstanding, it is important to note that the ‘de-dollarisation’ in trade debate is not a new concept for BRICS and its less about challenging the dollar but strengthening other currencies against external economic shocks. The real test is for the host country depending on whether President Putin attends the heads of state summit in August, given Pretoria’s obligations under the Rome Statute and domestic law.  Luanda Mpungose, South African Institute of International Affairs (SAIIA)  China’s push for a stronger BRICS on the global stage is advancing along a number of trajectories. Firstly, there is the BRICS expansion as well as the BRICS+ format that are likely to bring the majority of the Global South into BRICS-related platforms of economic cooperation. The implementation of the BRICS+ format may serve as a precursor for liberalizing trade across the Global South and exploiting the potential for boosting South-South trade and investment ties. The expansion in the membership of the Shanghai-based New Development Bank as well as the creation of its regional centers will increase the scope for connectivity projects across the developing world. There is also the greater use of national currencies (most notably the yuan) via de-dollarization as well as the R5 BRICS common currency project that if launched would mark a key transformation of the global financial system.  Yaroslav Lissovolik, BRICS+ Analytics   What and Where Thailand is ready to Move Forward   The May elections in Thailand resulted in a clear victory for the opposition parties. Led by Pita Limjaroenrat, Move Forward has won 152 seats, becoming the most voted party in the elections. This party is the heir to Future Forward, which was dissolved by the military government in February 2020, and was born out of the 2020-2021 protests against the army and the monarchy. The second party in the country is the historic Thai opposition party led by the Shinawatra family, the Pheu Thai. However, while the population has expressed its preference, there is no guarantee yet that Move Forward, and the opposition, will govern. Indeed, to be elected Prime Minister, and form a government, Pita will need to win the majority in the bicameral parliament made up of the elected 500 seats in House of Representatives and the 250 seats of the Senate – whose members are handpicked by the military. The Move Forward coalition with Pheu Thai and the other opposition parties so far can count on little more than 310 votes, a long shot from the majority needed to govern. The opposition must garner support among the senators – which generally have little interest in going against the military that put them in power – or among the parties that have yet to declare their allegiance.  Cambodia: Hun Sen is getting rid of the competition ahead of July elections  On the 14 of May, Cambodia’s opposition party – the Candlelight Party – has been disqualified from running in the upcoming July elections by the country’s election commission. The party has allegedly failed to submit the necessary documentation to participate in the electoral race. With the exclusion of the Candlelight Party from the coming elections, the only possible competitor to the ruling Cambodian People’s party (CPP) of PM Hun Sen – who has been in power for 38 years – has been eliminated. This is not the first time that the main opposition party has been cut out of the electoral race. For instance, in the 2017 the Cambodian court, which is heavily colluded with the CPP, dissolved the Cambodian National Rescue Party (CNRP) before the 2018 general elections – a party that was given new life when its members created the Candlelight Party. However, the members of the opposition continue to be persecuted by Hun Sen’s forces with many political exponents arrested on charges of treason, assaulted, or forced to leave the country. With the opposition forces largely depleted and the main party banned from running for elections, Hun Sen is likely guaranteed another term.   The United States seeks to expand influence in the Indo-Pacific  Washington took advantage of two key international events to strengthen its strategic position in the region. During the Quad Leaders’ Summit, which took place on the sidelines of the G7 in Hiroshima, President Biden, Australia’s PM Albanese, PM Kishida of Japan and PM Modi of India stressed their unity and stated their plans to invest in digital infrastructure in the region. Throughout the meeting they did not mention China directly in their statements, but their references to the country were clear. The Quad expressed concern over the militarization of the region and the use of both economic and military coercion to alter the status quo – a clear reference to Chinese activity in the South China Sea. Another important step for the US to consolidate its position in the region is the announcement of the Supply Chain Agreement under the framework of the Indo-Pacific Economic Framework for Prosperity (IPEF). The agreement includes the 14 IPEF partner countries, namely Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, the US, and Vietnam. A year following the launch of the IPEF, this agreement is the first practical measure undertaken by the group. The group did not announce any official trade commitments, there is expectation among partners for increased cooperation and monitoring of supply chains fragility. The concrete development is still unclear, but the agreement signals the need for Indo-Pacific countries to avoid supply chain disruption and to minimize their dependence on the region’s main economic player, China.  Semiconductors: China fires back   China has gone on the offensive in competition over the semiconductor sector. The Cyberspace Administration of China (CAC) has stated that products by Micron, the US largest memory chip maker, are a “security risk for the information infrastructure supply chain” barring infrastructure operators from buying them. While additional information has yet to be revealed, some negative impacts are expected for Micron even if China and Hong Kong accounted for only 16% of the revenue of the company in 2022. The measure is a retaliation to America’s effort to cut China out from the semiconductor sector and slow the development of its industrial base. Since October 2022, the Biden Administration has imposed strict controls over chips export, followed by the Netherlands and Japan, preventing China from accessing and producing more advanced semiconductors. China’s declaration comes also after the leaders of the G7 grouping released a statement criticizing the country’s economic coercion tactic. After the move from Beijing, Micron fears that their products will be replaced by South Korean competitors, Samsung and SK Hynix, on the Chinese market. In the rising technological row between the US and China, there is also fear that Beijing might choose to put some export controls over other sensitive technologies, such as solar panels – where China dominates the whole supply chain.    TREND: Despite rate hikes, Asian unemployment is faring well (but not for everyone)  In the current context of high inflation and high rates, unemployment has turned out to be one of the main socio-political issues of Asia. With skyrocketing prices hurting businesses and consumers, many central banks in the West have adopted more hawkish monetary policies during the last year. Yet, the soaring cost of money has forced many businesses into a tight spot with concerning consequences on the employment level. Some countries though – like Japan, China, and Indonesia – have made the unorthodox choice to not significantly raise rates during the last year, while others – like South Korea and India – have adopted similar policies to those of the FED and the ECB. However, the results vary. In Japan the unemployment rate has been quite steady at around 2.6% for some time now, but in China the range (5.2-5.7%) was wider, especially due to the uneven nature of the post-Covid economic recovery. Yet, as the economy is slowly returning to normal, Beijing’s unemployment rate is gradually decreasing. Meanwhile Korea has consolidated a positive trend, with the last available figure at 2.5%, but the reforms of the labor market proposed by President Yoon Suk-yeol may cause some issues. The critical indicator though will be youth unemployment. Employment in aging societies, like those of East Asia, will increasingly become a core issue to maintain the viability of existing social welfare programs. So far China has a staggering 20.8% unemployment rate in the 16-24 years old age group which is particularly concerning, as it is the 7.2% recorded in South Korea. Japan is faring quite well but unemployment in the 25-34 years old age bracket has risen since the beginning of the year from 3% to 4%.

Officials from the United States and India occasionally have some difficult private conversations about Ukraine and India’s domestic politics. But the official state visit this week by Indian Prime Minister Narendra Modi to the U.S. will mainly be about showcasing the strength of the two countries’ burgeoning partnership.   Modi and President Joe Biden both need the optics of a visit rich in symbolism to demonstrate the substantive achievements of a relationship based on shared concerns about China and multi-billion dollar deals in technology and defense. Modi wants to highlight his standing as a world leader ahead of the 2024 Indian election. Biden wants to underline that, contrary to the criticism of some, he does have a plan to deal with China’s rise and the U.S. has lined up partners and allies to execute that plan. Indian prime ministers have been regular visitors to Washington D.C. since India’s independence in 1947. But Modi’s visit is only the third time an Indian prime minister will be given official state visit protocol, including a state banquet at the White House on June 22.  The fifth Indian prime minister to address a joint session of Congress, Modi will be the only Indian leader to do so for a second time. Indians will be thrilled by the attention given to their prime minister, and the speeches about shared values and similar strategic vision of the world’s oldest and largest democracies will play well in the Indian media.  But the visit will not be about just pomp and show. Trade in goods and services between India and the U.S. reached $190 billion last year and the U.S. is now India’s largest trading partner. Companies from the two countries have made significant investments across borders and Indian and American enjoy close people-to-people ties. Moreover, the U.S. is keen to “friendshore” with India to deal with the threat America sees in China’s rise, and to ensure supply-chain resilience. This involves shifting the manufacturing of certain critical components from China to friendly countries, especially India. The U.S. is funding Indian technology startups and infrastructure projects from its $200 billion Partnership for Global Infrastructure and Investment (PGII) Fund.  India, as the world’s most populous country, represents a large potential market for U.S. companies currently reducing their Chinese presence. When Air India, India’s largest airline, decided to purchase 220 Boeing aircraft in a $34 billion deal, Biden celebrated, saying it “will support over 1 million American jobs across 44 states, and many will not require a four-year college degree.” U.S. aerospace and military industries have wanted a greater share of the Indian market for years.  This January, India and the U.S. announced the launch of the U.S.-India Initiative on Critical and Emerging Technologies (iCET) to the pave the way for “technology value-chain partnerships that would lead to co-development and co-production of high technology products and services in both countries,” in the words of National Security Adviser Jake Sullivan.  During a recent visit to Delhi by Secretary of Defense Lloyd Austin, a defense industrial roadmap was unveiled, reflecting an American willingness to share state-of-the-art technology with India. But India wants to build an indigenous defense industry and is keen on American technology and investment, while the U.S. wants India to stop purchasing military equipment from Russia and buy more from the United States. Historically, that divergence has resulted in announcements that have not always resulted in implementation.  For the Modi visit, the two sides have planned two key defense related deliverables: the purchase by India of 30 General Atomics-manufactured Predator or MQ9B Sea Guardian drones for $3 billion, and an agreement between General Electric and Hindustan Aeronautics Limited to coproduce GE-F414 turbofan engines for India’s indigenous Tejas Mark-2 fighter jet. India and the U.S. have a long way to go before reaching the $500 billion mark in bilateral trade, which experts see as the future potential of the trade relationship. Americans blame India’s default preference for protectionism, reluctance to offer a level playing field to domestic and foreign players, strict digital privacy rules, and historical skepticism towards free and open trade. Indians complain that America is used to allies who are junior partners, not a country that is not an ally and wants to be treated as an equal. India is not alone in that view in an era when several powers want recognition and are showing a preference for economic and technology partnerships, rather than military alliances.  India is not a treaty ally of the United States, but a partner that prides itself on its strategic autonomy and one that has reservations about how it was treated by U.S. officials in the past. The closest equivalent of that in U.S. experience from the Cold War era would be France under the Gaullists. But just as the U.S. overcame its reservations about real or perceived French prickliness in the interest of preserving the Atlantic Alliance, Americans realize the importance of India in their plans for maintaining a rules-based international order.

The escalating geopolitical competition has placed the US and China at odds. Both sides need to stabilise their relationship given the role they play in world affairs. US National Security Advisor, Jake Sullivan, met for over eight hours over two days last week with Chinese Communist Party Politburo Member and Director of the Office of the Foreign Affairs Commission, Wang Yi, in Vienna. The meeting, which had not been publicised by either side before the talks, has been seen as a part of an effort by both countries to stabilise their relationship which is perhaps at its lowest level in recent decades. Both sides have been locked in a steadily escalating geopolitical competition, even as they have close and intense economic linkages and a joint interest in dealing with several global and regional affairs. They are locked in opposing sides on issues like Ukraine and Taiwan, and a slow-motion decoupling as US companies diversify away from China and earnings of US companies in China are falling. Both sides used identical language to describe the outcome of the meeting. A White House readout noted that the talks featured “candid, substantive and constructive discussions on key issues of US-China bilateral relationship, global security matters, Ukraine and Taiwan. A Chinese readout used the same terms “candid, in-depth, substantive and constructive discussions” on ways to “remove obstacles in the US-China relationship and stabilise the relationship from deterioration.” Wang laid out the Chinese position on Taiwan, Ukraine and other regional issues. Speaking on background, a US official said that both sides saw the balloon incident as being “unfortunate” and were now looking to “re-establish standard, normal channels of communications.” Two days before the Sullivan-Wang meeting, US Ambassador Nicholas Burns met China’s Foreign Minister Qin Gang in Beijing. According to Qin, a series of “erroneous words and deeds” by the US had put the relationship between the two powers on “ ice” but stabilising ties was the top priority for both countries. Burns said that he and Qin had discussed “challenges in the US-China relationship” and the necessity of “stabilising ties.” The US is in a delicate balancing act with regard to its China policy. In recent years, American policy has shifted from engagement to competition and even containment. In the wake of the US-China trade war, and the first wave of US technology restrictions on Chinese firms like Huawei, there was talk of a “decoupling” of the two economies. The Chinese crackdown in Hong Kong and the post-Pelosi visit tensions over Taiwan have deepened the divide between the world’s two foremost powers. In 2021, Biden had told Xi of the need “to establish some common-sense guardrails” to ensure that the two do not get into an inadvertent conflict. Last November following their summit meeting in Bali, Biden said that “I am not looking for conflict, I’m looking to manage this competition responsibly” At the meeting, Xi called Taiwan “the first red line” that must not be crossed in China-US relations. This was to be followed by a visit of US Secretary of State Antony Blinken to Beijing, but that was called off last minute because of the balloon episode. Blinken met Wang at the Munich Security Conference later in February, but there was little forward movement. It may be recalled that last October, the US government put in place extensive new restrictions on China’s access to advanced semiconductors and the equipment used to make them. These restrictions were layered upon earlier decisions to restrict semiconductors to entities like Huawei and ZTE. Earlier this year, the US further tightened restrictions on the export of semiconductor manufacturing equipment to China. It coordinated with the governments of the Netherlands and Japan to tighten the guidelines. More recently, it has made it clear that it will restrict the actions of chipmakers who get funds under the CHIPs and Science Act. These restrictions are part of Washington’s effort to secure the supply of components that are needed for AI and supercomputers, as well as everyday electronics. In March came harsh signals from China. Speaking in March, President Xi Jinping for the first time named the US and said that it was in a policy of “comprehensive containment, encirclement and suppression against us.” The next day, the new Foreign Minister Qin Gang was more explicit. He slammed the US for equating the Ukraine issue with Taiwan and said that the “so-called ‘competition’ by the US is all-round containment and suppression a zero-sum game of life and death.” He warned that if the US “does not hit the brakes and continues to speed down the wrong path, no amount of guardrails can prevent derailing, and there will surely be conflict and confrontation.” In April, senior American officials have been trying to calm the turbulent waters. Last month, speaking at Johns Hopkins University, US Treasury Secretary Janet Yellen said that decoupling would be “disastrous” and that US goals relating to national security were not aimed at stifling China. She called for a plan of “constructive engagement” with three elements—national security of the US and its allies; an economic relationship based on “fair” competition; and cooperation on urgent global challenges. The Yellen speech was a comprehensive take on US approaches to China and struck what The New York Times said was a “notably positive tone” after months of tensions between the two countries. A week later, the tenor of her remarks was underscored by the National Security Advisor, Jake Sullivan at a speech at the Brookings Institution. Sullivan used the term “de-risking”, a term used earlier by EU Commission President Ursula von der Leyen: “We are for de-risking and diversifying, not decoupling,” he noted. Sullivan had earlier described the US policy of technology restrictions on China as creating a “small yard, with a high fence.” Now officials like Blinken, Yellen, Commerce Secretary Gina Raimondo and Secretary of Defence Lloyd Austin are trying to schedule meetings with their counterparts, but the going has been tough. According to Financial Times, the Chinese are reluctant to have Blinken visit because they were worried that the FBI may release the report based on the salvaged debris of the balloon. As for Austin, the problem is that his newly appointed counterpart General Li Shangfu is under US sanctions since 2018 in relation to Chinese imports of Russian arms when he was serving as a general. The US says that a meeting in third countries would not be affected by the sanctions, but it is unlikely that the Chinese will agree. General Li was appointed defence minister in March. With the tightening of the Western alliance in the wake of the Ukraine war, the US has sought to incorporate the European Union into its China project. Shortly after his three-day visit to China, French President Emmanuel Macron said in reference to Taiwan that Europe should not get caught up in crises “that are not ours”. Europe should try to be the “third pole” in the world order and that the need for Europe’s “strategic autonomy” was now accepted. But Washington points to a 30 March-speech by European Commission President Ursula von der Leyen where she said that it was neither viable nor in Europe’s interest to decouple from China, adding “We need to focus on de-risking—not decoupling.” She added in blunt language “The Chinese Communist Party’s clear goal is a systemic change of the international order with China at its center.” She added that it was there was a need for European companies to ensure that their “capital, expertise and knowledge are not used to enhance the military and intelligence capabilities of those who are also systemic rivals.” Just how much of the messaging from the US about the China relations is sincere, and how much of it is aimed at reassuring nervous allies who feel that Washington’s policies could have a negative impact on them is not clear. But Washington’s agenda remains clear. Speaking last week in Japan, where she is attending the meeting of G7 finance ministers, Yellen called for “coordinated action” by G7 nations against Chinese use of “economic coercion” against other countries. She also said that Washington has been considering the imposition of additional “narrowly targeted restrictions on outbound investment to China,” and that these have been discussed with other G7 partners. She said these would be targeted at technologies “where there are clear national security implications.” But as of now, it does appear as though the two sides are trying to create what David Ignatius called “a framework for constructive engagement.” There is some optimism arising from the detailed discussions that Sullivan and Wang held in Vienna which, as we note were described by both as “candid” and “constructive”. Both sides perceive the need to stabilise their relationship given the role the two countries play in world affairs. With the US going into election mode, it is not clear how long this period where the two sides are trying to work out a new modus vivendi will last. Engagement with China could become a political liability in the US where, if there is consensus on one issue, it is that of a hardline on China. World and New World Journal does not take positions on policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of World and New World Journal. 

In order to ‘walk, chew gum, and play chess’ at the same time, the US will have to both invest at home and sign more trade deals. A speech late last month by Jake Sullivan, President Biden’s national security adviser, on “Renewing American Economic Leadership” clarified that the administration wants to build resilience to “de-risk” from China. But dealing with Beijing will require more than investing at home. Washington also needs to re-engage in negotiations with China to manage difficulties in the bilateral relationship. And to better compete, the United States should get back into the business of signing trade deals. As Trade Representative Katherine Tai quipped during her 2021 confirmation hearing, the United States can “walk, chew gum, and play chess” at the same time. The Biden administration should not only invest in domestic resilience, but also participate in new trade agreements and negotiate directly with Beijing. Over the past two years, China joined the Regional Comprehensive Economic Partnership (RCEP), began acceding to the Digital Economy Partnership Agreement (DEPA), and applied to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). China’s integration into these new frameworks will create efficiencies in its own economy, while binding Beijing closer to the rest of Asia. Meanwhile, the United States does not expect to see the first “real outcomes” from the Indo-Pacific Economic Framework (IPEF) until the end of 2023, more than one year after its announcement. IPEF, moreover, lacks the market-access agreements characteristic of other, more substantive economic agreements. It is not surprising, then, that the 2023 Lowy Institute Asia Power Index ranks China 100 out of 100 on its “economic diplomacy” index, while the United States receives a ranking of only 34.6. The 2023 State of Southeast Asia survey similarly shows that only 21.9 percent of respondents view the United States as a leader in championing free trade, down from 30.1 percent in 2022. To be fair, Beijing has significant ground to cover before its markets become as free and as open as those in the United States. What many trade partners care about, however, is not where China and the United States have been, but where they are going. To many, it appears as if Washington is turning inward while Beijing continues to open its markets. This leads to the second error in Jake Sullivan’s “new consensus” on international economic policy. He expresses fatalism about China’s economic trajectory without giving credence to the possibility that China may change, or that the United States can play a role in influencing Beijing’s behavior. Sullivan explains, when “President Biden came into office, we had to contend with the reality that a large non-market economy had been integrated into the international economic order in a way that posed considerable challenges.” In response, Sullivan focuses on building domestic “resilience” and “capacity” to reduce America’s dependence on China. Washington appears to have given up on addressing the non-market practices contributing to U.S. dependence on China in the first place, including state subsidies and dumping. The administration also seems to have forgotten that access to low-priced imports is an important factor in the competitiveness of U.S. firms and the standard of living of American consumers. Fatalism about China’s trajectory tracks with the Biden administration’s overall Indo-Pacific Strategy, which does not seek to “change the PRC but to shape the strategic environment in which it operates.” Fortunately, Treasury Secretary Janet Yellen has bucked the trend by stating that she hopes to “engage” with Beijing “in an important and substantive dialogue on economic issues.” Not trying to influence Beijing, on the other hand, would give up an essential element of any effective China policy. Of course, prior negotiations were by no means unqualified successes. The Trump administration’s “phase one” trade deal largely failed to change Beijing’s behavior, in part, because the bilateral purchase agreements effectively, as Yukon Huang and Jeremy Smith of the Carnegie  Endowment for International Peace put it, “prescribed state-managed trade over market forces.” Other negotiations, however, have seen more success. Former Treasury Secretary Hank Paulson was able to persuade Beijing to revalue its currency by more than 20 percent in the late 2000s, helping to level the trade relationship. China’s WTO accession negotiations also moved the needle on the country’s economic policy. While Beijing failed to carry out many of its WTO commitments, China did reform key aspects of its economy and, notably, slashed its average tariff level from 15.3 percent in 2001 to 9.8 percent over the next decade. U.S. policymakers should learn the lessons of past negotiations rather than standing by as U.S.-China economic relations deteriorate further. One way to pressure Beijing to continue along the path of reform and opening up would be to carry out negotiations in concert with U.S. friends and allies. The Trump administration gave up significant leverage by dealing with Beijing bilaterally, outside the parameters of the international trade system. Plurilateral negotiations with U.S. partners — many of whom share U.S. grievances — may be more effective at convincing China to change course. The consequences of not having an effective economic dialogue with Beijing will become more apparent over time. Despite Washington’s wishes, China is simply not going away. Beijing will continue to join new trade agreements and integrate itself deeper into the global economy, even as the United States focuses on building resilience at home.

With relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. Five years ago, then president Donald Trump launched a tariff-fueled trade war with China designed to reduce the bilateral trade deficit. His successor, President Joe Biden, then added a decoupling focus by restricting high-tech exports and curtailing professional and financial links. Both wanted to reduce imports of manufactured goods and bring home more jobs. How should one judge the effectiveness of their policies? Back then, and even more so today, the logic of Trump’s fixation on trade deficits made little sense. But security concerns have now become the rationale for reducing America’s trade relations with China and undercutting China’s growth potential. Against these yardsticks, the results are mixed but on balance unconvincing, given the costs in the form of inflationary pressures, repressed export growth, and a projected decline in global output. But U.S. politicians from both parties strongly support these restrictive measures because the costs are not obvious to their constituents, while the benefits from appearing to be tough on China resonate well with voters. Rising trade deficits The recent U.S. Census Bureau data indicate that the politically sensitive U.S. merchandise trade deficit with China was larger in 2022 than when Trump became president, while America’s overall trade deficit hit an all-time high of $1.18 trillion. This reinforces the views of nearly all the economists surveyed at the launching of Trump’s trade war: that the tariffs would not reduce U.S. trade deficits and the costs would be paid largely by Americans. For the Trump administration, the wild card was the “phase one” purchase agreement, which called for an increase of $200 billion in China’s imports from the United States. But state-to-state purchase agreements have no logical basis when global trade is largely shaped by the market-driven decisions of firms and consumers and subject to unpredictable events such as the coronavirus pandemic. Economic principles tell us that how much a country saves and spends determines its trade balance. The combination of Trump’s large tax cuts and Biden’s huge expenditure initiatives has led to soaring budget deficits, which are mirrored in record trade deficits. All this has little to do with China. Yet the Biden administration still insists that China honor the purchase agreement and links the removal of tariffs to its fulfillment. Asking China to honor an agreement that made no sense to begin with as a condition for dropping another equally ineffective policy defies logic. Trade diversification but increasing import dependence on other countries But this focus on bilateral trade numbers overlooks the sharp decline in China’s share of trade with the United States. Whereas China accounted for 47 percent of the U.S. trade deficit in 2017, it accounted for only 32 percent last year, with most of this decline offset by the increasing shares of other East Asian economies. Europe’s share of America’s overall trade deficit also declined from 21 percent to 18 percent. Only Canada and Mexico, via the United States-Mexico-Canada Agreement (USMCA), were able to increase their share from 11 to 18 percent. More insights can be gleaned from looking at the components of trade. Although the value of U.S. imports from China was essentially the same in 2022 as it was in 2017, total U.S. imports increased by about $900 billion during this period. As a result, China’s share of the total, made up largely of manufactured goods, fell from 22 to 17 percent. This decline, however, did not reduce America’s dependency on imports of manufactured goods. The share of imports relative to overall expenditures on manufactured goods rose steadily to 34 percent in 2022 from 23 percent two decades ago. The decline in China’s share of U.S. imports of manufactured goods was more than offset by imports from other countries, notably Mexico and Vietnam. These two developing countries, more than others, were able to import heavily from the United States based on their locational advantages and free trade agreements. Vietnam and China share a border and are linked by the ASEAN-China trade agreement, while Mexico and the United States also share a border and are linked by the USMCA trade agreement. Less noticed, however, is the behind-the-scenes role that China plays in supplying the components and materials for these other countries’ exports to the United States. Most of Vietnam’s increased exports were in product lines where U.S. imports from China fell, such as computer accessories and telecommunication equipment. China’s exports to Vietnam have more than doubled since 2017, and its trade surplus nearly tripled by 2022. China’s exports to Mexico increased by nearly 30 percent last year, on top of a 50 percent increase in 2021. China may be exporting less to the United States directly, but it is now indirectly exporting more. This explains why China’s share of global manufacturing production has continued to increase from 26 percent in 2017 to 31 percent in 2021. As for U.S. exports, the total averaged about $1.5 trillion from 2017 to 2020 but then jumped to $1.9 trillion in 2022. But this increase was not in manufactured goods but in exports of energy products and chemicals to Europe, spurred by the Ukraine crisis. The trade war did little to expand U.S. exports to China, the share of which fell from 8.4 percent in 2017 to 7.5 percent in 2022. Costs and benefits of decoupling According to one study, U.S. firms were handicapped by tariff-related higher costs of their imported inputs, and coupled with China’s retaliatory tariffs, this resulted in U.S. exports to China being 23 percent lower than they would have been in the absence of the trade war. The consequence is that America’s trade war policies generated very little growth in exports of manufactured products, despite the priority given to those policies by both the Trump and Biden administrations. If the purpose of the U.S. punitive actions toward China was to weaken China economically, there is no clear evidence of that happening. By developing alternative export markets and tapping pandemic-driven demand in the West for manufactured goods, China pushed its share of global exports to record levels in recent years. Meanwhile, China’s imports as a share of its GDP have been declining steadily, from a high of 28 percent in the early 2000s to 17 percent in 2022. One could argue that the world has become more dependent on China in trade while China has become less dependent on the world. The benefits of decoupling—if any—should be weighed against the costs imposed on U.S. consumers and producers and damage done to the export competitiveness of U.S. firms. To counter such tendencies, the Biden administration is promoting domestic manufacturing with subsidies in the Inflation Reduction Act. Such actions can be justified for strategic reasons, but the rationale is weakened by protectionist Buy America conditions. U.S. policymakers often counter by pointing to China’s use of subsidies to promote strategic industries, but Chinese firms were keen to import key technologies and components to ensure that their products were globally competitive on cost and performance grounds. The recent semiconductor and other U.S. restrictions on China’s access to high-tech products are also problematic because these products are “dual use,” with a much larger commercial market relative to military applications. Such restrictions hurt the many U.S. firms that derive significant revenues from selling to China and may contravene World Trade Organization guidelines. The costs of trade-related distortionary policies can be substantial. One oft-cited study estimates that taxpayers end up paying about $250,000 for each job saved in typical Buy America programs. At a broader level, a recent International Monetary Fund study estimates that a combination of U.S. trade and technological decoupling measures could reduce global GDP by some 7 to 12 percent. Ultimately, the problem lies in the lack of clarity on U.S. policy objectives. What does it mean to undercut China, and how will the United States know if it has succeeded? With U.S.-China relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. The reality is that the United States and China have no choice but to continue trading with each other. But with security overriding commercial considerations, the economic interdependence built up over decades is now being reversed, leaving everyone worse off.

​Although the dollar continues to be the dominant global currency, Russia and China could dent this dominance. In the aftermath of global financial exclusion, Russia has had to make some strategic adaptations. The West’s sanctions had crippling consequences, and the Kremlin scrambled to find alternatives. In light of these developments, China became an important ally, and the Yuan—its currency—has taken on a more prominent role. It is telling that in Russia, the yuan has surpassed the United States Dollar (USD) in trading volume, a feat achieved a year after the Ukraine conflict, which triggered a series of sanctions against Moscow. As Russia and China band together, one wonders what other shifts will take place and how they will shape the future. Change is afoot, and the Russian market bears witness. The month of February saw a watershed moment as the yuan surged past the dollar in monthly trading volume for the first time. The momentum continued into March as the gap between the two currencies widened, showcasing the growing sway of the yuan. It’s an impressive feat, considering that the yuan’s trading volume on the Russian market was once quite insignificant. The winds of change blew through Russia’s financial system as the year progressed. Additional sanctions had taken their toll on the few remaining banks that still held power to make cross-border transactions in the currencies of countries that had been deemed “unfriendly” by the Kremlin. One such bank was Raiffeisen Bank International AG, whose Russian branch played a significant role in facilitating international payments within the country. However, the lender found itself under the watchful eye of both European and US authorities, which only added to the pressure. These events spurred the Kremlin and Russian companies to shift their foreign-trade transactions to currencies of countries that had not imposed sanctions.Converging coalitionsThe bond between Russia and China is growing stronger, with both nations seeking to bolster their positions on the global stage. Their alliance has spread across various spheres: military, economic, and political. With relations between Russia and the West crumbling, China has emerged as a key partner for Russia, providing it with the necessary support to counter economic and political pressure. On the other hand, China is keen on expanding its global reach, especially in the Eurasian region, and sees Russia as an important ally in this regard. President Xi Jinping’s recent visit to Moscow and his pledge to expand cooperation are likely to take this partnership to greater heights. Trade and investment ties are set to grow stronger, with both nations seeking to reduce their dependence on Western economies. Russia’s focus on infrastructure development and mega projects is also likely to benefit from China’s expertise in these areas. Energy is another significant area of collaboration, with Russia being a leading exporter of oil and gas and China being the world’s largest importer of these resources. Technology is also an essential domain, with both countries investing heavily in research and development to remain competitive in the global economy. While the alliance between Russia and China will likely have far-reaching geopolitical consequences, it is a complicated relationship with both nations pursuing their interests, even as they work towards common goals. As a result of Western sanctions, Russia has shifted its foreign trade transactions away from the dollar and euro to currencies of non-restricted countries. By doing so, the Kremlin and Russian companies hope to decrease their dependence on the Western financial system and explore new avenues for conducting their trade and economic activities. This shift in strategy reflects Russia’s determination to maintain its economic stability despite restrictions on its access to the global financial system. It also underlines the growing importance of alternative currencies in global trade as countries strive to minimise the impact of sanctions and safeguard their economic interests.Structural overhaulsThe Russian Finance Ministry was not immune to the winds of change either. Earlier this year, it made the switch from the dollar to the yuan for its market operations. It even went a step further by devising a new structure for the national wealth fund, earmarking 60 percent of its assets for the yuan. The Bank of Russia joined the chorus, urging its people and businesses to consider moving their assets to the rouble or other currencies considered “friendly.” This would help mitigate the risk of having their funds blocked or frozen. As the world undergoes a seismic geopolitical shift, it seems Russia is moving in tandem, searching for ways to secure its economic future. However, the dollar still reigns supreme in the Russian market. Even with all the changes taking place, it remains the most widely used currency, ceding its throne only occasionally to the yuan. This underscores the enduring dominance of the dollar, which has played a significant role in Russia’s financial landscape for years. However, as the world continues to evolve, one wonders how long it can hold on to its crown.