Globalisation versus America First is a false choice

Every country seeks its own national interest first, and globalisation works best with speed bumps to moderate its excess

Last Wednesday in Davos, after the 11am speech by Chinese President Xi Jinping, the conversations over lunch and dinner among the CEOs, politicians, journalists and professors were full of sheer ecstasy. In the past years at the annual meetings of the World Economic Forum (WEF), only heads of state from developing countries and business attendees talked positively about China, driven by aid from China or the size of the Chinese market.

Many attendees from politics, media and academia tended to be outright negative about China, arguing either that its economic growth is based on some incomprehensible formula, therefore its economy is bound to explode sooner or later, or that the authoritarian political system is evil regardless of economic development. At best, China received reluctant acceptance, due to the 700 million people it has lifted out of poverty.

This year is different. Last week, China solicited excitement and enthusiasm in Davos. Mr Xi's speech has seemingly won the hearts of all, from Western heads of state to hard-nosed journalists and intellectuals.

The global - still largely Western - elites who attended the annual mountain retreat this year have found their man. The head of the 80 million-strong Chinese Communist Party, and world's second-largest economy, turns out to be a bold champion of economic globalisation and delivered his hour-long speech with substance, wisdom, maturity, humour, forcefulness and confidence.

Mr Donald Trump's America First is not a surprise but the contrast between his stand and Mr Xi Jinping's economic globalisation, which the latter repeated 24 times in his Davos speech, is stark and bittersweet to Western elites. Still, questions rema
Mr Donald Trump's America First is not a surprise but the contrast between his stand and Mr Xi Jinping's economic globalisation, which the latter repeated 24 times in his Davos speech, is stark and bittersweet to Western elites. Still, questions remain, says the writer. PHOTOS: EUROPEAN PRESSPHOTO AGENCY

A Nobel economics laureate - who I managed to sit next to over dinner - flew in late that day and missed Mr Xi's speech. He asked the table whether Mr Xi quoted more Deng Xiaoping or Chairman Mao.

Thoughtfully designed connectivity and serving national interests first are the necessary twin foundations for an effective world order. One without the other is bound to destabilise the world.
Specifically, we should acknowledge that selectively and temporarily putting in place valves that would moderate the flows of goods, people, capital, technology and ideas, is not by definition morally indefensible. They are actually badly needed.

When he was told that neither was featured and that Mr Xi instead quoted Charles Dickens and Abraham Lincoln, he paused eating, looked far away and visibly tried hard to process this unusual piece of information. The villain in this disaster movie, which the world has been watching for the past 12 months with major plots such as Brexit and Mr Donald Trump's electoral victory, turned out to be the potential saviour.

Mr Xi is the new "Davos Man".

AMERICA FIRST AND CHINA DREAM

Two days later on Friday, Mr Trump's inaugural speech as United States President caused a schizophrenic reaction in Davos.

In spite of the natural curiosity about what outrageous things the disrupter-in-chief had to say this time, many Davos attendees showed contempt, claimed they were too busy or refused to watch the event on ideological grounds, and then quietly retreated to their hotel rooms to watch it, causing long lines at the WEF shuttle hub at the Congress Centre that afternoon.

Mr Trump's America First is no surprise to anyone, but the contrast between his America First and Mr Xi's economic globalisation, which the latter repeated 24 times in his speech, is stark and bittersweet to the Western elites.

Still, questions remain.

Is it really that outrageous for a president of a country, who is elected by the people of that country - and not by people from other countries to presumably represent their collective interests - to proclaim that he wants to put his country's best interests first?

What about the China Dream which Mr Xi coined six years ago - does that not sound a lot like "China First"? Would the seemingly opposing visions of the world of Xi and Trump clash in a future zero-sum conflict? Are the benefits of "economic globalisation" Mr Xi convincingly articulated in Davos last week absolutely irreconcilable with Mr Trump putting his country's national interests first?

POROUS BORDERS

Globalisation is a sufficiently and unnecessarily vague word to describe what has been going on over the past decades. The essence of globalisation is increased connectivity, that is, greater flows of goods, capital, technology, people and ideas. In a globalised world, two nations may be linked through multiple layers of borders, each governing the flow of an item.

A country may decide to let its border for people be watertight but the border for goods be porous. The porousness of a specific border is usually formulated using various speed bumps and valves a country chooses to design, negotiate and install. A country puts in place such speed bumps and valves with its national interests in mind.

The concept of unfettered globalisation, hinting that a country has to either espouse or reject connectivity, is therefore a total misnomer. The real question is not whether, but how, a country should install such valves and formulate these borders.

Thoughtfully designed connectivity includes putting national interests first, with speed bumps and valves to achieve it.

The choice framed between globalisation and protectionism is a false choice. A binary referendum designed to decide between "Leave" and "Remain" is the most ill-conceived way to handle the multi-border connectivity between one country and others.

Thoughtfully designed connectivity and serving national interests first are the necessary twin foundations for an effective world order. One without the other is bound to destabilise the world.

Specifically, we should acknowledge that selectively and temporarily putting in place valves that would moderate the flows of goods, people, capital, technology and ideas, is not by definition morally indefensible. They are actually badly needed.

What China has been practising since 1978, under the banner of "reform and openness", a phrase which appears in every policy proclamation from Beijing, is determined but also selective and gradual increase of connectivity with the rest of the world. China installs valves periodically if it determines this is in the best interests of the Chinese people and if it is able to negotiate these with other countries through a spirit of give and take.

If Mr Trump's America First is implemented with the same level of thoughtfulness and pragmatism, both America and the rest of the world would win.

Which valves are most needed for which borders at what particular time and how porous a particular layer of border should be - these are things that a country needs to first decide, and then seek agreement with others, especially those affected by such valves.

When we look at the flow of people, maybe that's why the refugee crisis in Europe needs a set of pragmatic solutions which may differ from country to country, rather than moral and ethical deliberation based on so-called universal values.

When we look at the flow of capital, maybe that's why the International Monetary Fund has modified its position and now endorses selective interventions by the central banks to stabilise their currencies.

When we look at the flow of information, maybe there are actually good reasons for China to shut down Facebook and Twitter for the time being, and for Singapore to exercise limited control over the media, even if such practices run contrary to the Western idea of press freedom and unfettered flow of information.

Unfettered globalisation and flow of goods, with its simplistic premise and unintended consequences, could cause havoc to communities, such as many in middle America.

When these "losers" are left behind, it could make the world worse off, even for the "winners".

• Kevin Lu is a partner and chairman of Asia at Partners Group, a Swiss private equity firm. He is also a distinguished fellow at Insead.

A version of this article appeared in the print edition of The Straits Times on January 24, 2017, with the headline 'Globalisation versus America First is a false choice'. Print Edition | Subscribe