The global trading blocs are shifting

PITTSFIELD — The historical East-West trade bloc that has developed over the post-war era is beginning to break down. In its wake, a new economic and geopolitical alliance is forming that pits the Northern Hemisphere against the Southern.

This new axis of trade has been slowly forming over the last two decades but has received additional impetus over the last few years. The global pandemic and its aftermath, the war in Ukraine and the subsequent energy and food crisis and changing social and political attitudes are forging new economic relationships among much of the world. The main players in dividing the global stage into a North-West axis have been China and more recently, Russia.

In the case of China, a serious effort of forming a new trading bloc, under the auspices of their Belt and Road Initiative, was launched back in 2013. Over the years a sprawling web of exports and imports has made major inroads in connecting the Middle East, Eastern Europe, Asia, and Africa with all roads leading to Beijing.

China has spent trillions of dollars building railways, ports, highways, dams, pipelines, and industrial corridors, as well as shoveling billions of dollars in foreign loans to tie together 71 countries. If China’s efforts are successful, this dawning economic entity would account for two-thirds of the global population, although only one-third of worldwide economic output.

China’s interest in investing in developing nations predates their Belt and Road initiative. Since 2001, China has invested more than $41 billion in Africa, while lending another $126 billion to various countries in that region. During the same period, Latin America has seen even greater Chinese investment totaling $450 billion yearly. That inflow of cash has paid off. Today, China is now South America’s leading trading partner and one of the region’s top lenders.

China’s stated strategy is to become the world’s largest trading partner. It wants to become the foremost global supplier of key products in supply chains in every country.

Russia was a Johnny-come-lately when it came to recognizing the value of a North-South trading bloc. Russia’s invasion of Ukraine and the resulting trade and financial embargos by the West have forced Russia to see the light and look elsewhere for trade and markets. Vladimir Putin, ever the pragmatist, in February 2022, announced a “friendship without limits” with Chinese leader Xi Jinping. The Western-ostracized Russian leader does bring valuable exports that can expand and facilitate the North/South trade group. It contributes oil, gas, minerals and foodstuffs to the trading partnership.

Unlike Russia, however, China is walking a fine line in the geopolitical arena between East and West. It does not want to jeopardize its existing trading relationships with the West, nor does it trust Russia all that much given the historical tensions between the two countries. However, it is happy to strengthen the trade bloc in those areas in which it lacks export capabilities.

What do the countries in the Southern Hemisphere find attractive in this partnership? In Africa and Asia, especially India, Russian energy is a sought-after product as is grain, due to climate change and the Ukrainian conflict. China supplies investment and finance as well as a long list of manufactured and finished goods. In exchange, China imports all sorts of materials, foodstuffs and strategic metals necessary to maintain the output they need to flood the world with their products.

The Middle East seems to be a target for expanding membership of the North-South axis. In December, Jinping met with the leaders of Egypt, Tunisia, Kuwait, Sudan and Saudi Arabia. He promised to expand Red Sea ports, invest in petrochemicals, and promote Chinese tourism in the region.

His talks with Saudi Crown Prince Mohammed bin Salman resulted in the signing of a comprehensive strategic partnership agreement that gives Saudi Arabia top-tier status in China’s foreign relations. That makes sense given that China is the world’s top oil importer while the Saudis are the largest oil exporter.

In addition, dozens of commercial agreements worth an initial $29 billion were also inked in areas like technology, manufacturing, and clean energy. Some of the initial projects include a Huawei-sponsored cloud-computing region, an electric vehicle manufacturing plant, and supplying green hydrogen batteries for a futuristic city the crown prince wants to build. they

Lending credence to the continued expansion of a North-South trade bloc is the changing attitude of many of the potential members. In their minds, the West is still occupied with a cold war mentality that is not as relevant today. They believe that the two decades-long war on terror has led to American indifference, while a large swath of nations has moved on.

Many Southern Hemisphere nations have different priorities today than the nations of the North. High debt and climbing interest rates, soaring food and energy prices, continuing COVID and other disease issues, and pollution caused by the industrial nations are overriding concerns to much of the developing world.

More recently, American foreign policy has undergone dramatic swings, depending upon who is in power. There is a perception that the nation’s lawmakers and the American public have turned inward. “America First” attitudes have sowed doubts over American reliability now and in the future.

Politically, many nations are more comfortable with the authoritarian rule of China and Russia, which is much closer to their ruling style. Maintaining and preserving a democracy where the rich get richer and the poor get poorer is not that appealing to populations more interested in water, food and keeping warm in winter.

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