Kumiko Haba
Alfredo Canavero
Satoshi Mizobata Editors

100 Years of World Wars
and Post-War
Regional Collaboration
How to Create ‘New World Order’?

100 Years of World Wars and Post-War
Regional Collaboration

Kumiko Haba · Alfredo Canavero ·Satoshi Mizobata
Editors

100 Years of World Wars
and Post-War
Regional Collaboration
How to Create ‘New World Order’?

Editors
Kumiko Haba
Aoyama Gakuin University
Tokyo, Japan

Alfredo Canavero
University of Milan
Milano, Italy

Satoshi Mizobata
Institute of Economics
Kyoto University
Kyoto, Japan

ISBN 978-981-16-9969-6
ISBN 978-981-16-9970-2 (eBook)
https://doi.org/10.1007/978-981-16-9970-2© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
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Foreword by Juichi Yamagiwa

This book presents what we consider to be the fruitful results of the symposium on“100 Years of World Wars and Post-War Regional Collaboration and Good Governance”. It was very timely, and I am grateful to the Science Council of Japan (SCJ)
for co-sponsoring this symposium. The SCJ was established in 1949 from reflection
on the role of Japanese scientists involved in World War II. The following year, theSCJ adopted a statement on its commitment to never become engaged in scientificresearch for war purposes and reissued the statement in 1967. Behind these statements was a deep remorse for the scientific community’s past cooperation with war
efforts and a concern for a possible resurgence of similar situations. In recent years,
however, the distance between scientific research and military endeavors has been
narrowing again. In 2015, the Acquisition, Technology and Logistics Agency (ATLA)of the Ministry of Defense started a research funding program called National Security Technology Research Promotion, in which research proposals are invited andreviewed with a clear objective of awarding prospective projects which are likely to
produce results useful to the future development of defense equipment. By recognizing the tension between the two sides, SCJ affirmed the previous two statements in
2017, and requested academic societies and other communities to develop guidelines
depending on the characteristics of their respective disciplines and fields. As to theappropriateness of the research, a shared understanding should be formed within thescientific community based on cumulative academic deliberations and judgments.
Sincere discussions should be ongoing among not only respective scientists, but also
universities, research institutions, academic societies, and scientific communities asa whole, and should be open to the rest of society.
At that time, I was serving as the president of Kyoto University. Our University’s
Mission Statement expresses the university’s aim to sustain and develop its historicalcommitment to academic freedom and pursue harmonious coexistence within theworld’s human and ecological community by generating world-class knowledge
through freedom and autonomy in research that conforms with high ethical standards.
The university’s research activities are undertaken with the aims of increasing thesafety of society and contributing to human well-being and peace. Therefore, we
decided that no one at the university is permitted to be involved in military researchvvi

Foreword by Juichi Yamagiwa

that threatens those aims. If concerns arise that any research activities do not comply
with the policy, a standing committee established by the president will investigate
each case individually. Many universities have made the same decision since then.
These efforts are also based on the reflection that Japan is the only country thathas suffered great casualties from nuclear bombs. The use of nuclear weapons in war
now runs the risk of destroying the planet. As a primatologist and an anthropologist,
I am worried about the traditional idea used by many politicians that war is deeply
rooted in human nature. For example, Barack Obama, the former president of theUSA, who was awarded the Nobel Peace Prize in 2009, misunderstood warfare in
relation to human nature. He gave the acceptance speech in Oslo. “War, in one formor another, appeared with the first man.” Since the dawn of history, humans havecontinuously experienced wars. War has been used to bring and maintain peaceand order. War is like a drought or a disease. Even Obama, who contributed to
the reduction of nuclear weapons, also thought that war was embedded in humannature. He apparently followed the statement by Thomas Hobbes, a philosopher inthe seventeenth century, that humans by nature were to constantly compete witheach other. Moreover, just after World War II, Raymond Dart, a paleoanthropologist,
insisted from his findings on fossil evidence that human ancestors had already begun
fighting with weapons 2 million years ago. He hypothesized that the ape-men firstused animal bones as a hunting tool and then as a weapon with which to fight.
The film “2001: A Space Odyssey” faithfully reproduced this hunting hypothesis.
Humans started to wage war. According to the movie, the original nature of humans
was converted into a weapon to kill, which was the true original sin, and it has been
judged.
But this scenario is misguided, and recent fossil evidence and socio-ecologicaltheory on primate social evolution have not supported the “hunting hypothesis”. In
7 million years of human evolutionary history, distinct hunting tools, such as spears,
first appeared at 0.5 Ma, and the evidence of violence with weapons among humans
appeared very recently around the emergence of agriculture. Primates form a group,
not for hunting, but to avoid being preyed on by carnivorous animals. It is probably thesame with humans. Humans have not evolved as hunters, but as prey. Phylogeneticalanalysis on the incidence of lethal violence estimated that the violence of humans
is deeply rooted in great ape ancestry (Gómez et al., 2016). The rate for paleolithic
people is kept as before, but it rises about 8–15 times in 3,000 and 500 years ago.
Therefore, the theory that humans are innately violent, and war-loving is completely
wrong.
Why and how did violence emerge and increase in the evolution of humans?
Now we should consider the evolutionary pathway to violence, which has notbeen accompanied by hunting or weapons until recently. Strong empathy and identity with community enabled human ancestors to expand their habitats into risky
environments. But the emergence of language and production of foods (agriculture and domestication of animals) led such emotional abilities to the protection of
their community and land tenure. Investment and stock of production promoted astrong coalition among people within a community and increased hostility between
communities, and finally resulted in violent interactions (Yamagiwa, 2018).

Foreword by Juichi Yamagiwa

vii

The modern legal system and technology may prevent the occurrence of violence.
However, empathy and sympathy, which we have developed in our evolutionary
history, have yet been applied to outside communities across cultural or religious
borders. Violence has still great negative effects on human relationships at various
levels of human societies. In today’s rapidly computerized and informatized society,social relations that people have relied on for centuries are collapsing, and there are
increasing numbers of people who feel a deep sense of isolation. We may be stepping
into a period of understanding what comprises the essential happiness of people.
I would like to thank Professor Kumiko Haba for organizing the symposium andediting this book. It was really hard work, especially under the difficult conditionsof Covid-19. I hope this book will help us to widen our scope on warfare and toconstruct harmonious relationships between people on this planet.
Juichi Yamagiwa
Former President of Science Councilof Japan (SCJ)
Former President of Kyoto University
Kyoto, Japan

References
José María Gómez, Miguel Verdú, Adela González-Megías & Marcos Méndez (2016), ‘The
phylogenetic roots of human lethal violence,’ Nature, 538: 233–237.
Yamagiwa J, (2018), ‘Evolution of community and humanity from primatological viewpoints,’
in Stomu Yamashita, Tadashi Yagi & Stephen Hill (eds), The Kyoto Manifesto for Global
Economics: The Platform of Community, Humanity, and Spirituality, Singapore: Springer
Nature, pp. 329–357.

Foreword by Takayuki Kajita

Distinguished Participants, Ladies and Gentlemen, good morning, good afternoon
and good evening,
It is my great pleasure to welcome all of you to the second day of the symposium; “100 years of World Wars and Post-War Regional Collaboration and Good
Governance”, which is organized by the Science Council of Japan, Committee of
Area Studies, Subcommittee of Asia Regional Cooperation and Academic Network
Construction, and Committee of Economics. I would like to give my sincere gratitude
for the cooperation and collaboration from co-sponsors, Aoyama Gakuin University,
Kyoto University and Asahi Shimbun.
My name is Takaaki Kajita, President of the Science Council of Japan. To open
the second day of the symposium, I would like to extend my brief remarks on behalfof SCJ.
SCJ was established in January 1949 as the representative of the Japan’s science
community. It aims to promote and enhance the field of science, and have science
reflected in and permeated into administration, industries and people’s lives. It ranges
over all fields of sciences including humanities, social sciences, life sciences, naturalsciences, and engineering. It represents Japan’s scientists both domestically and internationally with the firm belief that science is the foundation upon which a civilized
nation is built.
SCJ’s function is to deliberate and realize important science matters and topromote communication of scientific research. Under these functions, it has engaged
in various scientific activities so far. The major activities include “recommendations
to the government and public”, “establishment of networks among scientists”, “promotion of scientific literacy”, and “international scientific activities”. In particular, it
has deepened the partnership with academic societies across the world and promoted
communication of international academic research in order to contribute the development of academia. As a part of such activities, it advocated the necessity of aninternational academy in the Asian region and contributed to establish the Science
Council of Asia in 2000. Now, Science Council of Asia consists of 32 academicorganizations from 18 Asian countries and regions.

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Foreword by Takayuki Kajita

In addition, with regard to the activities related to the promotion of scientific
literacy, SCJ has organized academic forums, symposiums and science cafes inorder to give back scientific and academic research results to citizens. They havecontributed to deepen mutual understanding of science, and exchange opinions withcitizens and other stakeholders.
The theme of this 3 days’ symposium is “100 years of World Wars and PostWar Regional Collaboration and Good Governance—How to Make a New World
Order?”, which is important for all the people around the world, including scientists
and citizens.
I am very delighted that we have a large number of participants for the symposium.
Since discussions among many people based on investigations of the past experiences
are necessary for making new world order, I believe that discussions at today’s
symposium will be an important occasion towards further regional collaboration andgood governance.
To conclude, I sincerely hope that this symposium will be fruitful for all theparticipants. Thank you very much for your attention.
Takayuki Kajita
President of Science Councilof Japan(SCJ)
Professor at University of Tokyo,
Nobel Laureate in Physics
Tokyo, Japan

Prospectus

COVID-19 has brought the world to a major turning point.
Since 2020, this once-in-a-hundred-year pandemic has encircled the earth. Six
hundred million people are confirmed to have been infected and nearly six million
five hundred people deaths have been reported in August 2022. According to theWHO, already in October 2020, the number of infected people was actually morethan ten times higher: 8 00 million cases, which was 10% of the world’s population(BBC 06/10/2020).
A century earlier the fatalities stemming from Spanish flu were estimated to havebeen significantly higher. Today, in 2022 it is clear that the vaccines and medical
institutions have saved many lives especially in the rich and emerging economies.
But people continue to suffer and the impact of long COVID has yet to be properly
documented. The situation for poorer and developing countries without adequate
access to the vaccine or medical care remains grave. COVAX facility will be very
important for developing countries.
***The 20th century was a century of two devastating world wars and the proxyconflicts tied to the Cold War. Though the Cold War never saw a direct confrontation
between the USA and USSR there were times when the world was on the brink ofdestruction.
From the ashes of 1945 the European project began its gradual evolution. Today,
the European Union can be shown to have built a peaceful governance regime underpinned by economic collaboration, common institutions, democracy and the ruleof law. In Asia, ASEAN has also pursued varying degrees of regional governance.
However, in the last decade, a new nationalism that has manifested itself in the spreadof right-wing (nativist) populism across parts of Europe, the US, Latin America andAsia has come to the fore.
Unfortunately, the analysis of the Russian-Ukraine war was not in time. The study
will need to be analyzed again in a longer context.
Nevertheless, we are convinced that regional cooperation, and peace networks
rather than war and conflicts with neighbouring countries, will shape our future,development and prosperity.

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Prospectus

There is a wave of rapid economic growth in the emerging economies especiallyChina and India and political instability in parts of East Asia, Southeast Asia, SouthAsia, the Middle East, North Africa, and Central Africa as people (particularly theyoung) go in search of democratization.
In this field, based on the three wars in the 20th century (WWI, WWII, and theCold War), what kind of regional institutionalization and regional good governancehave been built up to avoid endless war and conflicts? We will examine and consider
what kind of order is needed to stabilize the conflict regions, among Europe, Asia,
Latin America and Africa.
The theme of the Tokyo and Kyoto Conferences organized by the SCJ (Science
Council of Japan), Aoyama Gakuin University, and Kyoto University, and honorably
funded by Erasmus Mundus of the European Union is to investigate and clarify how
the countries that experienced the World Wars subsequently embarked upon a processof region building underpinned by a desire for peace, stability and prosperity under an
institutional framework built upon the institutions and rule of law. We would like toorganize the Tokyo and Kyoto Conference and discuss post-war regional cooperationand good governance in this transition period. We were honored that many scholars
and young researchers decided to join us and discuss how to begin building ‘New
World Orders’ in the wake of the instability brought about by COVID-19, and therise of nationalism and populism. The chance to investigate, analyze and discuss
together proved invaluable!
In this common research in the world, international symposium and book publication, we have received academic cooperation from the Science Council of Japan,
funding from Erasmus Mundus of the EU, funding from the Ministry of Education,
Culture, Sports, Science and Technology (MEXT) and the Japan Society for the
Promotion of Science (JSPS), financial support from Kyoto University and Aoyama
University. We are grateful to appreciate to all.
Kumiko Haba
Aoyama Gakuin University
Tokyo, Japan
Alfredo Canavero
University of Milan
Milano, Italy
Satoshi Mizobata
Kyoto University
Kyoto, Japan

Contents

Part I
1

Keynote Speech: Who Constructs New World Orders?

“The United Nations’ Contributions to Order: Treaties,
Development, Human Rights, and Humanitarian Aid” . . . . . . . . . . . .
David Malone

3

2

America’s Role in The New Global Order . . . . . . . . . . . . . . . . . . . . . . .
Glen S. Fukushima

7

3

Afterimage of the British Empire? A Background of Brexit . . . . . . .
Yoichi Kibata

15

4Post-Trump Challenges for US and Japan . . . . . . . . . . . . . . . . . . . . . . .
Wataru Sawamura

235Power Transition and 100 Years of World Wars:
Reconstruction of the New World Order as the Great Powers
Decline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kumiko Haba

Part II
6

7

8

29

After World War I and the Inter-war Period

Disarmament and Equilibrium between the Two World Wars
(1919–1939) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valdo Ferretti
The Security of South-East Europe in the First Inter-War
Decade: “Greater Romania” Between Conflicting
Neighbourhoods and Regional Alliances . . . . . . . . . . . . . . . . . . . . . . . . .
Claudiu-Lucian Topor
The Inevitable Revolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miguel Ángel Vecino

47

55
69

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9

Contents

Eiichi Shibusawa’s Support for International Society Throughthe League of Nations Association of Japan . . . . . . . . . . . . . . . . . . . . . .
Akiko Iimori

77

Part III Post-colonization in Europe and Asia
10 European Integration and Decolonization: From
the Beginning to the Yaoundé, I Convention . . . . . . . . . . . . . . . . . . . . .
Alfredo Canavero

87

11 Political Europe: The Cold War and the Great
Decolonisation—From the Yaoundé Convention to Lomé
Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Giulia Lami
12 France, Decolonisation, and the Global South: France’s
Struggle for a New World Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Tomoya Kuroda
13 North Korea and Wars in Africa and Asia . . . . . . . . . . . . . . . . . . . . . . . 131
Satoru Miyamoto
Part IV After 100 Years of Wars: How to Make New World
Order – Politics
14 The United States’ Differing Strategies of “New World
Order” Between Europe and Asia in the Post-War Period . . . . . . . . . 143
Kumiko Haba
15 ‘I’m a Nationalist’: American Nationalism and Grand
Strategy in the Age of Trump . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
J. Patrick Boyd
16 Do SAARC and BIMSTEC Lead the World?—Regional
Collaboration in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Pradeep Singh Chauhan
17 Transition of Economic and Political Leadership in East Asia
Since the Second World War . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Sang-Chul Park
18 Chinese Economic Growth and Prospects of a New
International Monetary Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
Chris G. PopePart V

After 100 Years of Wars: How to Make New World
Order – Economics

19 Fundamental EU Reform: Impact of the COVID Crisis . . . . . . . . . . . 225
Bruno Dallago and Steven Rosefielde

Contents

xv

20 Connecting the EU and China Along the Belt and Road
Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
Bruno Dallago
21 Internationalization of Multinational Entreprises
from North-East Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
Victor Gorshkov and Zoia Podoba
22 Small Government in the State Capitalism? The Role of Public
Finance in Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281
Kazuho Yokogawa
23 Why is State-Led Capitalism Stable? Reconsidering
Comfortable Authoritarianism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
Satoshi Mizobata
24 Professional Associations’ Contribution to a New World
Order Formation – The Case of Russia . . . . . . . . . . . . . . . . . . . . . . . . . . 323
Olga Bobrova
25 Government-Enterprise Relationship in China . . . . . . . . . . . . . . . . . . . 331
Takuma Kobayashi
Part VI

Regional Collaboration and Good Governance

26 ASEAN’s Governance of Labor Migration: Progressof Institutionalization and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . 345
Motoko Shuto
27 Regional Collaboration in Europe and Asia; Learningfrom the European Union Strategy for the Danube Region(EUSR) and the Greater Mekong Sub-regional (GMS) . . . . . . . . . . . . 357
Soavapa Ngampramuan
28 The Belt and Road Initiative and China-Eastern European
Relations: The Domestic Context in Chinese Foreign Policies
Regarding the Hungary-Serbia Railway . . . . . . . . . . . . . . . . . . . . . . . . . 371
Shixin Du
29 Demand of Regional Cooperation in the New World Order:
Case Study of France and Germany Towards the EU
Formation, Focusing on Energy Security & Sustainable
Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385
Akanksha SinghEditors and Contributors

About the Editors
Kumiko Haba is a Professor Emeritus at Aoyama Gakuin University, Professor at
Kanagawa University, President of the EUSA Asia Pacific (2017), Vice President ofInternational Studies Association (2016–2017), Vice President of ISA Asia Pacific(2018–2021) President of ISA Asia Pacific (2021–2024), Director of Institute for
Global International Relations. She received the title of Jean Monnet Chair of theEuropean Union (2006–), Member of Science Council of Japan (2011–2017), andAssociate Member of SCJ (2017–2023). She is a Visiting Scholar at Harvard University (2011–2012), European University Institute (2007), Sorbonne University (2004),
University of London (1996–1997), and Hungarian Academy of Science (1995–
1996, 2002). Her specialty is international relations, comparative politics between
EU and Asian region, immigrant and refugee issues, and making peace and prosperity in conflict regions. She wrote 72 books (including editor and co-writer), 16
English books (including proceeding books), and 220 articles. Contemporary main
works/books include the following:・Brexit and After, Perspectives on European
Crises and reconstruction from Asia and Europe, Kumiko Haba and Martin Holland,(Editors) Springer, 2021, Encyclopedia of Central and East European Culture, Representative Editor: Kumiko Haba, Maruzen, 2021, Immigrants, Refugees and Minorities; Origin of European Populism, Kumiko Haba (Ed.), Sairysha, 2021, KumikoHaba, European Division and Integration, European Nationalism and Borders, Inclusion or Exclusion, Chuo Koron Shinsha, Tokyo, 2016,・Kumiko Haba (Ed.), International Society in Great Transition era, Low and Culture Publishers, Tokyo, 2019.
・Steven Rosefielde, Kuboniwa and Kumiko Haba (Eds.), The Unwinding of the
Globalist DreamーEU, Russia and China, World Science, London, New Jersey
and Singapore, 2017.・Kumiko Haba, Asian Regional Cooperation in the Global
Era, Iwanami Publishers, 2012. (Chinese translation, Beijing, 2013)・Kumiko Haba
(Ed.), Considering Asian Regional Integration, To avoid Wars, Akashi Publishers,2017. and others.

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Editors and Contributors

Alfredo Canavero was born in Milan in 1948 and took a degree in Political Sciencesat Milan Catholic University of Sacred Heart in 1970. He was Assistant professorof History of International Relations (1974–1980). Afterwards he has been teaching
Contemporary History since 1977 at Milan State University, as Associate professor(1980) and then as full professor (2001). He is interested in Contemporary Italian
History, History of Church and of Catholic movement, History of European Integration and History of Italian Foreign Policy. He was a member of the ScientificCommittee of Historical Dictionary of Italian Catholic Movement (Marietti) andcoordinator, with Jean-Dominique Durand (University of Lyon III), of an international research program on the role of Churches in political, social and economic
life of Europe (“The Europe of Religious Spaces), in the frame of a larger group(“Spaces and Times of Europe”) directed by Robert Frank (University of Paris I,
Sorbonne). He was also Director of the Centre for the Studies of Foreign Policy andPublic Opinion (Milan State University) and is General Secretary of the Commissionof History of International Relations, affiliated to the World Congress of Historical
Sciences. He gave papers during World Congresses of Historical Sciences from 1995
to 2015.
Satoshi Mizobata is Professor Emeritus and at the Kyoto Institute of Economic
Research, Kyoto University, Japan. He is Council member of Science Council ofJapan. He was awarded his degree of doctor in Economics at Kyoto University in
1997. He has investigated planned economies and transition economies based on thefirm structure and corporate governance. He is chief editor of ISI-cited Journal ofComparative Economic Studiesand contributes to editing of some other international
journals. He is a member of the executive board of the European Association for
Comparative Economic Studies. His recent publication: State-led innovation anduneven adaptation in Russia, in Steven Rosefielde ed., Putin’s Russia: Economy,
Defense and Foreign Policy,World Scientific, 2020.

Contributors
Olga Bobrova St. Petersburg State University of Economics, St. Petersburg, Russia
J. Patrick Boyd Aoyama Gakuin University, Shibuya, Tokyo, Japan
Alfredo Canavero Centre for the Studies of Foreign Policy and Public Opinion,
University of Milan, Milan, Italy
Pradeep Singh Chauhan Kurukshetra University, Kurukshetra, India
Bruno Dallago Department of Economics and Management, University of Trento,
Trento, Italy
Shixin Du Aoyama Gakuin University, Shibuya, Tokyo, Japan
Valdo Ferretti Sapienza University of Rome, Rome, Italy

Editors and Contributors

xix

Glen S. Fukushima Center for American Progress, Washington, DC, USA
Victor Gorshkov University of Niigata Prefecture, Niigata, Japan
Kumiko Haba Aoyama Gakuin University, Tokyo, Japan
Akiko Iimori The Institute of Asia-Pacific Studies, Waseda University, Tokyo,
Japan
Yoichi Kibata Seijo University, Tokyo, Japan;
University of Tokyo, Tokyo, Japan
Takuma Kobayashi Matsuyama University, Matsuyama, Japan
Tomoya Kuroda Senshu University, Tokyo, Japan
Giulia Lami Milan State University, Milan, Italy
David Malone United Nations University, Tokyo, Japan
Satoru Miyamoto Seigakuin University, Ageo, Japan
Satoshi Mizobata Kyoto Institute of Economic Research, Kyoto University, Kyoto,
Japan
Soavapa Ngampramuan Department of International Relations, Faculty of Political Science, Ramkhamhaeng University, Bangkok, Thailand
Sang-Chul Park Graduate School of Knowledge Based Technology and Energy,
Tech University of Korea, Siheung, Korea
Zoia Podoba Peter the Great St. Petersburg Polytechnic University, Saint Petersburg, Russia
Chris G. Pope Kyoto Women’s University, Kyoto, Japan
Steven Rosefielde Department of Economics, University of North Carolina, Chapel
Hill, NC, USA
Wataru Sawamura Washington Bureau, Asahi Shimbun, Washington, DC, USA
Motoko Shuto University of Tsukuba, Tsukuba, Japan
Akanksha Singh Special Researcher, Aoyama Gakuin University, Tokyo, JapanClaudiu-Lucian Topor Alexandru Ioan Cuza University of Iaşi, Iaşi, Romania
Miguel Ángel Vecino Madrid, Spain
Kazuho Yokogawa Kanagawa University, Yokohama, Japan

Part I

Keynote Speech: Who Constructs New
World Orders?

Chapter 1“The United Nations’ Contributions
to Order: Treaties, Development, Human
Rights, and Humanitarian Aid”
David Malone

Abstract The opening remarks of the conference focus on international order andthe UN’s role therein.
Keywords United Nations · World order · Development · International law ·Decolonization · Human rights
Speech at the International Conference by SCJ, Aoyama Gakuin University,and Kyoto University on 3rd December 2020
Thank you very much, Professor Haba; it is lovely to be partnering with you for thisevent. For those of you viewing online who do not know United Nations University headquarters building complex, at its center is a well-known pyramidal structure opposite Professor Haba’s historic Aoyama Gakuin University on Tokyo’s fairly
kinetic Aoyama Avenue in Tokyo.
And warm thanks to my friend, Glenn Fukushima. His presentation just now was
terrific, and my fond hope is that the new administration will recruit him into one
of its top jobs dealing with Asia—particularly with Japan—because we all so muchenjoy when we get to catch up with him in Japan and learn about what is going onin Washington.
I agree with everything Dr. Fukushima said about the United States so I will not
speak too much about it, except that it is with great regret that I must say the UnitedStates must now contend with a diminished image on the world stage. President
Biden’s election reassures the world, but he cannot start where President Obamaleft off. President Trump has created a great deal of international wreckage. He hasalienated many of America’s closest allies. This is unfortunate not just for the US,
but also for countries like Japan and my own country, Canada, very close allies andwarm friends of the United States.
I should mention that I do not speak for the United Nations at this event. I am not a
spokesperson for the United Nations. UNU’s Charter was negotiated by the General
D. Malone (B)United Nations University, Tokyo, Japane-mail: malone@unu.edu© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_1

3

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D. Malone

Assembly of the United Nations, and it grants UNU absolute academic freedom. I
use that academic freedom to express myself freely in academic meetings such as
this.
That having been said, on to the main subject of our meeting: order. It is quite
important to think about order in different ways. People often think about a formof order imposed by parliaments or by the United Nations Security Council. But
most order is promoted in much more voluntary ways, both internationally anddomestically. So, order is not primarily about the use of force.
The use of force is quite often necessary and justified, but it is not the norm inpromoting order internationally or within countries. It is mostly the exception. In thecase of the United Nations, there was a collective negotiation of many independent
countries at the end of the Second World War. Japan and the Allies were still atwar, but the European counties were already at peace. It was an agreement amongst
those countries participating, over 50 of them, that created the United Nations. It was
not established through coercion of the victorious powers, although the shadow of
President Roosevelt loomed largely.
So, order is often created by voluntary lawful processes or law-making processes.
In the United Nations, one form of order-promoting activity is the negotiation ofinternationally authoritative treaties, which are legally binding on the countries thatsign and whose parliaments ratify them. This is not a coercive process about imposing
order. It is about creating order without the use of force. The United Nations Security
Council can indeed authorize the use of force, but it very rarely does. And it is right not
to authorize it very often. For example, in several cases recently where it authorized
the use of force, a number of countries exceeded that mandate, and the results were
bad. Think of Libya today, a country that is still at war these many years later, insome part because of the excesses and misjudgments of foreign interveners. The
involvement of a NATO aircraft in the death of former President Ghaddafi was mostunfortunate in retrospect.
It helps to think of the United Nations’ activities in several different fields.
Regarding peace and security, the UN Security Council does have a unique power ininternational law to authorize coercive measures. This includes the use of militaryforce or the imposition of economic or other sanctions on countries. But it uses thesepowers rarely, and is right to use them rarely. The UN is at its best when it createsa consensus amongst countries rather than when it provides a platform for serious
divisions among them. I think this is more widely understood at the UN today thanit was when the cold war ended 30 years ago, when it was thought that the Security
Council could direct the world.
That turned out badly when attempted in the early 1990s. I think the limitationsof the United Nations need to be flagged here, and its power to coerce should be usedvery, very sparingly; this would be my conclusion as a student of UN activity.
But there are many other things the UN has done successfully in the peace andsecurity sphere, notably treaty-making regarding arms control, disarmament, andother topics. These are activities that member states participate in voluntarily: they
are free to accept or do not accept the outcome of negotiations and integrate (or not)the treaties into their domestic law. These measures are less dramatic than the use of

1 “The United Nations’ Contributions …

5

force or the imposition of sanctions, but often equally effective, if not more effective
over time. That is as much as I am going to say about peace and security.
The next area of UN endeavor I want to mention is economic development. When
the United Nation was created, it included relatively few developing countries inSouth America, Central America, and some of the few countries in Asia which had
maintained their independence throughout the era of colonization, like Thailand.
China was also a case in point, but there were very few.
In Africa, there was only South Africa, as a racist apartheid state, Ethiopia (after an
attempt by Italy to colonize it), a few Arab states of Africa and the Black African stateof Liberia, a country that had been created by slaves who were able to return fromthe United States or other countries to Africa. Because there were few developing
countries in the UN at the outset, economic development of colonized countries
was not very high on the agenda. Of course, Mexico, Argentina, Chile, and similarcountries did advocate for it, but it did not emerge as a central purpose of the UN.
Rather, what emerged as a central purpose was the more general economic and social
progress of mankind; all countries, not particularly developing countries.
The UN’s creation led to a great deal of treaty-making by the 1960s and 1970s,
which continues today, notably in the human rights sphere, but in many other spheres
as well. Some of these treaties have not been widely subscribed to by Member States,but others have been nearly universally signed and ratified, and turned out to be central
to our daily lives, in countries like Japan, the United States, or Canada, as well as
developing countries.
So, a project like the Sustainable Development Goals—which responds primarily
to the aspirations of developing countries, while applying to all countries—only
became possible after the process of decolonization, the process of granting absolute
freedom to the colonized countries. This process was largely completed between
1957 and 1965. In only eight years, about 90 countries became independent. This is
one of humanity’s great achievements, which is too often forgotten.
Decolonization, championed by President Roosevelt, was promoted above allwithin the United Nations system, as Roosevelt hoped would be the case. Roosevelt
also was the primary force behind the creation of the UN. Churchill on his own
would not have created the UN. He would have created something in the narrowinterests of the United Kingdom. But Roosevelt, who was a man of extraordinarily
ambitious imagination and generous disposition, was the man who really willed theUnited Nations to exist. And his widow, Eleanor Roosevelt, was behind the Universal
Declaration of Human Rights, the foundation for the human rights regimes recognize
today. We can talk more about development in the question-and-answer period, but
I do want to touch on two other areas that are important in the UN.
The first is human rights which I had already mentioned in passing. What the
UN contributed to the field of human rights—which individual countries had been
struggling with since the French Revolution in 1789—was that human rights came tobe analyzed and codified through treaties. Individual treaties and umbrella treaties,on, for example, the rights of women, the right to development, the right to health,any right we think of as a right as citizens of the world, largely has been codified
within the UN. And that is a huge achievement of the United Nations System.

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D. Malone

Now whether countries actually respect the human rights they agreed to respect
is a different matter. Some countries do. Japan does not sign treaties that it does notintend to implement, but other countries sign and ratify every available agreement
without really thinking through whether they are going to implement them. That is aproblem in human rights application, rather than the creation of human rights at thenormative level.
Finally, I want to mention humanitarian action. Many people in the world are
not just poor. Many people in the world are hungry and sick because they are poor.
They are distressed in a variety of ways; they lose their homes because of wars. They
become refugees, other forms of forced migrants, because of instability or war. And
the number of people in acute distress of this sort in the world today, beyond simply
being very poor, is probably around 250 million.
The UN counts around 175 million of these people, but there are doubtless many
more that the UN has not been able to count, in dire distress, hungry, without healthcare or shelter. The United Nations over the years has become increasingly activein addressing these needs, but generally not as the primary actor. In many countries
including Japan, NGOs (non-governmental organizations) do a great deal of the work.
What the UN does is raise a great deal of money for this work: probably around 30
billion this year. And the UN coordinates internationally in the field to help those in
the deepest distress.
The best humanitarian entities include UN organizations, like the World Food
Program, which won the Nobel Peace Prize this year. But they also include hybridinternational efforts such as those of the International Red Cross system, and thosevarious health NGOs that make a huge difference around the world, of which themost famous is probably Doctors Without Borders.
Finally, I want to say that for humanity the most urgent issue, whether we arerich or poor, is climate change, and the UN is the forum within which this issue isnegotiated. I sense this is an issue the Japanese public cares about a great deal, notleast as their country is increasingly impacted by this phenomenon.
I hope everyone understands how urgent it is.

Chapter 2

America’s Role in The New Global Order
Glen S. Fukushima

Abstract The topic I have been asked to address, “America’s Role in the New Global
Order,” is a difficult one, for several reasons. First, we in the United States had a hotly
contested presidential election just one month ago, on November 3, which will resultin a change of political leadership on January 20, 2021.
Keywords America’s role · New global order · Presidential election
Thank you for inviting me to speak at this important conference and to share my views
with this distinguished audience. I am honored to be invited to join the podium withmany prominent speakers, including my good friend Ambassador David Malone, ahighly distinguished and experienced diplomat.
Let me say at the outset that I am an American with a long-standing interest in
American foreign policy and America’s role in the world, but I am speaking today
purely in my personal capacity as a concerned American citizen, not representing
any government, organization, or political party.

1 Introduction
The topic I have been asked to address, “America’s Role in the New Global Order,”is a difficult one, for several reasons.
First, we in the United States had a hotly contested presidential election just one
month ago, on November 3, which will result in a change of political leadershipon January 20, 2021. I can say with certainty that our president-elect, former Vice
President Joe Biden, will pursue a significantly different foreign policy than that
pursued over the past four years by President Donald Trump, but it is difficult at
this early stage, seven weeks before the presidential inauguration on January 20, to
predict exactly how different it will be.
G. S. Fukushima (B)Center for American Progress, Washington, DC, USA© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_2

7

8

G. S. Fukushima

Second, President-elect Biden and his cabinet may have ambitious aspirations
regarding which policies to pursue and which direction to lead the country, but they
are likely to face serious domestic constraints.
Third, President-elect Biden will face a world that has changed significantly since
he stepped down as President Barack Obama’s vice president on January 20, 2017,
so any attempt to return to the pre-Trump world would be unrealistic.
I would like to discuss each of these topics—aspirations, domestic constraints,
and international environment—in turn.

2 Aspirations
On November 24, President-elect Biden held a press conference to announce his
senior foreign policy team. At the press conference, Susan Thomas-Greenfield, whowill be nominated as the next U.S. Ambassador to the United Nations, proclaimed,“America is back, multilateralism is back, and diplomacy is back!”
Ms. Thomas-Greenfield’s nomination represents three traits Biden values: expertise, experience, and diversity. Ms. Thomas-Greenfield, who is African American,
joined the U.S. State Department as a career foreign service officer in 1982 andserved with distinction as a diplomat for 35 years before being terminated in 2017 by
the Trump administration. Her recent nomination is seen as reflecting President-electBiden’s desire to show that women of color with expertise and experience should
be provided the same opportunities as that provided to white males, that professionalism is to be rewarded, and that America’s government officials should demonstrate
diversity and “look like America.”
The nomination of Alejandro Mayorkas as the Secretary of Homeland Security
is another indication of Biden’s emphasis on expertise, experience, and diversity.
Mr. Mayorkas emigrated to the U.S. from Cuba as a child, earned a law degree,
worked on immigration issues in the Obama administration when he headed the
U.S. Citizenship and Information Services, and was one of the principal architectsof the DACA (Deferred Action for Childhood Arrivals) program. This program,which Trump has tried to eliminate throughout his presidency, gives unauthorized
immigrants who came to the U.S. as minors temporary relief from deportation andthe right to work.
President-elect Biden’s choice of Tony Blinken as Secretary of State and of Jake
Sullivan as Director of the National Security Council shows that the Biden administration’s foreign policy will be led by professionals with deep expertise, extensive
experience, and personal relationships around the world. The fact that both of them
have worked in previous administrations in the NSC and the State Department isimportant, since both institutions have been severely weakened over the past four
years. The number of senior career officials who have left the State Department during
the Trump administration is the largest in any administration in recent history, andthe fact that we have had four NSC Directors in four years is unprecedented andsymptomatic of the turmoil in Trump’s foreign policy.

2 America’s Role in The New Global Order

9

Many of you are familiar with President-elect Biden’s article entitled “WhyAmerica Must Lead Again: Rescuing U.S. Foreign Policy After Trump,” publishedin the March/April 2020 issue of Foreign Affairs (a publication of the Council on
Foreign Relations), so I will not dwell on it at length. However, for the benefit ofthose of you who have not read it, let me quickly summarize the main points because
it should provide you a preview of things to come.
The article begins, “By nearly every measure, the credibility and influence of theUnited States in the world have diminished since President Barack Obama and I left
office on January 20, 2017.” Biden goes on to write, “The next U.S. president will
have to address the world as it is in January 2021 and picking up the pieces will
be an enormous task. He or she will have to salvage our reputation, rebuild confidence in our leadership, and mobilize our country and our allies to rapidly meet new
challenges…As president, I will take immediate steps to renew U.S. democracy andalliances, protect the United States’ economic future, and once more have America
lead the world.”
Biden goes on to argue that first, “we must repair and reinvigorate our own democracy.” His famous formulation is “the United States is prepared to lead again—notjust with the example of our power but also with the power of our example.” Hewrites that in his first year in office, the United States will “organize and host a
global Summit for Democracy to renew the spirit and shared purpose of the nationsof the free world. It will bring together the world’s democracies to strengthen our
democratic institutions, honestly confront nations that are backsliding, and forge acommon agenda.”
Second, Biden asserts that “my administration will equip Americans to succeedin the global economy—with a foreign policy for the middle class… Economic
security is national security. Our trade policy has to start at home, by strengthening
our greatest asset—our middle class—and making sure that everyone can share in
the success of the country, no matter one’s race, gender, zip code, religion, sexual
orientation, or disability.”
Third, Biden discusses countries and issues he views as high priorities—including
restoring partnerships with allies and partners, competing with China and Russia, andaddressing issues including climate change, nonproliferation and nuclear security,and technologies of the future.
He concludes his article with the following paragraph: “We must once more
harness that power and rally the free world to meet the challenges facing the world
today. It falls to the United States to lead the way. No other nation has that capacity.
No other nation is built on that idea. We have to champion liberty and democracy,
reclaim our credibility, and look with unrelenting optimism and determination toward
our future.”Now, especially for a non-U.S. audience, it is important to put this article incontext, since it may sound overly American-centric, naively optimistic, and evenarrogant.
First, the article was most likely written in late 2019, during the U.S. presidential
election campaign, when the Democratic Party had a total of 28 candidates runningfor the presidency. This means it was important for candidate Biden to distinguish10

G. S. Fukushimahimself from the other candidates by emphasizing his expertise and long involvement
in foreign policy, including serving as chairman of the Foreign Relations Committeeof the United States Senate.
Second, the article exuded such optimism in part because it was written before thecoronavirus pandemic emerged as a crisis in the United States in the spring of thisyear, before the pandemic devastated the American economy, and before the murderof George Floyd in Minneapolis on May 25 sparked nationwide protest against theAmerican criminal justice system and systemic racism, expressed in the Black Lives
Matters movement.
So, the optimism of late 2019 of restoring America’s role in the world had by thefall of this year become necessarily tempered because more urgent crises intervened.
Since this fall, candidate Biden has clearly stated that, if elected president, his firstpriority would be to control the pandemic. His second priority would be to revitalize
the economy, based on the comprehensive economic plan announced in July with
the name “Build Back Better.” A third priority would be to address the issues ofstructural inequality and systemic racism. Another priority, which remains constantfrom his Foreign Affairs article, is combatting climate change.
As you can see, President-elect Biden and his administration-to-be have ambitious
aspirations to conquer the coronavirus, revitalize the American economy, reduce
structural inequalities and systemic racism, combat climate change, and restore
America’s role in the world. However, as I mentioned earlier, they will face significant
challenges in achieving these goals, as I will now explain.

3 Domestic Constraints
The U.S. presidential election of November 3 produced a clear victory for former
Vice President Biden, who won 306 electoral votes to 232 for President Trump.
In the popular vote, Biden won more than 81 million votes, a margin of over 7
million votes more than Trump. However, contrary to the optimistic forecasts basedon public opinion polls, Democrats did not realize a “Blue Wave,” where Democrats
were hopeful of winning not only the White House but gaining seats in the Houseand flipping the Senate to a Democratic majority.
Instead, Democrats on Nov. 3 lost seats in the House of Representatives—althoughkeeping their majority—and failed to gain a majority in the Senate. The final outcomeof the Senate elections will not be known until the run-off elections in Georgia, set for
January 5, 2021. But which party wins a majority in the Senate will have important
implications for the Biden administration, on two counts.
First, Democrats winning a majority in the Senate will be vital for Biden to getlegislation he wants passed by Congress. Obama and Trump used executive orders
to achieve what they could not get passed in Congress, but there are limits to what
can be done by executive orders rather than legislation passed by both houses ofCongress.

2 America’s Role in The New Global Order

11

Second, having a Democratic majority in the Senate will be important for Biden to
get confirmed the senior officials he wants in his administration—the cabinet secretaries, deputy secretaries, undersecretaries, assistant secretaries, and ambassadors,
as well as federal judges to the Supreme Court, 13 circuit courts of appeal, and 94
federal district courts.
So, the first domestic constraint President-elect Biden will face is the Republican
Party, especially if it retains its majority in the Senate. In October 2010, Senator Mitch
McConnell, then and now the Senate Majority Leader, declared in an interview, “Thesingle most important thing we want to achieve is for President Obama to be a oneterm president.” And Senator McConnell, true to his word, did everything he could
to prevent President Obama from realizing his agenda.
Many Americans are hopeful that because Biden has so much experience in Washington, D.C., having served as Senator for 36 years and as vice president for 8
years, and because of his personality, decency, and empathy, he will be able towork with Republicans to arrive at compromises and to get things done. Some also
point to Biden’s personal relationships with prominent Republicans, including Mitch
McConnell. But it will not be easy, given the polarization that has increasingly divided
Democrats and Republicans over the past 30 years.
The second domestic constraint Biden will face is the American electorate, given
the fact that although he won more than 81 million votes, more than 74 million
Americans voted to keep President Trump in power for a second term. Biden has
repeatedly said, “I am a proud Democrat, but as president I will govern America, notonly those who voted for me.”But the reality is that America remains a deeply divided country. As a generalization, the West Coast, East Coast, and large cities favor the Democrats, while theMidwest, South, and rural areas favor the Republicans. When we examine in moredetail the voting behavior of the electorate, we see that in addition to geographic
region and urban/rural differences, there are also clear differences based on race,
gender, generation, religion, income, and education.
These differences have in recent years been exacerbated by cable television andsocial media. Whereas 30 years ago the main sources of television news in the
United States were the three major networks of ABC, CBS, and NBC—which by
and large agreed on what the facts were—we now see a proliferation of cable andother networks, many of which have a completely different narrative or view of theworld from the others. It is indeed a world of “alternative facts.” And social media
adds to the polarization, since the algorithms employed to keep users glued to thescreen to see advertisements ensure that the users are fed the political viewpoint thathe or she favors. So SNS users who support Democrats are fed news and featuresfrom the left, whereas those who support Republicans are fed news and features fromthe right—further creating alternative worlds and intensifying polarization.
The third domestic constraint Biden will face is Donald Trump himself, assuming
he is able to fend off the numerous lawsuits he is certain to face upon leaving theWhite House on January 20, 2021. At this point, no one knows what role Trump
will play after he leaves office. He may decide that he’s had enough of politics, inwhich case he may focus his energies on his business, including paying off the more

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G. S. Fukushima

than $400 million of debts he reportedly has. On the other hand, he may decide tokeep actively involved in politics, not only by continuing his daily Tweets but also
perhaps by starting or acquiring a media network, since he appears to feel alienatedrecently from Fox News. If this last scenario comes to pass, and if Trump is serious
about running again for the presidency in 2024, this could impose another constraint
on President Biden, both on domestic and foreign policy.

4 The New Global Environment
The world that President Biden will inherit in January 2021 will be significantly
different from that he left as VP four years before. America’s two major rivals,
China and Russia, are in comparatively stronger positions than they were in January
2017. For the United States, the situation in Iran, Iraq, Syria, Afghanistan, North
Korea, and the Middle East have not improved, and in some cases, have deteriorated.
America’s alliances and partnerships, including with NATO, have become frayed.
And Trump has withdrawn the United States from the Paris Climate Accord, Irannuclear deal (JCPOA), World Health Organization, Trans-Pacific Partnership, andother international organizations, arrangements, and commitments.
Although the Biden administration may declare that “America is back,” how will
America’s allies and partners respond? Some may welcome America re-engaging
with the world and with multilateralism and international organizations. But others
will understandably be skeptical whether the United States has the consistency andstaying power to keep its engagement with the world. If Donald Trump won in 2016,
what assurance is there that he—or someone like him who touts his “America First”
policies—will not be elected president in 2024 or 2028?
Here, I find several recent developments encouraging. First, regarding the world’s
reception of the Biden administration, I was encouraged that in the Washington Postof November 16, French Foreign Minister Jean-Yves Le Drian and German Foreign
Minister Heiko Maas co-authored an op-ed piece entitled “Joe Biden Can Make
Trans-Atlantic Unity Possible.” They wrote:
Europe and America need a transatlantic “New Deal” to adapt our partnership to global
upheavals and in line with the depth of our bonds, common values and shared interests. Our
two countries will be working toward that goal with President-elect Joe Biden and VicePresident-elect Kamala D. Harris, who believe in the value of international partnerships andin the friendship between the United States and Europe… There won’t be any better, closer
and more natural partners for this than America and Europe.

Four days later, on November 20, European Commission President Ursula von derLeyen gave a speech to the U.S. Council on Foreign Relations in which she presented
her vision of a new transatlantic agenda:
At this point in history, no country or entity can change the world through unilateral action,
so countries must work together. In particular, if Europe and the United States work together,
we can leverage extraordinary global resources and influence. We represent the world’s two

2 America’s Role in The New Global Order

13largest blocks of advanced democracies and we have the reach to set global regulations andstandards…Using this joint influence to get things done is more important than ever.

President von der Leyen went on to propose four concrete areas for cooperation between the United States and the European Union: overcoming the pandemic,
protecting climate and the environment, governing digital and technology, andupholding and upgrading global institutions and governance.
Clearly, the global challenges confronting the new administration are daunting,as are the tasks requiring immediate attention at home. The optimists in America
say, “We can walk and chew gum at the same time”—meaning, America can devote
the necessary time, attention, and resources to both the domestic and global issues.
The pessimists are prone to say that we lack the bandwidth to do both well, and thatrather than spread ourselves too thin and doing both badly, we should first devote
ourselves to fixing our domestic problems and doing that well.

5 Prospects
I myself come in somewhere between the optimists and the pessimists. Perhaps I
would call myself an optimistic realist. This may stem from the fact that I grew up in
California: I attended elementary school in the San Francisco Bay Area, high schoolin Los Angeles, and college at Stanford University, in the heart of Silicon Valley.
As some of you may know, California, which is the largest American state by
population, has almost 40 million people (15% of the population of the United States)
and is now the world’s fifth largest economy as measured by GDP, larger than Britain
and India and only after the United States, China, Japan, and Germany. It is also
considered the harbinger of the future of the United States, generally 20–25 years
ahead of the rest of the country.
California’s policies on such issues as international trade, immigration, environment, climate change, gun control, civil rights, human rights, inclusion, criminal
justice, and engagement with the world are diametrically opposed to what the Trumpadministration has tried to pursue in its four years in office.
It is an America that is open, tolerant, diverse, dynamic, innovative, green, andactively engaged with the world—in trade, investment, capital flows, immigration,
tourism, education, etc. It is an America represented by our vice president-elect,
Kamala Harris. Her mother immigrated to the United States from India and her father
immigrated to the United States from Jamaica, and they met when they were both
graduate students pursuing their Ph.D.’s at the University of California at Berkeley,
one of the world’s premier institutions of higher learning.
To me, Kamala Harris represents the future of the United States. So, although
in the short term, America will be confronted with many challenges, both domestic
and foreign, in the longer term, I am optimistic about the future of America andthe positive and constructive role it can play in the world. I therefore hope that theparticipants in this conference will join me and view the United States from this14

G. S. Fukushima

longer-term perspective, as we strive, as written in the preamble to the Constitutionof the United States, “to form a more perfect Union.”Thank you for your kind attention.

Glen S. Fukushima is a Senior Fellow at the Center for American Progress, a think tank headquartered in Washington, D.C. After law practice, he served as Director for Japanese Affairs(1985–1988) and Deputy Assistant United States Trade Representative for Japan and China(1988–1990) at the Office of the United States Trade Representative (USTR) in the Executive
Office of the President. From 1990 to 2012, he was based in Asia as a senior executive working forAmerican and European corporations and served two terms as President of the American Chamberof Commerce in Japan. He assumed his current position in 2012, and in 2015–2016 he served on
Hillary Clinton’s Asia Policy Working Group. He was educated at Stanford, Harvard, Keio, andTokyo universities.

Chapter 3

Afterimage of the British Empire?
A Background of Brexit
Yoichi Kibata

Abstract One important factor which lay behind the results of the Brexit referendumin June 2016 is what can be called ‘an imperial nostalgia’: the feeling that Britain
should not be content with being only a part of integrated Europe and should again
seek a more important position on the world stage which it once enjoyed. It is an
outdated sentiment and the future direction of Britain which it entails is unrealistic,
but in order to say so we should look back on the history of the world in the twentiethcentury and Britain’s position in that world. This chapter is an attempt to trace thehistorical background of that mindset.
Keywords Brexit · The British Empire · European integration · Imperial mindset ·Imperial nostalgia

1 Brexit and the Afterimage of a ‘Global Britain’: Hopes
for Empire 2.0
The outcome of the Brexit referendum in June 2016, which finally led to Britain’s
departure from the European Union in January 2020, was shocking. Like many otherpeople I was under the impression that, even if the pro-Brexit side were to gather
sizable support, those against leaving the European Union would ultimately win.
Therefore, I was very surprised by the results of the vote.
My career as a historian spans roughly the same period as that of Britain’s membership in the EC/EU. I first stayed in Britain between 1968 and 1969, when Britain
was not yet a member of the EC, but, during my second stint in the country between
1975 and 1976, Britain had already become a member country, having entered theEC in 1973. It was in 1975 in London that I watched the first referendum concerning
Britain’s EC membership.
Y. Kibata (B)Seijo University, Tokyo, Japane-mail: kbty38@seijo.ac.jp
University of Tokyo, Tokyo, Japan© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_3

15

16

Y. KibataSince then, I have been engaged in research about various phases and aspectsof the British Empire’s break-up and have always emphasised the importance ofthe transformation of Britain’s position in the world from an imperial power to a
European country. In arguing that Britain should accelerate that transformation andfavour greater integration with the European Union, I always thought that Japan had
a similar problem in its relations with neighbouring Asian countries, although, in thecase of East Asia, regional integration had not yet materialised. In short, my argument
was that Britain should become a part of Europe, just as Japan should become a partof Asia.
Hence my great disappointment with the result of the June 2016 referendum.
The reasons for the victory of the pro-Brexit vote were multifarious and the issueof the EU was not necessarily the decisive factor in the outcome of the referendum,
but this is not the place to discuss it. Here, I would like to point out that one importantfactor that can be called ‘an imperial nostalgia’: the feeling that Britain should not
be content with being only a part of integrated Europe and should again seek a more
important position on the world stage which it once enjoyed.
During the period leading up to the referendum, there were voices expressing thiskind of imperial nostalgia. For example, in 2015, the Institute of Economic Affairs,
a pro-Brexit organisation, published a report, Directions for Britain outside the EU,
which contained a proposal that Britain should pursue free trade through the route ofCommonwealth and the Anglosphere.1 Such an idea that the future of Britain outside
the EU would be guaranteed by the close relations with countries that had historicalties with Britain from the days of the British Empire was not at all new. This view
was held by many people who had a negative attitude toward Britain’s position in an
integrated Europe.
Of course, it is impossible to decide how important this kind of sentiment was forthe victory of those who voted to leave the EU in the referendum. But it was, andis, easy to refute the validity of such a proposal. At the time when this proposal was
made, the biggest trade partner of Britain was the EU, whose shares of the British
exports and imports were 43 and 53% respectively. The key country in the so-called
Anglosphere, that is, the USA, was the second partner, but its shares were only 20 and
10% respectively. The viewpoint that Britain should seek future prospects outside
the EU, in the renewed close relationship with the USA and the Commonwealthcountries, was nothing but imperial nostalgia.
A few days after the referendum, Prof. Philippa Levine, a prominent historianof the British Empire, contributed a short essay to an internet site titled ‘Brexit
succeeded by playing to Britons’ imperial nostalgia’, starting with the following
sentence: ‘Shortly after the result of Britain’s referendum on the European Union
was declared last week, an academic colleague remarked to me, “The final curseof the empire is that the imperial dream is destroying the imperial heartland”’, and

1 Rulph Buckle et al., Directions for Britain Outside the EU, London: The Institute of
Economic Affairs, 2015. http://www.iea.org.uk/sites/default/files/publications/files/Brexit-intera
ctive.pdf (lastly accessed 24 February 2021).

3 Afterimage of the British Empire? A Background of Brexit

17

stressed that ‘Britain’s long association with imperialism was a major undercurrent
in the campaign to leave the EU.’2
After the referendum, the persistence of imperial nostalgia became more evident,
and words like CANZUK, Anglosphere, or Empire 2.0 began to be heard in the
public discourse. These are, of course, terms that strongly remind us of the British
Empire. In the case of Anglosphere and Empire 2.0, no explanation may be necessary.
CANZUK is an acronym that combines Canada’s C with ANZUK, which stood formilitary collaboration between Australia, New Zealand, and the United Kingdom
during the days of the British Empire. People who used these words to forecast
Britain’s international connections after Brexit hoped that Britain, once the centre
of a great empire and the hub of the English-speaking sphere, would regain its
preeminent position outside the EU.
A vociferous protagonist of this line of thought is Andrew Roberts, a conservative
historian, who said, immediately after the referendum, that, after Brexit, CANZUK
could unite as a pillar of Western civilisation.3 Boris Johnson, the current British
Prime Minister, is himself one of the ardent supporters of such an idea. In September
2017, Johnson, the then Foreign Minister, wrote an article suggesting that, after
leaving the EU, the UK ‘will be able to get on and do free trade deals... not least withthe fastest growing Commonwealth economies, and build truly global Britain.’4 It
should be pointed out that this term ‘global Britain’ has been widely used in various
quarters since the referendum, and, in the context of Brexit, it is nothing but anexpression of imperial nostalgia.

2 ‘The Long Twentieth Century’
Imperial nostalgia is an outdated sentiment and the future direction of Britain which
it entails is completely unrealistic, but in order to say so we should look back on thehistory of the world in the twentieth century and Britain’s position in that world.
In 2014, I published a short book titled History of the Twentieth Century, and thefollowing is the gist of my argument in that book.5
In that book, I put forward the idea of ‘the long twentieth century’ which lasted
from the 1870s to the early 1990s. Needless to say, in reaching that idea, Eric Hobsbawm’s famous and influential view about the twentieth century, ‘the short twentieth
2 Philippa Levine, ‘Brexit Succeeded by Playing to Britons’ Imperial Nostalgia’. https://www.zoc
alopublicsquare.org/2016/06/28/brexit-succeeded-playing-britons-imperial-nostalgia/ideas/nexus/(lastly accessed 24 February 2021).
3 Andrew Roberts, ‘CANZUK: After Brexit, Canada, Australia, New Zealand and Britain Can Unite
as a Pillar of Western Civilization’, The Telegraph, 13 September 2016. https://www.telegraph.
co.uk/news/2016/09/13/canzuk-after-brexit-canada-australia-new-zealand-and-britain-can/ (lastly
accessed 24 February 2021)
4 Danny Doring & Sally Tomlinson, Rule Britannia: Brexit and the End of Empire, London: Biteback
Publishing, 2019, p. 142.
5 Yoichi Kibata, History of the Twentieth Century (in Japanese), Iwanami Shoten, 2014.

18

Y. Kibatacentury’, was always in my mind. Hobsbawm’s short twentieth century covered theperiod from the First World War and the Russian Revolution to the end of the Cold
War—that is, from 1914 to 1991–, and, when we look at the history of Europe, itcertainly provides a meaningful picture of the recent history. However, I doubted
whether this rather Eurocentric view could be applied to other parts of the world,
especially to those areas that were subjugated in the age of imperialism. The FirstWorld War had a crucial impact on Europe, but, if we look at the wider world, its
importance becomes smaller, and it cannot be said to signify the beginning of a newera. The colonial situation into which many areas outside Europe had been thrownduring the preceding years did not radically change.
This brings us back to the 1870s, when the age of imperialism began. After the1870s colonisation in Africa, Asia and the Pacific gained momentum. The world
became roughly divided into those countries that ruled colonies, and those areas thatwere ruled, and ‘the imperialist world system’ took shape. It should be added thatsuch a division of the world was regarded as natural and normal in those days.
The theme of this symposium is ‘100 years of world wars and post-war regional
collaboration and good governance’. Regarding regional collaboration, regionalframeworks in this imperialist world system were mostly defined by the rulingimperial powers and the scope of regional collaboration was limited. In addition,colonial governance, which was based on asymmetrical and unequal colonial rule,
was prevalent.
This imperialist world system was transformed by two world wars. It is true that,as I mentioned above, the First World War did not change this system radically,
but the process of its break-up started as a result of the war. That process—that is,
the progression of decolonisation—was accelerated by the Second World War, andfinally led to the collapse of the imperialist world system.
The early 1990s, which saw the end of the Cold War and was regarded by Hobsbawm as the terminal point of the short twentieth century, was the final phase ofthis process. In this view the break-up of the east European socialist bloc and of theSoviet Union itself meant at the same time the collapse of the Soviet imperial systemthat had succeeded the Russian empire.
In this process regional collaboration began to be propelled by the newly independent countries. In Southeast Asia the Association of Southeast Asia (ASA) was
formed in 1961 and then the Association of Southeast Asian Nations (ASEAN) was
created in 1967 by five countries, Indonesia, Malaysia, the Philippines, Singapore
and Thailand, of which only Thailand had not experienced colonial rule. In Africa theOrganization of African Unity (OAU) was launched in 1963 by 32 African countries,
most of which had become independent only shortly before.
In this process outright colonial governance faded away, and various forms ofinternational governance, which were based on the exercise of sovereignty acquiredby former colonies, came to dominate the world stage, however incomplete andporous that sovereignty might be.

3 Afterimage of the British Empire? A Background of Brexit

19

3 Britain’s Position in ‘The Long Twentieth Century’
Needless to say, Britain occupied a very important position in the world of ‘the longtwentieth century’, especially during its early phase. It is said that by colonising many
territories, the British Empire ruled one-fourth of the world’s land and as much asof the world’s population. As a hegemonic power, Britain could lay down various
international standards and norms. It was regarded as the front-runner of ‘the worldof civilization’, and, when the Anglo-Japanese Alliance was concluded in 1902, it
was said in Japan that, as a partner of Britain, Japan was finally admitted into thatcivilised world.
Having what I call ‘imperial mindset/mentality’ (‘teikoku ishiki’ in Japanese),
British people regarded Britain’s ruling position as natural, and, even if their concreteknowledge about the British Empire was poor or hazy, harboured little doubt about theimperial structure that surrounded their daily life. The strength of such a mindset has
become the subject of heated controversy. For example, Bernard Porter, a leading
imperial historian, repeatedly maintained that the working-class people of Britain
were free from imperialism and there was no ‘general feeling of support for and evenmild pride in this entity [the British Empire] which was not very important to them.’6
On the other hand, John M. MacKenzie, another doyen of imperial historians and thegeneral editor of numerous books on the British Empire published by the Manchester
University Press, continuously pointed out the importance of the ubiquity of thingsand information related to the empire in people’s daily lives and emphasised thestrength of imperial mindset.7 I have put this imperial mindset at the centre of mystudy of the British Empire since I published my first book more than thirty years
ago.8
In fighting both world wars Britain depended very much on material and humanresources from various parts of its empire. I have been calling this situation figuratively ‘the total war of the empire’. As the result of these ‘total wars’ Britain did
become one of the v¦ictorious powers, but at the same time these ‘total wars’ paved
the way for decolonisation and finally the collapse of the empire.
For this reason, there were people who thought Britain should not have foughtthese world wars in order to keep the British Empire going and preserving its power.
For example, Niall Ferguson, who later became well known for his advocacy of themerit of the British Empire, argued in a book published in 1998 as follows:
Had Britain stood aside – even for a matter of weeks – continental Europe could have beentransformed into something not wholly unlike the European Union we know today – but

6 Bernard Porter, The Absent-Minded Imperialists: What the British Really Thought About Empire,

Oxford: Oxford University Press, 2004, p. 226.
7 MacKenzie’s first and very influential work along this line was: John M. MacKenzie, Propa-

ganda and Empire: The manipulation of British public opinion 1880-1960, Manchester: Manchester
University Press, 1984.
8 Yoichi Kibata, The Price of Imperial Rule: ‘Imperial Mindset’ and the Collapse of the British
Empire (in Japanese), Tokyo University Press, 1987.

20

Y. Kibatawithout the massive contraction in British overseas power entailed by the fighting of two
world wars.9

However, Britain did fight these wars and, despite the effort to stem the tide of
decolonisation, the process of the breaking up of the empire became inevitable.
In 1962 Dean Acheson, the former United States Secretary of State, made afamous statement: ‘Great Britain had lost an empire, but not yet found a role’. One
year earlier, in 1961, the British government had applied for membership in the EEC,
which had been founded three years before in 1958. This application and the second
one made in 1967 were rejected, but Britain finally became a member in 1973. As
Acheson suggested, Britain’s international behaviour around this period was largely
defined by the process of decolonisation, and it was hoped that Britain, which had lostan empire, could and would find a new role as a European country in an integrated
Europe.
It should be noted here that European integration itself took place against thebackground of decolonisation. As mentioned above, in the wake of decolonisation
regional collaboration started to be undertaken by newly independent countries, but
in the case of Western Europe, regional collaboration and integration were propelledby countries, which were ruling powers in the imperialist world system. Among thesix countries that were founding members of the EEC, four countries, excluding
Germany and Luxemburg, possessed colonies at the time of its foundation. The
relationship between these countries and their colonies emerged as a contentious
issue, and, as a result of France’s strong insistence, the Treaty of Rome, signed on 25
March 1957, provided for the commercial and financial association of the overseas
territories (colonies) of France, Belgium, Italy, and the Netherlands with the EEC.
Therefore, in the structure of the EEC and the EC, which was launched in 1967,
certain continuity from the imperialist world system could be detected. Still Britain’s
entry into the EC meant a great leap from the situation in which Britain played asignificant international role as the centre of a huge empire.

4 Lingering Imperialist Mindset
Since it joined the EC, Britain has often been called ‘an awkward partner’ in an
integrated Europe,10 and it continued to keep distance from any initiative to deepen
integration. That attitude was epitomised in Margaret Thatcher’s crying out, ‘No,no, no’, in the Parliament in 1990 against the European Commission’s attempt toincrease its powers. I was in Britain at that time and was much impressed by seeingthat scene on TV.

9 Niall Ferguson, The Pity of War, London: Allen Lane the Penguin Press, 1998, p. 460.
10 Stephen George, An Awkward Partner: Britain in the European Community, Oxford: Oxford

University Press, 1990.

3 Afterimage of the British Empire? A Background of Brexit

21

Thatcher had to resign from the premiership immediately after that.11 The periodof her premiership that lasted from 1979 to 1990—that is, the last decade of the longtwentieth century—also saw the lingering of the imperial mindset. That mindset
clearly surfaced during the Falklands war in 1982, when the Thatcher government
launched a large-scale war against Argentina, which tried to take back possession of
the Falkland (Malvinas) islands. These islands lay offshore of Argentina, and, though
the Argentine government’s claim itself was valid in the context of decolonisation,
the method adopted by Argentina could not be justified. However, Britain’s military
reaction was excessive and reminded us of imperialist powers’ behaviour in the earlyphase of the long twentieth century. What was important was that many people in
Britain supported this war without holding any doubt about the continuing British
rule of small islands in the South Atlantic far away from their country.
This kind of lingering imperial mindset has been carried over into the twenty-first
century and has taken the shape of imperial nostalgia and influenced the outcome of
the referendum of 2016.
In 2017 a book titled Inglorious Empire: What the British Did to India, written by
Shashi Tharoor, an Indian politician and author, was published in Britain. That book,which originally came out in India a year before with the title An Era of Darkness:
the British Empire in India, was a critical historical examination of British rule inIndia. The author argued: ‘Britain is no longer “Thatcherite”, though in the aftermathof “Brexit”, it may even be worse. The need to temper British imperial nostalgia withpostcolonial responsibility has never been greater.’12
Certainly, imperial nostalgia and the lingering imperial mindset that resurfaced
long after the collapse of the imperialist world system should be erased in looking
for a balanced position of Britain in the world. However, it is a big question whether
Britain, which is now led by a pursuer of imperial afterimage like Boris Johnson,
can find a correct way or not in a multi-polarized world. As a historian who has
been completely disappointed with Britain, I shall continue to watch where Britain
is heading.

Yoichi Kibata is Professor Emeritus of the University of Tokyo and Seijo University. He
specialises in the history of the British Empire in the age of decolonisation. He has publishedin Japanese: Price of Imperial Rule: Imperial Mentality and the Break-up of the British Empire(1987); The Twilight of the Empire: British Policy towards Japan and Malaya, 1947–1955 (1996);
The British Empire and Imperialism (2008); History of the Twentieth Century (2014) and Travel
Along the Imperial Route: British Colonies and Modern Japan (2018). His publications in English
include: (ed. with Ian Nish) The History of Anglo-Japanese Relations, 160–-2000, Vol. 2, The
Political-Diplomatic Dimensions, 1930–2000 (2000).
11 A more important reason for her resignation was the problem of the poll tax, which Thatcher

tried to impose upon British people.
12 Shashi Tharoor, Inglorious Empire: What the British Did to India, London: Penguin Books,

2017, p. xxv. The review in The Guardian took notice of this part and noted that it was a timely
book which addressed the need to temper imperial nostalgia. https://www.theguardian.com/books/
2018/feb/23/inglorious-empire-what-british-did-to-india-shashi-tharoor-review (lastly accessed 24
February 2021).

Chapter 4

Post-Trump Challenges for US and Japan
Wataru Sawamura

Abstract Thank you very much for your warm introduction. I am very muchhonored to join the international symposium of the Science Council of Japan. Thisis a valuable opportunity with many internationally respected experts. I have been
involved in the work of international reporting at the Asahi Shimbun for nearly
30 years. With six years in the UK and four years in France, I had been working
mainly in Europe, but I have been in Washington as the Bureau Chief since July
2017. For the past three and a half years, I have covered the domestic politics,
foreign policy, and security policy of the Trump administration. As you all know,what has changed significantly in the last three and a half years is the U.S. policy
toward China. Keywords often heard in the Washington area have also changed. The
first was the “Revisionist”. It meant to be vigilant as China and Russia are seeking
to change the global status quo as revisionist powers.
Keywords Post-Trump · United States · Japan · Media’s role
Thank you very much for your warm introduction. I am very much honored to join
the international symposium of the Science Council of Japan. This is a valuable
opportunity with many internationally respected experts.
I have been involved in the work of international reporting at the Asahi Shimbun
for nearly 30 years. With six years in the UK and four years in France, I had beenworking mainly in Europe, but I have been in Washington as the Bureau Chief since
July 2017. For the past three and a half years, I have covered the domestic politics,
foreign policy, and security policy of the Trump administration.
As you all know, what has changed significantly in the last three and a half years
is the U.S. policy toward China. Keywords often heard in the Washington area havealso changed. The first was the “Revisionist”. It meant to be vigilant as China andRussia are seeking to change the global status quo as revisionist powers.
And then the term “Pushback China” was heard quite often. China may soon
overtake the United States not only in the military and economy, but also in science
W. Sawamura (B)Washington Bureau, Asahi Shimbun, Washington, DC, USAe-mail: sawamura-w@asahi.com© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_4

23

24

W. Sawamura

and technology. It is a voice that therefore we need to push back against China now.
The next buzzword was “Punish China”. The idea is that China should be deterredby punishment. The idea has grown with unfair practices such as market barriers
against foreign investment and theft of intellectual property.
And then since last year people are more and more mentioning the term “Decoupling” which implies a China-free supply chain and an economy not influenced by
China’s dominant market power and politics. Was this escalation a strategy that the
Trump administration had carefully crafted? My answer is No.
I would like to make three points:
First point. The biggest political goal for Mr. Trump was to use his personal
relationships with the leaders of superpowers and strong men leaders to make a big
deal that previous administrations have failed to do. For Mr. Trump it is not a matterof good deal or bad deal, it’s a matter of big deal.
The rise of China is an unquestionable fact in everyone’s eyes. However, there
is no evidence that Mr. Trump made any efforts to architect a comprehensive andcoherent strategy on how the US would manage the world order and rising China.
In other words, Mr. Trump’s policy decisions were based on his intuition, his reelection strategy, and his ego: he wanted to be considered a great president. I met
some administration officials who were concerned that direct negotiations with Xi
Jinping would result in an easy compromise deal.
The second point. Regardless of Mr. Trump’s thoughts, there was already growing
dissatisfaction with China in various sectors in the US such as its administration,
congress, industry and academia. Mr. Trump decided that it would be difficult tomake a big deal with Mr. Xi Jinping, and that it would be more politically positive
to put strong pressure on China through sanctions, tariffs and other trade issues. The
frustration that had been building up in the United States erupted at once. The viewof China in U.S. public opinion has deteriorated to a record low in the past two years,
and Mr. Trump has come to the conclusion that it is politically advantageous to beat
the hardline drum against China in response to this change in the will of the people.
Third point. The American public’s deteriorating view and sentiments toward
China really comes from the pessimistic self-portrait of the decline of the US. WhileI was covering the US presidential election campaign, I heard the American public
asking many times for the US to stop being a so-called world policeman, saying
instead it should focus more on domestic issues such as infrastructure, healthcare,and inequality.
The reason for this is that US society is undergoing major changes caused by
the widening economic disparities associated with globalization. These include thedisparities between urban and rural areas, the disparities associated with educational
backgrounds, and the dismal projection that younger generations cannot be richer
than their parents. Distrust of the elite and government institutions have paved theway for populists to gain political influence. In the presidential election, the biggest
indicators of whether one supports Trump or Biden were urban or rural (of course,
urban for Biden, rural for Trump) and educational background (college graduates for
Biden, non-college graduates for Trump).

4 Post-Trump Challenges for US and Japan

25

According to an opinion poll, Americans have lost trust in institutions such as
Congress, the executive branch and the media, which had long been considered acornerstone of democratic governance. Some surveys show especially the younger
generations are increasingly wanting military rules rather than democratic processes.
Disillusion with liberal democratic values and the rise of an undemocratic China
have invoked skepticism of the US model and its traditional leadership role in theworld. In other words, this sense of decline of the US and the loss of self-confidence
among the American public are major factors of the growing uneasiness with China.
All of this has been accelerated by the Covid-19 pandemic.
This symposium is a forum to look back on the wars in the world over the past
100 years and explore a new image of the international order. Would this hardening
relation between the US and China be leading to the next “Cold War”? At the Asahi
Shimbun we discussed whether it is appropriate or not to call US-China relations anearly stage of the New Cold War.
It certainly does look like the “Cold War” if you look only at the current situation
where two superpowers who have completely different views on democratic values
are fiercely competitive in military, economy and technology. But the reality is quite
different from the original cold war between the US and the USSR. The US andChina are closely tied to each other at various levels, and they are interdependent.
Neither country is conducting proxy wars in the world although there is competitionin the sphere of influence.
In addition, I would like to point out that the US and China share an identicalrisk: the growing discontent and frustration among the middle class. I was staying
in Beijing as a visiting fellow at Tsinghua University from 2013 to 2014 where I
had a lot of chances to interact with Chinese young scholars and graduate students.
I was so surprised that many of them did not hesitate to show me their frustration
and worries about their future even though they were already part of the promising
Chinese elite.
It was not because China’s economic developments were weak. But they wereworrying about an excessively competition-oriented society, materialism and greed ofcapitalism which created serious social inequality. They were also irritated that China
was not respected enough by other countries internationally in spite of economic
success. They were really frustrated by China’s lack of soft power. Since China does
not have a democratic electoral system, such voices are difficult to manifest. On
Social Networking Services, only voices biased in favor of nationalism stand out.
It was surprising for me to learn that there are objective and critical views to theircountry and government.
Now we have a new US administration. What we should keep in mind is that
Mr. Biden will not go straight back to a soft engagement policy with China. The
hardline policies toward China had already been formed with bi-partisan consensus.
In particular, people who have already been nominated or are going to be nominated to
the new administration tend to be far more critical of China on issues like human rights
violations, state-led Chinese industrial policies, and aggressive military activities.
We should remember as well that Biden won the election by flipping some rust belt
states like Pennsylvania, Wisconsin and Michigan where traditional manufacturing

26

W. Sawamura

industries had gone to China. Although Biden will never use “America First,” I think
he will not completely abandon protectionism.
Mr. Biden has already declared that he would heal this polarized country andeliminate division. However, the impact of the Trumpism era will remain strong fora long time and the divisions will not fade away immediately.
Although I am personally against using the term “new cold war”, the situation isvery volatile and unstable considering current competition. Rivalry does not comefrom the strength of the US or China but comes from the weaknesses of both superpowers. It could be far more dangerous than a real cold war as there is no effective
deterrent between the US and China.
That is why I think it is essential for the new US administration to carefullyarchitect a comprehensive strategy for China policy and manage bilateral relations.
Mixed responses have been heard from Japan since Biden’s electoral victory.
Some worry that US policy would return to Obama’s engagement policy towards
China. Others are hopeful that the US would go back to institution-based foreign
policy, internationalism, multilateral frameworks, and respect for alliances. It is also
true there are common natures between Mr. Biden and Prime Minister Suga of Japan.
Both are from commonality, not from political celebrity families, they both spent along time as number two, and nobody expected them to be number one. Both arefocusing on practical actions rather than flashy things.
But I think that Japan should not be satisfied. Unless Japan is willing to be on
the same page with the US regarding global agendas, Japan will not be treated as apartner and be left behind.
Based on those contexts, I would like to point out three keywords which I think
are crucial concepts for the future of US-Japan relations and their contributions to
global order.
The first keyword is capability.
The Trump era really showed us that even free and open democratic power countries like the US might be not immune to populism with authoritarian touches. And it
was already proven that this populism is ineffective and incapable of tackling global
crises such as the pandemic. Of course, we should not follow the same approach as inother authoritarian states. Needless to say, the top priority for Biden’s administrationis ending the Covid-19 crisis and rebuilding the US economy.
It is essential for countries like Japan, South Korea, Germany, Australia, andCanada, which were able to manage the pandemic fairly well through their democratic systems, secure democratic norms and transparency. They should help develop
capabilities and well-functioning governments with other like-minded democracies
such as the United States.
We need recovery but moreover we need a good model of recovery.
The second keyword is Big Picture. I think Japan should address its willingness
to commit to global issues by looking at the big picture such as public health, climatechange, nuclear proliferation, inequality, and mass migration issues.
I think it is expected that these democratic middle powers will unite to support
the United States if necessary and should pull the US back if it is going in the wrong
direction.

4 Post-Trump Challenges for US and Japan27

To do so, Japan itself must show its position of respecting free and democraticvalues both inside and outside the country. Mr. Suga’s signature policies include
issues such as lowering mobile phone fees and establishing the Digital Agency. It
is good to promote political agendas which are close to Japanese peoples’ everyday
life and show the efficiency of government. But I would like Suga to be vocal on the
global agenda as well.
He announced that Japan would achieve zero carbon emissions by 2050. I think
it is a very good start. I believe that what is expected of the Suga administration is
not ideology or nationalism, but rather a practical approach to effectively tackle thebig pictures.
The third keyword is diversity. I am sure that Biden’s cabinet and White House
will be very diverse with lots of women, people of color and younger generations. It
is already announced that the next UN ambassador would be an African American
woman, and there would be the first Hispanic Homeland Security Secretary. The
US will have its first female Treasury Secretary and female director of national
intelligence.
I am feeling a little bit nervous when I imagine a US-Japan ministerial meetingfull of old men with dark suits on the Japanese side and very diverse counterparts on
the US side. Of course, demographics are not the same between the two countries.
But it’s time for Japan to change our mindset and to highly value diversity by making
intensive efforts to have more women and younger generations in our politics.
Lastly, it should be pointed out that Japan is in a good position to play an importantrole as a free-democratic power in Asia. Therefore, it’s essential for Japan to maintain and improve relationships with neighboring countries including South Korea todemonstrate Japan’s regional leadership.

Chapter 5Power Transition and 100 Years of World
Wars: Reconstruction of the New World
Order as the Great Powers Decline
Kumiko Haba

Abstract It is more 1 than 100 years since the end of World War I, and in a worldin which conflicts occur and nationalism rises frequently, we need to investigate andre-learn fromthe past 100 years through our sharpened, objective and fair intellectual
spirits.
The author’s first concern about the power shift was that China overtook Japan’s
GPD in 2010, and that the territorial dispute spread around Japan’s territory andTaiwan, coupled with the signs of a power shift.
On the one hand, it was the period of 2012–2022 when the attempts of regional
cooperation and integration expanded, especially in Economic field.
However, amid intensifying competition, attempts at regional cooperation were
unsuccessful. On the other hand, since 2014–2022, tensions between the UnitedStates and China or the United States and Russia, had increased, leading to thecurrent conflicts and tensions. In the midst of such tension, we all, scholars of morethan eleven countries, UN, UK, USA, China, Italy, India, Japan, Korea, Romania,
Russia, Spain, Thailand, tried to attempt to investigate and analyze under the networkwith the Science Council of Japan, and discuss about what will be the New World
Order should be. We can learn from European Resilience and the Normative power.
This is our fruits of our investigation and analysis.

Toffler, Alvin, Power Shift; Knowledge, Wealth, and Violence at the Edge of the 21st century, 1990.
Haba, Kumiko, “Power Shift—National Anxiety, Territorial Dispute and Xenophobia”,
Academic Tendency, Science Council of Japan, 2014, January. Haba, Kumiko, Asian Regional Integration in the Global Era, Iwanami Publisher, 2012. Chinese Translation: Asian Regional Integration in the Global Era, 中央編峰出版社、China, 2014. Amid intensifying competition, attempts
at regional cooperation were unsuccessful. On the other hand, since 2014, tensions between the
United States and China have increased, leading to the current conflict and tension. Kumiko Haba
(Ed), Considering Asian Regional Integration—How to avoid war, Akashi Publisher, 2017. In the
midst of such tension, it was the Science Council’s attempt and this book that tried to think about
what the new world order should be.
K. Haba (B)Aoyama Gakuin University, Tokyo, Japane-mail: khaba@aoyamagakuin.jp
Kanagawa University, Yokohama, Japan© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_5

29

30

K. Haba

Keywords Power Transition · 100 years of World Wars · New World Order

1 Introduction
It is more 1 than 100 years since the end of World War I, and in a world in whichconflicts occur and nationalism rises frequently, we need to investigate and re-learn
fromthe past 100 years through our sharpened, objective and fair intellectual spirits.
The author’s first concern about the power shift was that China overtook Japan’s
GPD in 2010, and that the territorial dispute spread around Japan’s territory andTaiwan, coupled with the signs of a power shift.
On the one hand, it was the period of 2012–2022 when the attempts of regional
cooperation and integration expanded, especially in Economic field.
However, amid intensifying competition, attempts at regional cooperation were
unsuccessful. On the other hand, since 2014–2022, tensions between the UnitedStates and China or the United States and Russia, had increased, leading to thecurrent conflicts and tensions. In the midst of such tension, we all, scholars of morethan eleven countries, UN, UK, USA, China, Italy, India, Japan, Korea, Romania,
Russia, Spain, Thailand, tried to attempt to investigate and analyze under the networkwith the Science Council of Japan, and discuss about what will be the New World
Order should be. We can learn from European Resilience and the Normative power.
This is our fruits of our investigation and analysis.

2 Symptoms of War and Power Transition Afterthe COVID-19 Era
The UK’s BREXIT and the USA’s President Trump, who touted a “Strong America”,
emphasized the era of “post truth” and “anti-intellectualism” of Europe, especially
the UK and the US, the Anglo-Saxon Great Powers of the twentieth century.
The spread of populism and antagonism in Europe and the USA, and the trendsof exclusion has a strong parallel with the start of World War I.
The biggest and most terrible commonality is that a “relative long peace” hascontinued and “generations who do not know war” have become the majority in their
populations.
When World War I broke out, it was written that young people went to the war
joyfully waving their hands with laugh and joy, as if they were going on a field trip.
But what awaited them was a prolonged war and death.
On the eve of the First World War, the rise of nationalism, conflicts and collisions
at boundaries led to the inevitable result of war.
As the war dragged on, many young civilians were sacrificed as a result of a war
where science and technology had developed.

5 Power Transition and 100 Years of World Wars: Reconstruction …

31

On the other hand, with the Bosnian independent movement that became the direct
trigger of the war, an ethnic and Social Revolution broke out, four Great Empires
collapsed—the Russian Empire, German Empire, Habsburg Empire and Turkish
Empire,1 —and many independent countries were born.
In Russia, the Democratic Revolution and the Socialist Revolution had happenedin turn, and Russia continuously grew in power. However, the Soviet Union only
lasted 70 years. It couldn’t stand 100 years of history and collapsed.
The socialist revolutions which occurred in Central and Eastern Europe werecrushed, but the Nationalist Revolution had survived. Looking on the inside of history,
four Empires collapsed, and new “sovereign states” as successors of the Habsburgmonarchy established in the twentieth century became integral to the New World.
The independence of Central and Eastern Europe was supported by Allied countries.
However, the formation of the “nation-states” and subsequent destabilization soon
gave rise to “irredentism (the territorial recovery principle)” in the defeated countries,
and as a result, new wars were started to correct borders again after 20 years. Europe
was again devastated by wars and battles. More than 50 million people died in Europe
and Asia.
“War is a zero-sum game”. With one win comes one loss. Those who lost theirterritory continued their antagonism and strengthened military power to prepare andrestore territory in the next war for hundreds of years. There is no end to territorial
wars.
After the Second World War, under the devastation and scorched earth, European
people swore that they will never wage war for territory and national interests again.
Beyond the nation-state, European integration history had begun.
However, in the twenty-first century, nationalism and populism rose again both inEurope and the world. Both the US and the UK declared “Us first!” The UK decided
to leave the EU. Interestingly, developed countries such as the UK and the US, who
had led the free trade system in the twentieth century, turned inward to protecting
their own country first. On the other hand, the emerging countries such as China, and
ASEAN advocated regional collaboration.
“One Belt and One Road Initiative (BRI: Belt and Road Initiative)” and the South
Asian Association for Regional Cooperation (SAARC), BIMSTEC, and AU (African
Union) are working together in the twenty-first century, even though their population
is huge, but furthermore they wish to collaborate together. They are embarking on
cooperation with other countries like BRICS, as well as developing regions like
Africa, Central Asia, Latin America and others.
Angus Maddison’s analysis of long-term economic statistics using megacomputers (AD1-2030) shows that India and China dominated the world economy
1 Shin-ichi Yamamuro, First World War, Vol. 1. Iwanami Publisher, 2014. Kumiko Haba, “War,Declining Great Power and Reorganization of the World Order-100 years of Russian Revolution”,
Arena, 2017, Vol. 20. Yoichi Kibata, “First World War as a Total War”, War in 20th Century,
Yushisha, 2012. Noam Chomsky, 9.11.– Not Eligible to Retribute to America! (Japanese) Bunshun
paperback, Tokyo, 2002. Brill’s Encyclopedia of the First World War, 2 Vols, Leiden & Boston,
Brill, 2012.

32

K. HabaFig. 1 Long term power shift—historical GDP in world by Angus Maddison: India/China era
continued more than 1800 years! The US is only 100 years.3

between 1 and 1800 AD, and Europe is constantly Although the United States maintained a certain level of power, the United States only jumped to the top for 200 years
from 1800, and the so-called modern Europe and America colonized Asian countries
such as China, India and others. It was clearly shown that it was the result of thedeprivation of wealth by western countries. And as a result of the colonial newsletter,
emerging Asian nations are regaining power. With this, Angus Maddison showed instatistics that the United States developed just after the nineteenth century. Therefore,
the growth of China and India was not a miracle, but just a return to the past2 (Fig. 1).
History can be compared to “Saio’s horse”, Chinese narrative—Alternating
between good and bad and unpredictable. Fortune and misfortune alternate like arope waving in turns. So is a History.
Historically, federation, nation-states, and regional integration (union) emerged
repeatedly. Politically, there is no conclusion whether nation-state or federation,
protectionism or regional collaboration is better. However, it is obvious that nationalism, populism and protectionism bring destabilization of the region, and the
expansion of nationalism easily bring various traps of conflict and war crises.
The collapse of the Hapsburg Empire brought the independence of Poland, CzechSlovakia, Hungary and Yugoslavia, but after independence of these countries, instability continued in Central and Eastern Europe between the menace of the Soviet
Union’s Socialist System and the irredentism of Germany, Italy and Hungary. Thesesituations snowball so that they need to make stronger and more stable states, so at
2 Angus Maddison, Contours of the World Economy, 1–2030 AD; Essays in Macroeconomic History,

Oxford University Press, September 2007. Angus Maddison, Chinese Economic Performance inthe Long Run, 960–2030, OECD, Paris, October 2007.
3 Source: Angus Maddison, The World Economy: A Millennial Perspective, 2001; and Angus
Maddison, “The West and the Rest in the World Economy: 1500–2030”, 2005; Masahiro Kawai,
New Asian Economy, Bunchindo, 2016. Masahiro Kawai, “Economic Relations Between Japan,
the United States and China: East Asian Community and the United States”, Press Club Meeting,2009.11.25.

5 Power Transition and 100 Years of World Wars: Reconstruction …

33

first regional cooperation, secondly autocracy and military government, and finallyconflicts and wars. Therefore, these situations brought inevitably the next conflict,
the Second World War. The subsequence of history gives us many lessons.
It is a historical turning point in the contemporary world: it is 104 years since theend of the First World War, 77 years since the end of the Second World War, and33 years since the end of the Cold War. It can be said that people of all ages have a
responsibility to construct new international norms with a view to the future, how tomake stability and prosperity in the twenty-first century.
When it seems that the war crisis and destabilization are approaching again withpopulism and protectionism today, we are facing a difficult steering of how to avoid
war and conflicts and create a new era without destroying mutual interests at thisturning point.
As a researcher of regional integration, the author investigates the incidents of thepast 100 years from the perspective of how to reconstruct peace and stability in an
instable period.

3 Modernization and War“Democratic countries do not cause war with each other”.4 This is Bruce Russet’s
definition based on the analysis of war statistics over several hundred years; this is the“democratic peace” theory which was used in a long history of the Democratization(“Pax Democratia”).
However, the famous linguist Noam Chomsky wrote on 9.11, criticizing that thecountry which has caused the wars most is a democratic country—the USA, whichis the profound thinking (Noam Chomsky, 9.11).5
Without waiting for the analysis of Bruce Russet, it has been believed generally that under modernization and democratization states have achieved peace andprosperity, after “barbaric” dictatorship disappeared. Historically, it was thought thatmodernization and civilization has certainly made people richer and happier.
But on the other hand, as a result of recent post-colonialism research and criticism
of post-science and technology, discovery of new continents and colonization is thestudy of “brutality” that had harmed the natives, by using modern heavy weapons;
modern war’s brutality is beyond comparison with the Middle Ages. The expansionof brutality of wars is becoming evident in the new research.
The invention of “matchlock, navigation, and compass” by modernization,
contributed that the modern nation discovered, pioneered, and developed around

4 For more information on Democratic Peace Theory, see Bruce Russet, translated by TakehikoKamo, Pax Democratia, Principles for the World After the Cold War, University of Tokyo Press,
1996.
5 Noam Chomsky, 9.11.– Not Eligible to Retribute to America! (Japanese) Bunshun Paperback,Tokyo, 2002.

34

K. Habaall over the world, but also brought invasion, wars, conflicts, and colonization as
well. (Diamond, Guns, Germs and Steal).6
In the First World War, the invention of technology of flight and fighter aircraft
expanded war more brutally from the two-dimensional framework to a threedimensional one and caused widening of the war not only to the front but also
to the private sectors.
The development of technology, like tanks and heavy weapons in WWII, thenuclear weapons at the end of the WWII, and the chemical weapons in the Vietnam
war—all these technologies were able to harm and killed human beings dramaticallyand sustain and expand their damage, inviting the fear of the earth’s destruction.
Modernization has developed states and societies, but weapons and war technology in the early stages, cruelizing war, which has also caused tremendous sacrifice to the civilians beyond necessity (Toshihide Maskawa “What Scientists did in
the War?”, Ryo Ikeuchi “Scientists and War”).7
The cruelty of the “totalitarian state” is enormous. However, it is also a productof modernization. The power of nuclear intercontinental ballistic missiles andremote-controlled drones is enormous and global, even suggesting the possibilityof destroying the earth, anticipation from the front need. With modern technologythat destroys the earth and humanity, we can no longer have a world war.
Even after the end of the Cold War, people did not stop producing war and weapons
in the wake of the expansion of regional conflicts. Instead of destroying weapons
with all advanced technologies that create a “clean war” by remote control of war,such as carbon bacteria, cyber, and drones. It has come to be incorporated into daily
life.
It is even repeatedly reported at News Week, etc., that the spirit of American
soldiers cannot bear killing and it has created mental disorders and an increase insuicides.8 However, people do not stop inventions that simplify and enlarge the killingof people, calling that “defense” against the threat of terrorism and war.
The fact that scientific inventions in democratic countries are increasing slaughtering skills is enormous.9 Emerging countries and “barbaric nations” are not the
only ones that cruelize and refine wars. We should look directly at the state-of-the-art
science and technology through modernization.

6 Jared Diamond, Translated by Akira Kurone, Guns, Germs and Steal; The Fates of Human

Societies, Norton, New York, 2005.
7 Toshihide Maskawa, What Scientists Do in War, Shueisha New Book, 2015. Ryo Ikeuchi Scientists

and War, Iwanami Publisher, 2016.
8 “The Cry of a Young American Soldier who Commits Suicide After Returning”, News Week,

2012.8.7. Yukari Watanabe, “Why Soldiers Who Survived the Battlefield Collapse in the US”,
News Week, 2016.8.31.
9 Ryo Ikeuchi and Takayuki Kodera, Weapons and University: Why Should We Not Conduct Military
Research, Iwanami Publisher, 2016.

5 Power Transition and 100 Years of World Wars: Reconstruction …

35

3.1 Anti-Intellectualism, “Post Truth” and Conflicts
With the widening gap due to globalization and the influx of migrant refugees, the UK
and the United States, the two victorious powers that have pulled modern democracy,
self-priority like “We are the First!”, protectionism, etc. has begun to take actionthat overturns the common sense of modern liberalism and democracy, hiding themwithout concealing them. European countries are no exception, and exclusionism is
sweeping Europe, the USA and the world.
As symbolized by the atmosphere “post-truth” and “anti-intellectualism” werewidening in the middle-class people,10 who have traditionally supported the twoparty system’s “common sense” in modern nation-states. The era of overturningcommon sense is born by the economic crest of two major powers symbolizing
modernization and “home-country first!”
What is the cause of nationalism?
In the 1930s, the late-capitalist countries like Germany and Italy that pursued
developed countries created populism and dictatorship with the help of enthusiastic
youth.
In the modern world, why have advanced countries such as Britain and the UnitedStates, which had led modernization, introduced anti-intellectualism and aggressive“post truth” with the help of populism in the sense of crisis being driven by emerging
countries?
In Europe, especially among elderly and rural people who had experienced thedevastation of war, the claim to defend the welfare state from immigrants and thevoice to exclude migrants and refugees from their countries became stronger thanever.
So-called “welfare nationalism” and xenophobia (dislike of foreigners) emerged
along with the hidden discrimination.
The background is economic pressure and fear of decline. Contemporary
economic crisis in developed countries is obvious.
Seeing the world economic growth rate of 2016, published in 2017 (table), China
and India, with 6.7–6.8% growth, are at the top of the economic growth rate withsmall and medium-sized countries.
On the other hand, most of developed countries have the lowest growth rates: US,
UK, Germany, France and Japan (Table 1).
This is the current economic situation in the world and developed countries. And
this is the cause of social instability and “post truth”. Where are developed countries
going? How can we solve these situations?

10 For Post Truth and Counter-intellectualism, Evan Davis, Post-Truth: Peak Bullshit—and What

We Can Do About It, Abacus, Paperback, 2018. Matthew d’Ancona, Post-Truth: The New War on
Truth and How to Fight Back, Ebury Press, Paperback, 2017.
Anri Morimoto, Counter-Intellectualism; The True Identity of “Fever Disease” Born in America,
Shincho Paperback, 2015. Kiyoshi Uchida, Mari Akasaka, Takashi Odajima, Japanese CounterIntellectualism, Shobunsha, 2015.

36

K. Haba

Table 1 World economic growth rate in the world 2016
Developing power

Developed power

1

Knaul

10.3%

(190 countries)

2

Iraq

10.0%

128

UK

1.8%

3

Ethiopia

8.0%

129

Germany

1.8%

4

Uzbekistan

7.8%

131

United States

1.6%

↓

5

Courtjevoir

7.5%

6

Iceland

7.2%

1.23%

↓

7

Cambodia

7.0%

8

Laos

6.9%

9

Bangladesh

6.9%

10

Tajikistan

6.9%

11

Philippine

6.8%

169

Russia−0.225% ↑

12

India

6.8%

189

South Sudan−13.8%

13

China

6.7%

190

Venezuela−18.0%↓/
148

France//155

Japan ★

0.999% ↓/Source: IMF World Economic Outlook Databases 2017.4

4 World War-Collapse of a Great Power and Formationof a New World Order—“Thucydides’ Trap”
American political scientist A.F.K. Organski’s book, World Politics and Harvard
University’s Professor, Graham Alison’s book Destinated for war 11 showed that thechanges in international power relations will create anxiety, jealousy and tension indeveloped nations, and which is often settled by war, this is the “Thucydides’ Trap”
in the world, and as a result of war, emerging nations won historically and preaches
a new international order will start.12 This is similar to the contemporary situation.
World War I began exactly under such circumstances. That is, the Serb nationalist
group, “The Black Hand” youth of Bosnia and Herzegovina, Gavrilo Princip, 19
years old, “accidentally” assassinated Franz Ferdinand, the Duke and successor of
Habsburg Empire, and that incident became the start of World War I.
Franz Joseph I, Emperor and King of Austria-Hungarian Monarchy, Habsburg
Empire declared war against Serbia, posing an unacceptable ultimatum. As a result,in a short time, most of the European great powers joined the war in a chain reactionin which the power balance had been formed beforehand. Thus, a small accidental
assassination that took place in a frontier border area triggered a major war.
Nobody considered the Empire would collapse starting from such a tiny conflict.
The emperor and government of the Habsburg Empire rather considered it would end
11 A.F.K. Organski, World Politics, Alfred A. Knopf, 1968. Graham Allison, Destined for War: Can

America and China Escape Thucydides’ Trap? Houghton Mifflin Harcourt, 2017.
12 This is an example that is often cited as “Thucydides’ Trap” in international Politics. Thucydides,

Translated by Haruo Konishi Thucydides’ History, Chikuma Gakugei Paperback I–II, 2013.

5 Power Transition and 100 Years of World Wars: Reconstruction …

37

in only several weeks or at least by Christmas that year, but war continued almost
four and a half years, and the loser was not Serbia, but the Habsburg Monarchy, and it
collapsed not by war, but by itself, by inside revolution and independence of nations.
All four Empires which ruled Europe collapsed during World War I. Starting withthe collapse of the Russian Empire by the outbreak of the Russian Revolution,13
German Empire by revolution, the Habsburg Empire by the independent movementand declaration of independence by minority nations, and finally the Ottoman Empire
by the revolution of the Young Turkish party.
They collapsed not because of war, but from the inside, one after another.
Nation-states were born and established as “successor states” through the effects
of nationalism movement and leaders’ endeavor.
Four large Empires collapsed, and new sovereign nation-states were born.
However, the independence of new nation-states caused a new territorial anxiety
and conflicts among each nation; before long, “irredentism” occurred especially by
the claim by Germany and Italy, and after 20 years of a short crisis, again a new
World War began in 1939, 80 years ago.
In defeated Germany, the democratic Weimar Republic established after WorldWar I, Germany suffered from high compensation payments and a worsening
economy. As a result of that, the Nazi Party was elected as the first party in the generalelection, formed government, and before long the Nazi army marched east, to get the“right to live”. At first the German Nazi Army occupied the Sudeten German area,
and after that it invaded and occupied the Polish area as well. Then the German Naziarmy established notorious concentration camps in Auschwitz and Birkenau. Under
the Nazis German occupation, the following people were accommodated one after
another: Jews, Poles, Roma, Slavic nations, communists and socialists and disabled
people. Several millions of people had been executed to a cruel, ghastly department“Holocaust” in Auschwitz and Birkenau.
Eventually, the Nazism and fascism of Nazi Germany and the Italian Fascist Party
were defeated by the Allied nations, especially the Soviet Union’s Red Army, andthe partisan movements in various parts of East European nations.

4.1 The Cold War After World War II
The Cold War started under the Soviet Army in Eastern Europe on one side, andNATO (from 1949) in Western Europe, especially West Germany in the other side.
Under such occupation of Soviet Army and Warsaw Treaty Organization (from 1955),
East European movement for independent and sovereignty movement continued; in

13 Many literary figures portrayed a society of poverty and inequality at the time, hoping for arevolution in workers and farmers. It was an illusion, but it created an atmosphere full of expectations
for change from the bottom of society at the time. Kumiko Haba eds., Russian Revolution andEastern Europe, Sairyu-sha, 1991.

38

K. Haba

Eastern Germany in 1953, Polish sovereignty movement, and Hungarian Revulsion
for independence in 1956, and Solidarity movement from 1980–89.
Finally, Perestroika and democratization of the Soviet Union started in 1985,
collaborating with East European “Central European” literature and cultural movement in the 1980s, Eastern European revolutions happened one after another startingto open the Iron Curtain; the Solidarity Movement, “Pan European Picnic”, Velvet
Revolution in Czech Slovakia, Fall of Berlin Wall and Ceausescu resignation in theChristmas days.
Because of the “twin deficits” of the United States, it also compromised with theSoviet Union, and both US and USSR met and signed the end of the Cold War in
December, 1989. Before that, the “Revolutionary Dominoes” occurred where East
European countries became independent from the Soviet Union one after another, theSoviet-Eastern European socialist system collapsed at the end of 1989, and started
the withdrawal of the Soviet Army of Warsaw Treaty Organization in 1991, and at last
the collapse of the Soviet Union was complete in December 1991. The communistsocialist system from Russian Revolution to Soviet-Eastern European System didn’t
continue and collapsed after only 70 years or so. It could not withstand a 100-year
historical referee.
Human beings never learn from history, they have only managed to change theinternational order, through war and revolution.
Now nuclear missiles are scattered all over the world, even in North Korea. Under
such a situation, mankind has to use the opportunity to peacefully carry out not only
official diplomacy, but also public diplomacy and discussions; we need to consider
and learn the world and regional stability and prosperity through economic development and mutual discussion, and to learn power relations without going throughwars and conflicts.
Learning from our history, the author believes that human beings are not stupid
enough to go on the path of anger and collapse countries and the world.
Though two thousand years of repeated territorial conflicts and wars, Europe
learned many lessons, the scene of two world wars, beyond the post-wars after Rome
Treaty, 1957 by establishing the regional integration, created a system that does notcause war and conflicts, at least in the European region.
Can we adapt these lessons to the Asian region or a global system?
Isn’t it possible to create an order change through reconciliation, economic
cooperation, and institution building, rather than through war and military power?
That is my fundamental research point to make institution in the conflict regions.

5 The Collapse of Empires and Nationalism
100 years ago, four European empires collapsed in World War I, and a new order andnew nation-states were established. Central and Eastern European countries were
established, such as Poland, Czechoslovakia, Hungary, Yugoslavia, Romania andBulgaria.

5 Power Transition and 100 Years of World Wars: Reconstruction …

39

After the collapse under the war of modern empires that symbolizes the Europeof the Middle Ages and the modern age—the Russian Empire, German Empire,
Habsburg Empire and Turkish Empire, leaders of ethnic groups of each country
formed nation-states.
In history there are no “ifs”; conjunction with the subsequent history has important
implications. That is, the things that happened were inevitable. In 1918 the socialist
revolutions in Eastern Europe failed; on the other hand, the national independent
revolution succeeded in Eastern Europe. Only in Russia, not only democratic but
also a socialist revolution succeeded, and it lasted 70 years, but it also collapsed.14
After the Second World War, why did the socialist system in Eastern Europe andthe Soviet Union collapse rapidly after half a century?
Why did people of Central and Eastern Europe, especially Polish people, happily
and hurriedly escaped from the rule of the Soviet Union, and before the strengthening
again of the military influence of Russia, they wish to join NATO as early as possible?
Why are Polish youth volunteering and training as anti-Russian volunteers even now
in the Polish eastern border?
When thinking about the hundred years of Polish history and East European
History, we could learn very important lessons, how the two world wars and theCold War affected the Polish people and East European people, how they think
about the history of their country and the world during these hundred years.
We could write the next pages of history only after these suffering experiences,even in Japan and East Asia.

6 The End of World War and the Formation of a New
World OrderIn the course of the outbreak and the demise of World War I, the way of nationbuilding, and regional constructing follow three points: federation, nation-state, andregional collaboration.

6.1 Attempt to Reorganize Federal Institutions, Suchas the Danube Federation
One is a federal reorganization.
In the latter half of the nineteenth century, the concept of reorganizing the declining
powers into various federal systems with the growth of nationalism and the growthof influence of regionalism.
The reorganization of federal efforts had repeatedly appeared as a federalist
concept in the Hapsburg Empire from 1848 to the early twentieth century.
14 Eric Hobsbawm, The Age of Extremes: 1914–1991, Abacus, 1995.

40

K. Haba

After the failure of the 1848 revolutions, the Danube Federation or Confederation
concept was conceived by Kossuth Ferenc and Krapka György, to widen collaboration in Central and Eastern Europe. It ceased shortly after the compromise between
Austria and Hungary, against the Pan-Slavism movement. In the early twentiethcentury, the reorganized Federal Initiative was planned, and linked to the Greater
Austrian United States, Balkan Federation, and the Central European Union, and has
created a major trend in the history of reorganization of the Hapsburg Empire in the
beginning of the twentieth century and the theory of “Central Europe”.
From the 1890s to the early twentieth century, there were attempts to reorganize ethnic regions into multi-ethnic federal institutes, promoting multi-national
coexistence.15
However, as a result of the rise of the national movement, the Empire was dismantled, as the federal attempt could not withstand historical trials, and instead a modern
nation-state was formed.

6.2 Modern Nation-State Formation
The second is an attempt to form a modern nation-state.
Shortly after the war, the countries of Central and Eastern Europe that appeared
between Germany and Russia were politically and economically unstable and acollection of small countries that could not be united.16 As a result, they were dismantled one after another in the 30 s, or shifted to a dictatorship system and incorporated
under the influence of neighboring powers such as Germany and Russia.
New nation-states and the influence of the great powers in the “between area”
were so fragile that they gradually moved to an authoritarian dictatorship (Anthony
Polonsky’s Little Dictators),17 and easily merged to neighbor great powers. Then,the former empire nations were merged to Germany and the Soviet Union during
World War II.
Which is more preferable for people living in Central and Eastern Europe: afederal state or a nation-state? This is also a big dilemma for state reorganization of
the multi-ethnic region, but during these days, nationalism is stronger in each region
than federalism.

15 Kumiko Haba, Nationality Question of Integrated Europe, Kodansha, Paperbacks, 1994 (firsted.) – 2004 (seventh ed.). Miodrag Jovanović and Slobodan Samardžić, Federalism and Decentralisation in Eastern Europe: Between Transition and Secession (Publications of the Institute ofFederalism Fribourg Switzerland), Lit Verlag, 2007.
16 Arno J. Mayer, Wilson vs. Lenin: Political Origins of the New Diplomacy 1917–1918, Meridian
Books, 1969. (Translated by Yoichi Kibata and Takashi Saito, Wilson vs. Lenin—Political Origin
1917–1918, Iwanami Publisher, 1983.)
17 Antony Polonsky, Little Dictators: History of Eastern Europe Since 1918, Routledge & KeganPaul Books, 1975. (Translated by Kumiko Haba et al. Little Dictators, Liburaria Selection, Hosei
University Press, 1993.)

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41

After the end of the Cold War, federal republics, like Yugoslavia, Czechoslovakia,
and the Soviet Union dismantled and most areas introduced democracy, and conflictcontinued, especially in Yugoslavia from 1991 to 1999. Their massacre only ceased
due to the bombing by NATO in Bosnia in 1995, and Kosovo in 1999.
Most of the peoples who live in these regions considers that they wish to makeindependent as nation- states, and after that, join the EU and NATO, and the fourcountry cooperation Visegrád.

6.3 Regional Collaboration and Regional Integration
After two world wars and the end of the Cold War, people understood that “independence 100 years and sovereignty” is the most valuable and important point inhistory for the people and government, even though it is a little instable and weak.
Only after that can regional cooperation work together for stability and developmentof the region.
After the Holocaust and the end of WWII in Europe, through the German division
between West and East, and German integration into the new western systems like
EC and NATO, Franco-German Reconciliation aiming for a non-war community
kicked off European integration.
However, regional integration after the war did not intend to contain Germany,
which had the biggest responsibility for the war in Europe in WWII because of
the Holocaust, but it was intended to exclude the Soviet Union that led the victoryof Allied countries by the Great Patriotic War. Post-war regional integration wasformed including Germany, which caused the war, and excluded the Soviet Union,
which won the war. The situation was the same in the Far East. The new world order
was formed by incorporating the defeated former Axis country Japan and excluding
communist China.
Ideological hostility and exclusion of Russia and China has continued until thepresent day.

7 Epilogue: What Will Be the New World Order
Considering 100 years of World Wars and Regional
Collaboration?
The new era in which emerging Asian countries like China and India surpass developed powers like the United States, Europe and Japan in economic terms and technological terms has already begun. However, the move to build a new order in termsof international order and value has not yet started. That is why we must avoid the

42

K. Habadanger of wars and think about what the new international order in the future shouldbe.18
As a subject of international politics, in the turning point of a great historical era,
we need to consider and investigate, how peacefully and stably to make transformation and how to establish a new world order to achieve these goals? The important
thing is to avoid war and conflict between the emerging powers and the developed
powers for changing order, which Organski and Graham Allison warned against.
How to reconstitute a New World Order is the biggest subject for us, not throughnew war, but on the basis of peace, prosperity, sovereignty, regional collaboration,
and world collaboration, together with different nations’ joint wisdom!
Based on the 100 years of the “era of world wars; World War I, World War II,
Cold War, and the COVID-19 Pandemic, we should aim for (1) global scale analysis and consideration in international politics, objectively analyzing each situationfor various problems in the world, (2) Discuss the themes of economics, politics,
common securities, climate change, and pandemics with experts, scholars, governments, companies concerned in each country, deepening mutual understanding whileconsidering the sovereignty of each country, to find new solutions based on thewisdom of various countries and the joint efforts of the region, in response to thecrisis and tension of war.
In particular, in response to the widening disparities under globalization after thecold war, post-colonialism, and the global south, It will be important that we put theprotection of human rights first, and construct a new era collaborating with emerging
countries rather than against them, and building a new world order, practicing global
issues while respecting each other, aiming for a world where “no one is left behind”
based on SDGs.

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Allison, Graham, Destined for War: Can America and China Escape Thucydides’ Trap? Houghton
Mifflin Harcourt, 2017.
Brill’s Encyclopedia of the First World War, 2 Vols, Leiden & Boston, Brill, 2012.
Chomsky, Noam, 9.11. – Not Eligible to Retribute to America! (Japanese) Bunshun Paperback,Tokyo, 2002.
D’Ancona, Matthew, Post-Truth: The New War on Truth and How to Fight Back, Ebury Press,
Paperback, 2017.
Davis, Evan, Post-Truth: Peak Bullshit—and What We Can Do About It, Abacus, Paperback, 2018.
Diamond, Jared, Translated by Akira Kurone, Guns, Germs and Steal; The fates of Human Societies,
Norton, New York, 2005.
Haba, Kumiko, Asian Regional Integration in the Global Era, Iwanami Publisher, 2012.
Haba, Kumiko, Chinese Translation, Asian Regional Integration in the Global Era, 中央編峰出版
社、 2014.
Haba, Kumiko, Division and Integration in Europe; Nationalism and Borders in Enlarged EU—
Inclusion or Exclusion, Chuokoron-Shinsha, Tokyo, 2016.
18 Kumiko Haba, Division and Integration in Europe; Nationalism and Borders in Enlarged EU—

Inclusion or Exclusion—, Chuokoron-Shinsha, Tokyo, 2016.

5 Power Transition and 100 Years of World Wars: Reconstruction …

43

Haba, Kumiko, Nationality Question of Integrated Europe, Kodansha, Paperbacks, 1994 (first ed.) –2004 (7th ed.).
Haba, Kumiko, “Power Shift—National Anxiety, Territorial Dispute and Xenophobia”, Academic
Tendency, Science Council of Japan, 2014, January.
Haba, Kumiko (Ed.), Considering Asian Regional Integration—How to Avoid War, Akashi
Publisher, 2017.
Haba, Kumiko (Ed.), Russian Revolution and Eastern Europe, Sairyu-sha, 1991.
Haba, Kumiko, “War, Declining Great Power and Reorganization of the World Order-100 years ofRussian Revolution”, Arena, 2017, Vol. 20.
Hobsbawm, Eric, The Age of Extremes: 1914–1991, Abacus, 1995 (Translated by Shigeru Kawai,
History of Twenty Century—Extreme Era I–II, Sanseido Publisher, 1996)
Ikeuchi, Ryo, Scientists and War, Iwanami Publisher, 2016.
Ikeuchi, Ryo, and Kodera, Takayuki, Weapons and University: Why Should We Not Conduct Military
Research, Iwanami Publisher, 2016.
IMF World Economic Outlook Databases 2017.4.
Jovanović, Miodrag, and Samardžić, Slobodan, Federalism and Decentralisation in Eastern
Europe: Between Transition and Secession (Publications of the Institute of Federalism Fribourg
Switzerland), Lit Verlag, 2007.
Kawai, Masahiro, “Economic Relations between Japan, the United States and China: East Asian
Community and the United States”, Press Club Meeting, 2009.11.25.
Kawai, Masahiro, New Asian Economy, Bunchindo, 2016.
Kibata, Yoichi, “First World War as a Total War”, War in 20th Century, Yushisha, 2012.
Maddison, Angus, The World Economy: A Millennial Perspective, 2001.
Maddison, Angus, “The West and the Rest in the World Economy: 1500–2030”, 2005.
Maddison, Angus, Contours of the World Economy, 1–2030 AD; Essays in Macroeconomic History,
Oxford University Press, September 2007.
Maddison, Angus, Chinese Economic Performance in the Long Run, 960-2030, OECD, Paris,
October 2007.
Maskawa, Toshihide, What Scientists Do in War, Shueisha New Book, 2015.
Mayer, Arno J., Wilson vs. Lenin: Political Origins of the New Diplomacy 1917–1918, Meridian
Books, 1969. (Translated by Yoichi Kibata and Takashi Saito, Wilson vs. Lenin—Political Origin
1917–1918, Iwanami Publisher, 1983.)
Morimoto, Anri, Counter-intellectualism; The True Identity of “Fever Disease” Born in America,
Shincho Paperback, 2015.
News Week, “The Cry of a Young American Soldier Who Commits Suicide After Returning”,
2012.8.7.
Organski, A.F.K., World Politics, Alfred A. Knopf, 1968.
Polonsky, Antony, Little Dictators: History of Eastern Europe Since 1918, Routledge & KeganPaul Books, 1975. (Translated by Kumiko Haba et al. Little Dictators, Liburaria Selection, Hosei
University Press, 1993.)
Russet, Bruce, Translated by Takehiko Kamo, Pax Democratia, Principles for the World After theCold War, University of Tokyo Press, 1996.
Thucydides, Translated by Haruo Konishi Thucydides’ History, Chikuma Gakugei Paperback I–II,
2013.
Toffler, Alvin, Power Shift; Knowledge, Wealth, and Violence at the Edge of the 21st Century, 1990.
Uchida, Kiyoshi, Mari Akasaka, Takashi Odajima, Japanese Counter-Intellectualism, Shobunsha,
2015.
Watanabe, Yukari, “Why Soldiers Who Survived the Battlefield Collapse in the US”, News Week,
2016.8.31.
Yamamuro, Shin-ichi, First World War, Vol. 1, Iwanami Publisher, 2014.

44

K. Haba

Kumiko Haba is a Professor Emeritus at Aoyama Gakuin University, Professor at Kanagawa
University, President of the EUSA Asia Pacific (2017), Vice President of International Studies
Association (2016–2017), Vice President of ISA Asia Pacific (2018–2021) President of ISA
Asia Pacific (2021–2024), Director of Institute for Global International Relations. She received
the title of Jean Monnet Chair of the European Union (2006–), Member of Science Councilof Japan (2011–2017), and Associate Member of SCJ (2017–2023). She is a Visiting Scholar
at Harvard University (2011–2012), European University Institute (2007), Sorbonne University(2004), University of London (1996–1997), and Hungarian Academy of Science (1995–1996,
2002). Her specialty is international relations, comparative politics between EU and Asian region,
immigrant and refugee issues, and making peace and prosperity in conflict regions. She wrote 72
books (including editor and co-writer), 16 English books (including proceeding books), and 220
articles. Contemporary main works/books include the following:・Brexit and After, Perspectives
on European Crises and reconstruction from Asia and Europe, Kumiko Haba and Martin Holland,(Editors) Springer, 2021, Encyclopedia of Central and East European Culture, Representative
Editor: Kumiko Haba, Maruzen, 2021, Immigrants, Refugees and Minorities; Origin of European
Populism, Kumiko Haba (Ed.), Sairysha, 2021, Kumiko Haba, European Division and Integration,
European Nationalism and Borders, Inclusion or Exclusion, Chuo Koron Shinsha, Tokyo, 2016,
・Kumiko Haba (Ed.), International Society in Great Transition era, Low and Culture Publishers,
Tokyo, 2019.・Steven Rosefielde, Kuboniwa and Kumiko Haba (Eds.), The Unwinding of the
Globalist DreamーEU, Russia and China, World Science, London, New Jersey and Singapore,2017.・Kumiko Haba, Asian Regional Cooperation in the Global Era, Iwanami Publishers, 2012.
(Chinese translation, Beijing, 2013)・Kumiko Haba (Ed.), Considering Asian Regional Integration, To avoid Wars, Akashi Publishers, 2017. and others.

Part II

After World War I and the Inter-war
PeriodChapter 6

Disarmament and Equilibrium
between the Two World Wars
(1919–1939)
Valdo Ferretti

Abstract The paper attempts to discuss how the ideology of disarmament interactedwith the dynamics of the balance of power and the equilibrium among the great
powers in the period between the First and the Second World Wars. It deals withthe principles of the League of Nations and the Washington treaties of 1922 and thefailure of the so-called British appeasement and the ultimate failure of the system ofcollective security system which ensued from the treaty of Versailles of 1919.
Keywords Equilibrium · World wars · Disarmement
The Covenant of the League of Nations, attached to the Treaty of Versailles of June
28, 1919, established at art. 8 that “The Members of the League recognise that themaintenance of peace requires the reduction of national armaments to the lowest
point consistent with national safety and the enforcement by common action ofinternational obligations.”1
Such principles reflected an ideology which had developed in pacifist thought
since the late 19th century and was tentatively endorsed at the Hague conferencesof 1899 and again in 2007. The idea that was largely gaining traction in the public
opinion of several countries at that time was that the reduction of armaments andthe adoption of judicial procedures would be able to resolve international disputes
and avoid wars in the future.2 The diplomacy of arbitration had achieved important

1 https://avalon.law.yale.edu/20th_century/leagcov.asp.
2 See Maartje Abbenhuis, The Hague Conferences and International Politics, 1898–1915, London,

Bloomsbury, 2019.
V. Ferretti (B)Sapienza University of Rome, Rome, Italye-mail: valdo.ferretti@uniroma1.it© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_6

47

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V. Ferretti

results and made important steps forward before the First World War,3 especially inEnglish-speaking countries and the Far East. In that connection the peace programme
implemented by the Conference of Versailles of 1918–1919 was largely inspiredby the so-called “14 points” enunciated by the U.S. President Woodrow Wilson.
Moreover such a programme played a special role in the political settlement following
the First World War,4 as it aimed to consolidate the existing balance of power by
setting up a new institutional structure. In a sense, it also provided a model by which
the “federative” schemes of international organizations, aiming to “guarantee to [….]
to all parties concerned the peaceful enjoyment of their respective rights” have been
portrayed somewhat negatively, as if they had ushered an “oligarchic” rule overinternational society, one cloaked in “pacifist rhetoric”.5
The whole construction started to creak soon. It was done no favours by theAmerican Senate’s refusal to ratify the Treaty of Paris and the advent of an isolationist
administration in the United States. In the background, however, one should also
point out that several powers took the League of Nations only for a new diplomaticmechanism, largely overlooking the intellectual premises of the American President.6
In a nutshell, from the beginning, the two sides of the programme of the League of
Nations (Societé des Nations, SdN) looked as if they might collide with each other.
In the Pacific area, the Washington Conference7 was inaugurated in 1921, tobe followed by the Five-Power Treaty of 1922. As a consequence, a rift occurred,
to which only a handful of historians have paid attention. On the one hand, there
was the “system” of disarmament put in place in Washington, which regarded naval
armaments and included only the five signatory powers; on the other hand, there was
the League of Nations with its founding principles and its statute. Some countries,
including few potentially great powers as of yet, remained outside both entities,
because they had been on the losing side in the war, like Germany, or because,in spite of their size, they still had not obtained full recognition by internationalsociety, as was the case for Soviet Russia. The SdN programme in its turn featured
3 See, for instance, E. James Hindman, “The General Arbitration Treaties of William Howard Taft”,

The Historian, 1973, 36:1, pp. 52–65.
4 Martin Ceadel, “Enforced Pacific Settlement or Guaranteed Mutual Defence? British and USApproaches to Collective Security in the Eclectic Covenant of the League of Nations”, The
International History Review, 2013, 35:5, pp. 993–1008.
5 Stella Ghervas, “Balance of Power vs. Perpetual Peace: Paradigms of European Order from Utrecht
to Vienna, 1713–1815”, The International History Review, 2017, 39:3, p. 415.
6 See for instance the case of Italy, (cf. Italo Garzia, “ Italy Faces the Birth of the League of Nations”,
in, Antonio Varsori and Benedetto Zaccaria (eds.), Italy in the New International Order, 1917–1922,
Palgrave Macmillan, 2020, pp. 281–308), and of Japan, (Rustin B. Gates, “Out with the New andin with the Old: Uchida Yasuya and the Great War as a Turning Point in Japanese Foreign Affairs”,
in, Tosh Minohara, Tze-ki and Ewan Dawley (eds.), The Decade of the Great War. Japan and theWider World in the 1910s, Brill, London 2014, pp. 64–82).
7 Needless to say, there is a vast literature on the Washington conference and on the issue of the naval
disarmament between the First and the Second World War, cf. Erik Goldstein and John Maurer (eds.),
The Washington Conference, 1921–22. Naval Stability and the Road to Pearl Harbor, London, Cass,
1995, and Sadao Asada, From Mahan to Pearl Harbor. The Imperial Japanese Navy and the UnitedStates, Naval Institute Press, Annapolis, 2006.

6 Disarmament and Equilibrium …

49

disarmament, both land and naval, independently of the system in Washington, but
did not apply to the United States.
At this stage, the partisans of a general disarmament to be extended to as many
countries as possible realised that a bridge must be devised between the two systems,
but political obstacles promptly materialised. Aside from the concerns of several
minor countries, the Five-Power Treaty was the result of a difficult compromise thattook into account the strategic competition between the U.S.A. and Japan, in the
Pacific Ocean, and at the same time, between France, Italy, and England in Europe.
In addition, its regulations, based as they were on the different standards assigned tothe tonnage of the fleets of each country, followed the model suggested by the U.S.A,
but were prone to further difficulties, as they did not solve fundamental issues likethe limitations on cruisers under 10,000 tons and submarines, absent from the Treatyof Washington. Hence any observer could have easily realised that major problems
were in store, as arguments over additional limitations were expected to increase in
the future, and certain powers would certainly raise particular objections.
Therefore, the experts at the League of Nations went to work on the objective ofextending the agreements on disarmament beyond the five partners that had signed
the Washington Treaty, also including countries which were outside the League,
or even adopting criteria different from the proportions in the standard concerning
the fleets. A preparatory conference was convened in Rome in 1924,8 at which the
problem of enlarging the number of states joining disarmament was dealt with, andthe issue of Soviet participation played a significant role, albeit unsuccessfully. Latera League of Nations committee dealing with the naval disarmament issue addressed
the matter of alternative rulings to substitute for the tonnage of the types of ships,
which had been omitted in Washington. This matter became the focus of discussions
between 1925 and 1928, just when the measure to extend the limitations to all kindsof vessels was taken at the diplomatic level. It is important to note that in spite of thegenerally pacific atmosphere of the 1920s such an issue took a political turn once
again. Rivalries between Italy and France lasted up to the First London Conferenceof 1930 and were not settled at that stage either, while the rivalry between the U.S.A
and Japan was settled, but only on the surface, and for a short time; moreover,at the Geneva Conference of 1927 disagreements between the United States andBritain seriously undermined the negotiations. In the League of Nations, the optionof a mechanism of regulations not based on tonnage but on previous declaration ofvessel construction from each country, which in principle maintained the right to fullequality in a country’s armaments, was examined, especially on the initiative of theFrench,9 but attracted the attention of Japan and Italy as well. Hence, by the tail end
8 Stephen Roskill, Naval Policy Between the Wars, 1, The Period of Anglo-American Antago-nism, 1919–1929, Seaforth Publishing, Barnsley, 1968, pp. 426–427; Gerard Silverlock, “British Disarmament Policy and the Rome Naval Conference, 1924”, War in History, 2003, 10:2,
pp. 184–205.
9 Gaynor Johnson, Lord Robert Cecil: Politician and Internationalist, Abingdon, Routledge, 2013,
p. 280. On Japan, see Koike Seiichi, “Kaigun gushhoku wo meguru futatsu no kokusai kankeikan nosōkoku_-genebu kara rondon no aida de-”, in, Itō Takashi (hen/ ed.) Nihon kindaishi no saikōchiku,
Yamakawa Shuppansha, Tokyo, 1993, pp. 284–285.

50

V. Ferrettiof the 1920s two general avenues of discussion were open, one focusing on possible
new principles for disarmament and another on the prospect of inviting additionalcountries to join the Washington Five Powers Treaty. Moreover, the global politicalframework changed pretty quickly, as the League and the Washington system werechallenged by certain powers committed to shaking up the existing international
order. In 1933 Japan left the League of Nations and between 1933 and 1935, Germany
followed suit, disowned disarmament and inaugurated a revisionist course in foreign
policy. The disarmament conference called by the League, which largely pivoted onland factors, also failed in 1933.
The imminent threat of a new war was now perceived, and the issue of naval
disarmament took on a greater significance. Disarmament no longer seemed like alargely academic debate; it began to be seen as a way to avert actual dangers to peacein the framework of the deterrent strategies of certain powers that meant to curb therevisionist aims of others.
In addition, other issues gained force alongside the discussions over naval parity in
the Pacific area. Italy and France gradually realised that if this dispute were settled,
their collaboration on curbing German revisionism would be far more effective.
Therefore, they overcame their differences over the standards in the preparatory
talks for the third Conference on Naval Disarmament which took place in 1934, byoutlining a general formula that echoed the conclusions of the League of Nationscommittee over the previous decade and succeeded in bringing the United Kingdom
on board.10 The latter, whose imperial defence was certainly overstretched on several
fronts and whose finances were drying up, worked out a sophisticated strategy. On the
one hand, Britain tried to appease Germany, by agreeing to Berlin’s building a fleet
35% larger than its own, a choice often criticized by historians and contemporary
observers of the day; on the other, Berlin was persuaded to conform ultimately to thequalitative limitations stipulated by the London Conference of 1935–1936, which
forbade the newest and most powerful types of cruisers. In this way the British hoped
to contain the overall menace engendered not only by Hitler, but by Japan as well,11 asonce the German naval force was checked, more resources would become available
for the United Kingdom in the Far East.
One very revealing case of how the issue of disarmament was combined withdeterrence by the naval powers, was that of the Soviet Union. Since Stalin thoughtof building a military fleet both in the western hemisphere and in East Asia after the
USSR joined the League in 1934/1935, he began to fear a clash with Tokyo in Asia
and with Germany in Europe. Paradoxically, that put the USSR in an uncomfortablesituation. Russia demanded the same standard of armaments as Germany yet wasin need of technological assistance from the United Kingdom, which laid down
10 On this point, see Valdo Ferretti , Il Giappone E La Politica Estera Italiana (1935–41) (ristampa

integrata), Milano, Giuffrè Francis Lefèbvre, 2020, pp. 82ff.
11 For a fuller discussion of the Anglo-German Naval Agreement of June 10, 1935, cf. Joseph

A. Majolo, “The Admiralty and the Anglo-German agreement of 18 June 1935”, Diplomacy andStatecraft, 1999, 10:1, pp. 87–126, and Clare M. Scammell, “The Royal Navy and the Strategic
Origins of the Anglo-German Naval Agreement of 1935”, Journal of Strategic Studies, 1997, 90:2,
pp. 92–118.

6 Disarmament and Equilibrium …

51

the condition that Moscow adopt the rules established by the naval disarmament
conference of 1935–1936. Russia, however, expressed reservations, claiming thatfull parity with Germany would make it difficult or impossible to face the menacelooming in the Pacific. Stalin was on the verge of rejecting an agreement and risking
an arms race, but ultimately a final deal was reached and a treaty made,12 in 1937.
In the above framework, the cases of Japan and Italy should be considered parallel,in my opinion, as both nations, although generally considered revisionist, did not
wholly reject disarmament, and Mussolini even hoped to be rewarded as a champion
for peace after the Munich Conference of 1938.13
The former’s attitude at the London conference of 1935–1936 was swayed by
the influence of a faction of the Imperial Japanese Navy (IJN), which opposed the“standardization of the fleets”, demanding a “common upper limit” for all partnersof the treaty. It is important to note, however, that even that radical group indicateda scheme for disarmament only after lengthy discussions that lasted several months,of which we do not know all the details even now. Besides, the Japanese delegatesconceded, on meeting their Italian counterparts, that in principle they would not haverejected a formula based on the equality of the standards and a previous declarationof the tonnage of the ships to be built. Only because of the time required to makethe adjustments based on this mechanism and its financial costs, they claimed, had
the Japanese Navy decided for the Common Upper Limit formula.14 At the sametime, the IJN promised the Japanese government and the Japanese Army that they
did not intend to demand an increase in armaments and did not want an arms race.
Japanese scholars have insisted that this squabble between moderates and radicals
was, to a large extent, of a more domestic than international nature and was influenced
by financial considerations.15 It is interesting to note that both the Americans andthe British took the promise of the Japanese Navy to abstain from an arms race atface value, and that for this reason the international impact of the failure of naval
disarmament in 1936 was perceived as less important than is frequently claimed.16
The case of Italy prompts similar observations. It was hardly coincidental, it seems
to me, that in the so-called Easter Agreement (or Easter Accord) between Britain
and Italy of April 16, 1938, the government in Rome, which had not signed the naval
treaty of London following the Ethiopian crisis and Italy’s break with the League of
Nations, recommitted to naval disarmament once again. This signified, only a few
12 Joseph A. Majolo, “ Anglo-Soviet Naval Armaments Diplomacy before the Second World War”,

The English Historical Review, 2008, 123:501, pp. 351–378; Keith Neilson, Britain, Soviet Russia
and the Collapse of the Versailles Order, 1919–1939, Cambridge Univ. Press, 2006, p. 204.
13 William C. Mills, “Sir Joseph Ball, Adrian Dingli, and Neville Chamberlain’s ‘Secret Channel’ toItaly, 1937–1940”, The International History Review, 2002, 24:2, pp. 278–317, especially pp. 307–
308.
14 Valdo Ferretti, op. cit., pp. 96–98.
15 See for instance, Oka Kuniko , “1935nen Rondon kaigun kaigi to nihon seifu- gaikō seisaku
kettei katei wo chūsin ni-”, Nihon Rekishi, 2004, 7, pp. 71–88, and Imamura Kanako, “ Washintonjōyaku hōki to Nihon Kaigun”, Nihon Kenkyū, 2003, 16, pp. 59–66, and Fujii Takashi, “Washintonjōyaku hōki mondai to tōsuibu”, Nihon Rekishi, 2016, 8, pp. 40–56.
16 Keth Neilson, op. cit., p. 171.

52

V. Ferretti

weeks after the German annexation of Austria, that the Duce probably intended tobalance the success of Hitler with a pro-British gesture easing the British position in
the Far East, given that Mussolini still wanted to bandwagon between the democratic
powers and Germany. In the background, Italy continued to use disarmament as atool of power politics, largely in the framework created by the appeasement strategy
which the United Kingdom was pursuing with regards to Germany. This was notdesigned only to mend rifts, and even less to ward off war in principle, but mainly
to control the swings in international equilibrium at a time when tensions wereincreasing. Ironically enough, in the spring of 1938 such policies could even inspirea degree of optimism, given that they implied curbing the imminent threat to a stablebalance of power. On the one hand, the agreement between Italy and Britain madethe menace coming from Japan17 less dangerous for the latter, while Prime Minister
Chamberlain imaged that, with the German pressure on the northeast border of Italy
growing stronger, Mussolini would value acollaboration with the United Kingdom18
more highly, and for this reason London quickly proceeded to ratify the Anglo-Italianagreement in November.19
Clearly, disarmament still belonged to the repertoire of the powers as a hedging
tool in the political competition among them. It showed that the issues of the Mediterranean and the Pacific were connected, as proved by the fact that in Japan revisionist
diplomats were worried by the entente between Britain and Italy, and explanations
were politely asked of the government of Rome.20
This leads to one final question, i.e., why this ultimately positive factor did not
help to avoid the war which exploded roughly one year later. The obvious answer
is that stronger forces were working in the opposite direction, yet the fact remainsthat limited results were achieved. In spite of the end of the Washington system,
the Japanese Navy continued to exert a restraining role on the radical section of themilitary class for two years longer. As for Italy, throughout the tortuous developmentof the negotiations of the Tripartite Alliance and the Pact of Steel in 1938–1939,
Mussolini, as contradictory as his policy was, did ultimately attempt a mediation
between Germany and the Anglo-French group on the eve of the Czechoslovakian
and Polish crisis between 1938 and 1939. Moreover, in the overall atmosphere of
the late 1930s, the principles of pacifism embodied in the Covenant of the League of

17 Idem, p. 237.
18 There is a vast literature on this point as well. For one recent assessment in English, Brian

J. C. McKercher, “Anschluss. The Chamberlain Government and the First Test of Appeasement,
February–March 1938”, International History Review, 2017, 39:2, pp. 274–294.
19 Keith Neilson, op. cit., p. 258.
20 Valdo Ferretti, op. cit., p. 212. Nichidokui Teikei ni kan suru ken, in, Tsunoda Jun (ed.), Gendaishi
Shiryō, vol. X/3, Tokyo, Misuzu Shōbō, 1962, pp.89ss.

6 Disarmament and Equilibrium …

53

Nations were losing force, even in the public opinion of the democratic countries.21
The advent of a ‘world’ war between 1940 and 1941, involving both Europe andthe Asian-Pacific area, showed that disarmament had failed. The reason seems tobe that as a basic technical instrument designed by intellectuals, legal experts andstrategists, disarmament could not resist the wave of powerful political forces at ahistorical time marred by marked aggressiveness. In any case, it did produce theeffect of slowing down the descent into a global crisis, only confirming the validityof its original premise.

Valdo Ferretti (born6-3-1951) graduated in Political Sciences in 1973 and later received thedegree of specialization in Modern and Medieval History at the University of Roma “La
Sapienza”, where he served as a research fellow at the Faculty of Political Sciences up to 2000,
when he was nominated Associate Professor, joining the Faculty of Oriental Studies. Moreover,
he took the degree of Japanese Language of the Italian Institute for the Middle and Far East in1972 and lectured at the universities of Roma 3 and of Pisa. He enjoyed fellowships from JapanFoundation, from the Japan Society for the Progress of Science, and (as an exchange scholar)
from the General Council of the Research of Italy, visiting some foreign universities, institutes
and academies in Japan, RPC and the United Kingdom. His research has regarded topics of international history from the end of the XIXth century to the Cold War, Japanese-Italian diplomatic
relations in the 1930s and some issues of Japanese history. He is the author and an editor of somebooks and of essays on journals, including Japan Forumand Nihon Rekishi.

21 Andrew D. Stedman, Alternatives to Appeasement. Neville Chamberlain and Hitler’s Germany,

London, Tauris, 2015, pp. 177–179.

Chapter 7

The Security of South-East Europe
in the First Inter-War Decade: “Greater
Romania” Between Conflicting
Neighbourhoods and Regional Alliances
Claudiu-Lucian Topor
Abstract At the end of the Paris Peace Conference (1919), Romania reached its
objectives as a nation, speculating the disagreements among the Allies, who wereunable to impose their decisions in Central and Eastern Europe (as they had not occupied the region with their troops) after the armistices were signed. The Conference
could only ratify border modifications that had already been applied by Romania andby other states located at the periphery of Austria-Hungary. The disappearance ofAustria-Hungary meant that the structural problems of Central and South-East European stability were worsened instead of being solved. With their attention focusedentirely on the national project, many Romanians, governmental decision-makers
and party leaders alike, did little to combat the risks of border insecurity. Together
with Austria-Hungary had also fallen the system of German alliances (forged before
the Great War), which had provided Romania with security for 30 years. In theabsence of a viable protective umbrella, in the power vacuum created in Central andSouth-East Europe after 1918, Romania ended up, 25 years later, being incorporated
into the Russian sphere of influence. In search of security guarantees for defending
its new borders in the first years after the war, the Romanian governments looked tothe solution of regional alliances. Romania became a member of the Little Entente in1921. This paper explains why the regional alliances in South-East Europe could notprovide Romania the guarantee of territorial integrity within the Versailles system.
Keywords South–East Europe · Defense system · Interwar period · Romania ·Regional alliances
At the end of the Great War (1914–1918), the territorial order in South-East Europe
was profoundly changed and only apparently strengthened by the peace treaties
signed in Paris. The states in Central and Eastern Europe, newly appearing or reappearing on the map or significantly changing the configuration of their territories,
were facing great difficulties; they were in search of protectors and funding, and had
important divergences between them, with crucial effects on the course of events in
C.-L. Topor (B)Alexandru Ioan Cuza University of Iaşi, Iaşi, Romania© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_7

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C.-L. Topor

Europe.1 The empires that had ruled the Balkans and a great part of Eastern Europe
for centuries collapsed at the end of a decade of constant local wars. Nevertheless,their collapse did not bring about the peace expected by the Western liberals. The
successor states used the principle of nationality in order to claim territories fromtheir neighbours: irredentism was alive and well and only a few of the borders in the
Balkans remained unchallenged.2
The disappearance of Austria-Hungary meant that the structural problems ofCentral and South-East European stability were worsened instead of being solved.
At the same time with Austria-Hungary had also fallen the system of German
alliances (forged before the Great War), which had provided Romania with security for 30 years. Romania’s alliances with the Central Empires, joined by Italy on
9 May 1888, remained the foundation of its foreign policy until the start of WorldWar One. The political agreement with Austria-Hungary was signed in 1883 andrenewed for the first time in 1897. It was never matched by a military convention,
despite the fact that the issue of military cooperation between the contracting parties
had become one of general interest as early as the winter of 1887–1888, in thecontext of tensions between the Central Empires and Russia. The situation of Romanians living in Hungary was one of the original flaws of the alliance, but it was not amajor impediment for maintaining the agreement. The Romanian national question,
despite being activated in the decades preceding the war, did not produce tensions
in the relationship with the main ally (Germany). It never overshadowed the relationship between Romania and the Habsburg Monarchy, and it did not change thecourse of Romania’s security policy before 1914. The guiding principles remained
the same: maintain the existing borders and have no territorial expansion. Aware of
the fragility of Romania’s borders, the politicians in Bucharest tacitly focused on thenecessity to preserve the shield that protected the country against the aggression of
its neighbours. A summary of this prudent policy is reflected in a speech made by theminister of foreign affairs in winter 1894. Alexandru N. Lahovary assessed the political situation in the following terms: “(…) Before taking Transylvania, we should
think about preserving Moldavia and Dobrudja, which such a policy would certainly
expose to going the way of Bessarabia (i.e., ending up in the hands of the more
powerful neighbours, our note, CLT)”.3 The death of king Carol I, shortly after theoutbreak of war in Europe (27 September/10 October 1914), caused a fundamental
paradigm shift in Romanian politics. Decision-making moved into the hands of thegovernment, and the prime-minister, Ion I. C. Bratianu, undertook to re-orient the
Romanian foreign policy towards entering the war on the side of the Entente powers.
The national question returned firmly to the agenda and became the watchword in all
1 Lucian Leuştean, O istorie internaţională a Europei în secolul XX [An International History ofEurope in the Twentieth Century], volume I (1919–1945), Iaşi, Alexandru Ioan Cuza University
Press, 2015, p. 136.
2 Mark Mazower, Balcanii. De la sfârsitul Bizantului până azi [The Balkans. From the End of,,
Byzantium to the present Day]. Translation from English by Tudor Calin Zarojanu, Bucures, ti,
Humanitas, 2019, p. 146.
3 Rudolf Dinu, Diplomatia Vechiului Regat 1878–1915. Studii [The Diplomacy of the Old Kingdom,
1878–1915. Studies], Presa Universitara Clujeana, 2014, pp. 70–71.

7 The Security of South-East Europe in the First Inter-War …

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the government’s actions. The new king, Ferdinand I, a nephew of Carol I, married
to Maria of Romania, the daughter of the duke of Edinburgh, had tacitly approved
the change in course of Romania’s foreign policy and had approved the shift of thegravity centre in terms of decision-making.4 Romania’s intervention in World War
One (1916) was decisive for the nation’s fate. Romania had to face a difficult war,
endured military occupation and signed a separate peace with the Central Powers(Bucharest, 7 May 1918). In the end, Romania was among the victors, as the Entente
powers had won the war.
After the war, Romania changed its features. It became “Greater Romania”,
one of the national states resulting from the collapse of the old empires in nineteenth century Europe. Taking advantage of the power vacuum created in Central
and Eastern Europe, the Romanian delegates approached the negotiations with thewinning Great Powers with the purpose of creating a safer and more prosperous future
for the reunited nation. At the end of the Paris Peace Conference (1919), Romania
reached its objectives as a nation, speculating the disagreements among the Allies,
who were unable to impose their decisions in Central and Eastern Europe (as they
had not occupied the region with their troops) after the armistices were signed. The
Conference could only ratify border modifications that had already been applied
by Romania and by other states located at the periphery of Austria-Hungary.5 The
fiercest of Romania’s neighbours were part of the vanquished states (Hungary andBulgaria) or of the outlaw states (Bolshevik Russia). Following the Paris Conference,
Hungary had lost two thirds of its pre-war territory and over 73% of its population.
Ruined by four years of war, revolution and counter-revolution, as well as by theforeign invasion of 1919, the country was falling apart even before it accepted thetreaty. The treaty itself was signed on 4 June 1920 in the Trianon Palace, on theoutskirts of Paris, at a time when Hungary’s envoys protested and showed that theircountry had been punished more harshly than any of the other Central Powers. In
Budapest, the national flags were lowered at half-mast on all public buildings, andthey stayed that way for two decades, until Northern Transylvania re-entered thecomposition of Hungary following the second arbitrage in Vienna, in August 1940.
One year later, the Hungarian soldiers ventured deep into the territory of the Soviet
Union, together with the Wehrmacht troops, in what was viewed as a “just war”
for revising the Trianon Treaty and the world-wide defeat of Bolshevism. Until thatday (and again after 1990) in Hungary”Trianon” was shorthand for the injustice

4 Idem, Security vs. National Question. Continuity and Discontinuity in Romanian Foreign andAlliance Policy Before and During the Great War (1900–1916), in volume, La lunga Guerra. I
Balcani e Il Caucaso tra conflitto mondiale e conflitti locali (1912–1923), a cura di Lucio Valent,
Milano, Franco Agneli, 2020, pp. 129–151.
5 Lucian Leuştean, România şi marile Puteri la Conferinţa de Pace de la Paris (1919–1920)[Romania and the Great Powers at the Paris Peace Conference (1919–1920)], in the volume
România, Marile Puteri şi ordinea europeană (1918–2018) [Romania, the Great Powers and theEuropean order (1919–1920)], coordinated by Valentin Naumescu, Iaşi, Polirom, 2018, pp. 49–69.

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C.-L. Topor

committed by the Allies, wrapping in it the almost universal desire to annul its provisions.6 For the Bulgarians (not without cause), the Treaty of Neuilly (27 November
1919) symbolized the lowest point of their national existence as an independent state.
The redrawing of Bulgaria’s borders had left it without fertile agricultural land (suchas Dobruja and Thracia) and with no access to the Aegean Sea—a major problem,since maritime commerce was a crucial factor for the entire Bulgarian economy.
Bulgaria struggled to manage the human and financial costs of the war throughout
the inter-war period. It faced international isolation, deep internal rifts and violent
clashes between the supporters of various political parties.7 Unlike Hungary andBulgaria, countries that had been defeated in the war, Russia had a more complicated situation. As an allied state in 1941, it had most likely saved France fromdefeat by attacking Germany on the Eastern front. Russia had fought three years in a
row against the Central Powers, inflicting heavy losses, but suffering, in its turn, evenheavier losses. In 1917 it broke under pressure and transitioned, in the space of eightmonths, from autocracy to liberal democracy and then to the revolutionary dictatorship imposed by the extremist faction of the Russian socialists, the Bolsheviks, a party
that few people at the time (including the Russians) had ever heard anything. While
the Tsars’ Russia was unravelling, new states emerged from the ruins of the former
empire: the Baltic countries, Ukraine, Armenia, Georgia, Azerbaijan, Dagestan. In
a futile attempt to support its ally—now in complete disarray—against Germany,
the Entente sent reinforcement troops to Russia, but in early 1918 the Bolsheviks
made peace with Germany.8 By the Treaty of Brest-Litovsk, Russia was obliged togive up almost all its land possessions on the European continent. Poland, Finland,
Estonia and Lithuania gained independence under German protectorate. The Soviet
troops were evacuated from Ukraine. In the final confrontation, Soviet Russia had
lost 34% of its population (55 million people), 32% of its farming land, 54% of
its industrial companies and 89% of its coal mines. It had returned to international
status it had had in the seventeenth century, but Lenin’s revolution had survived.9
The wartime collapse was profound and lasted longer in the case of Russia than of
any other country in Europe. However, despite its internal weaknesses, the Soviet
Union (USSR) was the strongest of Romania’s neighbours. The Bessarabia question remained contentious until the start of World War II. At the end of 1918, theinternational recognition of the unification of Bessarabia with Romania was exclusively related to the dynamics of Bucharest’s relations with the victorious powers.
The decision of the Council of Ambassadors (following the Paris Peace Conference)came relatively late and only at the end of a gruelling diplomatic dispute. After the
6 Robert Gerwarth, Cei învinsi. De ce nu s-a putut încheia Primul Război Mondial, 1917–1923,[The Vanquished: Why the First World War Failed to End, 1917–1923], translation from English byAlexandru T, îrdea, Bucharest, Litera, 2017, pp.245–246.
7 Ibid., pp. 248–249.
8 Margaret Macmillan, Făuritorii păcii. Sase luni care au schimbat lumea [Paris 1919: Six Months,
That Changed the World], translation from English by Smaranda Câmpeanu, Bucharest, Trei
Publishing, 2018, pp. 101–102.
9 Orlando Figes, Rusia revolutionară (1891–1991) [Revolutionary Russia 1891–1991. A History],,translation from English by Alina Popescu, Bucharest, Corint, 2014, p. 150.

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withdrawal of the Romanian troops from Hungary and the recognition of the borders
with Yugoslavia, Czechoslovakia and Poland, the Romanian delegate Take Ionescu
received, on October 28, 1920, the text of a treaty recognizing de jure the annexationof Bessarabia. The document, signed by the main allied powers (the British Empire,France, Italy, Japan), recognized Romania’s sovereignty over Bessarabia and invited
Russia to join the treaty as soon as it was led by a government recognized by the
Allies. In the hope that the United States would also sign it, the document provided
that Romania would grant rights to non-Romanian residents of Bessarabia and would
respect the delimitation of the border with the Soviet Union. But the Americans interpreted everything as an attempt by the Allies to force them to legalize a biased judgment on the merits and validity of Romania’s claim to Bessarabia. As a result, delegate Bainbridge Colby, the successor to Secretary of State Robert Lansing, refused
to participate in what he called a “dismemberment of Russia” without the consent
of the Russian people.10 In the interwar years, the Romanian destiny of Bessarabia
depended on an ambiguous diplomatic approach, as Soviet Russia had not yet had
its last word on the issue. Among the neighbouring empires, whose dismemberment
Romania had taken advantage of in order to complete its national territory, Russia
continued to be a constant lethal threat. As far as the Soviets were concerned, thelegacy left by the war to the Romanians did not appear more comfortable than theformer threat of the boundless Tsarist Empire had been.
The inclusion of historically Romanian provinces (Bessarabia, Bukovina, Transylvania and Banat) within the Kingdom’s borders had more than doubled both thecountry’s territory and its population, compared to the era before the war (from137,000 sq. km to 295,000 sq. km, and from 7.235 million inhabitants in 1912, to
18 million recorded in 1930). Almost all the Romanians in Europe were now living
within the boundaries of one state. Living next to them in this country were minorities of race, language and religion, much more numerous than in the past, when
Romania came before Europe as an ethnically homogenous state. According to the1930 census, Romanian ethnics made up 71.9% of the country’s population. The
rest, up to 100%, consisted of ethnic minorities, spread in an uneven manner acrossthe national territory. In Greater Romania, Romanians were the majority ethnicity
everywhere (with the exception of the North and South of Bessarabia, the Northof Bukovina and the “Szeklerland” in Transylvania). The minorities were limited toparts of the country and the connecting social tissue was made up of Romanian ethnic
population. On the other hand, the provinces included in the territory after 1918 wereless Romanian than the reunited Romania taken as a whole. The constitution adopted
in 1923, however, defined by the phrase “unitary nation state” the country that was
the outcome of the Great War. Its borders were greatly extended and this made therelations with the neighbours more complicated. The security threats in this new
country between the two World Wars did not originate, as they had in the past, solely
in the expansionist ambitions of neighbouring empires (as it had been the case with
10 Sherman David Spector, România la Conferinta de Pace de la Paris. Diplomatia lui Ion I. C.
,,

Brătianu [Romania at the Paris Peace Conference: Study of the Diplomacy of Ioan I. C. Brătianu],translation from English by Sorina Pârvu, Ias, i, Institutul European, 1995, pp. 282–283.

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C.-L. Topor

Russia in the nineteenth century, when the territory of the Romanian Principalities
had been occupied on three consecutive occasions by the Tsarist armies). This time
the threats were based on the vulnerabilities of the Versailles system, reflected in thesignificant growth of the revisionist threats across Europe.
For this reason, the objective of Romania’s foreign policy between the world wars
was to secure its borders. This attitude influenced the choice of its new allies andreflected in the relationship with the neighbouring states. Romania had become amember of the League of Nations and had been integrated into the French security
system for Eastern Europe through the Treaty of Friendship with France signed in
1926. The Romanian governments sought to contribute through various means to thedefence of the Versailles system. They advocated collective security and supported allefforts meant to turn the League of Nations in a warrantor of global peace and stability.
The Romanian delegates adhered to the 1924 Geneva Protocol, which deemed any
war of aggression to be an international crime, and established procedures for identifying the aggressor and for imposing the arbitrage of the Permanent Court of International Justice. Bucharest was also party to other international agreements, such as
the 1928 Kellogg-Briand Pact, which outlawed war as a means of solving disputes
between nations; the Convention for defining aggression, signed in London (1933),
which the Romanian officials interpreted as strengthening the territorial integrityof their country; the Anti-war Treaty of Non-aggression and Conciliation signed in
Rio de Janeiro in 1933, which condemned wars of aggression and the annexation of
territories as an outcome. At the World Disarmament Conference organised by the
League of Nations place in Geneva between 1932 and 1934, Romania upheld thegeneral principle of disarmament, insisting that any formula of reducing armies andweaponry be applied equally to all nations, or that the League of Nations impose
strictly the compliance with its decisions. In all the critical circumstances that challenged the system of collective security, Romania invariably sided with the Western
powers. In 1935, the Romanian delegates supported the economic sanctions adopted
against Italy (following the invasion of Ethiopia). One year later, in 1936, whenGermany denounced the agreements made in Locarno and re-occupied Rhineland,
the Romanian governments expressed their indignation and concern towards France’s
and Great Britain’s hesitant reaction.
When the security guarantees insistently pursued in London and Paris proved
to be an ineffective and diluted substitute for the former treaties that were placing
pre-war Romania on the orbit of the German alliances, the Romanian governmentssought out the solution of regional alliances. Romania became actively involved in
the establishment of the Little Entente and of the Balkan Pact, political instruments
through which it sought to forge alliances with Poland, Czechoslovakia, Yugoslavia
and Greece. The aim of these agreements was to counteract revisionism in SouthEast Europe. They oriented the national security policy towards providing a joint
response from the regional actors that were vulnerable to the threats coming from

7 The Security of South-East Europe in the First Inter-War …

61

Bulgaria and Hungary.11 The Little Entente was created based on the need felt by
Romania, Czechoslovakia, and Yugoslavia to defend their security, as their confidence in the effectiveness of the guarantees included in the treaties of Trianon and
Neuilly had decreased. Three bilateral agreements existed (between Yugoslavia andCzechoslovakia, Romania and Czechoslovakia, Romania and Yugoslavia), each ofthem obliging its signatories to support the defence of its ally in the case of an
unprovoked attack from the part of Hungary. The Romanian-Yugoslav treaty was
also aimed at Bulgaria. The Balkan Pact meant the extension towards South-East
Europe of the principles of regional security that formed the foundation of the Little
Entente. It originated in the Balkan conferences organised starting with 1929 inorder to study issues of common interest. The Pact was signed in Athens in February
1934 by the representatives of Romania, Yugoslavia, Greece, and Turkey, and it
asserted the defensive character of the proposition of November 1933, which had
tuned the fourth conference of the Balkan states (Greece, Romania, Yugoslavia) into apermanent regional organisation. The Romanian foreign minister, Nicolae Titulescu,
outlined a system that would include all Balkan states as members. He meant it to
be a regional pact against all forms of territorial revisionism and as a support for
the efforts to stigmatize war as a means of solving international disputes. In the end,
the member states did not manage to create a united front for solving vital international problems. The General Staffs of the armies involved in these alliances did not
draw up consistent projects, studies, memoranda and reports aimed at planning joint
interventions in situations of regional conflict. There was a lack of coordination ofactions, which could have been achieved through the creation of integral commands
and groups of inter-Allied forces. Discussions and agreements remained only at thestage of hypotheses frequently invalidated by the changes in regional politics.12
Due to the fact that the mission of the treaty was to maintain the existing borders in
the Balkans, Bulgaria refused to sign it until its claims were recognized (1938). Mostof the participating states began pursuing their own interests without consulting theother partners. Greece and Turkey, for example, did not want to damage their relationship with Russia on account of Romania’s interests, or those with Italy becauseof Yugoslavia’s interests. The Balkan Pact survived the Munich agreement, which
stipulated the breaking apart of Czechoslovakia and heralded the demise of the Little
Entente. The effectiveness of the alliance was no longer a match for the new challenges. The Romanian foreign ministry had been too optimistic in appreciating thatboth regional agreements had created a swathe of states with identical political interests stretching from Czechoslovakia to the border with Persia. They did agree on

11 Keith Hitchins, România 1866–1947 [Romania 1866–1947], third edition, revised and amended.

Translation from English by George G. Potra and Delia Răzdolescu, Bucharest, Humanitas, 2013,
pp. 497–521.
12 Teofil Oroian, Gheorghe Nicolescu (coordinators), Sefii Statului Major General Român (1859–,
2000) [The Chiefs of the Romanian General Staff (1859–2000)], Bucharest, Europa Nova, 2001,
pp. XIX.

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C.-L. Topor

keeping Hungary’s and Bulgaria’s revisionism at bay, but they were not prepared tohold their ground in front of the great powers.13
The fact that inter-war Romania was engaged in regional alliance projects separated it from the security policy pursued before the outbreak of war in 1914. Until
then, Romania had shown detachment and neutrality in relation to the arrangements
made by the Balkan states, despite the fact that in the Balkan Peninsula (in Macedonia and in the Pindus Mountains) lived an important community of Aromanians (apopulation related to the prevalent Romanian ethnic element living in the kingdom).
Invited in 1912 to adhere to the Balkan Alliance (an alliance built for war purposes),
Romania rejected any active involvement and proclaimed itself neutral in the Balkan
nations’ war against the Ottoman Empire. Even the military intervention during
the second Balkan War (1913) did not occur as a consequence of any preliminary
alliance. Although acting against the same regional enemy (Bulgaria), the Balkan
belligerents (Serbia, Montenegro and Greece) did not sign political conventions, nor
did they make any military commitments in their relations with Romania. The projectof a closer Balkan connection, one that would include Romania, appeared only later(after the signing of the Bucharest Peace Treaty in 1913). Its purpose was security(maintaining the Balkan status-quo) rather than war policy. Safeguarding the provisions of the Bucharest Peace Treaty (1913) did not depend exclusively on the agreements between Romania and its Balkan partners, as Romania’s defensive policy still
enjoyed the protection of the Triple Alliance. After the Great War, Romania resorted
to the solution of regional security arrangements precisely because its Western allies
hesitated in offering any military commitments in guaranteeing the integrity of the
new national borders. Greater Romania looked like a multi-ethnic state located at
the meeting point between the Balkans and Eastern Europe, in the proximity of bothold and new conflicting neighbourhoods, with borders that were difficult to protect
through a coherent overlapping of national policies with the strategic agenda of themain European actors.
Regional alliances, despite occasional successes, did not provide the security
support required by Romania’s governments. Both the Little Entente, and the Balkan
Pact had the same harmful shortcoming: they were strong alliances against weakstates, and weak alliances against strong states.14
Firstly, they did not acquire over time the necessary cohesion, both in terms of
coordinating political interests and in the complementarity of business interests. The
efforts to ensure the inviolability of the country’s new borders remained fruitless. Both
Hungary and the Soviet Union speculated the Romanian state’s security crisis andthe limited options of Bucharest’s diplomats. Historically Romanian provinces such
as Transylvania and Bessarabia were dealt with as litigious issues at regional politics level. Hence, new tensions and threats for the peace. Over time, the old regional
13 Stevan K. Pavlowitch, Istoria Balcanilor 1804–1945 [A History of the Balkans, 1804–1945],

Iaşi, Polirom, 2002, pp. 257–258.
14 Misha Glenny, Balcanii. Nationalism, război si Marile Puteri 1804–2012 [The Balkans. Nation,,

alism, War and the Great Powers, 1804–2012], translation from English by livia Szász, Bucharest,
Trei Publishing, 2020, p. 478.

7 The Security of South-East Europe in the First Inter-War …

63

tensions escalated, emboldened by the changes in the international political hierarchy.
With the 1938 Sudeten crisis, the system of the Little Entente collapsed. The political crisis was marked by Romania’s attempt to eschew the obligations undertaken
by signing the alliance treaty with Czechoslovakia in order to avoid finding itself
entering a war against Germany. The Munich agreement meant the end of the collective security system in South-East Europe. It established the German Reich’s politicaland economic hegemony in the region. By absorbing the Czechoslovak commerce
and the foreign investments, Germany had become the main commercial partner ofthe states in Central and South-East Europe.15 The Munich agreement changed the
direction of Romania’s foreign policy. King Carol II had hoped in vain that GreatBritain would be able to counterbalance the German influence in South-East Europe.
In mid-November 1938 he travelled to Paris and London, but returned to Bucharestwith disappointing results. Not only had Great Britain avoided to provide any political guarantees regarding Romania’s borders, but prime minister Chamberlai’n was
reluctant to promise at least a more substantial British economic presence. The significance of the moment should not be overlooked. After his fruitless visits to Franceand Great Britain, Carol II was forced to accept the opportunity of another visit, thistime to Germany. The talks with Hitler were held at Berghof, but their effect was
not very comforting. Asked about his prospective position in the case of a conflict
between Romania and Hungary, Hitler replied that such a conflict would not be of
direct interest for Germany. As a consequence, there was no hope that Germany
would intervene.
In the months that followed the meeting in Germany, the security crisis that
Romania faced became acute, and the Balkan Pact did not provide security solutions. As a result, it was the German influence that was strengthened in the Romanian economy. However, the Bucharest diplomats’ liberty room for manoeuvre hadnarrowed considerably. The government led by Grigore Gafencu (the pro-West leaderof the National Peasant Party) had trouble moving within the constraints of an
impossible neutrality. Any additional attention given to the Western Powers with the
purpose of obtaining security guarantees was feeding Nazi Germany’s suspicions
regarding Romania’s duplicitous politics, the same way the strengthened German
position in the economy indicated a possible weakening (if not complete abandonment) of Romania’s pro-Western foreign policy position. Romania sought, as it had
done before, to protect the integrity of its territory through the strategy of rebuilding
its alliance with Germany. The roots of this orientation went deep into the past before
the Great War. The position appeared to be a reconstruction of the old friendship that
had connected Romania under Carol I to the Reich under Wilhelm II. But historical
tradition had nothing to say in the new international context. It was only geopolitical resort that played the decisive role, and this time it was especially different.
Greater Romania did not correspond to Nazi Germany’s vision of Eastern Europe.
Whereas before World War One Romania had been for Wilhelm’s Germany a factor
or regional stability, during the years between the world wars Greater Romania
15 Rebecca Haynes, Politica României faţă de Germania între 1936–1940 [Romanian Policy

Towards Germany, 1936–1940], translation by Cristina Aboboaie, Iaşi, Polirom, 2003, pp. 57–61.

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C.-L. Topor

had become a source of potential conflicts in Eastern Europe. Obviously, reopened
regional conflicts clashed with Nazi Germany’s projects. Despite differences in principles, after the signing of the Munich agreement (29 September 1938), Romania’s
policy—practised consistently by king Carol II and by the heads of the main politicalparties, Iuliu Maniu and Constantin Brătianu—was still pursuing close relations withGermany in order to defend its borders against revisionism. Nevertheless, concessions needed to be made. The German influence in Romania was growing throughthe economic treaty signed on 23 March 1939. The treaty ensured a close relationship between the economies of the two countries through coordinated planningand through the creation of joint-venture companies for the extraction of natural
resources.16 Romanian hopes in this case were to gain something at political level
as well. However, it was coming in the context of the Ribbentrop-Molotov nonaggression pact being signed in Moscow. In the secret annex of the document, thetwo European powers made an agreement regarding the annexation of Bessarabia
and of Northern Bukovina. Thus, the last of Romania’s inter-war foreign policy foundations was lost. Justified by the antagonism between Nazi Germany and the USSR,
the policy of balance between the great powers, that poor substitute for the failed
regional alliances, had come to an end after concluding Hitler-Stalin Pact in august
1939, leaving Romania stranded in South-East Europe. The Romanian government’s
options became dramatically limited, and thus maintaining the integrity of the stateborders was no longer possible in the geopolitical context of the moment. On 29
August 1939, Hermann Göring reassured the foreign minister, Grigore Gafencu, that
Germany considered it had made a commitment to Romania as a whole when it
had signed the economic treaty of 23 March 1939, and that Berlin had no interestfor part of Romania (Bessarabia) to be taken out of this economic cooperation.17
This surprising piece of news appeared indeed to be satisfactory for the security of
Romania’s borders.

Map in Annex
Titre: La Roumanie et les provinces roumaines. Les principales frontières historiquesdes provinces roumaines et l’administration politique, chemin de fer, navigation, en
1919 / par le Prof. A.-D. Atanasiu
Auteur: Atanasiu, A. D. (18..-19..). Auteur du texte
Auteur: E. Dufrénoy (Paris). Auteur du texte
Editeur: (Paris)
Date d’édition: 1919
16 Keith Hitchins, Scurtă istorie a României [A Concise History of Romania], translation by Lucia

Popovici, Iaşi, Polirom, 2015, p. 221.
17 Ottmar Traşcă, Relaţiile politice şi militare româno-germane septembrie 1940-august 1944

[Romanian-German Political and Military Relations, September 1940 August 1944], Cluj-Napoca,
Argonaut, 2013, p. 23.

7 The Security of South-East Europe in the First Inter-War …

65

Sujet: Roumanie
Type: carte, image fixe
Langue: Français
Langue: Français
Format: 1 flle: en coul.; 95 × 69 cm
Format: image/jpeg
Format: Nombre total de vues: 1
Droits: domaine public
Identifier: https://gallica.bnf.fr/ark:/12148/btv1b53209903m
Source: Bibliothèque nationale de France, département Cartes et plans, GE B1094
Relation: Notice du catalogue: http://catalogue.bnf.fr/ark:/12148/cb40756359n
Couverture: Roumanie
Description: Échelle(s): 1:1,000,000

References
Keith Hitchins, România 1866–1947 [Romania 1866–1947], third edition, revised and amended.
Translation from English by George G. Potra and Delia Răzdolescu, Bucharest, Humanitas, 2013.
Keith Hitchins, Scurtă istorie a României [A Concise History of Romania], translation by Lucia
Popovici, Iaşi, Polirom, 2015.

66

C.-L. Topor

La lunga Guerra. I Balcani e Il Caucaso tra conflitto mondiale e conflitti locali (1912–1923), a curadi Lucio Valent, Milano, Franco Agneli, 2020.
Lucian Leuştean, O istorie internaţională a Europei în secolul XX [An International History ofEurope in the 20th Century], volume I (1919–1945), Iaşi, Alexandru Ioan Cuza University Press,
2015.
Margaret Macmillan, Făuritorii păcii. S, ase luni care au schimbat lumea [Paris 1919: Six Months
That Changed the World], translation from English by Smaranda Câmpeanu, Bucharest, Trei
Publishing, 2018.
Mark Mazower, Balcanii. De la sfârs, itul Bizant, ului până azi [The Balkans. From the End of
Byzantium to the Present Day]. Translation from English by Tudor Calin Zarojanu, Bucharest,
Humanitas, 2019.
Misha Glenny, Balcanii. Nat, ionalism, război s, i Marile Puteri 1804–2012 [The Balkans. Nationalism, War and the Great Powers, 1804–2012], translation from English by livia Szász, Bucharest,
Trei Publishing, 2020.
Orlando Figes, Rusia revolut, ionară (1891–1991) [Revolutionary Russia 1891–1991. A History],translation from English by Alina Popescu, Bucharest, Corint, 2014.
Ottmar Traşcă, Relaţiile politice şi militare româno-germane septembrie 1940-august 1944
[Romanian-German Political and Military Relations, September 1940 August 1944], ClujNapoca, Argonaut, 2013.
Rebecca Haynes, Politica României faţă de Germania între 1936–1940 [Romanian Policy Towards
Germany, 1936–1940], translation by Cristina Aboboaie, Iaşi, Polirom, 2003.
Robert Gerwarth, Cei învins, i. De ce nu s-a putut încheia Primul Război Mondial, 1917–1923 [TheVanquished: Why the First World War Failed to End, 1917–1923], translation from English byAlexandru T, îrdea, Bucharest, Litera, 2017.
Rudolf Dinu, Diplomatia Vechiului Regat 1878–1915. Studii [The Diplomacy of the Old Kingdom,
1878–1915. Studies], Presa Universitara Clujeana, Cluj-Napoca, 2014.
Sherman David Spector, România la Conferint, a de Pace de la Paris. Diplomat, ia lui Ion I. C.
Brătianu [Romania at the Paris Peace Conference: Study of the Diplomacy of Ioan I. C. Brătianu],translation from English by Sorina Pârvu, Ias, i, Institutul European, 1995.
Teofil Oroian, Gheorghe Nicolescu (eds.), S, efii Statului Major General Român (1859–2000) [TheChiefs of the Romanian General Staff (1859–2000)], Bucharest, Europa Nova, 2001. Stevan K.
Pavlowitch, Istoria Balcanilor 1804–1945 [A History of the Balkans, 1804–1945], Iaşi, Polirom,
2002.
Valentin Naumescu (ed.), România, Marile Puteri şi ordinea europeană (1918–2018) [Romania,
the Great Powers and the European order (1919–1920)], Iaşi, Polirom, 2018.

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Ivan T. Berend, Decades of Crisis. Central and Eastern Europe Before the War World II, Berkeley,
1998.
R. J. Crampton, Eastern Europe in the Twentieth Century—And After, second edition, Routledge,
1997.
W. Simons Thomas Jr., Eastern Europe in the Postwar World, New York, St Martin’s Press, 1991.

7 The Security of South-East Europe in the First Inter-War …

67

Claudiu-Lucian Topor (b. 1975) has been an associate professor at the Faculty of History at the”Alexandru Ioan Cuza” University in Ias, i since 2014. He studied in Ias, i and received a scholarshipat the Konstanz University (Germany). Holds a PhD in history (2006), with a thesis on the diplomatic relations between Germany and Romania during the Balkan Wars (1912–1913). Specialises
in the research of themes pertaining to military history and to the history of diplomacy and international relations. His domain of interest in research also extended to the issue of Romania’s partin the course of the Great War. Author and editor of several volumes dedicated to German politics in Romania and in South-East Europe in the early twentieth century. His latest publications
include the studies A Forgotten Lesson: The Romanian Army between the Campaign in Bulgaria(1913) and the Tutrakan Debacle (1916), (Chapter 8, pp. 240–258), in the volume The Wars of
Yesterday. The Balkan Wars and the Emergence of Modern Military Conflict, 1912–1913, editedby Karin Boeckh and Sabine Rutar, Berghahn Books, 2018; Romanians at War—Soldiers´ Experience during the Military Campaign (1916–1918)in the volume Die unbekannte Front. Der Erste
Weltkrieg in Rumänien, edited by Gundula Gahlen, Deniza Petrova, Oliver Stein, Campus Verlag,
Frankfurt am Main, 2018 (pp. 223–249).

Chapter 8

The Inevitable Revolution
Miguel Ángel Vecino

Abstract Years ago, when a bipolar world came to an end, an immense numberof articles and statements were published declaring the final victory of capitalism.
Thus, beyond all controversy, Marxist ideas and forecasts were denied, identifying
the Soviet system which Marxism, even though, since 1917, it had been insistently
demonstrating that the Soviet system was an aberration of Marxis. The supposed newWorld Order based on U.S. hegemony lasted very few years and at the beginningof the new century, no order existed. The so called multilateralism vanished into
the turmoil of a world without international scenario. The confusion spread over
all aspects of society with a feeling of helpless. Globalism has not made poorness
disappear, and economic crisis with its tragic human consequences have not beenerased from the capitalist system. Societies are lost among a desert of contradictories
tendencies under irreal promises. If a solution is not found in shor period of time,
putting an end to poverty, dissatisfaction, frustration and the sensation that the future
will be worst than the present, human beings will have no solution but revolution.
Keywords Capitalism · Democracy · Wold order · Confussion · Social
disatisfaction · Fear of the future · Revolution

1 Introduction
Years ago, when a bipolar world came to an end, an immense number of articles andstatements were published declaring the final victory of capitalism. Thus, beyond allcontroversy, Marxist ideas and forecasts were denied, identifying the Soviet system
which Marxism, even though, since 1917, it had been insistently demonstrating that
the Soviet system was an aberration of Marxism.

M. Á. Vecino (B)Madrid, Spain© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_8

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M. Á. Vecino

In those past times, which today seem so distant, the apologists of capitalism
promised a paradise, much like the Bolsheviks had promised another one.1 In bothcases, the promises made did not became reality: today, the world is not that “global
village”, where wealth is distributed and growth continuously raises the standard ofliving of the vast majority of the population, allowing Western civilization to extend
its benefits to all corners of the planet, ruling out armed conflicts and imposing a pacifism based on universal multilateralism. Francis Fukuyama’s2 predictions, among
others, were not fulfilled, and today, the international panorama with the broken
equilibrium of the bipolar era and the demonstrated impossibility of a hegemon,
hangs in a serious imbalance, which will last until a new scenario reflects the relationof strength in the world. B. Badia could not be righter when he wrote: “The commonlyuses qualifier of ‘post-bipolar’ oddly enough tells us more about the system’s past
without informing us about what it has become or what direction it is likely to take”.3
Today, we know what the world is not, but no one is capable of defining what it is:the very same point of defining it “post” demos nsn trates the intellectual desarrayof the present.
The pages those follow are a summary of some of the ideas contained in thethesis that I defend in my essay, on the inevitability of a social revolution in the
short / medium term and that I have named “The Inevitable Revolution”. My thesisis that capitalism is returning to its origins, that is, before the movements of theleft appeared and the masses became part of politics. Consequently, the conditionsof the labour market are intensifying, which, as Marx well said, is a “market” likeany other, regardless of whether, in this case, the “merchandise” is a human being.
This reification of human beings has been reflected in the capitalist vocabulary,by changing the name with which the “personnel management” was known by the
management of “human resources”: the human being is a resource, a material likeany other, to achieve the ends that a capitalist entity pursues.
The recovery of absolute power by the capitalist forces is assuming a return tothe panorama of the mid-nineteenth century. From there, Marxism will once again
impose itself as an ideology of solution to the struggle, not between bourgeois andproletarians, but between those who have plenty and those who do not have enoughto survive with dignity, which will be the overwhelming majority of human beings
that will not even have the privilege of being a “resource”.

1 Branko Milanovic, still defending today capitalism as the solution in his article “The Clash of

Capitalisms”. Foreign Affairs, January/February 2020, pg. 10.
2 “The End of History and the Last Man”. Penguin Books London 1993. Many reprints.
3 Bertrand Badie “Diplomacy of Connivance”. Palgrave Macmillan New York 2012. Original in

French. 2011. 200 pg. Pg. 1.

8 The Inevitable Revolution

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2 Parameters
The essential reason for the difficulty in interpreting events and devising an international scenario is that we lack parameters, benchmarks to be able to correctly analyses
situations that, in addition, constantly change by converting the forecast into speculation. We follow a map in constant variation, ignoring if we move forward, backward
or walk in a circle. What we do know is that the route is out of control, at the mercy of
any unpredictable leader of an unforeseen event: “in this landscape, blunders could
set off escalatory spiral and mutual suspicion could engender hostilities”.4
The danger increases because we live in a world that aims to invent reality simply
by changing its name: In this verbal restructuring, the adjective “global” has been
added to today’s capitalism, thereby pretending to make it be a new system, a “different capitalism”; nevertheless, capitalism has been “global” by definition. Obviously, its radius of action was much smaller in the fifteenth and sixteenth centuries,
but it did not cease to have a globalizing claim: “Certes,- wrote Fernand Braudelle capitalisme d’aujourdhui a changé de taille et de proportions, fantastiquement. Il
s’est mis à la mesure des échanges de base et de moyens, eux aussi fantastiquement
agrandis. Mais, mutatis mutandis, je doute que la nature du capitalisme ait changéde fond en comble”.5
The triumph of capitalism has meant the imposition of its ideology: the only
principle that inspires and guides the world today is the exorbitant exaltation of thetriumph of profit at the expense of any other consideration. This situation on theinternational scene reflects what happens at the social level in the western world: theold values reflected in the behaviours in society, product of social or religious norms,
are being overwhelmed by the obsession of profit, and a society without principles
ceases to exist as such because, as Karl Mannheim pointed out, it is values that holdtogether the members of a society.6 Economic pressures, hindering a reasonable
standard of living, as it developed after World War II, are blowing up all the columns
that were sustained society: decent wages, social mobility, access to education atits different levels, access to satisfactory public health, working hours which arecompatible with private life, job security etc. When this has been disappearing, when
the citizen has found himself abandoned to his fate, populism has appeared as thesolution in some States, and nationalism, even racist nationalism have recover to acertain extent the role it had at the beginning of the last century: a Catalan leader
Oriol Jonqueras wrote about the genetic superiority of the Catalans in relation with
Spanish or Portugues people (newspaper “Avui” August 27 2008).
Against the identification of democracy-capitalism, a capitalism without democracy has been imposed in certain countries, calling it, within the verbal recreationof reality, ‘political capitalism’, when it is nothing more than an adaption of the old‘state capitalism’. The improvement of the standard of living in these societies has
4 Idem, pg. 74.
5 F. Braudel «La Dynamic du capitalisme». Champs histoire, pg. 102.
6 K. Mannheim “Ideology and Utopia”. Harcourt, Brace and Co. Inco. New York 1954, pg. 318.

Various earlier editions.

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M. Á. Vecino

been achieved by renouncing democracy and private life under the strict control of
the Police.
This leads us to mention another point of reference: technology does not necessarily mean an instantaneous improvement in existence. On the contrary, it can bea mode of manipulation, loss of privacy, control of people, in short, a Big Brothercome true. The right to “private life” has lost much of its meaning: it is currently
necessary to be exhibited, it is necessary to be on the networks, have followers, be afollower of someone.
Capitalism wants to reform society to put it entirely at the service of economic
interests, and in order to do so, nothing can interrupt the search for profitability, thepast must be erased. George de Santayana said that people who do not know their
history are condemned to repeat it.

3 The Essence of Capitalism
Capitalism emerged in the fourteenth and fifteenth centuries in Italy as a result of
the confluence of a number of factors, such as the development of banking and theincrease which greatly facilitated the development of trade through new, more secureand easy payment methods, such as bills of exchange, for example. Trade certainly
increased wealth rapidly, but the risk was equally greater, since this wealth wasvolatile and even (as seen today) could be purely speculative. Faced with the securityof territorial property, trade and financial speculation catapulted the possibilities of
profits, but also the insecurity, by greatly increasing the risk arising from long trips,
economic investments in distant lands or highly unsecure and unknown markets. The
stalking of commerce and banking increased and extended in the old society: the land
was wealth, product of immovable security; trade, greater wealth product insecurity
in perpetual movement.
Three decades after the end of bipolarity, of the “victory” of capitalism, in theWest, the gap between rich and poor widens in plain sight, while governments saythey are ‘worried’, although they do little to avoid it, except promise improvementsthat are like curing a haemorrhage with a plaster: the rich are getting richer andevery time there are more poor people whose situation doesn’t seem to stop getting
worse because, “economists, policymakers and ordinary people have increasingly
come to see that neoliberalism… has reached its limits”.7 The government being tied
to the power of financial means, they do not dare attack the origin of a reality thathas disastrous human consequences for the exploitation of the majority of the population. Klaus Schwab writes in his recent report for the Davos Forum: “The socialand economic consequences of inequality are profound and far reaching: a growing
sense of unfairness, precarity, perceived loss of identity and dignity, weakening

7 M. Fahnbulleh “The Neoliberal Collapse”. Foreign Affairs, January/February 2020, pg. 38.

8 The Inevitable Revolution73

social fabric, eroding trust in institutions, disenchantment with political processes
and erosion of the social contract.”8The pauperisation of society brings us back to the social situation of the midnineteenth century. It is unimaginable that there can be any change in capitalism,taking into account its evolution over the past 30 years. An editorial in “The
Guardian” from January 21, 2020 stated that, “The figure of Davos Man… has
become synonymous with a certain kind of deracinated corporate executive, whose
only loyalties and obligations are to the balance sheet”. The inevitable consequenceis that there is a change of fidelity: what was once the nation, towards the State andconsequently towards society, has lost all meaning and whoever wants to succeed,
must renounce the ‘state nationality’ to acquire the ‘corporate nationality’—thecountry that is the object of devotion is not the place where one was born or where
one has lived all his life, but the company for which one works. It is to take or leave,
but it is not negotiable.
There is no other objective in the foreign policy of the economic superpowers:
the network of capitalist dependence is such, that those who yesterday were leading
economic powers (Germany, France, United Kingdom, Japan …) are caught in the
networks of the economic superpowers (United States, China, Russia …) which inturn are equally dependent on each other because they are driven by their dependence
on financial powers, which they cannot control. The failure of the European Union
to create a united political and economic power had banised the EU and its member
states from the first row of international actors.

4 Democracy
The very essence of democracy is freedom, the right to dissent,9 equality before thelaw, respect for the dignity of the human being, the possibility to participate in thegovernment, and all other rights included from the Declaration of Law of the Good
People of Virginia on June 12, 177610 while they are inherent rights to the humancondition, until the Universal Declaration of Human Rights adopted on December
10, 1948. However, all these statements were drafted by Westerners and even thefact that in 1948 there were representatives of non-Western States they really were aminority.
Now, liberty does not mean, and has never meant economical ‘equality’. The endof World War II initiated the peak of the confrontation between liberal democracy
and capitalism, on the one hand, and Soviet democracy and Soviet planned economy,on the other. The very existence of the Soviet Union was the best instrument of theEuropean left-wing social democratic parties and unions to obtain continuous life
8 “Global Social Mobility. Report 2020”. January 2020. World Economic Forum. Davos, pg. 4.
9 In Voltaire’s words «Je ne suis pas d’accord avec ce que vous dites, mais je défendrai avec mavie votre droit de le dire».
10 Three weeks prior to the Declaration of Independence.

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M. Á. Vecino

improvements for the working class. With this, bourgeois democracy was also gaining
the support of the working classes. Given the evidence of the facts, even the Westerncommunist parties were evolving towards what was called the Eurocommunism,11
the need for total revolution, the dictatorship of the proletariat, Soviet style, andespecially the lack of internal democracy in the communist parties were questioned.
But the welfare state system was already running out in the 1980s and the disappearance of the Soviet Union, as a superpower and as a point of reference, was the final
culmination of an evolution of capitalism that had given rise to the welfare state.12
The fear of the guided revolution from Moscow disappeared and the capitalist classwanted and felt that it could return to the original capitalism.
On the other hand, in many democracies, political parties and unions had suffered
the loss of trust from citizens, and this happened especially in the case of leftwing parties and unions, which had been considered, since the end of the nineteenth
century, reference points for morals in favour of social equality and justice, defending
the unquestionable dignity of human beings. Social democracy developped the ideaof creating non-socialist states without the liberal interpretation of democracy, andat the same time rejecting democratic states that ignored the importance of the social
aspect,. They wished to create a new type of political society that encompassed both:a ‘social and democratic state.’ On the one hand Social democratic parties did notrenounce to its socialist ideas, but they admitted on the other hand the need for a true
democratic expression of popular will. But, confronted to the new savage capitalism
and the promises which lures a great part of society, the battle was lost in advance.
In fact, in the old-new capitalism, democracy had to reflect richness.
Other factors also facilitated the questioning of the democratic system and especially the September 11 attacks in New York. From then on and under the justificationof protection against terrorism, a cut in rights and freedoms began. As an example,
police forces have more rights and less responsibilities than ever: democracy is indanger because the rights it protected are threatened and because citizens no longer
trust states as instruments to channel and solve social problems. If the state is unable
to protect citizens as it has been conceived in the West, if the states are the first tobow down to the economic forces, it becomes obvious that the axiom according towhich capitalism entails a democratic political system does not correspond to thepresent: autocracies more or less disguised as democracies, or single party regimes
have been able to develop a capitalist system that has enriched millions of people
who, however, live with few or no rights recognised as essential in a democraticsystem. We are at the beginning of the dismantling of the Welfare State and democracy. If the capitalist system imposes itself with its logic, with no enemy to force it torenounce to its monopoly of power, as in the past, to yield in its rights, it is obvious
11 Also “neocomunism” and “democratic communism”. According to some authors, the root of thismovement is in Antonio Gramsci’s works.
12 It deserves to be noted that in English and Spanish the sense of Welfare State (Estado del Bienestar)is different from the French terminology “L’État Providence”, in Italian “Stato Sociale”, o alemán“Wohlfartsstaat” (Benefactor State), having all those three a sense of help, charity that in Spanishand English.

8 The Inevitable Revolution

75

that capitalism will opposes a democratic system that acts in the opposite direction
to its own interests.

5 Capitalist Democracy and the New International
Scenario
On these parameters the new international scenario will be built. Foreign policy
will be subject to the imperative of immediate profitability, which capitalism has
imposed on it, contrary to the very essence of international relations: “Beyond therisk of conflict, if stakeholders concentrate on immediate geostrategic advantage andfail to re-imagine or adapt mechanisms for coordination during this unsettled period,
opportunities for action on key priorities will slip away”.13 At present, and after
everything that has happened since 1989, it would be pure speculation to maintainthat while there is democracy there will be peace (the theory of “democratic peace”
very much followed in the 80’s that prooved to be far from real international statebehaviour).
Neither capitalism nor democratic principles suddenly emerged with the French
Revolution: the eighteenth century was the eighth month of a gestation that beganwith the Renaissance. From the fifteenth and seventeenth centuries, an international
order based on the modern state emerged, which has been its only and then its main
protagonist until the twenty-first century. But neither democracy nor capitalism werebases of that order, because the logic of international relations is much more complex
than that of the states themselves. Now, given the need to reflect an emerging reality
on the new international order, gradually created, it is necessary to use different
parameters unknown until now: The state has ceased to be the centre of the international scene and the inevitable confrontation between rich and poor nationally andinternationally, in a few years the economic and social differences among people inthe same societies will be the essential element to decide the contour and content of
the new scenario of international relations. Because human beings can bear everything if they retains the hope of improving his life, but what has been taken fromthem now is precisely that hope, and as it happened with the communist system, lostof hope is the end of any political or economic ideology and the only road aheadof any society without hope is revolution, simply because they know that they havenothing to lost.
Miguel Ángel Vecino
HistorianMiguel Ángel Vecino (Madrid, Spain, 1954). At 17 years, he passed the exams (calification “verygood”) for the Faculty of Law (Complutense University). He studied Law 5 years and after he

13 “The Global Risks Report 2020”. World Economic Forum, pg. 10.

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M. Á. Vecino

obtained two masters in the Centre for Constitutional Studies (Spanish Parliament) in Constitutional Theory and in Constitutional history, both with the mention “excellent”. After, he studied
5 years in the Ecole Pratique d’Hautes Études, IV section, Sorbonne-Pantheon Paris, on Historyof International Relations avec professor Bruno Neveu. He worked as a lawyer in Paris until hepassed the first exams for Spaniards to become civil servant in the Secretariat of the Council of
Ministers of the EU when Spain joined it, obtaining one of the 3 posts among 3.500 candidates.
At the same time, he passed the exams for the Diplomatic School in Madrid and become diplomatof career in 1989. In 1991 he passed the exams to direct programme of the EU for Eastern European countries in 1990, obtaining one of the 10 posts, among several hundred European candidates. He has participated in many international congresses, round tables, and lectures. He has
published more than 300 articles in the Spanish Press and specialized reviews, about Europe andthe Communist system. He has made research since 2000 for a book on the Balance of Power;
he is finishing another one on the evolution of democracy and capitalism (The inevitable Revolution).He has written essays on “The Intellectual Origins of Nationalism”, and “Origins of theSoviet Foreign Policy”.

Chapter 9

Eiichi Shibusawa’s Support
for International Society Throughthe League of Nations Associationof Japan
Akiko Iimori
Abstract The Japanese entrepreneur Eiichi Shibusawa (1840–1931) is so wellknown as the “Father of Modern Japanese Capitalism”. This article seeks to discuss
another aspect of his life: His role as promoter of internationalism in the 1920s
period of Japanese globalization along European countries concept. Shibusawa’srole at the League of Nations Association of Japan (LNAJ) showed his efforts todevelop peace with humanitarianism after his retirement from business as an earlyexample in Japanese modern society.
Keywords Japanese entrepreneur Eiichi Shibusawa · The League of Nations
Association of Japan · Internationalism of 1920s · Humanitarianism
The Japanese entrepreneur Eiichi Shibusawa (1840–1931) is so well known as the“Father of Modern Japanese Capitalism,” that his portrait will be printed on the newJapanese ¥10,000 banknote in 2024. Many books about him have been publishedwhich either evaluate his business management from his young days in Paris till his
retirement, or concentrate his work “Analects of Confucius and the Abacus” fromthe standpoint of Japanese ethics and business.
The former researches Shibusawa’s activities in the interwar period mainly
focused on the US-Japan relationship, such as the businessmen exchanges by Masato
Kimura, or the Institute of Pacific Relations (IPR) by Nobuo Katagiri. Regarding
Shibusawa’s attitude toward European countries in the same period, there are few
studies. However, this article seeks to discuss another aspect of his life: His role aspromoter of internationalism in the 1920s period of Japanese globalization along
European countries concept.
The German philosopher Immanuel Kant’s famous “Zum ewigen Frieden =Perpetual Peace; a Philosophical Sketch (1795)” was first translated into Japanese as
a booklet published by the League of Nations Association of Japan (LNAJ) in 1924.
While there is no certain evidence that Shibusawa directly ordered this translation,
he was nonetheless the LNAJ’s first Chair (1919–1931) and, obviously, willingly
A. Iimori (B)The Institute of Asia-Pacific Studies, Waseda University, Tokyo, Japan© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_9

77

78

A. Iimorisupported its activities. Here I would like to talk about Eiichi Shibusawa and to
introduce his engagement with the LNAJ where he strove toward the building of aharmonious international society. That is, the aim of this paper is to discuss Shibusawa’s role at the LNAJ in the 1920s and his efforts to develop peace after hisretirement from business. To this end, what follows is divided into four sections.
Section 1 shows how Japanese diplomats were rather reluctant participants inthe establishment of the League of Nations, demonstrating Japanese perceptions ofinternational society and the difficulties the government experienced in organizing
Japanese people. Section 2 introduces Shibusawa’s participation in a variety of nongovernmental associations. He worked to develop mutual understanding through an
exchange of people and ideas in many organizations, because he believed that themore people developed a mutual understanding of international society, the better
they could achieve economic development through free trade. In Sect. 3, his support of
LNAJ activities and his approach to engagement for international peace are illustrated
and analyzed through his speeches. He spoke out on topics such as disarmament,
humanitarian support for refugees, and disaster relief in Japan. Thus, in the final
section, the LNAJ and Shibusawa’s important role as its chair in the inter war periodof Japanese globalization will be evaluated.

1 The Japanese Attitude Toward the League of Nations
After the ceasefire ending the first World War, the Japanese government and people
were delighted to be recognized as belonging to the winning alliance and wereconscious of themselves as one of the five great powers or “the Top-Ranking Countries in the World.” However, even immediately upon its foundation, Japanese government was reluctant to participate in the League Nations. For example, the diplomat
Nobuaki Makino wrote in his memoires, “The League of Nations shall be layered
and utilized politically by the European Countries. But if Japan did not participate
in it, we would lose opportunities to negotiate about international politics among themember nations. Thus, we must join in the League of Nations.”1 That is, there was
not a widespread idea that it might be necessary to pursue any enlightenment of theJapanese people about international society, even from the standpoint of Japanesediplomatic advantage.
Just after the establishment of the League of Nations, the core countries recognized
the importance of informing their populations about the ideas behind the League of
Nations and to rally their state and people behind slogan “Publicity and Education

1 Makino Nobuaki, “Kaikoroku, vol. 2” [The Momoires], 174–175, Tokyo, 1978.

9 Eiichi Shibusawa’s Support for International Society Through the League …

79

about the League of Nations is necessary according to each country’s cultural situation.”2 The core European countries soon each organized their own non-political
League of Nations Association.
However, the league was quite a political issue for the Japanese government. Japan
had been involved in a dispute with the USA about the exclusion of Japanese immigrants since around 1900 and might have been able to exert diplomatic influence on
the United States through the Union of the related Associations. Moreover, China had
already established its own League of Nations Association and might take advantage
at the League of Nations on issues regarding East Asia. How could Japanese people
be best informed about the League of Nations?

2 Shibusawa’s Activities for Mutual Understandings
Before Shibusawa’s retirement from business around 1910, he recognized that an
exchange of people and mutual understanding activities could develop free trade andfurther mutual prosperity. As a leading businessman he had already participated inseveral bilateral private associations designed to support mutual understanding, suchas the Japan-Anglo Association, the America-Japan Society, a meeting later called
La Maison Franco-Japonaise, and the Sino-Japan Businessmen’s Association.
For him the issue of peace was an ethical priority. In 1912 he established andbecame the main supporter of the Association Concordia, which aimed to integrate
the world ethically. Many members of the Association Concordia, for example, Masaharu Anesaki, a professor of religion, Juichi Soeda and Yoshiro Sakatani, who often
collaborated with Shibusawa, along with internationalists from other societies, allcooperated to enlighten the Japanese people about the spirit of the League of Nations
in order to produce a more harmonious world.
Anesaki, Soeda, Sakatani, and others from the Association Concordia, Tsunejiro
Miyaoka from the Peace Association of the Empire, members of the Japan and
US-Japan Relationship Committee (also supported by Shibusawa), and Christian
Daikichiro Tagawa from the Society of the International Japan, together decided tomake a new organization in Japan in order to participate in the Union of the Leagueof Associations. These enthusiasts held meetings with younger diplomats to draft
new publicity and decided to recommend Shibusawa as the first chairman.3
Thus, in April 1919 the LNAJ was founded declaring its aim to be the realization of
the spirit of the League of Nations in Japan. In 1923 just before the Great Earthquake,about 2,000 people4 ; businessmen, students, and even some women were registeredin cities across the country as members of the LNAJ.
2 ‘Nihon Kokusai Renmei Kyoukai Kankei Ikken; Sankou Shorui no 2, Vol. 2’ [Document File

Regarding the League of Nations Association of Japan; Reference 2, Vol. 2. Stored in the Diplomatic
Archives of the Ministry of Foreign Affairs of Japan].
3 Ibid.
4 ‘List’, LNAJ ed. “Kokusai Chishiki”, December 1923.

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A. Iimori3 Shibusawa’s Speeches
Shibusawa played an important role in encouraging the LNAJ through his speeches
at its meetings and through articles he wrote for the organization.

3.1 Disarmament
Just after the end of the war, the Japanese military budget was ¥800,000,000,
amounting to almost half the government’s 1921 budget of ¥1,570,000,000. In
these circumstances, the comments of Shibusawa’s as the ex-businessman, madein a speech were remarkable:
We, as living and wise human beings, need a means to survive in peace without war. In orderto succeed in this aim, I believe, we need to build the League of Nations, rather than build
warships, coastal batteries, combat planes, submarines. … In order to construct a successful
League of Nations, it is not sufficient just to hope for international peace. We must keep
seeking a way of making a harmonious international society. Thus, I believe that the LNAJ
is one of the most suitable organizations for discussing disarmament.5

3.2 Refugees
Neither the Japanese Foreign Ministry nor diplomats could pursue any formal humanitarian action for the defeated Germany and they were equally unable to assist Armenian refugees. In the absence of this lead, Shibusawa demonstrated his sympathy
and action non-politically. As the chair of the Armenian Refugee Society, locatedin the same office as the LNAJ, he gathered donations totaling approx. ¥20,000 in
1922–1923 while the LNAJ spread the news about Armenia and information about
this Society through their periodicals.
Thus, on May 19, 1922, Shibusawa stated: “It is very proper that the Japanese feelcompassion for international issues, after Japan achieved a position of international
status. We feel dreadful pity for those starving and homeless Armenian children
obliged to eat grass. There is no difference of sympathy. I appeal to the humanitarian
sympathy of the Japanese people.”6

5 Shibusawa Eiichi, ‘Gumbi Shukusho to Nihon no Shorai’ [Disarmament and the Future of Japan],

LNAJ ed. “Kokusai Renmei”, November 1921.
6 “Yomiuri Shimbun”, 20 May 1922.

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81

3.3 The Great Earthquake and International Relief
Just after the Great Earthquake of 1923 many countries immediately sent large donations and large amounts of relief supplies. As the Japanese government did not express
its formal gratitude for these, Shibusawa undertook the necessary steps. Additionally, he helped to restore the daily life of foreigners who had lost their homes inthe disaster. Moreover, he was greatly appreciative of the relief and humanitarian
activities from China, especially since the two states had been involved in economic
disputes, with the Chinese imposing a heavy boycott on Japanese products.
Thus, he wrote in his articles in the brochure of the LNAJ that: “After hearing of
the Earthquake in Japan, China immediately changed from a policy of boycotting
Japan to one of helping Japan. …We cannot enjoy complete peace in the world.
International issues often arise everywhere, in these circumstances and even throughthere are differences between human races and nationalities, I think, humanitarian
sympathy is evidence of a great mercy. The Great Earthquake and the internationalrelief showed us this wisdom.”7
His belief in the role of the League of Nations and the LNAJ can be seen in his
address on the radio on the 10th anniversary of the ceasefire, where he stated:“I am very pleased that the League of Nations makes efforts for international harmony
from the economic standpoint, too. … In order to have hope for a real prosperity of anation, I believe that it is necessary to have concord in politics, economics and ethics. If
international economics proceeds in accordance with the spirit of the League of Nations, itwill be impossible to insist on defending the interests of one nation. … After the achievementof economic peace, then, each person will be content with their life, that is, the peace ofeconomics is based on the peace of people. After the achievement of sympathy for others
and peace in heart, harmony in economic development shall be successful.”8 He evaluatedthe League of Nations based on the economic international cooperation, and criticized “anation first” policy.

4 Conclusion
The Japanese Foreign Ministry was rather reluctant to participate in League of
Nations despite the organization’s political significance. In these circumstances the
LNAJ, fully supported by Shibusawa, attempted to fill the political space left by thegovernment and tried to spread the idea of the League of Nations and to help Japanesepeople to understand international society.
7 Shibusawa Eiichi, ‘Kokusai Kyojo Seisin no Kengen’, “Wagakuni no Sinsaini taisuru Sho Gaikoku

no Dojo; Sinsai ni kansuru Sho Meishi no Shokan” [‘The Appearance of the Spirit of International Mutual Help’, “The International Relief Toward Our Great Earthquake, Remarks of the
Earthquake”], LNAJ Pamphlet No. 38, December 1923.
8 Shibusawa Eiichi’s Radio Address, ‘Go-Tairei ni saishite mukauru Kyusen Kinenbi ni tsuite’,“Shibusawa Eiichi Denki Shiryo” [‘The Anniversary of the Ceasefire and the Enthronement of theEmperor Hirohito’, “The Shibusawa Eiichi Biographical Documents”], 265 vol. 48.

82

A. IimoriThus, in the early 1920s they published translations of many introductory articles on the ideas of peace by, for example, Immanuel Kant, R. CoudenhoveKalergi, Anatole France, and other internationalists, even spreading knowledge ofthe philosophies and way of life of Islam.
It is clear that these were neither the propaganda activities of the Japanese Government nor a form of short-sighted nationalism; they were not attempts to promotebilateral relations but rather efforts to further multi-lateral understanding.
However, after the Great Earthquake of 1923, Japanese economics slid into aslump and in 1927 a bankruptcy suddenly tipped the country into a deeper domestic
depression. Simultaneously so-called expansionists, who were also interested in East
Asia and international relations, became increasingly vociferous and began to participate in the LNAJ. Indeed, even the Foreign Ministry recognized the importance of
publicity and shaping public opinion and a young ex-diplomat began to work at theoffice acting on the instructions from the Ministry.
During the period of international harmonious relations in the 1920’s, though
there was a dilemma between humanitarianism and Japanese diplomacy, Shibusawa’s
activities might be described as an early example of so-called “Human Securities”
in Japan, based on his engagement to encouraging peaceful prosperity. The internationalism of LNAJ spread widely, even in the local cities and students, until the
Manchurian Incident occurred in September 1931, and old Shibusawa aged 91 passed
away in November 11 of the same year.
In addition, he tried to spread an idealistic perspective of the western concept of
1920s through LNAJ. On the contrary, Japan, the government, and Shibusawa, faced
the various difficulties at the negotiation with Asia countries, especially with China,
where the people had been developing their modern nationalism independently.
Shibusawa believed that mutual understanding between Asian people could beachieved easily, for he often said “we are the same race with yellow skin color andshare the same Confucian culture” based on his motto, while the Chinese people
actually considered Confucianism as useless and out of date.
In the crisis of 1920s, once even not only small economic discrepancy but also
natural disasters, such as the flu pandemic without the remedies and the great earthquakes of 1923 in Japan, happened, it turned to the serious and wide depression easily.
These reasons sprouted chauvinism in Japan. For example, just after the great earthquake the international emergency relief from U.S. and European countries madesome jingoistic Japanese Army officers skeptical, whether western way of life would
prevail over the whole society in Japan. Then the Japanese people also understood
the true situation of Japanese nationalism, especially after the Manchurian Incident.
In conclusion, Shibusawa’s activities as one of the leading internationalists
after the First World War teaches us that we must reconsider the significance of
keeping multi-lateral civil networks based on humanitarian activities, mutual understanding, with promoting free trade and mutual prosperity, even in the present mature
globalization.

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83

Bibliography
Hatano Masaru, Iimori Akiko, “Kanto Dai Shinsai to Nichibei Gaiko” [The Great Earthquake of
1923 and US-Japan Diplomacy] Tokyo, 1999.
Iimori Akiko ed. “Kokusai Koryu ni takushita Shibusawa Eiichi no Nozomi; Tami niyoru Heiwa
to Kyozon no Mosaku” [Shibusawa Eiichi’s Hope for the International People Exchange, a NonGovernmental Attempts Toward Peace and Coexistence] Kyoto, 2019.
Ikei Masaru, “Nihon Kokusai Renmei Kyokai no Seiritsu to Henshitsu” [League of Nations
Association of Japan; Its Foundation and Change] “Hogaku Kenkyu”, February 1995.
Ikei Masaru, “Nihon Kokusai Renmei Kyokai; Sono Hikari to Kage” [League of Nations Associationof Japan; Its Glory and Shadow] “Gaiko Jiho”, March 1997.
Katagiri Nobuo, “Taiheiyomondai Chosakai no Kenkyu” [The Study of the Institute of Pacific
Relations] Tokyo, 2003.
Kimura Masato, “Zaikai Nettowaku to Nichibei Gaiko” [Businessmen Networks and US-Japan
Diplomacy] Tokyo, 1997.
‘Kokusai Renmei Kyokai’, “Shibusawa Eiichi Denki Shiryo” [‘League of Nations Association ofJapan’, “The Shibusawa Eiichi Biographical Documents”] vol. 36.
Ogata Sadako, ‘Kokusaishugi Dantai no Yakuwari’, “Nichibei Kankeishi; Kaisen ni Itaru Junen”[‘The Role of the Internationalists Group’, Hosoya Chihiro ed. “History of the US-Japan Relation;
Decade Toward the Pacific War] vol. 3, New edition Tokyo, 2000.
Shibusawa Masahide, “The Private Diplomacy of Shibusawa Eiichi: Visionary Entrepreneur andTrans-Nationalist of Modern Japan” Kent 2018. Original Japanese edition first published 1970
by the Yomiuri Shimbun, “Taiheiyou ni kakeru hashi”.

Akiko Iimori

Education
Bachelor’s Degree in International Studies, Faculty of Liberal Arts, Tsuda College, Tokyo, 1980
Master of Human Science, Tokiwa University, Mito, 1995
Doctor of Human Science, Tokiwa University, Mito, 2000
Studied in Geschichte, Universitaet zu Koeln, Germany 1986–1988

Professional Experience
NITSUKO Ltd. Kawasaki, Sales operative for telephone equipment to European Countries, Overseas Department Apr.1980–May 1986
Part-time Lecturer, Tokiwa University, 2000–2018
Research Fellow, The Institute of Asia-Pacific Studies (WIAPS), Waseda University, 2007–2011,2012–2016, 2017–present.

Part III

Post-colonization in Europe and Asia

Chapter 10

European Integration
and Decolonization: From the Beginningto the Yaoundé, I Convention
Alfredo Canavero

Abstract How is the process of European integration linked to decolonization?
What influence had the events of decolonization on European integration?
European integration · Decolonization · Yaoundé treaty

1 The Dream of Euro-Africa
How is the process of European integration linked to decolonization? What influence
had the events of decolonization on European integration?
Colonial territories’ desire for independence that was accentuated during theSecond World War induced the colonial powers, especially Britain and France, toseek new ways to keep their empires. The aspirations of the colonized peoples, theweakening of the colonizing States and the hostility of the USA and USSR to ancientcolonialism had to be considered. Many things had to be changed so that the substanceof colonial rule remain unchanged. New ideas were necessary.
Already at the beginning of 1944, at the Conference of French colonial governors
in Brazzaville (then capital of French Equatorial Africa), General De Gaulle seemed
to abandon the traditional French tendency to assimilate colonial populations infavour of a policy of association with a federative character. This, however, was not
to lead to independence of the African peoples, but to a sort of autonomy with strong
ties to the French motherland.1 As it was said in the Preamble of the Conference
recommendations:

1 Frederic Turpin, 1958, la Communauté franco-africain : un projet de puissance entre héritage
de la IVe République et conceptions gaulliennes, in «Outre-Mers. Revue d’histoire», n. 358–359,
2008, pp. 46–47.

A. Canavero (B)Centre for the Studies of Foreign Policy and Public Opinion, University of Milan, Milan, Italye-mail: alfredo.canavero@unitn.it© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_10

87

88

A. Canavero
Les fins de l’œuvre de civilisation accomplie par la France dans les colonies écartent
toute idée d’autonomie, toute possibilité d’évolution hors du bloc français de l’Empire ; laconstitution éventuelle, même lointaine, de self-governments dans les colonies est à écarter.2

In other words, the authority of France was not to be questioned, as it was well
expressed in the Title VIII of the Constitution of the Fourth Republic, about the
French Union3 : “It’s one central feature -it was noted- stands out clearly enough,however: the authority of France over the Union was beyond dispute”.4
Also, Great Britain wanted to maintain control of Africa. The African continent
was considered essential for the access to raw materials and for strategic bases. In thisperspective, a partnership with France was necessary, despite bad bilateral relations
between London and Paris in 1945. Africa could be a good starting point to improvetheir relations. As Bevin said to the Cabinet on January 4th, 1948, not to be dependent
from the Unites States,
it would be necessary to mobilize the resources of Africa in support of a Western European
union; and if some such union could be created, including not only the countries of Western
Europe but also their colonial possession in Africa and the East, this would form a bloc
which, both in populations and productive capacity, could stand on an equality with thewestern hemisphere and the Soviet blocs.5

Afterwards, some British and French officials started speaking about Euro-Africa,
as a sort of economic sphere far from US and URSS, even if the expectations of
London and Paris were very different: for Great Britain it meant to maintain a sort ofleadership of Western Europe, whilst for France it was a means to block nationalist
movements in Africa and international anti-colonial thought.
President Truman’s Point Four Program, launched in the Message to the Congressof June 24, 1949, aroused the concerns of France and Great Britain. Speaking of theeconomically underdeveloped territories, Truman had said:
We look forward to the time when these countries will be stronger and more independent
than they are now, and yet more closely bound to us and to other nations by ties of friendshipand commerce, and by kindred ideals.6

2 La Conférence africaine française : Brazzaville 30 janvier-8 février 1944, Ministère des colonies,

Paris 1945, p. 32. “The ends of civilising work accomplished by France in the colonies excludes any
idea of autonomy, all possibility of evolution outside the French bloc of the Empire; the eventual
constitution even in the future of self-government of the colonies is denied”. See also Tony Smith,
A Comparative Study of French and British Decolonization, in “Comparative Studies in Societyand History”, Vol. 20, January 1978, n. 1, p. 73.
3 See Stefane Rials (editor), Textes constitutionnels Français, Presses Universitaires de France, Paris
2005, pp. 88–90.
4 Tony Smith, A Comparative Study of French and British Decolonization, cit., p. 74.
5 Quoted by Anne Deighton, Ernest Bevin and the Idea of Euro-Africa from the Interwar to the
Postwar Period, in L’Europe Unie et l’Afrique. De l’Idée d’Eurafrique à la Convention de Lomé I,
Bruylant, Bruxelles; LGDJ, Paris; and Nomos Verlag, Baden Baden 2005, pp. 111–112.
6 Harry Truman: The Point Four Program. See http://usinfo.org/PUBS/LivingDoc_e/pointfour.htm.
See Thomas G. Paterson, Foreign Aid Under Wraps: The Point Four Program, in “The Wisconsin
Magazine of History”, vol. 56 (1972–1973), n. 2, pp. 119–126.

10 European Integration and Decolonization: From the Beginning …

89

Truman was above all concerned about a possible Soviet Union interference inunderdeveloped territories, but for France and Britain the words “more independent”
were worrying and they feared they could jeopardize their control of their Africancolonies. To contrast the United States and the anti-colonialist lobbies in the United
Nations, where the Latin Arab bloc was strong, a colonial co-operation between
France and Great Britain was essential.7 Ernest Bevin, in a well-known speech at theHouse of Commons about the possibility of a Western Union, January 22nd, 1948,
said:
I would emphasise that I am not concerned only with Europe as a geographical conception.
Europe has extended its influence throughout the world, and we have to look further afield. In
the first place, we turn our eyes to Africa, where great responsibilities are shared by us with
South Africa, France, Belgium and Portugal, and equally to all overseas territories, especiallyof South-East Asia, with which the Dutch are closely concerned. The organisation of Western
Europe must be economically supported. That involves the closest possible collaboration
with the Commonwealth and with overseas territories, not only British but French, Dutch,
Belgian and Portuguese.
These overseas territories are large primary producers, and their standard of life isevolving rapidly and is capable of great development. They have raw materials, food andresources which can be turned to very great common advantage, both to the people of theterritories themselves, to Europe, and to the world as a whole.8

Even the European movements were not ready to abandon the colonial links. At theHague Congress of Europe (7–10 May 1948), for instance, it was affirmed that “TheEuropean Union must, of course, include in its orbit the extensions, dependencies
and associated territories of the European Powers in Africa and elsewhere, and must
preserve the existing constitutional ties which unite them”.9
In Spring 1948 the foreign office announced a plan for an African Development
Council, with the participation of all European Powers.10 Even if Bevin stated thatthe co-operation had “the object of making the whole world richer and safer”,11 it
was obvious that the plan had more to do with British interests than with developmentof European co-operation or with welfare of African people. As Ann Deighton put
it:
Cooperation with European powers over Africa was, in Britain, more to do with British
economic, strategic and political interests than with any notion of either “European-ness”,
or the liberation of the region from imperialism.12
7 Anthony Adamthwaite, Britain, France the United States and Euro-Africa, 1945–1949, in

L’Europe Unie et l’Afrique, cit., pp. 124–125.
8 Hansard Parliamentary Debates, 22 January 1948, vol. 446, col. 398.
9 Quoted by Alan Hick, The “European Movement”, in Walter Lipgens (ed.), Documents on the

History of European Integration, vol. 4, Walter de Gruyter, Berlin New York 1991, pp. 335–336.
10 Peo Hanson and Stefan Jonsson, Eurafrica: The Untold History of European Integration andColonialism, Bloomsbury, London and New York 2013, p. 89.
11 Hansard Parliamentary Debates, 22 January 1948, vol. 446, col.399.
12 Anne Deighton, Ernest Bevin and the Idea of Euro-Africa, cit., p. 117. See also Ann Deghton,

Entente neo-coloniale? Ernest Bevin and the proposals for Anglo-French Third World power, 1945–
1949, in “Diplomacy and Statecraft”, 2006, n. 17, pp. 835–852.

90

A. Canavero

The change of the international situation during 1948 caused the idea of an AngloFrench Eurafrica to end up. The crisis of the Council of Foreign Ministries foreshadowed the Cold War. Prague coup, Communist rising in Malaysia and Berlin blockade
showed the impossibility to follow the way of a third force between US and URSS.
Great Britain realized Europe was increasingly dependent on the US, either from a
political, or economic, or military point of view. The beautiful words of Bevin of
a richer and safer world were soon forgotten, as well as the idea of a third force.
United Kingdom put his trust in the United States, while France took the lead in theEuropean integration process, beginning with the Schuman plan.
In his famous declaration of 9th May 1950 which lead to the foundation of European Coal and Steel Community (ECSC), Robert Schuman did not forget Africa
and said: “With increased resources Europe will be able to pursue the achievementof one of its essential tasks, namely, the development of the African continent”.13
According to some observers, this could have been the first step for a European
common exploitation of Africa’s resources, but, on the contrary, in the text of thetreaty establishing the ECSC there is no trace of the task indicated by Schuman.

2 The Strasbourg Plan
We should note that at that at the end of the war only four African states wereindependent (Ethiopia, Liberia, South Africa and Egypt). France and Great Britain
had the lion’s share of colonial territories, but also Belgium and Portugal controlled
great areas. Italy and Spain had a minor role. It is not surprising that the issue of acommon European intervention in Africa re-emerged thanks to a German, namely
a representative of a country that no longer had colonies. Johannes Semler (1898–
1973), one of the founders of CSU and an economist, raised the question at theCouncil of Europe at the beginning of the Fifties. Semler’s proposal was transformed
into Recommendation n. 26, approved by the Assembly of the Council of Europe on
September 25, 1952. Actually, the Strasbourg Plan, as it was named, was a reaction
to the US development plan for Africa and an attempt to free Western European
countries from economic ties with Washington. Europe—it was said- imported “fromthe dollar area a large part of its raw materials and had been able to pay for them since
the end of the war only because of the generous assistance afforded by the UnitedStates”.14 This state of affair should change. For these considerations, the Assembly
recommended:
a. Increased production of raw materials in the area under consideration and, in particular,
increased production of such materials as are at present imported by Europe from thedollar area or are likely to be exported to that area;
13 See https://www.robert-schuman.eu/en/declaration-of-9-may-1950.
14 Co-ordination between the economies of the Member States of the Council of Europe and those of

the overseas countries having constitutional links with them (Recommendation 26), Parliamentary
Assembly Session 1952—4th Session—Second part.

10 European Integration and Decolonization: From the Beginning …

91

b. The adoption to this end of a policy of economic expansion;c. The utilization of the resources of all Member States in equipping and developing
overseas countries;d. The provision of facilities in the overseas countries for the settlement of nationals having
economic, scientific and technical qualifications, and for the introduction of enterprises,from countries having no dependent overseas territories;e. The co-ordination of investment projects, region by region and product by product;f. The creation of openings in the European countries for overseas products.
g. The establishment in the dependent territories having constitutional links with certain
Member States, of industries for the processing of the raw materials produced by them,as well as industries producing goods for local consumption.15

The establishment of a European Bank for the development of overseas territories
was also recommended, the conclusion of long-term contracts and the introductionof a preferential system “between the Commonwealth, on the one hand, and theother countries of the area under consideration, on the other.16 The Parliamentary
Assembly adopted the Recommendation on September 25th, 1952.
As everybody could understand, it was a plan useful for the European countries, but much less for African countries. The fundamental purpose was to subtract
Western Europe from economic dependency of US. According to former French
prime minister Paul Reynaud
We must also, if free Europe is to be made viable, jointly exploit the riches of the African
continent, and try to find there those raw materials which we are getting from the dollar area,and for which we are unable to pay.17

The Committee of Ministers of the Council of Europe approved the Recommendation and transmitted it to the Governments (May 6th, 1953),18 but the Recommendation was never applied. The failure of the European Defense Community (EDC)
and the consequent crisis of the European integration process blocked afterword any
possibility of establishing a common European intervention in Africa.

3 The Problem of French TOM
When the process of European integration kept again the stage, France had to solve
the problem of conciliating its European interests with the maintenance of the Union
Française, the political entity created in 1946 to replace the old French Empire.
Through the Union Française France controlled the Overseas Territories (Territories
15 Ibidem.
16 Ibidem.
17 The Strasbourg Plan: Proposals for Improving the Economic Relations Between Member Statesof the Council of Europe and the Overseas Countries with Which They Have Constitutional Links,
Secretariat-General, Council of Europe, Strasbourg, 1952, p. 135.
18 Twelfth Session of the Committee of Ministers, Minutes of the first meeting, 6th May 1953 at
the Seat of the Council of Europe, p. 16.

92

A. Canaverod‘outremer, TOM). They were divided in two great federations, French West Africa
and French Equatorial Africa. The first one included Mauritania, Senegal, French
Sudan (now Mali), French Guinea, Côte d’Ivoire (Ivory Coast), Upper Volta (nowBurkina Faso), Dahomey (now Benin) and Niger. The second one included French
Congo, Gabon, Oubangui-Chari (now Central African Republic), Chad, and French
Cameroon.
The Union Française had a common currency, high tariffs and guaranteed internal
prices. It was well living in the middle of Fifties: in 1958, it accounted for 37.5%
of French exports and 27.6% of French imports. It is also estimated that 7% of theFrench population was involved in colonial trade.19 As the director of Economic
Affairs of Ministry of Overseas France put it:
The common market France - Africa was, in many respects, beyond the one it was creating inEurope. As there was no question for France to abandon Africa, it was necessary to reconcile
these two appurtenances, it was necessary that Europe accepted Africa.20

At the eve of Venice Conference of Foreign Ministries of ECSC to discuss the
Spaak report for the European relance (which, it should be noted, did not made any
mention to Africa), Gaston Defferre, Ministry of Overseas France, on 17th May sent
a letter to Guy Mollet, President of the Council in which he urged to make TOM’s
participation in the Common Market a preliminary issue.21 Defferre proposed that
European countries participate in investments in TOM’s, but without endangering
the nascent local industries and agricultural production.
En contre-partie, il va de soi -Defferre wrote- que le marché des TOM cesserait complètementd’être réservé à l’industrie française et serait partagé entre les industries européennes.22

Mollet agreed and during the Conference (May 29–30, 1956) France asked European partners to take into consideration the participation of its overseas territories
to European projects. French Foreign affairs minister, Christiane Pineau, said that
France could not join a common market without TOM countries.23
The inclusion of colonies was very important for France. Firstly, it protected
its economic relations with African territories and guaranteed the supply of raw
materials; then, it was a mean to preserve French influence in Africa and lastly it

19 See Lorand Bartels, The Trade and Development Policy of the European Union, in “The European
Journal of International Law”, Vol. 18 (2007), n. 4, p. 717.
20 Pierre Moussa, La roue de la fortune. Souvenirs d’un financier, Fayard, Paris 1989, p. 72.
21 Guia Migani, L’association des TOM au Marché Commun : histoire d’un accord Européen entre
cultures économiques différentes et idéaux politiques communes, 1955–1957, in L’Europe unie etl’Afrique, cit., p. 234.
22 Letter by G. Defferre to G. Mollet, May 17th, 1956, quoted by Gerard Bossuat, Les fondateurs
de l’Europe, Belin, Paris 1994, p. 206.
23 See Marie-Therese Bitsch, Histoire de la construction européenne. De 1945 à nos jours, Edition
Complexe, Paris 2008, pp. 116–117.

10 European Integration and Decolonization: From the Beginning …

93

spread the cost of assistance of its colonies to the other members of EEC.24 It was agreat advantage for France, and, to a lesser extent, for Belgium.
The European partners were hardly enthusiastic about the French position. With
the exception of Belgium, they did not have important colonies: for Italy Somalia was
only a trusteeship, bound to end in 1960, and its economic interests were oriented
towards Latin America; The Netherlands and West Germany were more interested
in Asia or Latin America. In any case, they did not want to be linked with Frenchcolonial policy, which especially in Algeria was severely contested.
France, as we said, had only the support of Belgium. The two countries presented
a project of association of African territories to the Common market (November
1956). The proposal foresaw only an association and not a true participation and wasbased on the development of commercial exchanges and a distribution of investment
costs among the Six. If, on the one hand, the opening of TOM markets to the other
European partners was guaranteed, on the other, a preferential outlet for African
products and long-term commercial agreements were required.25
Luxemburg, The Netherlands, West Germany and Italy did not object to the principle of the association, but to the conditions of the association. Actually, they did
not want to have a direct political responsibility in countries they had neither the
possibility nor the willingness to control.26
On 29 November 1956, at the Castle of Val Duchesse, near Bruxelles, theCommittee of Heads of Delegation of the Intergovernmental Conference on the
Common Market and Euratom proposed the creation of a working group to examine
the technical issues raised by the Franco-Belgian proposals. On 20th December theworking group presented its final report which approved the association of TOMs
to EEC. Paul-Henri Spaak, who was the chairman of the Committee of Heads ofDelegation, tried to overcome the resistance of The Netherlands and West Germany,
arguing that national interests had to be forgotten in front of the political and economic
benefits deriving from the Common Market, but without great success.
It was only the international crisis of the end of 1956 which opened the possibility of a compromise. The humiliating end of the Suez affaire made France understand the weak position of a single European country against the superpowers andgave new impetus to the integration of Europe.27 French Government used the Suez
choc to speed up a change of public opinion, until then not very favourable to the
Common Market.28 At the beginning of 1957, French Assembly approved the project
24 Anjali Banthia, Success or Failure? An Evaluation of Fifty Years (1957–2007) of European Union

Development Policy in Africa, Caribbean, and the Pacific, in “Political Perspectives”, 2007, n. 2,
p. 4.
25 Guia Migani, L’association des TOM au Marché Commun, cit., pp. 238–239.
26 Ibidem, pp. 240–241.
27 See Gerard Bossuat, L’Europe des français 1943–1959 : La IVe république aux sources del’Europe communautaire, Publications de la Sorbonne, Paris 1996, pp. 334–337.
28 Gerard Bossuat, Messine, une méthode pour l’unité de l’Europe ? Ou comment le gouvernement français a été convaincu d’avancer vers l’unité, in Luigi Vittorio Majocchi (ed.), Messina
quarant’anni dopo. L’attualità del metodo in vista della Conferenza intergovernativa del 1996,
Cacucci editore, Bari 1996, p. 129.

94

A. Canaveroof Common Market, provided that it ensured the association of overseas countries.
Only after other meetings of the Six, discussions and several proposals, in Paris, on
February 19–20, 1957, just a month before the signature of the treaties of Rome, theheads of government found a compromise.29

4 From Rome to Yaoundé
On March 25, 1957, the Treaty establishing the European Economic Community
was signed in Rome. The Preamble said that the Six intended “to confirm the solidarity which binds Europe and the overseas countries and [desired] to ensure thedevelopment of their prosperity, in accordance with the principles of the Charter of
the United Nations”. Beyond these general affirmations, fourth part of the Treaty(articles 131–136) was devoted to the “Association of the overseas countries andterritories”. Article 131 said:
The Member States agree to associate with the Community the non-European countries andterritories which have special relations with Belgium, France, Italy and the Netherlands.
These countries and territories (hereinafter called the “countries and territories”) are listed
in Annex IV to this Treaty.30
The purpose of association shall be to promote the economic and social development of
the countries and territories and to establish close economic relations between them and theCommunity as a whole.
In accordance with the principles set out in the Preamble to this Treaty, association shallserve primarily to further the interests and prosperity of the inhabitants of these countries
and territories in order to lead them to the economic, social and cultural development towhich they aspire.

The then colonies of the six founder countries were granted access in the customs
union. A sum of 581 million dollars was deliberated to help economic and social
development of those territories. An Implementing Convention should determine
the details and procedure for the association of the countries and territories with theCommunity.
The Six realized that it was impossible for them to lose interest in territories
which they had had linked to in the past, especially when they were soon to attain
independence. Moreover, after the Conference of Bandung (1955) the developing
countries had become a real force between the West and East. Finally, the US had
urged the Europeans to take charge of the development of African countries, fearing
29 Guia Migani, L’association des TOM au Marché Commun, cit., pp. 243–247.
30 The countries were: the territories of French West and Equatorial Africa, Saint Pierre et Miquelon,

the Comoro Archipelago, Madagascar and dependencies, French Somaliland, New Caledonia anddependencies, French settlements in Oceania, Southern and Antarctic Territories, the Autonomous
Republic of Togoland, the trust territory of Cameroon under French Administration, the Belgian
Congo and Ruanda-Urundi, the trust territory of Somaliland under Italian administration, Netherlands New Guinea. French Overseas Department and Algeria were not included, as integral part ofFrench metropolitan territory.

10 European Integration and Decolonization: From the Beginning …

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that these would fall under Communist rule.31 This was particularly true after 1960,
when seventeen African States, fourteen of which already associated to EEC, became
independent.
The position of EEC towards African territories was criticized from various
parts. Certain Associated States complained that the agreements had been conceded(octroyée) (or imposed) and not negotiated (negociée). On the contrary, other African
states not associated wanted to join the association. Finally, in some circles of the
Six the agreements with Africa were considered hardly profitable.
The first All-African Peoples Conference (Accra, December 8–13, 1958)
denounced the European imperialism and its pacts, citing not only NATO, but also
EEC and EFTA.32 Ghana President Kwame Nkrumah spoke of “neo-colonialism”,
comparing the Treaty of Rome to the African conference of Berlin (1885).33
It was necessary for Europe to change and to have a relation with African countries on an equal footing. The European Parliamentary Assembly took the initiative.
At the end of March 1960, it proposed a Eurafrican Parliamentary conference. The
Council of Ministers was very concerned, but it had to accept.34 In April, the Commission submitted some proposals for a new Association Convention to the Council of
Ministers, to the European Parliament and to the African and Malagasy governments. After some preparatory meetings (Rome, January and Bonn, May 1961), in
June 1961, from 19 to 24, 103 deputies from 16 African countries and 142 European
deputies met in Strasbourg to deal with future Eurafrican relations.35 The conference
showed a remarkable convergence of views between European and African MPs. The
new rules of association were to enjoy equality in negotiations and parity in controlling the Common Development Fund (already European Fund of Development). The
words “cooperation”, “equality of rights”, “partnership” meant a new way of setting
up relations between Europe and Africa. An Italian MP, Mario Pedini, observed thatan era of cooperation was to replace definitively the colonial era.36 African countries
were determined to replace the ties with the former colonial powers with a multinational partner, the EEC. And the EEC wanted to enlarge the association beyond
the “little Eurafrica”, so to include other African States. The idea was to associate
African countries of Commonwealth, considering the opening of negotiations for theentry of United Kingdom into EEC.

31 Philippe Decraene, Les Etats-Unis manifestent un intérêt croissant pour les territoires de l’Afriquenoire, in «Le Monde Diplomatique», Décembre 1958, p. 3: «Et si toute mesure de libéralisation
outre-mer est bien accueillie outre-Atlantique, ce n’est pas tant pour les avantages qu’elle apporte
aux Africains eux-mêmes que pour les inconvénients qu’elle évite au bloc occidental».
32 See Ira William Zartman, Politics of Trade Negotiations Between Africa and European Economic
Community. The Weak confront the Strong, Princeton University Press, Princeton 1971, p. 20.
33 Kwame Nkrumah, Neocolonialism, International Publishers, New York 1966. See also AllAfrican People’s Conferences, in “International Organization”, vol. 16, n. 2, pp. 429–434.
34 See Ira William Zartman, Politics of Trade Negotiations, cit., p. 31.
35 See Urban Vahsen, La Conférence parlementaire eurafricaine de Strasbourg (19–24 Juin 1961),
in L’Europe Unie et l’Afrique, cit., pp. 375–391.
36 Ibidem, p. 382.

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A. Canavero

The association should be more than a simple commercial accord, but it had tobecome the base of a tight and lasting economic link between Africa and EEC.
A representative of the Ivory Coast said that the association was the best form of
co-operation between developed and underdeveloped countries.37 The Conference
foresaw also financial and technique aids and cultural co-operation.
Following the Parliamentary conference, the Six and the new African States met
twice in 1961 (1–3 June and 10–11 November), in order to prepare an Intergovernmental Conference among the African associated States, the Council of Ministries
and the European Commission (Paris, December 6–7, 1961). Forgetting that they
had considered the Treaty of Rome as imposed, African countries demanded now
that the Convention of Association be kept unchanged, to favor their economic
and social development. The EEC expressed only general remarks, underlining theprinciple of parity between the partners, promoting co-operation, exchanges andindustrialization.
As a matter of fact, exports from the Associated countries to EEC increased andmade it possible to carry out economic and social projects to improve life conditionsof African peoples. In view of the expiry of the association, the African states, now
become independent, asked to renew it. One more time, the main problem among
the Six was the position of Paris. The decolonization process was a big concern
because it threatened to jeopardize France world power status. France had alreadylost Indochina in 1954, Morocco and Tunisia in 1956, whilst Algeria was in turmoil.
Maintaining strong economic links with its former colonies was vital for France.
It should be noted that France wanted to maintain the role of privileged interface
between Europe and the African territories, even after their access to independence.
Paris opposed the direct representation of the African associated States in the EEC toremain an obliged intermediary. In addition, France held the office of commissioner
for African affairs, under different denominations, until 1985.38 Paris played a pivotal
role in the management of the European Development Fund (EDF), often arousing
criticism from the other five European partners.39
The situation was even more complicated by the British application for accession
to the EEC. For reasons like those of France, United Kingdom wanted the associationof Commonwealth countries and was contrary to a position of greater favor for
earlier associates. Germany and The Netherlands declared in favor of the suspensionof negotiations with the associated, pending the conclusion of negotiations with
Great Britain. France was completely against. Only in March 1962 the Council of
Ministries could come to an agreement and the meeting with the African States could
be resumed. On 9–10 April 1962, a second Intergovernmental conference decided toregulate trade on the provisions of the Treaty of Rome. From January 1963 customs
duties on certain tropical products would be abolished and replaced by a common

37 Ibidem, p. 385.
38 See Frederic Turpin, L’association Europe-Afrique : une «bonne affaire» pour la France dansles relations avec l’Afrique (1957–1975) ?, in L’Europe Unie et l’Afrique, cit., pp. 353–354.
39 Ibidem, pp. 355–357.

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external tariff. Resources for the implementation of the new agreement could not be
specified. It was said only that they would be increased compared to the past.
In July a third Intergovernmental conference (Bruxelles, July 4–5, 1962) definedin 780 million dollars the resources of the Fund of development. A fourth (Bruxelles,
October 23–24) and a fifth (Bruxelles, December 19, 1962) Conference allowed toarrive to a compromise text, valid for a period of five years. As we have seen,
negotiations were hold on three levels. The first one was the conversation among
the Six in order to present a common proposal. The second was among the Eighteen
African and Malagasy states and the third one among the Six and the Eighteen.

5 The Yaoundé Convention
On these bases on July 20th, 1963 EEC and 18 African and Malagasy States signed
in Yaoundé (Cameroon) a Convention.40 The agreement has four main parts: (1)Trade (2) Financial and technical cooperation (3) Freedom of establishment, services,
payments and capital movements (4) Institutions of the Association.
The Convention foresaw the continuation of the Rome Treaty with the main goals
to expand trade between the two partners. EEC agreed to lower and finally to eliminate
its custom duties on tropical products of associated states, but only the ones notcovered by the Common Agricultural Policy (CAP). For a limited period, a Common
External Tariff (CET) should prevent import of similar goods (for instance cocoa,
coffee, tea, cloves, nutmegs and pineapples) from other developing countries.
France agreed to eliminate progressively “Surprix”, an export subsidy to maintainthe prices of some export goods of its former colonies above market prices. At thesame time African and Malagasy states agreed to progressively abolish custom duties
on EEC exports, except those generating revenue for “its development needs or its
industrialization requirements or which are intended to contribute to its budget”(article 3). European goods, in other words, could not jeopardize the young Africanindustry. The African member states, however, establishing custom duties were notallowed to discriminate between one Community country and another. Within aperiod of four years “all quantitative restrictions on imports of goods originatingin Member States and all measures having equivalent effect” should be abolished(article 6). Convention would have led to the establishment of a free trade area
between the contracting partners.
The Yaoundé Convention foresaw also financial and technical aids. A sum of 730
million unities of account (more or less 800 million dollars)41 in grants and loans,part from the European Development Fund and part from the European Investment
40 See Ira William Zartman, Politics of Trade Negotiations Between Africa and the European

Economic Community. The Weak Confronts the Strong, Princeton University Press, Princeton 1971,
in particular chapter 2: Negotiating the Yaounde Convention.
41 As defined by article 1 of the protocol n.7 of the Convention “The value of the unit of account used
to express sums in the Convention of Association or in the provisions adopted in implementationof this Convention shall be 0.88867088 grams of fine gold”.

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A. Canavero

Bank, would finance projects, especially devoted to the “rationalization of croppingand sales methods” and diversification of products (article 17). It was one of the mainconcerns of the Convention to eliminate the dependence of African States on a single
commodity and in this way to protect them from the fluctuation of the market.
Last, a real organization was set up in order to give stability to the Convention:
the Association Council, composed of the members of the Community Council of
Ministers, the members of the Common Market Commission and one member of thegovernment of each associated state, for a total of 33, assisted by the Association
Committee; the Parliamentary Conference of the Association, composed by 54 MPsfrom European States and 54 from African States; the Court of Arbitration of the
Association, composed by 5 members (articles 39–53).42

6 Conclusions
The way to the Convention of Yaoundé had been long and not easy. Serious disagreements in the policy of intervention in Africa in 1957 were overcome only by the needto conclude the Treaties of Rome. The independence of many African states in 1960
led many European states to modify their approach towards the African continent.
The Netherlands and Germany wanted a regime of liberal economy with an importantrole for private initiative. France preferred maintaining a protectionist and interventionist regime. Belgium, Luxemburg and Italy tried to favor a compromise. Unlike theSix, African countries were able to present a united front and, even with the supportof the Commission and the European Assembly, less tied to national interests, they
got some result.
No doubt, European interests were well guaranteed, but the new agreement had
some interesting innovations. Yaoundé Convention was not a unilateral act, but a realtreaty, based on international law. The link was mainly economic, but there was also
a significant political component and an institutional framework, with bodies withreal powers. With the Convention, the EEC was turning a relationship of colonial
dependency into a model of cooperation for development, which, while not flawless,would contribute to the improvement of the living conditions of African populations.

Alfredo Canavero was born in Milan in 1948 and took a degree in Political Sciences at Milan
Catholic University of Sacred Heart in 1970. He was Assistant professor of History of International Relations (1974–1980). Afterwards he has been teaching Contemporary History since 1977
at Milan State University, as Associate professor (1980) and then as full professor (2001). He isinterested in Contemporary Italian History, History of Church and of Catholic movement, Historyof European Integration and History of Italian Foreign Policy. He was a member of the ScientificCommittee of Historical Dictionary of Italian Catholic Movement (Marietti) and coordinator, with
Jean-Dominique Durand (University of Lyon III), of an international research program on the roleof Churches in political, social and economic life of Europe (“The Europe of Religious Spaces), in
42 See Partnership in Africa: The Yaoundé Association, European Community Information Service,in aei.pitt.edu/34505/1/a674.pdf.

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the frame of a larger group (“Spaces and Times of Europe”) directed by Robert Frank (Universityof Paris I, Sorbonne). He was also Director of the Centre for the Studies of Foreign Policy andPublic Opinion (Milan State University) and is General Secretary of the Commission of Historyof International Relations, affiliated to the World Congress of Historical Sciences. He gave papers
during World Congresses of Historical Sciences from 1995 to 2015.

Chapter 11

Political Europe: The Cold War
and the Great Decolonisation—From
the Yaoundé Convention to Lomé
Conventions
Giulia Lami
Abstract The Treaty of Rome (1957) founding the European Economic Community(EEC) created a sort of special relationship between the Europe of Six and Africa,
involving privileged aids and prioritized markets. This special relationship led to the
Yaoundé Convention of 20 July 1963, when 18 African and Malgache countries that
had recently gained independence (14 former French colonies, 3 former Belgian and 1
former Italian), were associated to EEC in a form of reinforced economic cooperation.
After 1963, however, the original European political nucleus was about to becomea thing of the past, in the midst of the many and well-known difficulties involvedin the first EC enlargement and the many challenges this was to bring with it, notleast in terms of relations with the Third World. Economic and political relationshipbetween the Six and their former colonies firstly required some adjustments and then,from the 1970s onwards, a more thoroughgoing and qualitative reorganisation which
culminated in the drawing up of the first two Lomé conventions in 1975 and 1980.
This essay will attempt to shed light on the key phases in this process of regional andinternational cooperation, a still under-studied subject despite the great expansion ofacademic literature on European integration.
Keywords Treaty of Rome · EEC · Yaoundé convention · Third world
The period from the mid-1960s through the 1980s was one in which the European Community was faced with the most critical phase in a decolonisation process
which had been one of the contemporary era’s longest and most complex challenges.1 Whilst the issue of European relations with what were soon to be called
Developing Countries were of the utmost importance right from the inception of
the European Economic Community in 1957–1958, it was, however, only once the
Yaoundé Convention came into force as the first treaty regulating relations between
the European Six and the African and Malagasy Union that a tangible dialogue began
1 The first part of this essay, up to the Lomé and the Apex of detente in the Third World

section, isthe work of Giulia Lami and the second part that of Lorenzo Meli.
G. Lami (B)Milan State University, Milan, Italy© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_11

101

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G. Lamito take shape between at least one part of the Old Continent and its more-or-less recent
colonial past.
In this same time spectrum, however, the original European political nucleus
was about to become a thing of the past, in the midst of the many and well-known
difficulties involved in the first attempts at enlargement and the many challenges
this was to bring with it, not least in terms of relations with the Third World. This
first required adjustment and then, from the 1970s onwards, a more thoroughgoingreorganisation which culminated in the drawing up of the first two Lomé conventionsin 1975 and 1980. All this took place against the backdrop of a deeply rooted crisisin the whole European integration project which was to last well over a decade andsucceed, to a considerable extent, in thwarting the hopes raised by detente between
the two dominant geopolitical blocks.
This essay will attempt to shed light on the key phases in this process, a still understudied subject about which little is known, the great expansion in the academic
literature on European integration notwithstanding.

1 The ‘New’ Europe and the New ‘Third World’On the cusp of the 1960s the fledgling European Community saw the decolonisation
under way in the African continent as one of its thorniest issues and one which was
still at a challenging definition phase.2
It is well known that what made European relations with the colonial world especially thorny was, first and foremost, the intentions of de Gaulle’s France to establish
relationships of a strictly economic and trading nature with the majority of its former
colonies whose independence was then underway. It was, however, an approach
which accorded with those of many of the policies of the EEC’s founding states,
such as the Kingdom of Belgium and Italy itself, then grappling with the end of its
Trusteeship in Somaliland. The approach of West Germany and the Netherlands, on
the other hand, differed, aiming to insert European-Third World relations into thewider legal framework of the United Nations in order to thwart French ambitions.3
In this same period, and by no means accidentally, a parallel but distinct policy
was developing in what was to become the other great direction in early EEC
foreign policy, expressed by the launching of association negotiations with a range of
Mediterranean countries and first and foremost those most firmly integrated into the

2 The subject’s bibliography is an especially vast one. For a definition of ‘Great Decolonisation’ afirst reference point must be W. Reinhard, A Short History of Colonialism, Manchester University
Press, Manchester 2011. On the specific subject of relations between the European Community
and the Third World in the era examined here, see Anna Bedeschi Magrini’s fundamentally important summary, Dalla Convenzione di Yaoundé ai Trattati di Lomé, in R.H. Rainero (ed.), Storia
dell’Integrazione europea, vol. II, Marzorati, Milan 1998, pp. 261–283.
3 Ibidem, p. 263.

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Western Bloc, such as Greece and Turkey.4 This same European Community Mediterranean policy, after its first phase, underwent various attempts at reorganisation,
above all from the 1970s onwards.5
The year 1960 can, to all intents and purposes, be considered not simply ‘Africa’s
year’ but correspondingly, the year in which the Old Continent truly took stock ofwhat the existence of these new states actually meant and how they were to fit into
the new bipolar system. In fact, that spring the European Parliament decided to callthe first meeting preparatory to the joint inter parliamentary conference of the six
members of the EEC and the new-born African states, which were soon to join into
the African and Malagasy Union for Economic Cooperation (S.A.M.A.).6
This policy, adopted primarily at the behest of France and implemented by theHallstein Commission, was clearly designed to maintain pre-established bonds with
the new states and ensure—or at least foster—their insertion into the Western geopolitical sphere of influence. Negotiations then continued on an inter-ministerial levelfor over two years in the face of a multiplicity of problems.7 Initially planned forearly 1963, in a historical period which was anything but thriving for the European
Community, the signing of the Convention culminating from these intense debates
was then postponed to 20 July that year in the capital of the young Republic of
Cameroon before being ratified by the various parliaments involved.

2 The Rise of Development Cooperation
The Yaoundé Convention came into force on 1 July 1964 for a five-year term on
the legal basis of Article 310 of the Treaty of Rome. The historical importanceof the agreement signed in Yaoundé consisted, first and foremost, in its laying thefoundations for a model which, whilst much criticised by contemporaries and overthe decades that followed in the academic literature,8 ultimately left a profound mark4 On the first policies culminating in Association Agreements with Greece (1961) and Turkey (1963)

see Elena Calandri, L’eterna incompiuta: la politica mediterranea tra sviluppo e sicurezza, in Id (ed.),Il primato sfuggente. La Comunità Europea e i Paesi in via di sviluppo, FrancoAngeli, Milan 2009,
pp. 89–93.
5 On this subject see the introduction to the essay by Guia Migani, La politique globale méditerranéenne de la CEE, 1970–1972, in A. Varsori and G. Migani (eds.), Europe in the International
Arena During the 1970’s: Entering a Different World, Peter Lang, Brussels 2011, pp. 193–195.
6 These countries were Mauritania, Mali, Niger, Chad, Sudan, Guinea, Ivory Coast, Senegal,
Dahomey/Benin, Upper Volta/Burkina Faso, Togo, Cameroon, Gabon, the Central African Republic,
Congo Brazzaville, Congo, Somalia, Madagascar.
7 The first Commission chaired by former West German Foreign Minister Walter Hallstein took overmanagement of the technical aspects of these negotiations and had to extricate itself from heateddebates over the abolition of general external tariffs on SAMA imports, its renewal in 1962, theadvent of the PAC and the first rejection of UK membership of the EEC by France. See Bedeschi
Magrini, op. cit., p. 267.
8 In actual fact, the bitterest criticism of this first form of co-operation came from the emerging
leaders of the new-born African states, with the President of Guinea, Sékou Touré, in the forefront.

104

G. Lamion the whole history of relations between Europe and the Developing World. As has
frequently been underlined, this agreement consisted of a framework divided up
primarily into an institutional part, a commercial section and a technical-financial
part.
Taking the methods now customary with the first Mediterranean partners as abenchmark,9 the Convention involved setting up a Council and a joint Association
Committee made up of ministers and diplomats from signatory states, flanked by an
Inter-parliamentary Conference and a Court of Arbitration.10 The linchpin aroundwhich all the other agreements revolved was commerce. The customs agreement
involved the creation of a large free exchange area between the Common European Market and the agreement’s signatory nations, with certain exceptions relatingto specific agricultural products which were protected by the Common Market.11
Coming to what we might call the more technical aspects of the agreement, namely
financial matters, these consisted in the setting up of a second European Development
Fund,12 managed by the Commission, which was to be complemented by resources
made available by the European Investment Bank (EIB).13

3 Towards a First Challenge to French Leadership
The agreement so painstakingly arrived at had a great many detractors even before it
was officially launched. We have already seen that the near total predominance of theFrancophone countries had been the first main cause of disagreement between the
Six and this was especially true of new tensions between Paris and Bonn. From thisperspective we cannot avoid highlighting the presence of a French politician, HenryThe latter did sign Yaoundé I, and then effectively broke off all diplomatic relations with de Gaulle’s
France for years. The Marxist school publications of the era thus reiterated their historic diatribes.
The above did not fail to generate an echo in the historiographical world. Of these see Gerard
Bossuat’s conclusion in Marie-Thérèse Bitsch, Id (eds.), L’Europe unie et l’Afrique. De l’idéed’Eurafrique à la convention de Lomé 1, Actes du colloque international de Paris, 1 and 2 April
2004, Bruylant, Brussels 2005, passim.
9 At the time the Convention was signed only Greece and Turkey were in association with the
EEC. Israel followed in 1964 and Lebanon in 1965. New agreements with other key players on
the Mediterranean chessboard did not take place until the following decade. See G. Migani, La
politique globale meditérranenne, op. cit., passim.
10 For the whole of this part, see Bedeschi Magrini, op. cit., pp. 268–273.
11 A first reference to this is to be found in G. Vedovato, La politica agricola nei rapporti diassociazione tra CEE e SAMA, in Rivista di studi politici internazionali, n° 3 (1966), pp. 399–420.
12 The first EDF, as is well-known, was decided on by the Treaty of Rome as one of the first structural
funds and set up with the creation of the European Economic Community itself in 1958. See G.
Bossuat, Conclusion, in M.T. Bitsch, op. cit., p. 465.
13 A. Bedeschi Magrini, op. cit., p. 268.

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Rochereau,14 in his capacity as Overseas Development Commissioner15 within thesecond Hallstein Commission. Attempts were made to correct the imbalance in power
between the French Republic and the other member states from 1965 onwards. It wasat this point those tough negotiations between the Community and the new Republicof Nigeria, which had been initiated and pursued by the Commission separately fromits SAMA negotiations, came to fruition. This agreement was a twofold novelty inthe European Community policy in Africa context and, more generally, in Brussels’s
incipient foreign relations policy. In geopolitical terms it was, first of all, a clear
attempt to bring within the European diplomatic fold a state within the British sphereof influence, and a member of the Commonwealth, to balance out persistent Frenchhegemony.
The most significant innovation, however, consisted in the Abuja government’s
desire to exclude any sort of financial and technical agreement, which had, bycontrast, been one of the cornerstones of Yaoundé.16 There is nothing accidental
about the fact that the Lagos agreement was entirely commercial in nature whichbrought Nigeria into line with SAMA in this respect. When the time came to finalise
the agreement politically, however, all the incongruences inherent in this came fully
to the fore. De Gaulle’s France opposed it on the EEC Council, where the well-known
Empty Chair Crisis occurred in these same months. An even greater hurdle than thepredictable opposition and protests by the SAMA members against Paris was thegrowing tensions between France and Nigeria triggered by the complex situationin Biafra.17 In such a climate, the negative outcome to the whole business was no
surprise and the Lagos agreement never came to fruition.18
If, in the middle of the decade, a phase of profound and troubled internal renewal
was tangibly under way in Europe, Africa was projecting an image of a continent
with a bright and prosperous future before it. The principal signs of this ideal politicalferment were the initiatives under way to generate great regional common markets.
The SAMA model was, in fact, emulated by former British East African states suchas Kenya, Tanzania and Uganda, forming the East African Community, as early as
the beginning of the 1960s.19
14 Henry Rochereau (Chantonnay 1908-Paris 1999), lawyer, member of parliament and Minister ofAgriculture in the Debré government from 1959 to 1961, he was appointed European Commissioner
at the end of the first Hallstein Commission the following year, a role he also performed in the Rey
Commission.
15 It is significant that, in this EEC phase, French influence extended even to the words used for thenames of the various offices. This Overseas Development title only disappeared in the early 1970s
at the beginning of the Malfatti Commission.
16 See G. Migani, Strategie nazionali ed istituzionali alle origini dell’assistenza comunitaria allo
sviluppo, in (ed.) E. Calandri, Il primato sfuggente. La Comunità europea e i Paesi in via di Sviluppo,
FrancoAngeli, Milan 2009, pp. 28–30.
17 Ivi.
18 Nigeria’s accession to the more general European Co-operation for Development System wasthus postponed for around ten years when it joined the ACP and the Lomé Convention.
19 On the regional cooperation initiatives in general and specifically the East African Community,
see A. Adedeji, The Travails of Regional Integration in Africa, in A. Adebajo, K. Whiteman (eds.),
The EU and Africa. From Eurafrique to Afro-Europa, Hurst & Company, London 2012, pp. 83–105.

106

G. LamiThe new single European Commission led by Belgian politician Jean Rey from1967 to 1970 was determined to continue in the, by no means easy to manage, wake ofits predecessors. On the strength of the contribution of newly reappointed Rochereau,
and, to an even greater extent, those of other representatives of the Commission, with
Italian Edoardo Martino in the forefront,20 Brussels once again reached agreementsof a commercial nature in the African Great Lakes area, culminating in the Arusha
Agreement of 1968.21 Once again French opposition, together with the imminentend of the first Yaoundé Convention the following year, postponed the signing of theagreement, however. The Convention came up against even greater obstacles on thewider international stage. Its trajectory intersected with the contemporary emergenceof UNCTAD within the UN, which held its first working session in Geneva preciselyfrom March to June 1964 and launched the so-called Kennedy Round for GATT
signatories at the same time.
The UN institutions were clearly the primary venue for debates on the economic
and social development of backward countries in this period, with the Non-Aligned
Movement now gaining considerable weight and setting up the so-called Groupof 77 precisely in the wake of the 1st UNCTAD conference.22 European power
imbalances aside, the greatest criticisms levelled at the Yaoundé Convention andits successors right from the start related to an approach which many Third World
political leaders saw as suffused with a still colonial or ‘neo-colonial’ logic.23 It
was precisely the ‘reciprocity’ principle which was the main target, the linchpin to
the whole commercial part of the treaty and the most significant because, in theeyes of its many detractors, it perpetuated the minority status to which SAMA’s
members were relegated. The new African states were thus left incapable of freeing
their economies from an exclusive reliance on agriculture and achieving definitive
industrial development and risked triggering competition with other underdeveloped
20 Edoardo Martino (Alessandria 1910–1999), professor of history and philosophy at the Scuola

Normale Superiore and veteran of the ARMIR Alpini, was an eminent exponent of the Catholic
Resistance in Piedmont in 1944–1945. Having joined the Christian Democrat party before the endof the war he occupied second rank posts in the first De Gasperi cabinets before being appointed
Secretary of the Supreme Defence Council where he remained at length. From 1958 he was nominated to the European Parliament, chairing its Political Commission from 1964–1967. From 1967
to 1970 he was Commissioner for External Relations at the EC under Jean Rey, during the delicate
Merger Treaty phase and Britain’s second application for admission. See Historical Archives of theEuropean Union (HAEU), Fondo Edoardo Martino (EM), biographical profile. For a first overview
of his role in the European institutions see L. Meli, Un “altro” Martino in Europa. Il percorso
di Edoardo Martino tra Roma e Bruxelles (1967–1970), in M. Mascia-D. Preda-F. Velo (eds.), A
sessant’anni dai Trattati di Roma: dal Mercato comune all’Unione economica e monetaria, t. I. I
trattati di Roma: una prospettiva storica, Cacucci, Bari 2018, pp. 119–132.
21 On the Arusha Treaty, see HAEU, Edoardo Martino Fond (EM), Subfond C. Commission Executive, Subsubfond C.O1 Etats africains et malgache associés (EAMA), file EM 182, Rapport de laCommission au Conseil sur le résultat de la deuxième phase des négociations avec une délégation
conjointe du Kenya, de l’Ouganda et de la Tanzanie, 1968.
22 For a general overview of the formation of the Group of 77, see the still valid K. P. Sauvant, The
Group of 77, Oceana Publications, New York 1981.
23 Kaye Whiteman, The Rise and the Fall of Eurafrique. From the Berlin Conference of 1884–5 to
the Tripoli EU-Africa Summit of 2010, in Adebayo-Whiteman (eds.), op. cit., pp. 29–31.

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countries which were not even in a position to reap the limited fruits of such policies.
In actual fact this approach did not differ from the geopolitical ideology and context
permeating the international relations of the day, which were still a world away fromthe full detente which characterised the subsequent decade.
It was precisely at the first UNCTAD session and the Kennedy Round that oneof the issues around this matter emerged. The legal and technical cornerstone of
the commercial agreements consisted in the adoption of the Reverse Preferences
system24 between the EEC and SAMA, pursuant to the regulations up to then inforce in the GATT context. In actual fact, an entirely different orientation had alreadyemerged from the Commission’s own preparatory meetings in 1962–1963 and thoseof its counterparts, one designed to extend import tariff concessions for the largest
number of goods and semi-worked products from developing countries, freeing themof the classic compensatory measures applicable in other sectors and thus referred
to as ‘Generalised preferences’.25
Clearly such an innovation could not avoid encountering the opposite sparking
resistance marked by predictably firm opposition from the United States and,conversely, the support of the majority of the emerging Group of 77. Heated debate
over the nature of the trading exchange regime to be established between developing
countries and advanced economies was a constant feature of the relations in this field
between the two sides of the Atlantic in the Kennedy Round dominated years which
followed and returned to the fore on the occasion of the second UNCTAD session
held in New Delhi in 1968.26
If, at the time of the signing of the first agreement, the European Community did
not ultimately seem yet to be capable of freeing itself from the logics and mechanisms
characterising the context it was to work in, and perhaps it’s very raison d’etre, thedevelopments of the last decade and the early 1970s had witnessed the advent of a
new era in international relations.

4 The Last ‘Eurafrique’: Yaoundé II
The second decade of the European integration process was coming to an end in a by
no means easy climate for European Community institutions. On one hand, it was the
single Commission’s authority and role as against the Council of Six ministers and its
offshoots, first and foremost the COREPER, which was increasingly questioned.27
This dynamic had arisen in previous years and was destined to become a constant in
24 On these issues see P. Gramatica, Economia e tecnica degli scambi internazionali, Vita e Pensiero,Milan 2002, pp. 475–480.
25 Ibidem, ivi.
26 UNCTAD II was held in February and March of that year in New Delhi after the GATT
negotiations came to an end.
27 Having been set up in 1958, the Committee of Permanent Representatives (COREPER) was madeup of diplomats and functionaries from the Six and had always constituted a governmental voice inthe preparatory stages to the periodic meetings of the Council of European Community ministers.

108

G. Lamithe history of European integration. On the other hand, the turbulent stage exits inspring 1969 of the man who had dominated recent European Community events andthe arrival of his successor Georges Pompidou as president of France raised hopesof progress.
In a context marked by the first negative economic signals following on from two
decades of rapid growth and great social upheaval across the continent, European
politics could certainly not claim to have the needs of its Third World partners atheart. A clear sign of the fact that the focus of attention was elsewhere—and more
specifically preparations for the Hague ‘relaunch’ summit—was the fact that the
Yaoundé Convention was allowed to expire, having come to an end on 1 June 1969.
A renewal agreement was not actually long in coming,28 but some time passed
before it came into force on 1 January 1971, in conjunction with the previously cited
Arusha agreement. One of the main reasons for this slowdown in work would seem
clearly to have been the fact that it overlapped with crucial negotiations relating to
the United Kingdom, Ireland, Norway and Denmark joining the European Community in 1970, under the new Commission led by Italian Franco Maria Malfatti.29
From this perspective the decision to implement the second Yaoundé Convention
and the Arusha Agreements simultaneously would seem to have been the outcomeof a very specific policy by the Commission and the members of the European
Community Council designed to weaken France’s lengthy hegemony in this field inorder to remove all cause for new conflict with the United Kingdom over the courseof negotiations as far as possible.
Similar balancing attempts notwithstanding, the essential power balance could
not be said to have changed, however. In the early 1970s France still dominated theEuropean Community’s world image. Clear confirmation of this was the appointmentof yet another French politician, Jean François Deniau (1970–1973), at the apex ofthis sector. Much more significant changes took place in certain technical aspects ofthe second Convention, however. To some extent leaving behind the, in some ways,
still paternalistic framework of the 1963 agreement, now the European Community
nations were accorded greater autonomy in decision making and Development assistance programme proposals to present to the EIB which, it should be noted, werestill subject to final scrutiny by the Commission.30
In the meantime, the debate over the international trading rules had moved on, withdivergent positions between the United States and Switzerland, on one hand, and themembers of the European Community and developing countries, on the other, coming
In various forms it was retained after the treaty setting up the European Union and the Treaty of
Lisbon and still exists.
28 A new agreement with the African and Malagasy Union was, in fact, reached on 29 July 1969,
once again in the capital of Cameroon. See Marie-Thérèse Bitsch, Gérard Bossuat (eds.), L’Europe
unie et l’Afrique. De l’idée d’Eurafrique à la convention de Lomé 1, Actes du colloque internationalde Paris, 1 and 2 April 2004, Bruylant, Brussels 2005.
29 On President Malfatti’s Commission (1970–1972), and the various judgements of his work historiographically, a key work is that of Antonio VARSORI, Malfatti. Una presidenza interrotta, in La
Commissione. Storia e memoria di un’istituzione, 1958–1972, cit., pp. 153–170.
30 Bedeschi Magrini, op. cit., p. 268.

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increasingly to the fore. In view of its third working session, planned for Santiago
de Chile in April and May 1972, UNCTAD ultimately succeeded in winning theagreement of the General Assembly of the United Nations to the new Generalized
System of Preferences, as an exception to the previous GATT rules.31 Via President
Malfatti, the European Commission undertook to be the first in the developed world
to apply these new customs rules from 1 July 1971,32 underlining a growing desire
for independence from United States control shown in what, at the time and perhaps
also later, seemed essentially to be the only field of action in which some freedom of
manoeuvre from the geopolitical control of the blocs was still possible: trade. This
was a considerable step forward, precursor of the great changes which were to takeplace in the European Community’s Cooperation for Development approach in thedecade which had just begun.

5 Lomé and the Apex of détente in the Third WorldIt has frequently been noted that three new states joining the European Community
on 1 January 1973 ushered in a profound transformation in European politics whichcannot simply be explained away as the result of its enlargement. Upheavals in
the European Community’s framework predictably could not be confined to thecontinental plane. This is testified to by the fact that an ad hoc protocol extending thelaws applicable to the European Community’s members to twenty members of theCommonwealth had existed since the Treaty of Brussels dating to 22 January 1972.
New general orientations towards a more incisive European presence in the world
were also expressed at the Paris Summit’s debates the following October.33
The period following immediately on from the first extension was, in actual fact,
marked by a general stagnation in the reorganisation of the European Community’s
external matters. The most significant innovations in these months came from Africa,
where the SAMA partners gathered in Kinshasa were obliged, on 31 March 1973, todefinitively approve the new Generalized System of Preferences norms on a global
level, in compliance with the recent decisions of the United Nations on the subject.
In exchange, however, they succeeded in wresting from it guarantees that the prices
of many goods included in previous reciprocal agreements would remain the same.34

31 Ibidem, p. 269.
32 The years of the brief Malfatti presidency were marked by a growing awareness of the European

Community’s international role, with its external trading policies no longer being seen as marginal.
The available archive evidence makes this very clear. See Historical Archives of European Union(HAEU), Fondo Franco Maria Malfatti (FMM), subfond A-Commission Exécutive, file 11/1 “La
Communauté élargie”, pp. 1–44, and subfond C-Discours, file 33/3, “Discours prononcés par lePresident Malfatti en 1971” (juin-septembre), pp. 26–40.
33 Bedeschi Magrini, ibidem, p. 270.
34 On this subject, see Jean-Marie Palayret, Da Lomé I a Cotonou: morte e trasfigurazione della
Convenzione CEE/ACP, in Calandri, Il primato sfuggente, cit., p. 37.

110

G. LamiOnce this first readjustment phase in the new Nine member Europe had passed,
the Commission chaired by Francois Xavier Ortoli was faced with the urgent needfor a thoroughgoing reorganisation of its development aid policy as a whole. In its
policies in this sector Brussels thus decided to group together into the new category ofAfrican, Caribbean and Pacific nations (ACP) both the old SAMA members and therecent Commonwealth arrivals.35 Negotiations with this group of nations began in
October 1973 in Brussels and the impact of the outbreak of the Yom Kippur war andthe first oil crisis made itself felt right away.36 The consequent raw material supply
difficulties in late 1973 and early 1974 strengthened the ACP’s hand in its attempts to
wrest more favourable conditions from the European states. Negotiations thus stalledin the midst of simultaneous renewed debate on the terms of the UK’s joining theEuropean Community after Harold Wilson won the recent Labour election victoryand returned to power.
In these circumstances it was, paradoxically, decided French intervention under
the aegis of the new French President Giscard d’Estaing which averted complete
shipwreck. On the strength of its rotating presidency of the European Council in thesecond semester of the year, Paris promised support for the majority of the demands
put forward by the ACP gathered at the Kingston Interministerial Conference inJamaica on 25 and 26 July 1974.37 Via the customary intermediation with the otherexponents of the European scene, Federal Germany and the United Kingdom, negotiations were thus fast-tracked to a successful conclusion in a further African episode,this time in Lomé (Togo) on 28 February 1975. As was customary, the implementation of the treaty was postponed to 1 January 1976, keeping the usual five-year
duration formula unchanged.
The just twelve years separating the signing of the two main conferences examined
here were long coming-of-age years for the European Community which fitted into
the more generalised reorganisation of the international order which was such a
feature of these years.38 In such a framework the new policies applied to relations
with the Third World ended up being the fully fledged linchpin in a then unheard-of
Brussels assertiveness on the global stage.
The new treaties undoubtedly ushered in changes in this field which could justifiably be described as revolutionary. It was a revolution which was evidently not
35 As well as the 18 SAMA countries and the three East African Community states cited previously

these thus included Liberia, Ghana, Gambia, Nigeria, Ethiopia, Rwanda, Burundi, Malawi, Lesotho,
Swaziland, Zambia, Mauritius, Bahamas and Barbados, Jamaica, Grenada, Trinidad and Tobago,
Guyana, Fiji, Samoa and Tonga.
36 Palayret, Da Lomé I a Cotonou, cit., p. 36.
37 Ibidem, p. 38.
38 Studies designed to correct the excessively negative reading long made of the 1970s in the history
of integration have recently proliferated. In this context mention must be made of the previously cited
test edited by A. Varsori and G. Migani, Europe in the International Arena during the 1970’s, and,in particular the essays within it by Varsori, The European Construction in the 1970’s: The Great
Divide, pp. 27–40, and Federico ROMERO, Europe between the Superpowers, 1968–1980, pp. 85–
98. A recent article by Alessandra BITUMI, Integrazione europea e relazione transatlantiche,
1969–1975: alcune note sul dibattito storiografico, in Ricerche di Storia politica, XXVII (2014),
n° 1 (January–April), pp. 41–53 is also of interest.

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simply quantitative, however significant it was on this plane, with a sudden twofold
increase in the area affected by the agreements, passing from twenty-two to a grand
total of forty-six states, mainly geographically distributed over an area which covered
three continents for the first time.
First and foremost, it was the principles underlying the whole structure which hadradically changed. The principle of equality which had previously remained in the
background was fully applied for the first time. Even the ‘association’ terminology
was abandoned, underlining the full autonomy of those involved in it, on an equal
plane with the European Nine. The application of the Generalised System of Preferences to so many new markets was unprecedented in recent global trading history.
Even the Common Agricultural Policy, long a sticking point in European Community
politics, was affected, with the arrival en masse of products traditionally competingwith European goods being allowed.39 Further underlining the differences with thepast a novel financial tool was launched, Stabex, which was designed to use its own
resources to safeguard producer countries from a potential fall in exports in a long
list of agricultural products and, significantly for the first time, iron minerals.40
Its funding apparatus was impressive, too. The financial resources set aside forit tripled to 3.15 billion E.C.U.s under the Lomé II agreement, divided up between
the European Development Fund, an EIB allocation, and the share set aside for the
STABEX itself. The greatest financial burden was shared out between France andWest Germany, followed by Great Britain.41 All this was supplemented by a further
500 million dollars to be used as an exceptional aid fund for the other Third World
states not encompassed by the ACP and hit by the oil crisis.42
The great exponents of these years were the VIII Commission’s Director Generaland the linked European Community Development Commissioner, which remained
firmly in French hands, first with Claude Cheysson (from 1974 to 1981), and then with
Edgar Pisani (1981–1985). Whilst the former was one of the primary exponents of thetwo Lomé Conventions, the task of the latter was to lead the renewal negotiations,coinciding symbolically with the centenary of the 1884–1885 Berlin Conference
which had signalled the beginning of the so-called Scramble for Africa.
This is the phase at which an initially marginal, but not entirely absent, ideologicalelement is tangible in the context of the relations between developing economies andthe European states, the latter’s desire for atonement and reparation for the crimes
they felt they had committed in the imperialist era. To cite just one of the more
emblematic instances, Claude Cheysson went as far as to argue that the Commission’s
development funds were actually to be seen as their recipients’ property, an argument
39 If tropical products which cannot be grown in Europe are excluded, the greatest source of compe-

tition was the complex laws applying to sugar cane imports into the European Single Market which
encroached on the prerogatives of European sugar beet farmers, primarily in France.
40 J. M. Palayret, Mondialisme contre régionalisme: Cee e Acp dans les négoçiations de la Convention de Lomé 1970–1975, in A. Varsori (eds.), Inside the European community: Actors and Policies
in the European Integration (1957–1972), Bruylant, Brussels 2006, pp. 369–398.
41 The first covered the costs of 25.95% of the total, the second 18,7%. See Palayret, Da Lomé I a
Cotonou, cit., p. 40.
42 This was the so-called Cheysson fund. Ivi.

112

G. Lamiwhich had subsequently to be denied by his successors, not without considerable
difficulty.43
In the external context, Lomé was undoubtedly the culmination of the European
Community’s third way and neutralist approach which had, until then, been restrained
within the rigid framework of the Cold War which had governed international politics
in the three previous decades but which was, right then, believed to be on the point ofgiving way to an entirely different future. Much of its initial success and enthusiasm isthus to be attributed to the general atmosphere of detente which was, in 1975, destined
to culminate in the final phase of the Conference on Security and Co-operation in
Europe, sealed by the Helsinki Agreement and the birth of OCSE.
From an internal European Community perspective, the new framework agreements with the ACP members can perhaps be seen as one of the most successful of thecompromises reached between the needs of the two greatest former colonial powers,
which cannot be reduced to a straightforward alternation between the earlier French
and later British leadership. It is a success which becomes even more meaningful if
we take the difficulties Europe was experiencing in the second half of the 1970s into
account, which were to culminate in a profoundly different European Communityfrom that which its founders had envisaged.
The agreements reached in the Togo capital are thus to be fitted into an unusual
period for Africa, whose direct domination by European states was coming to an
end precisely in these months, with the Portuguese declaration of independence forAngola and Mozambique, soon to be followed, however, by its infamous civil wars.
The achievements of the second half of the decade were thus significant but doubt
was soon cast on them.

6 New Developments in the ‘Donor Fatigue’ Decade
The Jenkins Commission, at the helm from 1977 to 1981, with Claude Cheysson
confirmed at the Development department, was called on to manage the newly signed
agreements. Progress in this period is justly considered to include the launching of
the European Monetary System (EMS), heir to the first projects developed in view of
Economic and Monetary Union which had already been drafted at the beginning of
the decade, and the beginning of the European Community’s southward expansion,
with the 1981 inclusion of the young Greek republic accompanied by recent applications from Portugal and Spain. The radical changes in the European Community
representation system which were under way in those years, culminating in the first
European elections in June 1979, also need to be taken into account.
Less attention was thus paid to the renewal of the Lomé Treaty in 1980, whichcame into force the following year. Effectively, after the high impact changes which
the first treaty had ushered in, the second Lomé Convention was limited to certain
amendments. The most important of these consisted in extending the mechanisms
43 K. Whiteman, The Rise and the Fall of Eurafrique, in Adebayo, Id (eds.), op. cit., p. 35.

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designed to shore up export revenues to eight new types of minerals with the introduction of SYSMIN, in the wake of the earlier STABEX (whose revenues werealso increased).44 As 1982 wore on, however, the new European Community Gaston
Thorn cabinet was obliged to take stock of the fact that the agreement had lost a great
deal of its initial momentum for various reasons, many of which had just been set
out in the famous Brandt Commission report on disparities between the global northand south.45 In purely trading terms the fallout from the rises in raw material prices
caused by the Iranian Revolution of a few years previously, and the oil crisis which
had followed on from it, were beginning to be felt by Third World exporters. The
economies of the Ten were also a long way away from having recovered the growth
rates of the not-too-distant past. But the problems could certainly not be said to be
purely economic.
Even in this sector, what shored up the whole European Community construct was,as always, the classic supranational dynamic previously reinforced by the Councilof Europe which left very little room for manoeuvre, and policy making and coordination powers, to the Community’s institutions, especially the Commission.
The initiative was thus left to the decisions and vetoes of the European Community’s ‘leading’ nations, namely West Germany and France, initially dominated by
Helmut Kohl and Francois Mitterrand respectively. British PM Margaret Thatcher
also hijacked the debate over the European Community as a whole, casting doubt on
the effective value of aid to underdeveloped countries and, above all, their national
and European Community budget costs.
This was exacerbated by a by now objective difficulty in coordinating the various
demands of the ACP group which had also adopted common institutions immediately
after Lomé I and whose members were also increasing in number. If the beginningof the first Reagan government in the US in what has historically been called ‘thesecond Cold War’ is added to the equation, it is easier to explain how the cooperation
system launched in Lomé was already in crisis so soon after its launch. A fatal blow,
at least to the spirit of the agreement, was then dealt at the same time by the Cancun
International Meeting on Cooperation and Development, at which the United Statesbrought to bear a regionalistic approach to this theme, in juxtaposition to the globalist
logic followed by the European Community and the United Nations in recent times,
which were labelled unrealistic.46
Via Edgar Pisani the Commission’s intention was to take on these issues with thegreat changes planned for the third Lomé Conference in 1983–1984 in mind. Onceit began this was managed by Pisani’s successor, Lorenzo Natali47 —to date the only
44 For the whole of this part see Palayret, Da Lomé I a Cotonou, cit., pp. 41–44.
45 On the Brandt report see Politica internazionale, 1980, pp. 177–190.
46 On these issues see, in the first place, E. Di Nolfo, La politica estera di Reagan, in Nuove questioni

di Storia contemporanea, III (1985), pp. 338–339.
47 Lorenzo Natali (Florence 1922-Rome 1989), a native of Aquila, was elected as an MP for the

Christian Democrats in the first six republican parliamentary terms. After a few under-secretarialroles he was first appointed Minister for Public Works and then Minister of Agriculture in thevarious 1970–1973 governments. Part of the Fanfani faction, at the end of 1976 he was chosen byhis party to replace Carlo Scarascia Mugnozza as European Commissioner, thus beginning a long

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G. Lami

Italian to have acted as Development Commissioner – a member of the Brussels’sCommission presided over by Jacques Delors (1985–1995).

7 The Epilogue: Lomé III and IV
Midway through the 1980s Spain and Portugal joined the European Community,
creating further cohesion problems within the now 12-member-strong organisation,
primarily as a result of the rivalry which the opening up of new markets had triggered
between its Mediterranean area members in the agricultural field.48 This climate did
not prevent the extra-European co-operation programmes from continuing. Heir toa now prevalent European Community political and diplomatic climate,49 on theoccasion of the 1985 renewal the principle according to which everything had to be
formulated on the agricultural development and local industry scale, abandoning thestill surviving logic which had until then tended to prioritise foreign trade and exports,
was asserted. The pre-existing financial tools were further strengthened but this time
greater participation from the highest-level institutions, such as the International
Monetary Fund and the World Bank, was planned. For the first time the potential forshared public–private investment, in accordance with co-funding procedures, wasmooted.
A further great element of novelty was the birth in Brussels in 1986 of the EEC-CP
Cultural Foundation (now with 63 members) which set itself the task of the fostering
North–South dialogue in the name of the socio-cultural co-operation whose absence
had become tangible in previous years.50 Within this debate an especially importantrole was played by an exceptional programme of Aid in the Struggle Against World
Hunger and Malnutrition launched by the Council as a Recovery and RelaunchPlan, later called the Natali Plan after the Italian Development Commissioner whose
brainchild it primarily was. This was now a theme of widespread public interest,
especially in the wake of the terrible famines in Ethiopia in 1984–1985.
Negotiations for the fourth Convention began in October 1988 in Luxembourg,
around a year after the end of the previous Convention, a practice which was then sowell established as to have become the norm. Whilst the Single European Act, in force
since July 1987, had ushered in new stricter norms for extra-MEC imports, above all
and fertile career at the apex of the European Community under the Jenkins Commission whichlasted a grand total of twelve years, with responsibility first for the Environment, then Enlargement
and Mediterranean Policies and lastly Cooperation for Development under Jacques Delors, underwhom he was also appointed vice president. HAEU, Fondo Lorenzo Natali (LN), profilo biografico.
48 Precisely with a view to preparing the agricultural economies of Greece and the Italian Southfor the entry of the new states, Natali and the Thorn Commission drew up a vast producer support
package called Integrated Mediterranean Programmes before the middle of the decade. On thisissue consult the following web resource: http://cordis.europa.eu/programme/rcn/311_it.htm (lastaccess: February 2020).
49 Memorandum Pisani, in Bedeschi Magrini, op. cit., p. 276.
50 Ibidem, pp. 278–281.

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in technical-health terms, and thus potentially penalised Third World producers, otheraspects of the work fostered a greater sense of optimism. The economic recovery
then under way in the West, and even the Gorbachev era which had just begun in
the Soviet Union with its fallout across the Eastern bloc, seemed to foreshadow a
new detente and thus unprecedented room for manoeuvre in a new North–Southrelationship.
In actual fact, initial enthusiasm was soon tempered as an objective fact was
taken stock of: despite all the efforts made it became clear that the gap between
underdeveloped and advanced economies had actually increased in the decade now
nearing its close. It was Third World public debt which seemed most frightening,with exponential growth resulting, for the most part, from ill-considered business
investments made by incompetent and corrupt local managerial classes and leaders.
The last treaty between the European Community and the ACP signed between
the fall of the Berlin Wall and the final collapse of the Soviet Union, attempted tocurb the problem in a series of articles designed to abolish STABEX and SYSMIN
mechanism renewal. In accordance with a now prevalent sensibility, new priority was
also accorded to environmental protection in a challenging equilibrium with morestrictly economic goals.
Once again, in the new ‘post bi-polar’ era which had just begun, Brussels remained
the Third World’s primary partner, managing 13% of global aid to the Developing
Countries. Whilst the five-year review custom was not abandoned in the 1990s either,
it was 2000 before a further, thoroughgoing review of the matter took place, and thiswas brought to an end by the signing of the Cotonou Convention (Benin).51

8 Conclusions
An event of epoch-making scope such as the end of the Cold War inevitably left its
mark on the geopolitical framework. Whilst this is not the place for a considerationof the merits of the Cotonou Convention, which still governs the relations between
today’s European Union and the ACP countries, certain of its salient features can be
mentioned, such as its further extension to new states, its fundamental simplification,
which reduced Lomé IV’s by-then 369 articles by a third, and greater attention to therole played by new private entities such as the NGOs, both Western and otherwise,
active in the scenarios affected by the agreement.
The 1989–1991 revolution certainly did not bring European cooperation for development policies to an end. It is, however, equally certain that it radically changed
51 The Cotonou, Convention of 23 June 2000 significantly modified the framework of relations

between the advanced economies and the Third World, subjecting the matter to thoroughgoinglegal review. Its twenty-year validity expired in 2020. The time frame of this work means we
can only make a brief reference to this here but the complete text can be accessed online on theEuropean Commission website: https://eur-lex.europa.eu/legal-content/en/TXT/?uri=LEGISSUM:
r12101 (last consulted January 2021).

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G. Lamithese, first and foremost because it set in motion processes which led to unprecedented changes in Europe itself. The birth of the European Union in Maastricht and,to an even greater extent, the parallel affirmation of democratic-type political systems
in former ‘iron curtain’ countries, shifted the continent’s main interests’ eastwards,
and not solely from an economic and trading point of view. Enlargements over thelast twenty years, including within NATO, have clearly demonstrated this.
In the decade which followed the fall of the Berlin Wall many of the dynamics
already embryonic in the 1980s, and whose full expression had been blocked by thesurvival of bipolar logics both critical and otherwise, came to fruition. The financial
and industrial support given to developing countries, finally freed of the need tomaintain anti-communist-based relationships, could thus be bound to the achievement of specific civil and political standards in Africa, which had been on the drawing
board before but never applied with any degree of strictness. And once again, in thisvery unusual juncture, the role of the United Nations in planning development aid
increased and it thus tended to absorb and encompass the policies enacted by theEuropean Union in this sphere.52
The events we have attempted to retrace here could be described as the storyof great hopes ending in what would, at the present time, seem to be equally great
failure. And in this sense, it is of paradigmatic value for the history of integration
itself. Sandwiched between frequently much-resented US safeguards, the ‘red peril’at the gates and a growing desire to take its place on the international stage, debate
in the European Community on the future of its historic colonies was intense rightfrom its inception.
The non-feasibility of pursuing a fully-fledged foreign and military policy of its
own, which struggled to assert itself even after the Lisbon Treaty, Brussels maderelations with the Third World the principal tool of a foreign outlook which was
renewed over the decades. An initial free trade approach following in the footstepsof historic logics had been replaced, by the early 1960s, with a more successful
approach, a policy based on higher ambitions and ideals which, at least at the outset,
seemed to be truly capable of making an impact on Third World development.
This long process was, perhaps, the first battlefield in what, in more distant periods,
would have been called ‘power politics between the main European nations with
African colonial pasts, first France and Belgium and later the United Kingdom. It wasa rivalry within the European Community which also took the form of struggles overthe nationality of the various development commissioners and, to an even greater
extent, the members of the Commission officers working under them. This was abattle which the French would appear to have won for many years, well beyond the1970s.
This raises a fundamental point in this debate. As in all other European Community
policies, what worked primarily to the detriment of their effectiveness was essentiallythe supranational approach which Europe embarked upon, both in the de Gaulle era
and in the 1970s with Giscard and Schmidt and, once again, in the Margaret Thatcher
decade. It might be held that a Commission with full decision-making powers, and
52 Bedeschi Magrini, op. cit., p. 282.

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with its own resources to count on, even prior to 1971, should undoubtedly havebeen capable of reducing the crossfire and scaling down French dominance moredecisively. What is clear is that the positive outcomes of these policies gradually
lessened over the space of a half century. Its achievements should not, all the same,
be belittled, despite the evident differences and rivalries. It should be rememberedthat growth levels, at least in the 1960s and 1970s, increased significantly in many
countries, and with them the average life expectancies of many of their peoples.53
All this notwithstanding, it should be remembered that if all this was a failure—andthe current state of affairs not only in North–South relations but also between thenorthern and southern shores of the Mediterranean would seem to bear this out—thegreatest responsibility for this is certainly not to be laid at the door of European
policy. A multitude of opportunities were undeniably wasted in the obtuse policies
pursued by many of the leaders of the developing countries involved. In fact, fromLomé II onwards attempts were made to step up control mechanisms over the aid
given and monitor its practical implementation.54
In conclusion, if the newly self-aware Third World was given if not certainty thenat least hope of future prosperity and progress, beyond East–West divisions, muchof the credit for this lies with the continent which once dominated it and the model
it had created. How this hope might still find a way of coming fully to fruition willbe the subject of new challenges and new research in future.

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54 Ibidem, ivi.

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W. Reinhard, A Short History of Colonialism, Manchester University Press, Manchester 2011.

Archive Sources
HAEU, Fondo Franco Maria Malfatti (FMM) file 11/1 “La Communauté élargie”, file 33/3,“Discours prononcés par le President Malfatti en 1971”.
HAEU, Fondo Edoardo Martino (EM), EM 182 Rapport de la Commission au Conseil sur le résultat
de la deuxième phase des négociations avec une délégation conjointe du Kenya, de l’Ouganda etde la Tanzanie.
HAEU, Fondo Lorenzo Natali (LN), LN02, f. 5 (January–December 1983), L’adesione della Spagna
alla Cee: aspetti generali e conseguenze agricole, Perugia, 30 gennaio 1983; I Programmi
mediterranei integrati, Pescara, 10 December 1983.

Giulia Lami Graduated in 1982, in 1989 I obtained the Ph.D. degree in History and in 1991 a
post-Ph.D. grant at Milan State University. In 1996 I was been appointed as researcher and in 2005
as full professor of History of Eastern Europe at Milan State University. I am a member of many
scientific association, President of the International Commission of Slavic Historical Studies of
the ICHS; Director of the Centro per gli Studi di Politica Estera e Opinione Pubblica, Milan State
University. My scientific and didactic activity is mainly devoted to the History of Central-Eastern
Europe (nineteenth–twenty-first century).

Chapter 12

France, Decolonisation, and the Global
South: France’s Struggle for a New
World Order
Tomoya Kuroda

Abstract In the time of the COVID-19 pandemic, while the North–South divide
seemingly lingers, more frequent criticism has been directed at the South–South
divide (internal divide in the Global South) in recent years. In fact, people
in the Global South face a rather limited possibility of vaccination. Industrialised countries are in a better position to benefit from vaccination plans. Thus,
the paper’s aim to relate the North-South issue to the world order also has acertain relevance to the current situation. Focusing on French role in UNCTAD(including Generalised System of Preferences) and the Conference on International
Economic Cooperation (CIEC), this paper analyses the relationship between French
diplomacy, decolonisation, the Global South and finally, the world order.
Keywords Covid-19 · Global South · South-South divide · UNCTAD · CIEC

1 Introduction
In the time of the COVID-19 pandemic, while the North–South divide seemingly
lingers, more frequent criticism has been directed at the South–South divide (internal
divide in the Global South) in recent years. In fact, it is known that mainly because ofvery rushed production of anti-corona vaccines and the insufficient quantity of such
vaccines, people in the Global South face a rather limited possibility of vaccination,
despite international supply cooperation schemes such as COVAX. Industrialised
countries are in a better position to benefit from vaccination plans. Thus, the paper’s
aim to relate the North–South issue to the world order also has a certain relevance tothe world situation in 2021.
First, let us revisit the goal of this common project and examine the relationshipbetween France and the world order. In general, the world order is mainly createdby the hegemon of the time. Therefore, it is quite natural to focus on the behaviour
and idea of a hegemon when we think about the essence of world order. In the case
T. Kuroda (B)Senshu University, 3-8, Kanda Jimbocho, Chiyoda-ku, Tokyo 101-8425, Japane-mail: tkuroda@isc.senshu-u.ac.jp© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_12

119

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T. Kurodaof the Cold War, it is evident that analysis should be directed toward the UnitedStates, which contributed to the creation of a ‘liberal international order’.1 Onemight wonder, therefore, whether the analysis of medium (middle) power states suchas France is relevant for this theme.2 In fact, the case of France shows that evenmiddle powers can influence the status of the world order. By creating a conceptthat transcended the bipolar world of the Cold War, France played a certain role inremaking the world order after the Second World War.
What kind of relationships can we discern between French decolonisation and
the Global South? The first question may be whether French decolonisation had an
impact on the ascension of the Global South. At first glance, this question may appear
controversial. First, the Global South, long referred to as the ‘Third World’, was, atleast in the 1960s and the 1970s, headed by prominent leaders, such as the Argentine
economist Raúl Prebisch or the Algerian leader Houari Boumedienne. In addition,some recent studies have argued that the Vatican influenced the creation of the G-77 (agroup of developing countries) since UNCTAD (United Nations Conference on Tradeand Development) began its activities.3 However, France conceptually contributed
to their emergence, as the phrase tiers-monde (Third World) was coined in 1952
by the French economist Alfred Sauvy.4 France’s influence can be recognised atleast slightly. After answering this difficult question, we shall analyse how and why
France took the initiative to react to the Global South, from the 1960s to the endof the 1970s. France did this through pursuing negotiations in frameworks such as
UNCTAD, the Generalised System of Preferences (GSP), and the Conference on
International Economic Cooperation (CIEC).5

1 G. John Ikenberry, ‘The End of Liberal International Order?’ in International Affairs, Vol. 94, no.

1 (2018), pp. 7–23.
2 Frédéric Bozo, La Politique étrangère de la France depuis 1945, Paris: Flammarion, 2012.
3 Giuliano Garavini, After Empires; European Integration, Decolonization, and the Challenge fromthe Global South 1957–1986, translated by Richard R. Nybakken, Oxford: Oxford University
Press, 2012, p. 82; Saho Matsumoto, The Vatican in International Politics, 1914 to the Present(in Japanese), Tokyo: Chikura Shobou, 2019, pp. 102–104.
4 Some general explanations cite Oliver Franks, an English civil servant and philosopher, as theinventor of this phrase. However, this phrase was coined in 1959. So it is more appropriate to saythat Sauvy, rather than Franks, coined this term. Alfred Sauvy, ‘Trois mondes’, in L’Observateur(http://www.homme-moderne.org/societe/demo/sauvy/3mondes.html, accessed 17 March 2022);
Vijay Prashad, The Darker Nations, New York: The New Press, 2007; Garavini, After Empires.
5 For a comprehensive synthesis of European development policy, see Elena Calandri, ‘L’aide audéveloppement. Entre économie, culture, et relations internationales’, in Relations internationales,
no. 157 (2014), pp. 71–95.

12 France, Decolonisation, and the Global South …

121

2 UNCTAD and the Institutionalisation of the Third World
2.1 The Third World as Created by Sauvy and Its Meaning
According to the Indian-born historian Vijay Prashad, the concept of the Third World
had a certain effect on the consolidation of developing countries. Prashad maintainedthat Sauvy’s perception was not directly adopted by Nehru, who was a prominent
leader of this Non-Aligned Movement, but it was de facto adopted by him. Given
that the experience of colonial rule was common to all Third World participants, they
were able to unite into a group. Sauvy’s idea was very French, considering that hetook inspiration for the expression ‘Third World’ from the phrase ‘Third State’ (tiersétat), which was coined by Abbé Sièyes at the time of the French Revolution.6
Regarding French development aid, one important element of its policy towards
the Global South, Africa, especially North Africa, remained the main target of thisaid (almost 80%) from 1963 to 1971, with Algeria initially accounting for a large
share of this aid to Africa.7 Therefore, we can discern a regional approach, rather
than a global approach, to French aid policy during the 1960s.

2.2 Who Created UNCTAD?
There is widespread agreement that UNCTAD was established at the initiative of theThird World. Its origin may go back, of course, to the formulation of the conceptof self-determination, for example, in the fourteen points promulgated by Woodrow
Wilson.8 In addition, France’s defeat in the First Indochina War at Dien Bien Phu andthe Bandung Conference in 1955 were also important factors.9 Some leaders played
significant roles, such as Kwame Nkrumah, a pan-Africanist; Gamal Abdel Nasser,
who gained prestige after the victory in the Suez War; and Léopold Sédar Senghor,
through his négritude movement with Aimé Césaire.10 Therefore, if we take a longer
6 Prashad, op.cit., pp. 30–32.
7 Gérard Bossuat, ‘French Development Aid and Co-operation Under de Gaulle’, in Contemporary

European History, Vol. 12, no. 4 (2003), p. 443.
8 Erez Manela, The Wilsonian Moment: Self-Determination and the International Origins of

Anticolonial Nationalism, Oxford: Oxford University Press, 2007.
9 Regarding the impact of Dien Bien Phu towards the wave of decolonization, see Pierre Journoud(avec la collaboration de Dao Thanh Huyen), Dien Bien Phu: la fin d’un monde, Paris: Vendémiaire,
2019, p. 382. Concerning the impact of the Bandung Conference in 1955, see Odd Arne Westad, The
Global Cold War: Third World Interventions and the Making of Our Times, Cambridge: Cambridge
University Press, 2004, p. 103. Westad claims that the Bandung Conference produced ‘a new senseof closeness among African and Asian countries’.
10 Garavini, After Empires, p. 33. Concerning the Africanness, see Nakao, ‘Définir l’« Afrique»entre Panafricanisme et Nationalisme en Afrique de l’Ouest. Analyses à travers les transformationssociales au Sénégal, au Ghana et en Haute-Volta au temps de la décolonisation (1945 - 1962)’, PhD
dissertation submitted to EHESS, 2017.

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T. Kuroda

perspective, its origin can be discerned earlier than in the 1960s. However, its immediate origin was identified in the Cairo Declaration in 1962. Here, 36 nations fromthree major regions were gathered and supported by Raúl Prebisch. They presented aresolution in support of a new UN conference on ‘all vital questions relating to international trade, primary commodity trade, and economic relations between developing
and developed countries.’11

2.3 What Were the Reactions of Western Countries,
Including France?
Interestingly, among EEC countries, only the Netherlands was in favour of this new
conference. Even France, which had created the concept of the Third World, wasreluctant. A French diplomat who had requested that France’s African allies refrainfrom participating in the Cairo Conference, found that France had become the targetof heavy criticism from these ‘rebels’.12
The United States was also reluctant.13 Therefore, almost all Western countries
were reacting to the efforts made by the Global South. According to Garavini, thedysfunction of another UN agency, the Economic and Social Council (ECOSOC),
and other international organisations, such as the World Bank and the International
Monetary Fund (IMF), contributed to the emergence of UNCTAD.14 Interestingly,
the EEC was willing to set up a preparatory committee to ensure enough time tosecure the ratification of the Yaoundé Convention with the Association of African
States and Madagascar (AASM).15 Therefore, a regional approach focusing on Africa
and Mediterranean countries triumphed, at least at the beginning, over the global
approach. Finally, the French acceptance to the establishment of UNCTAD occurredbecause of a mixture of regional and global approaches.
In this way, France took a regional approach in the first half of the 1960s. Frenchdevelopment aid was mostly directed to Africa, where France had a ‘colonial inheritance (hértiage colonial)’. Regarding the formation of UNCTAD, France was reactive, rather than being an initiator, because of this regional approach, and because of
the perception of threat as described by the French diplomat cited above. This wastrue even though France had articulated the concept and vision of a multipolar worldorder, consisting of three worlds: the First World, the Second World, and the Third
World.

11 Garavini, After Empires, p. 35.
12 Ibid.
13 Prashad, op.cit.
14 Garavini, After Empires, p. 36.
15 Ibid. Regarding the making of Yaoundé Convention, see Guia Migani, La France et l’Afriquesub-saharienne, 1957–1963 Histoire d’une décolonisation entre idéaux eurafricains et politique depuissance, Bruxelles: Peter Lang, 2008.

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123

3 GSP
The EEC introduced the GSP to the G77 (which then comprised 91 countries) in July
1971, based on the proposal of UNCTAD.16 The GSP is an ongoing mechanism that
reduces or exempts duties to developing countries for certain finished products or
semi-finished products. This was non-reciprocal, which means that the preferences
would be accorded only from industrialised countries to developing countries, but
not from developing countries to industrialised countries.
In this process, what kind of position did France take? Further, why did France
adopt this attitude? On the basis of the multi-archival approach (French, German,
and European Community archives), this section seeks to answer these questions byclarifying the French idea and position towards this ostensibly global policy.
First, an initial formal move was made by the G77 in the framework of theAlger Charter in 1967. In addition, setting the target rate of development aid at one
percent of gross national product (GNP) and abolishing’special preferences’, theAlger Charter demanded that ‘all developed countries should grant such preferences[a general system of tariff preferences on a non-discriminatory and non-reciprocal
basis] to all developing countries’17 On the EEC side, West Germany (i.e. the Federal
Republic of Germany (FRG)) and the Netherlands, which could be categorised as‘globalist’ countries, were initiators.18 In particular, West Germany’s position wasvery close to that of UNCTAD, and it recognised the ‘importance’ of UNCTAD,
as can be seen in the notes of Karl Schiller, the then German Economic Minister.19
France, however, which was normally categorised as a ‘regionalist’ country, wasrather reluctant because the existence of ‘reverse preferences’ guaranteed the interests of European countries under the Yaoundé Convention, with 18 associated countries (AASM). In general, these preferences were to be accorded to the exports ofdeveloping countries, considering the underdeveloped status of developing countries
and those countries that were dependent on their exports for their revenues. However,Yaoundé Convention I, which was signed in 1963, also had reverse preferences forthe export of products from European countries to associated countries in return.
Finally, the AASM’s privileged status was assured because West Germany and
the Netherlands shifted their stance to a more conciliatory position than France andbecause of the support of the other member states of the EEC and the European

16 On this subject, historical research is quite rare. See Garavini. Garavini, After Empires; Tomoya

Kuroda, ‘Instauration du système de préférences généralisées de la Communauté européenne,1968–
1971’, in Bulletin de l’Institut Pierre Renouvin, no. 34 (2011), pp. 137–148.
17 https://www.g77.org/doc/algier~1.htm (accessed 17 March 2022).
18 As for the dichotomy of globalism and regionalism, see Jean-Marie Palayret, ‘Mondialisme
contre régionalisme: CEE et ACP dans les négociations de la Convention de Lomé 1970–75’, inAntonio VARSORI (ed.), Inside the European Community: Actors and Policies in the European
Integration, Baden-Baden: Nomos, 2006, pp. 369–398.
19 BAK (Bundesarchiv Koblenz), B 136, 8394, Aufzeichnung des Bundesministers für Wirtschaft,Bonn, den 19. Januar 1968, in Kuroda, op.cit., p. 143.

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T. Kuroda

Commission.20 Therefore, the renewal of the Yaoundé Convention (autumn 1970)
was guaranteed before the introduction of the GSP in July 1971.
France and the EEC finally succeeded in cooperating with the United Kingdom
and Japan to a certain extent. Japan’s GSP entered into force on 1 August 1971,
almost at the same time as that of the EEC. Regarding the United Kingdom, albeit
with a short time delay, the GSP of this future member of the European Community
entered into force in January 1972. The United States later joined this mechanism
in 1976. In this way, the GSP was a symbol of Western cooperation with the Global
South.
In summary, the GSP was, to a certain extent, a successful instrument vis-à-vis the
Global South, in that it had an effect on the economic growth of developing countries
by attracting more investments.21 It was a product of Western cooperation. However,
it is important to note that in the context of France’s initial reluctance and gradualadjustments to its approach to the Global South, France had a regional approach that
focused on Africa and Mediterranean countries. Thus, we can identify a mixture ofaltruism and national self-interest at work.

4 CIECThe final case is the CIEC, which was convened from 1975 to 1977 in Paris. This was
also called the North–South dialogue.22 Why is this conference important for thisstudy? Even though this conference was limited to 27 countries, it collected delegations from both industrialised and developing countries. Therefore, despite thecriticism that it might cause the G77 to split, it would have been almost impossible
to have a conference of all nations of the world. UNCTAD, which gathered industrialised countries (List B) and 91 developing countries in 1971 (List A), was anotherforum; it included almost all developing countries at that time. Therefore, French
global policy pursued another, more distinct framework than the more universal institution, UNCTAD. In this way, this North–South dialogue can be considered to havebeen a French and European policy vis-à-vis the Global South.
As can be indicated by the venue, France initiated this dialogue. Even in those days,
this dialogue was widely conducted among diplomats and politicians, recognised as

20 The change in the Dutch position didn’t materialise until after the Community adjusted its policy toinclude its dependent territories, such as Surinam and Antilles, in GSP territories, as the Netherlands
demanded for six months. BAK, B 102, 113764, aide-mémoire du Conseil, Bruxelles, le 15 mars
1971. Cited in Kuroda, op.cit.
21 Richard N. Cooper, ‘Economic aspects of the Cold War, 1962–1975’, in Melvyn P. Leffler and
Odd Arne Westad (eds.), The Cambridge History of the Cold War, Vol. II, Cambridge: Cambridge
University Press, 2010, p. 63.
22 On this topic, Garavini’s contribution was exceptional. Garavini, After Empires, especially
Chapter 6.

12 France, Decolonisation, and the Global South …

125

the initiative of French President Valéry Giscard d’Estaing.23 This is because Giscard
proposed a conference between industrialised and developing countries in a press
conference directed toward the Organisation of the Petroleum Exporting Countries(OPEC) in October 1974, after the first oil shock. It was also related to the New
International Economic Order (NIEO), declared at the UN General Assembly in
April 1974. It was initiated by the Algerian President, Houari Boumedienne. The
creation of the North–South dialogue can be considered Giscard’s reaction to thedemands of NIEO. Therefore, it is necessary to focus on Giscard d’Estaing and his
ideas and attitudes vis-à-vis developing countries.
What were Giscard’s ideas behind this initiative? It is easy to discern his overall
energy security policy, which includes economic, political, and strategic interests.
His initial idea at the time of the proposal was to hold a conference between energy
consumers and producer countries, including OPEC members, not to hold a conference on international economic cooperation. Giscard did not clearly articulate theinterest of the consumer countries; he only mentioned realistic solutions such as theadjustment of the world order, the potential limits of assistance by industrialised countries to developing countries, and the protection of the interests of petrol-producing
countries: the indexation and guarantee of revenue (garantie de revenu). As Jeande Lipkowski, the Minister of Cooperation under the government of then Prime
Minister Jacques Chirac recalled, Giscard’s idea was to ‘reduce the gap between
industrialised countries and deprived countries.’24 In this sense, Giscard’s idea wasbenevolent to developing countries. However, if the majority of industrialised countries were in favour of enacting energy committees, it can be deduced that securing
energy supply at a moderate price (the oil shock caused an upheaval of price andsupply) was also a principal objective of Giscard and his partner countries. Furthermore, the name ‘CIEC’ was only coined around October or November 1975, after
various French contacts with future participating countries, including the UnitedStates, Japan, and Saudi Arabia. Additionally, during negotiations of the first Lomé
Convention, Giscard and France faced enormous pressure from African, Caribbean,
and Pacific (ACP) countries to increase French development aid.25 Therefore, it was
important for him to ease this pressure. Thus, initially, Giscard and France were
motivated not only by humanitarianism but also by a clear national interest after the
23 For example, this document cites the words of the initiative of Giscard d’Estaing. AG/5(3)/889,

Réunion préparatoire à la conférence proposées par le président de la République française, le 15
avril 1975. We could find at least 11 citations in this carton. As for Giscard d’Estaing’s biography,
see the representative work of Roussel. Eric Roussel, Valéry Giscard d’Estaing, Paris: Editions del’Observatoire, 2018.
24 AG/5(3)/1478, Note de Jean de Lipkowski, ‘Le dialogue Nord-Sud- échec ou partie remise? Pourl’instant, l’impasse’, no date. Apparently, this note was written in 1976.
25 Regarding the EEC’s development policy, see Bossuat, Calandri, and Garavini.
Gérard Bossuat (dir.), La France, l’Europe et l’aide au développement: des traités de Rome à nos
jours, Paris: CHEFF, 2013. Elena Calandri, ‘EEC and Mediterranean: Hitting the Glass Ceiling’,
in Ulrich Kroz, Kiran Klaus Patel, and Federico Romero (eds.), Europe’s Cold War Relations: The
EC Towards a Global Role, Bloomsbury, 2020; Giuliano Garavini, ‘The EC’s Development Policy:
Eurafrica Factor’, in Ulrich Kroz, Kiran Klaus Patel, and Federico Romero (eds.), Europe’s Cold
War Relations: The EC Towards a Global Role, Bloomsbury, 2020.

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first oil shock. Henceforth, he pursued this interest around this global conference,
although he was flexible enough to enlarge this conference to other fields, such as
development and primary products, as desired by developing countries.
Diplomats, including Louis de Guirangaud, the then Foreign Minister, werelargely in favour of Giscard’s initiative, meaning that Giscard succeeded in holding
a conference in the autumn of 1975. Initially, a minority of diplomats opposed
Giscard’s initiative. For example, Jean-Pierre Dutet, an economic advisor to Giscard,
was exceptionally reluctant.26 Giscard’s idea was the ‘organisation of the market’.
This idea represented a shift from the liberal Bretton Woods order to an organised market, based on the collective management of great global mechanisms.27
The Foreign Ministry had already initiated lengthy contact with its West German
counterpart in June 1975, only two months after the meeting of the Conference on
Energy and Economic Issues (réunion à la Conférence sur l’Energie et les problèmes économiques).28 In addition, Francis Huré, France’s Ambassador to Belgium,
regarded the CIEC as a tool to react to the demands of NIEO.29
Therefore, the French initiative for ‘global’ North–South dialogue was not only
altruistic but also based on French perception of national interests. However, fromthe 1970s to the early 1980s, French policy remained regionalist if we consider
inter-regionalism between the EEC and ASEAN in the latter half of the 1970s. West
Germany and the United Kingdom were rather favourable towards the institutionalisation of these two regional organisations, while France only ultimately changed
its position on the holding of the Ministerial Conference in 1978, based on its own
Cold War diplomacy.30 Regarding India, the same phenomenon occurred in that theUnited Kingdom rather than France promoted the construction of a relationship, inthe case of a commercial agreement signed in 1973. Finally, France was reluctant for
the Commission and the People’s Republic of China (PRC) to have official relations
because ‘they did not want the Chinese to think that the French foreign policy wasbound by Community decision-making.’ West Germany was initially in favour of
empowering the European Commission to speak in the name of the Community.31
Therefore, the French formal bilateral relationship with the PRC after diplomatic
26 AG/5(3)/889.
27 Giuliano Garavini, The Rise and Fall of OPEC in the Twentieth Century, Oxford: Oxford

University Press, 2019, p. 256.
28 MAEF, DE-CE, 1705, Télégramme à l’arrivée de Bonn, le 18 juin 1975. Objet: échange de vus

franco-allemandes sur l’énergie, signé Wormser.
29 MAEF, DE-CE, 1706, Télégramme à l’arrivée de Bruxelles, le 10 décembre 1975.
30 Tomoya Kuroda, ‘Institutionalisation of Inter-Regionalism: European Community–ASEAN

Relations in the Late 1970s’, in Asia–Pacific Journal of EU Studies, Vol.13, no. 1 (2015), pp. 27–44.
However, if we consider informal commercial agreement between France, West Germany, Italy, theUnited Kingdom, Canada, the United States, and Japan in July 1976 (credit for the export), we
can discern the globalist element of France at that time. See Laurence Badel, Diplomatie et grands
contrats, Paris: Publications de la Sorbonne, 2010, p. 412.
31 Marie Julie Chenard, ‘The European Community’s Opening to the People’s Republic of China,
1969–1979: Internal Decision-Making on External Relations’, PhD dissertation submitted to LSE,
2012, p. 70.

12 France, Decolonisation, and the Global South …

127

recognition in 1964 precluded the EEC’s multilateral approach towards the PRC.32
Accordingly, the French global approach was superseded by its regional approach,so that French external policy sometimes emerged as a mixture of global and regional
approaches.

5 Conclusion
What were France’s relations vis-à-vis the Global South from the 1950s to the endof the 1970s? First, French attitudes were rather reactive, with some exceptions. It
is true that France created the phrase ‘Third World’ and contributed to a world ordercomposed of three groups. However, French governments did not necessarily pursue
this attitude later. Exceptionally, France under Giscard was a forerunner, but in manycases, French actions were rather reactive.
Even under President Giscard d’Estaing, the initiator of the international conference on energy and development, France’s motives for holding the CIEC in Paris justafter the first oil shock were a mixture of altruism and national self-interest. France
wanted to secure a supply of oil and ease pressures for a more equitable international
economic order from the Global South and to be benevolent in contributing to a more
equitable international order.
In addition, France was reactive in other cases because France was rather
favourable to the regional approach, which focused on nearby regions such as
Africa and the Mediterranean, rather than the global approach. This was becauseof France’s historical ties with Africa and the Mediterranean, and because of its
strategy to continue its influence. This is obvious in the GSP negotiations. France
finally accepted the EEC’s introduction of GSP to the G77 in July 1971 because
France could assure itself that the renewal of the Yaoundé Convention had alreadybeen decided in 1970, before the introduction of the GSP.
After the advent of neoliberalism, benevolence withered into a more equal but
somewhat merciless relationship, and different stories should be written. The timemight have already arrived when the Zeitgeist has shifted gradually to populism,
which is now widespread in the world, including in Asian countries such as thePhilippines, retaining its influence even in the midst of the COVID-19 pandemic.
Acknowledgements This paper is an upgraded version of an article as part of conference proceedings, edited by Kumiko Haba, 100 Years of World Wars and Post-War Regional Collaboration andGood Governance, Kyoto: Nakanishi Printing, 2020. The author thanks Prof. Asahiko Hanzawa andProf. Giulia Rami for their helpful comments. It should be noted that this research was supported
by JSPS KAKENHI Grant Number 18K01737.

32 Human rights issues may be an exception. Lorenzo Ferrari, Sometimes Speaking with a Single

Voice: The European Community as an International Actor, 1969–1979, Brussels: Peter Lang,
2016. Actually, Archives of Giscard d’Estaing in French National Archives sometimes shows the‘humanitarian’ as an index.

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T. Kuroda

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Relations in the Late 1970s,’ in Asia-Pacific Journal of EU Studies, Vol. 13, no. 1, pp. 27–44.
Manela, Erez (2007), The Wilsonian Moment: Self-Determination and the International Origins of
Anticolonial Nationalism, Oxford: Oxford University Press.
Matsumoto, Saho (2019), The Vatican in International Politics, 1914 to the Present (in Japanese),Tokyo: Chikura Shobou.
Migani, Migani (2008), La France et l’Afrique sub-saharienne, 1957–1963 Histoire d’une
décolonisation entre idéaux eurafricains et politique de puissance, Bruxelles: Peter Lang.
Nakao, Sakiko (2017), ‘Définir l’« Afrique » entre Panafricanisme et Nationalisme en Afrique del’Ouest. Analyses à travers les transformations sociales au Sénégal, au Ghana et en Haute-Volta
autemps de la décolonisation (1945–1962)’, PhD dissertation submitted to EHESS.
Palayret, Jean-Marie (2006), ‘Mondialisme contre régionalisme: CEE et ACP dans les négociations de la Convention de Lomé 1970–75’, in Antonio VARSORI (ed.), Inside the European
Community: Actors and Policies in the European Integration, Baden-Baden: Nomos, pp. 369–398.
Patel, Kiran Klaus (2018), Projekt Europa: eine kritische Geschichte, München: C.H.Bech.

12 France, Decolonisation, and the Global South …

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Prashad, Vijay (2007), The Darker Nations, New York: The New Press.
Prashad, Vijay (2012), The Poorer Nations, London: Verso.
Roussel, Éric (2018), Valéry Giscard d’Estaing, Paris: Editions de l’Observatoire.
Varsori, Antonio and Wolfram Kaiser (2010), European Union History: Themes and Debates,
Houndmills: Palgrave Macmillan.
Westad, Odd Arne (2004), The Global Cold War: Third World Interventions and the Making of Our
Times, Cambridge: Cambridge University Press.

Bibliography
Aron, Raymond, Paix et Guerre entre les Nations, Paris: Calmann-Levy Editions, 2004.
Kuroda, Tomoya (2014), ‘EC–ASEAN Relations and the Establishment of the Ministerial Conference, 1975–1978’, in Claudia Hiepel (ed.), Europe in a Globalising world, Baden-Baden: Nomos
Verlag.
Kuroda, Tomoya (2019), ‘EC–ASEAN Relations in the 1970s as an Origin of the European UnionAsia Relationship’, in Journal of European Integration History, Vol. 25, no. 1, pp. 65–80.
Loth, Wilfried (2015), Building Europe: A History of European Unification, Berlin: De Gruyter,
Oldenbourg.
Loth, Wilfried (2021), Tensioni globali: une storia politica del mondo 1945–2020, translated byAlvise La Rocca, Torino: Giulio Einaudi.
Milward, Alan (2005), Politics and Economics in the History of the European Union, New York:
Routledge.

Tomoya Kuroda, (Dr.) Associate Professor at Senshu University (Tokyo) Ph.D. in Political
Science. Tomoya KURODA is currently an associate professor at Senshu University (Tokyo,
Japan). He graduated from Kyoto University (B.A.) and obtained a Master’s degree and a Ph.D.
from Keio University (Tokyo, Japan). In the meantime, he has studied abroad, at Sciences Po
Paris, Paris 1/Cergy-Pontoise University in France, and at the University of California Davis in
the United States, for several years. His specialties are European integration history, French diplomatic history, and the relationship between Europe and Asia, mostly regarding developing countries. His recent publications include “EC-ASEAN relations and the establishment of the Ministerial Conference,1975–1978” published in Claudia Hiepel (ed.), Europe in a Globalising World,
Baden-Baden: Nomos Verlag, 2014 and “EC-ASEAN Relations in the 1970s as an Origin of theEuropean Union-Asia Relationship” in Journal of European Integration History, Vol. 25, No.1
(2019).

Chapter 13

North Korea and Wars in Africa and Asia
Satoru Miyamoto

Abstract Historically, North Korea has participated in many wars in Asia andAfrica. The question is “why?” Some people may say that North Korea is “exporting
revolution”, however, North Korea dispatched its troops and sent weapons not only tocommunist countries but also to non-communist countries. North Korea has participated in many wars because it has become more friendly with other countries. North
Korea has participated in wars in Asia and Africa according to two objectives—
exporting revolution, as a member of the Communist bloc, and anti-imperialism, asa member of the Third World. North Korea is a member of the Third World. It is
one of the reasons that the North Korean regime survived after the Cold War. Thus,
North Korea is not an isolated country; it has unexpectedly developed friendships
with countries that oppose the US. Therefore, North Korea, as a member of the Third
World, will continue to struggle against the US for anti-imperialism.
Keywords North Korea · Communist bloc · Third world · Anti-imperialism

1 Introduction
North Korea has participated in many wars in Asia and Africa. Not only did North
Korea start the Korean War in 1950, but it also dispatched its troops to the Chinese
Civil War (second phase), Vietnam War, October War (Yom Kippur War), Gukurahundi (aftermath of the Rhodesian Bush War), Ogaden War, the Iran-Iraq War, theAngolan Civil War, and so forth. Recently, it has been reported that North Korea
dispatched two military units to the Syrian Civil War.
Historically, North Korea has participated in many wars. The question is why.
Some people may say that North Korea is “exporting revolution” (like Cuba) as asocialist country. Cuba dispatched its troops to many countries, thereby exporting
revolution. It is not strange that North Korea also participated in wars, effectively
doing the same thing.
S. Miyamoto (B)Seigakuin University, Ageo, Japane-mail: s_miyamoto@seigakuin-univ.ac.jp© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_13

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However, North Korea dispatched its troops and sent weapons not only to communist countries but also to non-communist countries. North Korea would have different
reasons than Cuba for participating in wars. Exporting revolution is inexplicable
as a motive of North Korea because some refugees from North Korea confessedthat the country has exported weapons and dispatched troops to countries that havefriendships with the US, like Zaire (presently, Democratic Republic of the Congo),
Zimbabwe, the United Arab Emirates, and Saudi Arabia.
North Korea has friendships with former and current communist countries, as well
as non-communist countries. It is said that North Korea is an isolated country, but
this is not true. We need to reconsider North Korea’s image. Currently, the country
maintains diplomatic relations with 160 countries that are members of the United
Nations. During the Cold War, North Korea concluded its alliance treaties withnot only the Soviet Union and China, but also with Libya and Cuba. North Korea
is friendly with many countries throughout the world, contrary to many people’s
beliefs.
I think that North Korea has participated in many wars because it has become
more friendly with other countries. Herein, I would like to explain North Korea’s
participation in numerous wars by the changes in its foreign policies.

2 Changes in North Korea’s Foreign Policies
First, I should emphasize that North Korea currently has diplomatic relations withmany members of the United Nations (UN). At the end of 2019, North Korea had
diplomatic relations with 160 of the 193 UN members. In addition, North Korea
has diplomatic relations with three non-members of the UN: Palestine, the Sahrawi
Arab Democratic Republic (Western Sahara), and the European Union (EU). In total,
North Korea has diplomatic relations with 163 countries.
However, North Korea did not intend to increase its diplomatic relations, except
for relations with communist countries upon its founding. When North Korea wasfounded, it had diplomatic relations with only 11 communist countries. Its foreign
policy prioritized the Communist bloc until the Sino-Soviet split in the 1960s.
The number of foreign countries with which North Korea has established diplomatic relations is shown in Table 1. North Korea had diplomatic relations with
only communist countries in the 1940s and 1950s. However, it has enjoyed anincrease in the number of countries with whom it has diplomatic relations since
the aforementioned Sino-Soviet split.
North Korea established diplomatic relations with 66 countries in the 1970s
because of the Sino-Soviet split, and the Sino-American rapprochement changed
North Korea’s foreign policy from Communist bloc diplomacy to Third World
diplomacy.
Therefore, North Korea’s participation in war aligns with two objectives. One
is exporting revolution, as a member of the Communist bloc, and another is “antiimperialism,” as a member of the Third World. I realize that it is difficult to distinguish13 North Korea and Wars in Africa and Asia
Table 1 The number offoreign countries with which
North Korea has establisheddiplomatic relations1

133

1940s

11

1950s

3

1960s

21

1970s

66

1980s

15

1990s

32

2000s

24

2010s

1

clearly between the two objectives. Herein, I will attempt to explain several cases ofNorth Korea’s participation in wars in Africa and Asia that were based on these two
objectives.

3 Wars for the Communist Bloc
North Korea was founded as a member of the Communist bloc; therefore, it could
send weapons and dispatch troops only to foreign communist parties (i.e., exporting
revolution). Until the end of the 1960s, North Korea’s foreign activities were—in
most every case—cases of exporting revolution as a communist country. I will present
two cases, as follows:

3.1 Chinese Civil War (Second Phase)
Almost half of the early leaders in North Korea were members of the Chinese
Communist Party (CCP) before the liberation of the Korean Peninsula from the
Empire of Japan in 1945. Naturally, they assisted the CCP when the Chinese Civil
War began in 1945 in Manchuria (later called Northeast China).
In general, it is said that the Chinese Civil War broke out in 1946. However, soldier
units of the Chinese Nationalist Party (KMT) clashed with soldier units of the CCP
in November 1945 at Shanhai Pass, an entrance to Manchuria from mainland China.
The CCP organized the Northeast People’s Self-Governing Army—led by Lin
Biao—in Manchuria in November 1945. While Lin Biao brought many Korean
communists to Manchuria from Yan’an, the home base of the CCP, he regimented
many Korean partisans backed by the Soviet Union. It is estimated that his actions
reflected Stalin’s will. Korean leaders backed by the Soviet Union had two choices:
1 Satoru Miyamoto, “North Korea’s Foreign Policy: A Non-isolated Country with Expanding

Relations,” The SAGE Handbook of Asian Foreign Policy (Los Angeles: Sage Publishing, 2020),
pp. 636–656

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S. Miyamoto

to back North Korea in building a new country or fight against the KMT for the CCP
and the Soviet Union. Kim Il-sung was a member of the group that chose to returnto North Korea.
Therefore, early leaders in North Korea, including Kim Il-sung, assisted Lin Biao
and his army because they thought it was their duty as communists and Koreans
under the control of the Soviet Union. When Lin Biao’s army lost the field at the endof 1945, his army was harbored in North Korea. In addition, North Korea’s leaders
provided weapons to Lin Biao that they had confiscated from the defeated Japanesearmy.
North Korea’s leaders sent not only weapons but also soldiers for Lin Biao’s army.
It is said that several thousand soldiers in North Pyongan Province (Northwest Korea)
participated in the Chinese Civil War.2
Korean soldiers in the CCP fought against the KMT in Manchuria; however, someof them continued to pursue the KMT to Hainan (the southernmost area of China).
The soldiers backed North Korea after the Chinese Civil War and participated in the
Korean War. Therefore, I can safely say that the Korean War was an extra contest of
the Chinese Civil War for Korean communists.

3.2 Vietnam War
North Korea dispatched its air force to North Vietnam to fight against US and South
Korean forces in Vietnam during the Vietnam War. One of North Korea’s objectives
for participating in the Vietnam War was, reportedly, to assist North Vietnam inexporting revolution as a member of the Communist bloc. However, this was not
the case. North Korea, in conflict with the US, needed military assistance from theCommunist bloc, which was about to collapse because of the Sino-Soviet split. A
united Communist bloc was desirable for North Korea in its conflict with the US.
In the Vietnam War, both China and the Soviet Union dispatched auxiliary troops
and sent considerable aid to North Vietnam. The Supreme Leader of North Korea,
Kim Il-sung, thought that aligning with North Vietnam to participate in the Vietnam
War was symbolic of a solid Communist bloc. Therefore, North Korea decided todispatch auxiliary troops to North Vietnam as a member of the Communist bloc.
First, North Korea dispatched tunnel workers and other non-combatants to North
Vietnam in 1965. Subsequently, on October 5, 1966, at the Workers’ Party of Korea(WPK) conference, Kim Il-Sung declared the need to dispatch North Korean troops
to North Vietnam. He thought that forming a united front against “American imperialism” would make the Communist bloc solid. North Korea tried to fight against
American imperialism and its South Korean “puppet” in Vietnam.

2 Satoru Miyamoto, “The Influence on the Process in the Foundation of the Korean People’s Armyby China-North Korea Relations,” Modern Korean History, Volume 1, Number 1 (March 2013) [inKorean], pp. 7–29.

13 North Korea and Wars in Africa and Asia

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North Korea dispatched the air force’s 203rd Unit in October 1966 to North
Vietnam. The 203rd Unit consisted of approximately 150 members, including 24
pilots; 14 (12 pilots and two grand staff) of them died during the war. The unit thenchanged its name to the 923rd Regiment under the North Vietnamese Air Forcecommander and shot down 26 US Air Force planes during the war. It was estimatedthat they would withdraw from North Vietnam in 1969.3
North Korea fought against American imperialism and its puppet in a vain effort
to solidify the Communist bloc. Despite Kim Il-Sung’s wish, the Communist bloc
could not renew its past ties. In March 1969, the Soviet Union and China clashedmilitarily on Damansky Island (on the border between the Soviet Union and China).
The leaders in North Korea were shaken; we can see from the facts that this incident
was not reported in North Korea. Therefore, North Korea abandoned its Communist
bloc diplomacy.

4 Wars for the Third World
North Korea had to change its foreign policies from Communist bloc diplomacy
to Third World diplomacy in the 1970s because of the Sino-Soviet split andSino-American rapprochement. After the clash at Damansky Island, North Korea
succeeded in healing its relationship with China; however, China approached theUS, which North Korea had expressed hate for because of its imperialism. North
Korea had to find other friendly countries to oppose the US. Friendly countries that
North Korea found were members of the Third World. Therefore, North Korea began
to participate in wars for anti-imperialism as a member of the Third World. I will
present two cases, as follows:

4.1 October War (Yom Kippur War)Egyptian President Muhammad Anwar el-Sadat, who had been preparing to battle
Israel with support from the Soviet Union, suddenly disclosed that the Soviet military
assistance advisory group was pulling out on July 18, 1972, in accordance with arequest from the Egyptian government. It certainly prevented Egyptian forces frompushing ahead with their preparations for war. Saad el-Shazly, the general chief ofstaff of the Egyptian forces, remarked that the shortage of MIG pilots remainedunresolved.
Shazly asked CHANG Jung-hwan, a North Korean government representative of
Egypt in March 1973, to dispatch North Korean troops to train Egyptian pilots. After
repeated negotiations, Shazly visited North Korea for a week, from April 6 to April
3 Satoru Miyamoto, Why doesn’t Coup d’Etat Happen in North Korea?: Civil-military Relations

and Foreign Military Assistance (Tokyo: Ushiosyobo Kojinsha, 2013) [in Japanese], pp. 121–125.

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S. Miyamoto

13, and had a meeting with Kim Il-sung. In the end, his visit seemed to be decisivein ensuring the dispatch of North Korean troops to Egypt.
North Korea’s objective was clearly friendship with Egypt, the big power of the
Middle East and Third World. Supporting Egypt coincided with North Korea’s antiimperialism thoughts because Egypt was fighting against Israel, the country that
North Korea regarded as the puppet of American imperialism.
The North Korean Air Force units—consisting of 30 pilots, eight flight controllers,
five interpreters, three administrators, a doctor, and a cook—arrived in Egypt in June
and were assigned in July.4
The October War broke out immediately, led by the allied forces of Egypt. Syria
struck the Israeli military on October 6 but suffered defeat early on. After Israel
launched a counterattack, Kim Il-sung announced that he would support all Arabcountries on October 17. He seemed to be hoping to strengthen relations between
Arab countries as a whole and North Korea by touting military support. The US
government announced that Israel had fought against the North Korean Air Forceon the same day. The entire world knew that North Korean pilots were fighting theIsraeli Air Force in the skies of the Middle East.5 North Korean pilots shot down
four Israeli combat airplanes at the beginning of the war.6
Additionally, North Korea dispatched air force personnel to Syria in response toa request from the Syrian government during the latter half of the war. North Korea
succeeded in earning the friendship of Egypt and Syria. As a result, North Korea
received many advocates in the UN General Assembly and became a member of
the Non-Aligned Movement in 1975. Therefore, I can say that participation in the
October War made North Korea a member of the Third World.

4.2 Angolan Civil War
It has been reported that North Korea was engaged in the Angolan Civil War (1975–
2002) between the People’s Movement for the Liberation of Angola (MPLA), theNational Union for the Total Independence of Angola (UNITA), and the National
Liberation Front of Angola (FNLA). The MPLA has been a ruler of capital since1975, when Angola gained independence from Portugal. While the Soviet Union andCuba supported the MPLA, China and South Africa supported the UNITA and the
US supported the FNLA.
It has been reported several times—primarily by South African presses—that
North Korea dispatched troops to the Angolan Civil War in 1984. According to
4 Satoru Miyamoto and Satoshi Ikeuchi, “The Origin of North Korea’s Ballistic Missile Develop-

ment: From the Memoirs of Egyptian Army General Staff Saad el-Shazly”, The Monthly Journal
Toa (East Asia), Number 553 (July 2013) [in Japanese], pp. 82–86.
5 Satoru Miyamoto, “DPRK Troop Dispatches and Military Support in the Middle East: Change
from Military Support to Arms Trade in the 1970s,” East Asia, Volume 27, Number 4 (November2010), pp. 349–352.
6 Rodong Sinmun, February 12, 2012.

13 North Korea and Wars in Africa and Asia

137

these reports, North Korea dispatched several thousand troops to fight against the
UNITA.7 W. Martin James, a professor at Henderson State University, estimated that
North Korea dispatched 1,500–3,000 troops to Angola.8 It has also been reported that
North Korea dispatched twenty-five thousand troops to Angola.9 North Korea denied
these reports on December 3, 198410 ; however, South African press reports would
be considered correct to some degree by contemporary circumstantial evidence.
Information in foreign countries about North Korea during the Angolan Civil
War is confusing. John Stockwell, a former CIA officer during the Angolan Civil
War, reported that North Korea supported the UNITA.11 Humio Nakagawa, a former
professor at Tsukuba University, reported that North Korea supported the FNLA and
UNITA.12
What I can say with certainty is that North Korea consistently supported the
MPLA according to contemporary news in North Korea. Angolan’s first president,
Agostinho Neto, the chairman of the MPLA, visited North Korea in 1968 and 1971
before Angola’s independence. When he died in 1979, North Korea sent a telegramof sympathy to the Angolan government and MPLA. I cannot imagine that North
Korea assisted the FNLA and UNITA.
Of course, I do not yet know the details of North Korea’s participation in the
Angolan Civil War as it has not been made public. North Korea announced that it
assisted in the liberation of Zimbabwe, Mozambique, Namibia, Madagascar, andAngola.13 Therefore, if that is true, participation in the Angolan Civil War was partof North Korea’s anti-imperialism activities in Africa. In addition, North Korea did
not cooperate with China, but with the Soviet Union, as a member of the Communist
bloc in the Angolan Civil War. I can say that North Korea’s participation in the war
reflected two objectives: exporting revolution and anti-imperialism.
As a result, the MPLA still maintains its power in Angola and good friendships
with North Korea. Namibia gained independence in the Angolan Civil War and also
maintains its friendship with North Korea. North Korea built many artistic buildings
and works of art in Angola and Namibia after the war. I do not know the details yet;however, it seems fairly certain that North Korea participated in the Angolan Civil
War.

7 Asahi Shimbun, September 15, 1984 (quoted from the article of the Star, a newspaper in South

Africa).
8 W. Martin James III, A Political History of the Civil War in Angola, 1974–1990 (London and New

York: Routledge, 2011), pp. 212–218.
9 Mainichi Shimbun, November 30, 1984.
10 Rodong Sinmun, December 3, 1984.
11 John Stockwell, In Search of Enemies (London: André Deutsch Limited, 1978), p. 52.
12 Humio Nakagawa, “Cuba and the Angolan Civil War,” Humio Nakagawa ed., Modern Latin
America’s Relations with Asia and Africa (Tokyo: Institute of Developing Economies, 1980) [inJapanese], p. 43.
13 KIM Hyok-Mo and LEE Gwang Sam, Comrade Kim Il-Sung, Great Leader of the Cause of
Independent 8 (Pyongyang: Korea Social Science Publishing House, 2011) [in Korean], p. 266.

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S. Miyamoto

5 Conclusion
North Korea has participated in numerous wars in Asia and Africa according to
two objectives—exporting revolution, as a member of the Communist bloc, andanti-imperialism, as a member of the Third World.
North Korea participated in wars for exporting revolution as a member of theCommunist bloc until the Sino-Soviet split in the 1960s. North Korea participated in
the Chinese Civil War and Vietnam War, with the objective of exporting revolution.
However, North Korea began to participate in wars for anti-imperialism as amember of the Third World after the Damansky Island incident and Sino-American
rapprochement. North Korea began to find friendly countries in the Third World thatclashed with the US instead of the Communist bloc. North Korea participated in the
October War and Angolan Civil War owing to its anti-imperialist objective.
The two objectives sometimes coexisted if North Korea assisted pro-communist
parties or countries. While North Korea assisted the MPLA, which was supportedby the Soviet Union, it was in conflict with the UNITA and FNLA, which were
supported by China and the US in the Angolan Civil War. Supporting the MPLA for
North Korea fulfilled the objectives of exporting revolution and anti-imperialism.
North Korea has increased its friendships with other countries by participatingin many wars in Africa and Asia. I think it is one of the reasons that the North
Korean regime survived after the Cold War, even though many scholars expected it tocollapse like regimes in East European countries. I would like to emphasize that East
European countries were members of the Communist bloc; however, North Korea isa member of the Third World. Thus, North Korea is not an isolated country; it has
unexpectedly developed friendships with countries that oppose the US. Therefore,
North Korea, as a member of the Third World, will continue to struggle against the
US for anti-imperialism.

References
Books(English)James, W. Martin (2011), A Political History of the Civil War in Angola, 1974–1990, London and
New York: Routledge.
Stockwell, John (1978), In Search of Enemies, London: André Deutsch Limited.
(Japanese)
Miyamoto, Satoru (2013), Why Doesn’t Coup d’Etat Happen in North Korea?: Civil-military
Relations and Foreign Military Assistance, Tokyo: Ushiosyobo Kojinsha.
(Korean)Kim, Hyok-Mo and Lee, Gwang Sam (2011). Comrade Kim Il-Sung, Great Leader of the Cause of
Independent 8. Pyongyang: Korea Social Science Publishing House.

13 North Korea and Wars in Africa and Asia

139

Articles(English)Miyamoto, Satoru (2010), “DPRK Troop Dispatches and Military Support in the Middle East:
Change from Military Support to Arms Trade in the 1970s,” East Asia, Volume 27, Number 4(November), pp. 345–359.
Miyamoto, Satoru (2020), “North Korea’s Foreign Policy: A Non-isolated Country with Expanding
Relations,” The SAGE Handbook of Asian Foreign Policy, Los Angeles: Sage Publishing, pp. 636656.
(Japanese)
Miyamoto, Satoru and Ikeuchi, Satoshi (2013), “The Origin of North Korea’s Ballistic Missile
Development: From the Memoirs of Egyptian Army General Staff Saad el-Shazly”, The Monthly
Journal Toa (East Asia), Number 553 (July), pp. 78–86.
Nakagawa, Humio (1980), “Cuba and Angolan Civil War,” Nakagawa, Humio ed., Modern Latin
America’s relations with Asia and Africa, Tokyo: Institute of Developing Economies, pp. 33–57.
(Korean)Miyamoto, Satoru (2013), “The Influence on the Process in the Foundation of the Korean People’s
Army by China-North Korea Relations,” Modern Korean History, Volume 1, Number 1 (March),
pp. 7–29.

Newspapers(Japanese)
Asahi Shimbun
Mainichi Shimbun(Korean)Rodong Sinmun

Satoru Miyamoto is a professor at Seigakuin University. His expertise is North Korean studies,security in Northeast Asia, civil-military relations, and nuclear deterrence. He is the author ofbooks and many research papers about North Korean politics, diplomacy, and military. He is afamous researcher in Japan in the politics and international relations of North Korea. He also
attempts to establish empirical studies of North Korea in history and political science. He received
a master’s degree at Seoul National University and a doctorate at Kobe University. He is fluent inJapanese, Korean, and English.

Part IV

After 100 Years of Wars: How to Make
New World Order – Politics

Chapter 14

The United States’ Differing Strategies
of “New World Order” Between Europe
and Asia in the Post-War Period
Kumiko Haba

Abstract In this article, the author wishes to investigate and analyze what werethe underlying reasons for the United States to adopt a completely different strategy
towards Europe and Asia as part of its search for a New World Order during a period
defined by Toffler as a ‘Power Shift era’. While promoting the integration of Europe,
the US simultaneously accepted and encouraged division across East Asia.
Here, the author investigates and pays attention to why “the new world order”
of the United States or of the United States-Britain and the Soviet Union had beendifferent between Europe and Asia after WWII, and considers merits, demerits,
and limits of post-war new world order, analyzing forecast on European regional
integration, and Asian disintegration, or the aim and limits of new world order andthe “Divide and Rule” strategy of the United States. In connection with that, theauthor wishes to consider and investigate the contemporary “new world order” fromthe US-China trade war in 2018–2020; how we could reconstruct that phenomenon.
Keywords New World Order · The United States’ Strategy · European
Integration · Asian “Divide and Rule” Strategy

1 Introduction
In this article, I intend to investigate and analyze what were the underlying reasonsfor the United States to adopt a completely different strategy towards Europe andAsia as part of its search for a New World Order during a period defined by Toffler as aK. Haba (B)Aoyama Gakuin University, Tokyo, Japane-mail: khaba@aoyamagakuin.jp© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_14

143

144

K. Haba‘Power Shift era’.1 While promoting the integration of Europe, the US simultaneously
accepted and encouraged division across East Asia.2
Here, the author investigates and pays attention to why “the new world order”
of the United States or of the United States-Britain and the Soviet Union had beendifferent between Europe and Asia after WWII, and considers merits, demerits,
and limits of post-war new world order, analyzing forecast on European regional
integration, and Asian disintegration, or the aim and limits of new world order andthe “Divide and Rule” strategy of the United States. In connection with that, theauthor wishes to consider and investigate the contemporary “new world order” fromthe US-China trade war in 2018–2020; how we could reconstruct that phenomenon.

1.1 Democracy and War
In terms of values, US participation in World War I and World War II was verymuch connected with the pursuit of democracy. In World War I, President Wilson
changed the US position from one of neutrality to one spearheaded by the slogan,“the war to end all wars”. In its wake, President Wilson, issued the “Fourteen Points”
that envisaged a post-war world order built on democracy and establishment of the
League of Nations. In World War II, President Roosevelt entered the war, following
the Japanese attack on Pearl Harbor in December 1941, with a philosophy built upon
the “four freedoms”, freedom of speech, freedom of worship, freedom from want,
and freedom from fear.3 That he laid out during his January 1941 State of the Union
speech. It was a speech that also proposed a nascent United Nations and envisageda more effective post-war order than in 1918.

1 Fukuyama, Francis, State Building: Governance and World Order in the 21st Century, Profile

Books Ltd, 2004. Toffler, Alvin, Power Shift; Knowledge, Wealth, and Violence at the Edge of theTwenty-First Century, 1990. Haba Kumiko (Ed.), Twenty-First Century, International Society in the
Great Transition Era, Publisher of Law and Culture, Japan, 2019.
2 Haba, Kumiko, Division and Integration in Europe—Borders and Nationalism in Enlarged EU,
Inclusion or Exclusion, Chuo-Koron Shinsya, 2016. Haba, Kumiko, Yoshinobu Yamamoto andTakashi Oshimura (Eds.), East Asian Community Considering the International Politics, Minerva
Publishers, 2012. Haba, Kumiko (Ed.), Great Power Politics and the Future of Asian Regionalism, atHarvard University, Aoyama Gakuin University, Tokyo, 2013. Fukuyama, Francis, State Building:Governance and World Order in the 21st Century, Profile Books Ltd, 2004. Haba, Kumiko, AsianRegional Cooperation in the Global Era, Iwanami Publisher, 2012 (Translated to Chinese, 2013).
3 The Four Freedoms speech was given on January 6, 1941, in State of the Union. John V. Denson,
A Century of War (Large Print Edition): Lincoln, Wilson, and Roosevelt, CreateSpace Independent
Publishing Platform, 2006, Julia Hargrove, Franklin D. Roosevelt’s Four Freedoms Speech: History
Speaks, Teaching and Learning Company, 2018.

14 The United States’ Differing Strategies of “New World Order” …

145

The “four freedoms” would be protected by the “Four Policemen”, that is, theUSA, the UK, the Soviet Union, and the Republic of China. The inclusion of the
USSR and China stemmed from Roosevelt’s belief that future stability depended
on the inclusion of all the Great Powers. Such a ‘New World Order’ also addressed
skepticism that U.S. liberal leaders had towards what they saw as the colonial andimperialistic tendencies of many European nations, including the United Kingdom.
In addition, it was hoped that the future would be based upon ‘the rule of law’rather than the ‘the rule of force’. However, this wish had been repeatedly shatteredpost-1945. After World War II, the battle against Nazism, fascism, and militarism ofGermany, Italy and Japan, soon turned into a “fight to protect freedom” against theSoviet Union and communism as the world witnessed the start of “the Cold War”.
Because of this, “the four freedoms” underwent a major transformation in forming
the post-war World Order. No longer would they have a common global intent.
The strategy of the “New World Order” would take on a divergent hue i.e., would
be completely different in the European and Asian theatres. Was that difference
originally designed as such, or did historical or regional circumstances force thisdifference? This is the question that I will address in the rest of this chapter.

1.2 Change of “Enemy”
In Europe after World War II, a “no-war community” was realized through integration. It did so by incorporating the former Axis powers of Germany and Italy while
excluding the Soviet Union, which had experienced the highest human cost as amember of the Allies.4
As the security strategy, for energy collaboration the 1951 ECSC (European Coaland Steel Community), followed by the 1975 CSCE (Conference on Security andCooperation in Europe), which was organized, discussed and institutionalized, by not
only states but also by NGOs and NPOs, for regional safety and problem management.
On the other hand, in Asia, especially in East Asia, as is well known, a “Divide andRule” strategy was introduced.5
In Asia as well, a “network of containment”—against countries which had beenon the Allied side in World War II, like the Soviet Union and communist China,
established in 1949–, was formed to counter the communist threat. That network
would include Japan—the former “enemy”.

4 Documents: Germany/Holocaust, North Korea, and New Documents in East Asia/Korea, Wilson

Center, 2019.
5 Robert S. Ross, “The Geography of the Peace: East Asia in the Twenty-first Century”, International

Security, Volume 23, Issue 4, Spring, 1999, pp. 81–118.

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Japan is in a very specific position on the map when viewing the Earth from theNorth Pole. As a natural fortress it closes the Asian Continent toward the Pacific
Ocean, against the Soviet Union, China, or against North Korea and South Korea;
it contains the Asian continent over a length of 3000 km in the Pacific Ocean. Not
surprisingly, it functions as a very important fortress/base for the United States. At
the same time, as a result of the Korean War, the Korean Peninsula was divided
between North Korea and South Korea at the 38th parallel: geography encapsulated
the socialist sphere of the USSR, China and North Korea on the one hand, and thecapitalist sphere of South Korea and Japan on the other. This meant that a postwar peaceful collaboration and regional reconciliation across East Asia was notrealized and was, in fact, hampered by the US’s world strategy by Truman Doctrine,
which completely changed from Roosevelt ‘Four Freedoms’ policy. The USSR alsochanged their strategy by Stalin against so to call “Western World”. It wished to divide
Western World using that the ‘Stalin note’,6 the plan of neutralization of West- andEast Germany, but it was in vain.

1.3 Regional Collaboration Efforts and Their Obstruction
It has been 75 years since WWII, and 30 years since the end of the Cold War,but regional collaboration has remained so difficult in East Asia. During the first
22 years of the twenty-first century, we have witnessed many issues/problems thathave impacted upon regional dynamics—relations between Japan and China; thedemocratization movement in Hong Kong, elections in Taiwan, and the expansionof COVID-19.

6 Soh, Shimizu, “Stalin’s Note” and the Cold War, Journal of Western History, Volume 37, 2008,

pp. 58–68.

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Unlike in Europe, in East Asia regional co-operation and “non-war communities” through integration have yet to materialize. Under such circumstances, the US
unilateral leadership from the end of twentieth century, and especially during 4 years
of Trump Government from 2016–2020, had harmed so much the system of Liberal
Democracy.
Regardless of whether the US prefers it or not, the USA had always constructed
the New World Order after major conflicts. But the Trump administration amplified
fears that that traditional approach was in crisis. President Biden tried to change thatbut showed how difficult it would be to radically change diplomacy and domestic
affairs in a Republican-dominated parliament.
After four years of the Trump administration, Biden won the presidential electionin November 2020. But even in 2022, Trump and the Republicans have strong enoughinfluence in the United States and in the diplomatic field, still thinking “we are thefirst and brightest” and trying to prevent China from overtaking the United States in
the future.
There is a pressing need to consider a more multidimensional world order thatis different from “they are the first and American-led democracy”. And to consider
that, we need to think about Asia from the postwar period to the present day, why theUnited States did not allow integration and collaboration unlike Europe, and why itdoes not allow it until now.
Therefore, again, the main question of the author is, How could create the UnitedStates a “post-war world order” during and after the war, what were they aiming for,and why was it changed or different between Europe and East Asia?

2 The United States’ World Strategy After WWII
2.1 Three Focal Points of “Reconciliation” Between Europe
and East Asia After World War II
When considering the US strategy for Europe and Asia after World War II, there area few very important focal points. The first one is the massive number of casualties inWorld War II, the “German–French reconciliation” after the war and the start of theCold War. The second one is that the United States’ “post-war world order” strategy
was different in Europe and in East Asia. The third one concerns the changing status(conversion) of certain countries from ally to “enemy”, or from enemy to ‘ally’ afterWorld War II.

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1.

First, the number of dead in World War II and “German–French
Reconciliation”.7
In Europe during World War II, about 32 million to 37 million people died.
In World War I, this figure was about 9 million people; the number of dead had
quadrupled during only 20 years due to improved armaments. Among them, thedead of the Soviet Union were between 18 and 20 million people, accounting
for half of all casualties.8

•
•
•
•
•
•
•
•

•

On the other hand, the dead in Asia totaled over 18 million, with China
accounting for more than half with over ten million. That means about 50–57
million people died in World War II in Europe and Asia, more than 60 million
people died world-wide. The responsibility for the war was assigned to the
Tripartite Axis League—Germany, Italy, and Japan—who were compelled to
pay reparations to the Allies; the United Kingdom, the United States, the Soviet
Union and China. Therefore, under such circumstances, why was a German–
French reconciliation achieved, but not a German-Soviet reconciliation? If thelosing (defeated) nation is responsible for paying the cost of the war for the mostdamaged nation, it requires a “German-Soviet reconciliation” and “JapaneseChinese reconciliation”. So why a “German–French reconciliation”?
In Japan, it is sometimes said that Europe is a homogeneous society as a
Christian world; on the other hand, East Asia is so diverse due to the presenceof so many religions, cultures and nationalities; that is why it is not only difficult,but also impossible to make regional collaboration like in Europe. However, thiscomparison is not correct. A recognition of a long history of national rivalries
and conflict is a more accurate picture.
7 John V. Denson, A Century of War (Large Print Edition): Lincoln, Wilson, and Roosevelt,

CreateSpace Independent Publishing Platform, 2006. Alice Ackermann, “Reconciliation as a Peacebuilding Process in Postwar Europe, The Franco-German Case”, Peace and Change, A Journal of
Peace Research, July, 1994.
8 Times Atlas World War II Historical Map Compact Edition, Hara Shobo, 2001, 96, August 15,
1995, Asahi Shimbun, 1995.

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3.

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Krzysztof Pomian, a Polish historian, and Professor at the Nicolaus Copernicus University in Toruń, wrote in his book, Europe has been facing a confrontation over Christian religions, cultures and nations, since before the birth of Christ
until the contemporary world.9 The high number of dead during World War II
also tells the history of the conflict. Conflicts of nations were profound ones;
European history is a history of conflicts, and WWI and WWII were the peakof these confrontations.
Second, the Concept of the United States New World Order in the post war.
From the Tehran meeting to the Yalta Conference, unlike the more solitaryrole played by Woodrow Wilson towards the end of World War I, Roosevelt
would be joined by Winston Churchill and Josef Stalin to make the postwar“new world order.”After World War II, the postwar world order vision should have been basedon territorial inviolability and respect for sovereignty. However, at the end of
the war, in the Moscow Conference of October 10, 1944, Churchill and Stalin
talked about the influence of the great powers, sharing of key areas, and divided
the sphere of influence, as a “percentage agreement”.10 President Roosevelt wastrying to mediate the three countries, but ultimately lost out to illness and his
ultimate death in April 1945. Vice President Truman’s inauguration would resultin a sea change in the emphasis of US policy. It brought the Truman Doctrine(March 1947); military assistance toward Greece and Turkey following a requestof the United Kingdom brought the start of the Cold War, but it was alreadystarted a matter of controversy among the UK, the US and the Soviet Union in
the process of envisioning the postwar international order.
Third, The Decisive Transformation of the “Enemy” in the Post-War Period.
As is well known, in the second World War, three Axis countries, Germany,
Italy and Japan, requested territorial modification on the one hand, and Alliedcounties, like the US, the UK, Soviet Union, France and China, against the
infringement of the territory and sovereignty and respected “territorial integrity
and sovereignty” on the other. That is, immediately after World War II, the“enemy” of victorious powers was Germany, Italy, and Japan—Axis countries.
The German army was ruined completely by the Battle of Stalingrad, later by
the march to the west of the Soviet Army, and the United States indiscriminate
carpet bombing caused surrender. (May 1945). After that, America also dropped
atomic bombs on Hiroshima and Nagasaki in Japan (August 1945).
In the final stages of the war, the Soviet Union advanced until just before
the German border (January 1945), and on the eve of the German surrender,
in February 1945, the leaders of the US, the UK, and the USSR gathered in

9 Krzysztof Pomian, L’Europe et ses nations, Paris, Gallimard, 1990. Krzysztof Pomian (Transla-tion), What Is Europe?, Heibonsha, 1993.
10 “Percentage Agreement”, Charles Gati, Hungary and the Soviet Bloc, p. 31. Kumiko Haba,

Division and Integration in Europe, Chuo-Koron Shinsha, 2016, pp. 44–47. Gair Lundestad, The
American Non Policy Towards Eastern Europe, 1943–1947, Tromso-Oslo-Bergen, 1978.

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Yalta.11 Here, Roosevelt accepted Stalin’s request concerning Soviet interests
in Manchuria, the Kuril Islands and southern Sakhalin. As Roosevelt believedthat Soviet cooperation was essential for Japan’s surrender, he called for theannulment of the Japan-Soviet treaty of neutrality as he simultaneously asked
the Soviet army to enter Japanese territory. As a result, the three parties drew-up
a in Yalta, by the three parties of the United States, the United Kingdom and theSoviet Union, a secret agreement.12 The Soviet Union participated in the war
against Japan and invaded the northern Japanese islands the promised territory
at the request of the United States on August 9, 1945, in the wake of the atomic
attack. Five days later, Japan accepted the Potsdam Declaration on August 14
and sent a letter of surrender to the Allies on September 2, 1945. As a result, theSoviet Union kept its promises to the United States, occupying the Kuril andNorthern Islands. At this time, apparently Roosevelt respected the Soviet Union
and China as an Allied power and considered Germany and Japan as enemies.13
As a result of three points, namely (1) “Franco-German reconciliation”, (2) A
difference of Europe and Asia strategy as “post-war world order” of the US, (3)Conversion of “enemy” after the world war. In Europe, European integration
was under the US support. The Soviet Union containment policy started, on
the other hand, in East Asia. Then the underlying strategy of the East Asian“Divide and Rule “ was introduced, and as a result of that, the Asian region
continued to be hostile each other, until the twenty-first century. The questionis why European strategy could not be taken in East Asian international politics
of the US world order? Both were closely linked.
Four months before in Europe, the Soviet troops had already destroyed theGerman army in the Soviet territory and were marching west at breakneck
speed. The US and the UK Army quickly landed on the banks of the Elbe in
April 1945 and joined with the Soviet forces at the end of the month. Germany
surrendered on May 6, 1945. Pivatol to subsequent events, however, was thedeath of Roosevelt, who had a deep understanding of the Soviet Union and
China, without seeing the formal surrender of Germany or Japan.
11 Diana Preston, Eight Days at Yalta: How Churchill, Roosevelt and Stalin Shaped the Post-War

World, Pisador, 2019.
12 This secret agreement, called the “Yalta Agreement,” was agreed between Roosevelt, Stalin, andChurchill to encourage the Soviet Union to enter the war against Japan. Contents are following;
Maintaining the status quo of outer Mongolia (People’s Republic of Mongolia) under the strong
influence of the Soviet Union, returning southern Sakhalin to the Soviet Union, handing over
the Chishima Islands to the Soviet Union, the Soviet Union’s ports in Manchuria and the South
Manchuria Railway. It was agreed that the Soviet Union would participate in the war against Japanon the condition that it would secure its interests. It is said that the Soviet Union have resisted theabolition of the Neutral Treaty with Japan.
13 At the Cairo Conference and the Tehran Conference in November 1943, Roosevelt emphasizedadding China to the three major powers (US, UK and Soviet Union) by advocating the concept of‘Four Policemen’. It was also to advance the post-war initiative against Germany and Japan in anadvantageous manner.

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Containment policy toward the Soviet Union.
After the Second World War, both Truman and Churchill of the United
Kingdom both were wary of the Soviet Union, due to their overwhelming force
in the eastern half of Europe. The two leaders introduced the containment policy
against the Soviet Union in Europe and the far East.
In particular, Churchill had already delivered his famous Fulton speech in
March 1946 in Fulton, Missouri, USA, saying “From Stettin in the Baltic to
Trieste in the Adriatic, an iron curtain has descended across the Continent.”14
In addition, NATO (North Atlantic Treaty Association) was founded in April
1949. The organizations’ first General Secretary Hastings Ismay (from the UK)
famously quipped, “Keep the American’s in, the Russian’s out, and the German’sdown”.
On the other hand, Stalin, in what is referred to as the “Stalin Notes” inMarch 1952, offered German integration between east and west on a proposed
neutrality, German unity and in the center of the European buffer zone the safetyof the Soviet Union. However, at that time, this was refused by Adenauer’sWest German government. After that, Germany joined NATO and pursued rearmament.15 Through this process, the “enemies” in Europe were completelytransformed from Germany to the Soviet Union.
In the Far East, Roosevelt had always pinned his hopes on a Chinese administration under the leadership of Chiang Kai-shek. As we know, however, theChinese Communist Party secured power in October 1949 and the ChiangKai-shek’s Kuomintang administration fled to Taiwan. The following year the
Korean War broke out over the 38th parallel. When the outbreak occurred, theUnited States found itself up against a coalition of the Soviet Union and thesocialist regimes of China and North Korea.
Thus, the newly emerging Cold War order began to crystalize around thefollowing three focal points, (1) Reconciliation between Germany and France,(2) The “new world order” of the United States and the changes of strategy
between the administrations of Roosevelt and Truman, (3) The fundamental
transformation of former ‘enemies’ and ‘allies. The postwar world order, which
was supposed to be carried out by the United States, the UK, the Soviet Union
and China, was drastically rearranged by the transformation of the “enemy.“ But
the “new world order” would also take quite different forms between Europe
and East Asia.

14 Winston Churchill, Fulton speech on Iron Curtain. https://winstonchurchill.org/resources/spe

eches/1946-1963-elder-statesman/the-sinews-of-peace/.
15 Yoko Iwama, German Re-armament, Chuokoron-sha, 1993.

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3 Conciliation with the Enemy and the New World
Order—Divide and Rule in Asia
Considering why East Asia was not organized as a region, we must realize thatthe main reasons were driven by international rather than domestic factors. For theUnited States, immediately after the war, there was no reliable ally in East Asia.
Contrast this with the situation in Europe where almost every country in Europe
was in favor of restraining Germany, and few refused to form an alliance with theUnited States, except for French President De Gaulle. Therefore the “American in,German down, and Russian out" policy was very much welcomed. The United States
had, therefore, formed an alliance with Europe as a “region.” On the other hand, in
East Asia, both the Soviet Union and China, which extend far into the far East of thecontinent, had become socialist countries, and the leaders of the Republic of China
had fled to Taiwan. Therefore, in order to hold back the USSR and China, the only
remaining countries for the US to ally with were South Korea and Japan.
Few countries in East Asia could be trusted to organize the region. As a consequence of an accident of history, post-1945 Japan (a country that had experienced
one of the greatest human tragedies in history at Hiroshima and Nagasaki) became
a fortress of the capitalist world against the Soviet Union, China and North Korea
after the San Francisco Treaty in 1950. Initial signs for this envisioned role could
already be seen in McArthur’s direction of the GHQ. He considered using the Showa
Emperor as the center of new the constitutional monarchy in an attempt to bring thenation together and as an ally of the western world.

3.1 Leadership of Politicians Who Led the Reconciliation.
European Success
The reconciliation and joint leadership of European post-war enemies helped toframe the new era in post-war Europe. The success of this European settlement
largely depended on the following three examples of agency:
One is “Reconciliation between Germany and France” which was centered aroundthe central role Robert Schuman.16 Schuman was born in Luxembourg, studied inGermany, joined the resistance movement against the Vichy regime and was partof the liberation of France. He also held the office of French Prime Minister before
later becoming the Foreign Minister. He was a person who symbolized the German–
French Reconciliation, and the German–French Youth Exchange Program (used byeight million young people during the 70 years since the war) that has made the

16 Takahiro Kondo, “Robert Schumann’s German-French Collaboration”, Noriko Yasue, “GreatMen of the EU Integration; Schumann, Adenauer, Churchill”, both are in 63 Chapters to know theEuropean Union, Ed. By Kumiko Haba, Akashi Publisher, 2017, 5th edition, pp. 76–79, 80–82.

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likelihood of a war between Germany and France unthinkable. As a result of that,
the EU took the Nobel Peace Prize in 2012.17
The second is energy collaboration, which was the realization of the coal and steel
community and the Euratom (nuclear community) as laid out in the “Schuman Declaration” which was written by Jean Monnet. Having been the first of the SecretaryGeneral of the League of Nations, special chairman of the Joint Committee on the
management of military supplies during WWII he was familiar with the relationshipbetween energy and war.
The third is the freezing of geographical borders across Europe after WWII.
Europeans argued that changing borders would lead to conflict and war, therefore,
it would not allow border changes after the Soviet Union’s remarkable change likethe annexation of the Baltic states and the amendment of Poland’s eastern borderduring and after World War II.18 This played itself out in the “Helsinki Agreement”
and the creation of CSCE (the Conference on Security and Cooperation in Europe)in 1975, which was trying to solve the security questions all over Europe, including
the Soviet Union and Eastern Europe. Although Germany had been divided into Eastand West at that time, both German Prime Minister, Willy Brandt, who negotiatedthe agreement, and Helmut Schmidt who signed it, accepted the freezing borders
sincerely “but with humiliation”,19 for the sake of European stability and peace.
Because of that, after the fall of the Berlin Wall in 1990, Europeans no longer felt
a threat from the German unification, and accepted the unified Germany, as “thecountry walking with Europe”. That is why both Chancellor Kohl and Chancellor
Merkel repeatedly emphasized henceforth that “Germany lives with Europe.”

4 The United States’ World Strategy and International
Relations After 1950—Why Asia is Irreconcilable?20
As in Europe, East Asia too had a number of capable politicians who, preached theintegration of East Asia. In Japan, we can point to Tenshin Okakura and Hirofumi
Ito for example, who was assassinated because of the Japanese annexation of Korea,

17 It was highly estimated and praised following: Europe, especially Germany and France, overcame

nationalism after WWII, and realized an economic community, spread respect for the democraticsystem and basic human rights to the European continent, and as a result, peace, stability andeconomic prosperity in Europe and in the world. European Nobel Peace Prize, 2012. The Nobel
Peace Prize, 2012.
18 Annexation of the Soviet Union in eastern Poland after the conclusion of the German-Soviet
Non-Aggression Treaty and the annexation of the three Baltic states of the Soviet Union in 1940.
19 Professor Karl Kaiser informed that word when we discussed about the Helsinki agreement in2012.
20 Sharing the Burden of the Past: Legacies of War in Europe, America, and Asia, The Asia
Foundation, Friederichs Ebert Stiftung, 2003.

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K. Habaand Jungun An, who assassinated Hirofumi Ito.21 We can also mention Chiang Kaishek, leader of National Party, and Mao Zedong, leader of Chinese Communist
Party. However, their philosophies were obviously poling apart. In comparison with
European visionaries such as Schuman and Monnet, East Asian leaders, with national
unity as their primary goal, could not reconcile and work with each other Under suchcircumstances the prospects of mutual reconciliation and prosperity were lost.
As well as regional political dynamics, US opposition to East Asian nationalism
and region-building would also prove crucial. U.S. leaders regarded the ideas ofthose who aspired to Asian integration as dangerous. Because of that, after WWII,
the United States relied on politicians who could execute US strategies and concentrate on domestic development, rather than leaders who held a strong nationalist andregionalist outlook. In the case of Japan, Shigeru Yoshida and Hayato Ikeda, who
tried to suppress the increase in security and military power and aim for the prosperity
and development of the country, played such a role. After the war, Japanese leaders
specialized in its postwar recovery and growth, focusing on the economy, rather
than engaging in international politics. Politicians who sought nationalism, independence and collaboration with neighbors different from the United States tended tobe ostracized.
The US approach to East Asia became one of “Divide and Rule” especially after
the seizure of government of the Communist Party in North Korea in September
1948 and China in October 1949. The breakout of the Korean War in 1950, further
strengthened the US strategy, resulting in Japan becoming a buffer against communist
countries as laid out in the Treaty of Peace with Japan in San Francisco in 1950,
and the Treaty of Mutual Cooperation and Security between the United States andJapan.22

4.1 The Establishment of a Strong Socialist Regime
in the East Asian ContinentWith the establishment of Mao’s Communist Party system and Chiang Kai-shek
fleeing to Taiwan, a powerful Communist Party troika was established on the East
Sea coast of Japan, by the Soviet Union, North Korea, and China. In addition, North
Korea’s rich seams of uranium ore proved crucial for the Soviet Union’s nuclear
capability which would extent to both China and North Korea. The three represented
a powerful socialist and communist system that was deemed a threat by the UnitedStates. In such a geopolitical atmosphere, Japan’s importance as an anti-communist
buffer was enhanced. From a Japanese perspective it could be argue that it lacked the

21 Interestingly, both Hirobumi Ito and Jungun An have been highly regarded as nationalists andEast Asian integrationists as well, in both countries.
22 Full text and translation of the Treaty of Peace with Japan in San Francisco: http://www.chukai.ne.

jp/~masago/sanfran.html, http://worldjpn.grips.ac.jp/documents/texts/docs/19510908.T1J.html.

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sorts of reliable neighbors like Germany and Italy had in Europe, in order to engage
in processes of region-building.

4.2 Regional Integration Was Realized in Southeast Asia
Even Under the Cold War
This was not the difference between Europe and Asia. Because, as everyone knows,“divide and rule policy” was a peculiarity of East Asia and it brought antagonism andinstability. That is why the regional collaboration in Northeast Asia is so important
for to make peace and stability. In ASEAN, although Vietnam divided between northand south, both sides of the region pulled in, therefore South Vietnam was included
in ASEAN, and North Vietnam, established under Ho Chi Minh in cooperation with
the Soviet Union. Although the Cold War has divided all territories by border lines,
it is interesting to note that in Southeast Asia, of course, different from Europe, but
regional collaboration had managed to establish and taken the direction of combating
communism together.

5 The US Intervention in East Asia—Perception of East
Asian Threat: Comparing ASEAN
Why did the United States intervene in East Asia with a ‘divide and rule’ governanceapproach? It seems that at the heart of this policy were lingering perceptions of an
East Asian threat that centered around three scenarios:
1.
2.

3.

If Russia, China and North Korea collaborate as a socialist system, it will becomea strong competitor to US hegemony.
The United States’ desire to build a new world order necessitated a foothold in
East Asia in order to restrain the Soviet Union and China. It was MacArthur’s
strategy as well.
The US impact on the emerging post-war Japan. Unlike in Europe, MacArthur’spost-war determination to intervene in politics, carefully sidelined politiciansthat held anti-American, nationalist, and pro-independent views.

Not only the Japanese Communist Party or Socialist Party, but also nationalists
and independent fractions were also ousted from the government or leading positions.
In light of that the remaining political elite could hardly refuse the US strategy.

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5.1 ASEAN—Successful Integration in Asia23
As we could see, the US strategy was very different in Europe and East Asia, yet atthe same time Europe and ASEAN had many similarities.
For example, like the EC/EU, ASEAN was able to compete with the Soviet
Union, China, and North Vietnam by integrating its regional system, including South
Vietnam. On the other hand, in East Asia, the United States has implemented a “divide
and rule” policy, and Japan, China and South Korea have always been in conflict andhave continued to politically blame the “enemy” as neighboring countries. Although
Japan and South Korea both allied with the United States, that could not dispel theirown bi-lateral difficulties over, for example, numerous historical issues including theissue of the comfort women.
However, South-East Asia escaped from the suspicions of neighboring countries
and formed an EU-type network, therefore it became the center of ASEM (Asiaand Europe Meeting). We could learn from ASEAN several countries as “goodgovernance” as an Asian case of regional collaboration, although some of them are.
In Europe, post-war regional integration and the US strategy did not contradict.
“German–French reconciliation” started after WWII. By reconciliation, Germany
was included into Europe and got the Marshall Fund. On the other hand, GermanPolish reconciliation, or German-Russian reconciliation didn’t exist until the end of
Cold War for Poland, and never for Russia.

6 Thaw of the Cold War and the Limits of Independence(from the 1960s to the 1970s)
In the 1960s–1970s, in the thaw of the Cold War, high growth of Japanese economy
started after the war; the national restoration of diplomatic relations carried out that
had been suspended during the Cold War.
That is, the thaw of the Cold War and the restoration of diplomatic relations
between Japan and the Soviet Union, and Japan and China brought about friendshipwith neighboring countries and the development of Japan and Northeast Asia. Thisis the greatest achievement of regional collaboration.
The first moves in the normalization of relations between The Soviet Union andJapan came with the October 1956 Soviet-Japanese Joint Declaration that was cosigned by Nikita Khrushchev and Ichiro Hatoyama in October 1956.24 At that time, it
was recognized that when the peace treaty was concluded, the two islands of Habomaiand Shikotan could be returned to Japan. It was confirmed and ratified two months
later. Then, in June 1965, the Japan-Korea Normalization and The Treaty on Basic
23 R. Stubbs, “ASEAN Plus Three: Emerging East Asian Regionalism?”, Asian Survey, 2002.
24 Full text of Soviet-Japanese joint declaration: https://www.mofa.go.jp/mofaj/gaiko/bluebook/1957/s32-shiryou-001.htm.

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Relations between Japan and the Republic of Korea were concluded.25 It had US
support and encompassed a wide-range of political, economic, security, and culturalissues.
In September 1972, Tanaka Kakuei and Zhou Enlai signed The Joint Communiqueof the Government of Japan and the Government of the People’s Republic of China.
This was the basis of the historical and diplomatic reproachment between Japanand China.26 However, Nixon and Tanaka who were involved in the normalizationof diplomatic relations with China, were overtaken by Watergate and the Lockheedcase. With the coming to power of Deng Xiaoping, in China, he would go on to
pursue economic reform and economic cooperation and development. He pushed韜光養晦 (hiding one’s own fame and talent) and put China on a path of rapid andrealistic economic development and cooperation with neighboring countries. Thereis no doubt that the post-War development of Japan, China and Korea has beenremarkable. If these three nations were able to put aside historical antagonisms, East
Asia would stand alongside the EU and the US as one of the dominant economic
players in the world economy. However, there has been little progress in contrast toEurope.

6.1 Chinese Independent Development
As for the Communist bloc, China has taken a different path from the Soviet Union.
After Gorbachev’s Soviet Union gained acceptance in the western world, with theintroduction of glasnost and perestroika, the Soviet sphere of influence across Eastern
Europe began to collapse in the autumn of 1989. This was followed by the dissolution of the Soviet Union itself in 1991. In China, 1989 also saw the emergenceof a democratic movement, led by students, which culminated in its crushing in
Tiananmen Square on June 4, 1989. It raised considerable international criticism atthat time. Ironically, however, since the Tiananmen Incident, China has strengthened its global significance in economic, military, and even science and technology
fields – even overtaking the United States in some of these areas. Simultaneously,
though, it continues to maintain a political dictatorship, not to collapse like the Soviet
Union….

25 Full text of the Treaty on Basic Relations between Japan and the Republic of Korea, 2006. https://www.mofa.go.jp/mofaj/gaiko/treaty/pdfs/A-S40-237.pdf.
26 Full text of The Joint Communique of the Government of Japan and the Government of thePeople’s Republic of China. https://www.cn.emb-japan.go.jp/itpr_ja/bunken_1972seimei.html.

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K. Haba

7 Conclusion: Predicting the Decline of the Postwar“World Order” Due to Economic Development
Who makes the “new world order” in the twenty-first century? The transformationof economic power relations has begun in the second quarter of the century. Look at
the figures.27

Europe+North & Latin America
ASIA

AFRICA

Covid-19 continuously spread widely, especially in the USA and in Europe, therefore, how to develop after Covid-19 is the most important trial for the USA, Europe,
Asia and the rest of the world. It might change drastically the world order in the
future.
Between 2010 and 2030, China will have overtaken Japan and the United States.
In 2060, the OECD forecasts that China will be the first, and India or the USA willbe the second and third most powerful economy. However, a single country cannot
create a “New World Order”. The US leadership collaborated with the EU, the UK,
Japan and most of the Asian countries, Canada, Australia, and others; most of thecountries supported the USA leadership. If Asia is to take the reins of leadership in
the latter half of the twenty-first century, it must strengthen regional co-operation,
development and collaboration. Without such developments, it is impossible to makean Asian era.
The unanswered question though is ‘how to establish economic basement, politicalcollaboration and mutual trust in Asia’?

27 Maddison, Angus, Contours of the world Economy, 1–2030 AD; Essays in Macroeconomic

History, Oxford University Press, September 2007. Maddison, Angus, Chinese Economic Performance in the Long Run, 960–2030, OECD, Paris, October 2007. Kawai, Masahiro, “Economic
Relations between Japan, the United States and China: East Asian Community and the UnitedStates”, Press Club Meeting, 2009.11.25. Kawai, Masahiro, New Asian Economy, Bunchindo, 2016.

14 The United States’ Differing Strategies of “New World Order” …

1.
2.

3.

159

Democracy is not the goal. Stability, peace and prosperity are fundamental to
the world order.
How to build stable relations with neighbors and the world? Economic collaboration, interests, development and mutual communication of youth, citizens,companies, and professors are very important.
How to dispel US suspicion. Asia should not cut off the good relationship with
the USA but should call for the US to respect the sovereignty of Asian nations
and seek to build mutual trust.

With the future economic decline of the United States, the increased likelihood of
global instability appears unavoidable. Add to this flashpoints and unexpected events
like Hong Kong demonstrations, Middle East and Syria destabilization, COVID-19
pandemic spread, disaster, etc. It, therefore, becomes necessary to ask what the best
way is to create regional stability built on foundations of responsibility and trust.
Again, learning from historical European attempts could provide a potential
roadmap for building a regional security system. Rather than increasing military strength why not draw upon the examples of the CSCE and OSCE. Why
not draw upon civil society initiatives that promote cultural-, citizen’s- and youth
exchange, energy-, science- and technology exchange, expert- intellectual- and military personnel exchange. Such developments could be the basis upon which topromote regional, inter-regional, and trans-regional collaboration appropriate forthe global era. Asia’s joint development has just started. There will be many trials
and errors in the future, but we will not successfully deal with them on our own.
The need for mutual respect and trust; the need for diligence etc. will be the sort ofvalues necessary to take us towards a new era. In order to ensure the prosperity of
the region and the world, we should reorganize Asia in collaboration with the EU
and the United States to create a “New World Order” appropriate for the latter halfof the twenty-first century.

References
Ackermann, Alice, “Reconciliation as a Peace- building Process in Postwar Europe, The FrancoGerman Case”, Peace and Change, A Journal of Peace Research, July 1994.
Churchill, Winston, Fulton Speech on Iron Curtain, March 5, 1946. https://winstonchurchill.org/
resources/speeches/1946-1963-elder-statesman/the-sinews-of-peace/.
Denson, John V., A Century of War (Large Print Edition): Lincoln, Wilson, and Roosevelt,
CreateSpace Independent Publishing Platform, 2006.
Documents: Germany/Holocaust, North Korea, and New Documents in East Asia/Korea, Wilson
Center, 2019.
Fukuyama, Francis, State Building: Governance and World Order in the 21st Century, Profile Books
Ltd, 2004.
Full Text and Translation of the Treaty of Peace with Japan in San Francisco: http://www.chukai.ne.
jp/~masago/sanfran.html, http://worldjpn.grips.ac.jp/documents/texts/docs/19510908.T1J.html.
Full Text of The Joint Communique of the Government of Japan and the Government of the People’s
Republic of China. https://www.cn.emb-japan.go.jp/itpr_ja/bunken_1972seimei.html.

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K. Haba

Full Text of Soviet-Japanese Joint Declaration: https://www.mofa.go.jp/mofaj/gaiko/bluebook/1957/s32-shiryou-001.htm.
Full Text of the Treaty on Basic Relations Between Japan and the Republic of Korea, 2006. https://www.mofa.go.jp/mofaj/gaiko/treaty/pdfs/A-S40-237.pdf.
Gati, Charles, Hungary and the Soviet Block, “Percentage Agreement”, Duke University Press,
1986.
Haba, Kumiko, Asian Regional Cooperation in the Global Era, Iwanami Publisher, 2012 (Translated
to Chinese, 2013).
Haba, Kumiko, Division and Integration in Europe—Borders and Nationalism in Enlarged EU,
Inclusion or Exclusion, Chuo-Koron Shinsya, 2016.
Haba, Kumiko, Yoshinobu Yamamoto and Takashi Oshimura (Eds.), East Asian Community
Considering the International Politics, Minerva Publishers, 2012.
Haba, Kumiko (Ed.), Great Power Politics and the Future of Asian Regionalism, at Harvard
University, Aoyama Gakuin University, Tokyo, 2013.
Haba, Kumiko (Ed.), 63 Chapters to Know the European Union, Akashi Publisher, 2017, 5th edition.
Haba, Kumiko (Ed.), 21st century, International Society in the Great Transition Era, Publisher of
Law and Culture, Japan, 2019.
Hargrove, Julia, Franklin D. Roosevelt’s Four Freedoms Speech: History Speaks, Teaching and
Learning Company, 2018.
Kawai, Masahiro, “Economic Relations Between Japan, the United States and China: East Asian
Community and the United States”, Press Club Meeting, 2009.11.25.
Kawai, Masahiro, New Asian Economy, Bunchindo, 2016.
Kondo, Takahiro, “Robert Schumann’s German-French Collaboration”, 63 Chapters to Know theEuropean Union, Kumiko Haba (Ed.), Akashi Publisher, 2017.
Lundestad, Gair, The American Non-Policy Towards Eastern Europe, 1943–1947, Universalism in
an Area Not of Essential Interest to the United States, Tromso-Oslo-Bergen, 1978.
Maddison, Angus, Contours of the World Economy, 1-2030 AD; Essays in Macroeconomic History,
Oxford University Press, September 2007.
Maddison, Angus, Chinese Economic Performance in the Long Run, 960-2030, OECD, Paris,
October 2007.
Mayer, Arno, Wilson vs. Lenin: Political Origins of the New Diplomacy, 1917–1918, World
Publishing, 1969.
Preston, Diana, Eight Days at Yalta: How Churchill, Roosevelt and Stalin Shaped the Post-War
World, Pisador, 2019.
Pomian, Krzysztof, L’Europe et ses nations, Paris, Gallimard, 1990, Krzysztof Pomian (Translation),
What Is Europe?, Heibonsha, 1993.
Ross, Robert S., “The Geography of the Peace: East Asia in the Twenty-first Century”, International
Security, Volume 23, Issue 4, Spring, 1999, pp. 81–118.
Sharing the Burden of the Past: Legacies of War in Europe, America, and Asia, The Asia Foundation,
Friederichs Ebert Stiftung, 2003.
Shimizu, Soh, “Stalin’s Note” and the Cold War, Journal of Western History, Volume 37, 2008,
pp. 58–68.
Stubbs, R., “ASEAN Plus Three: Emerging East Asian Regionalism?”, Asian Survey, 2002.
Times Atlas World War II Historical Map Compact Edition, Hara Shobo, 1996.
Toffler, Alvin, Power Shift; Knowledge, Wealth, and Violence at the Edge of the 21st Century, 1990.
Yasue, Noriko, “Great Mem of the EU integration: Schumann, Adenauer, Churchill”, 63 Chapters
to Know the European Union, Kumiko Haba (Ed.), Akashi Publisher, 2017.

Kumiko Haba is a Professor Emeritus at Aoyama Gakuin University, Professor at Kanagawa
University, President of the EUSA Asia Pacific (2017), Vice President of International Studies
Association (2016–2017), Vice President of ISA Asia Pacific (2018–2021) President of ISA
Asia Pacific (2021–2024), Director of Institute for Global International Relations. She received

14 The United States’ Differing Strategies of “New World Order” …

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the title of Jean Monnet Chair of the European Union (2006–), Member of Science Councilof Japan (2011–2017), and Associate Member of SCJ (2017–2023). She is a Visiting Scholar
at Harvard University (2011–2012), European University Institute (2007), Sorbonne University(2004), University of London (1996–1997), and Hungarian Academy of Science (1995–1996,
2002). Her specialty is international relations, comparative politics between EU and Asian region,
immigrant and refugee issues, and making peace and prosperity in conflict regions. She wrote 72
books (including editor and co-writer), 16 English books (including proceeding books), and 220
articles. Contemporary main works/books include the following:・Brexit and After, Perspectives
on European Crises and reconstruction from Asia and Europe, Kumiko Haba and Martin Holland,(Editors) Springer, 2021, Encyclopedia of Central and East European Culture, Representative
Editor: Kumiko Haba, Maruzen, 2021, Immigrants, Refugees and Minorities; Origin of European
Populism, Kumiko Haba (Ed.), Sairysha, 2021, Kumiko Haba, European Division and Integration,
European Nationalism and Borders, Inclusion or Exclusion, Chuo Koron Shinsha, Tokyo, 2016,
・Kumiko Haba (Ed.), International Society in Great Transition era, Low and Culture Publishers,
Tokyo, 2019.・Steven Rosefielde, Kuboniwa and Kumiko Haba (Eds.), The Unwinding of the
Globalist DreamーEU, Russia and China, World Science, London, New Jersey and Singapore,2017.・Kumiko Haba, Asian Regional Cooperation in the Global Era, Iwanami Publishers, 2012.
(Chinese translation, Beijing, 2013)・Kumiko Haba (Ed.), Considering Asian Regional Integration, To avoid Wars, Akashi Publishers, 2017. and others.

Chapter 15‘I’m a Nationalist’: American
Nationalism and Grand Strategy
in the Age of Trump
J. Patrick Boyd

Abstract This essay addresses three key questions. First, what is the difference
between nationalism and populism? Second, is Donald Trump really a nationalist?
Third, what are the implications of the answer to this second question for American
grand strategy? The essay concludes that (1) nationalism and populism are distinct
analytical concepts; (2) Trump qualifies as a nationalist in this understanding; and(3) his nationalism can be linked to efforts to revise American grand strategy in waysthat should trouble allies and trade partners alike.
Keywords Donald Trump · Nationalism · Populism · American grand strategy
But radical Democrats want to turn back the clock for the rule of corrupt power-hungry
globalists. You know what a globalist is, right? You know what a globalist is? A globalist
is a person that wants the globe to do well, frankly, not caring about our country so much.
And you know what? We can’t have that. You know, they have a word. It sort of became
old-fashioned. It’s called a nationalist. And I say, really, we’re not supposed to use that word.
You know what I am? I’m a nationalist, OK? I’m a nationalist. Nationalist. Nothing -- usethat word. Use that word.1
Donald Trump, October 22, 2018.

This essay addresses three key questions. First, what is the difference between
nationalism and populism? Second, is Donald Trump really a nationalist? Third,
what are the implications of the answer to this second question for American
grand strategy? Having focused in previous work on how nationalism works inJapanese politics and security policy, the author here seeks to understand how related
phenomena may shape American politics in an area of vital importance to Japan,
American grand strategy. The essay concludes that (1) nationalism and populism
are distinct analytical concepts that sometimes intertwine in practice, especially inthe context of radical right-wing politics; (2) Donald Trump, both as a candidate
J. P. Boyd (B)Aoyama Gakuin University, Shibuya, Tokyo, Japane-mail: boyd@aoyamagakuin.jp
1 Factbase,“Speech: Donald Trump Holds a Political Rally in Houston, Texas - October22, 2018”: https://factba.se/transcript/donald-trump-speech-maga-rally-houston-tx-october-222018 (accessed March 14, 2020).
© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_15

163

164

J. P. Boydand as U.S. president, practiced a persistent nationalism, albeit framed as right-wing
populism; and (3) this nationalism can be linked to a number of his efforts to revise
American grand strategy, generating outcomes such as the failure to unambiguously
support traditional alliances and relationships with trade partners, two developmentsof particular concern for Japan.
The essay begins by distinguishing the key concept of nationalism from a related
concept often associated with Donald Trump’s politics, populism. These concepts
are then applied to the case of Donald Trump’s 2016 presidential campaign, andfindings from the existing literature on both his rhetoric and its reception by voters
are summarized. The next section reviews the literature on the Trump administration’s
grand strategy, first defining the term and then assessing whether American grandstrategy actually changed under Trump and whether those changes can be attributed
to nationalism. The final section considers what these findings mean in the postTrump era for American allies, such as Japan, that depend on the U.S. for security
and trade.

1 Nationalism or Populism?
Part of the confusion regarding whether and how Trump’s politics incorporate nationalism involves disagreements about the definitions of nationalism and populism.
Distinguishing between these concepts can be tricky, and the existing literature on
the question is divided. This section will first define nationalism in order to clarify
its relationship with populism.
Scholarly inquiry into nationalism is over a hundred years old and has produced
many definitions and approaches to understanding nationalism.2 Based on previous
work in the contemporary liberal democratic context, nationalism is defined here as a
discourse that constructs and reconstructs points of identification and differentiationthat define a distinct political community (i.e. “the nation”) and assert the form of
its dominion over a modern territorial state across time.3 In practice, this discourse
takes the form of a series of reoccurring and sometimes changing “nation-state narratives” that tell the story of how the nation’s (i.e. the people’s) putative qualities or
past experiences should define the present nature and actions of its territorial state.
For example, in the American context, Lieven argues that “the American Creed”
thesis, a narrative that asserts Americans share an ethos valuing “liberty, democracy,
the law, individualism, and cultural and political egalitarianism,” plays a unique rolein defining Americans as a distinct political community, irrespective of their birthplace, religion, class, ethnicity/race or other affiliations.4 It consequently also places

2 For summaries of this voluminous literature, see Snyder (1997), Ozkirimli (2010).
3 Boyd (2012).
4 Lieven (2016, p. 9).

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demands on the American state, both to embody these values in its structure andgoverning practices and to spread these values to other parts of the world.5
Three features of this approach to nationalism should be noted. First, the discourse
approach allows space for multiple such understandings or nation-state narratives toco-exist and compete at any given time within a single polity, as Lieven asserts isthe case in the U.S.6 Second, the focus on discourse requires analysis of rhetoricand the reaction to it by targeted audiences. Finally, in the context of establishednation-states such as the contemporary U.S., nationalist discourse is often deployed
as a remedy to an asserted state of affairs in which the sacred links between the nationand the state are said to have eroded. In this situation, Brubaker argues, “Nationalist
discourse claims to restore ‘ownership’ of the polity to the nation.”7
The proper definition of populism is a matter of dispute among scholars.8 Thisessay adopts the definition most widely used in the study of American nationalism:
Populism is a form of discourse that asserts a “corrupt elite” is undermining theinterests of the “virtuous people,” who, in a democratic society, are the source ofpolitical legitimacy.9 In making this argument, populists assert that they will remedy
the situation and seek to mobilize the people to help them gain the power to do so.
Populism is thus a political claim, one for which the definition of its key term, thepeople, is often vague and changeable. To realize popular mobilization, populists
often define the people through reference to available ideological resources, such as
liberalism, socialism, authoritarianism or nationalism. In this way, populism need not
involve nationalism and vice versa. For example, in the U.S., mainstream politicians
often assume populist stances by claiming the ruling party is serving its own corrupt
interests rather than those of the citizenry and demanding that voters “throw the bumsout” in the next election.10 Here, the conception of the people as citizen-voters isdrawn from political liberalism and thus can serve to reinforce liberal democratic
norms. In another example, left-wing populists, following socialist ideas, often define
the people as “the working class” and identify the offending elites as the economic
and political powers who exploit them without reference to concepts of nationhood(i.e., “a distinct political community”).11
Of more relevance to the discussion here, right-wing populism tends to define thepeople using concepts of nationhood in ways that not only place elites in opposition
but also identify unworthy out-groups inside the polity said to benefit from the elite’scorruption. These out-groups, even though living within the polity, are argued tobe outside the nation, a treatment often given to ethnic or cultural minorities andimmigrants. In these forms of populism, the clean “up-down axis” of the people
5 Ibid., p. 10.
6 Lieven (2016), Lieven (2004), Bonikowski and DiMaggio (2016).
7 Brubaker (2020, p. 51).
8 For a thorough account of this dispute, see Brubaker (2020).
9 Bonikowski (2019, p. 111), Bonikowski et al. (2019).
10 Bonikowski et al. (2019, p. 63).
11 In American politics, the populism practiced by Senator Bernie Sanders can be seen as an exampleof this form of left-wing populism.

166

J. P. Boydversus the elites in a single polity is complicated through the addition of an “in–out
axis” that also pits the people, defined as a nation, against both domestic out-groups
and groups outside the polity, such as external elites (e.g., “globalists”) and othernations.12

2 Nationalism or Not?
For the purposes of this essay, Trump is understood to be a populist. His extensive useof anti-elite rhetoric (which even sometimes includes elites in his own political party)
and appeals to redress the grievances of the “forgotten” people are well documented
and beyond dispute.13 But is he also a nationalist? He is so often referred to as apopulist that it seems worth exploring what type of populist he is and what relationshiphis populism may have to nationalism.14 This section reviews the academic literatureon Trump’s 2016 presidential campaign, with special attention paid to analyses ofboth his rhetoric and its reception by voters. Key questions to be addressed include:
How did Trump define “the people”? Did he identify any domestic out-groups to bescorned? What demands did he make on the state in the name of “the people”? How
did voters react to Trump’s rhetoric?
Analyses of Trump’s campaign rhetoric establish a consensus view that Trump
practices a clearly distinguishable variant of right-wing populism (often referred
to as “ethno-national populism”) that defines the people in ethno-national terms
largely consistent with one of the enduring traditions of American nationalism: axenophobic narrative that defines the nation as native-born, white, and Christian.15
In content analysis of Trump’s Twitter account during the election period, Shertzer
and Woods find that more than a third of his tweets present “ethnic conceptions”
of the American people and their history and religion and that overall, he “engaged
with ethno-nationalist themes more than any other topic.”16 By way of comparison,anti-elite populist content attacking the “establishment” and his opponent Hillary
Clinton appeared in nearly twenty percent of his tweets, while references to key issues
areas, including healthcare, taxes, education, and the Supreme Court, combined for
only two percent.17 With regard to ethnicity and religion, Gorski and Whitehead,
et al. note examples of Trump’s rhetoric appealing to what they call white Christian
12 Brubaker (2020, p. 45), Bonikowski (2019).
13 Schertzer and Woods (2020, p. 2), Oliver and Rahn (2016), Bonikowski (2019).
14 For example, a key word search of The New York Times between June 16, 2015 (the day Trump

announced his candidacy) and November 8, 2016 (Election Day) reveals that articles containing
the words “Trump” and “populism” (136) outnumber those containing the words “Trump” and“nationalism” (105).
15 Schertzer and Woods (2020), Oliver and Rahn (2016), Bonikowski (2019), Lieven (2016), Gorski(2017).
16 Schertzer and Woods (2020, p. 10).
17 Ibid.

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nationalism, a strain of nationalism that defines the nation as whites from European
ethnic backgrounds practicing the Christian religion.18
The definition of the nation described above is reinforced by Trump’s references
to domestic out-groups and groups outside the polity. Analysis of his Twitter accountreveals that Trump “focused on creating a moral binary between a virtuous in-groupand several immoral out-groups,” in which the in-group of the native-born, white,
Christian majority (sometimes referred to as the “silent majority,” or the “forgotten
men and women”) is threatened by dangerous, criminal and foreign out-groups
such as undocumented immigrants alleged to be involved in violent crimes andMuslims portrayed as terrorists.19 In addition, African-Americans are treated somewhat ambiguously, sometimes presented as a criminal “other” and sometimes as agroup to be helped. The valence attributed to each group in these tweets reveals
a spectrum from overwhelmingly positive framing for the ethnic majority group(95% positive for core ethnic group, 95% positive for Christians, etc.), to a mixed
framing for African-Americans (53% positive) to overwhelmingly negative framings
for Hispanics (including undocumented immigrants) (92% negative) and the external
out-group Muslims (100% negative).20 As Bonikowski concludes, Trump appealed
to an exclusionary, ethno-national American identity in part by criticizing domestic
out-groups such as immigrants, ethnic minorities and Muslims, efforts that occurred
after years of Trump “fanning the flames of Islamophobia and racial conspiracy
theories concerning President Obama’s place of birth.”21
Existing research on Trump’s campaign rhetoric highlights a number of demands
made on the state in the name of Trump’s defined nation. First and foremost, heargued the dominant ethnic group was under threat of losing their power in favorof immigrants, who he portrayed as dangerous “others” pouring across the southernborder. A central argument of his campaign was to urge this “silent majority” torecapture control of the state, with Trump as their leader and protector.22 He thus
offered proposals such as to build a wall on the southern border and generally to
crack down on immigrants, while accusing his opponent Clinton of being in league
with foreign elements and likely to increase immigration if elected.23 In his appeals
to Christian nationalism, he directly called for unity among Christians in the faceof the threat of Islam, and proposed a ban on the entry of Muslims into the UnitedStates.24
Trump’s ethno-nationalist rhetoric also appeared in his foreign policy proposals.
Trump repeatedly railed against past U.S. trade and environmental deals, which heargued elites profited from at the cost of good jobs for his favored majority ethnic

18 Gorski (2017), Whitehead et al. (2018).
19 Schertzer and Woods (2020, p. 10).
20 Ibid., p. 11.
21 Bonikowski (2019, p. 113).
22 Schertzer and Woods (2020, p. 12).
23 Ibid., p. 14.
24 Gorski (2017, p. 343).

168

J. P. Boydgroup. He promised to renegotiate or discontinue such deals in order to return highpaying manufacturing jobs for the benefit of this group.25 In security policy, he criticized the U.S. alliance system, arguing again that foreigners were taking advantage ofAmericans, and threatened to dissolve these arrangements if they could not be refashioned in America’s favor.26 Finally, he argued for improving relations with Russia, acountry long seen as an adversary by Americans and led by a man, Vladimir Putin,
who actively practices ethno-nationalist politics at home while seeking to spread it
abroad. Trump’s glowing references to Russia created a stark contrast to his questioning of traditional allies in Europe and Asia.27 In this way, Trump’s appeal to an
exclusionary ethno-national American identity prompted him to frame a number ofpolicy demands, some of which might have been justifiable using other rationales,as the means by which this ethnic majority could recapture their state.
There is strong evidence that Trump’s ethno-nationalist rhetoric resonated witha sub-set of voters, contributed to his election victory, and connected with existing
traditions and resources of American nationalism. First, scholars studying Christiannationalism argue Trump’s rhetoric resonated with a sub-set of evangelical voters(perhaps more than two-thirds), and can be linked in statistically significant ways
with support for Trump in the election.28 Exit polls also show Trump winning bylarge majorities with voters concerned about immigration, trade, and terrorism aswell as those unconcerned about racial justice.29 Finally, Lieven and Gorski argue
Trump’s ethno-nationalism largely conforms to traditional patterns of nationalism inAmerica, including white nationalism and Christian nationalism, while Bonikowski
and DiMaggio show that about a third of the population should have been particularly
receptive to Trump’s ethno-national appeals because they have medium levels ofnational pride (and thus desire for redress) but define American identity in especiallyexclusionary ways.30
Trump is a thus clearly a nationalist, albeit one of the right-wing populist variety.
He defines “the people” in ethno-national, exclusionary terms as native-born, white
and Christian, an identity he reinforces by scapegoating domestic and external outgroups as immoral and undeservingly benefiting from “corrupt” elites. The major
policy proposals of his campaign were all framed as demands on the state to betterreflect the nature and interests of this understanding of the American nation. Finally,
voters responded to these ethno-national appeals, which were themselves largely inline with preexisting but not hegemonic strains of American nationalism.

25 Schertzer and Woods (2020, pp. 14–15).
26 Lieven (2016, pp. 18–19).
27 Ibid., p. 19.
28 Gorski (2017), Whitehead et al. (2018).
29 CNN, Election 2016 Exit Polls: http://edition.cnn.com/election/results/exit-polls/national/pre

sident (accessed March 13, 2020).
30 Lieven (2016), Gorski (2017), Bonikowski and DiMaggio (2016). It is important to note that both

Lieven and Gorski identify some elements of innovation in Trump’s use of these existing strains ofAmerican nationalism.

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3 Whither America’s Grand Strategy?
Although populism can have implications for foreign policy, it’s up-down axis tends
to direct its influence more toward domestic policy and political fights. However,scholars generally agree nationalism, with its in–out axis, can often exert significant influence on foreign policy, sometimes with devastating effects.31 Has Trump’s
nationalism had a major impact on U.S. foreign policy? This section considers thisquestion by evaluating the state of American grand strategy while Trump was in
office.
There are numerous definitions of grand strategy.32 Here, it is understood as“general theories of how states create security for themselves” that consist offour elements33 : (1) basic assumptions about the international environment; (2) the
country’s prioritized goals in its international relations; (3) an understanding of themost important threats to these goals; and (4) a set of preferred actions to addressthese threats and achieve security.34
The grand strategy followed by the U.S. from before the end of the Cold War until
Trump took office is known as “primacy” or “liberal hegemony.”35 It first assumes theworld has one essential power (i.e., superpower), the U.S., along with other powers ofvarious strengths. The major goals of the U.S. in this environment are peace among
the great powers, an open international trade regime and continued cooperation within
U.S.-led international organizations. Threats to these goals include the proliferationof weapons of mass destruction, especially nuclear weapons, regional challenges
presented by failed and “rogue” states, international terrorism and the rise of authoritarian adversaries. The set of preferred actions involves the U.S maintaining military preponderance and asserting leadership mainly through military commitments,
including alliances, a network of overseas bases, constant naval patrols of international waters and military engagements where necessary. Primacy requires significant military spending, places great value on maintaining allies, and has received
bipartisan support from both major parties in the U.S. for decades.36
What are the implications of Trump’s nationalism for this well-established grandstrategy? Answering this main question requires consideration of three sub-questions.
First, did Trump persist in his nationalism after taking office? It is not uncommon forethno-national populist parties and politicians to adopt more moderate politics after
achieving office.37 Second, did Trump have an alternative grand strategy based, atleast in part, on his nationalism? Finally, was he able to use this new grand strategy
to guide U.S. security and foreign policy?
31 Lieven (2004), Bonikowski and DiMaggio (2016).
32 Posen (1986), Christensen (1996), Kirss (2018).
33 Friedman and Logan (2016, p. 17).
34 Kahl and Brands (2017).
35 Friedman and Logan (2016, pp. 17–18), Porter (2018, p. 9).
36 There are some disagreements about partisan supporters of primacy. See Friedman and Logan(2016, p. 18).
37 Taggart and Szczerbiak (2013).

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J. P. Boyd

By most accounts, Trump persisted with his ethno-national populism after
becoming president. Content analysis of his rhetoric reveals his “pattern of nationalism and populism persisted during his first couple of years in office.”38 In particular,
scholars who are concerned with the impact of Trump’s ethno-nationalism on American democratic norms and institutions agree that he maintained his ethno-national
populism while in office.39 Further, even some scholars who argue Trump’s ethnonational populist rhetoric had little impact on policy acknowledge it nonethelesscontinued while he was president.40
But did Trump have a nationalist alternative grand strategy to replace primacy?
Although there is disagreement over this question, a number of scholars have identified a Trumpian “America First” grand strategy.41 In this grand strategy, the international environment is a dangerous place from which powerful forces threaten
U.S. national security, thus favoring more conflict than cooperation. Ensuring thecountry’s physical security, economic well-being and way of life are America’s top
goals in international relations. The major threats to these goals are “radical Islam,”
unfair international trade deals (especially with China) and illegal immigration. The
set of preferred actions are (1) to embrace “economic nationalism” in trade policy,(2) to implement “extreme” homeland security, (3) to follow “amoral transnationalism” in dealings with other countries; and (4) to massively expand the U.S. military
to deter external threats while avoiding extensive military engagements overseas.42
It should be noted that the same scholars who identify this grand strategy are also
critical of it, pointing out internal contradictions and the problems it can cause forthe international system.43
The links between this “America First” grand strategy and the ethno-nationalist
demands on the state raised by candidate Trump are readily apparent. First, the specified threats are all either scapegoated domestic or external out-groups (undocumented
immigrants, potential immigrants, and Muslims) or foreigners taking advantage of
the white ethnic majority through unfair trade practices and alliance free riding.
Second, the first three preferred actions all address demands Trump made of thestate in the name of the nation during the 2016 campaign. In order to bring backmanufacturing jobs for his core ethnic majority, Trump promised to engage in “protectionist and mercantilist foreign policy.”44 In order to restore the power and statusof this white, Christian majority, he proposed a wall on the southern border and aharsh crackdown on immigrants more generally. “Amoral transactionalism” refers
to Trump’s view that the U.S. should be open to making deals (on a transactionby-transaction basis) with any international actors that share U.S. interests, even if
38 Hawkins and Hawkins (2018, p. 49).
39 Bonikowski (2019, pp. 123–130), Hawkins and Hawkins (2018).
40 Dombrowski and Reich (2018, pp. 56–57), Pierson (2017, p. S106).
41 For those who disagree, see Sestanovich (2017), Zenko and Lissner (2017); Scholars who see an

emerging Trumpian grand strategy include Kahl and Brands (2017), Carpenter (2017, pp. 36–37).
42 Kahl and Brands (2017).
43 Kahl and Brands (2017), Carpenter (2017, p. 43).
44 Kahl and Brands (2017).

15 ‘I’m a Nationalist’: American Nationalism and Grand Strategy…

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they reject or routinely violate American values.45 Actions in this category included
outreach to authoritarian Russia to cooperate in fighting Islamic extremists as well
as demands that liberal democratic alliance partners pay for the cost of American
efforts in their defense or prepare to be abandoned by the U.S. It is important tonote that this reduction in the valuation of U.S. alliances (external balancing) is also
linked through realist logic with the fourth preferred action, a U.S. military build-up(internal balancing).46
Was Trump able to use his “America First” grand strategy to guide U.S. foreign
policy? Not surprisingly for a new doctrine, evaluations are mixed. Some studies of
Trump’s first years in office minimize accomplishments in this regard. Analyzing
the conduct of military operations in the administration’s first year, Dombrowski and
Reich conclude there was more continuity than change. Despite Trump’s rhetoric,
they argue that U.S. military operations during this period remained constrainedby operational circumstances and bureaucratic and leadership limitations and werethus carried out much as they had been under the previous administration.47 Also
reviewing the Trump administration’s first year, Porter concludes “there was more
continuity than change regarding grand strategic issues.”48 Pointing out Trump’s
reversals on promises to question U.S. alliances and soften policies toward Russia,
Porter argues Trump’s 2017 National Security Strategy and military budget increases
simply reinforced primacy as America’s grand strategy.49 He concludes this was
likely due to the stability in American power capabilities and the effective pushbackfrom the American foreign policy establishment (referred to as “the Blob”).50
Others note success in one or more areas of the preferred actions. Evaluating policyin Trump’s first two years in office, Hawkins and Hawkins argue that, when it comesto keeping his nationalist populist campaign promises, “most of his successes havecome in the area of foreign policy.”51 Specifically, they point to Trump’s withdrawal
from the Trans-Pacific Partnership (TPP) trade deal and the Paris agreement on
climate change, as well as his efforts to renegotiate the North American Free Trade
Agreement (NAFTA) and to impose tariffs on steel and aluminum products, moves
that largely targeted Asian, European and North American allies and trading partners
and did not require the approval of the legislative branch.52 Still further, the Trumpadministration launched a trade war with China over persistent trade imbalances, theft

45 Ibid.
46 Although militarism is often associated with nationalism, and Trump sometimes refers to veterans

as a valued in-group in ethno-nationalist rhetoric, since the call for increased military spending in
the face of reduced dependence on alliances also follows realist logic, it is not asserted here that the
fourth preferred action stems directly from Trump’s ethno-nationalism.
47 Dombrowski and Reich (2018).
48 Porter (2018, pp. 39–40).
49 Office of the President (2017).
50 Ibid., pp. 45–46.
51 Hawkins and Hawkins (2018, p. 60).
52 Ibid., pp. 60–61.

172

J. P. Boydof intellectual property and the issue of forced technology transfers from American
firms, a lingering trade dispute that continued to the end of Trump’s term in office.53
Even scholars who downplay the influence of Trump’s populism on his administration’s domestic policies admit that his nationalism had major impacts in policy
areas such as immigration.54 Although some faced court challenges, actions implemented in this area included efforts to divert funds to the building of the border wall,
the rescinding of the Deferred Action for Childhood Arrivals (DACA) program for
undocumented migrants who arrived in the U.S. as children, draconian enforcementof immigrations laws (separating migrant children from their families, deporting
undocumented immigrants, strict policing of immigrant communities, etc.), and theimposition of a travel ban on people coming from Muslim-majority countries.55 Even
though immigration is often viewed as a domestic policy area, the “America First”
grand strategy elevates it to a strategic priority in foreign policy, and it is difficult
to avoid seeing the above actions as anything but the result of this grand strategic
guidance.
The last two years of Trump’s presidency provided additional indicators that the“America First” grand strategy was more than just rhetorical bluster. By declaring
China a currency manipulator in 2019, Trump fulfilled a campaign promise evenas the trade war with China continued, although a “phase one” deal, which leftmany difficult issues to future negotiations, was signed in early 2020.56 Trump’s
government also negotiated two trade agreements with Japan, although this too
was presented as a “stage one” achievement, with difficult issues left for later.57
In addition, his administration demanded steep increases in host nation support fromSouth Korea and indicated it would do the same to Japan in future negotiations.58
In the last year of his presidency, Trump began the process of withdrawing the U.S.
from the World Health Organization (WHO), which he accused of misleading theworld regarding the severity of the coronavirus pandemic in order to protect China,
and announced a drawdown of U.S. troops from Germany, which he said was a
response to the long-time U.S. ally’s failure to meet its financial commitments to theNorth Atlantic Treaty Organization (NATO).59 Although his presidency ended after asingle term, Trump’s effort to establish a new grand strategy clearly generated policychanges, changes which will complicate the U.S. government’s relationships with
its immigrant community, traditional allies and trading partners moving forward.

53 Swanson (2018).
54 Pierson (2017, p. S114), Hawkins and Hawkins (2018, pp. 61–62).
55 Bonikowski (2019, p. 125).
56 Lawder (2020).
57 CRS (2020).
58 Tatsumi (2020).
59 Council on Foreign Relations (2021).

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4 Conclusion
This essay has considered the difference between populism and nationalism, thenature of Donald Trump’s populism and nationalism, and the impact of his version ofnationalism on American grand strategy and immigration, foreign and security policy.
There are three major conclusions. First, nationalism and populism are different but
can sometimes be intertwine in practice, especially in the context of radical right-wing
politics. Second, Donald Trump, both as a candidate and as U.S. president, practiced apersistent nationalism, albeit framed as right-wing populism. Third, this nationalism
can be linked to a number of areas in his reworking of American grand strategy,
including the failure to unambiguously support traditional alliances and relationships
with trade partners, and should thus be of particular concern to policymakers in alliedcountries like Japan.
Trump’s defeat in the 2020 presidential election and the inauguration of President Joe Biden obviously calls the future of the “America First” grand strategy
into question, but the following seems abundantly clear. First, advocates of primacy
as America’s grand strategy should reconsider efforts to restore it without significant revision. Although it seems likely that voters in 2016 did not elect Trump
primarily because of his positions on foreign policy, “[t]hey did, however, respondto his assaults on free trade, failed wars, free-riding allies, and the negative consequences of globalization for American workers.”60 The critique of primacy and theforeign policy establishment is thus capable of gaining considerable support fromthe electorate. Second, although Trump did not win reelection, he continues to wield
influence in the Republican Party, and it seems likely that his vision of grand strategy
will continue to be upheld in some quarters of that party, which will likely impede
bipartisan cooperation in relevant policy areas even with Trump out of office. This
will complicate the efforts of the Biden administration to pivot away from “America
First” grand strategy priorities in immigration, foreign and security policy. Third,
allies and trading partners alike should take the elements of this new grand strategy
seriously, as most are linked to ethno-national claims that resonate with an historically stable sub-set of Americans and will thus be there as a resource for future
politicians seeking to following in Trump’s footsteps.61 In this sense, Trump’s grandstrategy should be seen less as an aberration and more as an indicator of a possible
though certainly not inevitable future for America’s vision of its place in the world.

60 Porter (2018, p. 39).
61 It should be noted that Donald Trump’s margin of victory with his white working classbase (measured as whites without a college degree) fell only 2 percentage points between his
winning effort in 2016 (+37) and his losing effort in 2020 (+35). CNN, Election 2016 Exit
Polls: https://edition.cnn.com/election/2016/results/exit-polls (accessed December 4, 2020) and
CNN, Election 2020 Exit Polls: https://edition.cnn.com/election/2020/exit-polls/president/nationalresults (accessed December 4, 2020).

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J. P. Boyd

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U.S. Foreign Policy Establishment.” International Security 42 (4): 9–46.
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J. Patrick Boyd is an associate professor of international politics at Aoyama Gakuin University.
He specializes in contemporary Japanese politics and foreign policy, with a focus on the changing
role of nationalism in the postwar period. Born and raised in the United States, Boyd completed
his Ph.D. in political science at the Massachusetts Institute of Technology (MIT), where his dissertation received the Lucian Pye Award for outstanding political science Ph.D. thesis. His work
has appeared in Policy Studies, Asia Policy, East Asia Forum, and Ronza, among other publications. He previously served as assistant professor of political science at the Graduate School of
Asia-Pacific Studies at Waseda University.

Chapter 16

Do SAARC and BIMSTEC Leadthe World?—Regional Collaboration
in South Asia
Pradeep Singh Chauhan

Abstract South Asia is among the world’s least economically integrated regions,despite the advantages of proximity, structural and cultural familiarities, and shareddevelopmental priorities. Constrained by disagreements stemming from past history,
national pride, territorial disputes, ethnic and religious disturbances, mutual mistrustand cross-border migration issues, the region has been unable to leverage the benefitsof regional cooperation to bolster its common future interest. Deeper regional integration could, however, turn the sub-region into an important land bridge and trade hub
between Europe, Central Asia and South-East Asia. The inception of multiple institutional frameworks for advancing regional cooperation, such as the South Asian Association for Regional Cooperation (SAARC), the Bangladesh-Bhutan-India-Nepal(BBIN) initiative and the Bay of Bengal Initiative for Multi-Sectoral Technicaland Economic Cooperation (BIMSTEC) indicates consensus on the importance ofenhanced South Asian cooperation, but these organisations have only had limited
success in overcoming hurdles to regional collaboration. With a vision to gradually transition towards a South Asian Economic Union characterised by a Common
Market and Customs and an Economic and Monetary Union, SAARC facilitated theinception of a South Asian Free Trade Area (SAFTA), which was operationalized in2006. After more than a decade since its initiation and despite multiple bilateral Free
Trade Agreements (FTAs), if the progress is satisfactory or not. This analysis wasmade in this paper that if this region of South Asia grows faster it can play a verysignificant role in the global scenario.
Keywords South Asia · Regional cooperation · Trade agreements
South Asia is one of the world’s most dynamic and diverse regions. A shared regional
leitmotif along with cultural, linguistic, topographical and economic diversity lends
the region a distinct identity. Its economies have demonstrated remarkable strengthand resilience amid global slowdowns, establishing their significance for global
economic growth.
P. S. Chauhan (B)Kurukshetra University, Kurukshetra, Indiae-mail: pchauhan@kuk.ac.in© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_16

177

178

P. S. Chauhan

Yet aside from a collective experience of economic progress, the region also
shares developmental challenges. Continuing to close the poverty gap, improving
infrastructure, strengthening institutions, harnessing the potential of its large youth
population and ensuring equitable growth are some of the most critical overarchingpriorities facing regional economies.
South Asia is among the world’s least economically integrated regions, despite
the advantages of proximity, structural and cultural familiarities, and shared developmental priorities. Constrained by disagreements stemming from past history, national
pride, territorial disputes, ethnic and religious disturbances, mutual mistrust andcross-border migration issues, the region has been unable to leverage the benefits ofregional cooperation to bolster its common future interest. Deeper regional integration could, however, turn the sub-region into an important land bridge and trade hub
between Europe, Central Asia and South-East Asia.
The inception of multiple institutional frameworks for advancing regional cooperation, such as the South Asian Association for Regional Cooperation (SAARC),
the Bangladesh-Bhutan-India-Nepal (BBIN) initiative and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) indicates consensus on the importance of enhanced South Asian cooperation, but theseorganisations have only had limited success in overcoming hurdles to regional
collaboration.
With a vision to gradually transition towards a South Asian Economic Union
characterised by a Common Market and Customs and an Economic and Monetary
Union, SAARC facilitated the inception of a South Asian Free Trade Area (SAFTA),
which was operationalized in 2006. But after more than a decade since its initiationand despite multiple bilateral Free Trade Agreements (FTAs), intraregional tradeaccounts for barely 5% of South Asia’s total trade compared to approximately 25%
for the Association of Southeast Asian Nations (ASEAN).
One of the biggest factors undermining intraregional trade is the long sensitive
list of products exempted by South Asian countries from the tariff liberalization
programme in the region. The average trade costs within South Asia are 20% higher
than the corresponding costs within ASEAN. Persisting high trade costs, the proliferation of multiple non-tariff and para-tariff barriers, poor trade facilitation at borders,lengthy sensitive lists and high connectivity costs continue to offset the positive
impact of geography and proximity.

1 Challenges of Integration in the Region
The challenges related to diversity and integration are complex, but not exclusive tothe region. Although European integration comes from the Second World War, cooperation in Southeast Asia arose from the polarized atmosphere of the cold war. Witha very different geopolitical context, the European Union has managed to overcome
regional disputes, particularly between France and Germany.

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The creation of ASEAN has been a milestone in promoting regional integration inSoutheast Asia, which it has done through multiple tools such as ASEAN, ASEAN+3
and ASEAN+6, as well as ALS bilateral between ASEAN and neighboring countries., among others. The Regional Comprehensive Economic Association (RCEP)
was the last of the major additions, although India has so far remained on the marginsof this agreement.
In these cases, the most important contribution of regional cooperation was thefacilitation of the restructuring of the sector which seeks efficiency across the region
to promote economies of scale, specialization and competitiveness. The key successfactor for ASEAN and the EU in promoting regional integration has been the abilityof their nation-states to prioritize economic prosperity over their political differences
and focus on a shared long-term growth agenda.
Whether market-oriented as in Asia or rooted in a solid institutional framework
such as in Europe, strengthening regional integration will be a strong lever to honeSouth Asia’s collective and individual competitive advantage, attract investors andaddress shared regional vulnerabilities such as food and energy security, poverty
reduction and job creation. South Asian nations have been able to make significant
economic progress through greater global integration and South Asian regionalism
will certainly drive sustained economic development for these economies.
Resuscitation of organizations and agreements promoting regional cooperation,such as SAARC recommendations to accelerate progress towards a South Asian
Economic Union, strengthen regional trade through full and complete implementation of the SAFTA and BIMSTEC FTA and launch agreements for trade in services,
investment promotion, regional connectivity and energy cooperation will contributesignificantly to promoting deeper economic collaboration in the region. Likewise,
a greater commitment to consistency in diplomatic dialogue between regional andinterregional organizations, as well as rigorous and timely adherence to the resulting
agreements and resolutions are essential to achieve the objectives set.
BIMSTEC vs SAARC: At a Glance
SAARC

BIMSTEC

1. A regional organisation looking into South
Asia

1. Interregional organisation connecting
South Asia and South East Asia

2. Established in 1985; a product of the Cold War 2. Established in 1997 in the post-Cold Warera
3. Member countries suffer for mistrust andsuspicion

3. Members maintain reasonably friendly
relations

4. Suffers from regional politics

4. Core objective is the improvement of
economic cooperation among countries

5. Asymmetric power balance

5. Balancing of power with the presence ofThailand and India on the bloc

6. Intra-regional trade only 5%

6. Intra-regional trade has increased around
6% in a decade

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P. S. Chauhan

2 How South Asia Can Lead the World?
The sub-region’s shared colonial past and popular cultural preferences, including
prolific culinary undertones, vibrant entertainment industries and common sports,
reinforce a South Asian identity and offer compelling cross-border drivers for better
connectivity. Exploiting them by promoting intra-regional tourism and direct interaction between people can help counteract confidence deficits and negative stereotypes,
as well as create a bulwark for lasting regional peace, reconciliation and collaboration.
Above all, shared political will and incremental but tangible measures to anchor
deeper integration have the potential to significantly strengthen cooperation in South
Asia. As the region moves forward with an altered and more external economic
orientation, greater economic integration and collaboration, fueled by increased intraregional trade and investment, promises that South Asia will realize its true growthpotential.
In light of global events around Brexit, the Trans-Pacific Partnership and NAFTA
that reflect the erosion of trust in existing multilateral collaborative frameworks,
South Asia can provide the world with a new context for regional collaboration andrevive the hope for a coherent and sustainable world order. As the region’s largest
economy, South Asia particularly India has the opportunity to pave the way forregional multilateralism through mutual interest.

3 India: The Bridge Between South Asia and Southeast
Asia
Geographically, “India is strategically positioned in South Asia. It is the only statethat enjoys direct physical contact with all states in the region. Its central position within the region allows it to be the bridge between SA economies such as
Bangladesh, Pakistan and Sri Lanka and the SEA economies. Nepal and Bhutan, thetwo landlocked states, can also access the SEA region through India.
Over the years, there have been several sub-regional initiatives linking the tworegions. Sub-regional economic cooperation of South Asia (SASEC), the Gulf ofBengal initiative for multi-sectoral technical and economic cooperation (BIMSTEC),ASEAN+1 and the Bangladesh-China-India-Myanmar (BCIM) initiative have India
as a common factor. Not only India, but other SA states have also increased theirties to the SEA region. Indeed, as has been stated, commercial integration with theASEAN+ India FTA and bilateral FTAs such as India-Singapore, India-Malaysia,
Pakistan-Malaysia will include the service sector and, finally, the agricultural sector.
The free movement of goods, services, labor, knowledge and capital within ASEAN
and South Asia will pave the way for a common Asian market. The development of
economic ties and connectivity between South and Southeast Asia appears to be anatural and progressive movement towards growth and prosperity. Trade connections

16 Do SAARC and BIMSTEC Lead the World? ...

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and connectivity between regions are carried out across land borders, sea routes andair connections.

4 Bilateral to Multilateral Connectivity
The changing political landscape in both of India’s eastern neighbours has led topositive bilateral relations and also opened up the scope of increasing the connectivity
linkages to include sub-regional levels. Thus, possibility of a similar agreement
amongst India, Myanmar and Thailand is now being discussed. The 1360 km longroad between Moreh-Mae Sot will pass through Mandalay and link Northeast India
and Southeast Asia. This route could then easily connect with the Kaladan Multimodal transit project that would link Kolkata port with landlocked Mizoram via
Myanmar into economic highways with special economic zones.
None of the three sub-regional initiatives undertaken to enhance road connectivity
between India and the Southeast Asia region, namely the Mekong-India Economic
Corridor, Bangladesh-China-India-Myanmar (BCIM) Economic Corridor, and the
Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation(BIMSTEC) has as yet resulted in any tangible progress.

5 Maritime Link
India’s maritime connectivity with Southeast and East Asia, although presently
limited, can be the facilitator of pan-Asian integration. The report also notes that
despite having one of the largest merchant fleets in the developing world, Indian
ports have a limited number of direct calls with ASEAN ports.

6 The Greater Mekong Sub Region or GMS
India’s Northeast region, although a critical connecting link between South andSoutheast Asia, is clearly beleaguered with security issues, economic stagnation, andpoor infrastructure. While India’s Look East Policy has made tremendous progress, it
has bypassed the Northeast region. The Act East policy was meant to perhaps redeem
that. Plans and proposals are in place and the possibilities of building a cobweb ofconnectivity networks through India and its Northeast region is high”. But given
India’s implementation track record, how soon it can be the real bridge between
South and Southeast Asia is still an open-ended issue.

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P. S. Chauhan

7 The Need for Regional Cooperation
Before delving into the functioning of BIMSTEC, “it is necessary to understandthe need for regional cooperation in South Asia. Trends in world affairs suggest an
increasing resistance to regional cooperation, which was once considered a preferredmeans of fostering economic prosperity among participating countries. Events suchas Brexit and the U.S. demolition of the Trans-Pacific Partnership in 2017 reflect the
global climate. However, unlike global models, South Asian countries have shown a
growing interest in regional cooperation. The creation of BBIN sub-regional cooperation (Bangladesh, Bhutan, India, Nepal) after the 2014 Kathmandu summit is agood example.
The South Asia region covers about three percent of the world’s total land area andis home to around 21% of the population. The region has a different socio-economic
configuration, which includes important economic powers such as India, as well asa large number of poor people living on less than a dollar a day. It also has a large
young population looking for work.
South Asia extends over a vast land area between the mighty Himalaya in thenorth and the Indian Ocean in the south. Of the countries in the region, only the island
nations of Sri Lanka and the Maldives are separated by waters; The rest are connectedby ground. Before 1947, India, Pakistan and Bangladesh were an integral nation andthe countries of the region had close socio-cultural linguistic ties. Countries are
therefore closely linked in their socio-political state, as they face similar threats andchallenges. For example, most countries in the region face terrorism. To meet thesechallenges, South Asian countries need to cooperate”. The European and ASEAN
experience is testimony to the contribution of regional cooperation to the economic
growth of the countries.

8 BIMSTEC as Vehicle for Regional Cooperation
BIMSTEC includes the countries of the Gulf of Bengal region: five countries insouthern Asia and two in ASEAN. The organization is a bridge between South
Asia and Southeast Asia. It includes all the main countries of South Asia except theMaldives, Afghanistan and Pakistan. Given this composition, BIMSTEC has becomea natural platform for testing regional cooperation in the South Asia region.
BIMSTEC was originally called BIST-EC, “or economic cooperation from
Bangladesh, India, Sri Lanka and Thailand. When Myanmar joined the cooperation, the organization was renamed Economic Cooperation of Bangladesh, India,
Myanmar, Sri Lanka and Thailand (BIMST-EC). After the inclusion of Nepal
and Bhutan, the organization was called BIMSTEC, or Economic Cooperation of
Bangladesh, India, Sri Lanka and Thailand.
As a commercial block, BIMSTEC offers many opportunities. The region has
countries with the fastest growing economies in the world. The combined GDP in16 Do SAARC and BIMSTEC Lead the World? ...

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the region is around $ 2 trillion dollars and is likely to grow even more. Trade between
BIMSTEC member countries has reached six percent in just a decade, while SAARC
has remained about five percent since its inception. Compared to SAARC, BIMSTEC
also has greater commercial potential. Among member countries, Myanmar’s intraBIMSTEC trade accounts for approximately 36.14% of total trade. The share of Nepal
and Sri Lanka in intra-regional trade is approximately 59.13% and approximately
18.42% respectively. For Bangladesh, the intra-BIMSTEC trade share is 11.55%,
while for India and Thailand it is around three percent.
Despite the numerous successes of BIMSTEC, however, some concerns remain.
One is the rarity of the BIMSTEC top management, the organization’s highest
decision-making body. In its 23 years of existence, the BIMSTEC summit took
place only three times. The first BIMSTEC summit was held in Bangkok, Thailand
in 2004. An important milestone for BIMSTEC was the establishment of a permanent
secretariat in Dhaka. However, the secretariat faces a serious shortage of resources,
both in terms of money and work, which has adversely affected its performance.
BIMSTEC observers see lack of leadership as the main disadvantage. In recent
years, this concern has been addressed as India has shown growing interest ingrouping. India’s initiatives have led to some important developments, including thecreation of the BIMSTEC Energy Center in Bangalore and the BIMSTEC BusinessCouncil, a forum for business organizations to promote regional trade. Numerous
committees have been set up to oversee developments in various sectors, e.g., thetransport connectivity working group BIMSTEC, which held its initial meeting in
Bangkok in 2016. The developments conducted so far within BIMSTEC have beenencouraging”. To maintain momentum and strengthen BIMSTEC as a sustainable
platform for regional cooperation, the following steps need to be considered:
1. Consistency in the frequency of the top management to ensure regularity in thedecision-making process;2. Improve the capacity of the secretariat, both in terms of staff and funding;
3. Ensure tangible results / benefits, which will increase countries’ motivation to
focus on BIMSTEC (projects in the sectors of tourism, digital connectivity,
energy connectivity and humanitarian assistance in the event of disasters should
be considered); is
4. Authorize BIMSTEC to be a platform for dispute resolution between member
countries. This will require a debate and discussion between the BIMSTEC
countries to reach a consensus.
BIMSTEC offers many opportunities to its member countries. For India, “it helps inits Look East policy and South-South cooperation efforts. The development of thenorth-eastern region, opening up to Bangladesh and Myanmar, is another incentive.
For Thailand, BIMSTEC helps with its Look West policy. Under BIMSTEC, eventhe smallest nations can benefit from the markets of India and Thailand. BIMSTEC
offers the nations of the Gulf of Bengal the opportunity to work together to create
a common space for peace and development”. Given the fairly friendly relationshipbetween BIMSTEC member states, the implementation of the suggestions listed

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P. S. Chauhan

above to increase BIMSTEC’s performance is an achievable goal if countries show
sufficient political will and mutual respect.

9 Conclusion
The South Asia can play a leading role in the world because of its special characteristics. The two organisations—SAARC and BIMSTEC—focus on geographicallyoverlapping regions. However, “this does not make them equal alternatives. SAARC
is a purely regional organisation, whereas BIMSTEC is interregional and connects
both South Asia and ASEAN. Insofar as their regions of interest overlap, SAARC
and BIMSTEC complement each other in terms of functions and goals. BIMSTEC
provides SAARC countries a unique opportunity to connect with ASEAN. Since the
SAARC summit has only been postponed, not cancelled, the possibility of revival
remains. The success of BIMSTEC does not render SAARC pointless; it only adds a
new chapter in regional cooperation in South Asia. This cooperation can be a bridge
between the South Asia and East Asia. Furthermore, with the agreement of RCEP,
which is a group of 15 Asia–pacific countries 10 ASEAN nations and five if its
major trading partner: Australia, China, Japan, New Zealand and South Korea. The
Mega deal started with 16 countries but India decided not to join the trade pact overconcern that it would hurt its domestic producers. Together, the 15 countries makeup close to one-third of the world population and global gross domestic product,
according to Reuters report. That’s larger than other regional trading blocs such as
the EU and the US-Mexico-Canada Agreement, or USMCA. In contrast agreements
such as the Trans-Pacific Partnership (TPP) pose a greater challenge, therefore after
taking into consideration the India’s concerns, it would be significant for the RCEP
to keep India along”. Therefore, the importance of South Asia’s presence at world
partnerships signifies its role in the affairs.

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New York: Routledge.
Baker, Peter. 2017. “Trump Abandons Trans-Pacific Partnership, Obama’s Signature Trade Deal.”
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Chauhan, Pradeep S. 2009. South Asian Economic Integration: Progress, Problems and Prospects.
Germany: Lap Publishing.
Chauhan, Pradeep S. 2010. Asian Economic and Financial Integration in Global Framework. New
Delhi: New Century Publication.
Chauhan, Pradeep S. 2018. BRICS and India: Recent Developments, Challenges and Prospects.
New Delhi: Bookman.
Chauhan, Pradeep S. 2019. Climate Change and Paris Agreement: Challenges After US Withdrawal.
New Delhi: New Century Publications.

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Gupta, Sourabh. 2015. “Modi Can Lead South Asia’s Regional and Global Integration.” East Asia
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East Asia Forum. http://www.eastasiaforum.org/2016.
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Hindustan Times, 23 March 2016.
Jha, Ram Kumar, and Saurabh Kumar. 2015. “BIMSTEC a Better Regional Cooperation Option
than SAARC?” South Asia Monitor, 13 January 2015.
Khullar, Akanksha. 2015. “SAARC Still Marred by Divisions.” East Asia Forum. http://www.eas
tasiaforum.org/2015/11/04/saarc-stillmarred-by-divisions.
Mandhana, Niharika. 2014. “Is the India-Pakistan Rivalry Spoiling SAARC?” The World Street
Journal, 26 November 2014.
Miller, Manjari Chatterjee, and Bharath Gopala Swamy. 2016. “SAARC Is Dead; Long LiveSAARC.” The Diplomat, 2016. https://thediplomat.com/2016/11/saarc-is-dead-long-live-saarc.
Rosefielde, S., Masaaki Kuboniwa, Satoshi Mizobata, and Kumiko Haba. 2018. The Unwinding of
the Globalist Dream: EU, Russia and China. World Scientific Publishing Co. Pte. Ltd.
Sharma, Aparna, and Chetna K. Rathore. 2015. “BIMSTEC and BCIM Initiatives and Their
Importance for India.” Discussion Paper. Cuts International, November 2015.
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Stanford Journal of International Relations 7, no. 1 (Winter 2006).

Dr. Pradeep S. Chauhan is noted Political Economist and an academic expert. He has been
visiting Professor to many world-renowned intuitions and Universities including University of
Oxford, Paris School of Economics, University of California, Berkeley, USA, Aoyama Gakuin
University, Tokyo etc. His illustrious academic career also includes a prestigious French Government Fellowship from the Government of France for which he pursued his research and teaching at
Paris School of Economics, Paris. He has been Agatha Harrison Memorial Fellow at St. Antony’s
College, University of Oxford for some years (2007–2010). Dr. Chauhan has already published 15
books. He is an expert in the development economics and political economy of South Asia and theworld economy. He is a member of many national and international academic bodies He has beenhonored with many national and international awards for excellence in academic research. He has
been appeared on national and international tv channels for debates and panel discussions.

Chapter 17

Transition of Economic and Political
Leadership in East Asia Since the Second
World War
Sang-Chul Park

Abstract After the Second World War, most East Asian countries were devastatedas in Europe. Compared with Western Europe, there was no comprehensive reconstruction plan such the Marshall Plan in East Asia. Despite the fact, Japan achieveda remarkable economic growth based on a trade-oriented economic growth strategy
that has been followed by other East Asian countries such as South Korea, ASEAN
member nations, and later China. Japan’s economic success made Japan the second
largest economy in the world in 1968 until 2010, when they were taken over by China.
As such, the Japanese economy dominated in the region till the 2000s. However, its
share has declined continuously because other major economies such as ASEAN,
China, and South Korea have generated higher economic growth rates than Japan.
Japan’s role in the unilateral leadership thus faced severe competition in the 1990s
and the 2000s in terms of investments and trade partners for FTAs. As a result, theunilateral leadership in the region started to transform into the multilateral leadership shared by other major economies such as ASEAN, China, and South Korea.
At present, the Chinese economy gains more attention than ever to strengthen her
leadership based on Mega FTA such as RCEP, while Japan struggles to restore her
leadership with CPTPP in the region. At the same time, ASEAN and South Korea
are also keen to expand their roles in influencing in the region continuously. Overall,
the transition of economic and political leadership in the region has been processedby playing their roles that are linked to their national and regional interests focusedon regional economic integration known as regionalization or regionalism.
Keywords Transition of leadership · Major economies · East Asia · Regional
economic integration · Regionalism

S.-C. Park (B)Graduate School of Knowledge Based Technology and Energy, Tech University of Korea,
Siheung, Korea
e-mail: scpark@tukorea.ac.kr© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_17

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S.-C. Park

1 Introduction
Since the Second World War, the global economy has grown rapidly based on strong
trade growth across the world that has accelerated globalization processes. As a result,these have formed the triad economic and trade system in terms of GDP and tradevolume. Namely, the European Union (EU), North America Free Trade Association(NAFTA), and East Asia are the major actors in the global economic system andtrade since the 1980s. However, the global financial crisis in 2008 created a new
global economic order and governance that consists of existing global economic
power such as Group 7 and new emerging economic powers such as Group 20 and
BRICS. Additionally, China has tried to build a new form of cooperative platform inworld politics and global economy by creating Group 2 in 2013. Since Brexit in 2016
and the Trump Administration in 2017, the global governance and economic systemhave faced a de-globalization process represented by protectionism. Additionally,
the world has been under the COVID-19 Pandemic since 2020 and suffering from it
in all areas around the corner of the world (Dicken 2015; Kirton 2013; Looney 2014;
Park 2020).
Along with globalization processes, regional economic integration is a process
which is taking place all over the world. The East Asian region is not an exception. However, in this area, it can be described rather as bottom-up integration, i.e.,market-driven (de facto) integration rather than institutional integration driven byintergovernmental cooperation in Europe and North America. The institutional integration in East Asia has been much less advanced than in Europe. Nevertheless,processes of economic integration have also been taking place in East Asia since the1970s. Dependent on the stage of process development, individual countries’ roles
have varied much in the East Asian context.
Japan, as one of the most developed economies in East Asia throughout the
post-war period, showed a relatively diversified approach towards this process. Bychanging its position from firmly reluctant to favorable, it played a discernable rolein the process of East Asian economic regionalization. This role has evolved overtime along with the transition to the next stages of de jure integration. This study aims
for presenting the Japanese economic activity at various stages of development of
East Asian regionalism and an assessment of the specific role played at a given juncture. Additionally, it indicates possibilities of the Japanese economy to contribute tofurther regional economic integration and create economic regionalism. Last, but notleast, it analyzes how economic and political leadership in the region has shifted fromJapan to China as well as which roles South Korea, as one of the major economies,
plays in the region.
In order to meet the research goals, various research methods will be used. These
are a method of critical analysis of the literature, an inference method, and to a limited
extent, a method of statistical data analysis. These methods will be focused on the
research period covered from the mid-1980s to the mid-2010s.

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2 Participation of Japan in East Asian Regionalism Since
the Mid-1980s
After the Second World War, East Asia had also struggled to recover their national
economies along with West Europe. However, the economic condition between
the two regions were fundamentally different. The U.S. government initiated the
Marshall Plan, investing a large amount of capital in order to restore the economy ofWestern Europe, but no direct U.S. capital investment in East Asia for rebuilding the
economy although the two regions faced severe threats from communism from theSoviet Union and People’s Republic China (hereafter China). Under such circumstances, the economic recovery in East Asia was slower than in Western Europe in
the 1940s and 1950s. The Korean War (1950–1953) contributed to generating higheconomic growth in Japan, the Philippines, and even many countries in Western
Europe such as Germany, France, Sweden, the UK, etc. As a result, Japan became
the second largest economy in 1968 (Hamada and Kasuya 1992).
The East Asian countries preferred a multilateral order in the global economy. The
International Monetary Fund (IMF) and the General Agreement on Tariffs and Trade(GATT) determined the framework for external economic policies of these countries.
However, the situation changed in the early 1990s, when some countries began toshow more interest in regional economic integration. There were four reasons for this.
First, external pressure, like the integration in Europe and North America, triggereda kind of defensive reaction. Second, East Asian countries began to realize that
institutional links create a more predictable framework for development of advanced
economic interdependence than ever. Third, the creation of larger geographic areas
with less internal barriers could encourage foreign companies to increase their direct
investments. Lastly, deepening economic relations with other countries in the region
had a positive impact on the structural changes in integrating countries (Rana 2006;
Zhai 2006; Baldwin 2007; Munakata 2004).
Economic regionalism in East Asia has a relatively short history. The most important regional organization, the Association of Southeast Asian Nations (ASEAN) was
founded in 1967. However, by the beginning of the 1990s ASEAN’s objectives werepredominantly political and defensive in character while economic cooperation did
not develop intensively. In the 2000s it became economic-cooperation oriented andcreated the common market in 2015 (Jetschke 2012; ASEAN 2019).
The first pulses of economic integration in East Asia were initiated by the U.S.
government. ASEAN became the object of the United States’ economic interest in
the 1980s, which was unofficially proposed in opening talks on a free trade area.
However, ASEAN was not ready to take the U.S. proposal at that time. Later, East
Asian countries began to endeavor to cooperate in order to strengthen their influence
in international affairs (Maswood 2001; Munakata 2004).
The first initiative of ASEAN was formulated in December 1990 by the Prime
Minister Mahathir in Malaysia proposing to establish the East Asian Economic
Grouping (EAEG). According to the plan, the EAEG did not include North East
Asian countries and represents only ASEAN’s interests on the world stage. This

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initiative was unacceptable to the U.S. government and their key allies, Japan andSouth Korea, facilitating its abandonment. The proposal was reformulated and in
October 1991 Malaysia reported another initiative, the East Asian Economic Caucus(EAEC). However, the U.S. government and its North East Asian allies opposed it sothat this initiative was not implemented. At the beginning of the 1990s, a largescaleeconomic integration in ASEAN began. In 1992, the ASEAN Free Trade Agreement
was established, a step forward in the process of the East Asian economic integration(Dent 2010).
Many scholars claim that Japan was a pioneer of regionalism in the Asia andPacific in the years 1985–1992. In reality, however, Japanese foreign economic policy
did not treat regionalism in East Asia as a priority at all. Japan’s activities werelimited rather to increasing its economic presence in the region and supporting East
Asian regionalization because most Japanese companies had significant advantages
over rivals in the region (Naya 2004; Yoshida 2004; Baldwin 2011; Sakakibara andYamakawa 2005).
Emerging initiatives for the integration of exclusively North East Asian nations
not including countries such as the USA or Australia, gained Japanese support.
Even assigning Japan to a leading role in these initiatives did not influence them togreater involvement. At that time, Japan was under strong influence of the USA andinterested in weakening rather than strengthening East Asian regionalism. In fact,
Japan supported the participation of the USA in East Asian regionalism resulted increating Asia Pacific Economic Cooperation (APEC) (Maswood 2001).
APEC was established in 1989 as an initiative of Australia and Japan. Nevertheless, until 1993 this forum did not generate any significant achievement. It functioned
according to the interregional cooperation formula, where, apart from East Asian
countries, also members in the Pacific area were included. The growing activity of
APEC in the early 1990s can be considered as a response of the USA to the East
Asian initiatives. According to the USA, independent initiatives taken by the East
Asian countries such as EAEG, EAEC or ASEAN FTA were regarded as unfavorable. Moreover, the USA did not want to lose their leading position in the region
and adopted a strategy of undermining a preferential trade agreement by proposing alarger one. Consequently, major East Asian economies reduced their interest towards
solely East Asian initiatives (Dent 2010; Baldwin 2007).
Under such a circumstance, the European Union (EU) contributed to building a
regional community in East Asia with increasingly converging internal targets. In
1996, the first Asia Europe Meeting (ASEM) was held. It was an initiative of ASEAN,
which wanted to develop economic cooperation with the EU, but the participation ofChina, Japan and South Korea was welcomed. The ASEM created an opportunity for
East Asian countries to talk and agree on common positions on different issues even
before the meetings with the EU. In 1997, the representatives of ASEAN, China,
Japan and South Korea met in Kuala Lumpur to discuss issues important for theregion. It was the first meeting of the group, which has been described as the informal
East Asia Summit named as ASEAN Plus Three (APT). Despite skepticism of theASEAN proposal because of the exclusion of Australia and New Zealand, Japan

17 Transition of Economic and Political Leadership in East Asia …

191

eventually decided to participate in the APT summit. It was the starting point ofJapan’s participation in East Asian regionalism (Naya 2004; Yoshida 2004).

3 Institution Building After the Asian Financial Crisis(AFC)
The Asian Financial Crisis (AFC) in 1997 is regarded as the beginning of true regionalism in East Asia. The AFC certainly accelerated the processes of East Asian regional
economic integration. Various factors stem directly from the AFC influenced regionalism in East Asia, including the contagion relationship between Asian countries,
major disappointment regarding the USA and IMF reactions to the crisis, some
progress of the APEC in achieving closer trade and financial cooperation, Japan’schanging perception of its role in the Asian Monetary Fund (AMF), the PRC’s decision not to devalue RMB during this period, New Miyazawa Initiative launched in
1998, and the policies promulgated by the IMF to solve the crisis. They were deemed
inappropriate and gave greater credibility to the East Asian approach (Pomfret 2006;
Plummer 2006).
The AFC started in Thailand in July 1997, and quickly spread to other countries,
including South Korea, Malaysia and Indonesia. To a lesser extent, the crisis affected
the Philippines, Hong Kong and Singapore. Owing to the rapidly spreading crisis,
East Asian countries realized that they were subject to close economic interdependence. In addition, they realized that international financial institutes were not fully
reliable during the crisis, and even APEC was not a proper platform for resolving
the problems of East Asia. (Munakata 2004; Naya 2004; Yusuf 2001).
Moreover, the desire to avoid problems in financial markets in the future, as well asa high surplus of foreign exchange reserves in China and Japan have caused a numberof proposals for institutional financial cooperation. As a result, AMF and the Chiang
Mai Initiative (CMI) were proposed and the concept of a single Asian currency wasformulated. While the previously proposed agreements on trade were not met withgreat interest, the idea of financial cooperation was supported by East Asian countries
in order to create a safety network for their financial markets. East Asian countries
expected that Japan would play the key role in overcoming the economic problems
in the region (Pomfret 2006; Munakata 2004).
Japan proposed the creation of AMF during the ASEM Finance Ministers Conference in 1997. It was the first Japanese initiative known as the original Miyazawa
plan. However, it was severely criticized by the U.S. government and the IMF sothat Japan could not lead AMF creation. Nevertheless, Japan was able to create acurrency swap arrangement, Chiang Mai Initiative (CMI) among ASEAN+3 countries in 2000, which was established in 2009 and came into effect with USD 120
billion in March 2010 (ADB 2021a).
In 1998, when the crisis persisted, Japan announced the New Miyazawa Initiativewith a USD 30 billion capital support package for the East Asian countries. It was an

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expression of empowerment in Japanese policy towards the countries of the region for
the first time. It turned out that Japan was able to pursue a policy independent from theUSA. Engaging in solving problems arising from the Asian Financial Crisis (AFC),
Japan strengthened its role in the East Asian region along with China, investing thesame share of 32%, with South Korea and ASEAN each investing a share of 18%.
As a result, Japan became more involved in the action at the ASEAN+3 Forum that
confirmed the growing interest in East Asian integration. At the same time, Chinese
involvement in East Asia started, and South Korea strengthened its influence inthe region. However, the APT had no support for free trade agreements covering
the entirety of East Asia; it was only interested in the development of financial
cooperation. As a result, many bilateral and multilateral FTAs arose in East Asia,
which constitutes the next stage of East Asian economic integration.

4 FTA’s’ Proliferation in East Asia
A new stage of East Asian regionalism, involving the creation of preferential free
trade agreements (FTA), began in 1999. South Korea started negotiations with Chile,and Singapore with New Zealand. Additionally, Singapore proposed to hold FTA
talks with Japan. The following year, China expressed its interest in FTA with
ASEAN, triggering similar actions in other countries, including Japan. In East Asia,
a domino effect spread out, and a number of agreements increased rapidly after 2000
(Baldwin 2011; ADB 2021b) (See Fig. 1).
Until the FTA between Japan and Singapore in 2002, there was only one important
agreement, the ASEAN Free Trade Agreement of 1992. Later, a rapid increase in
the number of agreements started. Given the data of ADB in 2020, 16 East Asian
countries completed 268 FTAs, and the largest number of them was signed by Singapore, South Korea, China, Japan and Malaysia. The dynamic growth in the numberof bilateral and multilateral agreements in East Asia has created a complex webof relationships and generated negative effects of FTAs, called the spaghetti bowl
effect. Overlapping agreements are economically inefficient and create new divisions
but also hinder the emergence of a leader who would be able to manage so many
economic links in the region. Therefore, ASEAN+3 need to create mega FTAs inorder to mitigate negative effects (Zhai 2006; Park 2020; ADB 2021b).
Integration processes involving countries in East Asia are not only intra-regional,
but also interregional in nature. In addition, currently a worldwide trend towards
so-called mega FTAs is observable, and this also applies to East Asia. Since 2012, 16
countries (ASEAN+6) have been negotiating the Regional Comprehensive Economic
Partnership (RCEP) and completed in 2020. On the other hand, the Trans-PacificPartnership (TPP) was signed in February 2016. The agreement covers 12 countries,
including the United States, Canada, Japan and Australia, but not China. However, inJanuary, 2017 the Trump government declared that it would not participate in the TPP
so that Japan and other 10 countries created Comprehensive Progressive Transpacific17 Transition of Economic and Political Leadership in East Asia …

193

Fig. 1 Number of newly effective trade agreements in Asia (As of 1975–2019) (Source ADB[2021b])Partnership (CPTPP) that came into effect under the Japanese leadership in Dec. 2018
(Park 2021).
China was particularly active in developing bilateral and multilateral frameworksof economic cooperation in the region. The Chinese economy did not suffer significantly during the AFC and the global financial crisis (GFC) in 2008 so that it
was able to attract new productive investment, create jobs and develop production
chains in Asia. Moreover, the credibility of China grew along with its responsible
behavior during the crisis, when it did not devalue the RMB, as well as with theentry into the World Trade Organization in 2001. These factors, along with longlasting dynamic economic growth, contributed to strengthening China’s position in
the region (Baldwin 2007).
China’s policy and rivalry with Japan for influence over the region were agentsof change in Japanese trade policy toward FTAs. In fact, the beginning of China’s
negotiations with ASEAN triggered the need to negotiate a similar agreement by
Japan. Changes in Japanese trade policy were also caused by the AFC which resulted
in a significant increase in interest of agreements within the solely East Asian region
but also by the continuous development of Japan’s economic relations with East
Asian countries (Baldwin 2007, 2011).

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Until 2005, there was only one agreement in effect made by Japan whereas insubsequent years they proliferated. In 2008, already nine agreements were in force
and in 2016 that number increased to 15. Apart from bilateral agreements negotiatedby Japan, the country participates actively in multilateral agreements involving awider group of countries in the Pacific basin. Japan is among the countries negotiating
RCEP and it was the first country which formally ratified TPP. This indicates thecontinuous and growing interest of the country in talks on economic cooperation not
only in East Asia but also in the Pacific region. Japan, therefore, pursues policy atmany levels from the multilateral, through inter-regional to a regional one.

5 Chinese, Japanese and South Korean Roles in East Asian
Economic Integration
The unprecedented and long-lasting economic growth after World War II led firstto Japan and later south Korea and China achieving a strong position in the
global economy. In the second half of the 1980s the Japanese prosperity was
widely acknowledged. Growing importance in the world economy was confirmed byincreasing shares in global trade and investment flows, as well as by rising share inglobal GDP. The adoption of a global perspective and a strong concentration on cooperation with developed countries gave the country benefits of an increasing economic
position in the world. As a result, Japan became the second largest world economy
from 1968 to 2009, till China took over its position in 2010.
Paradoxically, economic successes did not make Japan think about involvement
in regional economic integration as the Japanese authorities mainly adopted a global
rather than regional perspective. This was one of the reasons why Japan was so
reluctant to the proposal of Prime Minister Mahathir to lead the regional economic
integration in the beginning of the 1990s when EAEG and EAEC were established.
During the entire post-WWII period, Japan was pursuing the policy based on principles of multilateralism, so at the turn of the 1980s and 1990s with great economic
prosperity, no one was thinking about changing the successful strategy of Japanese
foreign economic policy.
According to data from the World Bank in 2017, Japan’s share of global GDP
was growing up to 1991. Since then, when real estate values and stock markets
deteriorated dramatically, the internal economic problems resulted in declining sharesof Japan not only in East Asia but also in the world economy, while the Chinese sharesof global GDP increased rapidly since the 1990s (World Bank 2017).
It is clear that the total share of East Asia in the world economy was increasing
due to the dynamic growth of China at the expense of Japan from the beginning of the
1990s. In addition, the two major economies exchanged their positions as main GDP
contributors to the world economy as well as for East Asia since the 2010s. Thesechanges resulted from fluctuations in the GDP growth between the two countries.
Moreover, it is visible that Japanese economic growth rate became lower than the

17 Transition of Economic and Political Leadership in East Asia …

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15.0

10.0

5.0

1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

0.0

-5.0
World

ASEAN

China

Japan

Korea, Republic of-10.0

Fig. 2 East Asian and World GDP Growth (As of 1985–2015 and %) (Source World Bank [2017])

average of world economic growth from 1992 to 2015, while ASEAN, Chinese, andSouth Korean economic growth rates were still higher than the average of world
economic growth rate from 1986 to 2015. (World Bank 2017) (See Fig. 2).
There was significant fluctuation of GDP growth in the countries analyzed. The
most striking fact is the Japanese performance. Since 1985, the situation had been
deteriorated and from 1992 onwards Japan was the worst performing country of East
Asia. In 1993, the GDP growth of Japan was at the level of 0.2% with the blast of
the bubble economy, while that of China stood at 13.9%, South Korea at 6.8% and
ASEAN at 7.7%.
After the AFC in 1997, the economic situation slightly improved in 1999, and up
to the outbreak of the GFC in 2008 economic growth of the countries was positive.
It seems that after the outbreak of the AFC, the Japanese economic position was
still relatively strong, despite its negative growth, so that Japan could become theleader of East Asian economic integration. The consistent pursuit of the creation of
the AMF and the allocation of significant financial support to this initiative would
convince East Asian neighbors about the credibility of the Japanese economic policyin the region. Japan, however, missed this opportunity, unfortunately, because of theconservative policies subordinated to the interests of the USA. Moreover, Japan wasless able to serve as an economic leader in the region with conditions of declining
economic growth since 2000.
Compared to other East Asian countries, Japanese economic performance was
the weakest because the GDP growth was at the lowest level for the entire period
regardless of its economic level. The GFC triggered by the US in 2008 strongly hit
East Asian countries. In 2009, Japanese GDP fell by as much as 5.5%, while South
Korea maintained a positive albeit modest growth of 0.7%, and ASEAN of 1.7%.
Similar to the AFC, the Chinese economy remained in relatively good shape with
8.9% of economic growth even in 2009. After 2010, the situation improved in all
analyzed economies, but the Japanese economy retained the lowest growth rate. In

196

S.-C. Park

90
80
70

76.8

74

60

65.7
59.8

50

42.7

52.4

35.8
42.7

40
26.3

30
20
10
0

36

20
15.2
10.3

9.3
8.3
5.6
1985

10.4

8.8
7
1990
Japan

11.8

11.4

11

10.4

8.7

9.9

10.3

10.1

9.5

1995

2000

2005

2010

2015

China

South Korea

ASEAN

Fig. 3 GDP share of major economies in East Asia (As of 1985–2015, %) (Source World Bank
[2017])

2011 and 2014 Japanese GDP growth went into negative territory in −0.5% and −
0.1%, respectively.
Such changes in economic growth resulted in the evolution of the economic position of countries in East Asia, measured by a participation in the creation of regional
GDP, but also by participation in East Asian trade and investment flows. In this regard,
the analysis of the data clearly shows the decline of the importance of Japan as themain source of East Asian GDP from 76.8% in 1985 to 36% in 2015, while Chinese
share of the regional GDP increased from 9.3% to 42.7% during the same period
substantially. South Korea also increased its share from 5.6% in 1985 to 10.5% in2002 and to 9.5% in 2015, while ASEAN’s share grew from 8.3% in 1985 to 11.8%
in 2015. It means that China, Japan, and South Korea became the major economies
in East Asia since the 2000s (World Bank 2017) (See Fig. 3).
Even in trade, China has played the core role in generating the Asian intraregional
trade from around 50% in 1991 to nearly 60% in 2019, which is lower than in theEU, but much higher than in North America. The Asian intraregional trade shareexcluding China is around 40% from 1991 to 2019 constantly. It means that Chinese
contribution to the Asian intraregional trade share accounts for maximum 20% in
the region (ADB 2021b) (See Fig. 4).
Such changes in the economic balance of power in East Asia and the whole of Asia
lead to a clear conclusion that Japan did not become a leader of the regional economic
integration not only because of the traditional aversion to institutionalized initiatives,
but also the weakening economic position of the country in East Asia comparably
during the period. In the 1990s, Japan could be perceived as the strongest economyof the region and play a leadership role in the integration processes. However, in thenext two decades, such a role became weakened while newcomers such as ASEAN,
China and South Korea expanded their roles as major competitors and investors in
the region along with Japan in terms of trade volumes and FDI inflows.

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Fig. 4 Intraregional tradeshares in Asia, the European
Union, and North America(As of 1991–2019, %)(Source ADB [2021b])

6 Shift of Economic and Political Leadership in East Asia
The evolution of the East Asian regionalism shows a de jure regional integration.
At the same time, roles of individual countries in the process evolve and change theeconomic balance of power in the region. The regional integration is also subject toreshape their foreign economic policy.
The unprecedented economic growth after World War II has provided Japan astrong and dominant position in the global economy and she decided to conduct
foreign economic policy based on the principles of multilateralism. This was due
in part to a conviction of the society about the necessity of reintegration with theinternational community and the restoration of normalcy after being defeated in
the war. The conviction about the primacy of multilateralism over regionalism waspresent in Japan until the end of the 1990s. Japan claimed that the regionalism could
bring more harm than good, and also constitute a flagrant violation of the principlesof GATT and WTO (Chiavacci and Ziltener 2008).
At the same time, however, conscious actions toward regionalism existed inJapanese politics since the end of the war. The Japanese approach toward regionalism was largely the result of external factors such as the strength of the politicaland economic relationships with the USA, the economic situation in the world, andthe regional and the domestic economic situation. Consequently, the Japanese role in
East Asian economic regionalism evolved accordingly, which is rather passive thanactive.
In fact, Japan was keener to develop economic relations with the developed nations
such as the USA and Western European countries than East Asian countries after thewar. The latter were regarded mainly as important markets, sources of raw materials,
but not as reliable partners in regional cooperation. By contrary, the adoption ofa global perspective and a strong concentration on trade with developed countries
provided Japan the benefits of an increasing economic role in the world till the end of
1980s. Therefore, the East Asian region was only the main area for Japan to develop

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its trade and investment ties, but she was not interested in the development of East
Asian regionalism. As a result, Japan’s role in the process was negligible.
Countries like Malaysia and Singapore even tried to make Japan more interested
in the East Asian region. However, even after assigning Japan a leading role in suchactivities as EAEG and EAEC, Japan did not change her approach to the process. Dueto the strong influence and pressure from the USA, Japan rejected the model of solely
East Asian cooperation and instead proposed cooperation within the Asia–Pacific(Low 1991; Maswood 2001; Yoshida 2004).
Later, Japan participated in the initiative of ASEAN+3 (ASEAN, China, Japan andSouth Korea) in 1997 because the USA supported concept of Early Voluntary Sectoral
Liberalization under the APEC regime that made Japan disappointed. For the firsttime, Japan began to engage in the processes of exclusively East Asian regionalism.
Since then, an increasing engagement of Japan in East Asian regionalism took place.
The currency and economic crises in the region allowed Japan to realize that it
belongs to this geographical area and shares its common interests. In addition, thedisappointment with the USA and IMF’s policies made the country more independent
in its decisions. Japan started becoming a real leader of regional initiatives. An
immediate financial assistance to countries affected by the AFC, the proposal toestablish the Asian Monetary Fund, the Chiang Mai Initiative and the New Miyazawa
Plan all are initiatives for strengthening its activity in the region (Yoshida 2004).
At that time, Japan was the most significant country in promoting intra-regional
cooperation in East Asia. Unfortunately, this activity has weakened due to the lackof support from China and the sharp opposition of the USA to the creation of the
AMF. In addition, the late 1990s was the beginning of the growing interest of countries in developing their bilateral preferential economic arrangements. Small andmedium-sized economies in East Asia have recognized that their bargaining power
is dependent on the attractiveness of the region to which they belong. Therefore,
these countries began increasingly to negotiate bilateral FTAs.
Japan has also joined this process, and policy makers started to consider regionalism as a complementary policy to the multilateral one. This was reflected in thestrategy of free trade agreements published by the White Paper on International Trade
1999. Japan stressed here its commitment to multilateral trade rules, but pointed tothe possibility of concluding bilateral agreements with South Korea and Mexico. In
October 2002 Japan announced its FTA strategy and acknowledged that FTAs would
bring economic and political benefits. In November 2010 the Ministerial Committee
on Comprehensive Economic Partnership announced a Basic Policy on Comprehensive Economic Partnership, where it was decided that the country’s economic
development would depend on deepening economic relations with Asian countries,
emerging economies, Western countries and those rich in raw materials. At the sametime, it stressed the importance of the Asia–Pacific region for Japan and its desire
to create a single economically integrated area (JETRO 1999; MOFA 2002; MOFA
2010).
Unfortunately, however, the period of rapid growth in the number of FTAs is notnecessarily good for Japan in East Asian regionalism because not only Japan but also
China, South Korea, and ASEAN do seek to conclude such agreements even earlier

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than Japan. Each of them is fighting for the position as a regional FTAs hub, because
it could give them various advantages in attracting investment and marginalize otherspoke countries in the region. As a result, the high level of competition between
countries for FTAs is not conducive to the East Asian regionalism.
Under such a circumstance, Japan is just one of many countries participating in theprocess and faces high competition with other major economic powers such as China,
South Korea, and ASEAN in the region. Furthermore, Japan is a latecomer in thecompetition for the leader of the FTAs creation. Its activity was the reaction and theresult of a greater interest of other competitors particularly such as China and South
Korea in the region. Therefore, it is not fully right that Japan currently possesses
a leading role in East Asian regionalism. On the contrary, her role is weaker thanin the previous period. This is also a result of an Asian-wide tendency to negotiateagreements not only within but also outside the region of East Asia. Overall, Japan
shares the economic and political leadership with China, South Korea and ASEAN
in the region. At the same time, it is visible that Chinese expansion and role gain
more attention in the region than ever (Zhai 2006; Obe 2016).

7 Conclusions
Regional economic integrations have become common in the world since the EU
started in 1957. Particularly economic regionalism can generate mutual benefits invarious aspects so that many regions have tried to create it. East Asia is no exception.
The analysis presented in the paper forms a basis for the verification of the hypothesis
about the significance of Japan in the development of East Asian regionalism as well
as how her leadership has been transformed from the unilateral to the multilateralpositions in the leadership along with China, South Korea, and ASEAN.
Japanese economic growth in the 1950s and 1960s was remarkable, and Japan
became the second largest economy in the world right after the USA in 1968. Since
then, she was able to hold her position till 2009 and handed over China its positionin 2010. Japan has suffered from low economic growth longer than two decades
long since its bubble economy burst in the beginning of the 1990s. In fact, Japan’s
economic position was very strong not only in East Asia but also in the world till
the end of the1980s, which made it adopt mainly a global perspective. The country’s
involvement in East Asia consisted primarily of capital and trade expansion, and her
economy was mostly linked to the developed world such as the USA and the EU.
It means that Japan clearly preferred globalism over regionalism. In addition, thespecial and beneficial relations particularly with the USA caused regional initiatives
by Japan to always consider the role of the USA in the region. As a result, Japanfavored broader agreements involving not only East Asia but also Asia–Pacific’s
countries creating the APEC.
However, this broader approach resulted in disappointing speed and scope of workwithin the APEC, which prompted Japan to become more involved in the East Asian
region. Finally, Japan decided to participate in the APT Forum, invited by ASEAN. It

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was the beginning of true regionalism in East Asia and at the same time the beginningof Japan’s involvement in East Asian regionalism. Unfortunately, however, Japan was
not able to maintain its leadership for creating the AMF due to the strong opposition
from the USA and IMF. As a negotiation, Japan enabled to create the CMI in order
to set up the financial safety net for East Asian financial stability right after the AFC
in 2000. At that time, Japan was not the single dominant actor on this issue, but oneof the major contributors along with China, South Korea, and ASEAN.
In line with the CMI, Japan missed her opportunity to engage with East Asian
countries to develop bilateral FTAs because Japan strongly intended to continue her
multilateral perspectives in terms of the trade in the 1990s and the early 2000s. On
the contrary, China, South Korea, and ASEAN changed their trade strategies toward
the bilateral FTAs in the end of the 1990s and completed several bilateral FTAs in
the region. As a result, Japan became a latecomer in terms of bilateral FTAs in theregion and faced a strong competition with the early comers in order to attract othercountries to become trade partners.
Additionally, Japanese economic capacity based on GDP has not grown since themid of the 1990s, while other East Asian countries, particularly China and South
Korea grew rapidly and substantially. Therefore, Japanese GDP share in East Asia
declined from 76.8% in 1985 to 36% in 2015, while Chinese and South Korean
shares increased from 9.3% and 5.6% to 42.7% and 9.5% respectively during thesame period. It means that Japan plays a role in regional leadership not unilaterally,
but multilaterally with other major countries in the region. It also shows how thetransition of economic and political leadership has been emerged since the Second
World War that will be accelerated in and after the COVID-19 Pandemic era in theregion.

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Chapter 18

Chinese Economic Growth and Prospectsof a New International Monetary Regime
Chris G. Pope

Abstract The chapter focuses on the rapid growth of China’s economy and assesses
the likelihood of China ending the US dollar standard. In doing so, it raises key
issues at the heart of the Chinese economy, particularly following the Great Financial
Recession of 2008, whilst evaluating the Chinese states’ capacity to address them.
Overall it argues that while the Chinese economy is dependent on US dollars, its
mid-to-long term goals are surely to significantly reduce this dependency so that theeconomy can transition to one primarily driven by consumption and thus avoid theso-called “middle-income trap”. Given this, the chapter argues that an end to thedollar system is, in fact, in sight.
Keywords China · United States · Dollar System · Great Financial Crisis

1 Introduction
In the aftermath of the 2008 Great Financial Recession (GFC), the United Nations(UN) hosted a conference which sought to lay out the brief schematics of how theinternational monetary system should be reformed. Coming from the central global
governing framework thought to be a foundation towards realizing the Kantian idealof a perpetual peace and evoking the idea of peaceful, orderly multilateral governanceacross the world, the report was surprisingly caustic. The UN blamed the “ideas andideologies underlying key aspects of what has previously been called neo-liberalism,
market fundamentalism, or the Washington consensus,” and highlighted the need toovercome the “fiduciary dollar standard” (United Nations 2009, 39, 92, 97–98).
While the US dollar had long since severed its tie to gold, it remains the de facto
global currency for two reasons. First, the increase of the Federal Funds Rate by the
US Federal Reserve in the 1970s and early 1980s made the US dollar an attractive
reserve asset because it attracted global capital to the US while the high dollar policy
pursued by the Reagan administration led to a debt crisis across the third world which
C. G. Pope (B)Kyoto Women’s University, Kyoto, Japane-mail: pope@kyoto-wu.ac.jp© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_18

203

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C. G. Popefurther accelerated the process. Second, the pricing of primary commodities such as
oil in dollars by exporters such as Saudi Arabia artificially increased demand for the
dollar, which encouraged central bankers from export-intensive countries to invest
in US treasuries (debt) to keep export prices low. This is what is called the ‘Dollar
Standard’ at the heart of the current international political economy.
The dollar standard relies on a constant demand for US treasuries and other forms
of debt because most of the world’s trade is carried out in US dollars, meaningthat there is always demand for it. In return, central banks across the world bought
US debt and stored them as forex reserves as their economies were dependent on
trade surpluses with the US given the high purchasing capacity of its citizens. As aconsequence, the US lost much of its manufacturing capacity and relied on financialization to maintain its status as the world’s dominant power. However, the pressuresof finance caused instability in the economy and owing to the decline and eventual
repeal of the 1933 Glass-Steagall Act in the 1990s which had separated commercial
and investment banking, and the Federal Reserve’s decision to cut interest rates in theearly 2000s, credit was expanded to parties simply unable to pay off their debts in theform of sub-prime loans, causing a housing bubble. This triggered the Great Financial
Recession (GFC) in 2008, and newly developed financial tools thought to insulate theeconomy from default risks were proven to be ineffective. In response, governments
across the world began implementing Quantitative Easing (QE) measures aimed at
refloating the economy. However, the financial collapse has resulted in a ‘balance
sheet recession,’ where because private debt levels are too high so corporate executives consider using their existing cashflows to minimize existing debt a preferable
option to investing in consumers with diminished spending capacity (Koo 2019).
Furthermore, the need to protect creditors and investors in order to restore market
confidence in a high globalized and financial market of rapid transborder capital
flows has caused governments across the world to offer backstopping guarantees tothe repo markets in order to avoid another collapse, which conversely has encouraged financial institutions to operate in these high-risk markets (Baker and Murphy2018). The vast majority of the world’s governments are dependent on a US market
with increasingly diminished spending power and which is increasingly reliant on
the forms of speculative finance that triggered the GFC in the first place. This hascaused many to speculate that the Dollar Standard is coming to an unceremonious
end. And in a climate of ‘trade wars’ between the fading US and an emergent China(Klein and Pettis 2020), many have speculated that it is China that will deal the final
blow.
Indeed, international monetary reform is a topic that Chinese officials have notshied away from discussing and, it seems, trying to implement. For example, Zhou
Xiaochuan, governor of the People’s Bank of China (PBoC) attributed the structuralproblems which led to the GFC to the Triffin Dilemma which states that when aglobal reserve currency dovetails as a national currency, such as the US dollar, theissuer inevitably must place international economic objectives over domestic ones
(Zhou, March 23, 2009). In other words, the Triffin Dilemma would contend that theworld needed dollars to finance trade and so the US ran a trade deficit and a current
account deficit to provide global liquidity and meet demand for reserve assets. Zhou

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also championed Special Drawing Rights (SDRs) as a potential avenue that could
lead to a new international monetary regime (Zhou, March 23, 2009). SDRs are atype of interest-bearing international reserve asset created in 1969 and managed by
the International Monetary Fund (IMF) whose value and yield are defined using abasket of major currencies selected due to their perceived strength and importancein the global economy and whose allocations are based on the economic might ofeach member-state respectively. Member-states are permitted to exchange SDRs for
currencies included in the SDR basket through voluntary trade arrangements andthey may be instructed to do so by the IMF if there are not enough SDR buyers.
Crucially, the supply of SDRs increased rapidly in 2009 in response to the GFC andin 2015, at the request of Chinese Premier Li Keqiang, the IMF decided to include
the Chinese Yuan, otherwise known as the Renminbi (RMB), in the SDR basket(Reuters, March 24, 2015). To the IMF, this increases the credibility of SDRs as ameans to manage global liquidity and to Chinese officials, no doubt, the inclusion
increases China’s credibility on the international stage and potentially signifies theend of export-led growth in China and the internationalization of the RMB.
Will China end the dollar standard? And if the dollar standard ends, what kind ofsystem should emerge as a result? In order to answer these questions the article evaluates the prospects of a new monetary regime led by China (The People’s Republicof China) by examining recent developments in the Chinese economy, and assessing
the challenges the Chinese economy faces. This is carried out in two sections: thefirst section explains how China emerged from a low-income country with a GDP per
capita on a par with sub-Saharan countries in 1990 to the world’s factory; the second
section summarizes the challenges that beset the economy after the GFC and how
the Chinese authorities aim to carry out the next phase of economic development sothat the country becomes an advanced economy on a par with the US in its pomp.
Following this, the article assesses the likelihood of China ending the dollar standard
by examining recent developments in US and Chinese monetary policy. Finally, thearticle concludes by answering the two questions above.

2 China ‘Opening Up’: From People’s Communes
to the Dollar Standard
China has achieved tremendous economic growth in the past decades owing to its
transition to a market-based society. The case for market-oriented reform was no
doubt strengthened by the hardship and traumas of the Great Leap Forward (1958–
1962) and the Cultural Revolution (1966–1976), a breakdown in Sino-Soviet relations
and China’s gradual normalization of relations with the US after US President Nixon’s
tour of China in 1972. However, the opportunity to actually implement such reform
arose following the death of Supreme Leader Mao Zedong and Premier Zhou Enlai
in 1976 as it led to a power struggle within the Communist Party of China (CCP)and the ultimate arrest of the Gang of Four—Jiang Qing (Mao Zedong’s last wife),

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Zhang Chunqiao, Yao Wenyuan, and Wang Hongwen—who had dominated Chinesepolitics particularly in the latter stages of the Cultural Revolution. The reformist
Deng Xiaoping was ultimately named as Premier in 1978 and China began to turntowards a market economy.
While China’s incorporation of capitalist tenets into its sociopolitical system iswell-documented, its success was not due to a blind allegiance to neoliberal doctrine
but rather a more complicated process of reform based on disagreements among policymakers over how to construct a ‘Communist utopia’. In other words, reform wasostensibly not about ditching Marxist-Stalinist ideology and embracing capitalism.
Rather, it was based on practical discussions over how to limit the shortcomingsof the first stage of communist construction with managed markets. This point isreflected well in two of Deng Xiaoping’s most notorious quotes:“No matter if it is a white cat or a black cat; as long as it can catch mice, it is a good cat”
“Cross the river by feeling for stones under one’s feet”(Sohu, July 23, 2012).

Though Deng himself acknowledged that he did not create either expression, Bothallegories were used as powerful metaphors to support the argument for economic
liberalisation measures in China, particularly from the late 1970s. The former quote
is a Chinese proverb which Deng Xiaoping often used as a means to negotiate apractical compromise between communist ideology or communitarian egalitarianismand economic liberalisation, or between social work and economic development.
One can presume that the mice in the way Deng would use the metaphor referto material wealth that can improve the lives of the people of China (Zhongguo
Renmin), and the cats denote the means to obtain them. In a similar way, the latter
is an expression used by Deng allegorically to emphasize the need for China toprogress its own development and that the best way to proceed is on a step-by-steppractical and empirical basis because there is no clear methodology that guarantees
success (crossing the river safely). In other words, both quotes are used to address
the apparent contradiction within communism “entailed by prosperity-seeking whereacquaintances have diverse needs” and to advocate for a transition from a Maoist
economy based on centralized planning to one where the engineering of markets
through trial and error serve the peoples’ needs (Rosefielde and Leightner 2018:20). The result was a centralized economy with government control of money flow
alongside market self-organization.
This shift would eventually lead to China’s utilization of the floating exchangesystem and the de facto dollar standard. However, transitioning to an export-intensivemodel of growth was not simple. For example, while market reform did benefit a large
number of Chinese citizens, the distribution of those benefits was by no means equal
across society and has led to a large division of wealth, the migration of labour andthe exploitation of workers leading to social movements across the country whichquestioned the legitimacy of CCP leadership (Bieler and Lee 2017). The processof opening up the Chinese economy to overseas investment was tightly controlled,
diversified and multi-layered. From the late 1970s into the early 1990s, a number ofSpecial Economic Zones (jingji tequ) were created for cities such as Shenzhen, close

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to Hong Kong, whose population dramatically increased as a result, and provinces
such as Hainan, as well as “Open Coastal Cities” (yanhai kaifang chengshi), including
the financial centre of Shanghai, which also were expanded over time to include entire
provinces and coastal belts. While many of these areas have prospered with the influxof foreign capital, China’s growth strategy was not simply about ‘opening the doors’
and letting the free market work its magic. Far from it, while exploiting its wage
differential with developed countries similar to many other East Asian and Southeast Asian countries, China also utilized its state-owned enterprises (SOEs; guoyouqiye), particularly during Hu Jintao’s presidency (2003–2013), which during the Mao
era (1943–1976) had been established to facilitate import substitution industrialization based on heavy chemicals manufacturing (Yamamoto and Toritani 2019, 197).
Additionally, it relied on joint ventures between foreign firms and Chinese partners
in free-trade zones where 50% of the ownership of the business is transferred to theChinese partner within five years in order to rapidly develop a domestic capitalistclass which could compete with foreign businesses in both domestic and international markets and hence protect Chinese autonomy (Keen 2017, 99). Thus, while
the high growth rates (between 7 to 15%) every year for decades until 2016 following
the 2015 stock market turbulence in Shanghai is indeed remarkable, it is all the more
noteworthy because it was not limited to a narrow range of commodity sectors but
through the industrial upgrading of production and the development and training ofChinese personnel, it extended across a broad range of sectors which allowed China
to undergo an industrial revolution (Bishop 2018).
Reforms from 1976 until the 1989 Tiananmen Square Protests had focused on
gradually reversing the three pillars of the Maoist economy which were rooted in
Marxist-Stalinist ideology, namely: the criminalization of (1) private property, (2)private business and (3) entrepreneurship. In this way, market forces would gradually begin to play a more prominent role in the Chinese economy as various localities were opened up to foreign investment, import tariffs were reduced, and market
mechanisms were incorporated in certain sectors (Rosefielde and Leightner 2018,
21–24). However, the events of the 1989 student-led protest and their suppression
by the CCP had an important role in weakening the ideological friction within theparty as it was rightly understood to signify that the CCP’s legitimacy was far fromguaranteed (Gruin 2019, 82). Amidst debate over whether the market economy was
primarily capitalist or socialist (shichang xingzi haishi xingshe) and a conservative base concerned with the destabilizing effects of rapid growth and the deviationfrom Marxist tradition, Deng Xiaoping embarked on a tour of southern China (Deng
Xiaoping nanxun) in early 1992 to affirm and reinforce the vision of “Reform andOpening Up” (gaige kaifang). In the same year, an ordinance was promulgated whichbegan the set of reforms that would be carried out on SOEs. This particular ordinance (quanmin suoyouzhi gongye qiye jingying zhuanhuan jingji jizhi tiaoli) granted
SOE managers a host of control rights over key aspects of economic management
including foreign trade, production, pricing, sales, investment, labour and so on,while SOEs would also later be turned into stock companies, albeit with the stateas the dominant stakeholder (Rosefielde and Leightner 2018, 24; Yamamoto and
Toritani 2019, 200; Toritani 2020, 40). With the apparent receptiveness of the public

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C. G. Popeto the market economy and the widely held belief within the CCP over the need topromote economic growth to protect its own legitimacy, Deng Xiaoping announced
the launch of the “Socialist Market Economy” (shehui zhuyi shichang jingji) in the
14th National Congress that same year.
At the outset, there was a tension between socialist ideals and the nature of modernizing reform. For example, many local officials made personal gains from the downsizing of the public sector, while the number of jobs among the state-employed
workforce was cut by approximately 45%. Similarly, many privatized SOEs wereasset stripped. Further, many Town and Village Enterprises (xiangzhen qiye), which
are market-oriented rural collective economic organizations under the purview of
local governments that emerged in the 1980s following the de-collectivization ofChinese agriculture and the abolishment of People’s Communes (Renmin gongshe),were privatized. This left approximately 20 million rural workers without employment or a means of income and increased the “floating population” (liudong renkou)
of workers illegally migrating to the cities for employment and whose exploitation
generated a substantial surplus that was used to invest in physical capital (Zweig
2019, 287–288; Klein and Pettis 2020, 101). Alongside the rapidity of privatization,
high-ranking officials within the CCP were also concerned over how to rein in the
power of finance in order to direct growth but, crucially, not compromise it. For
instance, all privately owned firms in China are leaseholds without freehold property rights and the state is often a minority shareholder, while SOEs are technically
freehold state property leased to CEOs who are permitted to sell their company’s
leasehold on to domestic partners or even the stock exchange. Control by the stateis maintained as they are the majority shareholder of SOEs, while the lack of freehold property rights for private companies means that all onshore production is, in atechnical sense at least, state-owned (Rosefielde and Leightner 2018, 25).
Similarly, Chinese banking had been reformed through the late seventies andeighties before the official launch of China’s socialist market economy. Four majorstate owned commercial banks were created—the Bank of China, China Construction
Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China—
while the PBoC’s role was limited to that of a central bank, albeit still a part of theState Council and closely connected to China’s four main commercial banks. As aresult of these changes, by the 1990s the Chinese economy already had a wide varietyof banks, including stock-based commercial banks, as well as non-banking financial
institutions such as trust companies, insurance firms, securities brokerage companies
and so on, all to varying degrees monitored and supervised by the state (Toritani 2020,
41–42). While this, as well as the subsequent opening of stock markets in Shanghai
and Shenzhen, had the effect of decentralizing credit allocation to an extent, theclosely integrated nature of China’s developmental economic model meant that thecountry’s rapidly growing spending power could be taken from Chinese citizens
through monetary and fiscal policy in order to generate surpluses that can subsidize
domestic investment and foreign consumption (Klein and Pettis 2020, 108). The
establishment of three policy banks (zhengcexing yinhang) in 1994—the Agricultural
Development Bank of China, China Development Bank and the Export–Import Bankof China—to direct state investments and changes to China’s taxation system played

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an important role in this (Toritani 2020). At the same time, monetary policy during
the 1990s and 2000s was crucial in determining the course the Chinese economy
would chart. For instance, in 1994, China’s two exchange rates—a market-based
exchange rate for voluntary trade and an official exchange rate for planned tradeand foreign visitors—were unified and the PBoC under the stewardship of then vicepremier Zhu Rongji, pegged the RMB to the US dollar. This brought about an increasein exports and foreign exchange (forex) reserves which helped to stabilize China’s
financial system, arrest inflation, redirect China’s economy towards the utilizationof the dollar standard system through exports, and even weather the 1997 Asian
Financial Crisis despite the devaluation of currencies across Southeast Asia.
The new model of Chinese economic growth would take off, however, after mainland China became a member of the World Trade Organization (WTO)1 in 2001
following a series of economic concessions made by President Jiang Zemin and
Zhu Rongji who had since become Premier of China (Pearson 2001). As a result,
China’s trade balance increased from a deficit of US$13.5billion in 2000 to a surplus
of USD$359.9 billion by 2005 (Yamamoto and Toritani 2019, 203). Following this,
China was accused of unfair trade practices and contravening WTO rules which has
limited the attendant costs of opening up its domestic market to foreign competitors. Examples of this include making technology transfer a condition for market
access, failing to prosecute Chinese firms for violating intellectual property rights,
and closing certain sectors of the economy to Foreign Direct Investment (FDI),
which have allowed the state to create national alternatives to compete with transnational corporate giants seeking to do business on the mainland (Zweig 2019, 297).2
Ultimately, whether owing to widespread criticism of Chinese trade practices, particularly from the US, or whether in order to implement a more flexible exchange rate
system in the aftermath of currency crises in Mexico (1994), Brazil (1999), Argentina(2001) and across Southeast Asia and beyond (1997), China ended its dollar-peg
policy and replaced it with the “managed float system” (you guanli de fudong huilű
zhidu) against a basket of currencies including the US dollar (PBoC, July 15, 2010;
Yamamoto and Toritani 2019, 203–204). Nonetheless, the Chinese economy was
highly dependent on the dollar standard, to the benefit of large US corporations, with
the PBoC intervening in the market to control the rise of the RMB. This led to an
expansion of the monetary base (currency in circulation and bank deposits) and theaccumulation of US forex reserves (Yamamoto and Toritani 2019, 204).
China’s transition to the dollar standard was long and complicated. However,the change to Chinese society has been profound. Nonetheless, the period of rapid
economic growth in China is over and the CCP is faced with enormous economic challenges that must be addressed. Much of this stems from the growth of the real estate
sector due to rising valuation of land and the ever growing influence of the financesector on China’s political economy. Such is the magnitude of China’s economic
strength that a collapse of the Chinese economy would push the world into another
1 Hong Kong was already admitted to the WTO in 1995 and formally handed over to China in 1997.
2 Of course, earlier economic powers such as the United Kingdom were accused of similar practices

during the industrial revolution (Chang 2012).

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GFC or even Great Depression, and widespread economic turmoil would clearlychallenge the legitimacy of the CCP as it would any other political entity. In thefollowing section, we explore the vulnerabilities within the Chinese economy thathave surfaced since the Chinese stock market crisis in 2015 and how the CCP has
attempted to respond to these issues by championing free-trade abroad and promoting
what appears to be a ‘globalization with Chinese characteristics’ through the internationalization of the RMB and the construction of various institutions and frameworks
to promote Chinese-funded international development.

3 China Post-GFC: From the World’s Factory
to a Consumption-Based Economy
Due to the switch to the managed float system, the PBoC was forced to allow acontrolled appreciation of the RMB as an anti-inflationary measure as China’s tradebalance and growth rate both hit the stratosphere. In addition to this, the PBoC
invoked a number of temporary price-controls, raised interest rates and increased
reserve ratios on bank deposits throughout 2007 and began monetary tightening by
the end of the year (Naughton 2008). This changed, however, five months after thestart of the GFC when in November 2008, the CCP launched a stimulus program ofapproximately RMB4 trillion, equivalent to 17% of GDP, which entailed an enormous expansion of credit aimed at infrastructure projects, predominantly in energy
and transport, but also for environmental projects, housing, as well as technological upgrading, health, education, and reconstruction from the May 2008 Sichuan
earthquake (Naughton 2015, 120). The stimulus programme offset the shortfall indemand for Chinese exports and limited the effects of the GFC across the world. The
cost, however, was the a real estate bubble and surge in private and public debt in acountry already attempting to reduce the risks of excess-liquidity, which posed newchallenges to China’s management of credit. This led to the rise of shadow banking
and increased China’s private debt to GDP ratio, where it overtook the level of private
debt (corporate and household debt) in the US just before the US housing bubble
burst, triggering the GFC3 (Keen 2017; Wu and Trading Economics 2020). It must
be noted that without the CCP’s stimulus programme, the GFC would have beenmuch worse. Nonetheless, because of the shortfall in global demand, China begantransitioning from an export-driven economy to one that is debt-driven. In the aftermath of the GFC, China has taken acts that would seem to spell the end of the dollar
standard such as the internationalization of the RMB and the ramping up of Foreign
Direct Investment (FDI) and trade in markets outside of the US, as well as buying
up precious metals, foodstocks and rare earth minerals. However, its response to the
GFC and steady internationalization have exposed a number of vulnerabilities in theeconomy. To explain this, this section focusses on China’s response to the GFC and3 Although household debt to GDP is lower in China (approximately 60%) now than the US(approximately 98%) at the onset of the GFC (Trading Economics 2020).

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its effects, the internationalization of the RMB and international investments thatsuggest the rise of new geopolitical strategy.
Much of the GFC stimulus programme was channeled through the banking system.
While the state-owned banks tended to focus its lending on SOEs, stringent liquidity
requirements, particularly among smaller banks, accelerated the rapid growth of
shadow banking in China which took the role of indirectly financing a large portionof new development projects. This is not to suggest that shadow banking emerged
because of the GFC, far from it. Financial liberalization in the early 2000s and thetransition to the managed float system led to the oversupply of liquidity in the financial
system causing households and businesses to hedge against inflation risk by investingin products which offered higher yields. These pressures augmented as a result of the
CCP’s stimulus programme in 2008, which caused shadow banking to grow further.
What is noteworthy here is that the bulk of Chinese shadow banking resulted from
regulated banks conjuring up new methods to circumvent normal banking regulations, rather than breaking the law (although there are illegal shadow banking activities). This includes interlinking with non-banking financial institutions such as trust
companies and securities brokerage firms to remove loans from the banks’ balance
sheets and offer wealthy clients and investors a series of wealth management and trust
products, not limited by normal regulations (Lindgren 2018). The rising valuation ofland, no doubt, will have added to the number of these wealthy clients looking forsuch financial institutions to build up their wealth. While there is disagreement overwhat actually comprises ‘shadow banking’ in general as well as in China itself, it
was these kinds of products that individuals and institutions gambled on to the pointthat shadow banking is now estimated to account for approximately one third of totalliquidity in China (Howell 2020, 177).
While funds procured through trust companies on the whole are increasingly being
invested into the financial sector and not the real economy4 (Toritani 2020, 105–107),a large proportion of the debt taken on by local governments is believed to be fromshadow banking activities owing to the utilization of Local Government Financing
Vehicles (LGFV; difang zhengfu rongzi pingtai) in order for local governments toqualify for loans and sell municipal investment bonds (chengshi touzi zhaiquan).
LGFVs are state-owned companies used by local governments to procure funds forinfrastructure projects because local governments were banned from direct banklending and access to the bond market in order to prevent overproduction. However,following the GFC, the central government sought to adapt existing institutions to
the effects of its stimulus programme and demanded that LGFVs be utilized to
procure funds in order to finance infrastructure and real estate development given
the centralized control the state maintains over land and real estate (Naughton 2015,
123; Toritani 2020, 106). Local government officials, after years of underfunding
following the 1994 tax reform in which financial resources were transferred to thecentral government, were presented with a golden opportunity to procure funds in
4 This is also true for wealth management products over half of which are issued by regulated banks

but channelled into short-term loans and securities through partners and subsidiaries with a different
legal status to the bank (Toritani 2020, 105–107).

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C. G. Popeorder to raise the economic growth rate of their area. Not only would this benefit
the local economy, but it was also a means by which these officials could secure
promotion.
The main means of funding however was from securitized products with variableinterest rates, or, in other words, shadow banking activities (Yamamoto and Toritani
2019, 208). Shadow bank funding to LGFVs remains a particular point of concern
for the Chinese authorities given that the high yields offered to bank clients throughwealth management products are turned over to (often comparatively high risk)
lenders with a profitable rate of interest for the financial intermediaries with little tono coverage or guarantees given the absence of liquidity requirements. Put simply,
the LGFVs ratcheted up a high level of unsecured debt and there are concerns it
cannot be repaid. Added to this and the fact that shadow banking is on the rise, is that
China’s declining population is very likely to negatively impact on the demand forproperty after thirty-six years of China’s infamous ‘one child policy’ from 1979 to2015 in a country where many middle-class and upper-class households, particularlyin the big cities, have purchased numerous properties. Demand may fall faster than
population decline also given that these households will likely sign one of theirproperties over to their child, and hence reduce the number of buyers on the market.
What is key here is the fact that the CCP’s directive to the banks following the GFC
to lend as much as possible was carried out in response to fears that approximately 60
million labourers could lose their jobs and the threat that economic turmoil poses tothe legitimacy of the government (Koo 2015, 267–272). Indeed, the ramifications for
economic turmoil during and following the GFC are considerable. The problem for
the Chinese economy was made clear by the GFC—China needs foreign markets andhence needs a stable international monetary system. This laid bare the incentive for
the Chinese state to decouple from the US market and seek to strategically manage
the internationalization of the RMB and turn China into a consumption-led economy.
Even before the GFC, Chinese authorities had taken steps to internationalize the
RMB. For example, in 2007, China Development Bank issued RMB-denominatedbonds in Hong Kong called ‘dim sum bonds’ (dianxin zhaiquan), though a market
only developed after the GFC when the right to issue them was extended to allbanks in Hong Kong (Li, November 19, 2011). However, several months after thepassing of the central government’s stimulus programme, Zhou Xiaochuan, as theGovernor of the PBoC, seemed to acknowledge not only the unsustainability ofthe dollar standard but also the urgent need for a new model of economic growthin China based on domestic consumption. Indeed, real wages in China have been
increasing since 2003 and had almost doubled by the time of Zhou’s statement,
signalling that the Chinese economy would soon reach the ‘Lewis turning point,’ if
it had not already done so, where through industrialization, urban factories absorb
all the surplus rural labour, causing labour shortages and rising wages (Zhang et al.
2010; Koo 2015, 278; Yamamoto and Toritani 2019, 207). For obvious reasons,export-driven growth based on labour-intensive production is not feasible in such a
scenario. Therefore, while the mechanization of the Chinese economy, particularly
agriculture, may alleviate these pressures, China is transitioning to an economic
model based on capital-intensive production, technologically advanced industries,

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domestic consumption and a demand for skilled labour (Zhang et al. 2010, 21). Thisis demonstrated by China’s shift from the production of cheap goods to cutting-edge,
high-value technologies (such as high-speed rail) which has lessened its reliance on
the US market to absorb its output and hence the need for China to rely on purchasing
US debt, whether public of private.
Key to China transitioning to a new economic model and avoiding the “middle
income trap” in which emerging economies can neither compete with advanced
economies for high-value products nor rely on the export of cheap goods as a growthmodel, means increasing domestic innovation to raise productivity and dealing withindustrial overcapacity (Koo 2015). In terms of innovation, Premier Li Keqiang
issued the “Made in China 2025” plan in May 2015 which focuses not only on
increasing the productivity of China’s manufacturing sector, the base of its exportled growth, by improving innovation capacity, resource utilization, and implementing
new streamlined and technologically-advanced methods of production, but also
laying the groundwork for China to become a leader in producing high-value goods
and sustainable development beyond 2025 (State Council, May 8, 2015). In orderto deal with industrial overcapacity, China announced a new strategy of economic
expansion across the world in November 2013 named the Belt and Road Initiative(yidai yilu; formerly, One Belt One Road). The BRI is considered to be President
Xi Jinping’s global strategy to realize the “Chinese Dream” (Zhongguo meng) ofnational glory and prosperity, in which all elements of the state and even parts ofChina’s civil society have been mobilized to pioneer a global infrastructure projectacross Eurasia and beyond (Zweig 2019, 300). The BRI comprises a “Silk Road
Economic Belt” (sichou zhi lu jingji dai) between East Asia and Europe, the largest
economic corridor on the planet, and the “twenty-first century Maritime Silk Road”(21 shiji haishang sichou zhi lu) which connects east China to southern Europe via
the South China Sea, the Indian Ocean, Somalia and the Red Sea, and east China
to northern Europe via the Arctic Ocean. While the BRI has been touted as the“Chinese Marshall Plan,” rhetorically implying the end of the US-led post-WorldWar II global order (Shen and Chan 2018), the US still remains China’s top trading
partner (Hamilton, February 19, 2021). Nonetheless, by strengthening alliances withresource rich countries in central Asia as well as Russia, China seeks secure themeans by which it can shift towards a consumption-based economy.
However, there are concerns that the BRI cannot achieve its goal of regional
integration, particularly in the Asia–Pacific. While political and historical issues
between East Asian countries are well-documented and certainly a factor in this argument, a more practical issue involves the limits of economic space. For example, theAsian Infrastructure Investment Bank (yazhou jichu sheshi touzi yinhang), a regional
investment bank, was launched by China in 2014 in order to foster economic connectivity and the establishment of an Asia–Pacific free-trade zone (Ministry of Foreign
Affairs PRC, March 29, 2015). However, even with concerns over national security
and politico-historical disputes notwithstanding, Chinese companies are spatiallylimited when it comes to constructing an integrated network of supply chains andintra-company division of labour given the fact that these networks have already been

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C. G. Popebuilt by Japanese, Korean and Taiwanese companies (Toritani 2020, 167). Competition in the area will remain high unless there is a major change in the world economy.
Nonetheless, there can be little doubt that the CCP will be cognizant of how the recycling of US surpluses in the post-war facilitated the rise of the Asian Tigers (Singapore, South Korea, Taiwan, and Thailand) and helped the Asia–Pacific become thegrowth centre of the world. For this reason, China’s multilateral efforts to financeinfrastructure projects in Central and Eastern European (CEE) countries is a key pointof focus which is often overlooked. China now participates in a cooperative initiative with, from north to south, Estonia, Latvia, Lithuania, Poland,5 Czech Republic,
Slovakia, Hungary, Slovenia, Croatia, Romania, Serbia, Bosnia and Herzegovina,
Montenegro, Bulgaria, Kosovo, Albania, and Greece.6 Most of these countries wereonce part of the Socialist Federal Republic of Yugoslavia, the Soviet Union or otherwise former members of the Eastern European Bloc, and hence are thought to be more
open to state-centric forms of investment. Geographically these nations comprise
the gateway to the Western European market. Moreover, China’s National Development and Reform Commission directly led by the State Council, whose remit isnational economic development, has played a prominent role in key infrastructure
projects within CEE countries, which connects China to Europe via the underdeveloped economies of Central Asia. This reflects the high priority the CCP places on the
BRI to the Chinese economy as, for one, it allows China to move investment expenditure to underdeveloped regions of China as well as abroad (Du 2020; Dallago 2020,
158). The last point to consider regarding how the BRI may offer China a means
to transition to a consumption-led economy is that labour-intensive industries may
relocate abroad to BRI member-states, particularly those neighboring China, and,supposing the “Made in China 2025” plan is successful, China can attract foreign
capital to the Chinese mainland.
Nonetheless, this transition is fraught with difficulties. The stock market turbulence in Shanghai in 2015 is a case in point. After the GFC, efforts to transition China
into a consumption-led economy were ramped up. Three months after Zhou’s advocation for an SDR international monetary system, the PBoC announced the RMB
trade settlement rules (renminbi kuajing maoyi jiesuan shishi xize) which allowed
Chinese companies in designated cities in China to settle cross-border transactions
with companies in member-states of the Association of Southeast Asian Nations(ASEAN), Hong Kong and Macau (as Special Administrative Regions of China),
5 In 2016, Poland also became the first European government to issue panda bonds (xiongmao zhaiquan), RMB-denominated bonds from non-Chinese issuers sold in China, following an agreement
between the PBoC and Poland’s Ministry of Finance (Zhang, June 22, 2016).
6 Greece’s decision to join this partnership, despite the fact that it was never a member of theEastern bloc (despite its civil war) is likely a key point of focus for other EU member-states. While
the European Union bailed out Greece after the Eurozone Debt Crisis, repayment is scheduled tolast until 2060, and because the state cannot print its own currency, it will be forced to impose
austerity for over four decades in order to deleverage (Maza, August 20, 2018; Varoufakis, August
26, 2018). Were Chinese investment to help Greece pay off these debts earlier or at least ease theburden of austerity on Greek citizens (including those still unborn), other member-states would
surely be interested in joining the 17 + 1 framework which would expedite and broaden China’s
access to the European market.

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in RMB.7 Since then, the PBoC signed bilateral local currency swap agreementswith over forty different central banks/monetary authorities, including the European
Central Bank, the Bank of Canada, the Bank of England, the Bank of Japan, and othercountries closely allied to the US8 . It also established RMB clearing arrangements
in countries all over the world including the US and even authorized J.P. Morgan
Chase & Co to serve as the RMB clearing bank in the US (PBoC 2020). In addition,
as RMB-denominated trade grew in Hong Kong, China further developed its financial infrastructure to expand the free flow of capital in and out of mainland China.
In 2010, it established a free exchange market between the RMB and US dollar in
Hong Kong (CNH), separating it from the Shanghai market (CNY) which is directly
managed by the PBoC, in order to use Hong Kong as an offshore market for RMB
trading whilst protecting the mainland economy (Toritani 2019, 6). Following this,the Chinese authorities established a number of frameworks to allow the free flowof capital in and out of China via Hong Kong, notably the Shanghai-Hong Kong
Stock Connect (hu gang tong), the Shenzhen-Hong Kong Stock Connect (shen gangtong) and the Bond Connect (zhaiquan tong) which allows offshore (in Hong Kong)
investors to access to China’s onshore bond market (Yamamoto and Toritani 2019,
216–217; PBoC 2020).
While many of these developments took place after the 2015 stock market turbulence in Shanghai, China is nonetheless vulnerable to capital flight. First, it is noteworthy that approximately 80% of investors on the Shanghai Stock Exchange aresmall retail investors which means that in the event of a stock market crash, the
CCP can expect political discontent and potentially protests (Duggan, July 8, 2015).
Secondly, the collapse and trading suspension resulted from the economic imbalances in the Chinese economy particularly as a result of injection of liquidity into theeconomy after the GFC. For example, SOEs had relied on debt-equity swaps in orderto remove interest-bearing debt from their balance sheets while for the state-ownedbanks financing them, it was a means to dispose of bad debt. This increase in thenumber of shares on the Shanghai Stock Exchange played a large role in driving down
prices, as did the refinancing of LGFV debt that year as it sparked fears that it could
not be repaid (Toritani 2019, 11). The stock market turbulence sent reverberations
around the world, and, as a countermeasure, the PBoC devalued the RMB. However,this had the effect of causing capital flight out of China and curbing its efforts to internationalize its currency. Therefore, the Chinese economy, having passed the Lewis
turning point, is now caught between the Scylla of the “middle income trap” and theCharybdis of managing credit for public welfare amidst financialization. More to thepoint, its focus on SOEs through the BRI is an important means by which the CCP
7 This had been planned before the GFC, however.
8 China has signed bilateral local currency swap agreements with the central banks/monetary

authorities of the following countries, regions, or unions: Albania, Argentina, Armenia, Australia,
Belarus, Brazil, Canada, Chile, Egypt, European Union, Georgia, Hong Kong, Hungary, Iceland,
Indonesia, Japan, Kazakhstan, Macao, Malaysia, Mongolia, Morocco, New Zealand, Pakistan,
Qatar, Russia, Serbia, Singapore, Sri Lanka, South Africa, South Korea, Suriname, Switzerland,
Tajikistan, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, Uzbekistan (PBoC2020).

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C. G. Popecan direct the flows of investment in ways that benefit the Chinese economy andpeople, and allow this transition to a consumption-led economy that is no longer tied
to the dollar standard. However, as the Shanghai stock market turbulence demonstrates, managing this process of marketization whilst maintaining the key resources
for its centralized control over the economy is to chart a fine course on perilously
treacherous waters.

4 Will China Put an End to the Dollar Standard?
The dollar standard will come to an end, and there are two ways that it may take place:with consensus or without. From the assessment above, we can conclude that it isunlikely that China plans to unilaterally replace the US dollar with its own currency
as the global reserve. The internationalization of its currency is hampered by theimbalances in its own economy and it is still dependent on the US market up to apoint to offset some of its own economic frailties. The dollar standard has allowed
the US to remain the global superpower in the current world order but at a cost to its
own workforce whose livelihoods have been threatened, if not destroyed, by financial
instability and the enormous political influence of the creditor class brought about
by the enormous growth of the US financial sector, and the hollowing out of US
industries. Undoubtedly, the pain has been palliated by the lower cost of goods, but
this too is now being challenged by China’s transition to a consumption-led economy
and the global rise of food prices as a result of structural inflation (Tan, September
9, 2020). Furthermore, there is increasing evidence to suggest that QE, whether in
response to the GFC or the Corona Virus, has pushed up asset prices and exacerbatedthe wealth divide and devalued people’s savings (the Cantillon effect), while citizens
and local businesses across the world have taken out loans simply to cover existingdebts in order to deal with the conditions of lockdown or being furloughed without
sufficient financial support.
It should be no surprise then that we have seen investors hedge against inflation risk
by investing in digital assets, gold bullion, silver, or securities (Garber, February 19,
2021; Tully, February 24, 2021). While the suggestion that these assets, particularly
cryptocurrencies like Bitcoin, will ever be considered to be safer investments than US
treasury bonds may to some seem, at present, outlandish, it is important to consider
what would happen if China were to sell large portions of their US treasury bonds.
If this were to happen, we would expect the dollar to collapse. This, in turn, would
affect all economies whose chief strategy of growth is exporting goods to the US and
it is likely that they would look for other export markets. With Morgan Stanley, forexample, predicting that China’s private consumption will more than double by 2030
to approximately the same amount that US consumers currently spend (and not asmuch on debt), one market that may stand to benefit from such a scenario is China,
provided it is able to decouple from the US market (Cheng, January 29, 2021). Further,while the risk of a rapid depreciation of the US dollar seems low to some given thatprimary commodities are predominantly sold in US dollars, US unilateralism, if too

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heavy-handed, may convince countries to sell goods in other internationally-reputed
hard currencies. Also, the Federal Reserve’s loose monetary policy in response to theCorona Virus is likely to increase the wealth divide in the US in the same way thatit did after the GFC. If financial institutions and companies refrained from investingin the US economy due to doubts over the spending capacity of US citizens after the
GFC, this problem will only be magnified after the Corona Virus pandemic unlessthere is a major change in how newly created money is distributed.
The question, then, is how long can QE continue? Can the Federal Reserve print
money without consequence provided that inflation is managed by building in theextra capacity in the economy to absorb deficits? The current outlook with respect
to inflation should raise significant doubts over this. Even if the Federal Reserve
has the capacity to act as a de facto global central bank as printing money bothleads to full employment at home and protects the trade flows of foreign countries(Kelton 2020, 151), this is simply not an act that would be welcomed across theglobe. Thus, at some point the financial sector will lose faith that the US government
can repay its debt, or enough foreign governments will decide to decouple fromthe US market over time as consumer spending capacity declines and the dollar
standard will end. In the meantime, the rise of decentralized digital currencies anddigital payment platforms have pushed governments to begin laying out the generalframework for digital currencies issued by central banks. Although it is by no means
the first to create digital currencies, China initiated trials of its own digital currency
issued by the PBoC, called the digital RMB (shuzi renminbi) or “Digital Currency
Electronic Payment”. While this is likely a response to the threat digital currencies
pose to China’s monetary sovereignty and the duopolization of e-payment systems
in China by the tech-giants Alibaba and Tencent (Sina-Finance, October 14, 2020),
it is built with Blockchain technology which significantly reduces the cost and timeof cross-border transfers. With a large population of Chinese speakers living abroad,particularly in the Asia–Pacific, it is not difficult to imagine how a digital currency
backed by the PBoC would facilitate the internationalization of the RMB (Vincent,
September 25, 2020). Furthermore, cross-border transactions using China’s digitalcurrency will likely carried out by their own clearing and settlement system, Crossborder Interbank Payment System (renminbi kuajing zhifu xitong; CIPS), and not
the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Given
that SWIFT has banned foreign countries from its system in compliance with USimposed sanctions (Coppola, June 30, 2019; Sina-Finance, October 4, 2020), it isconceivable that countries might turn to CIPS as a replacement to SWIFT to avoid
trade sanctions and hence integrate their economy in a different economic networkwith the Chinese economy as its consumptive heartland.

5 Conclusion
From the analysis above it seems unlikely that China alone has the capacity to end
the dollar standard, and, even if it did, such an act at present would inflict serious

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C. G. Popedamage to the Chinese economy. However, global events of this magnitude cannot
be predicted so accurately as they depend on a number of unknowable variables.
Nonetheless, whether China could weather to such a scenario depends on how it isable to adapt its economy. If China is successfully able to utilize the BRI to accessnew markets and reduce its reliance on US consumption and create an economic
bloc less reliant on US forex reserves and SWIFT, then it would be all but immune
to US economic sanctions given the abundance of resources across the new Silk
Road. Further, China could relocate its labour-intensive industries to other countries
in the BRI, whilst substantially increasing labour productivity and incorporating atransparent legal structure that will attract foreign capital to the mainland, and so
it is conceivable that it can successfully avoid the middle-income trap and become
the center of a new international economic order. In such a scenario, the RMB andother curriencies, if backed by gold or other precious metals, could replace the dollar
standard and fiat money out-right.
Despite this, RMB-denominated trade up to the present day has been limited toapproximately 1% of international settlements (Yamamoto and Toritani 2019: 215–219) and while RMB-denominated trade has been launched in the crude oil futures
market (Saefong, 26 March, 2018), indicating its rise as a major currency, the futureof the dollar standard is more likely going to be determined by whether the US
foreign policy and if it can overcome its own economic malaise, as China’s role issuch a dynamic is likely to be reactive. The dollar standard system, particularly after
the 1971 Nixon shocks and the reduction of capital controls had led to the so-called“Impossible Trinity” in international economics, which states that it is impossible tomaintain a fixed foreign exchange rate, free capital movement and an independent
monetary policy at the same time (Aizenman et al. 2012). If recent developments in
the Chinese economy demonstrate anything, it is of the necessity that the CCP an
independent monetary policy without completely abandoning capital controls in thecurrent international monetary system. To this end it is likely that Zhou Xiaochuan’sstatement on replacing the dollar standard with an SDR system reflected an earnest
desire that an upgrade of the current SDR system is negotiated among the world’s
countries so that a new Bretton Woods can be established where the IMF can act as
the lender of last resort in a truly multipolar world order. This prevents the current
scenario in which the Federal Reserve along with other major central banks such as
the ECB and Bank of Japan, and now even the PBoC, purchase enormous amountsof government bonds in a constant attempt to inject liquidity into the economy whileessentially attenuating its imbalances in order to offset a financial avalanche byallowing it to snowball a little longer (Streeck 2016).
However, without a framework of sustainable economic growth in the US andwith other governments and private investors seeking ways to decouple from the US
market as US power wanes and the spending capacity of US citizens weaken and their
liabilities grow amidst rising asset prices, a collapse of the dollar standard is anotherscenario that must be taken seriously for there to be a future that is sustainable. It is
likely that if the US does not do so, at some point, other countries will. Governments
therefore should begin negotiations over how the international monetary system canbe reformed, whether with SDRs or otherwise, with the obvious the goals of achieving

18 Chinese Economic Growth and Prospects of a New International …

219

economic sustainability, international peace and increasing public welfare. Failure
do so would be to all but guarantee the exact opposite.

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Chris G. Pope is assistant professor at the Department of Contemporary Society at Kyoto
Women’s University. He specializes in East Asian Politics, International Relations, and Environmental Governance, and focuses particularly on governance in China and Japan. Recent works
include a chapter on political translation of sustainability with Dr. Ji Meng of the University ofSydney and Professor Xuemei Bai at Australian National University for the Oxford Handbookof Translation and Social Practices. He has also published with Dr. Ji Meng on the translationof sustainable development goals in China and Japan, and published several online articles on
Chinese and Japanese international relations and governance. His thesis focused on using quantitative and qualitative methods to analyze Japanese political speeches and won the Charles Fisher
Prize at the University of Sheffield in 2017.

Part V

After 100 Years of Wars: How to Make
New World Order – Economics

Chapter 19

Fundamental EU Reform: Impactof the COVID Crisis
Bruno Dallago and Steven Rosefielde

Abstract We propose the construction of a multi-speed, multi-track and multi-level(MSTL) European Union to replace the present one-speed, one-track and one-level
union as a way to increase the flexibility of the process of integration and avoid intercountry conflicts. The paper shows that this general approach is superior, applicableeven in the presence of negative spillovers where some refinements may be in orderfor dealing with fundamental issues like monetary union and immigration. The EU
answer to the emergency caused by the pandemic goes in the direction of an MSTL
union, but some of its aspects and the temporary nature raise doubts on the long-term
perspective.
JEL classification E02 · E61 · F15 · G01 · 052
Keywords Crisis · Eurozone · European Union · Institutions · Policies · Reforms
The Treaty of Rome, which created the European Economic Community (EEC) in
1958 among the six founding countries and established the European Commission(EC), was the first comprehensive move in the process of European integration. The
Treaty foresaw the creation of a single market for goods, labor, services and capitalthrough the reduction of customs duties and the establishment of a customs union.
It also provided for the creation of common policies for agriculture and transportand established a European Social Fund for supporting employment and promoting
economic and social cohesion. Although the Treaty aimed mainly to create a common
market and coordinate the action of sovereign member countries, it also was a
waystation on the road to a fully integrated European Union.
The Treaty reflected the view that a progressive one-track approach would
resolve potential conflicts in trade issues through pragmatic, cooperative long-term
B. Dallago (B)Department of Economics and Management, University of Trento, Trento, Italye-mail: bruno.dallago@unitn.it
S. Rosefielde
Department of Economics, University of North Carolina, Chapel Hill, NC, USAe-mail: stevenr@email.unc.edu© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_19

225

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bargaining and compromise. Although in the Treaty this was limited mostly tomarkets and trade, a series of interpretative judgments by the European Court ofJustice established the EEC’s legal supremacy in selected fields. The prevailing view
became that member countries should adopt a single track and travel together at
the same speed by consecutively negotiating treaties in lieu of an EU constitution (Scicluna 2018). Following subsequent waves of enlargement, this principle
was relaxed for less developed new member countries and former socialist countries, granting them breathing room to successfully adapt to common standards andmodernize. This accommodation preserved national pluralism as an important aspectof the integration process.
Things changed when the Maastricht Treaty put monetary integration on theagenda in 1992, requiring all member countries to join the monetary union as soon
as they were ready, with the exceptions of Great Britain and in part Denmark. Monetary integration imposes stringent rules and requires more member country coordination than a common trade regime—a challenge that galvanized partisans of “moreEurope” to push for a federal system. In the years preceding the global financial crisisof 2008 “more Europe” supporters dominated, but the spirit of unity frayed after thecrisis. EU leaders expect the union to weather the financial crisis and make strategic
adjustments to the grand design on a learning-by-doing basis, and find it difficult tocontemplate the union’s fragility.
Their optimism may be misplaced because EU institutions are coping poorly
with external distress and internal contemporary dissensions. Pre-Maastricht arrangements worked well enough because the core goal was the creation of the common
market in a fundamentally stable international context. Conflicts could be resolved
relatively easily because they were about apportioning benefits, not winning andlosing. Once the monetary union raised the specter that some members might
lose, while others won, the nature of European integration changed fundamentally.
Consensus yielded to dissent. The failure to redesign the EU system to meet the needsof a more contentious era created fundamental institutional and political problems
with negative economic and social consequences. The EU can stay the single-track
course without crumbling under the Lisbon treaty, but better outcomes are likely witha fresh approach that does a better job of managing conflicting interests.
This requires returning to basics. The essential point to grasp is that the common
market (now the single market) no longer provides a strong enough bond to sustain
EU solidarity because the EU is triple-minded. Members invoke the win–win logic
of Pareto competition in embracing the single market but shift their ground twiceon other matters. First, they prefer socially managed markets to laissez-faire hoping
to reconcile efficiency with equity. This gives rise to inter-member disputes overregulatory power. Pareto bargaining is always win–win when market failures areabsent. Socially managed markets are not, unless they can avoid state failures and reestablish the conditions of perfect competition. When these conditions are missing,socially managed markets may create winners and losers of various sorts dependingon who holds the reins of power. Regulators try to allay fears with promises ofroundabout synergies, but as Greece discovered, assurances that austerity’s benefits
will outweigh its costs may be invalid.

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Second, strong EU members may decide to impose their “superior” values on
weaker states on political, social, military and foreign policy issues, claiming to
act as good parents disciplining wayward children. Powerful common instruments
and procedures requiring strict obedience support this paternalistic approach andpreclude joint autonomous utility enhancement or direct loser compensation.
Regulatory conflicts and brow beating occur in all political systems. They comewith the territory and in good times are manageable with a commitment to solidarity,commonsense and supportive institutions. These conditions were satisfied before theMaastricht Treaty. The shared fruits of trade liberalization and healthy competition
lubricated cooperation. The EU’s halcyon days however now are behind it. Potential
future gains from the single market seem modest, pressure for “more Europe” isgenerating stiff resistance, and a clash of rival social and political demands is testing
EU pragmatism.
The problem is resolvable by adopting a more accommodative EU mindset,
supported by flexible institutions. All member countries, stronger and weaker alikeshould implement European rules equally. Policy coordination should be effectively
implemented by all countries so that national business cycles are either coordinatedor compensate each other. Powerful member countries should exercise judicious selfrestraint in influencing common organs on consequentialist, rational choice grounds.
If they value the European Union, and are considerate of others, then they shouldbridle their power seeking, accommodate diversity and rationalize the EU’s institutional structure whenever costs exceed benefits. This requires that weaker countries
restrain their opportunism. Once power seekers and paternalists adjust their mindsets and soften their attitudes, the EU’s architecture can accommodate diversity andstabilize the system.
The refugee crisis exemplifies the clash of attitudes toward social change roilingthe waters of consensus. One faction demands unrestricted refugee immigration for
all those who qualify, the other opposes it maintaining that most of them are economic
migrants. There is little or no room here for negotiating mutual utility improving, joint
value-adding solutions. The refugee problem from the perspective of both parties isa win or lose proposition. The strong want to vanquish the opposition, and theiropponents to minimize losses. Poland and Hungary operating with weak hands wantto accept as few refugees as possible, even though their leaders acknowledge the needfor some refugee assistance, accept the concept of the “single market” and otherwise
endorse the Schengen agreement.
Poland, Hungary and others feel that “more Europe” arguments for EU wide
regimentation in selected issues such as immigration mean more lopsided losses,
not mutually beneficial Pareto improving gains. They prefer selective “less Europe”
to recover some lost ground and expand their degrees of freedom to pursue diverse
utility improving ends. Proponents of “less Europe” could switch sides in whichcase there is no need to scuttle the current one-tract, multi-speed approach, but thisseems unlikely. A multi-speed, multi-track, and multi-level (MSTL) (jurisdictional
redistribution of powers to supranational, national and shared domains) option for the
moment is wiser. It will eliminate unnecessary compulsion; diminish polarization,

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foster local adaptation, and tailor speed to circumstances, creating a space for all EU
members to flourish in the ways they consider best.
Can leaders reformulate an institutional framework for the European Union thatdampens conflict, expands Pareto improving ventures, curbs power seeking, andpromotes mutual accommodation, solidarity and consensus? Yes. It need only pragmatically return to its original flexible supranational vision (Scipioni 2018). However,there may be an important caveat: is this perspective valid across-the-board or should
there be exceptions, especially for the monetary union?
The economic emergency caused by the COVID-19 pandemic erupted in the EU
in early March 2019. After few weeks of uncertainty, due to the unclear seriousness
and spread of the disease and resistances by various resilient countries, the EU
acted unusually swiftly. The debate was intertwined with the new 2021–2027 EU
budget, the proposals of common bonds (Eurobonds or, as they were soon called,
recovery bonds) and Brexit. While the ECB, after initial contradictory moves, acted
massively and boldly, the European Commission and the European Council lost
precious time in debates that moved not only around the best way of supporting
EU economies and fighting the disease, but also and initially primarily around the
distribution of costs and benefits among member countries. The ECB acted rapidly
by introducing new instruments to support economies, providing credit on a massive
scale and keeping interest rates on sovereign bonds close to zero. The European
Commission swiftly suspended balanced budgets requirements as foreseen in the
Stability and Growth Pact (SGP) and allowed member countries to spend as much as
they consider proper to fight the pandemic and support the economy, including state
support to ailing companies. Although initial moves were uncertain, ultimately, theyreached unprecedented levels with the use of completely novel instruments. Does
this mean that the EU is finally moving in the direction of a MSTL union?
The next section sketches the fundamental features of the European problem that
require innovative solutions. Sections 3 and 4 explain why and in which sense a multispeed, multi-track and multi-level (MSTL) solution may offer a superior alternative
to the present EU institutional architecture. The fundamental features of the MSTL
solution are reconsidered in Sect. 5, especially the critical importance of negative
spillovers. Section 6 investigates whether the EU is becoming de facto, but not de jurean MSTL union. Finally, Sect. 7 considers the nature of the EU pandemic strategy
and Sect. 7 concludes.

1 Setting the Stage
Europeans for the moment are afraid to consider fundamental changes because theydread revising EU treaties. An increasing number of member countries are critical of
the EU and disrespect its rules. Yet despite prolonged turmoil following the eruptionof the 2018 international financial crisis, the European Union appears more resilient
than some expected. Rules and decisions of European organs are predictable andconsistent, in spite of occasional flaws and however vociferous political parties and19 Fundamental EU Reform: Impact of the COVID Crisis229

occasionally governments may be; Europeans are prudent when confronted withhard choices on their future. Greece back in 2015 considered leaving the euro, butchose to remain and undergo painful austerity policies and reforms. A previous
Italian government tried to resist Brussel’s “dictates”, although more in words thandeeds and the government failed. Opinion polls report an improving confidence
in the euro and the EU (EU 2019b). The 26 May 2019 European elections show
a fragmented electoral landscape, yet anti-European parties have not fared well.
There continues to be a solid pro-integration electoral majority of voters, in spite ofoccasional disappointments and complaints.
EU resilience reflects economic interests and the fear of exorbitant exit costs
as idealism wanes. An integration that discourages citizen participation and copes
poorly with prolonged economic difficulties is vulnerable to conflict. It is evident
that the EU has to change to deter defections. Europeans’ resilience provides time
for change, but is not a viable long run solution.
This is an important moment for reconsidering the integration process in thewake of the UK’s exit and the important, yet temporary EU pragmatism to stand the
pandemic crisis, understanding what went sour, and searching for practical solutions.
This paper deals with an issue that has traditionally only received token consideration.1 The issue is simple, but solutions require attitude adjustment and determination.
Why should member countries deepen their integration along pre-crisis lines once thepandemic crisis is over? It is self-evident that identical rules and rigid convergenceparameters generate different outcomes for different countries and no longer facilitate
integration. Most Europeans do not object to the EU in principle. Many, nonetheless,find residual strictures perturbing. They seek to understand the underlying sourcesof rigidity and some are offering ad hoc solutions.
The present pandemic deal is exceptional in both the solutions enacted and theirboldness and flexibility. Yet changes follow an ad hoc pragmatic perspective thatavoided changes in the institutional architecture of the EU. In a sense, these changes
may even represent a retreat form the set of proposals that were debated and included
in official documents, such as the idea of appointing a common economic and financial minister. So far, the EU prefers to give countries grants and cheap loans guaranteed by the common budget, rather than changing the institutional architecture. The
EU is moving prudently towards a MSTL union in practice, at least until the health andeconomic emergency exists, but not in the institutional architecture. Informal institutions conform to the MSTL perspective, while formal institutions remain traditional.
Which ones will prevail in the unavoidable future clash of views and interests?
Recent contributions in the literature like Andreozzi and Tamborini (2019) showthat technocratic regimes are dominated by non-cooperation, suggesting that EU
leaders may be conditioned to favor hard choices between the union and noncooperation. Richard Bellamy and Sandra Kröger (2017) argue that non-cooperation
1 The Rome Declaration on the occasions of the 60th anniversary of the foundation of the European

Union discretely expresses the need for pragmatism. “We will act together, at different paces andintensity where necessary, while moving in the same direction, as we have done in the past, in linewith the Treaties and keeping the door open to those who want to join later” (Rome declaration
2017).

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can be softened if leaders can be persuaded to accept differentiated integration on
democratic grounds of fairness, impartiality and equity. Peter Wahl (2017) sees thepossibility of finding common ground through selective integration in certain areasand selective disintegration in others, based on variable coalitions of the willing. De
Witte (2018) maps the recent surge of interest within the EU in pursuing new projectsof differentiated integration, and discusses their legal and political feasibility in lightof the characteristics of the main forms of differentiated integration currently offeredby the European Treaties. Telò (2017) and Ling (2017) propose further analyses in asimilar vein. Fabbrini (2019) proposes the decoupling and reforming of the EU. The
Union can decouple into the economic community of the single market (consisting of
the current member states of the EU and of others interested in joining or re-joiningit), and a separate political union (largely based on the Eurozone reformed according
to an original model of the federal union). We counter-propose a general theoretic
solution.

2 Implicit MSTL Union
Multi-speed integration means that member countries go in the same direction andpursue common goals, but do so at different speeds. Some countries are faster andreach the goal sooner. Others are slower and need longer time. This may create asymmetric situations with faster member countries in a stronger position and slower ones
in a weaker situation. Consequently, this kind of integration may cause imbalances
incompatible with spirit of the EU by generating permanent first and second-classmember countries. The advantages are that multi-speed, multi-track and multi-level(MSTL) facilitates monitoring and reduces moral hazard.
The integration process also may be multi- track, where some countries pursue
more integration, others less. For instance, a group of countries may enter the monetary union sharing the same currency, monetary institutions and policies, while othercountries are content with being partners in a single market. Although this arrangement is easy to implement because it respects national preferences, it raises serious
issues. It is alien to the spirit of the EU, which foresees a united future for all
member countries. A multi-level structure would create a heterogeneous confederation. Great Britain is a prime example. Its opt-out from the euro created a dual unionwith asymmetric properties.
Multi-level integration adds a third element. The term refers to the endpoints of
the integration process, which are open to discussion as members proceed along
different paths.
The EU today, despite the official rhetoric and by force of circumstance is actually a multi-speed, multi-track and multi-level union. Some member countries areunwilling to comply with the one track, one speed, one-level ideal to which they
formally agreed. Their resistance is natural to the extent that national benefits andcosts of compliance vary. Although the EU established a budget, and programs to19 Fundamental EU Reform: Impact of the COVID Crisis

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help countries converge in the real economy, these measures proved inadequate, andfraught with moral hazard.
The EU was de facto a MSTL project from the outset. The founding member countries of the Treaty of Rome were dissimilar in all dimensions: economic, political andsocial institutions, economic and social structures, geographical features, historicaland cultural aspects, language, and development levels. Since the Treaty of Rome
integration blueprint was identical for each country, each had to solve different problems at different costs to reach the same point. These differences seemed transitory
in the first decades, but proved persistent.
Enlargement and the monetary union exacerbated these asymmetries. While on
paper European integration remained mono-track, mono-speed and mono-level,reality was different. Exceptions accumulated, following hard bargaining and appeals
to special circumstances. This made sense, but led to growing difficulties culminatingin Brexit, the Greek nightmare and may continue in other countries, such as Italy,
the Czech Republic, Hungary, and Poland. The paper explores promising alternative
institutional solutions to today problematic EU architecture and policymaking thatshould complement national efforts.
The solution proposed reinterprets the spirit of the European integration in theSaint-Simonian tradition as a cooperative club with membership levels (supranational, national, joint) designed to suit different tastes and needs (Saint-Simon 1814).
The concept allows members to maximize utility without jointly optimizing wellbeing according to a single Bergsonian social welfare standard (Bergson 1938, 1954,1976). Paretian and Bergsonian metrics are identical if members have common preferences and values. If everyone agrees then whatever EU institutional order all selectwill be best. If members do not agree, some will necessarily be displeased and may
try to harm others deliberately or inadvertently by exerting de facto regulatory power
and imposing their “superior” values. EU leaders doubtlessly are aware that Paretianand Bergsonian utility optimization never are the same; that conflict is endemic in all
systems, and that they therefore must choose between a one-class membership cluband a MSTL confederation, but for decades, they have pretended that the benefits ofa unitary order outweigh the costs.
The pretense is misguided. It not only has been detrimental for some members, ittarnished transnationality’s appeal. Switching to a MSTL confederation may relieve
fears and facilitate cooperation, including acceptance of mutually amendable “moreEurope” policies. Finally, the cooperative club proposal may help avoid the backlash from endless economic and social crises and the revival of forms of disruptive
nationalism and localism, and guarantee respect for the fundamental EU principles(basic freedoms and subsidiarity). The proposed solution starts by taking stock of
the inter-country differences and the disruptive effect of imposing unitary parametersand criteria: if countries are different, a MSTL solution is the one that promises tomove the countries towards common goals along different sustainable paths.2
2 A possible solution is that countries in different situations receive different kinds and levelsof common management to converge to a mono-track path in the same conditions as the mostadvantaged countries. See Casagrande and Dallago (2021).

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In short, it is better to have an explicit and orderly MSTL union than a disorderly and inconsistent unitary federal integration. This would contribute to makethe European integration system more inclusive vis-à-vis all member countries. A
system works well when it is inclusive, pragmatic and adaptive thanks to stronger
incentives, superior production of institutional knowledge and lower transaction costs(Acemoglu and Robinson 2012; Rosefielde and Pfouts 2014). The present EU hardly
shares these features, caught as it is between the illusion of self-adjusting markets
and the power of ordoliberal discipline. A rationalized and explicit MSTL EU would
help the EU move towards flexible inclusive integration.
In a MSTL union, member countries pursue similar goals, but do this in different
ways at different speeds, along different tracks and at different levels in due consideration of their situations. Members may also seek objectives other partners dislike,but are willing to tolerate. Unanimity is inessential in most cases, but clear definitions of benchmarks and the countries’ position is paramount. When the politicalunion is missing even in the agenda, the rationale behind the multi-track solution isthat member countries are different: they have different resources and capabilities,
different institutions and structures and need to solve different problems. If they wantto achieve common goals, they may have to go at different speeds, along different
tracks and at different levels in solving different problems in different ways and using
different economic and financial approaches. The main problem of MSTL integration, with acceptable diversity, concerns how to manage spillovers and the dangerof moral hazard. There is a pressing need for proper measurement, assessment andenforcement to cope effectively with spillovers and moral hazard. MSTL’s primaryvirtue is empowering cooperative member countries to use their own resources,
constrained by shared responsibilities to minimize negative spillovers from particular decisions and avoidance of moral hazard. In short, MSTL integration requires
three transparent categories of sovereignty (supranational, national and joint) andpre-established transparent rules and procedures to assess the spillovers of different
national tracks. More national and joint responsibility and freedom promise superior
results also in the integration process, and political stability.

3 EU Architecture and National Institutional
Idiosyncrasies
European integration sought: (a) peace and democracy in war-torn Europe, (b)production and trade integration to deter armed conflicts, (c) reduced transaction costs
and strengthened scale and scope economies to improve enterprise competitiveness;(d) increased size to make the integrated economy more resilient to crises and improve
the Europe’s standing in international markets. The monetary union subsequently
sought additional transactionary and macroeconomic management efficiencies.

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These aims were politically ambitious, yet technically feasible. All countries
shared important characteristics: dynamic growth thanks to the post-war reconstruction period, rapidly expanding openness of economies in a globalizing international
context and strong willingness to cooperate. Member countries were confident thatcooperating to achieve these lofty purposes was the best way for former colonial
powers to regain a central place and role in the international arena.
The original intention was one-speed, one track and one level (OSTL): all countries had to proceed in the same way at the same time towards the same goals. This
trajectory became particularly clear with the implementation of the Economic andMonetary Union (EMU).3 Original intents notwithstanding, the EU quickly became adisorderly MSTL process through a series of enlargements, particularly evident since
Maastricht 1993 and epitomized by the British opt-out from the monetary union.4
The approach yielded high initial dividends because it focused on Pareto superiormarket building, allowing everyone to gain without compelling any member to lose.
Widened rational utilitarian choice outweighed conflicts over monetary and fiscal
policy and social values. The financial crisis of 2008 shattered the euphoria. The
game ceased being unambiguously Pareto superior, morphing into an asymmetricpower and social order game.
The epochal moment in this de facto MSTL evolution was the 1973 accession ofGreat Britain. The UK was different: it had political, military, economic and financial
power other founding members lacked. London used this power to acquire a special
status that allowed it to obstruct EU efforts at building a common fiscal system andcapital market, but also to build up EU banking regulation. Fiscal competition cameto epitomize the MSTL nature of the European Union. Britain’s refusal to join themonetary union compounded the problem. It left the monetary union incomplete.
Although, this handicap might not have been decisive in an optimal currency area
(OCA), it caused serious disparities and conflicts in the suboptimal European space.
The EU became a multi-speed process in different senses. First, the convergence
to Maastricht parameters was never iron clad. Italy and Belgium acceded to the Eurozone in 1997 despite public debts exceeding 60% of GDP. New members from Central
and East Europe likewise postponed land ownership liberalization for several years.
Some countries have refused to accept and implement commonly agreed refugeequotas.
3 The Economic and Monetary Union (EMU) was launched in 1992, advanced and is foreseen toadvance further through different stages. It involves the coordination of economic and fiscal policies,a common monetary policy, and the common currency, the euro. All 27 EU member countries takepart in the economic union, only 19 of them adopted the euro.
4 This is not the only case. Although the law of the European Union is valid in all the member countries, there are exceptions. Some member countries negotiated particular opt-outs from legislation
or treaties of the European Union. When so, these countries do not have to participate in certain
policy areas or comply with European decisions. There are currently five opt-out areas involving
four countries: Ireland and the United Kingdom from the Schengen agreement. The UK opted outof the monetary union while Denmark reserved the right to decide whether and when to join theeuro. Poland and the UK have partial opt-outs regarding how the Charter of Fundamental Rights ofthe European Union interacts with national law. Denmark, Ireland and the UK have opt-outs fromthe area of freedom, security and justice.

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The Eurozone consequently is de facto a MSTL monetary union.5 Countries
pursue the same goal (the same currency with the same monetary policy and macroeconomic and fiscal equilibrium in order not to jeopardize the stability of the currency).
They do so at different speeds, through different tracks (some countries have to stabilize and others not, some grow and others stagnate, some decrease their debt andothers increase it), at different levels, without this situation being recognized institutionally and in policies. National economic and financial outcomes are diverse,
and the Eurozone has entered a danger zone: fading common goals replaced bystrengthened national goals with divergent tracks and outcomes.
The EU has chosen to distort its de facto institutions rather than revise treaties.
Ultimate economic sovereignty still reposes in national governments, with the exceptions of the monetary domain, which is under an incomplete common organ (theECB) with a strict monetary mandate (price stability) and Schengen mobility requirements. While this dual sovereignty encourages cooperation, it disregards the growing
disparity among member countries. Pressed by a prolonged economic and financial
crisis and growing domestic social and political pressure, some governments are
increasingly resisting common rules and their enforcement. This enlarges intra-EU
conflicts, increases the costs and problems of adaptation and compliance and worsens
outcomes. We believe that an explicitly MSTL EU based on orderly and transparent
institutions and processes will improve the situation by riveting attention on the needfor cooperation and solidarity.

4 Immigration: An Important Case of Superior MSTL
Solution
The MSTL approach is particularly well suited to resolving the EU refugee immigration problem. In the EU a refugee is a foreigner who does not have the protection of
the home country or a stateless person who, being outside the home country, has wellfounded fear for her or his own safety if returned to that country.6 Members need only
5 The Eurozone or euro area is the monetary union of 19 out of the 27 EU member countries using

the euro as their common currency and sole legal tender. The monetary authority of the Eurozone is
the Eurosystem, whose primary objective is price stability. The Eurosystem consists of the European
Central Bank (ECB) and the 19 national central banks (NCB). The ECB sets the monetary policyof the zone and has the exclusive right to authorize the issuance of euro banknotes. National central
banks apply the monetary policy of the ECB. The Eurozone member countries are: Austria, Belgium,
Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
6 The EU defines a refugee “either as a third-country national who, owing to a well-foundedfear of persecution for reasons of race, religion, nationality, political opinion or membership of aparticular social group, is outside the country of nationality and is unable or, owing to such fear,is unwilling to avail themselves of the protection of that country, or a stateless person, who, beingoutside of the country of former habitual residence for the same reasons as mentioned above, is19 Fundamental EU Reform: Impact of the COVID Crisis

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agree to share responsibility for refugees between supranational and national authorities explicitly. Supranational authorities do not need to brow beat national authorities and vice versa. Co-sovereignty is an established aspect of the EU’s transnationalarchitecture.7 On paper, the management and inter-country distribution of refugees
and immigrants is clear. In the case of regular immigration, the EU defines the conditions governing entry into a member country, including the norms on legal residence.
Member countries determine the number of regular immigrants admitted. The EU
also may provide incentives and assistance to member countries in settling legal
immigrants, even though it does not try to harmonize national laws and regulations.
The EU takes an active role in combating irregular immigration, including repatriation. This requires the EU to conclude readmission agreements with refugees’
country of origin. These agreements are extremely difficult to implement, especiallyin the case of illegal immigration, a fact that is at the root of various conflicts between
member countries and the EU.
Other problems and areas remain uncharted. The EU does not have formal competence over the admission of immigrants to member countries. The Dublin Convention governs the actions of EU member country dealing with refugees at the port ofentry. Its protocols often overburden some, and under-burden other members, generating antagonism and conflict. Problems became evident following the summer 2015
dramatic unauthorized immigrant surge. The spark exploded in June 2015, when the
Hungarian government decided to allow immigrants to leave the country unregistered, an action tantamount to withdrawing from the Dublin Convention. In the caseof refugees, protected under international conventions, the EU tries to standardize
the definition of country quotas, based on transparent parameters that ease the burden
on first port of entry countries.8
EU leaders have chosen not to share responsibility on refugee matters formally,
but nothing prevents them from revising their position. They can formally authorize
national governments to co-establish limits on refugee mobility among EU countries (which could have consequences for being in the Schengen Agreement unlessequally applied in all Schengen countries), social support and the requirements for
EU citizenship. Members can negotiate amendments to the Schengen agreement
concerning intra-EU refugee mobility, without altering the treaty’s core. They canemploy the same tactic to modify aspects of other EU treaties bearing on citizenshipand EU-wide social support. Advocates of “more Europe” are sure to object because
they view co-sovereignty on the refugee issue as a step backward from their goal of afederal EU. They are right, but a bird in the hand in this instance, is better than two in
the bush. Enhancing solidarity now is more important than taking a step backward.
If the community agrees, two steps forward are always possible later.
unable or, owing to such fear, unwilling to return to it, and to whom Art. 12 (Exclusion) of Directive 2011/95/EU (Recast Qualification Directive) does not apply.” (https://ec.europa.eu/home-aff
airs/what-we-do/networks/european_migration_network/glossary_search/refugee_en retrieved on
27 October 2019).
7 https://www.europarl.europa.eu/factsheets/en/sheet/152/immigration-policy.
8 The EU immigration system is undergoing repeated changes and the fourth reform of the Dublin
Convention is presently under discussion.

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Opponents may also correctly caution that co-shared responsibility for refugees
might cause substantial negative spillovers and raise serious moral hazard issues. If
Hungary and Poland refuse to accept their “fair share” of refugees, then the burden
will fall disproportionately on others. These dangers could be significant, but notnecessarily fatal, if co-sharing embeds appropriate rules and policies to mitigate
collateral losses.9 Competently designed rules and policies permit the benefits ofstabilization and EU reinvigoration to outweigh the costs, especially if EU leaders
set sensible national quotas on refugee distribution.

5 MSTL Framework
There have been many proposals for improving the EU. Perhaps, as some supportersof the varieties of capitalism (VoC) literature suggests, the EU should abandon themonetary union. Perhaps, adopting expansionary policies will save the day. Perhaps,
inclusionary economics will cure the EU’s malaise. However, the success of anyof these recommendations is problematic because fixing one problem will not fix
many other defects. The same reductionist fallacy mars the arguments of “moreEurope” and “less Europe” advocates. There is no magic bullet capable of making
the European Union simultaneously Pareto efficient, politically potent and sociallyjust. Markets cannot be Pareto efficient. They are constrained by bounded rationality(Rosefielde and Pfouts 2014). Economic and political power are endemic, and social
justice is in the eyes of the beholder, leaving ample room for intra-EU conflict.
The EU’s founders from the start were evasive about whether supranationalism
was practical or ideal. If the EU were merely a framework for cooperation, it could
take diverse forms. If it were more, then it was the politicians’ duty to choose thebest arrangement. EU leaders punted on the issue, assuming that the Treaty of Romewas practical enough and that whatever form the union took ultimately, it would be
unique and best. The ensuing tug of war between advocates of “more Europe” and“less Europe” provided a forum for debating the EU’s endgame. The arguments forand against “more Europe” twisted and turned variously stressing efficiency, equity,
ideals and political power.
The pretense was not threatening until the centripetal forces unleashed by the2008 crisis started unhinging the entire project. The tug of war between advocates of“more Europe” and “less Europe” became an obstacle to progress because it diverted
attention from the practical task of preventing the EU’s internal degeneration. In theend the debate is moving in the direction of the fundamental distinction between
Eurozone countries, where more Europe is necessary and inevitable, and those countries among the others which want to remain outside and may be happier with less
Europe. The new imperative is to re-conceptualize the EU as an adaptive sociallyand politically inclusive, Pareto improving satisficing project with a flexible internal
9 Moraga and Rapoport (2014) advance an interesting proposal on tradable refugee admission

quotas.

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structure. For non-Eurozone countries, this is a two steps process. First, members
must make a political judgment about the division of sovereignty; how the balance ofauthority between nations and supranational entities should be altered, and portfolios
reallocated. Formal joint authority (shared sovereignty) should expand to facilitate
the resolution of contentious issues.
The fundamental distinction should be between the existence or absence of negative spillovers for other countries. For instance, if a country participates in the single
market and uses fiscal competition to the disadvantage of other countries it should pay
compensation. In other cases, when no negative spillovers exist, each country shouldbe free to take its preferred choice. This principle could be applied to immigration.
Some refugee cases are handled in accordance with international agreements, butthere were exceptions. Violators may have valid reasons, but a default mechanism
fining non-compliant countries, and assisting those shouldering the burden could
mitigate needless rancor. Under prevailing EU rules, some countries are net contributors to the EU budget, while others are consistently net recipients. If a country
refuses to accept its refugee or immigrant quota, burdening others, it should lose partof the transfer it receives from the federal budget. Clear ex ante rules and supranational enforcement protocols should be established.10 This would increase bureaucratization but would have the advantage of less bargaining and conflict. The mostimportant case of generalized spillovers is the common currency. A jurisdictional
reconfiguration that nips conflict in the bud will strengthen EU solidarity, even if
it fails to promote efficiency, by decreasing conflict and foot-dragging, improving
political competence and furthering the cause of social justice to most participants
satisfaction.
MSTL should be addressed after jurisdictional matters are settled. The supranational jurisdiction should set common standards and rules, leaving it to nations andjoint authorities to decide issues of speed, track and level, if this does not harm othercountries. In matters free of spillovers, if countries want to move at the same speed,on the same track attempting to converge at the same level, they should do so. If they
prefer, they should move along divergent trajectories. Pre-established general rules
should be fixed to deal with negative spillovers on important issues like refugeequotas. For example, if complying countries receive transfers (a pre-establishedamount of euro per refugee) from the EU budget non-complying countries might
be required to fund the expenditure.
Unbundling efficiency from equity and politics should also be beneficial
because maximizing efficiency, equity or political power invariably has side effects(spillovers). The best policy choices must take account of the costs and benefits
10 The debate related to the 2021–2027 EU budget included proposals to link the budget contri-

butions to the respect of the rule of law by member countries. See EC (2018b). The European
Parliament adopted a new regulation on 16 December 2020 and in force since 1 January 2021.
According to the new regulation, governments recognized to be in breach of the rule of law
risk losing access to EU funds (https://www.europarl.europa.eu/news/en/press-room/202012
11IPR93622/parliament-approves-the-rule-of-law-conditionality-for-access-to-eu-funds#:~:text=
On%20Wednesday%2C%20MEPs%20approved%20the,management%20of%20the%20EU%20funds).

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B. Dallago and S. Rosefieldeof tradeoffs among these objectives in all jurisdictions. Unanimity is unachievable,
but giving interested parties an expanded voice in deciding priorities should mutediscord.

6 Is the EU becoming a MSTL union?
Lately the EU policy approach has begun moving in the direction of greater policy
flexibility through the European Semester, a series of regularly scheduled fora
discussing national fiscal policies, structural reforms and macroeconomic imbalances, based on commonly agreed treaties and standards. Coordination rounds takeplace twice a year with the aim of aligning national fiscal and economic policies
with the objectives and rules agreed at the EU supranational level. Each Semester
includes three main phases: (a) EU member states submit their budgetary strategies
and reform plans to the European Commission; (b) the European Commission analyses them and issues recommendations for each member state; the Council adopts
these recommendations; and (c) the member states are expected to implement themin their national policy-making. This consultation process is not joint sovereignty
and may be inappropriate for some purpose, but is a step in the right direction.
The key objectives of the European Semester are of ensuring sound public financesand convergence and stability in the EU and thus preventing excessive macroeconomic imbalances in the EU. Additionally, the Semester supports the implementation of the Europe 2020 strategy11 and tries to foster economic growth. Following
the international crisis, the EU decided in the “more Europe” spirit to implement
stronger economic governance and better policy coordination, synchronization andmonitoring among member states to improve convergence, stability and other EU
objectives. With this, the growth agenda unfortunately slipped into the background.
The EU took another small step toward an adaptive consensus building, sociallyand politically inclusive, Pareto improving, satisficing EU project with a flexible
internal structure in November 2018. The European Commission prepared an analysis of the Eurozone economy clarifying the EU’s economic and financial philosophy
and related instruments and areas of intervention for promoting the convergence andcoordination of the Eurozone member countries (EC 2018a). The document reflects
the EC’s standard “more Europe” outlook, but also stresses the need for MSTL
accommodations including an EU Reform Support Programme, a European Investment Stabilisation Function and a European Monetary Fund. These instruments, if
implemented, may become important for allowing institutionally and structurally
different member countries to cohabit without having to become identical. They canserve to improve the efficiency and effectiveness of different economies, so that they
can share the same currency without the excessive divergence. This also means that

11 Approved in 2010, the Europe 2020 strategy was the EU’s agenda for growth and job creation

covering the 2010–2020 decade (EC 2010).

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these countries follow the same goals, although along different tracks at different
speed and perhaps at similar level.
A subsequent document by the Council of the European Union concerning theEurozone (CEU 2019) addresses the same issues. It states that: “The strengtheningof fiscal sustainability of the euro area and its Member States requires differentiated national policies in full respect of the Stability and Growth Pact, taking into
account fiscal space and spillovers across countries.” Although the document gives
priority to fiscal stability overgrowth, it foreshadows acceptance of an MSTL Eurozone. More recently released documents concerning monetary and non-monetary
matters support the inference.12 A Commission document on the 2019 European
Semester (EC 2019a) stresses that “While not all investment needs can be addressedby EU funds, these provide considerable opportunities for addressing concrete investment gaps identified in country-specific recommendations.” And further on: “Thestrengthening of fiscal sustainability of the euro area and its Member States requires
differentiated national fiscal policies.” The reports and recommendations for eachmember state present highly differentiated landscapes of problems, critical issues
and policy and reform suggestions and requests that clearly go in the direction of a
MSTL Union.

7 Stress Test: The EU and the COVID-19 Pandemic
The pandemic hit the EU aware of the failure of its crisis management policies, but
not ready yet to change fully its policy stance and even less to change its institutionalarchitecture. After years of restrictive stance, the ECB monetary policy became
definitely expansionary since approximately 2012. Yet fiscal policies continued to
be based on austerity for a while. They started to change in 2014, but not enoughto sustain growth and employment. The need to change was increasingly acceptedby EU organs, but not by resilient countries, which caused the prolonged stagnationof the vulnerable countries’ economy, together with the latter inability to implement
reforms. The pandemic apparently changed everything and dramatically transformed
the Eurozone trilemma.
Due to its construction, the Eurozone suffers from a peculiar impossibility trinity
or trilemma (Pisani-Ferry 2012) involving: (a) the lack of joint responsibility overpublic debts, (b) the strict no-monetary financing rule, and (c) the national characterof banking systems and bank-sovereign interdependence.13 The stubborn pursuit oforthodox fiscal and monetary policies under (a) and (b), given (c) caused a double
dip post-crisis recession and the inability of vulnerable countries to re-balance their
public finances, let alone support growth. The slow appreciation of the impossibility
12 The modest EU budget, corresponding to 1% of the EU GDP, has been traditionally used tosupport the growth and real convergence of branches and regions.
13 Beck and Prinz (2012) present the new trilemma in a somewhat different form and involving: (a)a no-bailout clause, (b) independent monetary policy, and (c) national fiscal sovereignty.

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led first to abandon (b) and then orthodox fiscal policies. While monetary policies
changed dramatically and suddenly in 2012 (Draghi’s celebrated “whatever it takes”),
the softening of fiscal policies was slow and never uncontroversial.
The pandemic hit the EU hard. Costs in terms of lost lives and forgone production
due to repeated lockdowns grew fast and reached threatening levels, particularly insome vulnerable countries (Spain, Italy, Portugal, Greece, Central-Eastern European
member countries), but also in some resilient countries, particularly France and later
also Germany and various others. The pandemic made clear that a much higher value
than policy orthodoxy was at stake: the very survival of EMU integration. Thus, anew, pandemic-forged trilemma prevailed, in which EMU survival was at stake andreceived nearly exclusive priority leading to abandon monetary and fiscal orthodoxy.
Alarmed in early 2020 by the perspective of ailing economies, the gloomy perspectives of economic recovery in the next years, the dramatic increase of interest rates in
Italy, Spain and Greece, and a politically and socially turbulent continent, EU authorities acted swiftly. Policy orthodoxy was totally abandoned in early 2020, startingfrom the suspension of the Stability and Growth Pact and consequently the convergence criteria and the request for fiscal stability. The European Commission invitedmember countries to spend as much as needed to combat the pandemic, strengthen
health care and revitalize the economy, in line with similar messages coming from the
IMF. Public debts abruptly disappeared from the black book of policy beds and EU
authorities started to stress the strategic difference between good debt for supporting
long term revival and growth and bad debt with a prevailing short-term perspective.
Added to this, both the ECB and the European Commission created new funds andpursued new policies.
More important, particularly from the MSTL perspective, countries in different
conditions started to be managed in different ways and enjoy different policy requests
and support. Both the ECB and the European Commission assumed an apparently
MSTL approach and perspective. The ECB acted swiftly by introducing new monetary instruments and further and dramatically expanding its strongly expansionary
stance. Among the most important new instruments for fighting the economic effectsof the pandemic were the implementation of PEPP (Pandemic Emergency Purchasing
Programme), the regular APP (Asset Purchasing Programme) and the extended APP
for 2020. These three measures are foreseen as injecting nearly 2e trillion in 2020–
2021, corresponding to 18.2% of 2019 EU GDP.14 More importantly, the previous
system of buying sovereign bond in the secondary market (by statute the ECB can
only operate in secondary markets through open market operations) based on thebonds rating (thus favoring resilient countries) was abandoned. In the new approach,
the ECB privileged countries according to needs, thus buying mainly bonds of Italy
and Spain. The goal became the stability of interest rates of sovereign bonds to easethe financial situation of member countries and avoid jeopardizing the stability of
the Euro. These measures were remarkably effective in keeping monetary stability
and easing financial stability in the EU.

14 https://www.ecb.europa.eu/home/search/coronavirus/html/index.en.html.

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Changes in the fiscal domain were even more remarkable. Fiscal policies abruptly
became extremely expansionary with the direct and indirect support of the European
Commission and ECB monetary easing. Government net lending in 2020–2021 isforeseen to reach approximately 1.7e trillion, corresponding to 15.6% of EU 2019GDP. The goal is reviving European societies and economies overwhelmed by theCoronavirus crisis and avoiding a prolonged COVID generated economic depression. The danger is increased by the fact that some vulnerable countries, including
Greece and Italy, had a GDP level in 2019 lower than in 2007, before the international crisis erupted. The most important EU fiscal novelty is the establishment ofa European Recovery Fund, complemented by the Sure program.15 To access theseresources, member countries have to prepare National Recovery and Resilience Plans
and present them to the European Commission for approval. Plans should address
major structural reforms and critical development projects.
After months of hot debates, it was decided to anchor the strategy in the EU’s longterm budget (2021–2027). The overall resources of the budget amount to e1,074.3,
corresponding to 1.1% of the EU GDP on a yearly basis. The budget is coupledwith e750.0 billion of the NextGenerationEU. These two sources together form
the largest stimulus package ever financed through the EU budget. NextGenerationEU is a temporary recovery instrument aimed at helping member countries torepair “the immediate economic and social damage brought about by the coronavirus
pandemic”.16
The long-term budget will continue to be financed in the usual way: (a) customs
duties, (b) contributions from the Member States based on value added tax (VAT),(c) contributions based on gross national income (GNI), and, since 1 January 2021,(d) a new national contribution based on non-recycled plastic packaging waste. The
real novelty is represented by the Recovery and Resilience Facility (RRF). This is
the core and bulk of NextGenerationEU and is aimed at supporting reforms andinvestments undertaken by EU countries by means of EU loans and grants for a total
amount of e672.5 billion, nearly 90% of the total NextGenerationEU budget.
The nature and financing of RRF includes various important novelties. First, RRF
not only comprises loans, but also of grants in the amount of e360 billion ande312,5 billion respectively. Second, to finance the fund, the EU will borrow on themarket at more favorable rates than many countries could obtain and use the EU
budget as a guarantee. Third, resources are allocated to countries according to theirneeds. Worse hit countries benefit disproportionately. The most important beneficiary
countries are Italy (e85.9 billion in grants corresponding to 5.2% of the estimated
15 The temporary Support to mitigate Unemployment Risks in an Emergency (SURE) is a new EU

program which can provide financial assistance up to e100 billion in the form of loans from the EU
to affected member countries to address sudden increases in public expenditure for the preservation of employment (https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policycoordination/financial-assistance-eu/funding-mechanisms-and-facilities/sure_en). The Council has
approved so far (February 2021) a total of e90.3 billion in financial support to 18 countries. Of
these, e53.5 billion has been disbursed to 15 countries, primarily to Italy (e27.4 billion) and Span(e21.3 billion).
16 https://ec.europa.eu/info/strategy/recovery-plan-europe_en#nextgenerationeu.

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2021 GNI), Spain (e80.9 billion and 7.0% of GNI), France (e43.2.9 billion and1.8%), Poland (e38.2 billion and 8.1% of GNI). The largest beneficiaries judged interms of estimated 2021 GNI are Bulgaria (16.0%), followed by Croatia (15.4%),
Greece (13.5), Latvia (9.9%), Romania (9.6%).
Worse hit countries get most support despite disregarding their compliance withconvergence parameters. Nonetheless, the question of whether the EU became an
MSTL union should be answered with caution for at least four reasons. First, allsupport programs, both monetary and financial are temporary. They will continue
until the worst economic consequences of the pandemic are over. It is not clear what
will happen thereafter. For the time being the presumption is a return to orthodoxy,
but this may remain just a desire of some countries. Second, there is no clear relation
between negative growth forecasts and the amount of grants and guarantees obtained
via the EU. In general, lower-income countries in Central-Eastern EU get more thanharder-hit countries compared to their GDP (Darvas 2020). Pandemic funds are thus
clearly instruments to support growth. Third, the abundance of financial sources will
predictably put under stress countries prone to misuse them for sundry institutional
reasons. Fourth, no one really knows how the EU will repay the loans to markets.

8 Conclusions
EU leaders are reluctant to rethink the European supranational project. While theyfiddle, Rome burns. Growth is stagnant, the gap between rich and poor members is
widening, and social and political tensions are intensifying with few signs of recovery
in sight. EU leaders know this, but have chosen to combat the projects numerous
problems by pressing “more Europe” solutions, while relaxing “austerity”, increasing
the monetary union’s flexibility, closing competitive divergences and listening tomember grievances. These reforms have not saved the day. The time looks ripe
for bolder steps forward. The tinkering will persist on a treadmill of reform. Results
perhaps will be positive, but a more fundamental adjustment of the EU’s supranationalarchitecture would be more prudent. The EU needs an “all weather” redesign to cope
better with its divisions and challenges, especially in times of adversity and social
turmoil. Pretending that this or that policy fix or cosmetic reform is a panacea may buytime, but is unlikely to reinvigorate economic growth, given the constraints imposedby European politics and social activism or solve other fundamental problems.
The best course at this historical juncture is to focus the EU leadership’s attention on developing an adaptive consensus building, socially and politically inclusive,
Pareto improving, satisficing EU project with a flexible internal structure. This framework should be participatory and inclusive across supranational, national and jointly
sovereign jurisdictions. It should address all issues on a rational choice basis that
permit both one-speed, one-track and one-level (OSTL) and multi-speed, multi-trackand multi-level (MSTL) options.
Such a new EU project with a flexible internal structure cannot guarantee ideal
results from diverse perspectives. Inclusive, participatory, consensus building is19 Fundamental EU Reform: Impact of the COVID Crisis

243

fallible. The goal is to facilitate best practice satisficing in ambiguous and contentious
environments and encourage learning by doing with results that are good enough tostrengthen the European project.
These pragmatic matters offer a constructive path forward, but do not guarantee success because of institutional and structural differences, moral hazard, otherconflicts, selfishness, willfulness and a fixation on winning. EU leaders therefore
should learn the virtues of satisficing, and consensus building where concern for
the wellbeing of others enables groups to forge agreements that still meet difficulties in Europe. The pandemic emergency offered a stress test to the EU that theEU managed with determination, in spite of some initial foot dragging caused bydifferent national positions and interests. Apparently, the new measures and policies
go in the direction of an MSTL union. However, so far, the EU forcefully stressed thatchanges and related resources are temporary and will be withdrawn as soon as the
pandemic emergency eases up. True, there always is the possibility that what starts as
temporary becomes permanent along the way. Much will depend on the attitude andaccomplishments of supported countries and their willingness and ability to makeproper use of the extraordinary support.
Nothing prevents EU leaders from studying the MSTL concept, other than thedanger of rocking the boat.

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19 Fundamental EU Reform: Impact of the COVID Crisis245

Bruno Dallago, Ph.D. is Professor of Economics at the Department of Economics and Management, University of Trento, Italy. He was visiting professor at various universities, including
the University of California at Berkeley, USA, the University of North Carolina at Chapel Hill,
Hitotsubashi University, Zhejian University, Kyoto University, the University of Pécs, Tshwane
University of Technology, Corvinus University of Budapest, Zhejiang University. He was thepresident of the European Association for Comparative Economic Studies (1995–1996) and isa member of the International Advisory Board of the Institute of Economics of the Hungarian
Academy of Sciences. His research interests include the European Union, comparative economics,
the transforming economies of Central and East Europe, SMEs and entrepreneurship, local development. He is the author and editor of several scholarly books and journal articles, including One
Currency, Two Europe(World Scientific, 2016), Transformation and Crisis in Central and Eastern
Europe: Challenges and Prospects(with Steven Rosefielde, Routledge, 2016) and Entrepreneurship and local economic development. A comparative perspective on entrepreneurs, universities,
and governments, (edited with E. Tortia, Routledge, 2018).
Steven Rosefielde Professor of Economics, University of North Carolina, Chapel Hill. He
received his Ph.D. from Harvard University and is a Member of Russian Academy of Natural
Sciences (RAEN). His books include: Democracy and Its Elected Enemies: The West’s Paralysis, Crisis and Decline, Cambridge University Press, 2013; Inclusive Economic Theory (withRalph W Pfouts), World Scientific, 2014; Global Economic Turmoil and the Public Good (withQuinn Mills), World Scientific, 2015; Transformation and Crisis in Central and Eastern Europe:
Challenges and Prospects (with Bruno Dallago), Routledge, 2016; The Kremlin Strikes Back:
Russia and the West After Crimea’s Annexation, Cambridge University Press, 2017; The Trump
Phenomenon and Future of US Foreign Policy (with Quinn Mills), World Scientific, 2016;
Trump’s Populist America, World Scientific, 2017; China’s Market Communism: Challenges,
Dilemmas, Solutions (with Jonathan Leightner), Routledge, 2017; The Unwinding of the Globalist Dream: EU, Russia, and China (with Masaaki Kuboniwa, Kumiko Haba and Satoshi Mizobata, eds.), World Scientific, 2017; Putin’s Russia: Economic, Political and Military Foundations,
World Scientific, 2020. Populists and Progressives (with Quinn Mills), World Scientific, 2020.

Chapter 20

Connecting the EU and China Alongthe Belt and Road Initiative
Bruno Dallago

Abstract The European Union and China share both similar and dissimilar
economic situations and problems. Similarities call for cooperation in solving problems and strengthening advantages, differences call for exploring compatibilities,
synergies in the use of instruments and actions for finding possibilities to diffuse
and appropriate positive spillovers. The Belt and Road Initiative promises to invest
Chinese surplus abroad and give a strong impetus to the development of infrastructure and connectivity, and lately to health and virtual connectivity, which is goodfor both China and the European Union. However, the role of the EU remains rather
passive and shows relatively weak opportunities for EU investment and job creation.
Problems remain in the geostrategic and political domains, but also in economic
terms. Prominent among these are the need to streamline economic advantages ofChina with opportunities for the EU, the compatibility of rules and standards andtheir enforcement, the difficulties for the European Union to manage jointly relations
with China and the need for China’s approach to be in line with European integration
aims, sharing the control over strategies and projects.
Keywords Belt and road initiative · China · European union · Growth ·Infrastructure · Trade
JEL classification F02 · F15 · F21 · F43 · F53 · O47 · O52 · O53

1 Introduction
The European Union (EU) and China share some similarities and complementarities
in their economic situation that may provide a common interest to deepen their cooperation. Their long-term development meets similar problems, although at different
levels and for different causes: slowing growth rates, financial unbalances, demographic crisis, sustainability of welfare systems, importance of innovation strategies,
B. Dallago (B)Department of Economics and Management, University of Trento, Trento, Italye-mail: bruno.dallago@unitn.it© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_20

247

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low competitiveness of part of enterprises, inequalities, regional differences. In bothareas, exports have an outstanding role in growth strategies and current accountbalances are in surplus. Other problems and situations are different, in particular thegrowth rate and working time of China are high, albeit slowing down, while wellbeing in Europe is among the highest in the world, but waning in part of the Unionand difficult to finance elsewhere. Further differences are in the role of foreign direct
investment (FDI) and in economic specialization.
With the eruption of the COVID-19 pandemic, China was able to produce an
impressive achievement in both healthcare and economic performance. While thepandemic allegedly started from Wuhan, and thus put China first under stress, thecountry has by now an impressive 3.46 people per million inhabitants who diedfrom the pandemic. Countries in the European Union had more time to prepare
before the pandemic reached them, yet they ended up for being hit much harder,
with death at 1.135 per million inhabitants (data from statista.com updated to March
3, 2021). Also, economic performance was strikingly different. China was the only
large economy in the world reaching progressive growth of GDP in2020. Conversely,
the European Union had the worst performance among highly developed countries,
with GDP estimated to have fallen by 6.8% in the euro area and 6.4% in the EU (EP2021). Growth was negative for all member countries. In most of its large member
countries GDP fall was particularly significant, at –11.0% (Spain) and between –9
and –8% in Italy and France, according to Eurostat (https://ec.europa.eu/eurostat/dat
abrowser/view/tec00115/default/table?lang=en).
Conversely, China was the only economy with a positive growth rate of 2.3% in2020 (Wall Street Journal, 18 January 2021). The pandemic also showed that Chinais the largest producer and exporter of medical devices necessary to combat the
pandemic—from face masks to machines easing breathing to vaccines obtained quite
soon, earlier than in the West—the European Union found itself totally dependent
from imports, particularly from China and, for vaccines, the United States and GreatBritain.
Some similarities, such as identical production or trade specialization, may leadto clash of interests. Other features with positive spillovers, network externalities orcomplementarities, such as those caused by infrastructure connectivity or the contrast
to the pandemic, call for cooperation in solving problems, exploring synergies in theuse of instruments and strengthening advantages. China has a surplus of savings andcapital and economic and political need to depend less on the United States for theuse of its surplus and on foreign trade and more on domestic and other markets. The
EU needs projects to upgrade its economy and restart to grow, needs to strengtheninternal demand and foster external demand and opportunities to use the presenthigh liquidity existing in its economy after years of significant monetary expansion
and to depend less on an increasingly self-sufficient United States in both financial
issues and trade. One problem is that both China and the EU have significant current
account surpluses. More recently, the fight to pandemic added important reasons to
the need for international cooperation.

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The Belt and Road Initiative (BRI) promises to invest a massive part of Chinese
surplus abroad. It also aims at building far reaching, modern and high-quality infrastructure (including roads, railroads, energy grids, ports and airports, and lately also
health devices) connecting China and the EU, including many parts of Asia andEastern Europe, and further connecting EU member countries. Moreover, BRI creates
jobs and business opportunities and increases existing capacity use. This should
decrease phenomena of congestion in Eastern coastal areas.
These initiatives are good for both China and the European Union. However, theinitiative still neglects offering significant opportunities for the use of the EU monetary surplus and production capacity and stimulating the EU economy. Both actuallyrequire a change in the EU approach both visa-a-vis BRI and EU internal policies
also after the health emergency will be over. Problems remain in the geostrategic andpolitical issues, but also in economic terms. These depend in part on the EU, but inpart they depend on the Chinese approach. Prominent among these are the need to
streamline economic advantages of China with opportunities for the EU, the compatibility of rules and standards and their enforcement, the complexity for the European
Union to manage jointly relations with China and the need for China’s approach to
be in line with European integration aims, sharing the control over strategies andprojects. Also, the EU should look favorably at the need of China to rely more onits domestic market, since this can go to the EU advantage. Further, the problem
of indebtedness for implementing infrastructural investments should be carefully
considered, particularly for economically weaker countries.
The next section introduces the main features of the EU and highlights how it istrapped in the trade-off between the goal of stabilization and the need to grow. The
following Sect. 3 shows that China has to change growth strategy to avoid fallingin the middle-income trap. Section 4 looks at BRI and concludes that China andthe EU have both common interests to cooperate and important diversities that callfor prudence and negotiations. Section 5 considers the changes that the COVID-19
pandemic caused to the BRI structure and strategy and considers their consequences
for the relation between the EU and China. Section 6 concludes.

2 Stabilization and Development Traps: The European
Union
The main problem of the EU economies has been a wide and persistent trade-off
between fiscal stabilization and economic development and growth. While the former
slightly improved in later years, overall, the EU was unable to solve the trade-off andfailed on both accounts and particularly in economic growth and technical progress(Dallago 2016). Before the crisis, the EU economies were growing and monetaryand fiscal stability were good. However, following the crisis considerable disadvantages and costs appeared in terms of lost output, unemployment, growing public andprivate debt, and recurring risks of countries’ liquidity crises and default. Although

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these disadvantages were dissimilar in the different member countries, the overall
performance of the Eurozone following the crisis was modest even in the case of themost successful Eurozone countries. This held on absolute level and in comparison,
to other countries, including the EU member countries which continued to keep theirnational currency. The comparison with China’s performance is staggering.
The monetary union is based on fiscal convergence through the discipline ofconvergence parameters and the Stability and Growth Pact (SGP), to avoid thosenational finances jeopardize the common currency. At the same time, it was believedthat efficient markets would solve the problem of financing directly investments
and growth through the inter-country flow of private capital. Following the crisis,
the flow of resources had a sudden stop and reversal, from countries in need tobalanced countries in search of a guarantee against the risk of redenomination into
national currencies. This produced dispersed interest rates within the EU to thedisadvantage of vulnerable countries. The “troika”—the EU, the European Central
Bank (ECB) and the IMF—required countries in distress to stabilize their publicfinances by means of austerity policies and internal devaluation before securingrescue packages. This was curing the effects and overlooking the deep causes offinancial distress, including ineffective economic structures and institutions, growing
inequalities and lack of investment. While a degree of financial stabilization wasnecessary, the particular policy measures and priorities sponsored by the “troika”
and the inability of distressed countries to reform their economies jeopardized thelong-run sustainability of distressed economies, their development and in the end
the very success of stabilization policies. As a consequence, debt service and public
debts increased significantly compared to GDP, adding additional fuel to distrust.
Companies in distressed countries had to compete at higher financing costs.
On the positive side, these policies aimed at decreasing labor costs and thusincreasing the competitiveness of enterprises and economies. Yet this happened ina time of slowing world market expansion (although not in the EU, except in 2009,
according to World Bank data). Current accounts of vulnerable countries improved
significantly after stabilization measures. However, the positive effect of growing
exports could not compensate the negative effect over GDP of shrinking domestic
demand, particularly in large and closer economies. This led to stable divergence ofGDP between resilient and vulnerable countries.
Since 2014, the Eurozone moved to consider exceptional circumstances to makethe application of convergence parameters softer and more flexible, defining thebudget deficit in structural terms, and adopting a moderately expansionary fiscal
stance (EC 2016; ECB 2016). More important, the ECB continued its expansionary
monetary policy and took on an increasingly resolute role to ease tensions and gain
time for reforms. The ECB determination to do “whatever it takes” to support theeuro since 2012 helped easing financial and monetary distress (Pisani-Ferry and
Wolff 2012). However, these measures could not solve the deep reasons for instability, nor could they complete the institutional setup of the Eurozone, as the ECB
repeatedly warned (Draghi 2015, 2019a, 2019b). Incomplete Eurozone institutions—starting from the lack of a common government of fiscal issues—and hard national
budget constrains have deprived the Eurozone of powerful countercyclical policies

20 Connecting the EU and China Along the Belt and Road Initiative251

and de-aligned national business cycles, thus jeopardizing the effectiveness of thecommon monetary policy. This created a dramatic need to promote investment andgrowth policies and to both change national policies and complete the institutionalarchitecture of the Eurozone.
The need for unconventional monetary policies led to bank-sovereign interdependence: large stocks of undiversified national public debt securities held by nationalbanks. The vulnerability of Eurozone countries increased, because adverse shocks
to sovereign solvency could interact with adverse shocks to bank solvency. The ECB
quantitative easing program, started in March 2015, ended at the end of 2018 andresumed in late 2019, eased but not solved the problem by transferring public debt
bonds from private banks to national central banks. At the same time, the ongoing
construction of a European banking union aims at strengthening large, systemicbanks and ease the burden of non-performing loans (NPL).
This problematic evolution prompted EU organs to start using more flexible
approaches to countries’ problems and pay more attention to broader economic,
social and political stability, along with fiscal stability. Lately, the European Commission initiated a broad discussion on fiscal governance of the EU. Topic momentsin this new institutional and policy stance were so far the report by the European
Fiscal Board (EFB 2019) and the February 2020 launch of the EU-wide consultationand debate on fiscal governance in the EU (EC 2020). These documents include
important statements and possibly foresee an important revision of policy making
followed so far, justified by an important set of structural and policy events and thegoal of proceeding towards a new growth strategy (EC 2019a) based on the European
Green Deal (EC 2019b). These documents are to be considered on the backgroundof the persisting goal of fiscal sustainability (EC 2020). However, the eruption of
the COVID-19 pandemic in early 2020 radically changed the economic, social andpolicy landscape of the EU.

3 Development and Stabilization Controversy: China
China has a clearly better economic situation, although not free of problems. China
has an effective economic government capable to define long-term strategies andreallocate resources, although not streamline the attitude and action of consumers
to government aims. In order to keep a high rate of growth and employment, China
has to change its growth strategy from export-led to domestic demand-led. To foster
domestic consumers’ demand China should develop its welfare system and expand
the pension system to induce people to consume their precautionary savings (Dai2019; Gao et al. 2018). Moreover, it is important to further shorten the working
time to allow more free time, a fundamental precondition for increasing consumers’
demand.
The remarkably long and sustained growth and development of the Chinese
economy was based on various factors (Morrison 2018; Yao 2014). Political decisions to open up and liberalize the economy were at the origin of the spectacular

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growth that lifted tens of millions of Chinese people out of poverty and led China tobecome a global economic power. Moreover, technically skilled reforms, reallocation of workers from agriculture to industry and services, foreign direct investments(FDI) and domestic (mostly state) investments and innovation also played importantroles (Chen 2018).
In recent years, China has become a highly innovative economy (Haour and von
Zedtwitz 2016). Nearly one third of its manufacturing exports are high technology
exports, according to the World Bank’s World Economic Indicators, the largest shareamong the large countries. However, most of this innovation is based in large stateowned companies and laboratories. China still lacks dispersed innovation activity
typical of competitive SMEs (Baumol 1993). The Chinese economy is also unbalanced, with remarkable current account surpluses, high savings, elevated investments, inflated real estate market, increasing debts of banks, enterprises and regional
governments (Guillén and Ontiveros 2016; IMF 2019).
The traditional export-led growth strategy met growing obstacles in recent years
due to the turbulence of international markets and growing opposition that the weakcurrency policy met. Chinese exports as a share of world exports started to decreasein 2015 and was 13.45% in 2018 according to China Power (https://chinapower.
csis.org/trade-partner/). Exports are bound to increase less than Chinese GDP in
the years to 2023. China’s share of exports in GDP is estimated at 17.7% in 2020,
compared to 17.4% in 2019. The share was at 36% in 2006 (World Bank database andstatista.com). Current account surpluses decreased as a consequence (from 9.9% of
GDP in 2007 to 0.2% in 2018 and 1.0% in 2019) (IMF and World Bank data bases).
The alternative of replacing slowing external demand with higher internal demand
was successful only in part, mainly for the slow expansion of private consumption.
Private consumption growth meets two problems. First, although wages have
expanded during the last years remarkably (on average at 8% per year in real terms),
their growth has been significantly lower than productivity (at 16% per year in the
manufacturing sector). The economy thus continues to produce more than the Chinese
people consume; the gap being necessarily filled by exports together with investment.
Second, high precautionary saving and low private consumption are mainly due
the insufficiently developed welfare system. The delay is particularly serious in the
countryside, where hundreds of millions of people are still virtually without healthcare and pension.
As a consequence, growth rates have slowed down. This is in good part aninevitable statistical phenomenon, but some scholars maintain that China may be on
the brink of a middle-income trap (Aiyar et al. 2013; Eichengreen 2016; Kharas andKohli 2011; Yao 2014. See also Han and Wei 2017). This danger is due to exhaustionof the factors supporting the traditional growth strategy, including depleting humanresources, ageing population, environmental problems and natural resources limits.
It is also due to rapid growth of inequalities.1
1 The Gini coefficient of per-capita income was 0.29 in 1981. It increased to 0.48 by early 2010s(Yao 2014, p. 1014). However, China has experienced a modest decline in inequality since 2008
(Jain-Chandra et al. 2018).

20 Connecting the EU and China Along the Belt and Road Initiative253

4 The EU, China and BRI: Common Interests
and Diversities
Launched by President Xi Jinping on 7 September 2013, BRI was presented as
an ambitious and complex project to connect China, the rest of Asia, Europe andAfrica through infrastructural, economic and cultural corridors, largely financed by
China. Two years later, in 2015, Prime Minister Li Keqiang launched the new 10year domestic economic strategy “Made in China 2025”. The strategy identified 10
strategic industrial sectors and focused on the extensive use of intelligent manufacturing with the aim of strengthening China’s position in high-tech industries, foster
growth and competitiveness and replacing China’s dependence on imported foreigntechnology with nationally developed solutions. The two strategies—BRI and Madein China 2025pursue China’s economy aim at strengthening its domestic basis andfurther opening up its economy, thus transforming China into one of the leading
economic powers and promoter of globalization.
Overall, 138 countries—some 70% of the world’s countries—and 30 international organizations adhere to the initiative (early 2020), mostly through bilateralagreements (EP 2020a). Of these, seventeen member countries of the EU out of
17 adhere to BRI, eleven of them being in Central-Eastern Europe. The remaining
six countries adhering officially to BRI are Austria, Cyprus, Greece, Italy, Luxembourg and Portugal. So many countries have different needs and different advantages
to gain. Their common interest lies in that improved infrastructure and connectivity,
the strong core of BRI, makes much sense in economic terms (Di Stefano et al. 2021).
Given the different needs and aims of countries, the dominating bilateral approachof BRI has some advantages, although runs the risk—evident in the EU stance to
BRI—that the Chinese approach can be seen as an attempt to divide countries andEU member countries from the EU and thus disrupt the EU. The EU initiative istherefore paramount to avoid risks and suspicions.
The situation of the EU and the new stance towards reforms and new policies
should offer a favourable ground to BRI and the latter could contribute to strengthen
the former. Cooperation with BRI may be important to revitalize the EU economy
through higher productivity, lower transaction costs, innovation, developed infrastructure, international cooperation, connectivity and networking. This promises tobe particularly important for vulnerable countries. As a consequence, the EU has
an interest to be more open to cooperate with BRI and support member countries’
initiatives. However, a critical issue are different standards and goals between the
EU and China, which make complex finding a common level playing field.
From China’s perspective, BRI promises to help the country move to a new growthstrategy. BRI is important to bring development to the Central and Western part ofChina, create jobs and develop an efficient international infrastructure that could
support international trade and investment. If managed as a two-way belt and road,from and towards China and coupled with the consumers’-based growth strategy, it
may help China to avoid the middle-income trap and support the transition to a newsustainable growth. By moving investment expenditure to the underdeveloped middle

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and west of China and abroad, BRI could help mitigating the domestic infrastructure
bubble. BRI aims at adding a growth strategy led by domestic and international
infrastructural investments which should help exports of high-technology products
and the acquisition of technology.
The EU and China share selected reasons for supporting cooperation and others
calling for prudence and flexibility. In both the EU and China population density andconcentration of economic activities are both cradles of social cohesion and economic
strength and sources of congestion and environmental problems. BRI offers advantages in terms of infrastructure development, connecting new regions and countries
and decreasing regional disparities, sharing experiences and solutions to mounting
problems, enlarging markets and better allocating resources, thus promoting efficiency and creating further opportunities for development. Although such reallocation may diffuse congestion and environmental problems to new regions, it may
help softening such problems in older population and industrialization regions andgive time to implement proper environmental sustainability policies. The mutualinterest for cooperation of Central-Eastern member countries of the EU and China
may contribute to decrease further development imbalances in the EU. The proper
coordinated management of these problems can go to the advantage of both China
and the EU.
Natural resources are a particularly important issue. Both areas need externalsources of energy and raw material and have an interest in developing renewable
resources. The development of infrastructural connections through resource-richCentral Asia and Russia may benefit both China and the EU, the construction oftranscontinental energy grids may favor better and cheaper distribution of energy
and help avoid energy shocks and shortage, efficient transcontinental connectivity
may promote economic and social interaction among countries.
Macroeconomic imbalances are perhaps the most pressing issue to cooperation.
Moreover, both areas are meeting serious disadvantages from the creeping retreatof globalization. BRI may provide significant opportunities to foster a new wave ofglobalization, based in good part on common investments and strategic developments,
and to find effective ways to promote domestic demand, invest liquidity and manage
imbalances. If the strategy helps China to keep a dynamic growth and the EU to revive
growth, beneficial consequences may derive for debts. However, the management ofinitiatives and strategies is of the utmost importance.
In all these cases, coordination and the exploitation of complementarities andsynergies between the two parties are fundamental for strategic sustainability. Yet
there are significant differences in the nature and position of the EU and China whichmake cooperation complex and sometimes problematic, coordination and adaptation
challenging, and require caution in managing BRI.
The main difficulties come from the different economic and political systems andgovernance, the different dynamism of the economies, the differences existing insocial and political norms and the different geopolitical integration and strategies.
Moreover, there are significant differences also in the decision-making process. The
EU is a group of countries that keep national sovereignty in many issues, including
foreign policy and bilateral trade, while multilateral trade issues belong in the EU

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competences. This framework makes decision-making processes sometimes cumbersome and long, due to the necessity of finding compromises among different governmental agendas and priorities. In the past this opened the possibility for China topromote the implementation of BRI projects in the EU through bilateral agreementswith national governments, which caused the EU Commission’s protests and reaction.
Clearly this attitude by China, although understandable, will hamper the achievementof an EU-China deal and the implementation of BRI projects in the EU countries.
Confronted with the EU slow and contradictory definition of its strategy to BRI andaction, some member countries acted faster and in more determined ways. China’s
strategic approach towards EU member countries is apparently differentiated(Di Donato 2020). Relations with Central and Eastern European (CEE) countries
are under the umbrella of the 17 + 1 framework and led by considerations of theirstrategic position to access the EU market through large-scale infrastructure projects
and the privatization of strategic assets.2 An apparently important appeal of thisframework is that Chinese loans and investments do not have normative strings andconditionalities attached (Popescu and Brînză 2018). In the case of Western EU
member countries China aims at investing in strategic assets, research and development networks, particularly in Central and Northern Europe. A partial exception is
Italy, which signed a Memorandum of Understanding (MoU) in the frame of BRI
in March 2019, a step without noticeable consequences so far. The most powerfulmember countries, Germany and France, repeatedly stated that they will not enter
any bilateral agreements with China concerning their participation in the BRI. This
lack of coordination and common perspectives of member countries is a fundamental
reason for the lack of a common EU strategy and action and the fragility of the EU in
the international arena, which in turn fuels the moves of individual member countries.
The direct relations between the EU and China have been uneasy and slow, particularly due to the EU prudent and uneasy approach. The “Comprehensive StrategicPartnership” that the EU and China launched in 2003, its translation into deeper relations and economic cooperation failed so far, mainly on grounds of different politicalvalues, geopolitical interests and priorities. Ten year later, in 2013, the EU and China
adopted the “EU-China 2020 Strategic Agenda for Cooperation”, a broader and more
ambitious initiative. This was followed in 2015 by the “EU-China Connectivity Platform”, aimed at improving transparency, reciprocity in market access and a levelplaying field in transport infrastructure. The platform foresaw also to enhance synergies between the EU’s Trans-European Transport Network (TEN-T) and BRI,
however with little practical success. The China-EU Co-Investment Fund was established in 2017. The Fund is jointly backed by the European Investment Fund andthe Silk Road Fund and is meant to create synergies between China’s BRI and theInvestment Plan for Europe (the so-called Juncker Plan) by supporting the implementation of BRI-related projects and ease investments in infrastructures andconnectivity.
2 A “16 + 1” Cooperation Framework was launched in 2012 to increase trade, investments andtransportation networks between China and 16 countries in Central, Eastern, and Southeastern
Europe through bilateral and multilateral initiatives. Greece was officially admitted in 2019.

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Parallel to these initiatives involving China, the EU also run a parallel diplomacy and trying to unite all EU countries in one approach based on full unity: “Incooperating with China, all Member States, individually and within sub-regional
cooperation frameworks, such as the 16 + 1 format, have a responsibility to ensure
consistency with EU law, rules and policies” (EC 2019a). The statement followed
the EU definition of its own EU Connecting Europe and Asia—Building blocks for
an EU Strategy in September 2018 (EC 2018c), an alternative strategic initiative
to improve trade, economic and political ties between Europe and Asia. This EU
initiative is apparently at odds with BRI also in its approach, since the EU stresses
the goal of establishing a rule-based international system for connectivity projects
that has commonly agreed upon international standards and debt sustainability as apivot. Similar effects have the belonging to two different and apparently increasingly
antagonist geopolitical areas.
In spite of potentially divergent moves, the Chinese government responded pragmatically by stressing the need to pursue mutual economic advantages on equal
footing (FMPRC 2018). Moreover, bilateral statements at EU-China Summit meetings, agreements (EU-China Comprehensive Investment Agreement)3 and structures to enhance technical cooperation (EU-China Connectivity Platform) may be
important steps to enhance cooperation on single initiatives.
The EU is careful in stressing that it pursues connectivity and does so “the EU’s
way” (EC 2018b). This means that the approach must be “sustainable, comprehensive and rules-based”, although with due flexibility in approach due to the “verydiverse countries in terms of economic models and level of development” that Asia
comprises. Actions promoted as part of the EU strategy include (a) creating transport
links, energy and digital networks and human connections; (b) offering connectivity
partnerships to countries in Asia and to organizations; and (c) promoting sustainablefinance through utilizing diverse financial tools.
In short, the EU attitude towards BRI seems to be one of cooperation and limited
integration, but not one of the EU participates in BRI. This is in a sense understandable in a relation between equal partners. Yet it may also be the EU reaction to
China’s initiative towards selected EU member countries. This is a delicate politicalproblem that may have undesirable economic consequences. Clearly the EU aims at
connecting partner countries, such as Japan, that BRI disregards. At the same time, it
is interesting that the EU Strategy for connecting Europe and Asia does not consider
BRI and mentions China only in bilateral relations (EC 2018a). This may be read asa negotiating strategy to progressively streamline the two strategies. However, thedanger exists that two strategies with similar aims and content fail to meet on an
efficient compromise, leading to duplications and useless costs.
3 See https://trade.ec.europa.eu/doclib/press/index.cfm?id=2115 for documents. On 30 December

2020, the EU and China reached an agreement in principle on investment (https://trade.ec.europa.
eu/doclib/press/index.cfm?id=2233). An important pressure to reach an agreement under discussion
since 2013 came from the entrance into force of the EU foreign investment screening regulation on
10 April 2019. The regulation is “instrumental in safeguarding Europe’s security and public orderin relation to foreign direct investments into the Union” (https://ec.europa.eu/commission/pressc
orner/detail/en/IP_19_2088).

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5 The COVID-19 Pandemic and BRI
The COVID-19 pandemic came at a time when BRI was meeting difficulties. Thesecomprised the critical and sometimes opposed attitude of many Western countries,
including various EU member countries; accusations of lack of transparency ofChinese initiatives and contracts; prejudice to civil rights in China; prevailing bilateralism. Moreover, a number of poor countries started to meet difficulties in repaying
Chinese loans, which led to apparently numerous re-negotiations.
The pandemic had both direct and indirect consequences for BRI, some of which
will also be felt in the long-term (Buckley 2020; Mouritz 2020). Many governments implemented lockdowns of different kind, duration and stringency to combat
the pandemic. First among them was the Chinese government that locked down
completely the Wuhan area, a major city and province playing a fundamental role invarious global value chains. This in turn disrupted the smooth working of those value
chains, with important consequences for many countries. As a consequence, countries
and industries started to consider repatriating production or shorting the geographicalspread of delocalization and outsourcing. These effects were particularly prominent
in the health industry, and even more so in the production of such devices as facemasks and ventilators necessary for curing people infected with COVID-19. In fact,
China is the most important producer in the world of these devices and also of othermedical products.
Considering the direct effects for BRI, the spread of the lockdown in China andaround the world made difficult for Chinese workers and technicians to reach the location of investments abroad. They also caused the slowdown of production and investments, which made difficult for Chinese and local producers to supply BRI implementations. Moreover, lockdowns and production disruptions resulted in the fall of
GDP in host countries, which is causing their difficulties in repaying Chinese loans
on time and further exacerbates Chinese excess capacity in the building industry.
The potential negative direct effect of the pandemic on the Chinese economy andits ability to continue financing BRI is apparently less significant than initially forecasted, thanks to the prompt recovery of the economy, capable of reaching a positive
growth also in 2020.
As a consequence, China’s FDIs around the world decreased and so happenedin the EU, a continent where China plays anyway a modest role (Poitiers andDomínguez-Jiménez 2020). As a matter of facts, Chinese FDIs in the EU started todecrease since 2016 and characterized the entire second half of the decade. However,their structure remained fundamentally unchanged, the bulk being made of mergers
and acquisitions and only a marginal share going into greenfield investments (RHG &MERICS 2020). The main reasons for the decrease of China’s FDIs to the EU is
the EU prudent and at times adverse attitude, with particular reference to the newscreening of Chinese acquisitions of EU companies and administrative controls andfinancial constraints in China, and China’s inability to enlarge the pool of activities
in the EU.

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According to RHG & MERICS (2020), China’s FDI in the EU continued to
decline in 2019 and their stock level went back to 2013 level. The drop in 2019 wasequal to 33%, from e18 billion in 2018 to e12 billion in 2019. In the second partof the past decade there were other significant changes: in sectoral and geographic
distribution, the role of state-owned companies (SOE) and entry strategy. Chinese
FDIs are now concentrated primarily in consumer products and services at 40% ofinvestment volume; automotive investments come now second. Moreover, Northern
Europe overtook the traditional dominance of the three largest EU economies (UK,Germany and France) among recipient countries. However, the UK, now out of theEU, continues to be the most important recipient country, with 29.8% of the total of
China’s EU FDIs, up from 24.1% a year before. These data show that China’s FDIs
are only in part linked to BRI and privilege countries having an uneasy relation to
BRI. The same refers to the structure by country of FDI stock. Finally, the shareof Chinese SOEs dropped to a bare 11% of aggregate investment. Beyond thesequantitative drawbacks, interesting and important developments are taking place in
the interaction between EU companies and Chinese companies, particularly in R&D
collaborations and the involvement of other players, such as universities and local
governments.
The drop of Chinese FDIs is caused also by the EU dismal economic performance,
particularly during the pandemic time. China was fast and effective in recovering: theeconomy grew by 2.3% even in 2020. Conversely, GDP decreased substantially in any
EU country. The difficulties caused by the pandemic slowed down the implementationof projects, although apparently no full stop was recorded. Chinese exports grew andChina honored its production in global value chains, after short initial disruption.
BRI strategy and performance adapted remarkably fast and in effective ways, also
thanks to the variegated and flexible nature of BRI. Although physical interconnections and connectivity—the fundamental components of BRI—became more difficult, China adapted by accelerating the implementation of virtual connectivity andinteraction in the health sector through two pre-existing but previously secondary
components of BRI: the digital silk road and the health silk road. Although bothwere under way since 2015, their implementation accelerated and their structure andcontent were adapted to needs. Both are apparently taking advantage of synergies
with other components of BRI and China’s reputation gained in combatting effectively the virus and implementing broad-based health diplomacy, particularly in Asia
and Africa (Cao 2020; Mouritz 2020; Tambo 2019).
These “side” silk roads were prescient in the 2015 BRI action plan, in that they
considered the aim of strengthening cooperation on epidemic information sharing andproviding medical assistance and emergency medical aid. In January 2017 the WHO(World Health Organization) signed a memorandum of understanding on BRI healthcooperation. Since the end of 2020 China has promoted rather successfully the use of
its inexpensive anti-COVID-19 vaccines and concluded contracts for vaccines deliveries with 26 countries, including Hungary in the EU (Moritz 2021). However, theChinese health diplomacy is meeting two serious obstacles. The first is the growing
opposition by Western countries, the second is that it is at odds with the prevailingbilateral approach of BRI.

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Neither one of the two silk roads is free of frictions, conflicts and dangers though.
The digital silk road goes to the core of the control of internet: if China wants topromote it, it needs to develop an alternative internet system (El Kadi 2019; Wheeler2020). The health silk road activated a great deal of China’s medical diplomacy during
the pandemic which not all recipient governments accepted benignly. Moreover,
China took actively part in the ongoing rationalization of global value chains to makethem more resilient in front of the danger of lockdowns and disruption caused byunforeseen events (Miroudot 2020). These developments also served EU countries.

6 Conclusions
EU enterprises and member countries have a clear interest in cooperating with China
and be connected to BRI, an initiative expected to involve over US$1 trillion in
investments and covering the 70% of the world countries, compared to much lower
EU resources for its own strategy.4 This difference is only in part due to the peculiar
nature of the EU, which relies mostly on member countries to finance investments.
BRI offers EU enterprises and countries evident opportunities for business and job
creation. Moreover, BRI opens new markets, promotes international cooperation,
develops efficient and harmonized infrastructure.
Concerns lie primarily in the prevailing bilateral approach that China took withselected EU member countries and that the EU replicated later in its EU Strategy forconnecting Europe and Asia. Among the most critical issues that the EU sees in BRI
it is worth mentioning: (a) limited involvement of local labor and contractor; (b) nontransparent procurement procedures; (c) materials and equipment mostly imported
from China; (d) weakness of standards and smooth playing field; and (e) other issues,
including environmental concerns, indebtedness of some weak economies for implementing BRI investments, social and minority displacement for implementing large
investments, security issues.
Finally, problems also come from differences in the EU’s and China’s approaches
and within the EU among different member countries and between some countries
and the EU. There are clear differences between the EU approach to the EU Strategy
for connecting Europe and Asia and China’s BRI approach, as much as there aredifferences in the nature and working of the two areas. Political and decision-making
systems are different as much as economic governance. Important differences exist in
economic systems, the nature and working of enterprise and the role of governments.
Differences in labor markets, rights of workers, working time and labor norms areamong the most pressing problems in cooperation. These differences require lengthy
negotiations and implementations, detailed controls and possibly political problems.
Overall, it appears that the EU is the fragile partner. Most of its member countries
are interested in BRI and adhered formally to it. The EU is trying to coordinate a
4 The overall EU budget for financing international projects—including with Asia—is foreseen toamount to e123 billion in current prices in the budget period 2021–2027.

260

B. Dallagocommon position among all 27 member countries, but clearly lacks initiative andconvincing alternative ideas and resources. The overlapping of economic interest,
Chinese dynamism, cumbersome EU management and geopolitical strains weaken
the EU position and action. A study prepared for the European Parliament summarizes well the EU uneasy relation to China: “…China is seen as being at once a partner
for cooperation and negotiation, an economic competitor and a systemic rival. … The
coronavirus pandemic has amplified pre-existing political and economic challenges
in EU-China relations. … It has also clearly demonstrated the need for a ‘more robust’
EU policy on China” (EP 2020b). These high-sounding geopolitical statements aside,a more concrete study of the Policy Department for External Relations of the European Parliament concludes that “…China is, and will continue to be, a major tradeand investment partner for EU countries. …regardless of the direction of the UnitedStates-China relationship, the EU needs to explore options for fruitful co-existencewith China” (EP 2020a). As to BRI, the same study concludes that “The BRI offers
potential trade gains for Europe by improving physical connectivity with countries
along the route to China, but it also poses challenges for the EU. The main challenge
is China’s increasing soft power, which is being felt in the EU’s neighbourhood andeven in a growing number of EU countries. A more united approach to managing the
EU-China economic relationship is required to improve the bargaining power of EU
countries when dealing with China.”
Concerns and differences make difficult to coordinate the strategies and exploit
synergies. Moreover, it is not easy to coordinate BRI initiatives undertaken by EU
member countries with the EU approach, priorities, policies and standards, as theconflicts over the Budapest-Athens high speed railroad construction shows. A BRI
project initiated in 2014, the railroad met delays and obstacles in the implementationof the Hungarian segment because of the EU investigation into possible violationsof its public tendering requirements. Moreover, opposition to the implementationof the project came from the accusation of being uncoordinated, if not in collision
with the EU Trans-European Transport Networks (TEN-T). Moreover, the Chinese
government had to sign two separate bilateral agreements with Hungary and Serbia—
a non-EU country—to implement the Budapest-Belgrade railroad, each segment
being under different rules (Rencs 2019).
Issues of coordination of projects with EU policies and standards, uncoordinatedapproach of EU member countries, and uneven distribution of gains among countries
abound. Only part of these problems has to do with China’s approach. Other parts haveto do with the EU approach and governance, its composite nature and the differencesamong its member countries. Obstacles to BRI are testing China’s endurance anddetermination and defy the EU. Clearly the latter is not ready to take on such achallenge, due to its cumbersome and incomplete governance and the limited amountof resources it can mobilize. Yet BRI offers important opportunities to EU economic
growth and challenges to improving its governance system.

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Morrison, Wayne M. (2018), ‘China’s Economic Rise: History, Trends, Challenges, and Implications
for the United States’, Congressional Research Service, 7–5700, 5 February (https://fas.org/sgp/
crs/row/RL33534.pdf).
Mouritz, Frank (2020), ‘Implications of the COVID-19 Pandemic on China’s Belt and Road Initiative’, Connections: The Quarterly Journal, Spring, Vol. 19, No. 2, pp. 115–124, Partnership for
Peace Consortium of Defense Academies and Security Studies Institutes, https://www.jstor.org/
stable/10.2307/26937614.
Pisani, Ferry J. and Wolff G. (2012), ‘Is LTRO QE in Disguise?’, VoxEu 3 May (http://www.voxeu.
org/article/ltro-quantitative-easing-disguise).
Poitiers, Niclas and Marta Domínguez-Jiménez (2020), ‘Europe’s China Problem: Investment
Screening and State Aid’, Bruegel Blog, 2 July, https://www.bruegel.org/2020/07/europes-chinaproblem-investment-screening-and-state-aid.
Popescu, Liliana and Andreea Brînză (2018), ‘Romania-China Relations. Political and Economic
Challenges in the BRI Era’, Romanian Journal of European Affairs, Vol. 18, No. 2, December,
pp. 20–38.
Rencz, Flora (2019), ‘The BRI in Europe and the Budapest-Belgrade Railway Link’, Briefing
Paper 10/2019, Brussels: EIAS European Institute for Asian Studies, http://www.eias.org/
wp-content/uploads/2019/07/EIAS-Briefing-Paper-The-BRI-in-Europe-and-the-Budapest-Bel
grade-Railway-Link-Final.pdf.
RHG and MERICS (2020), Chinese FDI in Europe: 2019 Update. Special Topic: Research Collaborations Agatha Kratz, Mikko Huotari, Thilo Hanemann, Rebecca Arcesati A Report by RhodiumGroup (RHG) and the Mercator Institute for China Studies (MERICS).
Tambo, Ernest, Christopher Khayeka-Wandabwa, Grace Wagithi Muchiri, Yun-Na Liu, Shenglan
Tang and Xiao-Nong Zhou (2019), ‘China’s Belt and Road Initiative: Incorporating Public Health
Measures Toward Global Economic Growth and Shared Prosperity’, Global Health Journal,
Vol. 3, No. 2, June, pp. 46–49, https://www.sciencedirect.com/science/article/pii/S24146447193
00089?via%3Dihub.
Wheeler, Andre (2020), China’s Digital Silk Road (DSR): The New Frontier in the Digital Arms
Race? Hong Kong: Deza Shira and Associates Silk Road Briefing, 19 February, https://www.silkro
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Bruno Dallago, Ph.D. is Professor of Economics at the Department of Economics and Management, University of Trento, Italy. He was visiting professor at various universities, including
the University of California at Berkeley, USA, the University of North Carolina at Chapel Hill,
Hitotsubashi University, Zhejian University, Kyoto University, the University of Pécs, Tshwane
University of Technology, Corvinus University of Budapest, Zhejiang University. He was thepresident of the European Association for Comparative Economic Studies (1995–1996) and isa member of the International Advisory Board of the Institute of Economics of the Hungarian
Academy of Sciences. His research interests include the European Union, comparative economics,

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the transforming economies of Central and East Europe, SMEs and entrepreneurship, local development. He is the author and editor of several scholarly books and journal articles, including One
Currency, Two Europe(World Scientific, 2016), Transformation and Crisis in Central and Eastern
Europe: Challenges and Prospects(with Steven Rosefielde, Routledge, 2016) and Entrepreneurship and local economic development. A comparative perspective on entrepreneurs, universities,
and governments, (edited with E. Tortia, Routledge, 2018).

Chapter 21

Internationalization of Multinational
Entreprises from North-East Asia
Victor Gorshkov and Zoia Podoba

Abstract Using the statistical data of international databases, this paper investigates
evolution and structural changes in the current rankings of multinational enterprises
from North-East Asia in 2000–2020. The authors aim to identify differences andsimilarities in the internationalization strategies and core competences of multinational enterprises from the region. The research outcomes clearly demonstrate thatthe role of North-East Asia in global outward foreign direct investment is expanding
and multinational enterprises from this region, particularly from China, become moremature. While rapid increase in the number of Chinese multinational enterprises andtheir foreign expansion are causing major structural changes in international rankings, comparisons on transnationalism explicitly show that Japanese multinational
enterprises and territories with small domestic markets, such as Hong Kong andTaiwan, have significantly higher levels of internationalization. The specific featuresof multinationals are pronounced in their original set of core competences, stages,
methods and global context of internationalization. Nevertheless, there are similarities among these multinationals, such as their reliance on country-specific advantages comprised of comparative advantages and government-created advantages;
centralized corporate structures built on strong connections with the government
and personal and social informal networks; and relatively strong regional supply
chains reflecting the high level of complementarity among almost all countries of
the region. The research findings also highlight the fact that many emerging multinationals from the region have successfully nurtured their original firm-specific advantages. Further success of MNEs from NEA shall depend on their capabilities tocope with new challenges of the global context of their internationalization, namely,
post-pandemic recovery, raising economic nationalism that gradually causing thedisruption of conventional global value chains and the sustainability agenda of theworld economy.

V. Gorshkov (B)University of Niigata Prefecture, Niigata, Japane-mail: vgorshkov@unii.ac.jp
Z. PodobaPeter the Great St. Petersburg Polytechnic University, Saint Petersburg, Russia© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_21

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Keywords Multinational enterprises · FDI · North-East Asia · Dragon
multinationals · Internationalization
JEL codes F200 · F210 · F230 · M160

1 Introduction
North-East Asia (NEA) is a sub-region of Asia, which in a broader sense includes
China, Japan, North Korea, Republic of Korea (South Korea), and the eastern regionsof Russian Federation. NEA accounted for 23% of the world population (excl. Russia)
and 26% of the world GDP (current USD) in 2019 and currently it is one of the mostdynamically developing regions in the world. The region possesses high level ofcomplementarity as participating countries have built intra-regional complementary
supply chains; thus, there is mutual interconnectedness between Japan, Republic ofKorea, and China, the “Big Three” of NEA. China is abundant in labor resources andhas a large market potential. Japan has long been serving as a supplier of technology
and capital to the region. The Republic of Korea is gradually catching-up with Japan
via the application of the export-driven model. Russia is rich in natural resources
which have the potential to significantly contribute to further development of theregion. Taiwan and Hong Kong are one of the most liberalized markets.
One peculiar feature of this region is that it includes a developed country, developing economies and a transition economy. Conventionally, Japanese multinational
enterprises (MNEs) were the first ones to implement internationalization and theirpositions within the region and worldwide remain significantly high. However,recently NEA is also in the center of attention of both academic and business societies because of the phenomenon of the so-called emerging multinationals. Emerging
MNEs entered as latecomers but have rapidly become global leaders. They are
actively involved in international trade and foreign investment activity (Gorshkov
2018); thus, emerging MNEs from China, Taiwan, Hong Kong, and the Republic ofKorea are likely to cause structural changes in the regional and international divisionof labor.
By using Global 500 and UNCTAD TOP 100 statistical data of the world’s largest
MNEs, this paper aims to investigate the evolution and structural changes in thecurrent rankings of the largest MNEs from NEA in 2000–2020. The authors summarize some of their specific and common features, particularly focusing on internationalization patterns and core competences. The primary assumption of this paper is that
MNEs from NEA pursue many internationalization strategies; in case of emerging
MNEs these strategies are sometimes not observed in developed MNEs. The second
assumption of the paper is that emerging MNEs are in fact evolving from the stage of
infant MNEs towards adolescent MNEs and mature MNEs (Ramamurti and Singh2009).
The structure of the paper is as follows. In Sect. 2, we provide a quantitative
assessment of MNEs from NEA by outlining major trends in outward FDI from the21 Internationalization of Multinational Entreprises …

267

region. We also highlight high rankings of these MNEs in Fortune Global 500, andanalyze their ownership and industry structure. In Sect. 3, by using UNCTAD TOP
100 statistical data of the world largest MNEs, we conduct international comparisonof these MNEs by their level of internationalization. In Sect. 4, we summarize somespecific and common features of these MNEs. Conclusion presents major findingsof this paper.

2 The Role of North-East Asia in Global Outward FDI:
Emerging Multinational Enterprises
According to the World Investment Report 2020 published by UNCTAD, almost all
NEA countries were in the top-20 list of home economies in terms of FDI outflows;
Japan (1st place), China (4), Hong Kong (7), Republic of Korea (9), and Russia (15).
Taiwan frequently joined the top-20 ranking in the 2000s.
The growing presence of NEA in global outward FDI is pronounced and can be
confirmed by the related statistics in Fig. 1. Since the 1980s, Japan has become theworld’s most prominent home country for FDI. The export of capital, associatedwith the active transfer of production capacities from Japan to foreign countries,
led to an intensification of the deindustrialization process, often referred to as the‘hollowing-out’ of the domestic manufacturing. It caused an increase in negative
trends in Japan’s economy: slowdown in the industrial production growth rate andmanufacturing employment, as well as declining competitiveness in tradables. Nevertheless, the scale of overseas business of Japanese MNEs in the early twenty-first
century expanded and in 2018–2019 Japan managed to become the leading overseas
investor in the world (Podoba 2021). Large-scale repatriations of the US MNEs’
accumulated foreign earnings due to trade disputes with China resulted in negative FDI outflows and contributed to Japan’s leapfrogging to the 1st place of global
investors. Japanese FDI growth in 2015–2019 can also be attributed to the effect ofJapan’s Global Outreach Strategy proclaimed by the Prime Minister Abe’s Cabinet.
The policy of stimulation of Japanese outward FDI abroad has been succeeded by
the new prime minister Yoshihide Suga.
The case of China is rather specific due to the round-tripping FDI via HongKong; thus, for statistical purposes we provide data for Hong Kong and Taiwan
separately from the mainland China. In 2000, Hong Kong and Japan were the major
investors from the region, however, China has been gradually catching-up and eventually it outperformed Japan in 2010. The rise of China is attributable to the China
Go Global policy of the government which extensively supports Chinese MNEs.
However, Chinese outward global direct investment declined substantially since 2017
due to tighter capital controls in China and to the growing regulatory scrutiny in hosteconomies.
As for the Russian outward FDI, they have been growing in the beginning of
2000s, but there was a remarkable decline in their volume due to the repercussions

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200000150000100000
50000
0

Japan

China

Hong Kong, China

Korea, Republic of

Taiwan Province of China

Russian Federation

Fig. 1 Outward FDI flows in 2000–19, USD million (Source UNCTAD, World Investment Report,
various years)of the global financial crisis 2008–2009 and sanctions imposed by the United Statesand some European countries over the Ukrainian crisis. FDI from South Korea andTaiwan have been growing at a moderate pace.
Outward FDI stock accumulation for NEA has been impressive: In 2000–2019,Japan’s outward FDI increased by 7, China—76, Taiwan—13, Hong Kong—5,
Republic of Korea—20, Russia—20 times (Fig. 2). The share of NEA in global
outward FDI stock in 2019 amounted to 20%.
Hence, it is interesting to analyze MNEs from the region in international rankings.
Figure 3 demonstrates remarkable growth in the number of Chinese MNEs, from 10
companies back in 2000 to already 124 in 2020 in Fortune’s ranking by revenue.
In 2020, China surpassed the United States in Global 500 (the United States—121,
China—124 companies, respectively); consequently, Chinese MNEs are obviously
reshaping the global business. As for Japan, despite the growing amount of its outward
FDI in 2000–2020, the number of Japanese MNEs in Global 500 has declined from278,445

Japan
China

27,768831,076

1,818,139

317,211

Taiwan, Province of China

66,655
190,803362,453

Hong Kong, China

379,285

Republic of Korea

21,497144,032

Russian Federation

19,2112,099,400

943,938

1,794,027

440,147

336,355
386,622

2000

2010

2019

Fig. 2 Outward FDI Stock, USD million (Source UNCTAD, World Investment Report, various
years)

21 Internationalization of Multinational Entreprises …
107
81 71

269

124
98
54 53

46
9 16

Japan

China

1 2 8 8 9

6 7

12 11 10 17 14

2 3 6 5 4

Taiwan,Province of
China

Hong Kong,
China

Republic of
Korea

RussianFederation

2000

2005

2010

2015

2020

Fig. 3 Number of MNEs from NEA, 2000–2020 (Source Fortune Global 500 Statistics)

107 to 53 in the respected period. Taiwan (9), Hong Kong (7), Republic of Korea(14), and Russia (4) have a smaller number of MNEs.
The average number of years on Global 500 list for MNEs from NEA in 2020
was as follows: Japan—9, China—9, Taiwan—11, Hong Kong—12, Republic ofKorea—7, and Russia—18 years. Consequently, Chinese, Taiwanese, Hongkongese,and Korean MNEs have only recently joined the ranking and represent the new
emerging force of NEA. In case of Japan, there has been only one recent entry fromTakeda Pharmaceutical that joined Global 500 in 2020 (414th place). It is important
to note that the global context for internationalization of Japanese MNEs and otheremerging MNEs from the region was different. In the 2000s, it was much easier
to internationalize due to the rising of outsourcing, development of global supply
chains, fluidity of international labor and other factors (Williamson and Zeng 2009).
The top-5 list of MNEs by home country in the NEA region is presented in Tab 1.
Japanese MNEs have maintained their strong positions in the automobile industry as
many automobile companies (Totoya Motors [10th], Honda Motors [39th]) have beenstably present in the Global 500. Other industries include telecommunications (NTT[62]) and commercial trade (Mistubishi [42nd], Itochu [72nd]). Most of Japanese
MNEs are owned by private capital, however, there are public companies with mixed
type of ownership.
China is leading the Global 500 as 3 out of 5 of its companies (Sinopec Group[2nd], State Grid [3rd], China National Petroleum [4th]) are present in the global top
5. Chinese MNEs are predominantly state-owned and operate in the power-supply,
oil and gas, and construction sectors. China also leading in metal, automotive, andreal estate industries. There is growing number of Chinese MNEs in banking andfinance (Gorshkov 2019). On the other hand, there is a shortage of MNEs oriented for
consumer business, however, that proves the fact that Chinese domestic market still
has plenty of opportunities to grow. High-tech and digital MNEs such as Alibaba andTencent are leading in innovation, and have high chances to catch up and even surpass
Western MNEs through the process of the so-called reverse innovation (Ramamurti2020).
Taiwanese MNEs are primarily owned by private capital and operate in suchindustries as electronics, computers, insurance and semiconductors. Global rankingsof Taiwanese MNEs are rather moderate: Pegatron (269th), Taiwan SemiconductorRepublic of Korea(South Korea) [16]Hong Kong [7]Taiwan Province ofChina [10]China [119]Japan [53]privatecomputer, officeequipment

Lenovo Group (224)

privateelectronics

Pegatron (269)stateenergyState Grid (3)privateautomobile

Honda Motor (39)

Samsung Electronics Hyundai Motor (84)
(19)

state

O

F

health care,pharmaceuticals

I

O

China Resources(79)

electronics

privateIF

Hon Hai Precision
Industry (26)

state

O

F

oil and gas

IprivateO

Sinopec Group (2)automobile

I

F

Toyota Motors (10)F

SK Holdings (97)

privatetransport

China Merchants Group(235)

privatesemiconductors

Taiwan Semiconductor
Manufacturing (362)statepower-supply

China National
Petroleum (4)privatetrading

Mitsubishi (42)telecommunications

NTT (Nippon Teegraph &Telephone (62)POSCO (194)privateinsurance

AIA Group (250)privateinsurance

Cathay Financial
Holding (374)stateenergy &construction

China State
Construction
Engineering (18)(continued)

LG Electronics (207)

privatemotor and vehicles

Jardine Matheson (301)

private with government
participation

computers

Quanta Computer (377)

private with stateparticipation

finance & banking

Ping An Insurance (21)

mixed (56.87% state) private with government
participation

finance&insurance&postJapan Post Holdings(60)

Table 1 Top-5 Multinational entreprises from North East Asia by home country in Fortune Global 500, ranking in 2020

270
V. Gorshkov and Z. Podoba

Gazprom (55)

Energy (oil&gas)

state

I

O

O

F

electronics

private (foreigners
more than 50%)I

private with govern.
influence

Energy (oil)Lukoil (57)

privatestate

Energy (oil)Rosnfet Oil (76)privatemotor vehicles & parts diversified industries

state

finance & banking

Sberbank (240)private (foreigners)

metallurgy
privateelectronics

Note The number in [] for countries shows the total number of MNEs from that country in Global 500 ranking; the number in () shows the ranking of a particularfirm in the Global 500; F stands for Firm, I—industry, and O—ownership
Source compiled by authors from Fortune Global 500 Statistics

Russia [4]Table 1 (continued)

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Manufacturing (362nd), Cathay Financial Holdings (374th) and Quanta Computer(377th). The only exception is Hon Hai Precision Industry, which is currently on the
26th place.
MNEs from Hong Kong also demonstrate rather moderate global rankings andoperate in such industries as pharmaceuticals, computers, office equipment, transport,
insurance and motor vehicles.
The majority of MNEs from the Republic of Korea are formally private businesses,
operating in electronics, motor vehicles, energy, and metallurgy sector. The catchingup policy of Korea’s government aiming to adopt the Japanese growth model ispresumably accountable for fostering MNEs in these industries. The number of South
Korean MNEs is somewhat stable in the respected period.
As for Russia, it has only a few MNEs in the ranking: they operate in thenatural resource and banking sectors and have strong economic and political ties
with Russia’s government. Many of these MNEs are inherited from the transition
period.

3 Internationalization of MNEs from North-East Asia
In order to identify the level of internationalization of MNEs from NEA, we analyzed
the ranking of non-financial MNEs published by UNCTAD which ranks MNEs by
the amount of foreign assets. Historically, the majority of top 100 MNEs are headquartered in the triad (the United States, the European Union, and Japan), and thesemajor centers of global economic activities still host a large number of MNEs. Total
sales of top 100 MNEs in 2019 were equivalent to about 12% of the world GDP. The
ranking is important as it helps gauge globalization trends.
According to Fig. 4, Japan and China had nine MNEs each in 2019. The numberof Japanese MNEs in the ranking has been declining despite the Global Outreach
Strategy aiming to promote international competitiveness of Japanese business. Other
countries and territories have rather moderate results, while Russian MNEs haven’t
made it to the list.
16
11
9

11
9

2000

9

2005

7
2
Japan

China

1 1
Taiwan, Provinceof China

1

1 1 1

Hong Kong,China

1 2 2 1 1
Republic of Korea

2010
2015
2019

Fig. 4 Number of multinational enterprises from North East Asia, 2000–2019 (Source The world’s
top 100 non-financial MNEs ranked by foreign assets, UNCTAD)

21 Internationalization of Multinational Entreprises …
84
49 53

91

81 81 86

62 59

273
90
63 61

56

47 47 46

37 40

36

56 60

65 65 64

23

Japan

China

Taiwan, Provinceof China
2000

2005

Hong Kong,
China

2010

2015

Republic of
Korea

Average Top-100

2019

Fig. 5 Average TNI for MNE from NEA (the world’s top 100 non-financial MNEs) (Source
UNCTAD)To measure the scope of transnationalization, UNCTAD applies the Transnationality Index (TNI), which is calculated as the average of foreign assets to total assets,
foreign sales to total sales, and foreign employment to total employment, and allows
to measure the foreign dimension of the overall activities of a firm. In 2019, theaverage TNI for top 100 MNEs was 64; among the NEA countries, the highest TNI
was for MNEs from Taiwan (91) and Hong Kong (90), followed by Republic ofKorea (61), Japan (59), and China (40). Thus, countries with small domestic markets
and lack of natural resources could internationalize through benefits of globalization.
Japan’s most internationalized MNEs are operating in automobile, telecommunications, electronics, wholesale and pharmaceuticals. Japan has been maintaining its
leading positions in the automobile sector; however, this industry is subject to further
significant global impacts, particularly due to the gradual shift towards the productionof electric vehicles following stricter emission requirements in the European Unionand other developed economies. There are also several large trading intermediarycompanies, sogo shoshas, in Japan that have unique business models. They haveplayed a significant role in Japan’s modern economic success. After the World War
II, sogo shoshas optimized the supply chains of Japanese industries by providing
raw materials, energy and technological needs of upstream and mid-stream manufacturers in Japan, while also rationalizing distribution between the manufacturingsector and the downstream retail sector. At the same time, they marketed the Japanese
products overseas and expanded global networks of trade. Sogo shoshas also serveas drivers of innovation by investing capital into developing new industries. Sogo
shoshas have steadily been in international rankings. In fact, in 1996, they were in
the top 5 of Fortune Global 500.
Currently, there are 7 sogo shoshas: Marubeni, Mitsubishi, Mitsui, Itochu,
Sumitomo, Sojitz, and Toyoda Tsusho. IT revolution has posed significant threat tosogo shoshas, however they survived and proactively expanded into resource, energy,
bio-, nano-technology, eco-technology sectors as well as launched business activities in emerging economies such as China. Sogo shoshas prefer long-term strategic
investment by engaging in long-term relationship to foster businesses by expanding
trade or finding synergies with other businesses under their own ownership. A typical

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sogo shosha has on average from 400 to 600 subsidiaries (more than 50% of ownership) and affiliate companies (20–50% of shares), with a total of 400,000 employees.
Sogo shoshas have business locations in 226 cities of the world, which is equal to thenumber of Japanese Embassies, Consulates and Permanent Missions, most of which
are concentrated in Asia and North America (Japan Foreign Trade Council 2019).
As for Chinese MNEs, despite their high rankings in terms of revenues, theirlevel of TNI is one of the lowest. Chinese firms are less internationalized as theirforeign assets shares are significantly lower than that of the average top 100 MNEs.
However, the speed of their internationalization has increased in recent years. In
addition, internalization strategies of Chinese MNEs differ from the triad’s enterprises. According to Mathews (2017), linkage, leverage and learning (LLL) strategic
framework can better explain the behavioral patterns of Chinese MNEs. The socalled dragon multinationals (a term coined by Matthews to describe a new species
in the ‘jungle’ of international business, equipped with specific strategies to enable
such MNEs to rapidly catch-up with incumbents) often do not have distinct firmspecific advantages and their internationalization strategy aims to establish links withexisting players (Western MNEs) and constantly leveraging resources (technologies,
assets, market positions) from them. Learning is the process of internationalization
as training and the gradual accumulation of practical experience by increasing its
presence in the global market. LLL strategies allow MNEs to catch up with existing
players by becoming active players in the world market (Mathews 2017). Thus,
Chinese MNEs possess fewer firm-specific advantages than Japanese or Western
MNEs, however, they significantly benefit from the so-called government-createdadvantages which are established to improve a country’s international competitiveness. These government-created advantages together with comparative advantages(natural resource endowments) constitute the roots of country-specific advantages inthe emerging markets (Ramamutri 2020).
Interestingly, among the largest Chinese MNEs there are not only state-owned
companies from basic industries, therefore, confirming that a few Chinese companies in fact also possess a certain level of firm-specific advantages. In 2017, Tencent
entered the top 100 global MNE ranking for the first time. It is a multinational investment holding founded in 1998, whose subsidiaries specialize in various internetrelated services and products, entertainment, artificial intelligence (AI) and technology both in China and globally. It has transformed into a very active investment
conglomerate with a recent special focus on financing tech start-ups in Asia. The
firm’s overall international expansion started since its public offering in 2004 andfeatured a full-scale strategy that incorporated various forms of inter-capital relations.
Tencent is an example of the so-called born-globals; it has been transnationalized
by the joint efforts of the state and domestic and transnational capital (Tang 2019).
Other examples of Chinese digital global players, for instance, include ByteDance,
the developer of the video-sharing social networking service TikTok, Alibaba andDidi Chuxing.
High TNI for Hong Kong and Taiwan can be explained by their relatively small
domestic markets, consequently, MNEs from these territories have to globally expandin order to overcome domestic market constraints and to realize economies of scale.

21 Internationalization of Multinational Entreprises …

275

The sole MNE in the ranking from Hong Kong is CK Hutchison Holdings Limited,which has five core businesses such as ports and related services, retail, infrastructure,energy and telecommunications. The world’s largest port operators and retailers,reliable infrastructure firms, energy firms and mobile multimedia telecommunication
networks are part of the holding. CK Hutchison is a multinational conglomerate witha truly global focus, operating diverse businesses in over 50 regions and countries
across the world.
Hon Hai (Foxconn Technology Group), representing Taiwan, is a multinational
contract manufacturing firm, which is the world’s largest provider of electronics
manufacturing services and the fourth-largest information technology firm. Taiwan
has managed to overcome the problem of small-domestic market by targeting the
global market through export-oriented industrialization and specializing in original
equipment manufacturing (OEM) and original design manufacturing (ODM) of ICT
products, however, in the twenty-first century Taiwanese MNEs are facing difficulties, such as raising labor costs in China and the China-US trade dispute, and aim to
relocate their investment to the domestic market and other international markets in the
United States, India, Southeast Asia, and Europe (Nakahara 2020). Taiwanese MNEs,
for instance Acer, despite relying on country-specific advantages in the beginningof their internationalization, have succeeded in nurturing their firm-specific advantages (strong brand name) at a later stage. In that sense, they have matured in theprocess of their internationalization utilizing different internationalization strategies(Ramamurti 2020).
Samsung has been the sole MNE representing South Korea. It is the largest
chaebol (business conglomerate) comprised of numerous affiliated businesses under
the complete control of the founder’s family. Samsung Group accounts for more than
20% of the country’s GDP (Podoba and Titova 2018). It was originally founded asa trading firm, however, since 1990, it has increasingly globalized its international
activities and its electronics, mobile phones, and semiconductors industries havebecome the primary source of income.
As for Russian MNEs, their level of internationalization measured by TNI remains
rather low and they are not currently present in the UNCTAD’s top 100 list however,there are a few of them in the similar ranking for developing and transition economies.

4 How Different or Similar are MNEs from North-East
Asia?
There are specific and common features in internationalization strategies and corecompetences of MNEs from NEA. First, let’s summarize some of the distinctive
features of MNEs from this region.
Japanese MNEs were the first regional-movers and together with the United Statesand European Union they have established the leading triad of most successful MNEs

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in the world. The success of Japanese MNEs was attributable to their unique business models and competitiveness based on superior technology and best management
practices. In literature, it is highlighted that their core competences are comprisedof leadership in management, technology, production methods, and product quality(Fitzgerald and Rowley 2016). Japanese MNEs prefer organic growth internationalization strategies and value gradual market entries. Initially, Japanese MNEs followed
the regional nature of internationalization which is to some extent preserved evennowadays (Iwashita 2020). However, their global positions have declined in the
beginning of the twenty-first century due to rather centralized and closed nature ofJapanese firms. Since 1990s, their typically domestically established management
practices sometimes complicate or inhibit adaptation to the demands of global competition (Fitzgerald and Rowley 2015). Their innovation and R&D systems are solely
built within the firms; thus, they are poorly integrated into the global innovation
networks and are relatively closed.
In addition, Japanese MNEs lack deep collaborative relationships and organizational learning processes in host economies and rely on home country capabilities and strong parent firm control. Manufacturing of Japanese MNEs in Asian
countries was in fact the production of components by Japan-owned plants for thenecessity of parent companies (this explains high ratio of inter-industry trade within
the region). Another feature of Japanese business—keiretsu—a group of companies
having mutual business relationships and cross-shareholding and usually connected
to a main bank, is also gradually dissolving under globalization and gradual convergence of the Japanese market towards the Anglo-Saxon model. The data on global
MNEs demonstrates that there is no change in the industrial structure of leading
Japanese MNEs. They avoid the risk of developing new industries and prefer shortterm profits rather than long-term investment in R&D. While the level of internationalization of Japanese automobile and trading firms is relatively high, their domestic
revenues are rather small due to a limited domestic market that is shrinking becauseof declining birthrates and ageing population. Despite the government initiatives,
moving towards the digitalization remains a challenge for many Japanese firms, as
controls by government and regulatory entities are deeply embedded in industries,
which delay changes and hinder digitalization. In such conditions, Japanese firms
should find ways to maximize their ‘late starter advantage’ by learning from a more
successful digital leaders such as the United States and China (McKinsey & Company
2020). In addition, prospects of digitalization in Japan are blurred by the scarcity ofnecessary resources.
Chinese MNEs demonstrate a more opportunistic behavior in their internationalization as they generally lack core competencies and effective management systems(Fitzgerald and Rowley 2016). However, they are rapidly expanding benefiting fromthe government-created advantages, which allow them do develop flexible learning
capabilities. LLL strategies provide state-owned MNEs and state-owned MNBs with
rapid opportunities of catch-up growth and internationalization. Chinese MNEs
still rely on cost advantage internationalization in some sectors and largely benefit
from strong domestic markets and rather responsive supply chains that allow speed
adaptation to the changes in the market environment.

21 Internationalization of Multinational Entreprises …

277

South Korean MNEs, on the contrary to the Japanese MNEs, are more flexible andrisk-taking (Fitzgerald and Rowley 2016). This explains why Samsung successfully
entered into the mobile phone market and enhanced competition with the UnitedStates’ Apple, Inc. A capacity of mass-production and low costs, together with relatively strong reputation for R&D, product quality and brands may be regarded as
their core competences. In addition, South Korean MNEs started internationalization directly from operating in foreign markets and did not possess firm-specificadvantages at home, which distinguishes them from both Western and Japanese
MNEs. Korean MNEs effectively combine synergies of their capabilities, such as
improvement of quality, brands’ reliability, design, which lead to a more diversified product lines and more stylish features, and consistent marketing. In contrast to
Japanese MNEs, Korean MNEs, representing family-owned structures with relianceon government support and centralized management systems, succeed in keeping
chaebol relationships and encourage robust competition among group and non-groupsuppliers, avoiding business relationship with internal suppliers with the low levelof global standards.
Russian MNEs are state champions backed by the government and are generally
smaller in size and inferior in terms of internationalization. The level of state control
and state interest is different depending on the strategic importance of that industry
for the government and for Russia’s economy. For instance, there are significant
differences in internationalization patterns of natural-resource based and technologyoriented companies (Panibratov 2017).
As for the common features, it is possible to identify the following. First, theanalysis by industry showed that the most successful MNEs from each country infact represent comparative advantages of their home countries. This explains whyleading Japanese MNEs are from automobiles, telecommunications, and electric
equipment sectors, Chinese MNEs specialize in natural resources and manufacturing,Taiwanese specialize in electronics, Hongkongese in finance, insurance, and logistics,
South Korean in electronics and semi-conductors, and Russian MNEs in natural
resources (Podoba and Lobareva 2017). Comparative advantages in the form of basic
natural endowments such as land, labor, natural resources, climate and geographicallocation in combination with advanced natural endowments such as technology andknowledge provide the initial basis for MNEs’ internationalization.
Second, all MNEs from NEA rely on state-support which in fact represents
government-created advantages. The phenomenon of state-owned enterprises istypical not only for emerging multinationals but also for multinationals from developed countries (Kalotay 2018). In contrast to China and Russia, leading MNEs fromJapan, South Korea, Hong Kong, and Taiwan remain privately-owned; however, thegovernment has always exercised a guiding role. In fact, as, MNEs have always been
applied by many Asian governments as instruments of conducting catch-up policy
agendas (Ozawa 2014). Japanese and other dragon MNEs evolved in the process ofpolicies of development states; in China the nurturing of both state and private MNEs
is implemented under state capitalism. Strong government-business relationship isvividly expressed by the international business terminology, such as ‘Japan Inc.’ and278

V. Gorshkov and Z. Podoba‘Korea Inc.’ Thus, these government-created advantages have played a significant
role in internationalization of MNEs from NEA.
Third, MNEs from NEA conventionally have centralized corporate structures that
had been established as a natural outcome of business practices based on personaland social networking. These relationship networks are essential informal mechanisms having influential power in shaping business operations and include relationship among businesses and with the government and sometimes represent cases ofstate-business collusion. For Japanese MNEs this centralization and networking isorganized in the form of keiretsu and yūchaku (collusion), Chinese MNEs take advantage of guanxi in building their networks, while many South Korean chaebols rely onyuchak (Rowley et al. 2019); in Russia, this informal personal and social networking
is known as blat (Michailova and Worm 2003) and is recently also observed in theform of oligarchy capitalism. Centralized management enables MNEs from NEA
to rely on the managerial or technological resources of the parent firm or global
networks, which is particularly typical for Japanese and Korean MNEs. Yuuchaku,
quanxi, yuchak, and blat are cultural features that determine the nature of personal,social, and business relationship in the respected countries. The nature of such social
networks is, however, radically different when measured by such dimensions asfactor ownership, products, finance, market and source of technology, and thus, ‘onesize fits all’ approach in investigating internationalization strategies of MNEs fromdifferent countries must be avoided (Buckley 2018).
Fourth, global value chains of MNEs from NEA to a large extent are constructedwithin the respected region as it possesses high level of complementarity. Consequently, to some extent MNEs from NEA (except Russia) have built intra-regional
complementary supply chains which can be confirmed by relatively high shares ofinter-industry trade. However, this trend is gradually changing as for instance Chinese
MNEs are expanding their international business operations into other emerging
countries and European markets. In addition, trade and political disputes between
member-countries both outside and within the region as well as COVID-19 pandemic
shall significantly impact further expansion of MNEs from NEA. Conventional global
value chains may be disrupted as there is a growing trend of reshoring that canpotentially lead to the creation of shorter and less fragmented value chains andhigher concentration of value-added. This is particularly true in case of Japanese andTaiwanese MNEs in China that already started searching for new locations for their
manufacturing FDI. For Japan, having 33,000 firms established in China as of 2020,
these transformations of global value chains are highly likely to be a difficult task.

5 Conclusion
Using the statistical data of international databases, this paper investigated theevolution and structural changes in the current rankings of MNEs from NorthEast Asia in 2000–2020. The authors identified differences and similarities in theinternationalization strategies and core competences of MNEs from the region.

21 Internationalization of Multinational Entreprises …

279

The role of North-East Asia in global outward foreign direct investment is
expanding and MNEs from this region, particularly from China, become moremature. More than a tenfold increase in the number of Chinese MNEs and theirforeign expansion are causing major structural changes in international rankings. The
competition has become intense, and Chinese MNEs are actively expanding to otheremerging and developed markets. Japan, on the opposite is gradually surrendering
its positions in Global 500, due to a slow adaptation to the changing market conditions. Nevertheless, when it comes to the level of internationalization, comparisons
explicitly show that Japanese MNEs together with Taiwanese and Hong Kongese
firms have significantly higher levels of transnationalization as measured by TNI.
The specific features of multinationals are pronounced in their original set of corecompetences, stages, methods and global context of internationalization. Nevertheless, there are similarities among these multinationals, such as their reliance on
country-specific advantages comprised of comparative advantages and governmentcreated advantages; centralized corporate structures built on strong connections withthe government and personal and social informal networks; and relatively strong
regional supply chains reflecting the high level of complementarity among almost
all countries of the region.
Overall, the research outcomes highlight the importance of developing adaptability of MNEs to fast-changing unpredictable global environment. Possessing highfirm-specific advantages in conventional industries, as in the case of Japanese MNEs,
might be beneficial in the short-term; however, MNEs should always anticipate
possible structural changes in the world economy and aim at open-type innovation systems, as in the case of China, Taiwan, and Hong Kong. In addition, the roleof the government and other home-country specific factors in fostering successful
development and internationalization of MNEs should not be underestimated.
Further success of MNEs from NEA shall depend on their capabilities to copewith new challenges of the global context of their internationalization, namely, postpandemic recovery, raising economic nationalism gradually causing the disruption of
conventional global value chains and the sustainability agenda of the world economy.

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Chapter 22

Small Government in the State
Capitalism? The Role of Public Financein Russia
Kazuho Yokogawa

Abstract This chapter focuses on the role of Russian government from a viewpointof public finance and explains the paradox of small government of a state capitalist
country, Russia. We analyzed the size and the structural characteristics of revenue andexpenditure of Russian government and explained its relatively sound fiscal balance.
Also, we show that the gap between small government expenditure and the active
state intervention to the economy can be explained by the finance via state-owned
enterprises as “shadow budget”.
Keywords Russia · State capitalism · Public finance · Small government

1 Introduction
Public finance is a state domain. There is no difference between a state-led economy
like Russia and a liberal market economy (LME) like the United States (US) in thisrespect. Then, what is the difference between the state of public finance in a state-led
economy and the same in a liberal market economy in terms of the role that publicfinance plays in the economy? How does the state-led nature of the Russian economy
manifest itself in the field of public finance?
In Russia, new taxes and fiscal systems, which are appropriate to the capitalist
economic system, were introduced during the transition to the market economy in the
1990s. However, in the 1990s, the government did not function well as a tax state, andthe macroeconomic situation in Russia remained unstable. Both the government’s
inability to collect taxes and the spread of tax evasion have attracted much attention
from researchers, and many studies have been conducted on this topic.1 Regarding the
public finance of Russia during this period, it has been pointed out that tax collection
1 In addition to studies of taxation by Western specialists of public finance such as Tanzi (2001)
and Alm and Martinez-Vazquez (2003), there have been a number of studies in Russia that havefocused on government-business relations and corporate behavior with regard to tax evasion.

K. Yokogawa (B)Kanagawa University, Yokohama, Japane-mail: yokogawa@kanagawa-u.ac.jp© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_22

281

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K. Yokogawa

became a tool for soft budget constraints and to bail out corporations (Turley, 2006),
while Shleifer and Vishny (1999) depicted the image of a government plundering
corporations through tax collection (grabbing hand). Although these studies seemed
contradictory, both cases show the legacy of the Soviet era of non-market economic
coordination between government and business. In the twenty-first century, Russia’s
economic growth has been accompanied by an increase in tax revenues from thenatural resources sector, and the state has achieved fiscal consolidation and budget
surplus. However, although there are many analyses of individual issues of Russian
public finance, the overall picture of the function of public finance as a tool forstate intervention in the economy, which is described as a state-capitalist or state-led
economy, remains unclear.
In this chapter, we attempt to clarify the role of public finance in the state-led
Russian economy and how state leadership is demonstrated in this domain. Section 1
provides an overview of fiscal trends in advanced democratic countries, which sufferfrom huge government debt, and post-communist countries. Section 2 analyzes thegovernment size and the fiscal revenue structure in Russia, pointing out its smallgovernment size. Section 3 analyzes the Russian government expenditure and clarifies its characteristics through an international comparison. Finally, in Sect. 4, weconsider the state-led nature of the Russian economy, focusing on the finances ofstate-owned enterprises as a “shadow budget” that supplements the official budget.

2 State and Public Finance
2.1 Public Finance in Democratic Countries
One of the most important issues that must be considered is the role the state or
government should play in a country’s economy, or what the optimal level of stateintervention is. Musgrave (1959) formulated the role of the state in the economy inthree fiscal functions: resource allocation, stabilization, and income redistribution.
As for the resource allocation function, the normative theory was developed mainlyin Britain and the US in the twentieth century; it was rationalized that the government should intervene in resource allocation to correct so-called market failures
such as the insufficient supply of public and quasi-public goods, natural monopolies, and the existence of externalities. In addition, with the rise of Keynesian
economics in the postwar period, countercyclical measures and stabilization policies were included as reasons for government intervention and became established
as a function of economic stabilization. Furthermore, income redistribution policies
to address income inequality and poverty have also been added to the government’srole, although efforts vary from country to country.
The size of the government has grown significantly in the twentieth century, alongwith the expansion of its economic role. The average size of government spending
in developed countries was about 10% of their GDP in the 1870s but has exceeded22 Small Government in the State Capitalism? …

283

40% since the 1980s (Tanzi, 2011, pp. 8–9). A major contributor to this expansion is
the spending on pensions, health care, and other social security schemes, education,and housing. In developed countries, the welfare state has developed with particularemphasis on these areas, and income inequality has decreased. However, from aroundthe 1980s, criticism of so-called “government failure” began to be leveled at overly
large governments, and the neoliberal movement toward smaller government andderegulation became more prominent. In other words, the inefficiency of public
spending, the selfish pursuit of profit by some bureaucrats and politicians, and theheavy tax burden that hinders economic growth are now recognized as problems.
However, despite the advocacy of reducing the size of public finance, in the realworld, the increase in debt in major countries has become more serious. Wolfgang
Streeck warns that the major democratic countries are now facing the crisis of “taxstates” turning into “debt states” (2014). In a debt state, a large part of the total
expenditure is covered not by taxation but by the issuance of government bonds,
resulting in the accumulation of huge national debt and devoting an increasingly
large part of revenues to repay that debt. As shown in Fig. 1, the government debt
of major advanced countries has increased significantly over the past half-century.2
Taking Japan as an example, whose outstanding debt is equivalent to about 250%
of its GDP in 2021, the need for fiscal rehabilitation has been pointed out for many
years, but reforms for that purpose have not been realized for political reasons.3 In
addition, development of arguments such as the Modern Monetary Theory (MMT) in
recent years 4 has made it more difficult to reduce the government debt. During the
COVID-19 pandemic in 2020, governments have been forced to take on historicallyhuge debt through a massive fiscal stimulus to the economy, raising the risk of apotential crisis.

2.2 Public Finances in Transition Economies
What is the state of Russia’s public finance? When discussing Russian publicfinances, it is necessary to recall the public finances of the Soviet era as an initialcondition. The role of the government in the Soviet Union differed greatly from thatof the governments of capitalist countries in that the Soviet economy was, in principle, run by a planned economy that eschewed the market, and almost all economic
activities were the state domain. Almost all enterprises and organizations were stateowned or publicly owned, and most of the economic activity was under state control,
2 However, some advanced democracies have succeeded in fiscal consolidation, and there arevariations in government initiatives and fiscal performance (Ide and Park, 2016).
3 The reason why Japan cannot overcome its fiscal deficit has been studied, for example, at the main

symposium of the Japan Institute for Public Finance in 2012; there, the problem was attributed
to the strong resistance of politicians to tax hikes and spending cuts as well as their avoidance tostrengthen the fiscal discipline. See Japan Institute for Public Finance (2013) pp. 4–62.
4 MMT believes that countries with the ability to issue their own currency do not need to worry
about increasing government debt as long as inflation does not occur.

284

K. Yokogawa(% to GDP)
300
250
Japan
200

Italy
United States

150

FranceCanada100

United Kingdom
50

Germany
Russian FederaƟon
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025

0

Fig. 1 General government gross debt of G7 countries and Russia (Note Data after 2020 are a
projection. Source IMF, World Economic Outlook, October 2020)

except for a few areas such as household consumption. As a result, Soviet finances
included not only the state budget in the narrow sense but also the finances of state
enterprises and other economic organizations; they were characterized by the factthat state finances covered an extremely wide range of areas.5 The size of the statebudget in the narrow sense was estimated to be about 50% of national income in the
1960s and 50% of GNP in 1985 (Sato, 1965, p. 156). In addition, it is said that thestate budget in the narrow sense accounted for nearly 80% of the total state finances(Sato, 1965, p. 111); thus, it is estimated that the size of the Soviet finances in the
broad sense, including the state enterprise sector, reached at least 60% of the grossnational income. Therefore, the size of public finances during the Soviet era can beconsidered to have surpassed that of the Nordic countries, where large governments
act as welfare states.
In 1991, the Soviet Union collapsed, and things changed dramatically. At the
beginning of the transition in the 1990s, Russia and Eastern European countries
pursued neoliberal transition policies based on the Washington Consensus. These
policies emphasized shrinking the excessive state in the former communist countries
and focused on destroying the state inherited from the old regime and replacing itwith a “self-regulating” market. It also demanded the austerity of fiscal and monetary
policies from the government to stabilize the macroeconomy. As a result, the sizeof government spending in many ex-communist countries was halved within a few
years. In Russia, general government spending shrank sharply from 58.4% of GDP
in 1992, just after the regime change, to 45.3% in 1996.6
5 Sato (1965, pp.109–110).
6 These figures are based on Myant and Drahokoupil (2011, p.129), but the numbers vary slightly

from statistic to statistic.

22 Small Government in the State Capitalism? …

285

However, the weakening of government functions was a more serious issue thanthe contraction of government spending (Mizobata, 2002). In a capitalist country,
the government needs to develop and maintain a variety of institutions for the sound
functioning of the market economy. However, although the transition to a market
economy proceeded rapidly, the governments of the former communist countries
had no time to acquire new functions. As a result, in the new economic system thatemerged, the legal systems that support the protection of private property rights andthe enforcement of contracts did not function well, and crime and corruption were
rampant. In addition, tax collection was not sufficient to raise financial resources
to support government activities. Instead, in the 1990s, the Russian government
continued to provide indirect subsidies in the form of tax breaks to companies to bailout those on the verge of bankruptcy due to the abandonment of the planned economy.
As a result, tax revenues were insufficient. In addition, as a result of decentralizationin the 1990s, local governments began to withhold taxes that should have been paid
to the federal government, making it difficult for the latter to secure sufficient tax
revenue to carry out its functions.
Facing such a crisis in the Russian economy, the importance of the state’s role in
the economy and its transition was reaffirmed by the end of the 1990s. The experienceof countries in transition, such as Russia, has made it clear that the institutions that
support the market economy, which had been considered self-evident until then,would not exist without the efforts of the state to maintain them. Thus, functions
such as the protection of property rights, enforcement of contracts, tax collection,social security, education, research and development, infrastructure investment, andindustrial policy have been reaffirmed as roles to be played by the state. China’s
rapid economic growth, in contrast to that of Russia, has also had an impact on these
discussions, as Stiglitz (2002) explained the contrastive performance of the Chineseand Russian economies by the differences in the government’s abilities.
However, it should be noted that the role of the state reviewed here is only related
to the maintenance and construction of various institutions to support the market
economy. Russian society had transformed from the Yeltsin regime, where the state
was disintegrated, to the Putin regime, where the state was consolidated (Myant andDrahokoupil, 2011, p. 149). Today, the “return” of the state can be seen in all aspectsof the Russian economy, and the Russian system has come to be known as “state
capitalism” with a strong degree of state intervention in the economy (Bremmer,
2010). However, the degree of state penetration we see in the Russian economy
in recent years has completely transcended the government’s role, which was once
expected as a complementary player in the market economy. This difference must be
distinguished. What functions does the government perform in contemporary Russia?
How do these characteristics manifest themselves in terms of public finances?

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K. Yokogawa

60.0
50.0
37.8 38.6 38.9 39.1

40.0
30.0

40.3 40.7 40.9 41.6 41.7 41.8 42.1

42.4 43.4 43.5

44.6

48.6
46.7 47.0 48.4

49.2 49.8

50.9 52.1

53.1

56.0

32.9 33.7 34.0
25.4

20.0
10.0
IRL
RUS
CHE
LTU
USA
LVA
JPN
EST
ISR
CZE
GBR
POL
ESP
SVK
NLD
ISL
PRT
SVN
DEU
HUN
GRC
ITA
AUT
NOR
SWE
DNK
BEL
FIN
FRA

0.0

Fig. 2 General government expenditure in OECD countries and Russia (2018, % to GDP) ( Source
OECD; Russian Ministry of Finance)

3 Small Government and State-led Economy
3.1 Small Government in Big Russia
First, we would like to start with the size of the Russian government. How has the sizeof Russia’s government changed from the Soviet period through the transition period
to the present? During the Soviet era, government size was so large that it surpassed
that of the Scandinavian countries; however, it privatized state-owned enterprises in
the 1990s, and the separation of the private sector from the public sector progressed.
As a result, the size of government spending, which was nearly 60% of the GDP in
1992, shrunk sharply. Figure 2 compares the size of general government spending in
Russia and OECD countries in 2018 and shows that Russia’s government spending
amounts to 32.9% of its GDP, the second smallest after Ireland. This figure is evenlower than that of the US, which is classified as an LME, not to mention European
countries. In terms of the national burden ratio, that is, the ratio of taxes and social
insurance premiums to national income, Russia’s burden is just over 30%, which isextremely light compared to OECD countries.7 In other words, as far as the size ofgovernment expenditure is concerned, Russia can be positioned as a country of small
government, even smaller than countries such as Japan and the US.
Then, where can we find Russia’s state leadership in terms of public finances?
The next section will take a closer look at Russia’s fiscal structure.

7 Calculated by the author from the Russian Statistical Yearbook and the Russian Ministry of Financewebsite.

22 Small Government in the State Capitalism? …

287

3.2 Trends in Russia’s Fiscal Balance
Russia’s public finance consists of the federal budget, regional budget,8 and three
off-budget funds (pension funds, social insurance funds, and compulsory medical
insurance funds). On an expenditure basis, the federal budget accounts for about
40% of the total, while the regional budget and off-budget funds account for about
30%. Among the off-budget funds, the pension fund is by far the largest, accounting
for approximately three-quarters of the total off-budget funds.9
Figure 3 shows the trends in Russia’s general government revenues and expenditures, including federal and regional budgets, as well as off-budget funds. Russia’s
relatively small government spending was not historically rooted; it shrank sharply
only in the 1990s when the government tried austerity measures, and it fell to 26% of
the GDP by 1999. However, the drop in tax revenue was more severe than the drop in
spending, and the 1990s saw consistently large budget deficits and continued inflation. In the 2000s, however, Russian economic growth turned positive, and Russia’s
tax revenues increased due to the surge in global oil prices, as discussed in a later
section. The Russian government was able to post a large budget surplus in the 2000s,
despite its expenditure gradually expanding along with an increase in tax revenues.
However, the economic boom had crashed down in the global financial crisis, and in
2009, Russia’s GDP growth rate became negative. The federal government createda temporary fiscal stimulus to support the economy, and as a result, the budget once
again had a deficit in 2009 and 2010. Although the Russian economy has managed to
crawl out of the crisis, its growth rate has slowed down, and tax increases have also
been sluggish. In particular, the annexation of Crimea by Russia in 2014 intensified
the conflict with Ukraine and negatively affected the economy. Imposed economic
sanctions by Western countries caused the Russian economy to once again experience significant negative growth in 2015, with recurring budget deficits. However,the Putin administration, after getting re-elected in the 2018 presidential election,
has worked on fiscal reconstruction and recovered the budget surpluses again in 2018and 2019.

3.3 Dependency of Russian Public Finance on Oil and Gas
Revenues
As mentioned above, Russia’s public finance is marked by great fluctuations inbalance; this is related to its extremely high dependence on tax revenues from the oiland gas sector, which is highly volatile and vulnerable to market conditions. The oiland natural gas industry form the backbone of the Russian economy, accounting for
8 Regional budget here means the sum of the budgets of the subnational level, such as oblast andrepublics, and the budgets of local governments, such as cities, districts, and townships. It is also
called “consolidated regional budget.”.
9 According to the data of Russian Ministry of Finance.

288

K. Yokogawa

45.0%

20.0%

40.0%

15.0%

35.0%
10.0%

30.0%
25.0%

5.0%

20.0%

0.0%

15.0%

-5.0%

10.0%
-10.0%

5.0%-15.0%

Revenue

2018

2019

2017

2015

2016

2014

2012

2013

2011

2009

2010

2007

2008

2006

2004

Balance(right axis)

2005

2003

2001

2002

2000

1998

1999

1996

1997

1995

1994

0.0%

ExpenditureFig. 3 General government revenue and expenditure in Russia (% to GDP) (Source Russian
Ministry of Finance; Russian Statistical Agency)

almost 30% of the GDP and 60–70% of total exports. The tax revenues generated bythese sectors are incorporated into the federal budget in the form of mineral extraction taxes and export duties, which account for approximately 40% of the federal
budget revenues (Fig. 4). These taxes are levied on an ad valorem basis, linked tothe price of crude oil. As a result, the soaring oil prices of the 2000s provided theRussian government with ample tax revenue; however, the tax revenue fell when oil
prices plummeted, as they did in 2009 and 2015–2016, causing a deficit in the federal
budget. Therefore, tax revenues from the oil and gas sector can be a double-edged
sword for the Russian government.
There was a severe battle between the government and the oligarchs concerning
taxing on oil and gas revenue10 since Vladimir Putin took office in 2000. The oiland gas industry, which has sustained the national economy since the Soviet period,
was privatized in the 1990s and handed over to newly emerged oligarchs. The newconglomerates were cozy with the Yeltsin family and enjoyed private benefits in the
1990s. However, their relationship with the government changed dramatically after
Putin took office in 2000. The new government drastically strengthened taxation in
the oil and gas industry and tightened state control for them. Companies that did notcomply with the government’s tax reforms found themselves in a crisis of survival,
just as the oil company Yukos was dismantled by the government. Thus, in the 2000s,
the Russian government succeeded in recovering much of the huge profits made by
the oil and gas industry in the national treasury. We can observe one aspect of the
10 The oil and gas tax revenue of the federal government consists of (1) extraction taxes on mineral

resources in the form of hydrocarbon fuels (oil, natural gas, and gas condensate), (2) petroleum
export duties, (3) natural gas export duties, and (4) petroleum product export duties. The amountto be transferred to the federal budget in a given year is determined by the budget law of that year,
and the rest is set aside in a fund called the Reserve Fund (currently the National Welfare Fund).

22 Small Government in the State Capitalism? …

289

25.0%

120

20.0%

100

15.0%

80

10.0%
60
5.0%
40

0.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-5.0%

20

-10.0%

0
renvenue from oil and gas sector

renenue from non oil and gas sector

balance of federal budget

WTI crude oil price(US$/barrel, right axis)

Fig. 4 Revenue structure and balance of the federal budget (% to GDP) (Source Russian Ministryof Finance)

authoritative Russian government in its heavy-handed taxation on the resource sector
and pressure on the oligarchs that control these sectors.
What about other tax sources? The dependence of Russia’s economy on oil andgas has been a problem for some time, and this leads to the issue of how to overcome
this fiscal dependence on resource revenues; in other words, how to diversify tax
bases? Fig. 5 shows the tax revenues of the general government of Russia. The
second-largest source of government revenue is the social insurance premiums forpension funds and compulsory medical insurance funds, which even exceeds oil andgas revenue in some recent years. In addition, the value-added tax (VAT) is also large,
partly due to the increase in the tax rate from 18 to 20% in 2019.
As for corporate profit tax and personal income tax, the burden is relatively light,
as tax cuts were implemented in contrast to the tightening of taxation on the resource
sector under the Putin administration. The general rate of corporate profit tax is20%, and the rate can be reduced to 16.5% in special economic zones. Compared tocountries such as Japan, where the effective corporate tax rate is just under 30%,11
the tax burden on corporations, excluding those in the oil and gas sector, is light. As
for the personal income tax, the 2001 tax reform changed the previous progressive
tax of 45% at the highest to a flat tax rate of 13%, which is an extremely light burden,
especially for the wealthy, compared to other major countries in the world.
To reduce the dependence of public finances on the oil and gas sector, it is necessary to strengthen the tax base outside the resource sector. However, this is not aneasy task because taxes such as corporate profit tax and personal income tax are
11 According to the Ministry of Finance of Japan, Japan’s effective corporate tax rate is 29.74%,

France’s is 31.0%, Germany’s is 29.89%, and the US’ is 27.98%, respectively (as of January2019). Source: Japanese Ministry of Finance, https://www.mof.go.jp/tax_policy/summary/itn_com
parison/j03.htm (accessed on March 27, 2020).

290

K. Yokogawa

10,0009,000

Oil&gas revenues

8,000

VAT

7,000
Excise taxes

6,000
5,000

Corporate income tax

4,000

Personal income tax

3,000
2,000

Import Duty

1,000

ContribuƟons to compulsory
social insurance
Others

2018

2019

2016

2017

2015

2014

2013

2011

2012

2010

2009

2008

2006

2007

0

Fig. 5 General government revenue of Russia (in billion Rubles) (Source Russian Ministry of
Finance)also likely to decrease when the oil price falls, as Russia’s economic structure itself
depends on the resource sector. However, as seen in Fig. 5, it is noteworthy thattax revenues other than oil and gas revenues continued to grow during the oil pricedecline in 2015–2016, although a decline in VAT and corporate profit tax, as well as
oil and gas revenues, was seen in 2009. This can be attributed to the recent efforts ofRussia’s tax authorities to increase tax collection rates, such as closing tax loopholes
and preventing tax evasion. These are desirable reforms, although it has also been
pointed out that the burden on companies, especially small companies that cannot
escape tax collection, has become heavier, and their business has been squeezed(Dolzhenkov and Obukhova, 2020). Therefore, it is necessary to avoid diminishing
the tax base. In any case, fostering economic diversity and increasing the capacityof tax administration will contribute to the creation of a more stable fiscal base for
Russia.

3.4 Fiscal Discipline and State Initiative
Another characteristic of Russian public finance that needs to be pointed out is thatof fiscal discipline. Figure 1 shows the general government debt of Russia and the G7
countries, indicating that the increase in government debt in advanced democratic
countries has become increasingly serious in recent years. Government debts inJapan, Italy, and the US exceed 100% of their GDPs, and debts of other countries
are also increasing, except for Germany. In contrast to these trends, the Russian
government has significantly reduced its outstanding debt since the end of the 1990s,
maintaining a remarkably low level of debt at 13.9% of GDP by the end of 2019.
Russia’s success in reducing its government debt is noteworthy in terms of fiscal
health.

22 Small Government in the State Capitalism? …

291

16,00014,00012,00010,000
8,000
6,000
4,000
2,000
0

StabilizaƟon FundNaƟonal Wealth FundReserve FundFig. 6 Russian sovereign fund (at the beginning of the year; billion Rubles) (Source Russian
Ministry of Finance; Russian Statistical Agency)

During the surge in international crude oil prices in the 2000s, the Russian government succeeded in increasing oil and gas revenues and set aside a certain portionof the increased revenues in a fund, avoiding expanding expenditures.12 This fund,initially called the Stabilization Fund, which was divided into the National Welfare
Fund and the Reserve Fund in 2009, has been managed in such a way that it accumulates during periods of high oil prices and is used to supplement revenue when oil
prices fall (Fig. 6). In recent years, the fall in oil prices from around 2015 caused abudget deficit, which was financed by the reserve fund (the reserve fund was dissolvedin 2018 with a zero balance), but the reserve amount has since increased again. In
addition, the Russian government expanded its foreign exchange reserves. As ofthe end of 2019, it held the fourth largest foreign exchange reserve in the world at$554.5 billion.13 In this way, Russia has been coping relatively well with the risks
that resource-exporting countries face, such as a sharp fall in resource prices as wellas the exchange rate.
In terms of fiscal balance, it is noteworthy that Russia had a budget surplus in2018 after it experienced a deficit in 2015–2016. The direct cause of this is thegovernment’s shift toward policies that emphasize fiscal discipline, such as raising
the pension payment age and increasing the VAT tax rate, after President Putin’s
reelection in 2018. In contrast to advanced democratic countries, which cannot stop

12 The portion of tax revenue from the oil and gas sector that will be set aside for the fund is definedas the portion that exceeds $20/bbl oil price in 2004, $27/bbl in 2007, $45/bbl in 2008, $91/bbl
in 2012, and $40/bbl in 2018, respectively. The portion below that threshold becomes the federal
budget revenue for the year.
13 It includes gold holdings (Source: Global Note).

292

K. Yokogawa

the growth of government debt, Russia’s policy management is characterized by astrong fiscal discipline to maintain budget balance.
Why is it possible for Russia to restore its fiscal health? This is not because thementality of the Russian people is oriented toward small government; rather, theytend to remember the Soviet era when the state took care of all their lives and expect
the state to play an active role in protecting the welfare of its citizens (Lezhnina,2019). Therefore, resistance to reforms that force pain on the people should bestrong, as the ruling party and the president’s approval ratings plummeted as soon
as the government announced raising the pension payment age in 2018. However,compared to democratic states, people’s demand is not reflected in the Russian fiscal
policy. As President Putin has been very authoritative and the ruling party, United
Russia, holds a three-fourth majority in the Federal Assembly, there are few obstacles
for the government to implement their policies. Currently, the time devoted to budget
deliberations has become half of what it was in the early 2000s, and there are fewer
amendments in the readings (Kluge, 2019, p. 31). Thus, there is little momentum
for fiscal democracy in Russia, and public finances have become the domain of the“state,” rather than the domain of the “public.”14 In addition, the Russian government
places great importance on maintaining fiscal discipline due to the bitter memoryof hyperinflation in the 1990s. The fiscal soundness of Russia has been achieved
because of its authoritarian state, which demonstrates a caracteristic of the state-led
Russian economy.

4 The Character of the Russian Government
from the Analysis of Its Public Spending
4.1 The Expenditure Structure of the Russian Government
What are the characteristics of Russia’s public finance in terms of its functions?
A Japanese famous researcher on public finance, Kenichi Miyamoto, once argued
that public finances are the face of the state, and three vectors can be identified
as the direction of development of the modern capitalist state: the welfare state,
the corporate state, and the military state (1981). In this section, we clarify thecharacteristics of the Russian government based on its expenditure.
Figure 7 shows the breakdown of general government expenditure in Russia. The
growth in social policy spending is particularly conspicuous, which now accounts
for more than one-third of total expenditure. About 80% of this is for pensions,and the burden of social security in Russia is becoming heavier every year as the
population ages. In Russia, pensions are paid to citizens through a pension fund, but
because social insurance premiums alone are not sufficient to cover the total cost of
14 In Russian, public finances are called “gosdarstvennyi financ,” which in English translation means“state finance,” not public finance. It seems to symbolize this matter.

22 Small Government in the State Capitalism? …
14,00012,00010,000293
State administraƟon (including
public and municipal debt service)
Defence
Law and orderNaƟonal Economy

8,000
6,000

Housing and UƟliƟes
Infrastructure
Environment ProtecƟon

4,000

EducaƟon

2,000

Culture, Cinematography and
Mass MediaSport and Health Care0

Social Policy

Fig. 7 Russian general government spending (in billion Rubles) (Source Russian Ministry of
Finance)pension, about 40% of the pension payments currently depend on transfers from thefederal budget. The second-largest category is national economy expenditure (expenditure on fuel and energy, agriculture and fisheries, transportation, roads, informationand communication industries, and basic research related to the national economy),which accounted for 13% of the total expenditure as of 2018. This includes subsidies
to companies and public works projects, suggesting that the government increased
spending in this category to stimulate the economy during the economic crisis of 2009
and 2014–2015. The next largest categories are education and health (medical care),each accounting for approximately 11–12% of the total. Defense spending accounted
for 8% of the total spending in FY2018. According to the timeline, defense spending
temporarily increased during 2014–2016 in response to the conflict in Ukraine anddeteriorating relations with the NATO members; however, it has been reduced andreturned to the normal level since 2017, although we have the impression that Putin’s
administration has continuously increased its military budget. Defense spending in2016 was 4.4% of the GDP, although it dropped to 2.7% in 2019.
In the next section, we consider the characteristics of the Russian government
through an international comparison of spending structures.

4.2 Comparison of Expenditure Structure with OECDCountries
According to Akindinova et al. (2018), who compared the Russian government’s
expenditure structure for the period 2007–2015 with that of OECD countries, Russia
spends more on defense, security, and justice, and the national economy than the294

K. Yokogawa

average OECD country, while the spending on health and education is lower. In
addition, social security expenditures have increased significantly in recent years
compared to the average level of OECD countries. However, fiscal structures differ
considerably, even among OECD countries. Therefore, we extract the expenditurecomposition of several major OECD countries and compare them with Russia.
Table 1 compares the general government expenditure of Russia with that of theUS, Japan, Germany, France, and Sweden in 2018. Social security spending, is aheavy burden for Russia, but it is by no means excessive when compared to major
developed countries. Except for the US, Japan, Germany, France, and Sweden spend
more on social security than Russia, both as a share in the total expenditure and as apercentage of GDP. The expansion of social security spending has become a common
problem worldwide in line with the aging society, and Russia is also not free fromthis trend, although it is not currently spending as much as developed countries.
Regarding national economic expenditure (economic activities), Russia surpasses
other developed countries, which suggests that Russia is relatively focused on thisitem. This seems to confirm the large state intervention in the Russian economy.
What about education and healthcare? In Russia, 10% of expenditure is allocatedto each item, but the weight of these items is relatively small compared to otherdeveloped countries. In particular, health care spending is conspicuously low at 3.5%
Table 1 Structure of government expenditure (2018, % to GDP)
RussiaUSA

Japan

Germany

SwedenFranceTotal

33.0 (100)37.8 (100)38.9 (100)44.6 (100)49.8 (100)56.0 (100)General public
services

2.9 (8.8)

5.7 (15.1)

3.8 (9.7)

5.7 (12.7)

7.1 (14.2)

6.2 (11.0)

Defense

2.7 (8.2)

3.2 (8.5)

0.9 (2.4)

1.1 (2.4)

1.2 (2.4)

1.8 (3.1)

Public orderand safety

2.0 (6.1)

2.0 (5.3)

1.2 (3.2)

1.6 (3.5)

1.3 (2.6)

1.7 (3.0)

Economic
affairs

4.3 (13.0)

3.4 (8.9)

3.7 (9.5)

3.4 (7.6)

4.3 (8.6)

5.8 (10.3)

Environmental
protection

0.1 (0.3)

0.0 (0.0)

1.1 (2.9)

0.6 (1.3)

0.5 (1.0)

1.0 (1.8)

Housing andcommunity
amenities

1.3 (3.9)

0.5 (1.3)

0.7 (1.7)

0.4 (0.9)

0.7 (1.4)

1.1 (2.0)

Health3.5 (10.6)

9.3 (24.6)

7.7 (19.7)

7.2 (16.2)

7.0 (14.0)

8.1 (14.5)

Recreation,
culture andreligion

0.6 (1.8)

0.3 (0.7)

0.4 (1.0)

1.1 (2.4)

1.3 (2.6)

1.4 (2.5)

Education

3.5 (10.6)

5.9 (15.7)

3.3 (8.5)

4.2 (9.4)

6.9 (13.8)

5.1 (9.1)

Socialprotection

11.9 (36.1)

7.5 (19.9)

16.1 (41.4)

19.4 (43.6)

19.5 (39.2)

23.9 (42.6)

Note Numbers in parenthesis represent the share in the total expenditure. Source OECD; Russian
Ministry of Finance22 Small Government in the State Capitalism? …

295

of the GDP, which is less than half of other countries’ spending. During the Soviet era,
free medical care and education were guaranteed to all citizens, and even today, thenumber of staffs working in educational institutions and the medical sector is quite
large compared to international standards.15 However, the lack of financial resources
has led to problems such as low wages for teachers and medical staff, which in turnleads to a low quality of services (especially health care).
Defense spending accounts for 8.2% of the total expenditure or 2.7% of the GDP,
which is considerably higher than that of other countries, following the US. Furthermore, according to the Stockholm International Peace Research Institute (SIPRI),
Russia’s defense spending as shown in the budget is only three-quarters of the actual
amount; when expenditures that should be included in the defense spending, suchas social security, health care, and education for military servants, are included, it
increases by about 1% of the GDP (Kluge, 2019, p. 23). Considering these points,
Russia’s defense spending is still relatively high, although it is much lower than thatof the US and China in absolute terms. Expenditures related to the security and judiciary sectors, the home of Siloviki who support the Putin administration, are also
relatively higher than in other countries, at 6% of the total expenditure.
How can we describe the nature of public finance in Russia? From the fiscal
structure of the Russian government, we can see that the government focuses on
three areas: national defense, the national economy, and social security. Judging
from the large defense spending, Russia may be a military nation on par with the
US. However, Russia’s defense spending is not only significant from the perspectiveof national security but also as an industrial policy. As a legacy of the Cold War
in the Soviet era, Russia had a large defense industry. Besides, many of them are
town-building companies in remote areas such as Siberia, therefore defense spending
cannot be reduced for fear that cutting state orders will destabilize the socio-economic
situation in many cities (Kluge, 2019, p. 28).
The rapidly increasing social security expenditures, while not yet at the level ofdeveloped countries, is undoubtedly the most serious domestic problem. Pensioners
demand paternalistic social policies from the government, and the government isforced to respond to them to retain their political support. The existence of a “social
contract” between the state and its citizens has been pointed out as the foundationof Russia’s political and social stability. Citizens give up their political freedom
in exchange for certain economic benefits guaranteed by the government (Cookand Dmitrov, 2017; Feldmann and Mazepus, 2018; Hayashi, 2018; Busygina andFilippov, 2016). Therefore, it is difficult for the government to reduce such expenditures because if the social contract relationship is broken, it could shake the support
base of the current government. Figure 8 shows the relationship between the sizeof social security expenditures and GDP per capita in OECD countries and Russia.
Roughly speaking, the higher the economic level, the higher the share of social
15 Most teachers and hospital staff in Russia are civil servants. According to Gruvich and Khazanov(2016), who conducted an analysis based on ILO statistics, the number of civil servants per 100
people in Russia is 2.4 people in state administration, 4.0 in education, and 2.9 in health care, whichadds up to 9.4. This figure is about 1.5 times higher than the average for Western European countries
and other transition countries in Eastern Europe.

296

K. Yokogawa(US dollar)
120,000

LUX

100,000

80,000y = 2452.9x
R² = -0.193

IRL
CHE

60,000

NOR

USA
ISL

40,000

KOR
CHL

20,000NLDAUSISR CZE
LTU EST
LVA

CRI
COL

GBR
JPN
ESP
SVK
POL
HUN

DEU

AUT
BELSWE

ITA
SVN
GRC
PRT

DNK

FIN

FRA

RUS

0
0.0

5.0

10.0

15.0

20.0

25.0

30.0

Fig. 8 Expenditure to social protection (% of GDP) and GDP per capita in Russia and OECD
countries, 2015 (Note The vertical axis represents the nominal GDP per capita, and the horizontal
axis represents the size of social security spending as % of GDP. Source OECD; Russian Ministryof Finance)

security they tend to spend. In this context, Russia, with a GDP per capita of lessthan $10,000, has a social security expenditure on the same scale as countries withthat of $30,000. Therefore, Russia has an excessive social security burden, given its
level of economic development. This may be understood as a legacy of the socialist“premature welfare state.”
The large amount of national economic expenditure, which includes subsidies
and investments to companies shows an aspect of a corporate state where the state
actively supports economic activity.
Summarizing the above-mentioned characteristics, Russia has a small government
in terms of the size of public expenditure and is maintaining a stricter fiscal discipline
than advanced democratic countries. In addition, the burden of social security is
increasing every year, while defense and national economy spending are also given
relatively huge emphasis, compared with other major countries. On the other hand,areas related to human capital formation, such as education and health care, havebeen less funded.

22 Small Government in the State Capitalism? …

297

5 Shadow Budget and the State-led Economy
The analysis of the Russian state budget, as seen in this chapter, has only widened thegap between the picture of “small government” and the reality, which is describedas state capitalism. To examine the state’s leadership in the Russian economy, it
is not enough to understand the formal state budget. This is because the Russian
government controls a considerable amount of resource allocation without going
through the budget, that is, resource allocation through the corporate sector. In thissection, we would like to focus on the role of the so-called “shadow budget” thattakes place beyond the framework of the formal budget.
It has already been mentioned that the core revenue source of the Russian government is taxes from the oil and gas sector. However, the official tax revenue fromthe natural resources sector is only a part of the resources collected from the sector.
American economists Gaddy and Ickes calculated the amount of “rent,” which isthe difference between the revenues earned by the oil and gas sector and the real
production costs. The rent naturally increases as the price of oil exports soars andthe authoritative Russian government collects this in formal and informal forms,
redistributing to other sectors as subsidies, especially to support companies that are
inefficient and cannot survive in a market economy. Gaddy and Ickes call this system
the “rent management system,” which portrays the economic regime under the Putin
administration (Gaddy and Ickes, 2015).
In Russia, energy producers, including those in the oil and gas sector, supply
resources to energy consumers, such as electricity and manufacturing companies,
at lower-than-market prices. This means indirect subsidies. They also subsidize,in the form of overpayments, those who support oil and gas production, such as
manufacturers of production equipment and transportation infrastructure providers,for example, railroads and pipelines. Most of the “rents” are distributed to various
sectors (rent-dependent sectors) through these price mechanisms. All of this is done
through informal mechanisms that do not involve formal budgets (Gaddy and Ickes,
2015, p. 19). Oligarchs who hold oil and gas companies are put under Putin’s control
and are forced to participate in this system (ibid, p. 25).
This kind of redistribution through the corporate sector reminds us of the Sovietera. Although it is difficult to ascertain the size of such redistribution, the IMF andRussian researchers estimated that the expenditures of state-owned enterprises, which
are considered to be the public sector in the broad sense, amounted to 29–30% of
the GDP (Kluge, 2019, p. 7).16 Although state-owned enterprises pay official taxes,
many funds remain in their hands without being incorporated into the budget. As
state-owned enterprises are used for political goals, the spending of these enterprises
has an aspect of national projects. Therefore, it can be positioned as part of publicfinance in a broader sense.
16 According to the Russian Academy of National Economy and Public Service, the weight of theRussian state sector in GDP is 13% for the state administration sector, 38.7% for state enterprises,
and 1.7% for unitary enterprises, respectively, totaling 53.4% of the GDP in 2018 data. (Source:
PAHXiGC, https://ipei.ranepa.ru/ru/kgu/indeksy).

298

K. Yokogawa

Let us explain the allocation of funds through state-owned enterprises based on thediscussion in Kluge (2019), which points out the existence of such shadow budgets.
Among the state-owned companies, which Kluge defines, the majority are “unitary enterprises,” which are directly controlled by federal and local governments.
Well-known examples include the Russian Postal Service, film studio Mosfilm, andMoscow Metro Corporation. The second group consists of joint ventures (JVs) thatare partly owned by private capital and listed on foreign stock markets. These
include Russia’s two largest energy companies, Gazprom and Rosneft, Russia’s
pipeline monopoly Transneft, state-owned banks Sberbank and VTB Bank, andservice companies such as Aeroflot and Rostelecom. The third group is the “state
corporation,” a unique form of a state-owned enterprise in Russia. State corporations
include Rostechnology, a military-industrial complex holding company, VEB Bank,a development bank, and so on, which hold their own shares.
Of these state-owned enterprises, unitary enterprises cannot make decisions
without the consent of the federal and local governments that own them, while JVs
and state corporations have much greater independence. However, as we will see
later, JVs are strongly influenced by the government. In the case of state corporations, the president has the power to appoint and dismiss the management team, andPresident Putin currently maintains influence by appointing people with personal ties
to the management team.
Unitary companies and JVs are required to pay a certain portion of their profits
to the state treasury. However, the dividends paid by JVs to the government areconsidered small by international standards,17 and after the fall in oil prices in 2015,
Prime Minister Medvedev issued a directive in 2016 requiring state-owned JVs to pay
more dividends. Precisely, these JVs are obliged to pay 50% of the previous year’s
net profit to the treasury in accordance with the International Financial ReportingStandards (IFRS). As a result, small JVs have complied with the directive, while large
energy companies could make exceptions with government support. Companies such
as Gazprom, Rosneft, and Transneft have not paid as much,18 while cooperating withgovernment projects in exchange for reduced payments to the treasury. These projects
include building oil and gas pipelines and other infrastructure, managing resource
exports, and cooperating with media nationalization. Thus, the Russian government
can control the funds in corporations directly or indirectly, which means it no longer
needs to make this money go through the state treasury (Kluge, 2019, pp. 34–37).
As for state corporations, they are legally not owned by the government; thus,
their profits are not put into the treasury as dividends. Therefore, more funds can beused internally than in the case of JVs. State corporations, such as Ross Technology,
17 The number of dividends that should have been paid, but were not, amounted to 386 billion rubles

in 2015 and 346 billion rubles in 2016, according to some figures (Kluge, 2019, p.36).
18 For example, according to IFRS standards, Gazprom paid only 20% of its previous year’s profits

into the treasury instead of 50%. This was justified by a major investment project by Gazprom,an investment in a gas pipeline. Rosneft paid 35%, which was justified on the grounds that thecompany’s state ownership is not direct (it is through Rosneftegaz) and therefore, Medvedev’s
mandate does not apply for it. Transneft also paid only 13% of its 2017 profits for various reasons(Kluge, 2019, p.37).

22 Small Government in the State Capitalism? …

299

include many manufacturing companies, some of which are in the military-industrial
complex. Many of them are in too difficult situations to survive in a market economy;
thus, the government is supporting these companies financially, protecting themunder the umbrella of state corporations.
Thus, in Russia, the government’s direct control over corporations makes it
possible to use the funds reserved within corporations for political purposes without
involving public finances. Such shadow budgets are neither debated in the Diet nor
subject to the Budget Law and public scrutiny. However, these funds make it possible
to support the stability of the Russian economy by enabling the construction of infrastructure and subsidizing companies out of the official budget. Here, we can find an
aspect of Russia’s active intervention in the economy as a corporate state.

6 Conclusion
In this chapter, we examine the role of public finances in Russia, which is often
referred to as a state-led economy or state capitalism, and how state initiative ismanifested in it. In terms of the size of the national budget, Russia is surprisingly
placed in the category of “small government,” and it maintains fairly sound fiscal
management compared to developed countries, keeping the balance of budget andthe low level of the national debt. In addition, Russia, which is dependent on resource
exports, has built up a sovereign fund and sufficient foreign currency reserves to copewith a drop in oil prices and the resulting rapid depreciation of the ruble. Russia canachieve fiscal discipline, which democratic countries are struggling with, due to its
authoritarian nature and methods, as discussed in this chapter. In contrast to countries
that practice democracy but have been unable to halt the growth of budget deficits
and government debt, Russia can maintain fiscal discipline because the voices of thepeople are silenced.
The role played by Russia’s public finances is characterized through international
comparisons, the first of which is the higher share of defense spending. This is due
to Russia’s emphasis on national security in the face of deteriorating relations with
NATO countries and at the same time, the need to support the large defense industry
that it inherited from the Soviet Union. Another major feature is that social security
expenditures, particularly pensions, are growing year by year as Russia’s population
ages. This is a necessary expense to retain the support of the people who demanda paternalistic social policy, but this has become the biggest factor putting pressure
on Russian finances. As a result, expenses related to the formation of human capital,such as education and medical care, are sacrificed.
From the above analysis of state finances alone, it is not clear why Russia waspositioned as a state capitalist country. In this chapter, however, I have argued that amajor source of the Russian government’s state initiative is the allocation of resources
through the state-owned enterprise sector, which bypasses the formal budget. This
resource allocation, which can be described as a shadow budget, plays an extremely
important role in supporting the Russian economy and maintaining social stability.

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The real picture of Russia’s “big government” cannot emerge without including thisshadow budget.
The challenges for the Russian economy are how to confront the slump in oil
prices and the decline in “rents” from the resource sector. The decline in rents meansthat there will be less room for fiscal maneuvering, both formal and informal. If they
fail to make effective use of limited resources in this context, there is a risk thatpolitical stability, which is the premise for state capitalism, will be undermined.

References
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Akindinova, N.V., Chernyavskii, A.V., Chepel, A.A. (2018) Mezhstranovoi analiz struktury ieffectivnosti byudgetnykh raskhodov, Voprosy Ekonomiki, No.2, pp. 5–27.
Bremmer, Ian (2010) The End of the Free Market: Who Wins the War Between States andCorporations? Portfolio.
Busygina, Irina and Mikhail Filippov (2016) The Calculus of Non-Protest in Russia: Redistributive Expectations from Political Reforms, in Cameron Ross (ed.) State against Civil Society,
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regime: bridging political culture and social contract theory, East European Politics, vol. 34, No.
1, pp. 57–76.
Gaddy, Clifford and Barry Ickes (2015) Putin’s rent management system and the future of addictionin Russia, in Susanne Oxenstierna (ed.), The Challenges for Russia’s Politicized Economic System,
Routledge.
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sotsial’nye ili economicheskie faktori? Voprosy Ekonomiki, No.8, pp. 28–56.
Hayashi, Hiroaki (2018) Rossian Socio-economic System from a viewpoint of “Social Contract
Theory”, Russia-Eurasia no Keizai to Shakai, September 2018 (No. 1032), pp. 25–38 (inJapanese).
Ide, Eisaku and Jene Park (ed.) (2016) Deficits and Debt in Industrialized Democracies, Iwanami
Shoten, Publishers (in Japanese).
Japan Institute for Public Finance (2013) Symposium: Why Can’t We Rebuild Our Finances? Zaisei
Kenkyu, No. 9 (in Japanese).
Kluge, Janis (2019) Mounting Pressure on Russia’s Government Budget: Financial and Political
Risks of Stagnation, SWP Research Paper, February 2019.
Lezhnina, Yulia (2019) Russians’ Expectations from the State Social Policy as an Indicator of Their
Risks and Opportunities, The Journal of Comparative Economic Studies, Vol. 14.
Miyamoto, Kenichi (1981) Modern Capitalism and the State, Imanami Shoten, publishers (inJapanese).
Mizobata, Satoshi (2002) State Failure in Russian Transition to the Market Economy, Kansai
University Shogaku Ronshu, Vol. 47, No. 2–3 (in Japanese).
Musgrave, Richard (1959) The theory of public finance: A study in public economy, McGraw-Hill.
Myant, Martin and Jan Drahokoupil (2011) Transition Economies: Political Economy in Russia,
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Sato, Hiroshi (1965) Soviet Finances, Miraisha (in Japanese).
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Cures, Harvard University Press.
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Kazuho Yokogawa is associate professor at the Faculty of Economics at Kanagawa University, Japan. She has received Ph.D in Economics at Kyoto University in 2007. Her research andteaching focuses on the contemporary Russian economy, economics of transition, and comparative
economic systems. Her recent work includes fiscal problems in Russian regions under the centralization policy of Putin government, and the social contract between state and society in Russia interms of public service provision and fiscal redistribution.

Chapter 23

Why is State-Led Capitalism Stable?
Reconsidering Comfortable
Authoritarianism
Satoshi Mizobata

Abstract In contrast to the liberal orientation in the 1990s, the 2000s saw a strong
trend towards the ‘state-led’ system of governance. Emerging market economies
such as China and Russia have achieved high economic growth on the basis of stateled capitalist systems, and political and economic frictions with developed countries
have become apparent. These economic frictions have intensified the politicisationof economies worldwide. This study provides empirical evidence of the effectivenessof the state-led system and its stability.
Keywords state-led capitalism · emerging economy · penetration ·govermentalisation · security · authoritarian

1 Introduction
The transformation of the socialist economic system caused unprecedented changes
in the world economy. However, it did not mark the end of the contest between
systems; it marked its beginning. Thirty years ago, the euphoria of Europeanisation
had disappeared; the difficulties of political and economic integration became more
apparent; and China—a country with a small economy until 1990—was on the vergeof surpassing Japan as an economic rival to the United States. Today, the situation isserious, as China is seen as a catalyst of a new Cold War.
Concerning the market transition of former socialist countries, one scholar notes
the following:[N]ormalcy and convergence are two different things. The transition countries – hardly ahomogenous group – are normal in the sense that the challenges that they face are not specificto or caused by their transition status. There is a myriad of political and economic reasons
why convergence is a slow and slowing process. (Wachel 2021: 408–409)

However, this assessment is not conclusive. Insofar as the literature does not define
normalcy, examination of the economic system where transition countries have
S. Mizobata (B)Kyoto Institute of Economic Research, Kyoto University, Kyoto, Japane-mail: mizobata.satoshi.8e@kyoto-u.ac.jp© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_23

303

304

S. Mizobata

landed remains an open-ended question. The problem is situated in the transformation of the world economy beyond the framework of system change, in the riseof emerging market economies within the context of remarkable globalisation, thedigital revolution, and the fourth industrial revolution. Emerging economies—that
is, China and Russia—appear to engage in state-led capitalism, which seems more
effective than laissez-faire or self-adjusting societies in addressing the series of crises
faced by the world in the 2000s.
A strong hand does not prove the superiority of the authoritarian states. Rather,authoritarianism cannot be used as an excuse for the pandemic response if COVID19 has been caused and exacerbated by the secrecy of authoritarian regimes.
It is reasonable to state that a strong hand depends not on the nature of politics/politicisation/governmentalisation but on the high-quality institutional infrastructure of the state. Moreover, market quality, measured by the maturity of market
infrastructure, institutions, norms, values, and other factors (Yano 2009, 2010), is
inseparable from state quality. Therefore, emerging market economies may adopt
the authoritarianism front and centre, but they have not succeeded in introducing
new innovations in the quality of the market and the state.
The growth of emerging market economies, their institutional weaknesses, andpoliticised nature, as well as the constraints that stand in the way of sustained
growth, appear to be ‘social experiments’ for normalisation of state-led capitalism.
This chaper examines politicisation/governmentalisation through state-led-type capitalism, focussing on state–society relations in Russia and considers the reasons why
state-led capitalist society becomes stable.

2 Significance of State-Led Capitalist Economies
In emerging economies, the state plays a leading role, and its influence has penetrated
deep into the economy. Particularly for countries in transition, the 2000s saw the
return of state-led capitalism in response to international openness and neoliberalmarket economisation. In Russia, the state significantly amplified its influence during
the emergence of the economic crisis of 1998 and the growth period of the 2000s.
Djankov (2015) considers Russia to be on the course of crony capitalism to state
capitalism and regards the state control of strategic industries and sanctions from theWest as an indicator of the same. However, in the case of Chinese capitalism (Kato2013), in parallel with severe market competition and the expansion of the private
sector, the large presence of the state-owned sector, fierce market competition among
local governments, and bureaucratic and party ruling classes functioning as interest
groups has given rise to a literal state-led economic system. The state can be regarded
as ‘an economic entity that pursues commercial interests as well as state interests,
with the ultimate aim of increasing state assets’ (Kato 2013: 13).
In contrast to the free-market economy, ‘state capitalism’ has enjoyed a resurgence in comparative economics in the 2000s. Bremmer (2010) defines it as ‘a form

23 Why is State-Led Capitalism Stable? …

305of bureaucratically engineered capitalism particular to each government that practices it [and] a system in which the state dominates markets primarily for political
gain’ (Bremmer 2010: 23) and focusses on the following tools as indispensable forstate capitalism: a variety of intermediary institutions such as ‘national oil (and gas)
corporations, other state-owned enterprises (SOEs), privately owned national champions, and sovereign wealth funds (SWFs)’ (Bremmer 2010: 54) and the linkage ofgovernment rulers and managers. ‘There is no precise tipping point that separates
state capitalism from free marketers’ (Bremmer 2010: 46). Any country, including
those that have elements of both models, is located on the market spectrum between
two extremes: utopian communism and utopian libertarianism.
Further, Wood and Wright (2015) identify new statistics based on government
funds, military–industrial complexes, and public–private partnerships. They consider
the contemporary market in the context of the relationship between new statist players
and politics. Hu et al. (2019) characterise varieties of state capitalism with influence from business groups, and Musacchio et al. (2014) comment on the strategic
behaviour and governance of SOEs. Nee and Opper (2007, 2010) highlight theexistence of politicised capitalism in China, where political capital is linked toeconomic institutions. However, this view is not limited to China. For Russia, Oxenstierna (2015) describes a rent-dependent and redistributive economy in a politicised
economic system. The state, not the market, is at the centre of rent formation andredistribution.
Even though the state takes the lead in state capitalism, the institutional arrangements and the relationship (cooperation and conflict) between the state and business (corporations) differ across countries . Nölke et al. (2015, 2020) regard ‘statepermeated capitalism’ as a model by expanding the approaches of varieties of capitalism and comparative capitalist systems.1 Here, the state does not become omnipotent, but there is close cooperation and competition based on loyalty and trust between
individuals in a state–business alliance. The institutional basis is a strong state penetration of corporate governance and corporate finance, a low-cost, well-educatedworkforce, and a growing capacity for innovation.

3 Measuring State-Led Characteristics
How can state-led characteristics be measured in terms of the form, function, andquality of the state? We focus on three criteria for measuring state-led characteristics:
size, strength, and depth.
First, the state is large. On the one hand, it is measured by the size of the national
budget and of the national civil service. On the one hand, it is measured by the size of
public ownership and the size of state (related) enterprises, which are the economic
activities of the state. Second, the state is strong. Strength refers to the intensity of
1 The institutional foundations of comparative capitalism include corporate governance, corporate

finance, industrial relations, education and training, and the transfer of innovation.

306

S. Mizobata

300
200

state expenditure100

total state debts

0

USA

GermanyJapan

Singapore

India

China

RussiaFig. 1 State expenditure and state debts (2019, % of the annual GDP) (Source IMF,
Database, https://www.imf.org/en/Publications/WEO/weo-database/2020/October, 10 October
2020 accessed)

the state’s penetration into society, which is indicated by the frequency and intensityof state intervention, strength of the legal system and regulations, enforcement ofintervention, and strength of credibility. Third, state intervention reaches deep into
the socioeconomic fabric. This indicator is shown in the degree of penetration andthe size of the penetration area of state intervention. The state expands its areaof intervention not only through its public nature, education, labour, and industrial
policies but also through the expectations of businesses and citizens during the crisis,increasing the redistributive role of the state to achieve fairness.
A state-led capitalist economy satisfies all three of these criteria to a relatively
high degree. In this section, I measure the magnitude of these three criteria using
Russia as a representative case.
First, the state is not abnormally large in Russia, and both the size of the budget(expenditure) as a percentage of GDP and the size of the civil service per capita are
relatively close to the average levels for developed countries. Figure 1 shows the scaleof government spending and debt as a percentage of GDP, and these are no larger
in the case of Russia—as well as China and India—than in the case of advanced
economies, especially liberal representative states: the United States and Singapore.
In terms of the scale of government bond issuance, Russia is not far behind Japan.
However, the state was large in Russia. As the share of employment in the public
sector averages approximately 20% in the Organisation for Economic Co-operation
and Development (OECD) countries and 25% in Eastern European countries, thestate sector’s impact on the economy is relatively large, even though it has been
declining (becoming more privately owned) over time. Moreover, the weight of the
public sector in GDP terms in Russia is also significant: the private sector has beensteadily shrinking since the 2000s, where as the state sector has been increasing, but
the position occupied by the state can be assessed in different ways. For example, theInternational Monetary Fund estimates the size of the state sector at 33% of GDP in
2016, which is detrimental to competition, and it corresponds to approximately 50%
of official employment (Bella et al. 2019). In contrast, the Anti-Monopoly Agency
has found that the state sector is more important and has a similarly negative effecton competition, rising from 35 to 70% of GDP between 2005 and 2016, particularly
in sectors such as transport, energy, and resource extraction (Federal Anti-monopoly
Agency 2020: 14). Figure 2 shows the composition of the state sector in relation
to GDP, and although the size of the state-controlled sector has gradually increased

23 Why is State-Led Capitalism Stable? …
60
1.7
50
3.5 3.1 2.9 2.6 2.2 2.2 2.1 2.1 1.9
3.2
40
3.6
3.3
4.3
5.3
38.7
4.2
30 4.1 5.4 5.4
32.732.734.431.930.232.631.531.8 34
29.8
20 20.119.918.522.719.424.3 27 26.7
10
9.5 9.6 9.5 8.9 9.2 9.3 9.5 11.811.211.812.513.413.513.413.613.3 13
0 7.1 7.9

307

Unitary enterprises
state participating companies
state management

Fig. 2 State sector structure in Russia (% of GDP) (Source Russian Presidential Academy of
National Economy and Public Administration, Institute of Applied Economic Investigation, Indexof state ownership, 2000–2018 gg., https://ipei.ranepa.ru/ru/kgu/indeksy, 15 September 2020
accessed)throughout the 2000s, the greatest weight is probably given to the size of stateparticipation companies. At the very least, the state has taken control, and the scaleof its intervention in the economy is large.2
Is the state strong? Generally speaking, the frequency and intensity of state intervention (at various levels of government and state-related organisations) is high, andthis can be clearly seen in the development of the legal system. State intervention
in the economy in Russia has become the norm, and many interventions have beenlegalised. The intensity in the security sphere was particularly strong, and in response
to Western economic sanctions in 2014, a wide variety of industrial policies werelegislated. However, its strength cannot be overestimated: ‘Once you are in the orbitof the Despotic Leviathan, the state and elites controlling state institutions become
stronger and society and the norms meant to keep the state in check become even
weaker’ (Acemoglu and Robinson 2019: 67). In practice, law enforcement in Russia
is miserable, and infringements of the law occur. Raids, meaning illegal takeovers ofcompanies, and widespread corruption are sufficient to discredit the state (bureaucracy). The political intervention of economic elites and businessmen also plays a rolein weakening the strength of the state. They have access to political decision-making
and work with the system to help companies maximise their profits. Paradoxically,
the Russian state is not as strong as it seems.3
As size and strength do not explicitly characterise state-led capitalism, we concentrate on its depth. First, the state constitutes a diverse set of stakeholders. The stateis one of the players in the market; it is both a producer and a consumer and constitutes inter-state transactions (G2G). State purchases are used to support development
institutions and correspond to the orders placed by governments and municipalities.4

2 This trend has also been observed in China, where the debate is over whether the country should

be state-owned or privately-owned, see Nakaya (2019), who clarifies the control high ground.
3 Taylor (2018) argues for the paradox that aiming for a strong state creats a weak state.
4 The Presidential Decree of 21 December 2017 “Basic Direction of the State Policy on the Devel-

opment of Competition” stipulates the maintenance and development of competition. However, 5%of suppliers were awarded 82.84% of the contracts in 2018. Additionally, the number of cases of nocompetition in tenders conducted in the framework of the 44-FZ exceeds 50% (Volkov et al. 2020:
4).

308

S. Mizobata

In 2019, the total value of contracts awarded in Russia was 8.2 trillion, equivalent to 7.5% of total GDP, and construction accounted for approximately half ofthese contrants (42%; Volkov et al. 2020). The scale of tenders by state agencies andcompanies is increasing, but the focus is on the centralisation of tenders and on cases
in which the supplier is a state company (state agency contracts). With regard to thelatter, the state plays the role of both consumer and producer (service provider), as
well as being an auxiliary entity that supports economic activity, and G2G is thoughtto account for at least a quarter of all contracts.
Additionally, the redistribution of resources by the state not only supports enterprises but also contributes to social stability, and Russia’s centralised system cannot
exist without this stability. Traditionally, a variety of social benefits and material perks
were provided to the population, and as of 2019, social benefits accounted for 19%of the monetary income. After the market transition, the State Social Assistance Law
was passed in July 1999, but the law has been repeatedly amended ever since. Above
all, residents’ great concerns about social assistance can be observed in the sensible
nature of the response to the Federal Law on the payment of in-kind privileges on 12
August 2004 (122-FZ). This law clarified the division of powers between the federal
and regional governments, made benefits payable to the population at the expense of
the regions and municipalities (increasing the number of beneficiaries from eight in2006 to 21 in 2015), replaced in-kind benefits with monetary compensation, andsystematised social assistance for the population. Consequently, the number of beneficiaries of monetary benefits has increased from 6.6 million in 2006 to 25.4 million
in 2015, because of the global economic crisis and the inclusion of those who are
not necessarily in need, resulting in inadequate benefits and disparities due to local
financial constraints (Trubin et al. 2016). Therefore, the new law caused a backlashamong existing beneficiaries, did not succeed in ending poverty, and was criticisedfor its bias towards benefits for the elderly (Takeda 2019: 60).
The state’s social integration is based on financial backing. It is public finance,with its emphasis on oil and gas revenues, that bears the cost of this integration.5
Table 1 shows that the main state expenditure and compulsory expenditure items,
in particular, social policy–related expenditure, have risen sharply since the global
economic crisis compared to the early 2000s and have remained stable. Notably, theshare of mandatory expenditure on defence and security has declined since 2016.
The penetration of the state in society has been prioritised over defence. However,this has not necessarily freed defence from budgetary constraints.
The effect of mandatory burdens on social stability is also problematic. If poverty
and inequality are causes of social instability, then their reduction would imply theeffectiveness of policies for stabilisation.6 Econometric surveys based on the RussianLongitudinal Monitoring Survey (RLMS-HSE) and RUSMOD (a microsimulation
5 The following literature focusses on the transfer of rent to the service sector: Connolly (2018) andMiller (2018).
6 The income redistribution effect in Japan has risen from 20% to over 30% in the 2000s (Ministryof Health, Labour and Welfare, Income Redistribution Survey, https://www.mhlw.go.jp/toukei/list/
dl/96-1/h29hou.pdf).

23 Why is State-Led Capitalism Stable? …

309

Table 1 Expenditure structure of integrated Finance in Russia (% of annual GDP)
Total

2002

2004

2006

2008

2009

2011

2013

2015

2017

2019

31.6

27.8

31.1

34.3

41.4

33.3

34.7

35.8

35.3

34.0

Defense

2.7

2.6

2.6

2.5

3.0

2.5

2.9

3.8

3.1

2.7

Law and security

2.2

2.3

2.7

2.6

3.2

2.5

3.0

2.5

2.2

2.0

Social, total

13.9

9.8

17.0

17.1

21.7

20.7

21.4

21.9

22.3

21.6

Education

3.8

3.5

3.9

4.0

4.6

3.7

4.0

3.7

3.6

3.7

Health

2.4

2.2

4.0

3.7

4.2

3.2

3.2

3.4

3.1

3.4

Social policy

5.7

2.4

8.4

8.7

12.2

10.8

12.0

12.6

13.1

11.8

Debts service

2.2

1.1

0.8

0.5

0.6

0.5

0.6

0.8

0.9

0.8

Source Rosstat, https://rosstat.gov.ru, 20 September 2020 accessed

model for fiscal incidence analysis in Russia) (Matytsin et al. 2019; World Bank
Group 2016) clarify the performance of the Russian tax-benefit system (Table 2).7
Above all, direct taxes and pensions have the greatest poverty-reducing effect,
doubling the poverty rate if pensions are deducted from income. Social insurance
contributions also contribute to poverty reduction, followed by social assistance,
albeit to a lesser extent than pensions. Regarding changes in the Gini coefficient,pensions are also the most effective means, followed by social assistance and indirect taxes, while social security contributions increase inequality. The World Bank
Group (2016) also gave us the same results, while stressing the effects of in-kindtransfers. Pension households (the older generation) have become the biggest beneficiaries of tax redistribution, whereas other household types play the role of donors(Matytsin et al. 2019: 9–10). In Russia, the flat income tax system means that the
tax system has little effect on reducing inequality and poverty, but income transfer
through pensions and in-kind transfers has a significant effect.
The state penetrates society in the form of wages through employment,
and through redistribution channels. Effective social policy encompasses only alimited class of citizens, and the effect of the mandatory burden should not be overestimated, given the measures taken to raise the pension age (from 60 for men and55 for women to 65 and 60, respectively). Nevertheless, given that everyone will bea pensioner and has the possibility of accessing benefits in kind, the penetration of
the state into society and households cannot be ignored.
The sphere of state penetration has deepened during each crisis. In Russia, after
the market transition, measures were taken to maintain employment. The economiccrisis of 1998 was characterised by a total intervention in economic life, including
the declaration of a state of emergency; the contagion of the global economic crisis in
2008–2009 was also accompanied by large-scale economic intervention. In response
7 Despite being official Russian statistics, they are inaccurate because of under-reporting and under-

declaration of income and the existence of unofficial sectors. Not all measures are included in themodel. In-kind measures, although effective in reducing inequalities, are not considered becauseof the difficulty of tracking them (Matytsin et al. 2019: 8–9).

310

S. Mizobata

Table 2 The overall redistribution effect of the tax-benefit system in Russia (2017)

Gini
index

Original Disposable DPIDPI plus
income incomeminussocial(DPI)pensions insurance
contributions

DPI minus
Consumable Disposal
non-means-test income
incomesocialeffectassistance(%)
benefits

0.496

Poverty 34.0
rate
(%)

0.348

0.476

0.352

0.356

0.355

29.8

14.7

39.3

11.0

16.8

21.1

56.8

Note disposal income = original income – direct taxes (direct benefits), before indirect
taxes/benefits.consumable income = disposal income – indirect taxes (benefits) Source Matytsin et al.
2019: 9–10

to the economic sanctions imposed on Russia following the annexation of Crimea
and the crisis in Ukraine, industrial policies have been implemented to substituteimports, and in the case of COVID-19, there has been widespread intervention inpeople’s lives, the economy, industry, and healthcare. The more capitalist the country
becomes, the deeper is the penetration.
Despite its inadequacies in size and strength, Russia has shown a degree of penetration sufficient to qualify it as ‘state-led capitalism’. The process of consolidating
authoritarian regimes can be seen more clearly in China than in Russia. In China, too,the state-led characteristic is evident in the tacit compromise between the promiseof sustained improvements in the living standards of the population in exchange forrecognition of the exclusive political power of the Communist Party and in the decentralisation of decision-making and initiative under central control, devolution of local
corporatism, and acquisition of cutting-edge technology through the introduction of
global value chains (GVCs) (Boyer 2021: 171).

4 Cycle of Politicisation and Governmentalisation
The growth of emerging economies in the 2000s and the formation of state-led capitalism, symbolised by emerging economies, point to the emergence of economic
agents linked to the state in the global market and the governmentalisation of
economic agents themselves. The penetration of the state into corporate management has been both direct and indirect. In Russia, symbolised by the 2003 Yukos
affair, we find a strong state hand in the oil and gas sector, which is at the centreof national interest. State intervention can also be observed in China, such as theantitrust fine against e-commerce giant Alibaba in May 2021.
According to the OECD (2016), SOEs have become the main competitors in the
global marketplace8 , and they are motivated not only by commercial gains but also
8 Twenty-two of the world’s 100 largest companies are effectively under state control.

23 Why is State-Led Capitalism Stable? …

311

by public policy and political objects. When SOEs receive cheap state financing, faircompetition is damaged. The following may be included as privileged preferential
treatments: preferential financing from SOEs and other state institutions, privileged
access to information, outright subsidies/tax concessions, in-kind subsidies, grants
and other direct payments for R&D and environmental and green programmes, privileged position in the domestic market, explicit or implicit guarantees, exemptions
from bankruptcy rules, preferential regulatory treatment, preferential treatment inpublic procurement, price supports, support in the form of commercial diplomacy,and other measures (OECD 2016: 28–30). The OECD (2016) kists 326 companies
as the largest state-invested firms, based on the 2015 Forbes 2000 Global ranking ofcompanies; among them, the majority belong to China (128), India (34), the UAE(11), and Russia (10). Even though most OECD countries have a lower share of SOEs,
their impact in the utilities sector; network industries; and, in some cases, the financial
sector is larger and augments their power (OECD 2016: 20–21). In short, state-led
economies enhance their politicisation/state intervention, and developed economies
also strengthen politicisation in response to global competition. Moreover, politicisation/governmentalisation in the global marketplace is promoted by an environment
marked by a global inclination towards political populism, the development of new
industrial revolutions and innovations, and an emphasis on global risks and global
issues, as exemplified by global warming and climate change (Endo ed. 2015).
The confrontation between the United States and China has far-reaching consequences, including not only trade, but also technology and cyberspace, and cannot
be limited to friction over tariffs. On the Chinese side, economic frictions havebecome even more heated, as developed countries have imposed economic sanctions against China in response to the current one-country-two-systems situation
over Hong Kong’s National Security Maintenance Law and the human rights of the
Xinjiang Uyghurs, and China’s counter-sanctions have also worsened the confrontation. The same situation can be observed on the Russian side. Triggered by the
Ukraine crisis, the West has imposed economic sanctions against Russia, and Russia’scounter-sanctions have been prolonged indefinitely, prompting politicians to compare
the situation to a trade and economic war:
Economic sanctions have become an increasingly popular international policy tool in recent
years and even the preferred foreign policy tools of the US and EU in some cases. Globally,
the number of sanctions in force almost doubled between 2006 and 2014. (Davydov et al.
2021: 31)

In this environment, insofar as sanctions amount to war, all economic policies aretilted towards security; politicisation and governmentalisation are increasing in theemerging countries concerned as well as in the developed countries complementarily.
The security debate is even seen as a safeguard to secure national interests, increasing
the degree of state interference and protectionist trade (UNCTAD 2020). In particular, the concept of economic security, which in the neoliberal view of policy tended
to focus on employment stability because of limited state intervention, has expanded
to include areas specific to the country in question owing to the emphasis on international economic competitiveness (Nakamura 2020). A series of global economic

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S. Mizobata

200
150
100
50
0

2
20

1
25

142 118

0
22
104

2
19
58

2
15
51

4
24
61

6
33
77

3
21
62

6
21
65

3
21
63

10
12
52

11
14
75

19
22

23
23

84

96

neutral/ indeterminate

16
31
65

20
21
66

Restriction/ regulation
Liberalisation/promotion

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Fig. 3 Changes in national investment policies: 2004–2019 (Number of measures) (Source
UNCTAD 2020: 97)

crises, the United States–China economic frictions, and the COVID-19 pandemic
have further bolstered its significance.
Foreign investment restrictions have been tightened on security grounds;
investment-screening schemes have been introduced; and the number of countries
with such schemes (30 at the end of 2019) and their share of inward FDI balances is
steadily rising. Figure 3 illustrates the changes in foreign investment policy, with anincrease in the number of negative-change cases in 2010 and 2018.
The OECD has stated that emerging countries pose a security risk because ofgeopolitical changes and has accepted investment restrictions on security-relatedindustries such as arms, aircraft, nuclear power, space exploration, telecommunications and broadcasting, and transport. In particular, both the expansion of investments and acquisitions by SOEs pose a security problem as they presuppose strategicacquisitions and non-market behaviour, such as in the case of advanced technologies.9
The United States has tightened the review of inward capital acquisitions throughthe Foreign Investment Board. In 2018, the Trump administration restricted dominant
and non-dominant investments and land transactions by foreigners through the Export
Administration Reform Act and the Foreign Investment Risk Review Modernisation
Act, as well as imposed strict controls on the outflow of technology. The restrictions
cover emerging and fundamental technologies, as well as aviation, telecommunications, shipping, power generation, banking, insurance, real estate, undergroundresources, and national defence. Next, the 2019 Defence Powers Act banned theuse of products and technologies from Chinese companies such as Huawei and ZTE
on security grounds and included them in a trade blacklist. The European Commission has also imposed restrictions under the Common Foreign and Security Policy,
including an arms embargo, asset freeze, and more than 40 other sanctions against
Russia, Belarus, Iraq, and other countries.
Japan has adopted security-related legislation since the December 2013 Act on theProtection of Specific Secrets and has drawn up a list of companies to be pre-screenedin 2019 to tighten the rules for foreign capital share acquisition. This includes key
industries such as arms, aircraft, and mackerel security; the main Japanese companies
involved in these industries; and medical equipment and vaccines because of COVID19.
9 See Wehrlé and Christiansen 2017; ‘Acquisition- and ownership-related policies to safeguard

essential security interests: Current and emerging trends, observed designs, and policy practicein 62 economies’, May 2020 (https://www.oecd.org/Investment/OECD-Acquisition-ownership-pol
icies-security-May2020.pdf, accessed on 25 May 2021).

23 Why is State-Led Capitalism Stable? …

313

China has also established a list of prohibited areas for foreign investment in
the areas of safety, public interest, environmental pollution, and protection of land
resources, and the examination of foreign investment has also been tightened.10 In
September 2020, transactions by foreign companies deemed to have unfairly harmed
Chinese companies were restricted or banned. Additionally, on 10 June 2021, China
adopted an anti-foreign sanctions law that retaliates against foreign countries if they
re-invade China, further heightening frictions. At the very least, it is difficult to see
how the parties involved in the United States–China ‘war’ can ease the conflict.
The rise of opposition among emerging and developing economies to mergers andacquisitions (https://www.jetro.go.jp/biz/areareports/special/2020/1001/9b5420160
7380739.html, accessed on 25 May 2021) points to one aspect of linking security
to the economy: thirteen objections were made in 2019, three of which are securityrelated and two of which target Chinese investors (UNCTAD 2020: 103).
Politicisation is observed not only in the international trade and investment fields
but also—and more clearly—in innovation. In terms of the digital transformationand the Fourth Industrial Revolution, state leadership is strong, and underlying thisis a crisis consciousness around labour productivity due to the depletion of thelabour force. Ito (2020) discusses the benefits digitalisation can bring to emerging
economies, and the growth of major IT companies is, in fact, tied to government
strategy. ‘Made in China 2025’ (2015), which aims to make China the world’s largest
manufacturing nation by identifying priority areas such as information technology,
has been proposed, and industrial policies have been implemented for the semiconductor industry. China adopted the ‘China Standard 2035’ in 2017 to establish aninternational standard for high technology. In March 2021, the National People’s
Congress adopted the ‘Fourteenth Five-Year Plan for National Economic and Social
Development and the Outline of Long-Term Goals to 2035’, which includes thedevelopment of a national innovation system and human resource development asgoals, including the strengthening of security.
The inclination of the state towards strategy and industrial policy has also been
observed in Russia (Mizobata 2020). In December 2014, the Presidential Message
identified the creation of a national technology initiative as a priority national policy
and called for the formation of conditions for Russia to become a global technology leader by 2035. In 2015, the Agency for Strategic Initiatives was established, and in 2016, an initiative was underway to create a new market worth $100
billion in 2035, using China, Germany, and other countries as models. This initiative is a ‘long-term comprehensive programme aimed at preserving the leadershipof Russian companies in the high-tech market on the basis of joint public–private
projects’ (Idrisov et al. 2018: 12) and serves as a new industrial policy.
Russia’s policy to develop science and technology based on national projects
has been implemented with the goal of creating a world-class science centre in
2019, in which seven priority development directions for 2020 have been arranged,
including digital technology, ecology and energy conservation, and medicine andhealth. The development of digitalisation, science, and education is at the centre of
10 See JETRO (2020).

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the programme. In other words, Russia under Putin’s regime has consistently pursued
a state-led policy of science and technology development, and by 2014, it had placed
an innovation policy centred on digitalisation at the core of its growth strategy.
This inclination towards national strategy, innovation, and industrial policy isalso observed in developed countries. It is particularly typical in the constructionof supply chains for key components such as semiconductors and batteries. At least
110 countries have issued industrial policies or policy frameworks for industrial
development, all led by a ‘targeted industrial policy’ to create jobs and ensure longterm economic growth and national security (UNCTAD 2020: 147).

5 Cosy Authoritarianism versus Depressing Democracy
Politicisation and governmentalisation are not phenomena confined to emerging
economies but are occurring on a global scale. Moreover, the deepening of globalisation has strengthened governmentalisation, and it is even possible to observe complementarities between emerging and developed countries, which mutually strengthen
governmentalisation. Economic activity is politicised under these circumstances, andeconomic agents are forced to adapt their business strategies to government sanctions
or security-oriented policies.
Globally (V-Dem Institute 2021), an increasing number of people are living
under authoritarian regimes, especially under electoral authoritarian regimes, andthe degree of liberal democracy has decreased from 2010 to 2020, even if the world
has become more democratic since the 1970s. The most remarkable declines are in
Poland, Hungary, Turkey, Brazil, other emerging economies, and the United States. In
the V-Dem Institute’s Liberal Democracy Index, Denmark is the highest-performing
country, with the European Union (EU) mainly in the top 10%, while Japan and theUnited States are in the second-highest decile. Conversely, China is in the bottom
10%, while Russia, Vietnam, and Turkey are in the second-lowest decile. In many
countries, the COVID-19 pandemic is also used as an excuse for authoritarianisation(V-Dem Institute 2021: 36). Based on the above trend, governmentalisation can beseen as a ‘normal’ responses to the global crisis of the 2000s, when developed countries and markets failed to prevent the outbreak of the 2008 global economic crisis,
and a ‘perfect storm’ (UNCTAD 2020: 120) of the COVID-19 with unprecedented
intervention, and protective measures. Consequently, governmentalisation reduces
the dividends of democracy, and there is a segment of the population that supports
governmentalisation regardless of the political regime.
The degree of state penetration was measured using Russia as a case study, where
pensions have helped to reduce economic disparity and poverty, and the state has
contributed to providing a safety net through jobs, benefits, in-kind services, and othermeasures. When we consider that political support is attributable to stability in daily
life, the support level for President Putin is remarkably high, despite the authoritarianregime. Insofar as this support is because democratisation has not necessarily broughtsocial equality and has caused disparities to widen, and because the state fulfils the23 Why is State-Led Capitalism Stable? …

315

function of a social safety net, then Russia can be described as a ‘cosy authoritarianregime’. An increase in the size of the ‘civil service’, which depends on the state,allows it to enjoy stability as well as the fear of redundancy, and the middle classes
expect better economic conditions under authoritarian regimes (Rosenfeld 2021:
19). In fact, real wages and consumption levels have continued to rise regardless ofchanges in oil prices, and the state has been called upon to take social responsibility
in the event of wage arrears by companies (Mizobata 2010).
The cosiness of authoritarianism has also been noted in China. When one’s material livelihood is heavily dependent on the state, it is natural to have an interest in thecontinuation of the status quo, even if it is not liberal or democratic (Wright, 2010:175). In China, however, where digitalisation is significantly more advanced thanin Russia and growth is sustained, paternalistic relations are not limited to material
safety nets. Kajitani and Takaguchi (2019) characterise digitalising China as ‘a happy
surveillance state’. China’s economic system is congenial to the values of its people,
and ‘even if they ultimately have the power and the option of violent repression,
they need to protect as much as possible the pretence that the people support the
dictatorship’ (Kajitani and Takaguchi 2019: 126). This characterisation cannot be
confined to China. Kajitani and Takaguchi (2019) argue that when governments use‘nudges’ to encourage people to change their behaviour, not only in China but also
in developed countries, this phenomenon also applies to governments in developed
countries, and in a country with a ‘civil society’ with little capacity to monitor thegovernment, the possibility of Sinicisation cannot be negated.
Democracy, in contrast, suffocates. In spite of digitalisation, the surveillance capitalism brought about by the concentration and secrecy of personal data by GAFA
(Google, Apple, Facebook, and Amazon) shows the horror of market monopoly andthe risk of a divided society (Bartlett 2018; Foroohar 2019). The need for regulations
is common.11 In the United States, inequality and fragmentation characterise society,and the instability of regime change suggests that people are not always happy withrules; in the EU, globalisation is increasingly seen as a threat, and European scepticism and anti-liberal populism are emerging, for example in Poland and Hungary(Shoji 2018). In the case of Japan, the Pew Research Center survey paints a pessimistic
picture, with high levels of dissatisfaction with both democracy and the economy.12 In
2021, Japan was ranked 67th in the world for press freedom—the worst among developed countries—and this is considered a ‘problematic situation’ (Reporters Without
Borders, The World Press Freedom Index, https://rsf.org/en/ranking, 25 May 2021
accessed).13

11 In June 2021, the United States parliament discussed revision of antitrust bills, for regulating

the giant information technology monopolistic enterprises following a detailed investigation report(Nadler et al. 2020).
12 See Japanese Feel Better About Economy But Negative About Future | Pew Research Center.
13 The state-led capitalist countries are ranked at the bottom: Russia at 150th and China at 177th.

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Voice and accountability

60
50
40
30

Political Stability and
Absense ofViolence/Terroism
Government
Effectiveness
Regulatory Quality

20
10

Rule of Law

0

Conrol of Corrption

Fig. 4 World governance indicators in Russia (Note Percentile Rank (0–100): rank of country
among all countries in the world. 0 corresponds to lowest rank and 100 corresponds to highest rank.
Source Worldwide Governance Indicators (WGI) 1996 ~ 2019, https://info.worldbank.org/govern
ance/wgi/Home/Reports, 25 May 2021 accessed)

6 Perspective of State-Led Trends
Today, ‘state-led’ has become the norm, and it is so large, strong, and deep that an
economic system worthy of being called ‘state-led capitalism’ can be found mainlyin emerging economies. However, the market and the state are not necessarily mutually opposed. ‘State-led’ is based on the interconnectedness of the state and themarket. The market seeks the existence of the state as its guardian, and the stateseeks the market as a major tool for economic development and a channel for globalisation. Therefore, the rise of ‘state-led’ and governmentalisation can be observedin advanced capitalist economies (Boyer 2021), and both advanced economies andemerging economies appear to be complementary.
‘State-led capitalism’ does not imply a high-quality state, and there is no guarantee that the cosiness that underpins it will last. The following indicators suggest a
difference of state quality.
First, the Worldwide Governance Indicators (WGI)14 clarify the miserable positions of China and Russia, compared with advanced economies. Even though all theindicators reveal low quality, Russia’s scores for rule of law, voice, accountability,
and control of corruption are particularly miserable (Fig. 4 and Fig. 5).
Second, the quality of government (QOG) Institute at the University of Gothenburg (Sweden) considers QOG—obtained by using a variety of indicators such as
health, the environment, social policy, and poverty—as a benchmark for measuringcredible, fair, corruption-free, and competent state institutions; however, QOG indicators are low among so-called state-led economies. For example, the fragile states

14 Seehttps://info.worldbank.org/governance/wgi/ (5 March 2021 accessed). The survey
was conducted in over 200 countries and territories over the period 1996–2021 for six dimensions: voice and accountability, regulatory quality, political stability and absence of violence, ruleof law, government effectiveness, and control of corruption.

23 Why is State-Led Capitalism Stable? …

317
Voice and accountability

80
70
60
50
40
30
20
10
0

Political Stability and
Absense ofViolence/Terroism
Government Effectiveness
Regulatory Quality
Rule of Law
Conrol of Corrption

Fig. 5 World governance indicators in China (Note Same as Fig. 4. Source same as Fig. 4)

index (the failed states index),15 political corruption index, and other indexes are at
low levels in emerging economies, including China and Russia.16
State-led capitalism is politically authoritarian and deeply entrenched in stateled characteristics. The state cannot be (over)estimated only in terms of its size andstrength, and a deterioration in its quality can be observed. The depth of the state ismeasured by state penetration into society through income redistribution, as well as
the attributes of the state players. If we emphasise that the problem lies in the sourceof its funding, the source of state-led capitalism in Russia is heavily dependent on oil
and gas revenues and in China, on manufacturing and innovation based on GVCs.
What, then, is the origin of ‘the state-led’? In modern economy, where the private
sector and the markets’ function and the state strategically complements market
failure, the state-led stems from the malfunctioning or disappointing results of themarket. However, we cannot indulge in such modest assessments. In state-led capitalism, the interests of the ruling elite are the driving forces. There is a proactive willthat creates initiative. It may be seen as a kleptocratic system, where groups linked
by both politics and economics form a system of plunder and create a state initiative
to maintain it (Åslund, 2019). In this respect, it will be reasonable to say that Russia
and China have a system in common, although their political systems are different.
Insofar as both Russia and China, which experienced or are experiencing socialist
economic systems, institutionalise state-led types of governance, institutional change
may well be path-dependent. Dzaraso (2011) finds the sources of Russian capitalism
in the decline of the Soviet system and the influence of world capitalism. Therefore,
private ownership exists in affinity with the state. This means that the quality of theRussian market itself was also developed on the initiative of the state. The same
applies to China: ‘The state and elites controlling state institutions become stronger
and society and the norms meant to keep the state in check become even weaker’(Acemogul and Robinson 2019: 67).

15 It is measured by 12 political, economic and social indicators, including population issues,

refugees and economic inequality.
16 See https://qog01-p.gu.gu.se/shiny/users/xalvna/qog/map2, accessed on 5 March 2021.

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Why are market institutions so fragile? Why do people react to state decisions?
As Table 1 and Table 2 show, we may stress the state’s takeover of the people or the‘tacit contract’ whereby the people accept and conform to state-led trends. However,this contract cannot be overestimated. The scale of the takeover is low compared tothat of the European welfare states. In contrast, the resources for acquisitions are at
risk of drying up. Paradoxically, the state-led is based on the values of the people,
who are satisfied with the redistributive policies of the state, even if they are low, andthese values have not undergone a drastic change in the 30 years since the market
transition.
At the opposite end of the spectrum from the liberal values of the United States
is Russia, which the society is significantly more dependent on the state. Interestingly, Poland was in close proximity to Russia. Japan places a clear emphasis on
state responsibility despite its low orientation towards state ownership. In addition
to the unique positions of each country, we find a shift away from private ownershipand personal responsibility, and we observe a shift towards state responsibility inGermany and the United States, whereas in Russia, the shift towards state responsibility is either stronger or generally more stable. In other words, the level of state
responsibility in Russia has been stable and high in the context of the global increasein state dependence since the 2000s. In this case, if democracy is a constraint on state
dependence, the population judge’s democracy as a regime risk and sees authoritarian acceptance as an advantage (Rosenfeld 2021: 47–48). State dependence canbe seen as an essential benefit for the population, especially for the middle classes,
in the provision of public goods such as health, education, public transport, energy
supply, and job security.
The sustainability of state-ledness depends above all on the sustainability of theresources used by governments to ‘buy off’ their citizens. Given that resources are
finite, innovation is essential, while maintaining/increasing cost payers and reducing‘tacit contracts’ is demanded. This is why the population problem is considered themost critical factor in state-led capitalism. The higher the cost, the more uncomfortable the situation becomes, and the more the state wants to have a policy in which
all citizens share the pain.

7 Conclusion
The beginning of the twenty-first century was marked by terrorist attacks in the
United States and China’s accession to the World Trade Organization.17 In fact, thegrowth of emerging markets, especially in Asia and China has been remarkable,
while the 2008 global economic crisis has strengthened the presence of emerging
countries. Additionally, this crisis highlighted the importance of state intervention,
which may have been fuelled by the emergence of populist politicians. The market

17 Russia joined the WTO in 2012.

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319

was powerless to address poverty as well as economic inequality, and expectations
were placed on the state’s safety-net (OECD 2013, 2014).
The growth-obsessed emerging economies, especially China and Russia, aregenerally superimposed on authoritarian regimes, and consequently, the ‘variant’ ofstate capitalism in the global economy gradually spawns new growth ‘by-products’.
China, the world’s factory since the 2010s, has become a key player in GVCs, withadvanced manufacturing, research and development, and the emergence of the ‘One
Belt, One Road’ global economic strategy. No longer subordinate to the developed
world, China has developed a competitive growth strategy. Russia, as if in response
to China, launched a more dynamic offensive from its position as the energy supplier
to Europe and challenged the long-term war of economic sanctions and countersanctions. In both cases, the predicted growth has provided the impetus for innovation; here, the driving force has been none other than the state. Growth has ensured theprosperity and security of the population, which in turn has fostered public support,
comfort, and happiness under authoritarian regimes.
The economic systems of developed and emerging countries resonate aroundthe state-led character, and even ‘complementarity’ can be observed. The division
between politics and economics has disappeared, and this mixture has been broadenedby digitalisation and innovation. It will not be an exaggeration to say that all goods
are now subject to security. Both the politicisation and governmentalisation of theeconomy have spread globally and appear to be self-perpetuating. The COVID-19
pandemic was the culmination of this process. Medical and pharmaceutical products, including masks and vaccines, are not only international public goods but also
security imperatives, and both developed and emerging countries are undergoing astate-led restructuring of the international division of labour and innovation policies.
Interestingly, and ironically, in all of these countries, the state stresses the need fora strong hand but struggles to secure trust. The perspective of state-led capitalism
provides us with a means for thinking about the future of developed economies.

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Satoshi Mizobata is Professor Emeritus and at the Kyoto Institute of Economic Research, Kyoto
University, Japan. He is Council member of Science Council of Japan. He was awarded his degree

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of doctor in Economics at Kyoto University in 1997. He has investigated planned economies andtransition economies based on the firm structure and corporate governance. He is chief editor of
ISI-cited Journal of Comparative Economic Studiesand contributes to editing of some other international journals. He is a member of the executive board of the European Association for Comparative Economic Studies. His recent publication: State-led innovation and uneven adaptation in
Russia, in Steven Rosefielde ed., Putin’s Russia: Economy, Defense and Foreign Policy,World
Scientific, 2020.

Chapter 24

Professional Associations’ Contribution
to a New World Order Formation – The
Case of Russia
Olga Bobrova

Abstract Professional communities are important actors of civil society in most of
the countries around the world. Professional in different fields – industries or functions of management – come together, make groups, join each other with different
non-commercial goals and boost economic development. Although the relationsof government and business from one side and non-profit organizations and nongovernmental organizations from the other side differ in the context of different
world regions, they must be considered as important stakeholders for the New World
Order and they play a unique role contributing to mitigation of the world wide problems – poverty, disease and unemployment. Many Associations made significant
efforts to improve the quality of the market in their countries, they provide deeper
engagement of business into the local communities, NPOs and other stakeholders.
In Russia we have an example of Russian Business Ethics Network which targets
compliance education of business and CSR and sustainable development promotion.
In Japan we may learn from Japanese Forum of Business in Society founded in 2011.
Keywords Professional communities · Business ethics · Compliance · Corporatesocial responsibility (CSR) · Stakeholders · New world order · Russian
management · Sustainable development

1 Introduction
Professional societies, unions, forums, associations and other collaborations areimportant actors of civil society in most of the countries around the world. Professionals in different fields – industries or functions of management – come together,make groups, join each other with different non-commercial goals and are really able
to influence on the societies. In Japan we have a perfect example – The Japanese
Forum of Business in Society which was founded in 2011. During last decade theJapanese companies have become more deeply engaged with local communities,
NPOs and other stakeholders. Maybe due to exchange of experience on the JFBS
O. Bobrova (B)St. Petersburg State University of Economics, St. Petersburg, Russia© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_24

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they became more socially responsible and business of other countries will learn thebest practicies.
In my country Chamber of Commers and the Russian Union of Industrialists andEntrepreneurs (RSPP) was founded and supported by the government. But now there
are some independent NGOs which unite professionals.

2 Classification of Professional Communities
2.1 The First Business Associations in the New Russia
Some unions are sponsored by government in Russia. They were founded in 1990s
to follow the world patterns. Every developed country has a Chamber of Commerce,
so in Russia we also need to have one. The Russian Union of Industrialists andEntrepreneurs (RSPP), the biggest business union nowadays, was established inJune 1990 as a non-political organization to protect the interests of industry. Russian
government and parliament members were the key initiators of the union and I
guess they used some administrative resources to establish the organization. “RSPP
priorities include: promotion of the business community interests in Russian and at
the international level and consolidation of Russian industrialists and entrepreneurs‘
efforts for business environment development; enhancing the status of business in
Russia and the world; maintaining the balance of interests of society, governmentand business” – may we read on the web-site of the organization.
During last years these big and influential organizations focused on the fightwith corruption. In Russian Chamber of Commerce was established the Councilof business ethics and anti-corruption. And Russian Union of Industrialists andEntrepreneurs has launched an anti-corruption rating for Russian business.

2.2 Independent Unions
Along the development of independent Russian business some new associations
were opened. For example, “Delovaya Rossiya” (Business Russia) and OPORA
union. They unite Russian business of different size – the first union includes large
businesses and OPORA specializes on the small and medium enterprises.
Later, businesspeople decided to make unions in accordance with their professional specialization. Association of Managers of Russia is a good example.
We may compare diversity of Russian business Associations with the two big
ones which act in Japan for many years: Japan Business Federation and Nippon
Keidanren. Although we cannot say that influence of Russian organizations is on thesame high level as in Japan.

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325

3 The Role of Civil Society in the New World Order
Formation
3.1 New World Order in Regional Aspect
The term “New World Order” was introduced in the years of the First World War
by N. Butler (1915). The main idea was about creation of the World Federation. UN
contributed into realization of this concept. Moderation of the wars, as a functionof this world organization in the beginning of XXI century still is needed. At thesame time there is a number of other important problems which our world faces
nowadays. «The essence of the new world order is characterized by the following
trends: the strengthening of structural changes in the state and social arrangement of
individual countries; transition to a new economy; the formation of a civilized man.
However, even at this stage, there are such constraining factors as poverty, disease andunemployment» (2017)—states Sh. Zainutdinov. Therefore, we must concentrate on
solving the local problems in different regions of the world.
Regional aspect of the world development includes the local economic development. So, the main actors of the New World Order in our century are subjectsof business and their unions as well as professional communities. The last are important stakeholders of companies which are able to improve their business with thehelp of expertise of the professional communities mostly acting as NPOs.

3.2 Civil Society
In many countries non-profit organizations and non-governmental organizations arestill relatively weak and, generally speaking, the ties with most of the stakeholders
are still underdeveloped. That may be said about Russia and its eastern neighbors.
Among stakeholders of business, NGOs and NPOs provide the special links
between society and companies. The most of corporate social responsibility (CSR)
programs are realized through NGOs, in ESG agenda thier role also is leading. Groupsof people with similar interests may join the movements to pursue their goals. Professional communities allow to provide common development of people engaged indifferent organizations along with their professional needs through exchange of theirexperience and knowledge. And the civil society becomes stronger by developmentof variety of NPOs and NGOs.

3.3 The Ways of Influence of NPOs on the New World Order
NPOs influence development and implementation of the laws in their countries andthey also promote world initiatives regarding sustainable development, ESG etc.

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O. Bobrova

Business associations contribute into the development of CSR and making business more transparent and understandable for its stakeholders. For example, many
companies join Global Reporting Initiative and publish their non-financial reports.
The companies get recommendations to step into this process by the associations
where they are members. Also, business is responsible for innovation, manufacturing and delivery of the basic goods and technologies to the people of the planet,so companies are providers of standard of living. Within the associations companies
may develop the rules and approaches which they apply to the market. And the international standards, such as ISO 26000 and ISO 37301: 2021, are also developed withparticipation of many companies. The implementation of standards of CSR, compliance, anticorruption, stakeholder engagement and so on make business involved into
the solving social problems of the world under the New World Order. Not to say
about lobbing the interests of the business in governments and among politicians.
In 2020 Russian Federation for the first time presented the First voluntary National
Review of UN Sustainable Development Goals. The presentation was made by the
Russian Minister of Economic Development Maxim Reshetnikov in New York. The
Minister told his listeners about the results of several years monitoring of socioeconomic development, especially he focused on the measures taken to tackle theconsequences of the COVID-19 pandemic. Several NGOs contributed their competence into the report. And now we are assured that Russia is on the way to sustainable future. In 2022 we entered a new world economic crises and professionals
in Russia now are involved in developing ways to overcome consequences of theeconomic sanctions for the Russian society.

3.4 Russia as a Regional Actor in North-East Asia in XXI
CenturyIt’s difficult to say that in XXI century our world became more unified. “The current
situation of global uncertainty in the development of the world economy leads to theformation of multilevel and multidimensional economic multipolarity” (Arkhipov
and Yeletsky 2014). We may consider Russia as one of the points of growth in the
global economy. And in North-East Asia we know several regional powers apartfrom Russia – Japan, both Koreas and China.
Russian Far East is developing intensively. Transport infrastructure in Siberia andFar East will provide my country the means to strengthen the trade relations with theeastern neighbors.

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327

4 Russian Professional Communities in the Business Field
But no means and resources can help if managers in business are acting without
integrity. If they not only escape making not ethical decisions but also if businesspeople do the right things due to wrong reasons. In the business assemblies integrity
has been discussed and developed.
If we consider a businessman to be a profession (specialization), we must admitthat businessmen started to unite into the unions and Associations in Russia in 1990s.
We mentioned above the national movement in business circles to promote fair business. For example, at RSPP there is a Committee on Corporate Social Responsibility
and Sustainable Development. But in newly appeared independent business associations some are exactly focused on business ethics and CSR. The example is in thenext part of the paper.

5 Russian Business Ethics Network
Association of business ethics, compliance and corporate social responsibility(Russian Business Ethics the Network—RBEN) is a professional community ofRussian researchers in the above fields, as well as representatives of business. The
association units those who share the values of the association and are interested
in the development of fair business in our country. The Association is a member ofEuropean Business Ethics the Network—a European network of national associations in the field of business ethics. RBEN was founded in 2016 and now consists ofmore than 170 individuals and 4 corporate members.
The mission of RBEN is a research and promotion of the principles of ethical andsocially responsible business and sustainable development in Russia and the world.
The main projects of RBEN are:
1)
2)

3)
4)
5)
6)
7)

Development of new educational case studies on business ethics, compliance,
CSR and sustainable development on Russian companies’ data;
More than 20 professional round tables in 2020–first quarter of 2021 withdiscussions of compliance (including digitalization), business ethics problems (including gender discrimination at work issues), environmental matters,
corporate social responsibility and others;
The annual contest of student research papers;
Educational products for advanced training in the field of business ethics for
employees;
Ethical audit—professional independent assessment of business ethics management systems in companies and organizations;
Promotion of educational cases among university professors;
Promotion of the new professions to the students and graduates—compliancemanagers, business ethics and ESG manager;

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O. Bobrova

8)

Common with EBEN Online Workshops on Self-Regulation of Market Ethics
organized in 2021
9) Development of RBEN Certified Ethics and Compliance Professional
10) Cooperation with industries to support implementation of the Codes of Ethics.
For example, in March 2021 Moscow Exchange has introduces the Code ofGood Conduct on the Russian Financial Market.
11) Support of Russian universities to create or improve the Codes of Academic
Ethics.
In 2022 we may say that Russian Business Ethics Network is rapidly growing
Association of Russian speaking professionals in business, especially in compliance,and business ethics research. We participate in improvement of Russian legislation in
the sphere of compliance. And by the means of formation of business public opinion
we are eager to contribute into the New World Order creation in the XXI century.

6 Conclusions
The civil society in different countries pays an important role in the New World Order
formation in XXI century. Through communication between NPOs internationally
professionals may contribute their expertise to solve the problems of poverty, disease
and unemployment independently from governments.
Acknowledgements I’m grateful to my colleagues in Russian Business Ethics Network Maxim
Storchevoy and other members of the team for their contribution into the development of RBEN
from the very beginning of its foundation.

References
Arkhipov A., Yeletsky A. (2014) Mnogopolyarnost’ global’noy ekonomiki [Mnogopolpnoct
globalno konomiki]// Russian Economic Journal (3), 42–53.
Butler N.M. (1915) Address to the Members of the Union League of Philadelphia at Founders’ Day
Celebration Held Saturday Evening, November 27, 1915.
Zainutdinov, Sh. (2017). New world order or the “Three whales” concept. Bulletin of Science andPractice, (8), 275–278.

Olga Bobrova, Ph.D. in Management, is teaching students at St. Petersburg State Universityof Economics, Russia. Bobrova currently works as an Associate Professor at the Department of
Economy and Management of Enterprises and Industrial Complexes. In 2007 she presented her
PhD thesis titled “Forming a System of Socially Responsible Management of Enterprise”. She
also has wide experience working since 2004 in NGO sector in Russia. Now Olga holds a positionof Deputy Director of Russian Business Ethics Network. Her research interests include corporate

24 Professional Associations’ Contribution …

329

social responsibility, entrepreneurship in Russia, stakeholder management and Japanese management. Her recent works include Business Essentials: textbook and practicum for academic bachelors (published in Russian), Stakeholder Management of Japanese Companies: the View from
Russia and CSR of Japanese Companies after the Fukushima Nuclear Disaster of 2011 E-mail:olbobrova@hotmail.com

Chapter 25

Government-Enterprise Relationshipin China
Takuma Kobayashi

Abstract The purpose of this chapter is to discuss the government-enterprise relationship in China. Although China’s marketisation process has progressed, unnecessary government intervention is still excessive. The share of state-owned sectors
remains at a significant level. In addition, state-owned enterprises (SOEs) are predominant in strategic industries. Thus, China’s government still has a strong influence on
SOEs. Debt-laden SOEs can survive in the market, because they can obtain guarantees and support from the government. However, as the number of zombie privatelyowned enterprises (POEs) has been increasing, the government and POEs also havea close relationship. Contrary to the market mechanism, POEs aim to expand rather
than become more efficient, due to governmental policy.
Keywords Guarantees · Overcapacity · Zombie enterprise

1 Introduction
Although China’s marketisation process has progressed, governmental market intervention remains. To demonstrate the strength of the government’s influence, I would
like to discuss the significant share of the state sector and Guo jin min tui, whichmeans ‘state enterprises advance, the private sectors retreat’.
Then, I will describe the relationship between the government and private enterprises from the perspective of overcapacity and zombie enterprises. State-owned
enterprises have a close relationship with the government. Then, I would also like toconsider the following questions. Is private enterprise in compliance with the market
mechanism?

T. Kobayashi (B)Matsuyama University, Matsuyama, Japan© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_25

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T. Kobayashi

2 Marketisation and Reduction of Government
Involvement
In this section, I will explain two indicators of marketisation and market regulation.

2.1 Decrease in Government Involvement
Okamoto (2013) states that China’s economic development has been engendered bya decrease in governmental involvement, rather than strong leadership of the government. Transitioning from socialism to capitalism, the free labour movement, openness to foreign countries, and the separation between ownership and management
are the factors of China’s economic development.

2.2 Marketisation Index
Table 1 illustrates the marketisation index and its five sub-indices. The marketisationindex is an indicator that accounts for the contribution of market-oriented reform
to economic growth. According to this index, China has accomplished significant
achievements in marketisation from 2008 to 2014. Rapid progress has been made in
the development of the private sector, market intermediaries, the legal environment,
and the development of product markets. However, progress has stalled regarding thegovernment-market relationship over the past few years, which indicates that there is
still excessive unnecessary government intervention. Thus, we can say that althoughmarketisation is developing in China, government intervention is not decreasing.

2.3 International Comparison of State Involvement
Table 2 shows the OECD Economy-wide Product Market Regulation (PMR) Indicators, which measure how competition-friendly a country’s regulatory environmentis within a broad range of economic sectors and policy domains. A higher scoreindicates less regulation. China’s score is lower than that of developed countries andRussia. Therefore, China’s state involvement is strong internationally.

6.56

2014

Source Wang et al. 2016

5.48

2008

Marketisation index

5.40
7.33

5.62

Development of private
economy6.83

Government-market
relationship

Table 1 Scores for the 5 aspects of marketisation

7.77

7.59

Development of
product market

5.93

4.01

Development of factor
market6.11

3.58

Development ofintermediaries and legal
environment

25 Government-Enterprise Relationship in China
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T. Kobayashi

Table 2 Comparison of state involvement (2013)
China

Russia

USA

Japan

PMR

2.86

2.22

1.59

1.41

Distortions Induced by State Involvement

3.57

3.41

2.70

1.85

Public Ownership

4.15

3.94

3.03

2.15

Scope of SOEs

6.00

5.40

2.90

2.13

Government Involvement in Network Sectors

4.44

3.72

0.58

1.63

Direct Control over Enterprises

3.16

2.87

3.00

1.85

Governance of SOEs

3.00

3.75

5.63

3.00

Involvement in Business Operations

2.98

2.89

2.38

1.55

Command and Control Regulation

2.90

2.36

2.19

0.76

Retail Price Controls and Regulation

3.06

3.42

2.56

2.34

Source OECD, Indicators of Product Market Regulation

3 Relationship Between Government and State-Owned
Enterprises
3.1 Guo Jin Min Tui
Here, I focus on Guo Jin Min Tui.
China’s reform of state-owned enterprises (SOEs) began after 1978. In the 1980s,
the delegation of decision-making powers regarding production, sale, etc. centred on
government enterprises. The separation of ownership from management increased
the incentives towards the management of enterprises.
In the 1990s, the reform of ownership began. The reorganisation of SOEs into
joint-stock enterprises and limited enterprises was promoted. As a result of thereform, the number of SOEs introducing private capital, that is, mixed ownershipenterprises1 , increased, and many small-sized SOEs were sold to the private sector.
SOE reform has stagnated since the 2008 financial crisis. At that time, the index of
the government-market relationship, one of the subindices of the marketisation index,
declined. The government was concerned that several large-sized SOEs that had anabundance of physical and human capital were applying pressure on privately-owned
enterprises (POEs).
As I already mentioned, Guo jin min tui has been concerned. I will explain whether
it is really occurring or not.
Firstly, the share of the state sector within the GDP was 32% in 2014. Although
it has been decreasing from 42% in 2004, it remains at a significant level (Kato et al.
2013; Kajitani 2018).
1 Mixed ownership enterprise consists of state-holding enterprise, whose majority shares are owned

by government, public organizations, or the SOEs themselves.

25 Government-Enterprise Relationship in China

335

Secondly, state-owned enterprises were predominant in strategic industries (electrical generation and transmission, petrochemistry, information and communication,coal, aviation) (Nakaya 2013).
Thirdly, SOEs enjoy significant benefits from monopolies or oligopolies and preferential treatment in finance. This results in the expansion of the wage gap with
non-SOEs.
To summarise the analysis of Guo jin min tui, the share of state-owned sectors
has been decreasing; however, it remains at a significant level. China’s government
still has a strong influence on SOEs.

3.2 Government Guarantee
Here, I discuss the relationship between the government and SOEs, and consider
why, although China’s SOEs’ performance is poor, they can survive. The keywords
are ‘government guarantee’.
Debt-laden SOEs can survive in the market because they benefit from guarantees
and support from the government.
SOEs assume some governmental responsibilities, such as providing infrastructures, social welfare, education, and even government debt. Conversely, SOEs enjoy
many benefits from their close ties with the government, such as entry into monopolistic areas, legal certification in key projects, taxation, and loans at lower interest rates
with greater ease2 . The government and SOEs form an interdependent relationship(Zhu 2017).

4 Competition-Based State-Owned Enterprises
In this section, I discuss the coexistence of state-owned and privately-owned
enterprises in the same sector and within the same enterprise.
Generally speaking, POEs’ total factor productivity (TFP) is higher than SOEs’.
However, this gap has decreased in almost all industries. In some sectors, SOEs’ TFP
is higher than POEs’ (Xu 2014).
Why is SOEs’ productivity improving? Such improvement is correlated with amixed economy. A mixed economy consists of a mixed market and mixed ownership.
In the mixed market, SOEs and POEs coexist within the same industries.
A mixed ownership enterprise comprises state shares in addition to private shares.
I will present an example in the automobile industry.

2 Because SOEs can obtain the loans directly from the banks at lower interest rates with greater

ease, a lot of SOEs make some handsome and easy returns by lending out the loans which theyobtained from banks (Zhu 2017).

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T. Kobayashi

4.1 Mixed Market
As I mentioned, China’s markets are divided into three categories.
The first concerns monopoly or oligopoly markets, which POEs are prevented
from entering due to governmental regulations (for example, power generation, oil,etc.).
The second category concerns markets in which POEs compete with each other.
The third category concerns competitive markets (mixed markets) in which SOEs
and POEs coexist, such as iron and steel, automobile, construction, and so on. In
mixed markets, SOEs exist. However, keen competitions take place. POEs misunderstand that there are opportunities to make a profit, a new capital investment decision,and seek to pursue more profits because SOEs do not exit from the market. In mixed
markets, significant overcapacity occurs. Both SOEs and POEs are thought to be thesource of overcapacity. Vigorous entry into markets also leads to overcapacity (Zhou2006).

4.2 Mixed Ownership Enterprises
I consider why mixed ownership enterprises are not so inefficient3 , which is partly due
to the complexity of their ownership structure. This restricts governmental (SASAC:
The State-owned Assets Supervision and Administration Commission of the StateCouncil) intervention in the management of listed and affiliated enterprises. The
parent enterprises who own joint enterprises are SOEs. These enterprises are statistically classified as belonging to the state sector. However, they are practically private
or foreign enterprises.
I take the example of the ownership structure of China’s automobile enterprise,
FAW-Volkswagen Automotive Co., Ltd. The competitive market is formed in China’s
automobile industry, where China’s SOEs collaborate with multiple foreign enterprises, 60% shares of which are owned by the government. However, 40% are owned
by two foreign enterprises4 . This results from the complexity of ownership. FAWVolkswagen Automotive Co., Ltd. is statistically classified as an SOEs because
government owns the highest share, however, it introduces private capital.
Another reason behind the efficiency of mixed ownership enterprises is that
China’s SOEs collaborate with two foreign enterprises. Further, POEs are rapidly
developing5 .

3 TFPs of the state-holding enterprises, which are are higher than those of wholly state-owned in

all of 40 sectors except for tobacco between 1998-2007 (Liu and Nie 2015).
4 They are VW, by which 30% shares are owned, and Audi, by which 10% shares are owned.
5 For example, Geely Automobile. Its new auto sales were ranked 4th in 2020 (Website of Mitsubishi

Motors Hyogo).

25 Government-Enterprise Relationship in China

337

In November, 2013, a decision of the Central Committee of the Chinese Communist Party (CCCPC) on major issues concerning comprehensively deepening thereform was announced.
The mixed economy is conducive to improving the amplification function of stateowned capital, ensuring the appreciation of its value and raising its competitiveness.
Further, it is conducive to enabling capital under various kinds of ownership, to draw
on one another’s strengths to offset weaknesses, stimulate one another, and develop
together. We will allow more SOEs and enterprises of other types of ownership todevelop into mixed enterprises (Kato 2016).
Mixed ownership reform is not the first step to comprehensive privatisation. It
ensures the appreciation of the capital of mixed ownership enterprises. Clear policies
for the privatisation of SOEs’ were not presented.
The aim of mixed ownership reform, rather than comprehensive privatisation, liesin the appreciation of its value and the improvement of its efficiency.

5 Overcapacity and Zombie Enterprises
In this section, I introduce the issues of overcapacity in China and zombie enterprises.
The purpose of this chapter is to examine the relationship between the government
and POEs.

5.1 Causes of Overcapacity
Table 3 illustrates the GDP composition in China. The investment rate has been
increasing in China since the 1990s. The household consumption rate decreased
from 1980 to 2010. Therefore, China’s economic growth is characterised by highdependency on investment.
Overcapacity is defined as the difference between production capacity and actual
production. Thus, overcapacity is considered the converse of the utilisation rate.
Figure 1 shows capacity utilisation rates in six industries. In all these industries,
capacity utilisation rates have been decreasing from 2008 to 2014.
One of the effects of overcapacity on the economy is that it provokes a decline
in price and applies pressure on the profits of enterprises. Another effect is that
SOEs that suffer from financial difficulties cannot repay loans to state-owned banks.
Consequently, they ask for more loans, and the financial situations of state-ownedbanks worsen (Lu 2001).
The factors leading to overcapacity are as follows. The first factor concerns industrial policies for a specific region, e.g., the ‘go west’ strategy6 in 2000, and the6 This is the regional development policy which China’s government launched in 2000 to boost

economic development of 12 western provinces.

338

T. Kobayashi

Table 3 GDP composition
GDP

Final Consumption
Expenditures

Gross Capital Formation

HouseholdConsumption

Net Exports

Gross Fixed
CapitalFormation

1978

100.0

62.0

48.8

38.4

29.9

−0.3

1980

100.0

65.4

51.5

35.0

28.8

−0.3

1990

100.0

63.3

49.7

34.0

23.9

2.7

2000

100.0

63.9

47.0

33.7

32.7

2.4

2005

100.0

54.3

39.5

40.3

39.4

5.4

2010

100.0

49.3

34.6

47.0

44.3

3.7

2015

100.0

53.7

37.6

43.0

41.9

3.2

2019

100.0

55.4

38.8

43.1

42.4

1.5

Source China Statistical Yearbook

95
90
85
80
75
70
65
60
2008

2014

steel

aluminium

cementrefining

flat glass

paper and paperboard

Fig. 1 Utilisation rates for 6 industries (Note Data for Aluminium are from 2008 and 2015) (Source
European Chamber 2016, p. 3)

high availability of technology. Another factor correlated with zombie enterprises,
which I will detail later, concerns local-level economic policies, that is, subsidies to
producers. Local officials aim to avoid laid-off workers due to concerns about social
stability. If zombie enterprises are non-performing and need to be shut down, thenemployees lose their jobs. Given current economic realities, new jobs may not bereadily available in those same locations (European Chamber 2009, 2016).

25 Government-Enterprise Relationship in China

339

5.2 Main Factor of Overcapacity
Here, I introduce you to two studies on overcapacity in the steel sector. Bothresearchers insist that SOEs are the main source of overcapacity. However, one
insists that large SOEs are the main source (Brun 2016), while the other insists on
small and medium SOEs (Watanabe 2017).
Are SOEs the main factor of overcapacity? In my opinion, POEs also create excess
capacity. The reasons for this are as follows. First, small and medium-sized POEs
vigorously enter markets. Second, POEs misunderstand that there are opportunities
to make a profit, a new capital investment decision, and seek to pursue more profits
because SOEs do not exit the market.

5.3 Zombie Enterprises Generating Overcapacity
Zombie enterprises are indebted firms that are unprofitable and depend on banks or
government bailouts to continue their operation.
According to the official standard, zombie enterprises are enterprises whose profits
have been negative for more than three consecutive years. However, this standard
is excessively simplistic. According to Caballero et al. (2008), zombie enterprises
repay their debt at a very low interest rate7 .
The number and ratio of zombie enterprises in industry sectors above the designated size. Due to the reform of state-owned enterprises, the number of zombie
enterprises decreased after 2009. Nevertheless, it increased again after 20128 (Nieet al. 2016).
As for their influence, zombie enterprises distort the allocation of labour resources
and bank financing, which hinders the growth of non-zombie enterprises. Zombie
enterprises prevent technical progress and exacerbate overcapacity, especially indeclining industries. These are factors of the increase in the number of zombie
enterprises. Local governments collude with state-owned enterprises regarding local
government officials’ promotion9 (Zhou 2004).
The ratio of state-owned enterprises is higher than that of private enterprises,
however the number of zombie private enterprises increased (Nie et al. 2016). The
influence of the government on POEs is also thought to be significant. There aresome cases in which SOEs received loans from state-owned banks and increased theirprofits, which can be managed for small and medium-sized POEs. Therefore, I thinkthat POEs may not be in compliance with market mechanisms. Private enterprises

7 The criteria are explained in Nie et al. (2016).
8 According to the investigation of 340 thousand industrial enterprises in 2013, 27,167 enterprises

were identified as zombie (Nie et al. 2016).
9 GRP (Gross Regional Product) growth is the most typical standard of performance in their region.

They want to raise GRP for their promotion (Zhou 2004).

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T. Kobayashi

also become zombie enterprises. In the absence of promising state-owned enterprises,
local governments also protect private enterprises.
As it is more difficult for small and medium enterprises to borrow funds frombanks, they do so through mutual guarantees, irregular financing routes, and close
ties of capital and business with upstream and downstream enterprises. In this case, if
one enterprise faced difficulty and became a zombie enterprise, other enterprises thatcooperated with it would follow suit because they would be obligated to rescue theenterprise by lending funds. This is called ‘the contagion effect’ (Fang et al. 2018).
Next, I explain why China’s government supports SOEs and POEs. Generally,a purpose of enterprises is to generate profits for shareholders and create value.
However, in China, expanding the size of enterprises and increasing sales and total
assets are critical.
In China, large enterprises find it easier to obtain support from governments dueto the risk of mass protests occurring when governments do not save large enterprises
experiencing financial difficulties. Hence, governments try to prevent such situations.
The bankruptcy of large enterprises with numerous employees has a significant
impact on the local economy and people’s lives. Thus, enterprises should not be shut
down if they expand their size.
The issue of inaccessible financing for private enterprises and small and microenterprises remains. At the end of 2006, Shenzhen City decided to certify large
private enterprises with more than 10 billion yuan in annual sales as ‘Privatelyowned Leading Enterprises’, and to urge banks to extend loans to them. This policy‘selects winners’ and is contrary to market mechanism, although it alleviates thedifficulty of raising funds. POEs expanded their size ahead of their efficiency (Li2018).

6 Conclusion
Although China has made significant achievements in marketisation, unnecessary
government intervention is still excessive.
The share of state-owned sectors remains at a significant level. Thus, it can besaid that China’s government still has a strong influence on SOEs. Debt-laden SOEs
can survive in the market because they can obtain guarantees and support from thegovernment.
As the number of zombie POEs has been increasing, the government and POEs
have been maintaining a close relationship. Further, contrary to the market mechanism, POEs aim to expand rather than become more efficient, due to governmental
policy.

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341

References
Brun, L. (2016). Overcapacity in Steel: China’s Role in a Global Problem. Duke University, Centeron Globalisation, Governance and Competitiveness.
Caballero, Ricardo J., R. J. T. Hoshi and A. K. Kashyap. (2008). “Zombie Lending and Depressed
Restructuring in Japan”. American Economic Review, Vol. 98, No. 5, pp. 1943–1977.
European Chamber. (2009). “Overcapacity in China: Causes, Impacts and Recommendations”, https://understandchinaenergy.org/wp-content/uploads/2013/10/European-Chamber-ofCommerce-_Overcapacity-in-China_Dez09.pdf, Accessed 28 July 2019.
European Chamber. (2016). “Overcapacity in China: An Impediment to the Party’s Reform
Agenda”, https://www.pulpmarket.ca/wp-content/uploads/Overcapacity_in_China_An_Impedi
ment_to_the_Party_s_Reform_Agenda_English-Version.pdf, Accessed 28 July 2019.
Fang, M., Y. Zhang and H. Nie (2018). “The Mystery of Middle-and-Small Scaled Private Zombie
Firms”. Academic Manthly, Vol. 50, pp. 75–86 (in Chinese).
Kajitani, K. (2018). Lectures on Chinese Economy: From the Reliability of Statistics to the Futureof Economic Growth. CHUOKORON-SHINSHA (in Japanese).
Kato, H. (2016). Introduction to China Economics as the “Ambiguous System”. The University of
Nagoya Press (in Japanese).
Li, W. (2018). China’s New Economic Journey: Structural Reforms and Long-Term Growth
Potential. ZHEJIANG UNIVERSITY PRESS (in Chinese).
Lu, J. (2001). “Hazards, Causes and Governance of Redundant Construction”. Productivity
Research, 2001, No. 2–3, pp. 61–63 (in Chinese).
Nakaya, N. (2013). “A Survey on the Controlling Power of Public-Owned Enterprises in China’s
Commanding Heights Sector”. Economic Research, No. 118, pp. 1–54 (in Japanese).
Nie, G., T. Jiang, Y. Jiang and M. Fang (2016). Research Report of China’s Zombie Enterprises: Current Situations, Causes and Countermeasures, National Academy of Development
and Strategy. RUC (in Chinese).
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Okamoto, N. (2013). China: Principle of Its Miracle Development, IDE-JETRO (in Japanese).
Wang, X., J. Yu and G. Fan (2016). “Eight-Year Progress of China’s Marketisation”
China Reform Forum (http://people.chinareform.org.cn/W/wangxiaolu/Article/201604/t20160
414_246875.htm Accessed 3 July 2019) (in Chinese).
Watanabe, M. (2017). “Overcapacity and Subsidy in China’s Steel Sector” pp. 1–31 (https://www.
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Xu, T. (2014), How to View China’s Capitalism. Nihon Keizai Hyouronsha (in Japanese).
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(http://www.eeo.com.cn/observer/eeo_special/2006/05/12/45057.shtml, Accessed 10 November2015) (in Chinese).
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Takuma Kobayashi is an associate professor at Faculty of Economics, Matsuyama University,
Japan. His research interests are industrial location, overcapacity and government-enterprise relationship in China. His main research achievement: Overcapacity in China after Economic Crisis:
In Relation to Industrial Location”, Journal of Comparative Economic Studies, Vol.12, 2017.

Part VI

Regional Collaboration and Good
GovernanceChapter 26

ASEAN’s Governance of Labor
Migration: Progressof Institutionalization and Challenges
Motoko Shuto

Abstract This chapter argues that the ASEAN Forum on Migrant Labour (AFML)
has provided an unprecedented platform of policy reviews and discussions on migrant
workers among a variety of stakeholders. It is unprecedented not only in terms of thevarious stakeholders but in the sense that each group of them annually holds meetings
at the national and regional levels in advance, in collaboration with the ILO. Without
this AFML process, the adoption of the ASEAN Consensus on the Protection andPromotion of the Rights of Migrant Workers in November 2017 would have been
impossible. Nevertheless, there still remains a wide gap of policy implementationof the protection of migrant labor, which is a highly divisive issue in the domestic
context and between the labour sending and receiving countries of ASEAN.
Keywords ASEAN Community · ASEAN Consensus · Labor Migration · AFML

1 Introduction
This chapter discusses new features of the dynamism of ASEAN’s regional governance on labor migration from the three aspects. First, it reviews developments during
the last decade in norm-setting and norm-sharing processes on protection and promotion of migrant workers’ rights at the regional level. Second, it focuses on a new multilayered scheme of policy discussions by multi-stakeholders for the ASEAN Forum on
Migrant Labour (AFML). Third, it discusses the function and challenges of ASEAN
for regional governance of labor migration by referring to the ASEAN Consensus
on the Protection and Promotion of the Rights of Migrant Workers approved at theASEAN Summit in 2017 based on recommendations originally submitted by the
AFML.
The AFML is an unprecedented regional platform of policy discussions with avariety of participants and multi-layered schemes of discussions among government
officials, associations of employers, labor unions and NGOs that have been working
M. Shuto (B)University of Tsukuba, Tsukuba, Japane-mail: shuto.motoko.fm@u.tsukuba.ac.jp© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_26

345

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M. Shuto

for migrant workers, in addition to the UN organizations and the ASEAN Secretariat.
It is a multi-layered platform in the sense that such multi-stakeholders’ meetings areheld separately at the regional and national levels in advance before they attend the
AFML meeting. It means that such participating members including NGOs are nolonger the target of governance but part of actors in constructing a new platform ofregional governance on labor migration in the ASEAN countries.
Based on recommendations of the AFML meetings which are mostly accepted in
the ASEAN Consensus above in 2017, new or revised laws/regulations have been
adopted at the national level. This means that once regional norms are shared andturned into a regional action plan, albeit with some reservations, it is not acceptable to ignore them by referring to the “non-intervention principle in domestic
matters,” which used to be one of the principles of ASEAN. Particularly since2003 when ASEAN adopted the ASEAN Concord II, which declared that ASEAN
would create an ASEAN community that consists of three pillars; ASEAN Political
Security Community, ASEAN Economic Community and ASEAN Socio-Cultural
Community, ASEAN began to institutionalize new regional platforms of policy
discussions.
Then, this paper discusses the features of such new dynamism with multistakeholders’ participation both at the national and regional levels and examines
developments and challenges in enhancing regional governance in protecting andpromoting migrants workers’ rights to materialize an ASEAN Community.

2 Framework of Regional Governance of ASEAN on Labor
Migration
After the ASEAN Concord II was adopted in 2003, ASEAN started its preparatory activities based on the Vientiane Action Programme (VAP), which was to be
implemented during 2004 and 2010. In VAP, a number of interesting agendas wereadopted, such as “strengthening the rule of law, judiciary systems and legal structure, effective and efficient civil services, and good governance in public and private
sectors (1.1.iv),” and to “increase the participation of non-governmental organizations (1.1.v).” Moreover, the summit meeting agreed to charge their Ministers tostart the “elaboration of an ASEAN instrument on the protection and promotionof the rights of migrant workers (Annex 1.1.4.6).” After this VAP, a new dynamism
started for institutionalization of ASEAN to protect and promote the rights of migrant
workers. The process of policy dialogues of ASEAN on labor migration can be shownin (Fig. 1).
Through the process of (Fig. 1), there are three crucial aspects: the participatory pattern, contents of discussions and regional action programs which turn topolicy guidelines and new legislations in the ASEAN member states. Regarding
the new pattern of multi-stakeholders’ participation as is shown in the following
sections, ASEAN has provided a platform for such multi-stakeholders’ participation

26 ASEAN’s Governance of Labor Migration…
at the regional level
Proposals of Norms

Sharing Norms
Action Programs

Reviews/Feedback347
at the national, local levels
Making/Revising Laws/Regulations
Implementation

Externalization

Fig. 1 Framework of regional governance of ASEAN on labor migration (Source by author)

and institutionalization since the mid-2000s. Concerning the contents of discussion, Section 4 below shows how norm-setting and norm–sharing discussions at the
AFML are related to providing common policy guidelines of ASEAN.

3 Proposals of Norms from NGOs
The initial stage for proposals of norms in (Fig. 1) had actually started earlier througha series of consecutive advocacy activities by different types of NGOs since the1990s. In a chronological order, the earlier actors were NGOs working for the rightsof migrant workers at the regional level, such as Forum Asia (established in 1991),
Asian Migrant Centre (AMC, est.1991) and Migrant Forum in Asia (MFA, est. 1994).
While they had been active since the early 1990s, the important turning point was the
Asia Pacific NGO Conference on Human Rights in Bangkok as a regional preparatory
meeting for the UN World Conference on Human Rights in Vienna. Through thismeeting the NGOs had started to make networking activities at the regional level. The
focus during the 1990s and early 2000s was fundamental human rights in general. For
instance, the Bangkok Declaration in 1993 referred to the importance of protecting
human rights and freedoms of “vulnerable groups such as ethnic, national, racial,religious and linguistic minorities, migrant workers, disabled persons, indigenous
peoples, refugees and displaced persons.”1
After the Vienna Human Rights Conference in 1993, there emerged three types of
new dynamism to advocate the ASEAN Ministerial meetings. The first type was theWorking Group for an ASEAN Human Rights Mechanism (hereafter, WG-AHRM)
which was established at the meeting of LAWASIA that is a regional group of law
experts and professionals. It was this WG-AHRM that kept advocating the importanceand responsibility of ASEAN for establishing a regional mechanism on human rights.
The second type was the ASEAN People’s Assembly (APA) which was a regional
meeting organized by ASEAN-ISIS that consists of ASEAN affiliated think-tanks. In
November 2000 when the first ASA was held in Batam, Indonesia, it was an epochmaking regional meeting of NGOs to discuss problems from the aspect of people.
1 Coordinating Committee for Follow-Up Asia Pacific NGO Conference on Human Rights,

Our Voice: Bangkok NGO Declaration on Human Rights, Bangkok: Asian Cultural Forum on
Development (ACFOD), 1993, p. 245.

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M. Shuto

One of the speakers from Singapore, S. Samydorai, argued an importance of social
dialogue for creating an ASEAN community and particularly the rights of workers
should be guaranteed at the ASEAN level. His initiative eventually played a crucialrole in the institutionalization process of the AFML. In this way by the initiative ofNGOs, the concept of “people’s ASEAN” has turned to be one of the key conceptsof an ASEAN Community since the 2000s, and in the ASEAN Charter which cameinto effect in 2008.
Nevertheless, while APA generally took a positive stance on liberalization ofmarket economy, those who took a critical stance against it organized alternative
NGO networks such as ASEAN Civil Society Conference (ACSC) and ASEAN
People’s Forum (APF). When such reform-oriented NGOs held the regional meetingin February 2006, another regional network called SAPA (Solidarity for Asian
People’s Advocacy) was set up.
As mentioned earlier, since ASEAN declared in the VAP that it would promoteparticipation of NGOs in the policy dialogues, civil society groups became more
active in advocacy activities on the agenda of ASEAN. It was against such new
trends of “alternative regionalism”2 that SAPA set up a working group on rights of
migrant workers and an activist of a Singapore-based NGO, Samydorai, took theleadership in this working group of SAPA. He was a member of the WG-AHRM on
behalf of Singapore during 2003 and 2007 when the VAP was adopted. It was the time
when human rights NGOs were active in appealing the concept of “people-oriented
ASEAN” and to establish an ASEAN Human Rights institutional mechanism.
In this way, since the early 1990s, advocacy activities on human rights issues andbuilding a regional institution of ASEAN began to be proposed by various types ofNGOs. Protection and promotion of the rights of migrant workers was one of suchhuman rights issues. As ASEAN became more responsive to proposals of the NGOs,
it turned from a target of their advocacy activities to an important partner to workwith. In this context, Samydorai was committed with all three types of civil society
groups above: WG-AHRM, APA and SAPA. As the appendix of the VAP imposed
ASEAN to elaborate “an ASEAN instrument on the protection and promotion of
the rights of migrant workers,” then Secretary General of ASEAN, Ong Keng Yong,asked him to take the initiative in preparing for the institutionalization.3 Thus, thepurposes of the three types of NGOs above converged through him into the formationof the Task Force of ASEAN Migrant Workers (TF-AMW) which plays a crucialrole in the AFML process, as shown below.

2 Rother S. and N. Piper, “Alternative Regionalism from below: Democratizing ASEAN’s Migration

Governance,” International Migration, Vol. 53, No. 3, 2015, pp. 36–49.
3 Personal communication with Mr. Sinapan Samydorai, 21 May 2019.

26 ASEAN’s Governance of Labor Migration…

349

4 Sharing Norms at the Regional Level
Though ASEAN Labour Ministers’ meetings had been held once every two years
since 1975 except for the issues on Indochina refugees and human trafficking, it issince 2000 when they agreed to establish the ASEAN-OSH (Occupational Safety
and Health) Network and they started to deal with labor issues at the regional level.
Likewise, the issues related to labor migration did not become an agenda of ASEAN
Labour Ministerial Meetings till the early 2000s.
After the Secretary General of ASEAN asked Samydorai to set up a meeting platform to discuss the issues on migrant workers, he coordinated a number of meetings
with NGOs and the TF-AMW was established in April 2006. In addition to regionallyactive NGOs, three regional branches of international associations of labor unions;
Union Network International–APRO, Public Services International, and Building
and Woodworkers International4 joined the TF-AMW, and they submitted a set of
15 proposals for protection of the rights of migrant workers to the ASEAN Senior
Labor Official Meetings in December 2006.
Shortly after that, the ASEAN Declaration on the protection and promotion of
the rights of migrant workers (hereafter, Cebu Declaration) was adopted in January
2007. This was the first regional arrangement on labor migration. Having the fourparts (22 articles), it was stated for the first time that the ASEAN member states“will promote decent, humane, productive, dignified and remunerative employment
for migrant workers (Article 15).” And it clarifies Obligations of Receiving States(6 articles), Obligations of Sending States (4 articles) and Commitments by ASEAN(8 articles).
The implementation of the commitments above, however, is left to each member
state “in accordance with national laws, regulations and policies.” It was a limitationof harmonization through the AFML. Also, while TF-AMW submitted proposals
from a broader scope of protection including family of migrant workers and undocumented workers, the Cebu Declaration left them off the agenda, except for a sectionthat both receiving and sending states “shall, for humanitarian reasons closely cooperate to resolve the cases of migrant workers who, through no fault of their own,
have subsequently become undocumented (Article 2)”.
At the same time, the draft of ASEAN Charter was adopted at the Summit inNovember 2007 (took effect in December 2008). According to the Charter, thepurposes of ASEAN are stated to “strengthen democracy, enhance good governanceand the rule of law, and to promote and protect human rights and fundamental freedoms.” This is a remarkable change, considering that ASEAN used to restrict its
principles to state-state relations only and avoid such domestic state-society relations as democracy and human rights. Based on the ASEAN Charter, the first ASCC
Blueprint (2009–2015) was adopted in 2009, and in its C2 section, “Protection andPromotion of the Rights of Migrant Workers” was stated as one of the policy goals.
4 These three regional branches established ASEAN Services Employees Trade Union Council(ASETUC) in March 2007 to make advocacy activities directly to the ASEAN meetings, in addition
to the AFML. ASETUC at the same time attends AFML every year.

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At the same time, after the 4th ASEAN–UN Summit meeting in 2011, the UN
organizations and ASEAN started comprehensive collaboration institutionally, especially in the socio-cultural sectors. Their collaboration throughout the processes of
implementing and monitoring programs of ASCC was crucial for the first ASCCBlue Print (2009–2015) and the second one (2016–2025). On the other hand, for the
UN organizations close collaboration with ASEAN for the ASCC-related programshas been part of implementation of MDGs/SDGs at the regional level. In other words,
once ASEAN declared to realize an ASEAN Community, it has become a regional
partner of UN organizations to carry out programs for MDGs/SDGs.

5 Institutionalization for Sharing the Principles throughAFML(1) Setting up AFML The ASEAN Ministerial Meeting in July 2007 agreed to set
up the ASEAN Committee on the Implementation of the ASEAN Declaration on
the protection and promotion of the rights of Migrant Workers (ACMW) under the
Senior Labour Official Meeting (SLOM). And in March 2008 the ASEAN Forum on
Migrant Labour (AFML) was held in Manila to follow up the Cebu Declaration. At thesame time, since early 2007 TF-AMW made continuous efforts by holding bilateralmeetings with the ASEAN secretariat, each member country except Brunei and
Myanmar, on the agenda of the 22 Articles of the Cebu Declaration from the national
aspects. The outputs of the meetings were submitted to the ACMW and became thebasis of policy discussions of the AFML. In this way, a bottom-up approach wastaken for starting the dialogues of AFML, largely owing to the contribution of the
TF-AMW.
(2) Institutional Features of AFML The purpose of AFML was initially to
examine the principles for implementation of the Cebu Declaration and submit theannual reports to the ACMW. After the meeting in 2008, AFML has been held
annually at the host Ministry of Labor of the ASEAN Ministerial Meetings. The
scheme of the AFML is remarkable in the following points.
First, the AFML is based on the Tripartite-Plus scheme consisting of representatives from each Government, the ASEAN Confederation of Employers (ACE) and theASEAN Trade Union Council (ATUC) which is a member of ITUC that is closely
linked to the ILO, and NGOs in addition to the ILO and other UN organizations(Fig. 2). If NGOs wish to attend, they first contact the TF-AMW, and the TF-AMW
compiles the list of participating NGOs to the ACMW which endorses the list. In
this sense, the TF-AMW is regarded as “a gate-keeper”5 of the AFML.
The other institutional feature is that since 2012 under the ILO coordination thesimilar trilateral national dialogues have been held several weeks before the AFML
5 Rother, S., “ASEAN Forum on Migrant Labour: A Space for Civil Society in Migration Governanceat the Regional Level?” Asia Pacific Viewpoint, March 2018, p. 8. https://onlinelibrary.wiley.com/
doi/10.1111/apv.12181.

26 ASEAN’s Governance of Labor Migration…

351

Labour

ILO and other
UN Organizations

Meeting

ACE and National
Representatives of
Employers

SLOM Ministryof Labour

AFML

ACMW/ASEAN

TF-AMW, NGO
TUs (ILO-ATUC)ASETUC, Nationaland other Regional

Fig. 2 AFML: Tripartite-Plus Scheme (Source by author) (Notes ACE [ASEAN Confederation of
Employers], ATUC [ASEAN Trade Union Council], TU [Trade Union])

meeting. For such national preparatory meetings, government officials also attend.
They usually attend the SLOM meetings or report what was discussed to their seniors
who will attend the SLOM. Since the early 2010s, along with the AFML, the ASEAN
Summit adopted documents which support the AFML process. For instance, theASEAN Human Rights Declaration (AHRD) in November 2012 stated the rights of
migrant workers as “integral and indivisible part of human rights and fundamental
freedom (Article 4).” In the ASEAN Guidelines for CSR in 2016, protection of
migrant workers’ rights is mentioned. In this way, in parallel with the annual AFML
meetings similar statements were adopted at the ASEAN level.
(3) Policy Proposals of AFML Policy Recommendations of AFML are madebased on a consensus-style and submitted to the ACMW. The two topics of each
AFML are informed by the host government. So far, a wide range of issues havebeen discussed: from the 2nd to 4th AFML meetings (2009–2011), the topics wererelated to enhancing public awareness and promoting public campaign on the rightsof migrant workers, from the 4th to 6th AFML meetings (2012–2013), effective
recruitment practices and enhancing protection of migrant workers through datacollection and sharing were the major topics. After the 7th AFML meeting in 2014,
more specific agendas were discussed such as institutional reforms of pre-departure
administrative procedure, by referring to One Stop Services and enhancing Occupational Safety and Health (OSH) for migrant workers. At the 11th AFML when
Singapore was the host, the two topics were related to digitalization of information
control for migrant workers. At the 13th online AFML meeting in 2020, the impact
of COVID-19 on migrant workers was one of the two main topics.

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M. Shuto

Table 1 Policy recommendations of AFML from the 3rd to 13th meetings
Category

Major agenda

Number of recommendations
3rd-11th + 12th + 13th meetings

A

Information

Pre-departure Orientation,
One-Stop Service, Migration
Resource Centers

27 + 2 + 2

B

Fair recruitment

Regulation of Brokers, G-G
MoUs

19 + 4 + 1

CDecent WorkSocial security, Occupational
Safety and Health (OSH),
Portability, decent wages etc

48 + 6 + 8

D

Legal Support

Complaint-mechanism

22

E

Reintegration

Effective social reintegration
programs

12 + 0 + 1

FPublic Education

Public education campaigns

6+1

G

Data collection

International Labour
Migration Statistics (ILMS)
Database

14

H

ASEAN cooperation

ASEAN Consensus,
cooperation with TUs and
CSOs

10

Source compiled by author from the Annual Reports of AFML https://www.ilo.org/asia/publicati
ons/WCMS_713541/lang--en/index.htm

According to those who have participated in the AFML meetings, they havepositive comments on the outputs of the discussions, though some said that the
responses are not enough from the Mekong-basin countries of ASEAN.6 NGOs
too have positive evaluation that AFML works as “facilitator” for the protection of
the rights of migrant workers, while the employers’ association takes it as a useful
opportunity to get information that is related to them. What is impressive is that Trade
Unions, which used to pay little attention to migrant workers, have become active
in monitoring the situation and reviewing feedback through the AFML. In addition,
ATUC and the ILO-Bureau for Workers’ Activities (ILO-ACTRAV) conduct an online survey twice a year on the development of the agendas of the previous year. ILO
is coordinating the “Triangle in ASEAN Programme” with the five Mekong-basincountries plus Malaysia during the period 2015–2027. ATUC too is committed withthis Programme at the regional and national levels.
Among the 183 proposals submitted during the 13 AFML meetings up to 2020,
62 proposals are related to Category C on decent work such as Occupational Safety
and Health (OSH), social security, freedom of association of migrant workers and soforth (Table 1). Also, agenda on Information Services and Fair Recruitment process
are much focused categories (Table 1).
6 Interviews with representatives of ATUC, 31 January 2019 in Manila and ASETUC, 4 February

2019 in Kuala Lumpur.

26 ASEAN’s Governance of Labor Migration…

353

The recommendations of the eight categories in (Table 1) were submitted to the
ACMW which subsequently submitted them to the SLOM each year. In this way,
based on the recommendations of AFML, the ASEAN Consensus on the Protection
and Promotion of the Rights of Migrant Workers (hereafter, the ASEAN Consensus)
was adopted at the Summit meeting in November 2017. Accordingly, the Action
Plan (2018–2025) of the ASEAN Consensus has become the common platform ofpolicy implementation for the ASEAN Labor Ministers.
(4) The ASEAN Consensus in 2017 The ASEAN Consensus consists of 60
Articles, referring to all the stages of placement as follows. The first stage is forpre-departure procedures. It focuses on improvement of information services, efficient procedures, pre-departure training and new actions to prohibit overcharging ofplacement fees by any parties. The second stage is related to agendas on protectionof migrant workers while they are working abroad. And the third stage is on theagenda related to the re-integration and social welfare after their contract is over andthey return home. Concerning all these stages, it states the obligations of receiving
states (14 Articles) and sending states (9 Articles) in addition to “Commitments of
ASEAN Member States” (17 Articles). While the structure is the same with the Cebu
Declaration in 2007, the ASEAN Consensus has more contents in detail. All such
issues were discussed at the AFML and recommendations were submitted to the
ACMW, which submitted them to the SLOM.
Among others, in the pre-departure process, sending states have obligations suchas to provide information to migrant workers about the terms and conditions of theirwork through documentation (Article 22), to “prohibit overcharging of placement
or recruitment fees (Article 23) and to simplify the processes by setting up “onestop service centre” (Article 24). The obligations of receiving states are among otherthings to provide fair treatment to migrant workers in respect of working condition
and Occupational Safety and Health protection (Article 40), while one of the major
obligations for both sides is to eliminate recruitment malpractices (Article 51).
(5) Linkage with National governance Then, how can such shared principles in
the ASEAN Consensus be linked to new dynamism at the national level to facilitate
the implementation? There are four types as follows.
First, among the sending countries the Philippines had established institutions wellbefore the AFML, and among the receiving countries in ASEAN, Singapore has
the high level of governance on migrant workers in terms of openness, institutionalization, and efficiency. Not a few agendas of the ASEAN Consensus have alreadybeen institutionalized in Singapore before the AFML started. For instance, as isstated in the Consensus, trade unions are already open to migrant workers in Singapore with the same membership fee, irrespective of nationality. Since 2004 twoNGOs, Transient Workers Count Too (TWC2) and Humanitarian Organisation
for Migration Economics (HOME) have been active in helping migrant workers.
Obligations of employers to join insurance, attend an orientation program in caseof employing domestic workers, confirming OSH Pass for construction work, areregulated in detail. Furthermore, the Employment of Foreign Manpower Act has
been often revised in order to adjust to changing needs. Even so, however, the354

M. Shuto

COVID-19 pandemic in 2020 revealed that around 94% of the infected patientsare migrant workers.7 Thus, the Government took quick actions and launched new
housing plans, which had been long overlooked, for migrant workers.
Second, along with the AFML process, a new dynamism from Civil Society
Organizations (CSOs) including Trade Unions led to new legislations since theearly 2000s. The remarkable case is Indonesia, where since the early 2000s NGOs
started to advocate for a coherent and comprehensive strategy for the promotion of
migrant workers. Based on the Law No.39 in 2004 on placement and protection of
migrant workers, the National Agency for Placement and Protection of Indonesian
Migrant Workers (BNP2TKI) was launched in 2007. Then, the Law No 18 in 2017
on Protection of Indonesian Migrant Workers stated that recruitment fees are notcharged to migrant workers. Considering that many problems of migrant workers
can be attributed to the recruitment methods and fees, this was a remarkably
radical decision, even though the zero-fee in employment process is one of the ILO
principles. It was later followed by a detailed regulation in 2020 to be implemented
in 2021.
Also, the One-Stop Service System has rapidly expanded in Indonesia, from one
in 2014 to 33 places in 2019, and 45 as of February 2021.8 The village development program with former migrant workers (Desmigratif program) increasedin number, from 120 villages in 2017 to 402 villages of 12 provinces in 2019.9
Though the Desmigratif program is still in the initial stage, along the AFML
discussions, new policy measures have been taken to improve both pre-departure
procedures and local re-integration programs for returnees.
Third, ILO’s “Triangle in ASEAN Programme” works as a catalyst to improvegovernance on labor migration in the Mekong-basin countries, in collaboration
with ATUC and other local stakeholders. Their achievement includes setting
up 35 Migrant Resource Centers (MRCs), providing remittance schemes andpolicy consultations.10 Also, ILO helped the Cambodian government launch a
code of conduct in early 2020 with two Associations of Recruitment Agencies in
Cambodia, and made the standard of recruitment fee.11 These developments arepart of a progress in creating regional governance of labor migration in ASEAN.
Nevertheless, according to survey reports by NGOs a great number of people in
Myanmar, Laos, Cambodia and Vietnam answered they received no pre-departure

7 The Straits Times, 18 July 2020. https://www.straitstimes.com/singapore/why-dorms-with-lower-

covid-19-prevalence-were-cleared-first.
8 https://pedoman.co/news/lindungi-pekerja-migran-kemnaker-siapkan-45-ltsa/ 19 February 2021

(Last Accessed 27 February 2021).
9 https://www.kemnaker.go.id/news/detail/petugas-desmigratif-diminta-bantu-pendataan-pekerja-

migran 23 September 2019 (Last Accessed 20 February 2021).
10 “Triangle in ASEAN, Key Results” https://www.ilo.org/asia/projects/WCMS_718233/lang--en/index.htm (Last Accessed 20 February 2021).
11 https://www.ilo.org/asia/events/WCMS_735805/lang--en/index.htm (Last Accessed 20 February2021).

26 ASEAN’s Governance of Labor Migration…

355

orientation or training.12 Thus, it seems that many of them go abroad without havingbasic knowledge, skills and information about their rights to protect themselves.
Moreover, in Thailand which is one of the major labor receiving countries in theregion, among those who come from Cambodia, Myanmar and Laos and have got
a job in Thailand through registered brokers are around 14% only. Far more people
find a job through unregistered brokers or directly by employers.13 At the border areas
even Cambodian and Thai police officers are directly or indirectly committed withbroker business.14 Thus, there remains a vast space beyond the AFML discussions
on regional governance.

6 Conclusion
Concerning the regional governance on protection and promotion of the rights of
migrant workers, the AFML has contributed to making shared norms and principles
which are mostly repeated in the ASEAN Consensus in 2017. It is a bottom-up participatory forum with multi-stakeholders, though they target on documented workers
only.
There are key factors which have sustained this process. First, there was a continuing collective will to create a regional mechanism for labour migration governancefrom NGOs that had taken the initiative since the 1990s. Second, since the early
2000s ASEAN changed to take a more responsive attitude toward them, and third,
an insightful leading activist played a crucial role to help ASEAN launch and facilitate the AFML process. Fourth, UN Organizations too actively joined the process tocoordinate the Tripartite-Plus dialogues at the regional and national levels. In short,such various stakeholders actively joined the multi-layered process of AFML. The
ASEAN Consensus is a product based on recommendations submitted by the AFML.
Nevertheless, how it can enhance quality of governance at the national level greatly
depends on the will and capacity of each government, integrity of employers andmigrant workers. At present there is a gap between labour sending and receiving
countries in fulfilling obligations as stated in the ASEAN Consensus, which has nolegal binding force. The lower the level of transparency and rule of law is, and thelesser public space is for NGOs, the harder it becomes to materialize the sharedprinciples of the ASEAN Consensus. In short, due to such wide gaps, challenges
still remain for full standardization of regional governance on labor migration which
12 Human Rights Working Group (HRWG), Migrant Workers’ Rights in ASEAN Region: A Baseline

Study, Jakarta: HRWG, 2018, pp. 18–36.
13 ILO, Recruitment Fees and Related Costs: What Migrant Workers from Cambodia, the Lao PDR

and Myanmar Pay to Work in Thailand, 2020, pp. 20–26, https://www.ilo.org/wcmsp5/groups/pub
lic/---asia/---ro-bngkok/documents/publication/wcms_740400.pdf (Last Accessed 10 December2020).
14 Sary Seng, “Unseen Undocumented Cambodian Migrant Workers in Thailand,” in Um, Khatharya
and Sofia Gaspar eds., Southeast Asian Migration, Eastbourne, UK: Sussex Academic Press, 2019,
pp. 167–168.

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is a highly divisive issue, even though there have been developments of the AFML
process.

Motoko Shuto is a Professor Emeritus, University of Tsukuba. She is currently working
on regional governance of labor migration in ASEAN. She was teaching International Relations in Southeast Asia for the Graduate School of Humanities and Social Sciences, University of Tsukuba. She got her PhD from Doctoral Program in Law, Hitotsubashi University, Tokyo. Some of her latest publications include: “Patterns and Views of China’s Public
Diplomacy in ASEAN Countries: Focusing on Confucius Institutes”, Journal of Contemporary
East Asia Studies,Vol. 7, Issue 2, 2018, pp. 124–148, Published online: 24 Dec 2018, DOI:
10.1080/24761028.2018.1553227. “ASEAN and UN: Development of supplementary relations forregional governance,” in S. Oyane et al. eds., Global Governance Studies, Vol.II, Kyoto: HoritsuBunakasha, 2017, pp. 132–152. “Indonesia’s Views and Policies vis-à-vis China” in Seiichiro
Takagi, ed., Major Countries Views and Policies vis-a-via China, Japan Institute of International
Affairs, 2015, pp. 57–71.“Toward ASEAN Socio-Cultural Community”, in International Affairs,
Nov. 2015, No.646, pp.25–36 ( 201511.php)

Chapter 27

Regional Collaboration in Europe
and Asia; Learning from the European
Union Strategy for the Danube Region(EUSR) and the Greater Mekong
Sub-regional (GMS)
Soavapa Ngampramuan
Abstract This research focuses on investigating comparatively the origins anddynamics of sub-regional projects in the form of international river basins (IRB)
in two different geographic settings, with one case study in Central Europe, andanother one in Southeast Asia, namely the European Strategy for the Danube Region(EUSDR) and the Greater Mekong Sub-region (GMS). This research recognizes thatdifferent levels of regional integration processes, like regional and sub-regional, andthe dynamics behind them need to be distinguished from each other. These two casestudies show a number of sub-regional characteristics, like cooperation at the local
level, even transcending national borders, for supporting local economic development, in supporting related infrastructure development and inter-connectivity, sharedenergy supply and generation, shared tourism, and people-to-people exchange. They
also share another commonality of sub-regional cooperation dynamic, the interaction of different actors across a range of issues and hierarchies, involving state andnon-state actors. At the same time, they differ with regard in characterizing their integration process as either bottom-up or top-down. Lastly, they cannot be explained
without taking into consideration both specific local aspects and the regional andglobal structural environment.
Keywords Sub-regionalism · Comparative politics · Danube region · Mekong
region1 Introduction
The objective of this research is to investigate the elements of sub-regional cooperation comparatively between the European Union Strategy for the Danube Region(EUSDR) and the Greater Mekong Sub-region (GMS). Hence, in order to gain the
S. Ngampramuan (B)Department of International Relations, Faculty of Political Science, Ramkhamhaeng University,
Bangkok, Thailande-mail: soavapa@ru.ac.th© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_27

357

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result of research aims, this research is based on a qualitative method. According to
Hay (2002: 61–66), this research aimed to collect evidence systematically (e.g.,archival records, interviews, official statistics, histories, or surveys), search fornoticeable patterns in the evidence, and formulate theories to account for thosepatterns.
While EUSDR and GMS can be regarded as sub-regional projects through international rivers, they are different in their characters. The EUSDR was elaborated
by the Council of the European Union in October 2009 in order to support a subregional process of 14 countries along the Danube Basin. Its objective is territorial development in focus on the improvement of transport; the protection of theenvironment (including the fight against pollution); the promotion of economic
development, activities of culture and tourism; and the reinforcement of disastermanagement (for instance, flooding). Its strategic objectives are divided into four‘pillars’ and eleven priority areas. Each priority area is managed by two responsible countries. (Hübner 2008). While the GMS was initiated in 1992 by the AsianDevelopment Bank (ADB) as a program of sub-regional economic cooperation,
designed to enhance economic relations of states along Mekong River namely
Cambodia, Lao PDR, Myanmar, Thailand, Vietnam and the People’s Republic ofChina (Yunnan Province and Guangxi Autonomous Region). The six member countries endorsed eight priority sub-regional projects and initiatives: energy, environment, human resource development, transportation, telecommunications, tourism,
trade and investment.
Moreover, it is worth pointing out that there exists a relationship between bothsub-regions at the Asia-Europe Meeting (ASEM) Foreign Ministers’ Meeting held
on 6–7 June 201. The ministers noted that large rivers like the Mekong in Asiaand the Danube in Europe have common features because of their size, and as aconsequence, their international character. They also emphasized that the Danube
Region Strategy and the Greater Mekong Sub-region have important experience andknowledge to share, which would assist capacity-building, and help them face theircommon challenges and their destiny to collaborate to make the best of the vast
economic and social potential of the river basins. As a result, gaining knowledgeof cooperation in a comparative perspective will provide a deeper understanding of
sub-regionalism in current international systems.
In order to compare these two cases precisely, it is better to understand the
dynamic of sub-regionalism phenomenon from existing literature reviews, especiallyin empirical case studies in Europe and Southeast Asia.

2 Understanding Sub-regional Development
This research recognizes different levels of regional integration processes, likeregional and sub-regional dynamics that need to be distinguished from each other.
Bremner and Bailes (1998), Cottey (2009), Dangerfield (1999, 2016), Gänzle (2017)

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and Cihelková and Hnát (2006: 53) claimed that sub-regional groups were first established simultaneously in Europe when the processes of eastern enlargement andgeopolitical changes were provoked by the formation of regional integration especially in Central and Eastern Europe since 1989. Multilateral cross-border cooperation platforms already existed in the form of the so-called sub-regional initiatives
that had proliferated in Europe, located around the north, east-central and south-east
peripheries of the pre-2004 EU after 1989 (Dangerfield 2016: 25). Meanwhile, Dosch(2013: 36) and Bhattacharya (2015: 19) claimed that sub-regional cooperation has
been awaken in Southeast Asia since 1989 when the new schools of regionalism inAsia started to focus on the sub-regional schemes, and their effects on economic
integration below the national state level, e.g., cross-border economic zones.
Sub-regionalism is classified to be different from classic integration theories ofregionalism (Carmen 2013: 26–28). Sub-regionalism tends to focus on a smallerscale and a lower level of issues. Breslin et al. (2002) and Cottey (2009: 4) adds thatthe term “sub”-region refers to geographical-political spaces which are sub-sets of alarger regional space. Similarly, Hook & Kearns (1999: 6) stated that sub-regionalism
is a type of regional cooperation which does not fall into the ‘sui gelleris’ theory.
For example, they used term of sub-regionalism to describe inter-state cross-bordercooperation schemes, but sub-region has generally been defined as part of a region
whether it involves more than one state or some border areas or as a constituent partof a regional project. Carmen (2013: 26–28) analyzed that sub-regional form goes
downwards to specific region, e.g., Central Europe and local entities. Likewise, subregional structure has frequently been used to imply ‘low’ or ‘limited’ cooperation
among regional integration process especially cooperation among Western European
states engaged in a wider EU regional integration process. Similar to Inotai (1998: 27)
stated that sub-regionalism to integrate within a broader region, rather than to achieve
deeper integration within the area it delineates, a sub-region theoretically may exhibit
all the characteristics of a region but to the subordinate character of a sub-regional
formation vis-à-vis larger regional structure. Therefore, sub-regionalism in the firststage is characterized by the interactions as a geographic connotation between nodes(states or parts of states) that transcend national borders which take place within abroader hemispheric or continent-wide regional context (Mittelman 2001: 214). The
term ‘sub-regionalism’ has been adopted in order to be distinguished from the higher
levels of regionalism, like the EU, and also from the lower levels of sub-regionalism
promoted at the national level and actors below the national level (Hook & Kearns
1999: 6).
In addition, the fundamental difference of both does not relate only geographicalterm or size but also the economic and political weight of their respective memberships. Ochieng’-Springer (2016: 41) also stated that after the 1990s, because of
globalization and other related events including the collapse of the Soviet Union,
countries have sought to manage their affairs more outward-looking from regional
protectionism under the new conditions that is sub-regionalism. Jessop (2011: 12)
also argued state attempts to continuously promote cooperation at global level inthe context of structural differences of each state in order to maintain security
and the economic survival of the states within international politics. As a result,

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sub-regional forms of cooperation shared between a group of geographically adjacent states which in broader contexts of integration depends on the constellation ofstates working together and the internal balance among them (Bhattacharya 2015:24). Whereas, at the end of Cold War, security issues of sub-regionalism involve a
new range of transnational security concerns, such as transnational organized crime,
drug trafficking, terrorism increasing flows of illegal migration and environmental
degradation (Carmen 2013: 26).
Later, from early to late 2000s the eastward enlargement of the EU and the endingof the Yugoslav wars reshaped the dynamics of sub-regionalism. The structure of
sub-regionalism began to involve multi-lateral, sub-regional cooperation for policymaking and implementation: national governments (e.g., foreign ministries and otherministries or other state bodies), non-state actors (businesses and civil society organizations) and international administrative bodies became involved (Cottey 2009: 11).
Sub-regionalism might complement the role of the nation-state and non-state actors inpromoting the success of participation in sub-regional projects (Bhattacharya 2015:24). It can be said that sub-regional dynamic involves emphasizing from both topdown and bottom-up process such as sub-state level and civil society. Furthermore,
sub-regionalism involves with external actors such regional institution in particularfor financial support.
Consequently, sub-regionalism from the existing literature review above will beapplied as a framework to compare sub-regional processes of between EUSDR and
GMS as follow:
a)
b)
c)
d)
e)

Geographical indicators and cross border cooperation
Economic development and non-traditional security
Domestic actors both in state and non-state levels
Loose institutional form and multilevel
External actors

3 Comparative Sub-regional Development Between
EUSDR and GMS
3.1 Geographical Indicators and Cross-Border Cooperation
As geographic proximity still remains a central element of any sub-region that has
been formed in territorial spaces based on a significant geographic characteristic suchas a natural physical border of river or sea (Manoli 2012: 19; Dangerfield 2016: 25). It
can be seen that EUSDR and GMS represent an enlarged geographic area consistingof a number of different countries along the river, Danube River and Mekong River
respectively. Moreover, Osborne (2000; 259) called Mekong that “River Danube of
the Orient” as the longest international river in Asia. Similarly, both sub-regions havebeen extensively used to delineate groupings of states in the post-Cold War having ageographic connotation.

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EUSDR can be defined as being constituted of the riparian states along Danube
Basin including Austria, Bosnia-Hercegovina, Bulgaria, Croatia, Czech Republic,
Germany (Bavaria and Baden-Württemberg), Hungary, Moldova, Montenegro,
Romania, Serbia, Slovakia, Slovenia and Ukraine. The process of the Eastern
Enlargement of EU focused on the geographical and political relations to the dominant EU integration can be shown. EUSDR can reveal the aspect of sub-regional
integration on the periphery which often coheres with the process of enlargement
and thus prepares a way for the enlargement process in some respects contemporarily.
However, it is different from GMS; while the five states of GMS namely Myanmar,
Laos, Thailand, Cambodia and Vietnam are member of ASEAN but China (Yunnan
province and Guangxi Region) did not join ASEAN.
Besides, sub-regionalism can be defined as structured relationship between
geographically adjacent entities to facilitate both inter-state and sub-state level cooperation when only Bavaria and Baden-Württemberg of Germany join EUSDR andonly Yunnan province and Guangxi Region of China join GMS. Both EUSDR and
GMS can represent sub-regionalism which reflected an intent of conceiving a group ofstates as a part of a region, and some part of state can join sub-region in target specificareas. Additionally, the contiguous areas have prior interactions with the sub-statelevel to promote a borderless environment. For instance, the Yunnan government
sought Yunnan that is a landlocked area but shares borders with Southeast Asian
countries. Therefore, the local government used the Mekong or Lancang in China as
a gateway to the South China Sea and development of border trade with neighboring
countries such as Myanmar, Thailand, Laos and Vietnam, and according to Chinese
economic export-oriented policies.
Sub-regional cooperation in one area may spill-over into other areas, for instance
EUSDR hopes economic principles to gain impact on the policy-making process
in non-traditional security issues such as, transnational border control of migrationand crime when Priority Area (hereafter PA) 11 aims to foster security and to fightserious and organized crime. Additionally, EUSDR aims to share and resolve problems together particularly in terms of environmental degradation When one pillar of
EUSDR focuses on environmental protection in the Danube Region by way of PA4
aims to Restore and safeguard the quality of the water in Danube, PA5 targets tomanage environmental risks and PA6 attempts to preserve biodiversity, landscapesand the quality of air and soil of Danube.
Likewise, EUSDR and GMS similarly intend to focus on cross-border collaboration among member states in their natural boundaries of sub-regionalism such theriver coinciding with national borders. It can be seen when EUSDR and GMS covera portion of a country include sub-state actors as Germany includes Germany only
Bavaria and Baden-Württemberg and GMS included only two provinces: Yunnan andGuangxi of China on cross-broader process in circumstance geographic proximityof Danube and Mekong.
However, geographical indication is not only an essential component to constructsub-regional integration. Sub-region is dominated by geo-economic and national

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strategies through a strategic network of transnational and trans-local actors. Subregion could be also built to aim for strengthening interdependence and developing
networks to economic cooperation and non-traditional security.

3.2 Economic Cooperation and Non-traditional Security
Sub-regional integration of EUSDR and GMS are dominated by geo-economic priorities of state. For instance, EU cross border program and European Territorial Cooperation (ETC) funding are employed for EUSDR in order to forge alliances onconnecting the Danube Region for infrastructure and innovative services; development corridors; development of rail, inland water way and maritime transport
in PA1 in order to improve mobility and multi-modality in inland waterways, rail,
road and air. Moreover, European Commission is involved with EUSDR as financial
resource in order to implement joint cross-border and transnational strategies anddevelopment programs within member countries.
While in GMS, economic corridors strategy was adopted to improve and enhanceinvestments, focused on infrastructure transport development. When road accessis available, it will help to reduce poverty and bring economic prosperity to thearea. Three major roads under economic corridors projects namely the East–West
Economic Corridor (EWEC), the North–South Economic Corridor (NSEC) and theSouthern Economic Corridor (SEC) brought an important issue for private businesses
development in the Mekong River basin. The scope of those economic corridor
projects is dominated by geo-economic factors by focusing more on supporting
multi-sectoral investment, greater transfer of urban development to rural area, andsupporting a unified development of the economic corridor concept. GMS is also
claimed as a strategic network of transnational and trans-local actors to localized
economic cooperation zones. Trade and cooperation agreements seem to be an important component of liberalize economic activity and to go for export promoting. In
2015, Special Economic Zones (SEZs) were initiated along the economic corridors.
SEZs are aimed to offer a competitive business environment to support global supply
chains for foreign direct investment’s attraction.
From this point of view, we can see the difference of GMS from EUSDR, SEZsof GMS are involved with some states which are related to geographic commonality,
as Mekong river, flowing through the specific areas that launch a program (nontreaty based) to enhance economic activity of subset areas of the states. It shows
as sub-regional cooperation to expand flows of foreign direct investment in orderto activate management and integrate corporate functions. As a result, the economically weak states like Cambodia Laos, Myanmar and Vietnam (CLMV) need to share
increasing trade and investment in their immediate environment, practical economic
cooperation in the most promising area for sub-regional development among them.
Consequently, in order to employ the GMS to attract Foreign Direct Investment(FDI) to the sub-region, the member states need to increase sub-regional integration and spur social and economic development through collaborative efforts. The

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FDI also attracted to increase employment opportunities and industrial developmentin the participating localities, through distribution of benefits that may not always
be equitable across the GMS region. Furthermore, GMS member states especially
CLMV states expected that participating in GMS might lead to the improvements anddevelopment of infrastructures such as roads, railways, airlines, bridge, ports, rivers
transportation and power plants. As a result, local and sub-regional stakeholder aswell as private business sector have supported sub-regional integration dynamic.
The widening and deepening of GMS economic corridors through development
and construction of SEZs intent to enhance capacity development and knowledge
generation and management through competitiveness of border zones with respect
to transforming transport corridors into economic corridors.
While member states in the EUSDR, poor states, in particular former Soviet Union
states such as Bulgaria, Croatia, Romania and Serbia aimed to join this sub-regional
economic cooperation because of benefit from the other rich member states from
Germany and Austria. They do not aim at higher levels of economic integration,
but they considered a pragmatic solution to increase trade among member states
are highly interlinked in production networks especially infrastructure development
and cross border economic activities in free trade specific agreements. Some alsoneed industrial investment such as new car industries from Germany and Austria thatinvested in Romania and Croatia etc. Besides, new effort to promote non-traditional
security concerns such as transnational organized crime, drug trafficking, terrorism
and the ever-increasing flows of illegal migration were discussed in EUSDR tasks
and goals. In addition, sub-regional cooperation in EUSDR was targeted to solve
trans-border problems like border security e.g., environmental harms, migrationand from 12 priority areas of the EUSDR are related to cross border cooperationin economic development education, transport, tourism, culture, science and technology, environment, organized crime and border management. For instance, theAustrian government is worried about the possibility of a huge immigration movement of workers from the Central and Eastern Europe towards Austria. It would be
more helpful to support economic development within the lesser developed parts of
the Danube region by direct investment. Austrian and German business sectors also
provide business opportunities for investment and transfer knowledge and technology
to poorer states especially SMEs for reducing a development gap and creating jobs
in the areas. However, it is different from these two sub-region, in EUSDR, there arerich states like Germany and Austria that can provide financial support for business
opportunities and transfer knowledge and technology to weaker states.
Whereas GMS, member states also promoted sub-regional cooperation witheconomic development as the primary goal, other dimensions such as the environment
protection, tourism, or to support poverty reduction are indicated as concern factors.
As GMS, main goals included transportation, telecommunication, energy, humanresource, environment, trade, investment, tourism and agriculture. Nevertheless, moststates in GMS need loans from ADB or private funding especially for infrastructure.
GMS member states still need funding for infrastructure and investment.
Thus, it can be surmised that both EUSDR and GMS do not aim at higher levels of
economic integration or trade bloc. Each member state considers a practical solution

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in low politics that is linked in production networks especially infrastructure development and cross border economic activities including new efforts to promote nontraditional security concerns such as economy, culture, navigation and environment
protection.

3.3 Domestic Actors in State and Non-state Level
It can be seen that sub-regionalism both in EUSDR and GMS are promoted bynational and sub-national actors. Especially, EUSDR was supported by Austrian andRomanian national governments and Baden-Württemberg Provincial government toformulate at the EU level since 2009. Both Austria and Baden-Württemberg local
government hope the EUSDR can serve as an instrument of monitoring and coordinating the co-operation between different countries, to support activities and policies
which should benefit the whole Danube region. While GMS was supported strongly
by ADB as private international bank. Then member countries agreed to the benefit ofjoining the GMS. Six member states especially CLMV aim the same goal to integrate
in the sub-region in order to get financial and technical assistance from ADB andprivate donors. As all GMS member states are developing countries, their national
interests need to survive in the context of the new world economy. They need toincrease flows of labors, exchanges of technology and resources, and greater capitals
by external trade and investment.

3.4 Loose Institutional Form with Multi-level GovernanceAlthough, both EUSDR and GMS are primarily intergovernmental arrangements,
they do not focus on absolute gains or formal institutionalized regional integration.
Both of them aim to increase social and economic interdependence by a low levelof institutionalization and to address specific challenges by a particular group of—usually—neighboring states. There are two ranges of administration. The High-Level
Group of All Member States is for the international level and national coordinator isfor the national level. Both sub-regions’ work depend mainly on task of coordination.
Two member states are assigned to get in charge of each coordinated policy field suchas to launch ideas, support policy implementation, and provide technical assistanceand advice. Annual Forums and state meetings (Submit) are arranged each year as
supreme meeting. EUSDR is coordinated to meeting by the European Commission,and the non-member states should be invited as appropriate. But GMS Submit andforum are arranged by the GMS Secretariat (located in Manila, Philippines) that wasestablished by ADB. Secondly, the national contact point is to facilitate and support
the co-operation at the national level among the members.
In particular, EUSDR is based on EU macro-regional strategy that restrict? with thethree “No” rules (no new EU legislation, no new EU institutions, no new EU funds).

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EUSDR focuses on coordinating existing financial resources, a coherent implementation of existing regulations and legislation and on minimal formal structures byusing the existing institutions for the benefit of the region. Even though, there is PA
10 that is involved with institutional capacity and cooperation. It is concerned forcooperation regarding public services in order to support institution and companies
in project formulation and project financing. PA 10 aims to distribute information tomember states particularly to let the governments facilitate financial policy efficiency
especially members from Eastern Europe.
Moreover, the most important thing that make sub-regionalism different fromregionalism is accumulation of bottom-up projects, led by non-state actors. It isshown obviously in EUSDR goal that civil society such as NGOs and local groupof people play important role since the establishment. It bases on the process ofcooperation between provincial states and civil society. EUSDR was initiated by
Baden-Württemberg and Vienna provincial governments including working groups
and civil society such as ARGE Donaulaender, the Council of Danube Cities andRegions etc. The EUSDR is established with a strong emphasis of local governmentof Baden-Württemberg and civil society such as ARGE Donaulaender as well as on
the participation of civil society on cross border cooperation of Danube such as theCouncil of Danube Cities. It can be said that EUSDR sub-regionalism is involved
with multilevel actors, and is designed for a bottom-up approach of macro-regional
strategies involving national, regional and local actors. EUSDR sub-regional integration process underlines national systems, subnational authorities and international ortransnational bodies, as well as civil society, administrative and corporate structures.
Whereas GMS was initiated by suggestion and support of international development bank like Asian Development Bank, but the central government of member
states still mostly manage and control transnational cooperation. However, the statesallow business sector to perform as only advisor and deliver some of agendas togovernment in order to negotiate at the sub-regional level. This point is totallydifferent from EUSDR. There is no power of non-state actor involve with the subregional integration process. Except Yunnan and Guangxi provincial governmentsthat are commissioned to sub-national responsibilities of trans-national control ornatural borders. Nevertheless, the main national authority remains with central
government in Beijing. Civil society actors in the GMS initiative hardly play anyrole in the sub-regional integration process or corporate structures. Not like othermultilateral initiatives such as Mekong River Commission, there are many Civil
Society Groups who are involved for long in the monitoring activities, even if they
may not be powerful enough to stop the degradation of the Mekong Basin environment. Even though there are fewer formal schemes of institutionalization, GMS
sub-regionalism is intergovernmental arrangements, controlled with the top-down
process particularly by the national governments.

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3.5 External Dominant Actors
The importance of sub-regionalism phenomenon in 1990s is dominated by external
factors from international system or outsider. It can be specific states, international organizations or other regions. Both EUSDR and GMS are constrained byexternal actors since their establishment. However, EUSDR has depended on regional
institution, GMS has been influenced by the international organization.
EU is still the center of EUSDR sub-regional process. The relationship between
EU and EUSDR has still remained and got involved as the subordinate status to wider
regionalism. EUSDR embedded in the case of EU cross border programs. Austria,
Bulgaria, Croatia, Czech Republic, Germany (Bavaria and Baden-Württemberg),
Hungary, Romania, Slovakia, Slovenia are also members of EU. The role of EU
can be a driver of economic transformation of developing national economies especially through its financial support in developing states to candidate countries such asMontenegro and Serbia or. In addition, EU’s neighboring policy was represented by arelatively strong tool in EU’s external relations to Bosnia-Hercegovina, Moldova andUkraine. The EU Commissioner for Regional Policy launched the Danube Strategy
is not only aimed at fostering good neighborly relations in the region, but it should
also consolidate the European integration process with the Western Balkan countries. Its objective is territorial development, and it is based on the experiences of
the Baltic Sea Strategy, in which the EU proposed four objectives: environmentally
sustainable development, welfare (i.e., prosperity), accessibility and attraction, andsafety and security (Hübner 2008). These are clear indications that a sub-regional
integration approach was selected, even though the EU prefers to use the term ‘macroregional’. The strategy’s priority involved the following topics (Assembly of European Regions, 2009). It can be seen that EU are building effort between EU members
and non-members. As it can include an ‘integrative function’ supporting EU aspirant members. And providing a framework to tackle transnational policy challenges;
and finally, it supports economic, political, and institutional reform in participatingstates. As a consequence, EUSDR can be seen as a superstructure category, whichbroadens the study of main tendencies in EU integration.
It is obviously opposite to GMS whose member states just transformed the national
productive structure from agricultural and primary to industrialized economies, whiledevelopment policies were to be coordinated by centralized governance throughcoordination among governments and public authorities like Asian Development
Bank (ADB). ADB has played a crucial role in GMS as financial donor and technical supporter. ADB continually facilitate to create and support the communication between member countries and stakeholders at both political and operational
levels within the GMS area, consequently providing assistance in re-enforcing a
sub-regional consultation process.

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4 Conclusion
At the level of sub-regionalism between EUSDR and GMS, there are both similarities and differentiations. Both sub-regional mechanisms do not aim for political
integration or trade bloc, but EUSDR rather focuses on the promotion of cooperation
in low politics (economy, culture, navigation and environment protection, Invest inpeople and education. EUSDR emphasizes on increasing growth potential, in a wayof the new growth strategy by digital economy, innovation and services for people.
While GMS concentrates on improving sub-regional infrastructure such as road, rail,
airport, power grid, expand trade and investment cooperation for FDI. Both, EUSDRand GMS highlights sub-regional cooperation on connection for mobility, trade andenergy, but EUSDR put more efforts on environment protection and risk managementwith cooperation on non-traditional security issues e.g., organized crime, migration.
The most important point of EUSDR is to connect people to people through culture
and tourism. Whereas, GMS supports the flow of people, goods, and vehicles, infrastructure development for FDI. GMS attempts to improve tourism and disease control
for business sector and FDI too. However, both sub-regions hope sub-regional cooperation in one area might spill-over into other areas For instance, economic cooperation
may help to solve to conflict according to water management such as for the GMS,
economic cooperation may trigger members to solve problem about water degradation and level of water between Upper and lower Mekong especially when they haveannual meeting. While EUSDR is aimed EUSDR may improves the water quality of
the rivers and apply wastewater treatment in Danube. The sub-region shared problems particularly in terms of environmental degradation which can only be resolved
through substantial interdependence.
Although, members of EUSDR have the same political system that is democracy but there is a big economic gap between rich and poor states, while there arepolitical-economic differences among the GMS members. The important driver of
EUSDR’s establishment is a combination of historical awareness of belonging andthe prospect of local and regional economic benefits. Despite the fact of GMS is motivated for economic benefits only. In addition, the initiative for formation of EUSDR
was introduced by internal factors such as Austria and sub-national level of Germany
including with non-state actor such as civil society. On the contrary, the foundationof the GMS was introduced by financial organization like ADB. The highlight ofapplication of EUSDR depends on legal security, transparency, democracy, market
economy and general political stability. It is composed in its objectives that are basedon four policy areas, 11 priority areas namely environmental protection, economic
development, infrastructure improvement, develop research, education and information technologies Tourism, institutional capacity and cooperation in soft security
e.g., organized crime, migration. It can be felt to Strong sense of EU Danube identity creation of the EUSDR as a new symbol of Europe to strengthening the unityof Europe in order to create a new fragmentation of sub-group. Opposing to GMS
that emphasizes on trade and FDI from industrial states. Even though, GMS goals
are covered to soft” and “hard areas of co-operations that are transportation, trade

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S. Ngampramuan

and transportation facilitation, energy, agriculture, environmental protection, humanresource development, tourism, Information and communication technology, healthcollaboration particular AIDS, urban development and illegal drugs. All objectives
aim for FDI and economic cooperation. Member states remain in political instability
and no awareness of democracy or transparency with state centric control.
It can be surmised that trying to compare sub-regional contexts of these two subregions should consider sub-regional factors and conditions in the context of thevarious sub-regions. As one sub-region does not fit to explain the phenomenon ofcomplexity of other part of the world. In order to understand sub-regional phenomena,
it should be examined other regions and learn to share similarities and differences as
a lesson to each other.

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Inotai, Andras. (1998). Correlations Between European Integration and Sub-Regional Cooperation:
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Soavapa Ngampramaun is an Assistant Professor at the Department of International Relations,
Faculty of Political Science, Ramkhamhaeng University, Bangkok Thailand. Her research interest
is involved comparative politics and international relations between EU and ASEAN; and regionalism of ASEAN. She has been recently a visiting professor at School of International Politics,
Economics and Communication, (SIPEC), Aoyama Gakuin University, Tokyo, Japan from June
2016 to September 2019 under supervision of Prof. Kumiko Haba for doing Comparative Analysis of Sub-regional Processes in Europe and Asia: The EU Strategy for Danube Region (EUSDR)
and Greater Mekong Sub-region (GMS) as a case study. She is currently doing a research project
about “the Silk Road Environmental Program: Case Study of Impact of BRI and Thailand in
Economic and Social Development in Rayong Industrial Park”. This project is funded by Institute of Geographical Sciences and National Resources Research, Chinese Academy of Sciences,
Beijing, China from 1 September 2019–30 November 2021.

Chapter 28

The Belt and Road Initiativeand China-Eastern European Relations:
The Domestic Context in Chinese Foreign
Policies Regarding the Hungary-Serbia
Railway
Shixin Du
Abstract Since initiated in 2013, the Belt and Road Initiative (BRI) has been widely
focused on and debated in the context of political science and international relations.
Given the character of the rise of China, which remains one of the most profoundfactors in East Asia and the world, BRI has been strongly promoted by the Chinese
government and officially supported by involved countries, though how this initiative
could reshape international order in the twenty-first century remains debatable. This
paper’s central puzzle is exploring how China could influence the international relations through the BRI, in a domestic context related in foreign policies, by focusing
on an empirical study of the BRI project in the Central Eastern European Countries(CEEC).
Keywords Belt and road initiative · China · Central Eastern Europe · East Asia

1 Introduction
Since initiated in 2013, the Belt and Road Initiative (BRI) has been widely focused on
and debated in the context of political science and international relations. Given thecharacter of the rise of China, which remains one of the most profound factors in East
Asia and the world, BRI has been strongly promoted by the Chinese government andofficially supported by involved countries, though how this initiative could reshapeinternational order in the twenty-first century remains debatable. This paper’s central
puzzle is exploring how China could influence the international relations through the
BRI, in a domestic context related in foreign policies, by focusing on an empirical
study of the BRI project in the Central Eastern European Countries (CEEC).

S. Du (B)
Aoyama Gakuin University, Shibuya, Tokyo, Japan© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_28

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There have been intense discussions about this research question. In the recent
research literature, Haba (2015) explores the significance and implications of global
strategy of China, including AIIB, BRI and Silk Road Concept.1 Liu (2020) is trying
to construct a new theoretical approach for understanding the roles of China in
the global order. Since its critically theoretical analysis for huge of study literature in this field, after reviewing ‘status quo’ and ‘revisionism’, the author formed
approaches such as ‘Status Quo, Parallel Supplement, Nested Enhancement, Regime
Shifting, Competitive Regime Creation, and Ideological Confrontation’, and gave
certain implications and hints for testing them by presenting brief observation of thecase of BRI, which in the author’s view, is the typical case for understanding thecore research question: China and the global order.2 Singh (2020) contributes to alarge scale of analysis for theoretical implications, focusing on geopolitical perspectives, towards an understanding of the geopolitical significance of One Belt One
Road (OBOR) in Central Asia, including analysis of contexts among major players
such as Russia, US, and China.3 Pepermans (2020) is based on a perspective ofInternational Political Economy (IPE), contributes to a critical review of knowledge
in mercantilism, by researching China’s construction (CE) and railway equipment
sector (RWE) in global scale, both domestic and international contexts of actors in IRsuch as multilateral enterprise and states.4 Given by the significance and implicationsof theories in International Relations, especially neorealist, institutional liberal, andrealist neoclassical concept, and though comprehensive literature study focusing on
global governance which those theories put assumptions, Ly (2020) gives a broad
thinking for the “efficacy of the BRI in serving Beijing’s quest for leadership in
global governance”. By providing facts of advocating FTAs, multilateral cooperation within current global governance regimes, multilateral financing structures, etc.,
Ly (2020)’s argument lays on a character of China “to achieve leadership insofar as it
seeks to shift the structure of global governance in its favor”.5 With the implicationsof Neoclassical Realism, Clarke (2020) explores two aspects of BRI, the “Structural

1 Kumiko Haba (2015), “Powershift, AIIB and Silk Road Concept, the collaboration between

Europe and China (パワーシフトと、AIIB・シルクロード構想-欧州と中国の共同-, translated by Shixin Du)”, International Trade and Investment (『国際貿易と投資』, translated by
Shixin Du), No. 100.
2 Lina Liu (2020), “Beyond the status quo and revisionism: An analysis of the role of China andthe approaches of China’s Belt and Road Initiative (BRI) to the global order”, Asian Journal of
Political Science, https://doi.org/10.1080/02185377.2020.1837193.
3 Singh A. (2020), “Brzezinski & Mackinder theories: Role and influence on the political construction of Eurasia”. Vestnik of Saint Petersburg University. International Relations, vol. 13, issue 4,
pp. 527–535. https://doi.org/10.21638/spbu06.2020.407.
4 Astrid Pepermans (2020), “Economic Nationalism in all its variety: The case of China’s
construction- and railway equipment industry”, Journal of Contemporary China, 29:123, 431–453,
https://doi.org/10.1080/10670564.2019.1645491.
5 Bora Ly (2020), “China and global governance: Leadership through BRI”, Cogent Social Sciences,
6:1, 1,801,371, https://doi.org/10.1080/23311886.2020.1801371.

28 The Belt and Road Initiative and China-Eastern European Relations …

373

Drivers and Domestic Imperatives”.6 All of these arguments are informative andcomprehensive in analyzing and crafting theoretical framework.
This paper initiates a counterpart of this discussion, by looking into the empiricalfacts of China-CEEC relations in BRI. China-CEEC relations is a typical case towards
the understanding of China’s influence on the international relations. Pepermans(2018), in which the central puzzle is that how China can influence Central andEastern Europe by economic and political initiatives of cooperation which could beanalyzed as a soft power, focuses on the framework of the BRI-17 + 17 , by providing
several typical cases such as the Belgrade-Budapest high speed railway link andBar-Bolyari Highway between Montenegro and China, to conclude with ‘creating
a balanced trade relationship, involving cheap money, and resulting into a fruitfulwin–win cooperation’ of China’s approach to certain area.8 And in Tsuchida (2019),
the motorway project in Montenegro, Bar-Boljare highway is analyzed particularly
for understanding China EU relations in the CEEC area.9 Furthermore, in the light of
the theoretical implications discussed above, China-CEEC relations could be either
an initiative for enchanting the international system, as Ly (2020) and Liu (2020)
argue, or it could be as Singh (2020) and Clarke (2020)’s implications for Chinese
geographic focuses and inner legitimacy building consequence. It is now obviously
leading to an enthusiastic discussion regarding China and CEEC.
This paper provides a domestic perspective for understanding China-CEEC relations in BRI, in the light of the assumption that the role of national actors in China
can be significant in the regional cooperation (Fukuyama, 2016).10 Through thecase study of Hungary-Serbia Railway, this paper explores the significance of multidomestic actors for observing China and international relations from a domestic
context.
Moreover, though the speech for ‘OBOR’ given by Xi Jinping was originallyproposed in Central Asia and South East Asia, this paper argues that, China and
CEEC relations remains one of the most important aspects for understanding theorigin of BRI, and BRI was motivated by the cooperation with CEEC relations. In
this meaning, an analysis of the CEEC area has a possibility to enlarge the scale
6 Michael Clarke (2020), “Beijing’s pivot west: The convergence of innenpolitik and aussenpolitik

on China’s ‘belt and road’?”, Journal of Contemporary China, 29:123, 336–353, https://doi.org/
10.1080/10670564.2019.1645485.
7 About the 16(17) + 1, refer the next section, ‘The Origin of BRI and the Central Eastern Europe
Countries (CEEC)’.
8 Astrid Pepermans (2018), “China’s 16 + 1 and Belt and Road Initiative in Central and Eastern
Europe: Economic and political influence at a cheap price”, Journal of Contemporary Central andEastern Europe, 26: 2–3, 181–203, https://doi.org/10.1080/25739638.2018.1515862.
9 Tsuchida (2019), “The Belt and Road Initiative & Central Eastern Europe: The Case Study ofHighway Project in Montenegro”, Russian and East European Studies, No. 48, 2019, 41–54, https://doi.org/10.5823/jarees.2019.41.
10 Francis Fukuyama (2016), “One belt, one road: exporting the Chinese model to Eurasia”, Stanford Public Policy Program, https://publicpolicy.stanford.edu/news/one-belt-one-road-exportingchinese-model-eurasia, accessed on 24th Feb, 2021. Peter Cai (2017), “Understanding China’s Beltand Road Initiative”, Lowy Institute for International Policy, https://www.lowyinstitute.org/publications/understanding-belt-and-road-initiative, accessed on 24th Feb, 2021.

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of the picture of the real characters of BRI, for understanding China’s approach tointernational order.
This paper firstly describes the 17 + 1 mechanism of China and the CEEC area.
Then, it introduces the case of the Hungary-Serbia Railway, one of the significant casesof BRI in the CEE, to clarify the role of current characters of China CEEC cooperation.
Finally, it concludes the empirical character of BRI, that instead of a liberal cooperation, and the mutual state-centered cooperation is the basic character of the cooperation CEEC and China. Chinese foreign policy towards CEEC has been an extensionof complex Chinese domestic policy as well, and it is still under discussion whether
the narrative of “Win–Win” cooperation could craft a new international order.
This paper takes advantage of the official documents from the government of China,
the government of Serbia and the government of Hungary, and a basic picture of
the major actors enrolled in the BRI can be observed. Despite a lack of further anddeeper information of current events, it is conceivable that this paper can give a general
initiative for the further study of BRI and China’s impact on international order.

2 The Origin of BRI and the Central Eastern Europe
Countries (CEEC)
The symbol of beginning of One Belt One Road (OBOR), or Belt and Road Initiative(BRI), both known as Yi Dai Yi Lu (“一带一路”, in Chinese) is widely mentioned
as President Xi Jinping’s speeches in Central and South East Asia, in 2013, whichindicated China’s initiative in global regional cooperation, and the official documentfor BRI, Vision and Actions on Jointly Building Silk Road Economic Belt and twentyfirst-Century Maritime Silk Road, which was issued by the Ministry of Foreign Affairs
and the Ministry of Commerce of China in 2015.11 In this sense, it seems the startingof BRI had less relations with CEEC area. However, focusing on the relations between
CEEC and China, before 2013, it is conceivable that China CEEC relations was asignificant factor of the emerging of BRI.
Historically, especially since the end of WW II, CEEC have established relationships with China. After the establishment of PRC, CEEC, on the influence of theSoviet Union, became the first group of countries which recognized the diplomatic
status of PRC and had cooperation with China during the Cold War era. In the 1980s,
China sent delegations to Hungary to learn the market economy mechanism.12 From
1990s to twenty-first century, China generally insisted the opening policy from Deng
Xiaoping’s era and achieved rapid economic growth, while in 2004, the enlargement
11 http://www.xinhuanet.com/world/2015-03/28/c_1114793986.htm, viewed Feb 28th, 2021.
12 New Historical Documents, Sino-Soviet-Eastern European relations (Xin Shi Liao, Xin Faxian:

Zhong Guo Yu Su Dong Guan XI) China Social Academy, Edited by Hu Lifu, Vámos Péter, Li Rui,2014.

28 The Belt and Road Initiative and China-Eastern European Relations …

375

Fig. 1 16 + 1 Format (Source 16 + 1 Format, the European Council on Foreign Relations [ECFR])

of EU allows CEEC countries to become EU member states. It is conceived thatthese two factors granted both an opportunity to cooperate with each other in afurther global context, and in 2012, the first 16 + 1 meeting was held in Poland,
which started the mechanism of the current China-CEEC cooperation.
The 16 + 1 China CEEC Cooperation meeting was firstly held in 2012 in Warsaw,
Poland; in that year Xi Jinping was elected as the General Secretary (the fifth generation of leadership of the Communist Party of China, CPC). The meeting then began
to be held once a year. In 2013, the 16 + 1 meeting was held in Bucharest, Romania,
in which year that Xi Jinping made his speeches in Asia to announce the initiativeof BRI. In 2015, the 16 + 1 meeting was held in Suzhou, China, when the official document of BRI was issued by Ministry of Foreign Affairs and Ministry ofCommerce. And in 2015, the leaders of Hungary (Orban), Serbia (Vuclc), and China(Li) signed the railway construction cooperation between Budapest and Belgrade.
In 2019, Greece became the member of the Format, and 16 + 1 format (Fig. 1)

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become 17 + 1.13 It is conceived that before the announcement of BRI in 2013 and2015, China CEEC cooperation was already on track and became the foundation of
the format of China CEEC regional cooperation, as a part of “One Belt” in BRI. In
this sense, the China CEEC cooperation remains one of the motivating factors of
the emerging of BRI, and then, along with the official announcement, it has beendeveloped, with intensive diplomatic and economic cooperation, becoming one of
the most important phrases of the regional cooperation mechanisms within BRI.

3 Hungary-Serbia Railway
Motivated by China CEEC relations, what has been the consequence of China CEEC
mechanisms since 2012 and how can its implications be understood? For these questions, analyzing the project case of BRI in China CEEC relations is necessary, andthis paper focuses on the Hungary-Serbia Railway, one of the most significant casesin the sense that domestic sectors play a profound role in BRI.14 This railway projectis a result of the 16 + 1 format and supported by three main participants in theregional cooperation: China, Serbia, and Hungary.
The project of the Hungary-Serbia Railway was signed by the leaders of Hungary,
Serbia, and China in 2015.15 It is said that the length of the railway will be 260 km,
and the top speed will be 200 km per hour (160 km per hour, by Hungarian media),
and it will shorten the time between Belgrade and Budapest from 8 to 3 h.16 The
whole project is supposed to finish in 2023. The project is motived by several national
actors in China, including National Development and Reform Commission of China(NDRC), China State Railway Group Co., Ltd. (China Railway) with the cooperationfrom the government of Serbia and Hungary, and related to the policies of European
Union (EU).

4 National Development and Reform Commission of China(NDRC)
Among a number of actors who participate in the train project, one of the mostimportant is the National Development and Reform Commission (NDRC) of China.
13 http://www.china-ceec.org/eng/, viewed Feb 28, 2021.
14 For the significance of this project from an economic analysis, see Samuel Rogers (2019), China,

Hungary, and the Belgrade-Budapest Railway Upgrade: New Politically-Induced Dimensions of
FDI and the Trajectory of Hungarian Economic Development, Journal of East–West Business, 25:
1, 84–106, https://doi.org/10.1080/10669868.2018.1561589.
15 National Development and Reform Commission, https://www.ndrc.gov.cn/fzggw/jgsj/gjs/sjdt/
201511/t20151125_1106321.html, viewed Feb 28th, 2021.
16 National Development and Reform Commission, https://www.ndrc.gov.cn/xwdt/xwfb/201512/
t20151224_955866.html, viewed Feb 28th, 2021.

28 The Belt and Road Initiative and China-Eastern European Relations …

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National Development and Reform Commission (usually called Fa Gai Wei in
Chinese), is a directly led by the State Council (Guo Wu Yuan), and its most importantfunction is national economic growth and plans, rather than foreign policy or foreign
investment.17 The central role of NDRC in the railway project and the function of
NDRC in China, indicates that the goal of railway project has a strong domestic
context.
NDRC remains the center of the Hungary-Serbia Railway project. Before 24th
November 2015, when the leaders of Serbia, Hungary and China signed the official document on the railway project in the 16 + 1 meetings, January of 2015, thedeputy director of NDRC, along with the Ministry of Foreign Affairs, the Ministryof Finance, China Railway, visited Hungary. And Export–Import Bank of China,
visited Hungary, Serbia, and Macedonia for the preparation of the Hungary-Serbia
Railway project. The director of NDRC is the presenter of China who signed thecontract with the Hungarian government on the witness of the leaders of Hungary,
Serbia, and China in the 16 + 1 meeting in 2015.18 And in December, when the
project starting ceremony was held in Novi Sad, Serbia, the deputy director of NDRC
presented himself in the ceremony and read the congratulating letter from the prime
minister of China, Li Keqiang.19
The primary motivation for NDRC to promote the railway project is related tothe policy of “Railway Going Out Strategy” (Tie Lu Zou Chu Qu). The Railway
Going Out Strategy is a grand strategy of Chinese infrastructure, which contains
not only the Hungary-Serbia Railway, but also the Jakarta-Bandung High-Speed
Railway in Indonesia, Chinese-Laos Railway, Chinese-Thailand Railway as well, allof which promote the building of infrastructure connection in the peripheral countriesof China.20
The Railway Going Out Strategy led by NDRC indicates the significance ofrailway project in China’s national economy. According to NDRC’s document, by
the year 2015, the length of China’s railway had achieved 121 thousand kilometers,
and the high-speed train had achieved 191 thousand kilometers, which remains 60%of the world’s high-speed train length. It is conceivable that the success of China’s
domestic railway is the motivation of the Railway Going Out policy.21

17 National Development and Reform Commission, https://www.ndrc.gov.cn/fzggw/bnpz/, viewed
Jan 20th, 2021.
18 National Development and Reform Commission, https://www.ndrc.gov.cn/fzggw/jgsj/gjs/sjdt/
201511/t20151125_1106321.html, viewed Jan 20th, 2021.
19 National Development and Reform Commission, https://www.ndrc.gov.cn/xwdt/xwfb/201512/
t20151224_955866.html, viewed Feb 28th, 2021.
20 National Development and Reform Commission, https://www.ndrc.gov.cn/xwdt/xwfb/201602/
t20160214_955410.html, viewed Jan 20th, 2021.
21 National Development and Reform Commission, https://www.ndrc.gov.cn/xwdt/xwfb/201607/
t20160705_955571.html, viewed Jan 20th, 2021.

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5 China State Railway Group Co., Ltd. (China Railway)
While NDRC is a governmental agency which takes the responsibility of the goingout policy of China’s railway project, the main actor (state-owned company) which is
involved in the railway construction is the China State Railway Group., Ltd. (China
Railway).
In 2013, the Ministry of Railway was abolished, and China Railway Agency wasestablished to take the administrative responsibility of formal Ministry of China,
while a corporation was established at the same time to continue the corporate
responsibility of the formal Ministry of China.22 In 2019, China State Railway
Group Co., Ltd. (China Railway) was established, as “a solely state-owned enterprise
under the management of the central government, established in accordance with theapproval of the State Council and the Company Law of the People’s Republic ofChina”.23 From 2015, the beginning of the construction of Hungary-Serbia Railway,
China Railway remains one of the main actors taking responsibility for the railway
construction.
China Railway takes on both domestic and international railway projects.
Currently, China Railway has undertaken five overseas projects: Pakistan Lahore
Orange Line Rail Transit Project, China-Thailand Railway Cooperation Project,
Hungary-Serbia Railway Project, China-Lao Railway Project, Jakarta-Bandung HSR
Project in Indonesia, and Hungry-Serbia Railway. According to the official documents of China Railway, China Railway must implement the national strategy of
BRI and “going out”, to achieve the goal of “Railway Going Out”.

6 The Government of Serbia and the Governmentof Hungary
The government of Serbia supported the project of Hungary-Serbia Railway and ismotivated to build a close relationship with China, primarily because the China’s
railway project can benefit Serbia so that Serbia can connect to European countries
more conveniently. In September 2019, President Vucic attended a ceremony marking
the 70th anniversary of the founding of China, and he said, “he is proud that Serbia
is a significant link in the implementation of the One Belt, One Road project”, andhe also said, “China has no partner that is more reliable than Serbia, or a friend thatis more sincere24 ”.
22 The Beijing News, http://epaper.bjnews.com.cn/html/2013-03/11/content_416789.htm?div=-1,

viewed Feb 28th, 2021.
23 The Government of PRC, http://www.gov.cn/xinwen/2019-06/18/content_5401248.htm, viewed

Feb 28th, 2021. China Railway, http://www.china-railway.com.cn/english/about/aboutUs/, viewed
Feb 28th, 2021.
24 The Government of the Republic of Serbia, https://www.srbija.gov.rs/vest/en/145452/serbiamost-reliable-partner-most-sincere-friend-of-china.php, viewed Jan 20th, 2021.

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In the following month, October of 2019, when the first cargo train from China
arrived in Serbia, President Vucic attended the ceremony and said his idea is “tocriss-cross and cover Serbia with all the modern communications, roads, railways,
internet, and that thus Serbia joins in the developed economies which would solve
infrastructural issues”. He also said that the railway project “will be a perfect connection with Europe”, and “Serbia is not a stop-by station for the Chinese trains anymore,
but rather a destination25 ”.
Familiar with the government of Serbia, the Government of Hungary strongly
supports BRI and the relations between China and Hungary. In September 2019,
Peter Szijato, the Minister of Foreign Affairs and Trade held talks with Wang Yi,
member of the State Council of China and Foreign Minister, and emphasized in a jointpress conference: “Hungarian-Chinese political, economic, trade and cultural relations are exceptionally good”. He said China is the number one trade partner outside
the EU and “Chinese companies continue to view Hungary as an attractive investment destination, and their investments are bringing new technologies to Hungary
with which they are greatly facilitating the Hungarian economy in the success of its
dimensional transition”, as well he recalled that Hungary “was the first EU member
state to join the bilateral agreement linked to the One Belt, One Road strategy, andwe regard the initiative as “the foundation for new Eurasian cooperation”.26 In thesubsequent meeting, the minister also explained the contract on the Hungary Serbia
railway is being realized with Chinese loan assistance.27
The railway construction has been recognized as “one of the Central and Eastern
European region’s most important infrastructure projects,” and the contract of the
project in Hungary is signed and the implementation will be taken with the approvalof the credit contract entered with China Exim Bank where 85% will be supplied(the remaining 15% will be supplied by the Hungarian state own resources).28

25 The President of the republic of Serbia, https://www.predsednik.rs/en/press-center/news/presid

ent-vucic-attends-the-arrival-of-the-first-cargo-train-from-china-to-serbia, viewed Jan 20th, 2021.
26 The Government of Hungary, https://www.kormany.hu/en/ministry-of-foreign-affairs-and-trade/news/hungarian-chinese-relations-have-never-been-as-good-as-they-are-today- viewed Mar 12th,
2020.
27 The Government of Hungary, https://www.kormany.hu/en/ministry-of-foreign-affairs-and-trade/news/loan-agreement-negotiations-with-china-concerning-the-construction-of-the-budapest-bel
grade-railway-line-to-be-accelerated, viewed Mar 12th, 2020.
28 The Government of Hungary, https://www.kormany.hu/en/ministry-for-national-economy/news/
construction-of-budapest-belgrade-railway-line-could-begin-soon, viewed Mar 12th, 2020.

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7 The perspective of EU
From 2017, when China became the largest EU import country, expecting cooperation between Trans-European Transport Network (TEN-T)29 and BRI, along with
European Investment Fund (EIF) and Silk Road Fund (SRF), was focused.
The cooperation between Trans-European Transport Network (TEN-T, Fig. 2) andBRI was initiated by NDRC, interacting with the European Commission (DirectorateGeneral for Mobility and Transport, DG MOVE)30 to improve transport connectivity,
and a Connectivity Platform in 2015 was established.31 Silk Road Fund (SRF),
founded with multi-national actors investment from State Administration of Foreign
Exchange, China Investment Corporation, China Development Bank and Export–
Import Bank of China, is to provide investment and financing support for trade andeconomic cooperation and connectivity under BRI.32 SRF and European Investment
Fund (EIF), which is a part of the European Investment Bank Group (EIB), withthe central mission to provide finance to benefit small and medium-sized enterprises(SME) across Europe33 signed a Memorandum of Understanding in 2017, aiming
at facilitating a co-investment framework, in the presence of Premier Li Keqiang,
President of the European Commission Jean-Claude Juncker and President of theEuropean Council Donald Tusk.34 Figure 3 is shows trends in EU and trains between
China and Europe, and it is conceived that trains have increased sharply from 2014.
Nevertheless, the start of Hungary-Serbia Railway was from Serbia side in 2015,
while in 2020, it is conceived that the project in Hungary side was eventually
launched.35 The reason is assumed by the concerns from EU, about ‘the transparency,
non-discrimination and equal treatment, including for foreign companies, that are
applied in the EU’.36 Moreover, the critiques of this BRI project are ongoing. As
29 European Commission, https://ec.europa.eu/transport/themes/infrastructure/ten-t_en, viewed Jan

19th, 2021. EU has been involved into several regional cooperation towards building infrastructure connectivity in Europe. For this point, Ngampramuan (2019) contributes an analysis of SubRegionalism in the EU Strategy for Danube Region, referring Soavapa Ngampramuan (2019) “Comparative Sub-Regionalism: Investigating Sub-regional Processes in the EU Strategy for the Danube
Region and the Greater Mekong Sub-Region”, Asia–Pacific Journal of EU Studies Vol. 17 No. 2.
30 European Commission, https://knowledge4policy.ec.europa.eu/organisation/dg-move-dg-mob
ility-transport_en, viewed Jan 19, 2021.
31 European Commission, https://ec.europa.eu/transport/themes/international/eu-china-connectiv
ity-platform_en, viewed Feb 29th , 2021.
32 Silk Road Fund, http://www.silkroadfund.com.cn/enweb/23775/23767/index.html, viewed Jan
19th , 2021.
33 European Investment Bank, https://www.eif.org/who_we_are/index.htm, viewed Jan 19th , 2021.
34 European Investment Bank, https://www.eif.org/what_we_do/equity/news/2017/eib_silk_road_fund_initiative.htm, viewed Feb 28th , 2021.
35 https://www.reuters.com/article/hungary-china-railway-law/hungary-classifies-budapest-bel
grade-chinese-rail-project-idUSL8N2D14V2, https://www.ndrc.gov.cn/fggz/lywzjw/jwtz/202005/
t20200521_1228543.html, viewed Jan 19th , 2021.
36 Delegation of the European Union to China, https://eeas.europa.eu/delegations/china/21594/
reply-eu-delegation-china-recent-media-reports-related-belgrade-budapest-railway-project_en,
viewed Jan 19th , 2021.

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Fig. 2 The Trans-European Transport Network (TEN-T) (Source Trans-European Transport
Network, European Commission37 )Zoltan indicates, “the Hungarian section will cost 750 billion forints” (roughly $3
billion). Of this, 85% will be financed by Chinese loans, with interest between 132
and 200 billion forints ($500 and $800 million) and 15% by the Hungarian government. Potentially, then, the whole project will cost around 950 billion forints ($3.7
billion). “Is it beneficial for Hungary to construct this railway with Chinese help?
It seems that the project is more ideal for China than for Hungary.”38 Even somescholars from China indicate the risk of the BRI project, though the government ofSerbia, Hungary, and China support the BRI project as well as a majority of Chinese
scholars39 However, these points can be complex, while some studies focus on thelarger picture of geo-political effect of the project indicating that “The HungarySerbia Train Project in the cooperation of China-Central Eastern Europe, is precisely
the important project of pan-European Communication Corridor and also one of theten projects which motivate the whole of Europe from west to east, and from south
37 European Commission, https://ec.europa.eu/transport/themes/infrastructure/ten-t_en, viewed Jan

19th , 2021.
38 Zoltán Vörös, “Who Benefits from the Chinese-Built Hungary-Serbia Railway?”, https://thediplomat.com/2018/01/who-benefits-from-the-chinese-built-hungary-serbia-railway/, viewed Jan
20th, 2021.
39 Shixin Du (2018), “The Regionalism of Europe and Asia: Will OBOR be a solution?” Aoyama
Journal of International Studies (5), 179–190, 2018.

382

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Fig. 3 Trends in TEU and trains between China and Europe (Source Dunmore [2019]41 )to north.”40 Remaining debatable, China CEEC cooperation will still be one of the
hot spots for exploring the nature of BRI and China’s influence to the global world.

8 Conclusion
This paper analyzed China CEEC cooperation in the framework of 17 + 1 Format,
BRI, focusing current connectivity cooperation. From 1990s to the twenty-firstcentury, the rapid economic growth of China and the enlargement of EU provide
great opportunities for China and CEEC, and since 2012 the establishment of the 16(17) + 1 Format accelerated infrastructure connectivity constructions in China CEEC
cooperation. The typical case provided in this paper is the Hungary Serbia Railway
project, involving Hungary, Serbia, and China. By analyzing the actors enrolled into
the project, such as National Development and Reform Commission (NDRC) of
China and China Railway, which played a profound role in the railway construction,
it is conceived that the domestic development context remains the motivation of theregional cooperation between China and CEEC.
40 Liu, Zuokui (2017), “Europe and the initiative of OBOR”, OBOR Cooperation and Win–Win,edited by WANG Lei and WANG Liqiang, 2017.
41 ‘The “Belt and Road Initiative”: impacts on TEN-T and on the European transport system, Dick

Dunmore, Alberto Preti & Clémence Routaboul’, Journal of Shipping and Trade volume 4, Article
number: 10 (2019).

28 The Belt and Road Initiative and China-Eastern European Relations …

383

The project is supported by the governments of Serbia and Hungary, mainly forthe reason of developing connectivity in Europe, and EU also welcomed Chinese
regional cooperation with BRI, including the cooperation between Trans-European
Transport Network (TEN-T) policy of EU and European Investment Fund (EIF)and National Development and Reform Commission (NDRC) of China and Silk
Road Fund (SRF). The increase of trains connections between China and Europe
in recent years indicated the further trade opportunity in the regional cooperation.
Nevertheless, the agenda between EU states and non-EU states remain different,
and it is assumed that the concerns and critique about the transparency and equal
treatment, as discussed in the section of ‘The perspective of EU’, could be the reason
and one of the challenges of China CEEC cooperation.
The findings of this paper above could help to explain the current charactersand situations of both China CEEC cooperation and BRI. First, as well as the BRI
being recognized as one of the significant foreign policies of China, the main actors
in railway project, especially NDRC and China Railway indicate foreign policies
regarding BRI are also can be explained as an enlargement of Chinese domestic
development policy context. The success of high-speed trains in China motivates the
Chinese government to introduce the railway project business as a foreign policy suchas “Railway Going Out.” In this sense, the behaviors of China as either a geographic
or a revisionist power while being discussed, have been enclosed by a domestic
context, which could develop further discussion about China and international order.
Regarding the central puzzle, “how China could influence the international relations through the BRI”, if one expects this regional cooperation to lead to governancethat is beyond sovereignty in the future, the answer of this paper is that point is notclear yet. Though 17 + 1 has provided a platform for China CEEC cooperation, as
findings of this paper have shown, it remains the role of state (government)-centered,and it is still not clear how far institutionalization and norm constructure can reachyet. Nevertheless, especially from EU perspective, since China remains EU’s second
largest trading partner and EU remains China’s biggest trading partner, it could bea strong motivation for both EU and China to cooperate further in China European
relations, which could be expected to benefit CEEC, as the corridor between EU andChina eventually.

References
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on China’s ‘Belt and Road’?”. Journal of Contemporary China, 29:123, 336-353, https://doi.org/
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Dick Dunmore, Alberto Preti & Clémence Routaboul (2019), “The “Belt and Road Initiative”:
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and China (パワーシフトと、AIIB・シルクロード構想-欧州と中国の共同-, translated by
Shixin Du)”, International Trade and Investment (『国際貿易と投資』, translated by Shixin
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Bora Ly (2020), “China and global governance: Leadership through BRI”, Cogent Social Sciences,
6:1, 1801371, https://doi.org/10.1080/23311886.2020.1801371
Soavapa Ngampramuan (2019) “Comparative Sub-Regionalism: Investigating Sub-regional
Processes in the EU Strategy for the Danube Region and the Greater Mekong Sub-Region”,
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Construction- and Railway Equipment Industry”, Journal of Contemporary China, 29:123,
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Astrid Pepermans (2018), “China’s 16+1 and Belt and Road Initiative in Central and Eastern Europe:
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Samuel Rogers (2019) China, Hungary, and the Belgrade-Budapest Railway Upgrade: New
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Singh A. (2020), “Brzezinski and Mackinder theories: Role and influence on the political construction of Eurasia”. Vestnik of Saint Petersburg University. International Relations, 2020, No.13,
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Tsuchida (2019), “The Belt and Road Initiative & Central Eastern Europe: The Case Study ofHighway Project in Montenegro”, Russian and East European Studies, No. 48, 2019, 41–54,
https://doi.org/https://doi.org/10.5823/jarees.2019.41, viewed Feb 28th, 2021
Zoltán Vörös, “Who Benefits from the Chinese-Built Hungary-Serbia Railway?”, https://thediplomat.com/2018/01/who-benefits-from-the-chinese-built-hungary-serbia-railway/ viewed Jan
20th, 2021.

Shixin Du is a post-doctoral researcher from Aoyama Gakuin University, Tokyo, a research fellow
in the Institute for Global International Relations, Tokyo, and a research fellow in Institute forNortheast Asian Future. He was born in Luoyang, China, and received a B. A. degree of JapaneseStudies from Xi’an International Studies University, China. He then continued his research careerin Japan, and received a M. A. and Ph.D. degree in Political Science from Aoyama Gakuin University. His research interest is the Europe-Asia International Relations, focusing on the Hungary
1956 in the Cold War Study, and China-Central Eastern European Countries (CEEC) Relations
and BRI.

Chapter 29

Demand of Regional Cooperationin the New World Order: Case Studyof France and Germany Towards the EU
Formation, Focusing on Energy
Security & Sustainable Development
Akanksha Singh
Abstract The twenty-first century has witnessed the most significant wave of globalization in history. Predominantly breakthrough of the internet (digital globalization) has made this world a global village in reality. On the contrary, due to theincreasing trend of nationalism worldwide, nations are developing rather conservative approaches despite becoming more liberal and open to others. In this scenario, thesignificance of regional cooperation and integration among states increases manifold
to maintain a rules-based international order, promote the rule of law, and peacefulresolution of disputes in the international community. This paper examines that how
after an era of hate and suspicion during the two World Wars, countries reconciled forthe common cause. Consequently, this paper analyses Franco-German reconciliation
as a paradigm for present-day leaderships to cooperate and tackle global problems
such as climate change, terrorism, nuclear threats, and poverty. This paper mainly
outlooks energy as one of the essential cornerstones of European integration. Being
the significant element of world order, energy has materialized as the most persuasive tool in global geopolitics. It has gradually been instrumental in designing worldpolitics and international relations. Through this paper, author aims to foster regional
cooperation in the current international order via the tool of energy security.
Keywords Globalization · Franco-German reconciliation · Energy policy inEurope · Regional cooperation

1 Introduction
The twenty-first century has witnessed the most significant wave of globalization inhistory. Predominantly breakthrough of the internet (digital globalization) has madethis world a global village in reality. On the contrary, due to the increasing trendof nationalism worldwide, nations are developing rather conservative approaches
A. Singh (B)Special Researcher, Aoyama Gakuin University, Tokyo, Japane-mail: akanks56_ssf@jnu.ac.in© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
K. Haba et al. (eds.), 100 Years of World Wars and Post-War Regional Collaboration ,https://doi.org/10.1007/978-981-16-9970-2_29

385

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despite becoming more liberal and open to others. According to the Japan Instituteof International Affairs (JIIA) Strategic Annual Report 2019, “liberal international
order” developed in the post-World War II era may end due to the lack of interest in
multilateralism. Thus, the significance of regional cooperation and integration amongstates increases manifold to maintain a rules-based international order and promote
the rule of law and peaceful resolution of disputes in the international community.
This paper examines that how after an era of much hate and suspicion towards
each other during the two World Wars, countries reconciled for the common cause.
Consequently, this paper analyses Franco-German reconciliation as a paradigm forpresent-day leaderships to cooperate and tackle global problems such as climatechange, terrorism, nuclear threats, and poverty.
This paper mainly outlooks energy as one of the essential cornerstones of European integration. Being the significant element of world order, energy has materialized as the most persuasive tool in global geopolitics. It has gradually been instrumental in designing world politics and international relations. Under the “Schuman
Declaration” France and Germany agreed to pool their coal and steel resources under
the cooperative framework, resulting in the European Coal and Steel Community(ECSC) formation, making the European integration process practically feasible.
Therefore, through this paper, author aims to foster regional cooperation in the current
international order via the tool of energy security.
Regional cooperation and integration are processes through which countries
can achieve national interest in collaboration with each other (ADB 2013). Wellintegrated markets are more secure to economic shocks and tend to avail more investment in high risk and high return assets since there is an opportunity to diversify andshare the risk (Obstfeld 1994; ADB 2013). With deeper connectivity and balance inresource distribution across the region, the integration process stimulates economic
growth, consequently increasing employment opportunities. However, benefit distribution is an essential element that needs to be considered to foster future integration(ADB 2013). The process of regionalization and globalization in the present era areso intimately intertwined overlapping one another, hence making the contemporary
regionalism of the twenty-first Century fundamentally different from the regional
cooperation and integration, which developed in the post-world war phase in thetwenty Century (Soderbaum and Hettne 2006).
Classical regional integration theories between the 1950s and 1960s focused
mainly upon European integration. It was the time when regional cooperation under
the influence of national interest was determined by the governments (Soderbaumand Hettne 2006). Thus, a lesson, which can be learned from the European experience
is-the need to lay an early institutional foundation for financial policy cumulation.
Due to its strong focus on the role of institutions in Europe’s own integration process
and the importance of institutionalized interregional relations, the European regional
integration model represents a potential world order (ibid).

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2 Franco-German Reconciliation
France and Germany are the two largest economies of the European Union (EU),with leading positions in the European politics. During World War II, French, on
one hand, was an allied power, and on the other hand, Germany was a vital axis
power; at the end of the war, France emerged victorious, and Germany, with defeat
became even more isolated (Sudholter 2014). War left economies with the problem
of reconstruction, at that time Coal and Steel emerged as the critical sector of theeconomy, whether it was day to day commodity, or the refined products for military
expansion coal and steel was the centre of all industries, thus it became essential
for each state to acquire and exploit these mineral reserves in order to grow theireconomy.
For a very long time, the Ruhr basin situated in France and the German border had
been an area of conflict between them. Ruhr was the primary mining field supporting
the heavy industries, and traditionally, it was considered as Germany’s armory (Piodi2010). After World War II, allies placed this critical territory which was the backboneof the Germany’s most established steel industry, on the underside of the exclusive
International Authority for the Ruhr (IAR) which was responsible for managing regulation and distribution of coal and steel production between domestic consumption
and exports (ibid).
In the post-WW II period, the Schuman Declaration was the first and the mostsignificant breakthrough towards Franco-German reconciliation (Hitchcock 1998;
Gillingham 2004). Schuman Declaration on 9 May 1950 proposed that “FrancoGerman production of coal and steel as a whole be placed under a common High
Authority, within the framework of an organization open to the participation of theother countries of Europe”, in order to set up a common foundation for economic
development of European states. Schuman viewed that in order to make war “notmerely unthinkable but materially impossible between France and Germany”, it wasessential to setup up a production unit in consensus with both states with basic
element of industrial production on the same term. There was fear that Germany may
misuse its dominant position in the market and prevent other European states fromrebuilding their industries. Thus, the European Coal and Steel community (ECSC)
was proposed to avoid German sovereign control of over coal reserves of Ruhr Basinand steel industry (Milward 1984; Alter & Steinberg 2006). The plan intended tosetup a single European market for “community development” of coal and steel
where raw material consumers would be approved free access to production sources(Sethur 1952). Under the “Schuman Declaration” France and Germany agreed topool their coal and steel resources under cooperative framework, resulting in theformation of European Coal and Steel Community (ECSC) making the European
integration process practically feasible.
Political will, personal connections and ceremonial events have been pivotal infostering Franco-German reconciliation (Krotz and Schild 2013; Druol 2017). It
happened after that personal invitation, when French president Charles De Gaulle

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invited his German counterpart to his personal family home in Colombey-les-deuxEglises in Eastern France instead of the Elysee Palace in Paris making German
chancellor only leader to visit French president’s family home. It was under thisintimate setting when De Gaulle conveyed his intentions to end the old age hostilities
between the two countries. Moreover, there was time to start relationship based on
mutual trust, respect and understanding to foster this bilateral relationship (Druol2017). This personal entente between both leaders led to the signing of the Elysee
Treaty on January 22 in 1963 to establish a new level of cooperation between Franceand Germany with idea of lasting friendship between the two former rivals (ibid).

3 Regional Cooperation and Integration: Need of the Hour
The formation of European Union has set up a unique level of economic and political integration and an example for others to learn from it. As of 2020 448 million
people move freely with security of freedom and equality in the region. Such kindof sustained model requires strong institutions to handle legal and political mechanism. Starting from the Schuman declaration in 1950, then formation of ECSC
(1952), European Economic Community, European Atomic Community (1957),
Single European Act (1986) and the Maastricht Treaty (1992). Thus, these were thesustained political efforts for a long time to carve out the picture of highly integrated
European Union (Cuyvers 2017).
Taking an example from European integration, there have been many other initiatives from groupings in Africa, Asia, Middle East and South and Central America toachieve regional integration through cooperation such as- African Union (AU), Association of South East Asian Nations (ASEAN), Mercosur in South America, South
Asian Association for Reginal Cooperation (SAARC), Gulf Cooperation Council(GCC) and others. However, despite the initial enthusiasm the desired level of cooperation could not be achieved and no other regional association is near to EU interms of political and economic cooperation. After European Union, the best modelof regional cooperation has been obtained by ASEAN. However, unlike European
Union, ASEAN is an intergovernmental organization with no clear interest in sharing
sovereignty (Cameron 2010).
Despite the clear ambitions for regional integration, there are no leadership efforts
in this direction from states to resolve problems and suspicion towards each othersuch as; a) in North East Asia, integration will be impossible without the cooperation
between South Korea, China and Japan, b) similarly, in South Asia leaders from India
and Pakistan must learn to leave behind past and reconcile for better and secure future.
It is possible only through the reconciliation. In this direction, countries can go ahead
above on the steps mandatory to create a regional community such as custom union,
free trade area and single market (Cameron 2010). As one of the most importantcommodities which can drive countries to come together for mutual cooperationis the “energy” which is a vital necessity of the modern globalized world. In the
post-World War time, it was coal and steel which acted as the chief material force

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for progressive and pragmatic cooperation among the European countries (Tripathi2012). Now it can be power grids and multi-national pipelines, which can inspirestates to connect for sustainable growth and progressive future.
It shows that reconciliation led to increase in cooperation among states, this cooperation enhances multinational infrastructure development which enhances connectivity, the unhindered connectivity nurtures the flow of energy from energy surplus
states to energy deficient states hereby fostering energy security for all. Once theenergy security of a state is maintained then it directly affects the economy of state,
and deepens the prospects of regional cooperation and integration. Regional cooperation and integration not only foster stability in the region through democratic reforms
but also enhances the economic sustainability via efficient usage of scarce resources(Edoho 1997). Since the establishment of ECSC, energy has played a key role innurturing European economic Integration. EU has benefitted from open policies onenergy market liberalization and integration, and hence presently European energy
sector has the largest interconnected power systems of natural gas and electricity inmore than 20 countries of continent Europe (Shi and Yao 2020). Taking a lesson fromthe European experience, other sub-regional initiatives in different parts of world canlearn that regional integration could be the crucial approach which can give boost
to macroeconomic policies and can enable economies to cooperate with each otheron the basis of their individual economic benefits for common development (ADB2013). Hence, Asian Development Bank defines regional integration, “as a process ofstrengthening interconnectivity encompassed by the economies of a region throughenhanced collaboration with the backing of unified policies and initiatives” (Sarker
et al. 2020).
In order to nurture deeper regional cooperation and integration, world leaderson 25 September 2015 decided to adopt new framework, which is titled as “Transforming our World: The 2030 Agenda for Sustainable Development” and reiterated
that “The 2030 Agenda compels us to look beyond national boundaries and shortterm interest and act in solidarity for the long term. We can no longer afford to
think and work in silos” (UN ESCAP 2016). It is high time to work together, useavailable energy reserve and address global challenges such as terrorism, climatechange in cooperation with each other. However, because of the lack of politicalwill, capital investment, mutual trust among countries, and the absence of Institutional framework, the course of action for regional cooperation is undoubtedly slow
despite the enormous potential benefits, which can garner from regional cooperationand integration (Lee 2003).

4 Role of Energy in Boosting Regional Cooperation
In its recent report McKinsey Global Institute predicted that by 2040, Asia would
account 50% of worlds total GDP, and 40% world’s energy consumption. Growth ofenergy consumption in rapidly developing energy markets of the Indo-Pacific region
would change the geopolitical dimensions of the region and intensify competition for390

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energy resources (Sovacool and Vivoda 2012). Thus, to ensure security of available
energy resources, it becomes imperative for Asian economies to realize the importance of regional cooperation to sustain their economic growth in long run. An American legal expert John Ashcroft said that, “if necessity is the mother of invention, it isalso the father of cooperation” thus energy security is the necessity of present worldorder where cooperation is well desired (Tripathi 2012). Energy has the potential tocreate a new regional and international cooperative framework. In today’s interdependent world, no country can fulfil its energy needs on its own. Energy connectivity
via multinational cooperation opens the doors of energy diversification to countries
through more energy reserves. There is scope for developing countries to strengthen
their capacities through transfer and application of technologies (UN ESCAP 2017).
In the present era of globalization maintaining energy security is of crucial importance for each country to sustain their economic growth, therefore energy security
holds a special place in the foreign policy making of each country. The stability ofenergy markets is of crucial importance for the peaceful world order, thus bilateraland multilateral cooperation for successful energy collaboration is highly essential
to maintain energy security. Energy connectivity links energy producers to energy
consumers of the region and advantages to their geographical proximity throughfavourable transportation cost. Energy deficit countries with high consumption forenergy have to depend on other energy resource-wise rich countries to meet theirdomestic demand. Cross energy trade and greater interdependence within the region
is an effective solution to deal with the energy imbalance. Greater interdependenceis critical particularly for consuming countries as it reduces vulnerability to energy
price volatility and supply disruption, which are commonly caused by undiversified
sources of energy imports (Cabalu et al. 2010).
International Energy Agency (IEA) explains energy security as “the uninterrupted
availability of energy sources at an affordable price” (IEA 2019). Thus, intra andinter-regional connectivity of energy guarantees the availability of energy resources
at economic prices in a sustainable manner. Asian economies however rich in diverse
energy resources, these resources are unevenly distributed in different regions ofAsia. Such as the energy surplus countries are unevenly situated in the different
sub-regions of Asia such as Kyrgyzstan, Kazakhstan, Turkmenistan, Azerbaijan,
Saudi Arabia, Bhutan, Nepal, Lao PDR, Myanmar, Uzbekistan, Russia, Cambodia
and Vietnam in terms of hydrocarbon, hydro power, geothermal, nuclear, tidal andwind power energy sources. Countries accounted as the growth engine of Asia suchas China, India, Japan, South Korea, Indonesia and others are highly energy deficient countries. Therefore, regional cooperation and integration can bring together
deficient and surplus regions and enhance their economic growth through investment, infrastructure development and energy security (Sarker et al. 2020). In thisdirection, the several energy connectivity initiatives of Asia overlapping each other,struggling to find out sustained path of cooperation and integration. SWOT Analysesof Interstate & Inter-regional cooperation.
This article uses the SWOT Framework where S stands for Strength, W stands for
Weaknesses, O stands for Opportunities and T stands for Threats for the interstateand inter-regional cooperation. S & W are considered as an internal factors which can

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help a region to understand that which of its resources and capabilities are likely tobe sources of competitive advantage and which can act as barriers on path of growth.
O & T shed a light on external environmental factors which a region or state may
attract from other state or region (Gurel and Tat 2017).
Strategic location, energy reserves, connectivity between energy deficient andenergy surplus countries have been identified as the internal Strengths of a region
which can attract countries towards each other to connect. Weaknesses emphasize
upon the disadvantages such as lack of investment, government policies (complicatedbureaucratic procedures which may hinder economic growth), and fragmented energy
networks which are less efficient in terms of cost and resource used hereby providing
costly energy. Technology advancement, investment inpouring and economic integration are considered as the external Opportunities a state can leverage while collaborating with other state. Lastly the Threat section identifies environmental threats,
conflicts and interstate competition as the external risks to be taken into consideration and sumps up about these potential disadvantages that—in between all growthand infrastructure development ecological concerns are taken for granted, borderconflicts and terrorist activities can hold up any initiated project for years and interstate competition for scarce resources can create dispute among the actors involved.
Henceforth this SWOT framework analyses provide positive and negative aspects ofexternal and internal environment to policy makers while formulating global policy
processes. The very essence about SWOT analyses that it provides holistic perspective with greater degree of transparency about the subject matter by envisioning that
how weaknesses can be turned into strengths and how threats can be turned into
opportunities.
In order to secure energy security and sustainable growth for the upcoming
decades, role of regional cooperation will be imperative for sustainable growth,for example sub-regional power trade can help meet energy demands while maximizing scarce natural resources. Usage of different peak times for different states
in an inter-regional power grid can reduce the need to build a new power generation plant all together in each country (ADB 2013). With greater cooperation andenergy connectivity, there is huge potential for energy security improvements via
addressing energy challenges to enhanced energy cooperation. Most of the times,
energy connectivity links together effectively indigenous energy sources to demand
centres through trade, cross border investment and technical cooperation (UN ESCAP
2017). Biggest challenge in front of Asia towards its regional integration like EU asa whole is its vastness, extreme diversity and huge economic imbalance, therefore
Asian economies can learn from the experience of ASEAN that has learn from EU
experience that how regional cooperation can be leveraged to facilitate connectivity
and economic growth.

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5 On Path of Cooperation & Integration: ASEAN
Experience
This section examines the growth and evolution of energy connectivity in ASEAN
region, which has emerged as the most successful economically integrated regionof Asia. According to ASEAN secretariat report it is the most preferred investment destination and would grow to be the 4th largest economy in the world by2030. ASEAN Economic Community aims to boost energy security, connectivity
and sustainability through multilateral power trade cooperation and provide political, regulatory and policy framework to establish regional energy market. ASEAN
Power Grid and Trans-ASEAN Gas Pipeline are the two most suitable example ofmultilateral cooperation in energy sector from the region (Xunpeng 2014; ASEAN
Centre for Energy 2020).
ASEAN Power Grid (APG): Started in 1997 as the cross-border bilateral power
connection initiative, APG has grown into sub-regional initiative which aims to integrate whole Southeast Asian region and presently interconnects the power system
of Singapore, Thailand, Lao- PDR, Malaysia, Indonesia and Brunei through 3 subsubsystems i.e., Upper West System, Lower West System and East System (Xunpeng
2014). Strengthen electricity network would foster the market integration and development via reduced energy prices, power shocks, supply shortages and efficient
usage of available resources thus facilitating sustainable development goals (Silitonga 2018). As ASEAN region consists of large, medium and small economies, and
it is challenging for small economies to develop such large-scale infrastructure on
their own, thus APG is expected to reduce regional gap by supporting more crossborder trade, as well as promote profitable investment in renewable energy (ASEAN
6th Energy Outlook 2020). So far APG has not only benefitted the region in termsof energy connectivity and economic integration, but it has also strengthened theASEAN’s influence in global economy (ibid).
Trans-ASEAN Gas Pipeline (TAGP): Estimated by ASEAN Secretariat, Southeast
Asia has the 7.5 trillion cubic meters of gas reserves almost 3.5% of world’s total(Subhan, The ASEAN Post 2018). In 1990s ASEAN commissioned a regional study
for the development and consumption of region’s natural gas to reduce the region’s
dependence on crude oil, the study recommended a construction of trans-ASEAN
gas pipeline that could link 80% of ASEAN’s total natural gas reserves (Xunpeng2020). Thus, TAGP is the second important infrastructure project which aims to foster
ASEAN’s energy cooperation. With a view of minimizing environmental impact thisproject aims to setup interconnected energy network to ensure greater gas supply
through connecting prevailing and planned pipelines and regasification of terminals
across the borders (ASEAN Centre for Energy 2020) and hence connects gas fields
from diverse region i.e., Andaman Sea, South China Sea, Gulf of Thailand to ensure
uninterrupted gas supply. With enhance energy security project TAGP is expected toencapsulate investment in infrastructure and technology in the region.
These examples showcase that regional cooperation and integration at the level ofresource sharing can bring countries together into a network of interdependence to29 Demand of Regional Cooperation in the New World Order …

393

ensure maximum use of scarce reserves fostering sustainable development (Sarker
et al. 2020). Such connectivity and transmission links can act as a stepping stone
towards stronger international agreements in global policy processes.

6 Conclusion
Process of regional integration also promotes peace and security, but for that, political will and commitment are of utmost necessity. In the present global scenario, tomaintain political and global significance, integration is a feasible option for eachstate. Since the inception of digital globalization, markets and companies have transcended borders, so countries must rise above their own borders and cooperate toretain their relevance, leaderships can adopt a proactive approach with a greater
sense of ownership and provide policy support to foster investment friendly environment, as conducive the environment the greater the chances for collaborations.
From European experience, it can be derived that reconciliation can be an important component for developing the crucial political will for cooperation and ultimate
integration. The cornerstone of EU integration was the Franco-German reconciliation, which was achieved by the sustained political efforts of leaders from bothcountries. As stated by Charles Lyell, “the Past is the Key to the Present” this is
a lesson which present leaderships can learn from their predecessors, that it’s hightime we all should move forward on one path to provide sustained future to our
future generations. Owing to its vast range of diversity, building regionalism in Asia
would require collective leadership from major economic powers to recognize tolerable balance of power among all participants. Other sub regional initiatives of Asia
can learn from the approach of the successful initiatives mentioned in the paper todevelop energy corridor through which it will be easy to develop economic corridors.
Therefore, countries such as Japan, China, India, Republic of Korea and Indonesia
and others can play an influential role to enhance the “soft” & “hard” connectivityof the continent.

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Akanksha Singh has completed her Doctor of Philosophy (Ph.D.) degree in Geopolitics ofEnergy Security at the Center for Russian and Central Asian Studies, School of International
Studies, Jawaharlal Nehru University, India, in 2019. She received her Master of Philosophy(M.Phil.) degree from Center for Russian and Central Asian Studies, School of International
Studies, Jawaharlal Nehru University, India, in 2014, and her Master of Arts (M.A.) degree fromCenter for Study of Regional Development, School of Social Sciences, Jawaharlal Nehru University, India, in 2012. She has published the journal paper and a book review and also presented
her research at international conference. She is a member of the International Studies Association(ISA).