Unlock Editor's Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
If trade and economics are really all about politics today, then the horrific Hamas attack and Israel's deadly bombing of Gaza are sure to create a new global tension between rich and poor countries. It will cause a huge rift. The United States is a loyal supporter of its longtime client state, Israel, and low- and middle-income countries generally stand by the Palestinians. Will the Gaza conflict be the moment when the soi distant 'Global South' finally asserts itself as a geoeconomic power?
Answer: Probably not. Read on the surface, America's isolation lies within both the misnamed “Western” alliance of wealthy democracies led by the United States and emerging markets that wish to join the geo-economic clique skeptical of China. It would undermine America's global standing. Upon closer inspection, you'll see that it's greatly exaggerated. This episode doesn't show the “West” or the “Global South” (East and North don't seem to have their own groupings, sorry) coming together to form a solid bloc. In any case, foreign policy issues that do not have a major impact on the world economy cannot be expected to have enough effect to change trade patterns.
In the United Nations General Assembly's Oct. 26 vote for a ceasefire in the Gaza Strip, the United States joined Israel in the minority in opposing it. Only 14 countries voted against the bill, with 45 abstained and 120 countries in favor. However, the EU did not obediently follow the lead of the United States, and instead faced problems on all fronts. Four EU member states opposed the motion, 15 abstained, and the remaining countries, including NATO members France and Spain, supported it. Most developing countries voted in favor, but India, a self-proclaimed leader of the “Global South” and having grown closer to Israel in recent years, abstained.
The United States also maintains foreign policy influence in some areas where it is expected to sympathize with the Palestinians. The United Arab Emirates, which signed a trade deal with Israel last year after normalizing diplomatic relations in 2020, voted in favor of a ceasefire at the United Nations, but in practice it may not be able to maintain traditional security if the conflict escalates. There is a possibility that the company will approach the United States as a guarantor. Via the Middle East.
In any case, history suggests that even though the United States is more squarely responsible for mass deaths through its foreign policy adventurism, this does not affect its ability to trade or negotiate. After President George W. Bush's war in Iraq in 2003, global public opinion of the United States fell sharply, dropping by 30 to 40 percentage points in some European countries and sharply in middle-income Muslim countries. But that doesn't mean the US has become a trade pariah. The share of US exports in gross domestic product (GDP) rose from 9% in 2003 to more than 12% in 2008, the last year of the Bush administration, on the back of a recovery in world trade.
In 2008, the United States succeeded in starting negotiations for the Trans-Pacific Partnership Agreement, which brings together 11 countries, including Singapore, which is economically inclined to China. Similarly, the United States is leading negotiations this week with 13 Asia-Pacific countries on the Indo-Pacific Economic Framework Plan. Although the idea doesn't have much substance, it is a political signal for countries that want to maintain good trade terms with the United States, and there is no sign that IPEF members will walk away in protest of U.S. support for Israel.
Israel-Hamas war: 2 minute press conference
Stay up to date with the latest event summaries and FT analysis, comments and features
Glorious support for the Palestinians is an easy way for emerging market countries (and some Europeans) to pretend to be skeptical of the US-led political order, but from an economic perspective, events in Gaza Their reactions to it are likely to be realistic. The conflict has hurt Middle Eastern economies, but it is unlikely to be as noticeable outside the region unless major fires send oil prices soaring.
After Russia's invasion of Ukraine, wealthy democracies formed a fairly solid geopolitical bloc against Moscow, but developing countries did not primarily take sides, but instead remained adamant on trade and economics. (and wisely) continued to be opportunistic. Emerging markets have competed with each other, pursuing trade relationships with both the United States and China, sometimes explicitly emphasizing non-aligned positions.
Indeed, if the Gaza conflict weakens Joe Biden domestically enough to elect Donald Trump as president of the United States next November, or if China becomes emboldened to invade Taiwan, the world The catalytic impact on the economy will be profound. But more than that, while trade is certainly more politicized than it was 20 years ago, most governments probably won't allow conflicts in distant territories to affect their pursuit of economic self-interest. Dew.
The Gaza conflict could be a turning point in U.S. operations in the Middle East, especially given the domestic resistance to Biden's pro-Israel policies. But absent rapid escalation and spillover effects in the United States and China, it has so far failed to trigger a broader realignment in geoeconomic relations. The “Global South” and the “West” are no longer a coherent bloc, as they were before the conflict began.
alan.beattie@ft.com
