Warning: This is a rush transcript generated automatically and may contain errors.
Asbed: Hello everyone, and welcome to this Conversations on Groong episode. Today, we’re going to be talking about China on the world stage. At a time when the US is initiating tariff wars with everyone, including friendly countries, we’re going to explore what really is driving this tariff regime and what it means for the US-China relationship. So today we’re talking with Professor Warwick Powell from the University of Queensland in Australia, and also the Taihe Institute in Beijing.
Professor Warwick Powell, welcome to the show.
Powell: It’s great to be with you both.
Hovik: Welcome, Professor Powell. So, Professor,
Asbed: you describe your work to be, quote, at the intersection of digital innovation and technologies and international political economy, unquote. And you have a particular interest in the place of China in the future of international economics, political and social systems. As this is your first time on our show, please tell us a little bit about your work and how you came to focus on China and its place in a changing landscape of geopolitics and technological innovation.
Powell: Sure, I’ll do my best. It’s a big topic, but hopefully I can give a reasonably succinct overview of the sorts of things that have interested me over many years and which provide the focal points for the work that I do from a research and an education point of view. My interest in China, of course, go back many decades now to the time when I did my undergraduate work and then into my first phases of postgraduate life and then eventually working in government in Australia, where China was emerging in the early 1990s as a very significant part of of the region.
And so it was important for Australia, Australian governments, enterprises and other forms of organizations to develop a better understanding of what was happening in China, which suited me perfectly fine because I had a background in that arena. And of course, I have my own personal and family interest in the world of China as well. I’m from Hong Kong originally. And whilst I’ve been in Australia most of my life, I still have many family members and friends all through southern China, Hong Kong, Macau and those sorts of My work has, as you mentioned, looks at the intersection of a number of things.
One is the role of China. The other one is global geopolitical economy, which aims to provide a macro context for how China may or may not fit into the dynamics of the world. And as we drill further into a place and how it connects with other places, I’m interested in supply chain interconnections and ultimately the technologies that enable enterprises to interact with each other. And that’s where we start to touch on the digital dimensions, whether they are digital infrastructure to enable data about supply chains to be captured and shared, or whether they are digital infrastructure to support the future of transnational payment systems.
So in some ways, you could think of it as a layered cake. Start off at the international geopolitical economy and then progressively drill down into areas of specific interest.
Hovik: Well, let’s talk about some of those topics, I guess. If you’re listening to this and you have been under a rock for the last week, you will know, and you’re just listening to us, you will know that the Trump administration has introduced a sweeping package of tariffs, invoking emergency powers while doing that, and framing the move as a strategy to restore American manufacturing. The tariffs have been placed across many countries in the world, And the reasoning is that it is meant to address trade imbalances, especially with China. It seems like China was the main target though.
Critics… including international economists like Jeffrey Sachs and those such as yourself, have argued that the logic behind these policies is deeply flawed. You argue that these tariffs are a political response to a misguided economic problem. So, Professor, what is the real cause of the problem that they’re trying to solve, which in my opinion, I guess, is America’s industrial decline? And why are tariffs the wrong tool to fix this?
Powell: Look, I think it’s important to try to understand what it is that people may mean when they talk about rejuvenating American manufacturing and by implication what they mean by the underlying problem. The target of rejuvenating manufacturing or American manufacturing is the end outcome. But there’s clearly some sense of what the problem may be, certainly at a symptomology level and perhaps not so much at a causation level.
At a symptom level, the argument that is usually used around all of this is that America no longer makes anything and that America is overly dependent on the on the production capabilities of other countries around the world for the things that America consumes. Now, on both of those fronts, there is a little bit of exaggeration, if you will, around the extent to which the problem currently exists. And therefore, it also affects the way in which the problem has been ultimately diagnosed.
If you look at the long run pattern of the American economic model, What we see is that on two critical measures, namely employment as a share of GDP and output as a share of GDP, the manufacturing sector has exhibited a declining pattern for the best part of four to five decades, starting from the 1960s. And we see that fall in both employment and output contribution terms, particularly clearly all the way through to about 2010.
Now, the reason why this longest sweep of history is important is because it shows that prima facie trade with China or the entry of China into the world trade network via its ascension to the World Trade Organization in 2001 did not come inside with the emergence of this hollowing out of manufacturing problem. So hollowing out began in the 1960s, and in fact, by the mid 1970s, early 1980s, there was plenty of academic work as well as political hand-wringing around the concerns of a declining share of manufacturing to the American economy. Now, what that tells us is that the problem isn’t so much trade itself.
And I would suggest that, in fact, the dynamics of trade are a consequence of deindustrialisation rather than the cause of it. The other thing to bear in mind before I go on too much more is that from about 2010 onwards, American manufacturing’s contribution to employment and output more or less leveled out. So it had reached, in a sense, the bottom level within the overall structure of the American economy. And it hasn’t really changed a lot over that period of time since around 2010 to now.
The recent years has seen a modest uptick in manufacturing employment, but certainly not at levels as high as overall employment growth is concerned, which suggests, of course, that manufacturing does not put jobs on as quickly as the economy as a whole. And output has also experienced a little bit of an uptick in the last few years, in large part as a response to the stimulus post-COVID or as part of COVID and the activation of surplus capacity within the manufacturing system. But by and large, for the last 15 years, American manufacturing has largely plateaued out.
The problem around this idea that trying to turn that dynamic around through trade-related measures is that it has the symptomology and the causation arrows around the wrong way. American manufacturing hollowed out in large part as a result of two broad factors wrapped by one macro trend. The immediate factors was technology substitution for labour, where machines… were increasingly implemented to replace labour where possible. And when that became difficult to do or more expensive to do than alternatives, the alternatives such as offshoring and labour intensive manufacturing began to take place.
The macro trend wrapping around all of this was the progressive financialisation of the American political economy. And by that, I mean the growing extent to which the financial system, the marketplace of stocks and bonds and derivatives and foreign exchange began to dominate the economic landscape in terms of the use of available money capital.
So as enterprises earned money from their manufacturing activities and collected profits progressively, rather than substantially investing those back into the manufacturing sector to continue to expand local capacity, The funds actually were progressively diverted into the financialised sector where monetised profits could be achieved at a far greater rate of knots. So that’s your broad dynamic. The idea that you can play around with relative pricing, which is what tariffs are, in the hopes that that will fundamentally transform the deep structures of the American economic system is really a fantasy.
Hovik: So there’s this trend over the last, I guess, several years, including maybe even more, but at least that’s what in the news you can read about, is that China is becoming less and less reliant on U.S. markets. So what impact, if any, will this new wave of tariffs have on China’s economy and the global trade posture of China as well?
Powell: Yeah, because look, it’s a very interesting question because it also points to another long run historical pattern, and that is the progressive reduction in the role of the American market and the American economy in global trade. So these days, the American market represents a little bit less than 15% of global imports, which is around half of what it was 25 years or so ago. In other words, the United States market is simply not as important as it once was in a relative sense.
The reason that has happened in large part is because the markets of all the other countries in the world have grown at a rate faster than the United States market has grown. The expansion of countries of the global south, including south trade as well as trade with China, has meant that China has, over the course of the last 25 years, emerged as the most significant trading partner for over 150 countries now. And in a relative sense, it means that the US market simply doesn’t have the same economic pull as it once did.
From a geopolitical point of view, of course, that means that the US market doesn’t bring with it the kind of leverage that perhaps it might have a generation or a generation and a half ago, whereby decisions made by Congress or by the United States president could have outsized impacts on what happened in terms of the contours of global commerce. That cannot happen anymore. The United States simply doesn’t have the same kind of leverage. More to the point, the US economic system is not able to produce the kinds of things for the rest of the world that can’t be sourced from other parts of the world.
So there are very, very few things now that the United States economic system produces that others in the world can’t buy from other suppliers. And that ultimately means that a regime based on punitive tariffs in the attempt to create price-based barriers to exporters to the United States market, as well as ultimately giving rise to retaliatory measures from others, will more likely than not damage the United States economic system than it will other systems around the world. Now, I say that not because I think that there are, you know, simple win-wins or win-losses in this particular set of dynamics.
And in fact, the outbreak of some kind of a trade war, big or small, does generate what is in effect lose-lose outcomes. The real issue is the extent to which different parties will lose and the extent to which different parties around the world can adapt quicker to the new circumstance than the others.
Hovik: And we know that China is spearheading this alliance called BRICS, or not an alliance, maybe a loose association of countries. So my question is, how might this tariff escalation affect BRICS countries, especially as it looks to expand its economic influence and reduce dependence on Western-led trade systems?
Powell: A logical response for most countries will be to seek to expand and consolidate their trading relationships with each other. So I think we’re going to start to see that take place a lot more. BRICS, as one of those multilateral institutions that has been developed to facilitate more intensive trade and easier low-cost trade between its member states, will no doubt come into its own. And BRICS isn’t the only one.
There are other trade-based organizations or networks of countries, such as the Regional Comprehensive Economic Partnership, which is the free trade agreement that was initiated by ASEAN in Asia, which now includes ASEAN’s 10 members. together with Australia, New Zealand, Japan, Republic of Korea and China. And there are other free trade or open trade arrangements that cover different continents in the world.
So I think that BRICS as one of those, and obviously the BRICS member states represents a very substantial part of the global economy, will play an important role reinforcing the benefits of multilateral trade whilst the United States, in effect, deals itself out of the flows of goods in particular.
Hovik: And, you know, commentators, including A favorite one that many of our listeners might listen to, Alexander Mercouris, for instance, have termed this move by the U.S. as the ‘end of globalization’. Do you agree with this characterization? And we talked about BRICS, we talked about China, but what might this portend overall for world trade in general?
Powell: This reminds me a little bit of the debates in the early 1990s, which was all about whether or not we were entering into a period of globalization.
And just as those debates ultimately were fraught by simplistic ideas of what globalization meant, I think that the discussions today at the back end of this 30 odd years would do well to reflect on the lessons of the earlier debates. those early debates in a sense tried to construct a caricature of the dynamics of intensified global trade and investment flows and also to some extent people flows and those debates tended to overstate the extent to which nation states diminished in their importance and and that nation states were in effect being replaced by multinational companies So I would caution against this sort of broad sweeping description that this is the end of globalisation, in part because we need to have a tighter idea of what it is that we’re talking about.
What I would suggest, though, is that we are certainly seeing a transformation qualitatively, certainly. between a globalisation that was largely dominated by interactions between North America, Europe and the Japanese economic systems to one that involves a lot more countries than that. The period from the 1990s through to the mid-2000s and perhaps towards the end of the 2000s still saw the G7 economies as the dominant parts of a global economic system. What we now see 15 years on is that those economies are no longer as dominant as they once were. So that’s the first thing I’d say.
And so perhaps it’s probably fairer to say that we are witnessing the passing of globalisation with transatlantic characteristics to a world in which we have globalisation with multipolar characteristics. multipolar characteristics because we currently see an ongoing expansion of trade, notwithstanding the headwinds that global trade has experienced.
And in fact, trade has been buttressed by the development of the multipolar institutions or the multilateral institutions that I touched on earlier, as well as the ongoing expansion of the infrastructure necessary to facilitate trade in many parts of the world that have historically been kept out of the loops of the high-value trading circuits. And that kind of infrastructure, of course, includes transportation infrastructure, whether it’s railways across continents or expanded port facilities to enable large-scale cargo ships to come to and fro.
So I don’t think we’re seeing the end of globalisation per se, in large part because I think it’s a little bit too loose to be too meaningful to It’s a bit too caricatured, if you will. But we’re certainly seeing a transition from a transnational or a multinational economy dominated by the transatlantic worlds to one in which the global economic system is far more multipolar in nature.
Asbed: I guess I’ve also heard the term reshoring or friendshoring as an alternative as well, in the sense that some of these countries like in the West are trying to align their trade a little more with their geopolitics.
Powell: Yeah, look, it certainly became popular in the context of the pandemic where these concerns or attitudes towards the risk of critical supplies being in the hands of unfriendly partners really became prominent in the minds of politicians in various parts of the world, and mainly, I might add, in the sort of Western parts of the world, whether it’s the transatlantic economies or their sort of Asian offshoots, including here in Australia, where I am.
You know, in 2020, for example, the national government at the time reacted quite strongly to concerns around supply chains and initiated a number of inquiries in terms of supply chain vulnerability with a view to developing and promoting policies that would encourage friend-shoring and near-shoring. In practical terms, none of that has actually happened. The existing supply chain networks in the world are changing slowly but surely, and that’s part of a longer-term series of patterns. And perhaps accelerated a little bit as a result of the post-pandemic reactions and more recently geopolitical risks.
And I think one of the broad patterns we’re seeing is, particularly in the Asia region, is a consolidation in a geographical sense. So supply chains are getting a little bit shorter. by and large, and regions are trading more intensely with each other. So, for instance, the RCEP countries, which are the 10 ASEAN ones and the five others, trade from those 15 countries. Of that, about 60% is now intra-regional trade.
So more than half of the trade between involving those 15 countries actually just involve trade with each other. I wouldn’t be surprised if those sorts of patterns continue to develop over time. So, you know, trade within the African continent, for example, is likely to intensify as time goes by, whereas by and large, historically, Countries on the African continent have tended not to trade with other countries on the continent, but with their former colonial masters, so to speak. So we are going to see some changes in the contours of Europe. global commerce.
The idea of reshoring and friendshoring is a great soundbite for social media and political campaign purposes, but it’s very hard to turn that slogan into reality when Supply chains are invariably complex these days and often straddle multiple countries. And they do that because different countries have emerged over time with different kinds of specialisations that they can bring to the table and enable through effective coordination and collaboration, the creation of some amazing products around the world.
Hovik: Makes sense. Armenia lives in a great neighborhood. You know, we have Iran to our south, we have Turkey to our west, and Russia north of us. And we are also involved, you know, we have been involved in wars, you know, as recently as five years ago, and some would say continuously.
So I wanted to ask you this next set of questions. because I think that many feel that what happens in Iran or what happens to Iran is going to be very consequential for Armenia. The recent weeks have seen tensions between the United States and Iran escalate rapidly. Iran has closed its airspace, in fact, most recently, and placed its military on full combat readiness in response to U.S. deployment of stealth bombers to Diego Garcia. While talks with Iran are reportedly being hosted by Oman.
So there’s this track of both countries trying to have discussions or have diplomacy while the threat of wars is still sort of escalating. Meanwhile, China and Russia have also responded with calls for diplomacy. with China stressing sovereignty and dialogue and Russia warning that any U.S. strike on Iran would be catastrophic. As part of a growing multipolar response, the Iran-Russia-China axis appears to be solidifying under the strain of the U.S. pressure.
So with Iran on high alert and U.S. building up its military assets in the region, do you see this as posturing ahead of negotiations or Are we beyond that and this is a prelude to open conflict?
Powell: Well, I think we can hope that it’s the former, but perhaps brace ourselves for the possibility that it’s the latter. We can hope that it’s former because any significant outbreak of warfare and violence can have devastating effects, not only in terms of the people, the victims of of the military campaigns, but ultimately also in terms of how that reverberates around the immediate neighborhood and ultimately into global networks. Obviously the global networks relate to, so I’m thinking purely in economic terms, global networks relate to oil and energy. So we hope, I guess, that this is posturing with a view to getting to a negotiation table.
My concern, I guess, is that the United States does have a decades-long track record of limited posturing and a lot more kinetic response as its preferred way of dealing with whatever it sees are its problems.
And the question of Iran is intimately tied up with the way in which the United States frames its foreign policy relationship with Israel and therefore what’s going on in Palestine. creates a very complex and potentially explosive environment, in part because of the nature of the domestic political influence of the Jewish lobby and how that can affect the ways in which the United States Congress and the presidency ultimately responds to these sorts of issues.
If the or that it is the only issue, but if the real issue relates to Iran’s nuclear program, then chest-beating about bombing Iran has clearly so far not budged the decision-makers in Iran in relation to how it stands on the major issues. Resolving this issue of a potential nuclear issue enabled Iran is ultimately best done, it would seem to me, by constructive negotiations and engagement. And that will mean not just in a bilateral sense, but ultimately, without a doubt, I think, enlisting Russia into these discussions and perhaps to some extent also China.
This idea of an axis of course is again a little bit of a throwaway line and it goes back to Bush who talked about axes of evil and that sort of stuff. I think Another way of thinking about it with perhaps less emotional baggage, if you will, or a bit less colour, is simply that countries understand that if they are under pressure from particularly big ones, that they need to, you know, buttress their own positions by cultivating relationships with others. People and countries are stronger together, and I think Iran quite clearly understands that.
Hovik: And given the coordination between Russia and China on this issue, on Iran, what are the wider implications to both of these, in your opinion, amidst this standoff and the geopolitical alliance between Russia, China, and Iran, which seems to be a strong underpinning for China’s economic policies, at least, if not geopolitical policies?
Powell: Yeah, and I think that there’s something more to it too than simply, you know, the economic dimension. The economic dimension, I think, underpins these sorts of relationships, of course. But there is something about… a different way in which both China and Russia frames the future of global international relations, that is, relations between states, that is underpinned by the principles of multipolarity, that is quite different from the ways in which the United States has traditionally framed international relations.
So the United States has generally framed international relations where the US sits at the core and it is able, through dint of its economic size and its military preponderance around the world, to impose its will. That world not only is waning, but it’s also not the ways in which Russia and China tend to frame international relations, certainly in a practical sense and also in a normative sense.
So, you know, the Chinese have long argued for principles that in effect speak to a multipolar environment where issues are resolved through dialogue and where we accept the need to create environments in which difference can exist and in which they can prosper in an environment of coexistence. That’s a particularly Chinese approach to international relationships. Russia, not dissimilarly, also emphasizes the idea of indivisible security, which was something that underpinned the declaration out of Helsinki back in 1975, but has never seen the light of day.
And certainly after the dissolution of the Soviet Union in 1991 was put on the back burner by the Western powers because it was no longer seen as something that they needed to pay any serious note to given American primacy. So China and Russia both bring a certain sensibility to tackling what are difficult issues, you know, when there are longstanding historical conflicts and grievances and differences.
The question is, is how does one go about resolving them, not only in so far as a short term, which is to prevent these grievances from spilling over into kinetic waters? conflict, but to create institutions that enable the disputing parties, in a sense, to transcend their historic grievances and build a new form of indivisible coexistence. And that approach takes a lot more time and a lot more patience to achieve than the approach of beating your chest and threatening to bomb somebody.
We can all remember that the United States 20 odd years ago went into that part of the world, and I’m meaning Iraq in this case, on the basis of trumped up and ultimately falsified evidence, so to speak, of weapons of mass destruction. The worry is that the current environment has a lot of resonance with that historical experience where there are parts of the United States body politic that is itching for a war.
There are obsessions about Iran as enemy, and there is a pent-up pressure within the American political community, in certain sections anyway, to take preemptive action. this has been the pattern of American foreign policy for a long time and that’s why it’s a worry the upside at the moment if you can say that this is an upside is that there are strong countervailing pressures against that And namely, the interest of Russia and the interest of China within this particular set of circumstances. And those interests, I think, are weighing on the capacity of the United States to act capriciously and wantonly.
Asbed: Professor, you mentioned a little earlier the rise of the global south and the growing prominence of BRICS. This is the block that we talked about. It was led by Brazil, Russia, China, and India and South Africa. The weaponization of the dollar by the United States has only intensified the efforts among these countries to find alternatives to international trade using the dollar.
China and Russia in particular are pushing forward with a payment system like the BRICS Clear, I think they call it, aiming to reduce reliance on the U.S. dollar and bypass Western financial choke points. Is the rise of alternatives to trading with the West making punitive actions like sanctions and tariffs less effective in the current world climate?
Powell: Look, I think you hit the nail on the head. The evolution of alternative payment systems and the willingness of states to measure their exchanges with each other in units of currency that are not the US dollar is a sign of a… a maturation of multipolarity. The ability, therefore, for those who control one particular national currency, the US dollar, as well as the institutions that administer it, whether it’s SWIFT or whatever, the days of being able to do that are certainly numbered. By all means, it is possible to exercise authority over SWIFT and force SWIFT to disconnect a range of banks from that particular information network.
But as the case of Russia has shown in the last three years, The mere act of doing that did not stop the ability of Russian enterprises to trade with others in the world and for those trades to be settled by Russian banks interacting with counter-party banks in other parts of the world. So the days of US dollar weaponization as a tool that countries need to be fearful of are over. there is already an infrastructure that enables currency multipolarity to become part and parcel of the natural order of things.
And we see that with the proliferation of interbank swap agreements between the central banks of various countries we see that with the development of alternative interbank messaging systems as alternative messaging systems to swift and we are now starting to see the emergence of a range of digital infrastructure such as the enbridge project as well as no doubt the bricks clear project the participating national central banks to manage their respective ledgers in a way that is credible and dependable with each other, and all of that to take place without the ability of the United States to intervene in those processes.
Asbed: Could this have specific long-term effects on US capital markets and global financial flows, and what kind of effects?
Powell: Look, it will have an effect in that the principal reason why US capital markets over the last 40 years have burgeoned and expanded to the extent that they have is because they are the means by which Surplus trading countries, that is countries who have merchandise goods surpluses with the United States, are able to do something with their dollar holdings other than simply hold the dollars in accounts. And should countries… the United States dollar less and less for their real economy transactions, then they will, over time, actually have less need for US capital markets as the mechanisms by which they cycle their dollar holdings.
Now, the implication of that is that the capital markets in the US begin to increasingly look inwards. They are heavily financialized, meaning that The size of these capital markets is incredibly disconnected now from the productive capacity of the real economy. Now, the real economy isn’t just, of course, the creation or the production of tangible things. It also includes services.
But nonetheless, this is the real economy of use value creation. Use values are things that humans and human organisations find useful. And as a result of them being useful, they’re valuable. The capital markets in and of themselves are basically marketplaces of what I would call exchange values.
These are things that can’t actually be used in production or consumption systems directly, other than as ways of denominating either an exchange value of a number of things or they represent legal rights to future value. So this is what some economists in times past have described as the world of fictitious capital. The expansion of this world of fictitious capital, particularly over the last 40 years or so, has significantly outgrown the capacity of the underlying real economy in the United States to absorb.
The fact that it has grown to, in a sense, absorb or cycle US dollars that have found their way out into the rest of the world means that it was the capital markets that emerged as a consequence of American trade as opposed to anything else. Should the US evolve to be an even more introverted market, economy and the tariffs, of course, are pointing in that direction, then the outsize of the American capital markets will begin to be a challenge for the American political economy. Now, the challenge, of course, comes in a few ways.
One is that as rights to future value, when it comes to cashing in those rights and making a claim on the real economy, the question is whether or not the real economy in America can make the value claims being made upon it. from the fictitious capital markets.
The second one, of course, is that these fictitious capital assets themselves have a life of their own, and they are the basis upon which we have seen over the course of the last 40 years a growing income disparity and wealth disparity in the United States whereby owners of capital wealth much of which now is denominated in fictitious capital terms, are able to dictate terms across the rest of the economy. And that results in all sorts of things, including significant asset inflation.
Asset inflation is a problem because it drives up the cost of accessing critical assets, whether they’re housing or factories or land. that inhibits the ability of the rest of the real economy and the rest of the real society, you know, after all, people need places to live, to be able to function properly. So these chronic imbalances that are unfolding as we speak can be accelerated, leading to a significant overhang in the sheer scale of the state of fictitious capital and money capital flows that are now bearing down on a real economic system whose capacity is nowhere near as great.
Hovik: Interesting. We, of course, we briefly talked about Iran previously already, but, you know, I was really interested, how might a, if things do come, you know, to head in terms of worst case scenario, how might a US strike or even the threat of, you know, continued threat of one, I guess, impact the cohesion of BRICS in general and the efforts to de-dollarize and restructure global trade between these countries?
Powell: Look, if we’re talking about military strikes, I’m sure that there’ll be other more competent observers to talk about specifically what the tactical approaches would be, but obviously long-range bombers and those sorts of things would be used insofar as its implications geopolitically. I think the jury, in a sense, is out as far as what kind of shockwaves this would send across the world. One possible reaction or one possible consequence is that it will scare everybody back into the old ways and, in a sense, put the world back to how it was in terms of its political and power relationships. I doubt that that will be what happens.
I doubt that in large part because both Russia and China, are no longer in a position where they think they are vulnerable to this kind of scare tactic from the United States. Needless to say, a military intervention in Iran will be, as I mentioned earlier, incredibly devastating for the people of the country as well as the medium-term economic system because a lot of things will be destroyed in the process. But I doubt that it will necessarily result in BRICS countries suddenly cowering in the face of this kind of violence from the Americans.
In fact, it is just as possible that in the face of this kind of unprovoked violence, that BRICS countries and the countries of the Global South more generally will appreciate the importance of coordinating and acting together in ways that bolster the multilateral system and also at the same time provide each and every one of them with the protective cover that many of them will need.
Asbed: Professor, before we hit the final topic, just a quick question. You mentioned that we seem to be heading into a world tariff climate. Do you think this is more a Trump thing or do you think this is a US thing?
Powell: In terms of tariffs, you mean?
Asbed: Yeah, the tariff wars and this new MO that the U.S. wants to work with the rest of the world with. I’m just wondering if this is something that the United States, this is a natural progression of the thinking of the United States, or is this more of a phenomenon of the Trump administration that might blow over after he is gone? Yeah.
Powell: I think President Trump is as much a symptom of the broader set of circumstances as he is a cause of the current state of flux. The broader set of circumstances is the progressive situation Diminution of American authority, unblemished and unquestioned authority over the world. The 30 years or so of American primacy, I think, is over. We have certainly been experiencing a period of significant change. displacement anxiety is how I would describe it, particularly from the United States and its beltway institutions, you know, the political parties in particular.
And so I think that the underlying conditions that have given rise to the last 10 plus years of American policy response haven’t gone away. The policy responses have varied in some ways from administration to administration, but they all, in a sense, seek to accomplish a few things. One is to bring back as much resource as they possibly can to North America itself. And, you know, Biden tried to do that with a continuation of Trump’s first term sanctions and tariffs.
Biden also did that through a number of fairly grandiose efforts at industry policy, you know, the CHIPS Act and things like that. The Trump 2.0 tariffs in many ways is a continuation on that theme, which is an effort to bring things back to the American homeland. The second part of the response is aimed at containing China in particular. This effort to contain the development and growth of another country, and in this case China, and previously Russia, is the other side of the coin.
So the US has, for quite a number of years, aimed to weaken and reduce the ability of others in the world to develop as a way of ensuring American primacy. And now that that has been failing dismally, it now seeks to firstly intensify the pressure around key things such as semiconductors and artificial intelligence in particular, but also it tried it on with Russia in terms of financial sanctions. Now, none of that has worked to plan. These two economies have defied the attempts by Washington to dictate terms.
In fact, the more that Washington tried to dictate terms, the worse things got from Washington’s point of view. these economies and their societies, you know, and I’m talking about the quality of the people, the education levels that they have, as well as the sort of cultural determination that places under pressure can often bring to the table, have simply shown that trying to stop others from developing and stop others from being able to have a meaningful place in the world, to be at the table as equals is simply no longer possible. Will Washington continue this for a while longer, even after Trump goes?
My own suspicion, and it’s only a suspicion, is that it will continue beyond Trump and it will continue until it no longer works actively. not functional as a response type. So we’re in for a period maybe another 10 years or so of American efforts to divide and conquer, to destabilise parts of the world so that it can distract others from their principal purpose, which is their own economic development, and ultimately also provide time for the United States to consolidate resources back to on the American mainland in the event that it wants to pursue whatever policy or strategy it has in mind to put the world back into its place. Yeah.
Asbed: Well, as international trade and industrialization goes, the two largest countries in the world by population, China and India, have similar world infrastructure concepts, ideas, projects, initiatives. I’m not sure exactly what I should call them. China has the Belt and Road Initiative, while India has the International North-South Trade Corridor, the INSTC. Both countries are generally trying to put aside their local and regional animosities towards each other for the greater good of the continent and maybe also the rest of the world.
What’s the driving impetus behind these initiatives? It’s probably not by coincidence that both 1.5 billion strong countries have come up with similar infrastructure projects. They’re somewhat similar to the old Silk Road in the idea that they’re joining Western and Eastern markets together. So why do these countries have similar projects?
Powell: Well, the Belt and Road Initiative is substantially larger than India’s initiative, which is comparatively modest. But they are both countries that have long and, I mean, well before the Europeans arrived. So we’re talking well beyond the last 500 years. So both of these parts of the world, these civilizational states, have long had trading relationships with others in the world.
And those trading relationships have been facilitated both in a maritime sense and also in a continental sense. The fact that both of these civilizational states are reaching back into their deep collective memories as far as how they have prospered in times past. It’s not surprising, really, because geography actually is quite determinative in a sense that it establishes the foundational ground rules that you have to play with.
The fact that these two great civilizational states border each other and historically have also seen them differ. manage, I think, relationships that have largely been mutually beneficial tells us that whilst friction arises from time to time, and I think it’s impossible for neighbouring countries to always avoid friction, but the fact that they have historically been able to manage those differences whilst coexisting and at times prospering together tells us that there’s something deep in the historical memory. that informs the general posture of the national leaders from both places, that points to a capacity to, again, manage differences with a view that those differences should not overshadow the opportunities that come with better coordination and perhaps even collaboration.
People often say that if India and China could put their differences aside and get their collective acts together, that they will be a very difficult combination to beat. And there is some truth in that because in the long run… GDP and population have always been quite tightly correlated, mediated, of course, by technology and ways in which societies harness those technologies and harness those resources. But GDP and population are things that can be quite tightly coordinated.
And India has tremendous prospects over the next 30 to 50 years to fulfil many of its ambitions. i think it is best placed to fulfill those ambitions by more effective coordination with china and and there is a lot of mutual benefit to be gained by these two great civilizational states of history by you know getting their acts together and and moving on from some of the more recent difficulties that have affected their relationships
Asbed: At present, would you say that the BRI, the Belt and Road Initiative, and the INSTC are competing or cooperating world initiatives? Because at least in Armenia’s region in the South Caucasus, one is the East-West or the Middle Corridor, and the other one is the North-South Corridor. So I’m asking because I’m interested in knowing how small and medium countries, well, in our case, you’re on an Armenian podcast, how should Armenia navigate what sometimes seem to be competing projects?
Powell: Well, I think it’s important to see infrastructure like this as potentially complementary. They serve different purposes and they firstly connect up to different nodes in the world. So that’s the first thing to remember is that they provide different networks of connectivity. The second thing as a result is to remember that the more connectivity and the more connective possibilities that a place has, the more able it is to find new value connections around the world.
If you can’t connect up to some other part of the world, then you don’t have access to either their technologies and their know-how or their markets. So these infrastructure projects, these transportation infrastructure projects, really create what I would describe as networks of infrastructure that facilitate flow. So this is the infrastructure of value flow. And value, if you imagine it like you would imagine… a neural network, you know, where neurons are firing energy and they’re connecting with each other and energy flows in all directions.
This is exactly the kind of effect that this array of infrastructure projects can actually bring to the table. There’ll be parts of an economy that will find it valuable and useful to tap into the north-south flows, and there will be other parts that will find it valuable to tap into the east-west flows. So networks can be incredibly complementary with each other and they create opportunities and options.
Asbed: So for the record, I couldn’t agree with you more. I think that if the purpose of all this transit is actually doing trade between these countries, then there is absolutely nothing stopping east-west from south-north or vice versa. It’s only when the politics of the region starts interfering that people think that they need to have control and ownership of the land before trade is possible. And I’m specifically talking about what Azerbaijan and Turkey call the ‘Zangezur Corridor’, that they cannot have it in the hands of Armenia before they do their trade.
So that’s just commentary from me. But we’re going to leave it there for today, Professor. Thank you so much for coming on the show. This was a great conversation.
I hope we will have you on the show again.
Powell: It’s been an absolute pleasure, gentlemen. Look forward to it.
Hovik: Thank you.
Asbed: That’s our show today. And this episode was recorded on April 6, 2025. We’ve been talking with Professor Warwick Powell, who is adjunct professor at Queensland University of Technology in Brisbane, Australia. He’s also a senior fellow at Taihe Institute in Beijing.
He is the author of China and Digital Supply Chains, Dynamics of a Zero Trust World. And his work focuses on digital innovation technologies and international political economy. For more information on everybody in this show, check out our show notes at podcast.room.org slash episode number. I’m Asbed Bedrossian in Los Angeles.
Hovik: And I’m Hovik Manucharyan in Yerevan.
Asbed: Okay. Well, find us on social media. Everywhere you get your Armenian news. The links are going to be in the show notes.
Hovik: And don’t forget to comment on this video. Help us get more feedback and improve our reach. Yes.
Asbed: Comment on this video. Join our Substack pages. And our shows are also published there. Thank you very much.
And bye-bye.