February 16, 2023 ☼ Lecture ☼ geopolitics ☼ geoeconomics ☼ information age
My lecture at College of Defence Management's session on "Great Power rivalry in the Indo-Pacific"
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Commandant, members of the faculty, ladies and gentlemen, I’m delighted to be with you at the College of Defence Management today, in spirit if not in body.
The text of this speech was fleshed out by ChatGPT based on my detailed outline. While it is very representative of the points I made, the language and words used are quite different from my actual lecture.
The 21st century has seen a shift from military-centric to geoeconomic competition, and trade is one of the primary instruments of this contestation. Technology and information warfare are also essential to this competition, and their importance cannot be overstated. In this speech, I will explain the impact of geoeconomic competition on trade, the theoretical predictions of trade war, empirical evidence of the trade war between the United States and China, India’s position and challenges, and the impact of the tech war on five fronts.
The trade war started in 2018 when the Trump administration realized that China was not a free-trading economy and had taken the US for a ride. The US imposed tariffs of up to 25% on over 200 billion dollars of Chinese goods, and China retaliated. A “Phase 1” deal was agreed upon but not followed up, and the tariffs remain in place. The consequences of the ongoing trade war have been significant. Trade theory tells us that it is a lose-lose proposition, and the one who can suffer the losses with the least impact will be the “winner.” However, everyone loses in absolute terms, including the environment.
Gita Gopinath’s 2019 estimates projected a cumulative 0.8% drop in global GDP by 2020.
The theoretical predictions are not wrong. However, the impact is not distributed equally. The average hides a lot of variation, as Bibek Debroy points out in his analogy of a person with their head in the oven and their feet in the freezer, being told that “on average, you are at a comfortable temperature.” Both the US and China have suffered, but China’s GDP loss may have been three times that of the US. According to empirical evidence from the International Monetary Fund, global GDP fell between 0.1% to 0.8%, but much of it may be masked by the impact of Covid-19.
Khandelwal & Fajgelbaum have two very good papers that delve into the data: on the economic impacts and global reallocations. Chad P Brown’s analysis of US-China decoupling is also excellent.
Khandelwal & Fajgelbaum find that global trade increased by 3%. According to Peterson Institute’s Chad P Brown, non-China exports to the US increased by 38%, China’s share declined, and supply chains shifted away. Those who could substitute China benefited, and those who complemented China suffered. Mexico was the immediate winner, Viet Nam the short-term winner, and India positioned itself to be a longer-term winner. However, India faces several challenges, including macroeconomic policy, import substitution, skill & productivity levels, and state government policies. For India, the good news is the bad news. India is a subcontinental-sized economy and can expect to grow even in the absence of multilateral trade. Still, the lesson to learn from the 1980s, 1990s, and 2000s is that trade allows us to accelerate that growth. India will become a 3, 5, or 10 trillion-dollar economy, and the question is “when.” I argue that we have a moral imperative to accelerate that. Multilateral free trade is in India’s national interest, and we must find ways to get back to that.
The US-China trade war has not been a bad turn of events for India. The US has raised China’s costs, limited China’s innovation capability, moved manufacturing away, and restricted China’s markets. In the triangular relationship, India still enjoys better relations with the US and China than they have with each other. Geoeconomic and geopolitical opportunities have opened up for us, and India has acted to grab some of these, but carrying the political economy along remains a challenge. To convert the economic opportunity into a geostrategic advantage, plugging into trading blocs is necessary.
Technology is one of the primary instruments of “trade war.” The tech war has five fronts, and these include semiconductors, network infrastructure, operating systems, platforms, and content.
The Biden administration’s semiconductor export controls of October 2022 have dealt a significant blow to Chinese (and Russian) technology capability roadmaps. While the immediate effects are serious but manageable, the longer-term effects are severe. China’s technology sector’s leading edge, particularly in AI and quantum, has been set back by a decade. Xi’s inclination to explore detente may be related to this.
I have argued that India’s siliconpolitik strategy should focus on dominating the human resources side of things.
Semiconductor plants are shifting elsewhere, with massive expenditures required, and sustained good relations with the US. No country has built an advanced semiconductor sector without being politically on the same side as the United States. Network infrastructure, including satellite constellations, undersea cable routes, and 5G equipment decisions, are also subject to political decisions.
On the stupidity of Western tech companies.
In the information space, we see acute contestation in operating systems, platforms, and content. The behaviour of US and Western companies after the Russian invasion of Ukraine has been self-defeating. It is foolhardy to trust multinational tech companies with your data and business-critical systems. We must consider options such as data localisation and building inter-dependencies by getting our partners to use our technologies. Using open source systems is another answer.
Moving onto information warfare, war is politics by other means. Information warfare is war by other means, and it is about achieving desired political outcomes without necessarily having to engage in violence. It is like “Command of the Skies” and “Command of the Seas”; it is about “Command of the Mind.” Information warfare has two dimensions: cognitive warfare and cyber warfare.
Why liberal democracies have a fundamental advantage in information warfare.
While China faces the world with a big disadvantage, the US and other open, liberal democracies do not have to defend ideological frontiers. People are free to think whatever they want, and these countries have more resources available for offensive operations. The most successful information strategy is the one that you do not see.
Why liberal democracies must invest in cognitive security.
India and other liberal democracies must worry about cognitive security as a dimension of internal security. They must focus on protecting cognitive autonomy, the ability to think for themselves. It is an exciting time with many opportunities, and India must weigh its options carefully to navigate the complex and ever-changing world of global power dynamics. Thank you.
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