U.S. Treasury chief Yellen’s recent visit offers little hope for developing nations, highlighting the need for Beijing and Washington to prioritize broader concerns beyond their own agendas in the future.
“Knock knock! We are here too,” seems to say the world’s developing countries amid rising economic tensions between the United States and China. Those who are more affected by international trade wars want more certainty, but also more consideration. Finally, they want more determination around easing the financial burden on them that partially results from such tensions.
On the face of it, the U.S. and China play the game of economics and trade. They maintain a poker face waiting for the right time to make decisive moves and take the lead in the global economic order. That is why former U.S. President Donald Trump’s tariff-intense era is followed by Bidenomics, which witnesses trade restrictions with China. President Joe Biden’s administration has imposed restrictions on some high-end chip exports to China and plans to introduce investment screening targeting China. China, too, now plays this game. It has restricted the business of Micron Technology, a U.S. chipmaker; limited the exports of germanium and gallium, two essential products for chip production, and introduced the Counterespionage Law which complicates foreign businesses’ operations in China.
These steps have triggered widespread interest in the players, their strategies, and the potential implications for China and the U.S. However, every move in this game affects third parties too. The latter is forced to take sides and bear the consequences. That is why the recent visit by the U.S. Secretary of the Treasury Janet Yellen to China, has implications for developing countries.
Last week, Yellen visited China. This was an important visit amid rising economic tensions between the two nations. Following U.S. Secretary of State Antony Blinken’s recent visit to China in June, both countries stepped up their efforts to mend fences. Yellen’s visit was important as a goodwill gesture to find common ground. Even though both governments were vocal about their concerns and requests, the talks ended with no significant commitment. Many reports focused on what this meeting means for China and the U.S., but, sadly, many missed this meeting’s implications for low- and middle-income countries.
Developing countries seek economic certainty
Predictability is important in economics. It allows stakeholders to allocate their resources effectively. Therefore, preestablished rules and foreseeable economic policies matter in the global economic order. But we live in uncertain times. The COVID-19 pandemic, Brexit, and the trade war between China and the U.S. are the primary causes. Multilateralism is still in place, but bilateral, even unilateral actions such as export controls and subsidies have mushroomed, fuelling uncertainty in the process.
Predictability plays a crucial role in economics as it enables stakeholders to allocate their resources effectively, ensuring the smooth functioning of the global economic order. However, the current era is characterized by significant uncertainty due to various factors such as the COVID-19 pandemic, Brexit, and the trade war between China and the U.S. Multilateralism is still in place, but bilateral, even unilateral actions such as export controls and subsidies have mushroomed, further fuelling the prevailing uncertainty.
Developing countries have fewer resources than developed countries. Thus, they don’t have the luxury of being inefficient. Therefore, they must manage their resources with greater consideration for existing and foreseeable circumstances.
In the sea of uncertainty, we live in today, developing countries are trying to keep afloat, but they do not always have adequate capacity. Yellen’s visit does not offer them any leeway either. Even though during her visit to China, both countries addressed issues around tariffs, export controls and unfair trade practices, there were “no announcements of breakthroughs or agreements” between countries. This situation reinforces the uncertainties plaguing the developing countries’ economic planning.
Developing countries want to be heard
History repeats itself: Those gripping onto power have always shaped the rules of global economic order. For instance, during the talks that led to the establishment of the World Trade Organization (WTO), discussions focused on the preferred means of trade restrictions. India suggested quotas, whereas the U.S. wanted tariffs. Ultimately, Washington’s desire prevailed.
In the current situation, once again, the strong ones are turning a deaf ear to the needs of developing nations. The U.S. tries to slow down China’s economic prosperity while continuing to call the shots for the economic order. On the other hand, China wants to keep its playing field where it can enjoy subsidizing and devaluing the renminbi to be more competitive. Both sides have little consideration about how developing countries can keep up their commerce in front of export controls or compete with their subsidies while having way fewer resources.
Yellen’s trip was mainly focused on the relations between China and the U.S. and those countries’ position in the global economic order. “We believe that the world is big enough for both our countries to thrive,” said Yellen. What about the economic interests of developing countries? Obviously, this question was not even on the agenda.
The COVID-19 pandemic and high inflation rates put developing countries in a dire situation. Many countries are struggling with debt burdens. High-income countries and financial institutions occasionally come together to address these countries’ problems. The U.S. and China are the most important in such gatherings; however, bringing them to the same table is not easy, but not impossible either. Debt restructuring efforts for Zambia proved to be fruitful. China agreed to restructure Zambia’s debt without requiring the International Monetary Fund’s (IMF) write-off.
That shows that developed countries are not always blind to developing countries’ interests. The recent Yellen visit proves otherwise even though these countries’ financial situation impacts the U.S. and China’s economic growth.
Yellen’s visit does not end other talks between China and the U.S. Although this visit does not deliver much hope for the developing nations, even the realization of the talks between China and the U.S. shows that there is light at the end of the tunnel. Perhaps, one day, both countries will stop being fixated on their respective agendas and start looking more closely at others’ concerns.
This article originally appeared in the opinion section of the website Daily Sabah.