Ukraine conflict: a battle over the rules that govern the global economy

In 2013, former Ukrainian President Viktor Yanukovych was on the verge of signing an association agreement with the European Union, a major step toward integration with the global economy.

But Russian President Vladimir Putin, who wanted Ukraine in his rival economic bloc, the Eurasian Economic Union, responded to the attempt to sign that agreement by stopping Ukrainian imports and threatening to impose more duties on natural gas supplies.

Russia pressure

Ukraine succumbed to pressure from Russia, and President Yanukovych abandoned the deal with the European Union, sparking a wave of massive protests in the streets of Ukraine that led to his ouster and brought about a pro-Western government, prompting Russia to respond in 2014 by annexing “Crimea” and fomenting a rebellion. In the "Eastern Donbass" region of Ukraine.

Battle "rules"

The trade dispute makes clear that the growing divide between Russia and the West is as much a battle over the rules that govern the global economy as it is a battle over military alliances and missile facilities.

For a while after the Cold War, globalization triumphed in Western capitals.

Market forces are beginning to determine where goods, services, capital and knowledge will flow, not governments, ideology or spheres of influence, a view that President Putin rejects.

For President Putin, economic integration must reflect geographic, cultural, and strategic ties.

"Ukraine and Russia have developed as a single economic system over decades and centuries," he said last year. "We are economic partners and complement each other naturally."

He added that Ukraine and Russia, like Canada and the United States, or Austria and Germany, "are close in ethnic composition, culture, and language, with conditional and transparent borders."

geography and politics

The Wall Street Journal says defining the geopolitics of economic relations is not a new idea.

Throughout the Cold War, much of the world was divided into two economic blocs: the bloc of western market democracies led by the United States, and the centrally planned economies bloc led by the Soviet Union, and these two blocs barely traded with each other.

But geopolitical considerations pushed US trade policy to support the creation of the General Agreement on Tariffs and Trade (precursor to the World Trade Organization), lowered tariffs, and pushed Western Europe to integrate all in the service of strengthening Western democracies against communism.

With the end of the Cold War, ideological lines blurred. When the Soviet Union disintegrated in 1991, China accelerated market reforms and opening up to the world.

clash over trade

The great economist Doug Irwin wrote in his book The Clash of Trade: A History of American Trade Policy: "Socialism is no longer an economic model for most developing countries, many of which have embarked on reforms that include opening up to international trade."

An example of this is Mexico's rush to pursue what eventually became the North American Free Trade Agreement with the United States and Canada at the end of the Cold War.

The World Trade Organization came into being in 1995, accompanied by sweeping cuts in tariffs, subsidies, and other trade barriers, and China joined in 2001 and Russia in 2012.

"Inevitable globalization"

Many in the West saw the end of the Cold War as evidence that free markets and the rule of law are universal values.

And when the European Union began accepting Eastern European and Baltic states, a few of its officials believed that this was not a geopolitical ploy targeting Russia, but the product of “inevitable globalization,” as Columbia University historian Adam Toze said, who argued that Eastern Europeans did not They support this view, and believe that joining the European Union and NATO was a “means of securing themselves against Russia.” Russia saw the same thing, which made it refuse to view NATO and the European Union as two separate entities.

The European Union may pose a greater threat, Toze said, because while Russia can compete militarily with NATO, it cannot compete with Europe's social, cultural and economic attractiveness.

commercial undermining

In the past decade, as Putin's discontent with the European Union and NATO has grown, the West has become disillusioned with trade.

Nor did economic integration make Russia or China more liberal, as they doubled down on authoritarianism and state capitalism.

Rather than trade dampening geopolitical rivalry, this geopolitical rivalry undermined trade, as it seemed when former US President Donald Trump invoked national security to impose tariffs on aluminum and steel imports, impose heavy tariffs on China and block it from accessing key technologies. .

international deficit

The World Trade Organization has been unable to stop trade disputes, and in some respects has even fueled them.

When Russia prevented Ukrainian goods from transiting through its territory to other markets, in violation of trade rules, the World Trade Organization ruled that Russia had the right to do so within its national security rights.

"All trade rules will collapse, because everyone can do anything in the name of national security," said former World Trade Organization official Jennifer Hellman.

Putin may succeed in reshaping the Cold War order of eastern and western economic blocs.

But despite this, its Eurasian Economic Union is insignificant, and it has less economic weight relative to other countries, except for commodities.

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