Economic cooperation and trade continue to be a key focus of global relations as geopolitical skepticism rises in the second year of the war in Europe. Discussions on global platforms increasingly show how countries are closely looking at the implications of their strategic decisions on their economies.
While India’s G20 presidency was said to be geared toward the nation emerging as a voice for the ‘global south’ as well as playing a critical role on issues of global importance, the changed geo-political scenario—due to the Russia-Ukraine war and developed economies’ growing aversion to China’s influence—have dominated the discussions so far.
Prime Minister Narendra Modi urged the G20 to bridge differences over Ukraine and focus on building consensus on pressing global challenges. His opening statement at the G20 Foreign Ministers Meeting emphasized that the group is gathering at a time of deep global divisions and G20 has a responsibility for those who are not in the room. In worry that the rift between the United States and its allies and Russia and China is likely to widen further, Prime Minister Modi acknowledged and expressed concern by stating that “multilateralism is in crisis today.”
However, the contentious G20 Foreign Ministers Meeting in New Delhi ended with no consensus on the Ukraine war even though discussions of the war and China’s widening global influence dominated the conversation. The impact of the war on the global economy and development was also discussed. As continued disagreements over Russia’s war in Ukraine have dominated G20 conversations, India stated that this implies there will be no joint statement. For G20 Finance Ministers Meeting as well, India was forced to issue a chair’s summary at the conclusion after Russia and China objected to a joint communique that retained language on the war in Ukraine drawn directly from last year’s G-20 leaders’ summit declaration in Indonesia.
On the other hand, the global supply chain underpinning trade and economic movements has seen a major perspective shift over the last two years given the Covid-19 pandemic and subsequent Ukraine- Russia war cautioning against overdependence on a single economy. Global economic integration and value chain interdependence are prone to risks if not stress checked. The US-China trade war and the pandemic-induced supply chain disruptions prompted the China Plus One strategy for diversifying investments from China to other countries to mitigate the economic and geopolitical risks associated with the former.
According to a report by the World Economic Forum, geoeconomic confrontation ranks among the top three perceived risks over the next two years. The geopolitical events and pandemic have necessitated rebalancing the global supply chain. The war in Ukraine and the subsequent strong retaliation of the European Union, the United States, and their allies against Russia pushed toward the transformation of the international economic order from open markets and expanded globalization by a more fragmented international economic system.
The focus is no longer on creating the most efficient supply chains, but on the most resilient ones. Amidst the COVID-19 pandemic, rather than just economic efficiency facilitated by globalization, the rebalancing of global supply chains is heavily premised on geopolitics. The outcome of the disruptions in supply chains during the post-pandemic period has boosted their resilience amid unforeseen exigencies. The geopolitical urge to move supply chains out of China after COVID-19 has experienced some activity among countries to come together to safeguard supply chains with increasing attention to India as an alternative. The main initiatives in this regard are the Quad (Australia, India, Japan, and the U.S.); Supply Chain Resilience Initiative (India, Japan and Australia), and the G7’s commitment to strengthen supply chains.
It is of key importance for businesses with an interest in the region to look at India’s turn toward geopolitical repositioning, as it moves away from its old non-aligned movement rhetoric, pursues national interests-based economic partnerships, and builds stronger strategic ties with a wide range of countries including the United States and its allies in the region. Heads of nations continue to balance strategic geopolitical divergences and requirements that are shaping global economic movements and considerations. This begets the need for organizations to strategically invest in capabilities, people structures, and technology to navigate the risks arising from an evolving geopolitical and geo-commerce landscape.