Find out why the political framework has become more fragile for businesses and why they need International Relations expertise to navigate global politics.
This post was written by Dr Patrick Holden, Course Leader for the University of Plymouth's online MA International Relations: Security and Development. His research and teaching is focused on international political economy, the European Union in the world, international development policy, global governance and regional integration. Here, Patrick explains why an understanding of International Relations is more important than ever for businesses.
Introduction
Politics and economics have always been interrelated. However, in the era we are entering they are more intertwined than ever in increasingly complex and volatile ways. In recent decades businesses – in core Western countries at least - may have felt relatively secure in the political framework. If you were a business in the UK you had guaranteed deep market access to your 30 plus neighbours. If you were a US-based transnational company countries such as the People’s Republic of China/PRC would woo you to set up manufacturing plants and base your supply chains there.
The 'liberal' worldview
Although the World Trade Organisation was an unwieldy bloc more and more countries joined it after its establishment in 1995 (including Russia, PRC and Saudi Arabia). Different forms of free trade were spreading across different world regions. Leading states and international organisations all expounded a basically ‘liberal’ worldview that the states of the world would and should gradually open their markets to each other.
Of course this was never entirely the case in reality. Exporting food to ‘liberal’ Europe from outside could prove very demanding while the US would not even allow foreign companies to bid for work transporting goods between its ports. Also the geopolitical shadow for US companies working in China would (or should) have been obvious.
The shattering of liberal illusions
Beginning with the financial crisis of 2008 a series of events shattered any liberal illusions. Brexit broke up the integrated European Economic Area. 2016 brought to power Trump who completely eschewed a liberal view of trade in favour of a zero sum ‘winner takes all’ approach to trade as a power game.
More gradually, it had become apparent that countries such as the PRC that were actively engaging in the global economy were not ‘liberalising’ in the sense Westerners liked to think. Trump attacked the WTO directly and launched a trade war against China. Then along came COVID-19 which blocked the free flow of goods and services and led to zero sum competition (rather than free trade) over key medical equipment.
The current state of affairs
Biden’s administration (2021 - ) did not return to free trade orthodoxy. It continues to sabotage the WTO by not nominating officials to its dispute settlement appeal board. It came up with more radical anti-Chinese economic measures, banning the export of key technology entirely.
Meanwhile, his Inflation Reduction Act to support green energy is a multi-billion pound subsidy to US-based companies (which US allies are currently negotiating to get a piece of). Russia’s invasion of Ukraine was responded to be extensive Western sanctions. This includes the US using its key financial/monetary powers as the holder of the global currency, an example of what call ‘weaponised interdependence’.
None of this means that ‘globalisation’ has ended but it does mean that the liberal vision of an open level playing field of free markets is very much on the defensive. Political Risk for companies was once felt to apply mostly to large transnational companies that do business in ‘trouble spots’.
This has now well and truly spread to a wider range of businesses. If you are a British company, should you mention Brexit as a source of your supply problems? If you are a South Asian SME will investment from China put you in the US crosshairs? If you are an agri-food business in South America are you willing to provide all your geo-data to the EU to allow them check that you are not involved in deforestation? If you are a Chinese construction company do you have a chance of bidding for reconstruction contracts in Ukraine?
Conclusion
In brief, trade and business policy globally is being primarily guided by climate, security and power considerations rather than commercial logic. To rework an old phrase, if you have a business or work in one, whether or not you are interested in International Relations, International Relations are interested in you.
Analyse and critically evaluate policy-making processes in global security and development with the University of Plymouth's part-time, online MA International Relations:
