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Hitachi Research Institute

Interview

Interviews with experts and opinion leaders from our research network

Geopolitical Landscape in the next Decade

The global order and norms established after World War II are facing unprecedented challenges. With the United States pulling back from its traditional leadership role and China continuing to enhance its geopolitical and security presence, the world appears to be at a crossroads. To examine current trends and take a look at what the future might hold in store, we spoke with Dr. John Hamre, President and CEO of the Center for Strategic and International Studies (CSIS), a bipartisan, nonprofit policy research organization with the stated mission of providing strategic insights and policy solutions to help decisionmakers chart a course toward a better world.

Dr. John J. Hamre

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John Hamre was elected president and CEO of CSIS in January 2000. Before joining CSIS, he served as the 26th U.S. deputy secretary of defense. Prior to holding that post, he was the under secretary of defense (comptroller) from 1993 to 1997. As comptroller, Dr. Hamre was the principal assistant to the secretary of defense for the preparation, presentation, and execution of the defense budget and management improvement programs. In 2007, Secretary of Defense Robert Gates appointed Dr. Hamre to serve as chairman of the Defense Policy Board, and he served in that capacity for four secretaries of defense.

Before serving in the Department of Defense, Dr. Hamre worked for 10 years as a professional staff member of the Senate Armed Services Committee. During that time, he was primarily responsible for the oversight and evaluation of procurement, research, and development programs, defense budget issues, and relations with the Senate Appropriations Committee. From 1978 to 1984, Dr. Hamre served in the Congressional Budget Office, where he became its deputy assistant director for national security and international affairs. In that position, he oversaw analysis and other support for committees in both the House of Representatives and the Senate. Dr. Hamre received his Ph.D., with distinction, in 1978 from the School of Advanced International Studies at Johns Hopkins University in Washington, D.C., where his studies focused on international politics and economics and U.S. foreign policy. In 1972, he received his B.A., with high distinction, from Augustana College in Sioux Falls, South Dakota, emphasizing political science and economics. The following year he studied as a Rockefeller fellow at the Harvard Divinity School in Cambridge, Massachusetts.

The Past and Next Decade of Global Order

Shirai: As you know, the world is now in conflict, facing various frictions and confrontations. So today, I would like to hear your prospects of global order from a long-term point of view. The world has changed significantly during the difficult 11 years since the global financial crisis, when the world faced its gravest economic challenge in almost a century. What do you think the world learned from the financial crisis, and what remains as ongoing challenges?

Hamre: The response to the financial crisis could be summarized that countries learned a lot from it, but the world didn’t learn anything.
Specifically, individual countries have taken steps that demonstrate they understand the risks and conditions that contributed to the financial crisis. In the case of the United States, Congress passed legislation that established new regulations and structures to strengthen oversight of the finance industry. But there is some degree of relapse underway as some of these laws are now being watered down. The U.S. also implemented structural changes, including the establishment of new institutions as well as procedural changes to better understand risk and lower the vulnerability of the finance sector. Similar steps were also taken by Japan. The countries of Europe also took some steps, but probably not to the extent that was needed.

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It could be said, therefore, that at the nation-state level, lessons were learned and various steps were taken. At the international level there were also important changes in the non-government banking sector and international coordination mechanisms, with financial institutions themselves engaging in informal measures. However, there was no significant push to institutionalize the G20 process and make it more effective in global coordination. The G20 today is no different, no stronger than it was back in 2008 and remains largely ad-hoc. The bulk of meaningful international coordination has therefore been informal, implemented by the industry itself and based on what was a collective learning experience.

Shirai: The world that came down this difficult path now seems to be at the starting point of a new and perhaps winding path. The global order has existed since World War II has been relatively stable, but now, it is facing unprecedented currents of change. When we foresee the world 10 years ahead, do you think that we are exiting an era of stability and heading towards an era of conflict and confrontation again?

Hamre: At this point, it seems that we may be heading towards a bifurcation between western countries that continue to operate under Bretton Woods*1 norms, and a China-centric emerging bloc that operates under different rules. The China orbit has not yet fully emerged, but the foundations are being laid. The confrontation between President Trump and Beijing may accelerate the process. What is not yet clear is whether the China-dominated world will adopt transparent norms or drift into more mercantilist, nationalistic norms. It is unlikely that China is going to try to force the end of the Bretton Woods system, but they are looking to create a competing alternative. That seems to be the path we are on.

*1
The Bretton Woods system of monetary management was based on the 1944 Bretton Woods Agreement to govern monetary relations among independent states. The agreement resulted in the establishment of the World Bank and the International Monetary Fund (IMF).

Things that Change and Do Not Change

Shirai:After the end of the Cold War in the early 1990s, it was the era of globalization, and the growth of the global economy was accelerated especially in emerging economies. Now we are in a world of nationalism and bilateralism, composed of countries with divided societies. Do you think that history will repeat itself, or will the world move in a different new direction?

Hamre:What we will see is China growing and China wanting more supportive structures in the international system that they view as more favorable to them. I don’t think that that will entail any big structural changes in the next 10 years, but there will be changes coming. For example, China may seek to add further international institutions beyond the Asian Infrastructure Investment Bank (AIIB)*2. Over a 10-year horizon, the international system is still largely going to be the Bretton Woods system, but with a much stronger alternative that the Chinese will be controlling.

What remains unknown is whether the nationalism phase we are in now is the understandable aftershock of the worst global recession in 80 years, or whether it represents a structural backlash against the patterns of globalization, including open transportation, rapid movement of news and information, and reduced barriers at borders. The jury is still out.

On the one hand, the business sector is looking for greater predictability and fewer barriers to undertake global commerce. It will be a force for continued integration and global cooperation. On the other hand, however, politicians find it easier to erect barriers than to transform their own social and economic policies for enhancing competitiveness.

Shirai:The ideology of liberty and democracy has long co-existed with ideologies based on different values and/or state systems. And the global free trade economy has also co-existed with protectionism and economic blocs. The balances of them have changed from time to time. What do you think will change or not change in the years to come, as the world goes through further transformations?

Hamre: This is something that we do not yet know. Although it is framed a little differently, this is part of the great debate that is going on within the United States. President Trump campaigned on the theme that the U.S. leads an international community that takes advantage of its generosity. His argument is that the U.S. should protect its own interests while leading an international community based on liberal values. While this may not be the majority view in the U.S., there is significant support for President Trump.

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It probably makes sense to study the question—what transformation might be coming? It is doubtful that we will see the diminishment of the role of nation-states over the next 30 years. Modern technology and global commerce mean that we will continue to need to find structures of coordination across national borders. The most likely transformation is that the global economy will split into two camps—a “western camp” based on Bretton Woods principles, and a “Chinese camp” based on national spheres of influence. An important question is how will the competition between the “western camp” and the “Chinese camp” play out in Africa and South America? While I don’t think that there will be major structural changes, we are likely to see strong factionalism and parallel competing institutions.

Shirai:Under initiatives of the United Nations, almost all countries have supported the philosophy of the global community, the Millennium Development Goals (MDGs) and the Sustainable Development Goals (SDGs). Will these ideas and structures related to global issues continue to be shared and enhanced, regardless of the circumstances surrounding the global community?

Hamre: We will probably see a continuation of this pattern. Progressive international non-governmental organizations (NGOs) have figured out how to use the leverage of the United Nations to advance their agendas. The general pattern is to create a sense of momentum that forces states to agree to goals that they would not otherwise have set for themselves. Because of the public relations aspect of such campaigns, the countries generally sign up to initiatives, but then just never live up to the expectations, falling short when it comes to implementing the goals. I think that is what we could see with the MDGs and SDGs, with them being promoted as normative objectives for individual countries, but the progress toward achieving those objectives being slow.

  
*2
Chinese President Xi Jinping first proposed the Asian Infrastructure Investment Bank at an APEC summit in Indonesia in 2013. The AIIB began operations in 2016 and is headquartered in Beijing.

Competition for Digital and Technological Supremacy

Shirai:We are now in an era of digitalization and data capitalism, as symbolized by the Fourth Industrial Revolution*3 and Society 5.0*4, and both competition over data hegemony and efforts to establish rules for the free flow of data are taking place concurrently. Do you think that countries throughout the world would be able to share the fruits of digitalization, resulting in improvement in people’s quality of life?

Hamre: That is a question that has yet to be answered. For the last 20 years, digital commerce has been dominated by the United States, but the U.S. hasn’t formulated specific policy in this area.

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All we have done is to encourage and try to protect the American companies that are engaged in digital commerce, while maintaining a “hands-off”, laissez-faire policy. Now what we are seeing is alternative ideas being promoted. The Europeans are promoting a very different concept for privacy. We are also seeing the Chinese promote ideas about their own control of the internet. The norms of the last 20 years can therefore be perceived to be gradually breaking down. America’s dominance in this area is eroding, although it does appear that the trend is toward a more structured regulation of the industry, and the “hands-off” norms that dominated U.S. thinking are losing momentum.

There are regional patterns where countries are developing their own agenda, such as China’s state-controlled internet, and similar efforts in Russia although they are not strong enough to do it on their own. The Europeans have a collective process but they are only really focusing currently on privacy-related issues. Overall, this remains an unresolved issue and the United States would like to stay in control of it, but we do not have a policy.


Shirai:Historically in the United States, I heard, the concept of national security has included not only the military power but also the economic power. And recently, advanced technologies, as well as data, are also included. Will this new concept of national security be established and penetrated not only in the United States but globally?

Hamre: I think every country has had economic prosperity as a foundation for their national security, and that certainly was part of our strategy at the end of World War II and the Cold War. But it was discussed in terms of geopolitics and competition, as part of the security architecture that we were trying to create around the world, although there was a strong economic foundation behind it. I think that will continue.

What is challenging about this era is that the foundation of economic strength is how you adapt to the technologies. New technologies are now very much international, and that means you have to have structures for international coordination and collaboration. And that is now being challenged because there is a perception that the Chinese and others have stolen our ideas because we have been too open. That is feeding the sentiment towards protectionism, because people are afraid that our secrets could be stolen to our detriment.

This is a debate that is only now starting to unfold and is one that is not yet resolved. The big question is whether we will use national security as a reason to constrain global commerce as the competition between the U.S. and China becomes more intense.

*3
This phrase was first introduced by Klaus Schwab, executive chairman of the World Economic Forum, in a 2015 article in Foreign Affairs. It is a way of describing the blurring of boundaries between the physical, digital, and biological worlds.
  
*4
Society 5.0 was proposed in the 5th Science and Technology Basic Plan by the Government of Japan and is defined as “A human-centered society that balances economic advancement with the resolution of social problems by a system that highly integrates cyberspace and physical space.”

Relationship between U.S., China and EU

Shirai:The stance and the position of the United States as a leader of the global community seems to have shifted under the Trump Administration, but will the U.S. shift back to its policy of leading the world? And vice versa, do you think that the global community will continue to need the U.S. as a global leader?

Hamre: The simple answer is we don’t know. We were all shocked at President Trump's open questioning of alliances and allies and international structures. President Trump was elected in part because many citizens perceived that President Obama pursued international objectives that were of marginal benefit for America’s economy and society. Public opinion in the United States is divided over whether an alliance with Japan and with the Republic of Korea is necessary, or whether the North Atlantic Treaty Organization (NATO) is needed. This will be one of the central issues in the next election. It is unlikely that the election will ultimately resolve anything, and people will continue to say that we should pull out of various alliances and structures. We have not made a very good case to the American public about why international engagement is so much in our own interests, as well as being good for the world.

Shirai:There is a possibility that China will not only become the world’s largest economy by overtaking the United States around 2030, but also challenge the U.S. in military power in the near future. If it is unlikely in the long run that China changes its state capitalism system, how much can the U.S. tolerate China’s presence in global economy and security?

Hamre: I don't think that we can change nor stop it. We cannot deflect China from its policy path. The key question is “What can we do about it?” If we are going to compete against China as global competitors with alternative views of the world, then the real issue for us is to ask ourselves whether the United States is still an attractive alternative. Does the U.S. still hold out a leadership image that the rest of the world wants? That is the question. If we continue to lecture the world and give the impression that we have a double standard, “We will tell you the rules, but we don’t have to live by them ourselves.”, I don’t think that we are going to be the world leader very long. But I don’t think it is about China, and there is nothing we can do about it. China is going to do what it will do, so it is really the question of what do we do.

Will the U.S. and other western countries band together to block China from exploiting the advantages of the liberal western system if they don’t change their policies in China and the China-dominated bloc? Will we come together to coordinate our policies to prevent Chinese investments in our countries until they change their policies on forcing our companies to give up intellectual property, for example? We are heading in that direction, but it is not coordinated because the Trump Administration has a bias toward bilateral negotiations, and not multilateral coordination.

Shirai:Under the long-term scenario that the United States and China are competing for hegemony in economy, technology, data and security, can the European Union assume the role as a balancer of our world by becoming the third force?

Hamre: I cannot assume such a role in a strategic structural sense. At the moment the EU is too divided and too uncertain about itself. It doesn't really have the capacity to be a balancer. It is always tactically trying to take advantage of the United States, but only on economics, not on geopolitics. The values that hold the EU together are also values we share with them in the liberal international system. They always did tactical balancing in the past, but have not become a strategic balancer. I think that will likely continue.

Japan’s Role in the Next Decade

Shirai:Finally, I would like to ask about our country. Although Japan is facing population decline and aging society, its government and economy are relatively stable under Prime Minister Abe’s administration, and it holds a unique position diplomatically now. Looking 10 years ahead, what would be Japan’s role that other countries expect, and in which direction should Japan move towards?

Hamre: I think these last three or four years under Prime Minister Abe have been really quite good, and I think this period represents one where we have been seeing a new and more confident Japan. All other countries in Asia, perhaps with the exception of China, are comfortable with that. There is always a question about Japan’s relations with Korea, but that is in a different category. However, in terms of broad Asia, they are comfortable with Japan playing a larger leadership role and Japan has done a good job of that.

As the United States has been pulling back in the last two or three years under President Trump, it has been fortunate that Prime Minister Abe has stepped forward, on issues like the Trans-Pacific Partnership (TPP)**5. It was a very sensible move, because although everybody in Asia may want a stronger U.S. presence, if, for whatever reason, the U.S. isn’t able or willing, then Japan is the next best thing.
Nobody wants to be put in a position where you can be close to the U.S. only if you are hostile to China. This is untenable for Asian countries who live next to China and whose economies are deeply connected.

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So what every Asian economy wants is for the U.S. to be active in Asia, but not hostile or aggressive and not to put them on the spot. I think that Prime Minister Abe’s recent visit to Beijing was exactly the right thing to do. It sent a message to everybody else in Asia that Japan is not going to be overtly hostile to China. I think it was a clever move on Abe’s part.

The question is what is the U.S. going to do? Trump’s pulling out of TPP was the tragedy because TPP was exactly the way in which Asia sought engagement with the U.S. Since pulling out of TPP, what we are now saying to the Asian countries is that you are either with us or against us, either with us or with them. This is an unrealistic position as Asian economies are with us, but neither can they be hostile to China. Fortunately, Japan stepped forward into TPP and Prime Minister Abe is doing a good job, which is also good for the U.S.

Shirai:Thank you very much for your time today.

*5
Originally conceived as a free trade agreement among 12 Asia-Pacific nations, after President Trump announced the United States’ withdrawal from the agreement, Prime Minister Abe was instrumental in moves to conclude the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP11 Agreement) among the 11 remaining nations.