The war in Ukraine is teaching America and Western allies some tough lessons about globalization, multilateralism and the influence of its authoritarian rivals. However, many of the vulnerabilities laid bare by the war were festering and bound to come to the surface.
Even without the war, shortages for computer chips, cars and some digital products would have emerged, because the efficiencies driven by international competition have created brittle and inflexible global supply chains.
The pandemic shutdowns did shift demand toward chip-hungry products like computers but often neglected were factory fires in Japan and Germany that knocked out critical links in semiconductor supply chains.
Fragile supply chains
Competition without safeguards pressures managers to pursue wage arbitrage and economies of scale to their absolute limits and creates unacceptable vulnerabilities to natural disasters, pandemics and wars.
Climate change has instigated record heat in the American West, Europe, India, Brazil and elsewhere that are tearing at global food supplies. Those would have threatened shortages even before Russian President Vladimir Putin imperiled Ukrainian and Russian exports of wheat, corn, sunflower oil and fertilizer.
In response to exacerbated shortages of cooking oils, Indonesia created turbulence with a temporary export embargo on palm oil. The WTO offers few timely remedies for those sorts of trade actions.
COVID and the Russian invasion brought those vulnerabilities to the foreground more intensely.
A confrontation with China over Taiwan would prove much worse. Taiwan is a critical link in the semiconductor supply chain. China is dominant in the manufacturing of batteries and solar cells and has the military capacity to disrupt one-third of global seaborne commerce in the Western Pacific.
U.S. chip-making capacity now being built would hardly compensate for the loss of Taiwan.
Rule of law
Weaning the world from gasoline with EVs requires even more chips and prodigious quantities of lithium, nickel, cooper, phosphate and manganese from Russia and other countries with whom relations could sour. Or who could fall into the orbit of China and choke Western industry in a Pacific crisis.
The Ukrainian war has laid bare that much of the world is not behind the United States and Europe as full and responsible players in the enforcement of the international rule of law. Many abstained from the U.N. resolution condemning Russia or are not much cooperating in the sanctions.
The unfortunate fact is the international system—the security and human rights arrangements founded in the League of Nations and United Nations—and the free-trade system institutionalized by the WTO are seen by much of the developing world as artifacts of past Western colonialism.
American calls for defense of international rule of law fall on jaded ears among many nations occupying the space between the Western democracies and the authoritarian states of Russia, China, Saudi Arabia, Iran and a few others. Entreats for solidarity are filtered by minds with harsh memories of European seizure and plundering of sovereignty, farmland, mineral wealth, tribal identities and the slave trade from the 15th through the early 20th Century.
In the post-World War II era, American diplomats relied on overwhelming U.S. wealth and military power to bend those ears. However, the rise of China and its Belt and Road Initiative often frame, however incorrectly, Western notions of the international rule law and capitalism as engines of neocolonialist exploitation.
Consequently, China is enjoying much greater diplomatic and economic influence in the Middle East and developing world.
The West can’t change history. Reparations would only validate resentments and lead to more demands.
It’s high time for globalization with guardrails, a Western security system that best serves the West. And a system of free-trade agreements among the industrialized countries and the more dynamic, compatible and friendly economies in the arch from India to Korea that emphasizes resilience as well as efficiency.
Shaken by the vulnerabilities laid plain by the war in Ukraine, Germany and Spain are seeking to speed up EU free trade negotiations with Latin America and the Pacific—effectively displacing the WTO with its implied predisposition to foster vulnerable supply chains.
America is impelled to follow their example lest it wake up one day hostage to a Chinese-inspired embargo that shuts down U.S. manufacturing in a Pacific crisis. And to build military capabilities and mutual-assistance agreements to protect those trade alliances and buttresses or replaces the U.N. apparatus.
That would confront India, like other nations who currently refuse to meaningfully sanction Russia, with tough choices. But our message should be you can obsess about British colonialism of ancient days or safeguard yourself from Russian-style aggression and economic exploitation from China.
The West should take a page out of China’s playbook to indigenize critical technologies and ensure reasonable self-sufficiency in a crisis lest a war over Taiwan give us a new hegemon and we all must learn Mandarin to serve new masters.
Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.