Ju Jiandong: Global disorder originates not from the U.S.-China dispute, but the contradiction between global trade and the U.S. dollar

Originally published by Interface News on December 4, 2020, translated by ACCEPT

Professor Ju Jiandong, Unigroup Chair Professor at the PBC School of Finance of Tsinghua University, recently said that in the context of the current global disorder, there is an urgent need to build a regional governance system. In the case of Asia, the Regional Comprehensive Economic Partnership (RCEP) is the first step toward establishing a common Asian market, with the ultimate goal of establishing an Asian governance system similar to that of the EU.

On November 15, China signed the RCEP along with 10 ASEAN countries in addition to Japan, South Korea, Australia, and New Zealand. Together, these 15 countries account for about 30% of the world’s total population and economic volume. They now form the world’s largest free trade area through the RCEP, which aims to establish a unified market by cutting tariff and non-tariff barriers.

At a lecture held by Fudan University’s Fanhai International School of Finance on Dec. 1, Ju compared the current situation to the Great Depression of 1929 in that both times were marked by global disorder. A relatively popular view internationally, and especially in the U.S., is that a major cause of the current global disorder is the Sino-U.S. rivalry for hegemony.

But Ju said he does not agree with this view. Rather, he believes that the current global disorder stems from a conflict between the U.S.-led global governance system (monetary system) and the global economic structure based on trade, production, and consumption.

“The global trade landscape has taken on a three-legged pattern, with Germany at the core of Europe, China at the core of Asia, and the United States at the core of North America. But in contrast, in the international monetary system, the U.S. dollar has been absolutely dominant since the 1970s,” Ju said.

To resolve this contradiction, Ju proposes the establishment of a two-tier, three-legged global governance system. For example, financial governance requires both a multilateral governance system—such as the World Bank and the International Monetary Fund (IMF)—on one hand, and a regional governance system—namely the U.S. dollar zone, the eurozone, and the Asia-Pacific Monetary Area—on the other. In the trade governance system, there is a need for both global multilateral institutions like the World Trade Organization (WTO) and regional FTAs, such as RCEP.

“With the global order out of sorts, RCEP is very important as part of the Asian order,” Ju said. “The establishment of the Asian order is similar to the course of European integration, which started with the common market, then the European Economic Community, followed by the integration of the monetary system, and finally towards the European governance system.”

He further pointed out that globalization has now entered a new stage, “a stage dominated by technological innovation, as knowledge and technology are naturally decentralized, and the economic landscape is therefore polycentric.” Ju continued, “In such an era of pluralistic coexistence, the U.S. mindset has to move away from the past—hegemonic, unipolar, monolithic—and move toward an era of pluralistic competition and competitive coexistence.”

At the forum, Yu Miaojie, Boya Chair Professor and Deputy Dean of the National School of Development at Peking University, also noted that for China, RCEP can further contribute to the development of the new dual circulation development pattern.

Furthermore, Yu said that on the topic of exports, RCEP is a very important step toward achieving free trade between China and Japan. Japan’s elimination of tariffs on Chinese products will, to a certain extent, boost China’s exports. From the perspective of imports, RCEP also helps higher quality products enter China, promoting domestic consumption and consumer upgrading. Finally, Yu pointed out that the negative list model adopted by RCEP in terms of investment is conducive to the promotion of various innovative investments.

Source: https://baijiahao.baidu.com/s?id=1685126748598917343&wfr=spider&for=pc