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The world is fighting a virus without borders, but all the reactions havebeen taken inside themBCs Module Global Business EnvironmentProfessor: Luís Brites Pereira & João Silva28 May 2020NOVA – School of Business and EconomicsINTRODUCTIONWe are living in a VUCA world. A world that is volatil...

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The world is fighting a virus without borders, but all the reactions have been taken inside them

BCs Module Global Business Environment Professor: Luís Brites Pereira & João Silva

28 May 2020 NOVA – School of Business and Economics

INTRODUCTION

We are living in a VUCA world. A world that is volatile, uncertain, complex and ambiguous (Kraijenrink, 2018). The pandemics came to reinforce this statement. The volatility of the virus brings around the uncertainty of the future.

The contagion patterns were quite different around the global. China sky rocked first has it was the epicenter of the pandemic, however, soon after, European countries like, Italy and Spain come really close with the number of cases. If we analyze the spread by days of contagion then we can even state that Italy and Spain, at a certain stage, had more death causes by Covid-19 than China did at the same stage, despite the difference in time (graph 1 – annexes) (Surico & Galeotti, 2020). Soon after, was the US turn to ski rise with the number of deaths.

Global business took a huge tool with the Chinese stock market fell by 10% points in February but almost nothing compared with the falls of 30% and 20% that Italy, UK and US, respectively, presented (graph 2 – annexes). President Trump and President Xi started a throwing guilt game, leaving behind the need for cooperation towards ending an enemy that this time is common to both. To analyze the state of the global business environment after the pandemics, we will first examine how China was already paving its way to hegemony and what they did as a response to the virus spread. Secondly, we will look at how the tensions between the US and China are getting worse and will likely deploy in a cold war. Then, discuss the global shift that is happening and how Europe again, finds itself in a dilemma. Lastly, assess how the war over technology is a matter that for the first time is bringing the entire global scenario to the fighting world stage and how technology is allowing to adopt to the new normal.

CHINESE EMERGENCE: PANDEMICS AS THE TRIGGER

The pandemic spreading around the world is a fire that China light up in the first place. Now, Beijing it is using it as the catalyzer towards its ascendance to the global superpower (Ward, 2020). While some are distracted arguing that president Xi should be held accountable for numerous deaths, China is taking advantage of the chaos generated to put in motion its foreign policy plan goals (Ward, 2020).

China seems to have recovered considerably faster than the rest of the world, according to the Trivium National Business Activity Index (graph 5 – annexes) in mid-May, it was already operating at an 86.4% capacity. Specialists say that Xi’s goals are to make China great again but this time in a faster paste. Its Beijing’s strategy towards “a modern China of unprecedented power and influence through the recapturing of lost glories worldwide” (Erickson, 2019) (Surico & Galeotti, 2020).

When President Xi rose to power, he promised to revive China, indeed, in the following years Beijing started growing economically, taking advantage of the US security in the Middle East as the relations with its neighbors are not best. Furthermore, it put in motion its Silk and Belt Road plan, which attracted several investors that saw it as a perfect driver of globalization. Xi while growing the economy based his speech on the ideals of a multilateral world and how important cooperation between nation-states is, despite the fact that his actions and the regime he follows are not as transparent as that.

For months China has been targeted with criticism towards the way the outbreak was dealt with (Wang, 2020), so one would be prompted to say that its pollical image is somewhat damaged. It’s is believed that China hid the severity of the Covid-19 for weeks, which costed global nations crucial preparation time. As an answer to all the critics it was being targeted with, China created protective mechanisms to clear its reputation beside countries, blaming other nation-states for the spread of the virus.

In parallel, China stepped in to face the lack of medical equipment and workforce, that has been being felt by several countries (Ward, 2020). They wanted to be portraying as saviors, providing countries with medical equipment and even doctors, namely in those where it seeks an influential expansion, like in Europe. In addition to, by strengthening these ties, hope to slowly crack the ones existing with the US. The medical equipment sent abroad also impacted the exports positively in relation to what was expected by economists (Campbell, 2020). Thus, this shows how China is taking advantage of the coronavirus pandemics to strength its image globally furiously, instead of taking the quiet and “doing it from the back” approach that has been felt so far.

The last final cut was to invest in the WHO fund over US decision of withdrawing from it, which gave China a huge competitive advantage in influence terms, establishing itself as a champion of multilateralism. The approach President Xi has supposedly been basing its approach to the global environment on. The Chinese foreign minister justified this move as being defendant of the principle of multilateralism while upholding the United Nation’s status and authority (Ward, 2020).

China seems to be transmitting hope. The Chinese economy seems to be putting in motion a recover economic measure allowing for a considerable contraction of gross domestic product. Secondly, there has been rumors about policy support for the economy by Beijing. However, is it arguably doubtable that will effectively happen as no efforts are being seen to launch a credit fund similar to the one launched in 2008 (Financial Times, 2020). Nevertheless, President Xi announced that it would boost in country demand, encouraging the consumer spending and public spending. While highlighting the level of caution and diligence required.

The reality is that the US left a gap to be filled and taking into accounts China’s goals, they would not let this opportunity pass by (Ward, 2020). Nonetheless, the world’s skepticism about the mistrusts the intentions of president Xi Jinping became higher namely with the approach it was took towards the pandemics.

FROM BAD TO WORSE “Relations between the US and China are terrible and getting worse” (Wolf, 2020). China is advancing frenetically with its foreign policy agenda, now that the rest of the world is focused on pandemic. China wants to dethrone the US from its superpower position while strengthen its own position and say a golden opportunity in Covid-19. The United States have already perceived the Chinese hegemony plan, namely after the Chinese strengthening of sovereignty over the islands in the south of the Chinese sea, which came to be crucial for the US recovery, as those sees are common space between the two nations. Thereafter, the US has intensified its warships in the region, namely following the month of April (Pasley, 2020). However, Trump’s approach to the pandemic was not the most diligent one. A side from increasing military tensions, it has also slandered WHO as to have had omitted information regarding the spread of the virus catapulting an increase in the number of infected people, being the information’s provided based on uncomplete report from China (Florko, 2020). China took advantage over this move of the US to pledge a 30-million-dollar funding for the WHO.

Chinas has been catching every bad move the US makes to ascertain its global position which ultimately resulted in tensions between US and China raising. China blames the US for the heated tension that has been emerging, namely, the accusations president Trump made regarding the way China approached and

shared the information regarding the virus. In addition to severe allegations of having silenced the ones who tried to spread the alert about the seriousness and danger of the virus. Furthermore, President Trump has accused the WHO of having helped China to spread the virus (Bucalinao, 2020). Beijing is said to have in their best interest to safeguard the relationship between the two world leaders through refraining from criticizing. Although it has been object of severe criticism it denies all allegations trying to turn the game on the US questioning the speed with which a response to the pandemic was put in motion.

The tensions are sky rocking to a point where it is believed, even by the nation-states, that is pushing towards a Cold War. Cooperation between the two biggest nations in the world have been built throughout the years, a conflict like this will put the relation in jeopardy and have direct impact in global stability and prosperity. The conflict between US and China is namely over the military and economy, not about ideology as it was the matter in the first Cold War. Furthermore, there is a well-established web of trade and investment anchored to the relation between the two powers (Akita, 2020). Thereafter, a new Cold War would have a severe global impact. Taking into account the economic and military power that China has been acquiring, one would be prompted to state that the gap between the two has been diminishing considerably.

The world is calling for global cooperation, but what we are seeing is more likely similar to competition. Global coordination to face a global affair is needed more than ever. The US-China conflict is jeopardizing that need, while it is reshaping and drifting away from any similarity to a relationship. In addition, the conflict is making victims, nation-states are feeling pressured to choose one side and afraid that is they do what will be the consequences from the unchosen nation. As long as this dispute takes place the global order and governance will always be in a limbo.

A WORLD SHIFTING FROM WEST TO EAST: EUROPEAN DILEMMA

The fine line between cooperation and competition became even thinner. The global economic architecture of governance will never be business as usual again. Political leaders face the dilemma of retaining the benefits of international cooperation or turn to competition.

The pandemics came to reinforce the idea that governments need to adopt more consistent and effective emergency measures. In addition to accelerate the power shift from West to East. We saw how Europe and

US struggled to responded to the pandemics and are still thriving to fight it, while countries like China took a tool but where able to be less jeopardized, or at least it seems so (Foreign policy, 2020).

The coronavirus crises brought around the clear necessity that Europe can no longer stand in the middle of the two largest world economies and must choose between one. The biggest drawback of Europe is that, it is not the political union that was once envisioned which means that the approaches towards different topics is not shared by all nation-states. In the light of its creation was more than improving the economic situation, it was the eagerness to take a “political leap” and create a strong independent massive country composed by several nation-states, something that the world had never seen before (Atlantic Council, 2020)

Both the EU and China are committed to promote a multilateral approach and the in United Nations the approaches differs (Visão, 2020). The United States perceive their best move towards the chaos to be decoupling from China while Europe’s economy, on the other hand, likes to have the best of both worlds and does not want it to be interrupted (Dopfner, 2020). Strong EU leaders have been appealing to what they called “strategic autonomy”, meaning the ability of Europe to defend itself and became autonomous namely in economic and military power. In fact, this approach of the leaders can go hand in hand with the Smith theory that states that countries should focus on which they are the strongest at, so that they can specialize and gain a greater advantage on it. Europe has now prioritized the well-being of its citizens. The budget will be destined to recovery and creating jobs (Erlanger, 2020). However, this budget can specifically be target towards the enhancement of the population, both in terms of military training and enhancing the production skills, as we have the fertile soil and the industry to do so.

However, for many years, it has been discussed that the objectives of the creation of the European Union were not being held properly. A union fundamentally based on principles such as solidarity and free movement has showed little of both as many members choose to take a self-centered approach to the pandemic crisis, the feeling of vulnerability was felt generally by Europeans. That is the main argument why the Union is not working, each country wants to leverage their own interests in the light of the issues, while they should be appealing to cooperation in facing the virus (Atlantic Council, 2020). A clear example of this paradigm was the way in which some European countries, when China offered medical supplies in a way to portrayed itself as a savior, were the first ones to accepted, instead of relying in the union’s countries that could assist them in a similar manner. In reality their selfish and unthoughtful actions lead

them to be worse off as many of the equipment China provided proved to be defective and had to be returned.

In spite of this actions, the way President Trump is dealing with the pandemics rises many questions about a future deterioration of the US’s global power, leaving the EU again in the middle of the two world powers. Thereafter, it is undeniable how many European countries are progressively turning their attention to China as a future global power. China shares integrated objectives with the EU, constituting a partner with which a middle term must be fund towards fair negotiations, namely towards what concerns the interests in the technological field which may turn into wither a cooperative or competitive relation.

FIGHER OVER TECHNOLOGY SUPERMACY IS DISRUPTING GLOBAL ORDER

The pandemics already acts as a catapult for change. It has disrupted operation’s order of many technology companies, namely, within Asia. Dominance over technology and the improvements in that matter are an open source of concern, as “technology is a permanent shift” (Wolf, 2020).

Most of them are concentrated in China both in terms of manufacturing sites as well as the consumer base. Analysts point out the new objective of President Xi, leveraging the pandemics to develop in two years a decade worth of reforms. During a speech in April, the president stresses the need to advance the investment in the 5G technology alongside with the investment in artificial intelligence and an industrial network (Campbell, 2020).

The Chinese advancements in technology are an open source of concern for the US. After the Huawei security scandal, president Trump banned the Chinese company and others from the US market, as they are perceived as a threat towards national security. Stressing the need that allies show do the same as this type of companies will disrupt their national order and bring chaos (Tourngbam & Hariharan, 2020). However, being some of the strongest tech companies it had to find alternative paths to exploit, and that is when it turned to the EU. Huawei itself has been established in Europe for many years now and has created many job opportunities for Europeans.

Nonetheless, that is when the competition factor enters. Countries want to buy the best 5G technology and the best one is believed to be the Huawei tech from China. However, US has made it very clear that anyone

buying that sort of technology will get high sanctions from the US. Countries face a dilemma, in spite of not wanting to be caught in the middle of these two powers they will always end up in.

According to tech experts, the Chinese tech companies are one step ahead in the digital world, as they were able to diminish the disparity between the physical and online world.

Business who are opened to change and have it engraved in their culture are the ones who are more likely to survive. A crisis is a trigger to explore new directions and the pandemics came to show the fast path of the evolution of the technologic field. According to Wolf, the benefits of technological change are unprecedented and have benefitted important businesses. Millions of companies and universities forced their employees and students to work from home, pressuring the corporate technology infrastructures. The current environment proved the benefits and significance of technology through innovative treatments, AIassisted diagnosis and brought down the barrier regarding who would the educational system would proceed, while above all facilitating social distance. All technological fields that China has been developing for years now. Governments can invest in further development of policies that help to proliferate the expansion and upgrades of technology. In addition to promote a multilateral cooperation approach to face the long recovery path ahead. Advance technical devices and fast network are key elements towards an easy communication between nation-states.

CONCLUSION

The volatility of the virus brings around the uncertainty of the future. The pandemics made us adapt to a new normal. The world is fighting a virus without borders, but all the reactions have been taken inside borders. China, US and Europe member states have taken matters into their own hands to cope with the virus, which as we seen as increased tension, created dilemmas and to some extend proven to be not very effective to avoid the spread. The logical response would be to come together to fight a global problem.

The geopolitical contest is being driven by deep structural powers. A new global environment is emerging, we are on a cold war between the two major world power which will have global consequences. The west that is losing its leadership position and it will fight back (Mahbuani, 2020). The fight towards supremacy will involve several fields that have been discussed, despite to a smaller extend, through the last years, like leadership over technology. Despite the neutral way Europe has been acting for years, this is a matter that

is in their higher interests. The pandemics brought us chaos. However, it was also an essential event that is seen as critical opportunity for digital learning, which some companies expect that becomes a permanent change.

Tensions are certainly raising and a multilateral approach to globalization that is beneficial is unlikely to be reinstituted. (Foreign Policy, 2020). Nonetheless, the ones in the middle are the ones who should shine a light towards the need for cooperation and that, as of right now, the enemy is common no matter what the economic or political interests or goals of each nation are. Those will be worth too little of we are not able to face this major disrupter in a conjoint way. “We do not need to like each other. We need to work with each other to fight something that we all dislike even more” (Mahbuani, 2020). The enemy of my enemy is my friend.

REFERENCES:

Akita, H (2020) “Coronavirus pandemic pushes US and China into new Cold War”. Retrieved on May 26th, 2020: https://asia.nikkei.com/Spotlight/Comment/Coronavirus-pandemic-pushes-US-and-China-intonew-Cold-War

Atlantic Council (2020) “Europe’s economic emergency is also a geopolitical one”. Retrieved on May 28th, 2020: https://www.atlanticcouncil.org/blogs/new-atlanticist/europes-economic-emergency- is-also-ageopolitical-one/

Baculinao, E (2020) “China warns U.S. taking world to brink of 'new Cold War' over coronavirus”. Retrieved

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https://www.nbcnews.com/news/world/china-blames-u-s-growing-

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