Calmer 2021? Think again!
To say that 2020 has been a brutal year may be the understatement of the century! The havoc has been all too visible to everyone. As far as policy responses go they have been weighed and they have been measured and they have been found wanting!
Will the turmoil continue? It will! Consider.
2021 will turn out to be as turbulent a year as 2020! But for a variety of reasons and differing
One – the fallout from COVID-19 will endure unabated. Nations across the world have been propping up their economies through stimulus and artificial means. Once these financial crutches are removed, the true nature of fiscal devastation will come to the forefront with consequent impact on real estate, businesses, commercial operations, trade and supply chains. While there is enough bonhomie for vaccine supplies currently, time will prove whether ‘vaccine nationalism’ a phrase coined by the Harvard Business Review – takes to the fore and if distribution comes down to the ability to pay rather than the need of individuals. Till the pandemic remains which will be the whole of 2021 export restrictions and additional tariffs will remain on the cards while governments try to protect their population and shore up their revenues. General perceptions and political careers will continue to be made and broken by the handling of COVID-19 and effective and confident vaccination regimes.
If the broad policy for 2020 could be summed up in one word, it would be intervention. COVID-19 made
Two – with the election of Joe Biden to the White House, only small US policy realignment may be seen throughout 2021. On the industrial front Biden is targeting almost $300 billion in research and development. Environment, one of the cornerstones of the Democratic agenda will take the front seat and the US will aim to re-join the Paris Accord. This is expected to reinvigorate the discussion about climate change and the need to execute policy objectives that will in turn shape the international business environment for years to come. There is also a proposed $2 trillion US plan for investment in renewable energy infrastructure and tax incentives for energy efficiency. Nevertheless, a nail-bitingly divided Senate means that it will be an uphill struggle to get these initiatives through Congress. Although Multilaterism will be the flavour of the month but reversing stringent immigration and protectionist policies of the past will still pose a huge challenge to the incoming administration.
Three – the US-China conundrum will continue to dominate the headlines and global policy making. Over the course of 2020 relations between the two global powerhouses soured to quite a degree. While Joe Biden may try to re-baseline US’ relationship with China, he will still end up continuing many of the confrontational policies executed by Donald Trump. The biggest bone of contention between the two will be technology specifically 5G networks, Artificial Intelligence and related underlying industries. The Trump-led ban on Huawei, the Chinese network maker, will still be in place, antagonising Beijing further. Hong Kong and Taipei will carry on being proxy battlefields for diplomatic skirmishes and rhetorical scuffles. Truth be told, Joe Biden will not want to use up his political capital to shore up local support for a continued trade war with China something that may end up costing the US more than China.
While Joe Biden may try to re-baseline US’ relationship with China, he will still end up continuing many of the confrontational policies executed
Four – the EU will want to put the COVID-19 limitations behind it and move on with its vision of ‘a stronger Europe in the world’. In fact, this galvanising statement was from Ursula von der Leyen when she was running for President of the European Commission. Now that she is in the role, she will want to make 2021 all about establishing Europe as a formidable force in the world. This will be especially true with the UK leaving the EU and the finer points of the agreed BREXIT deal coming into full view. The EU, as a whole, will focus its foreign policy objectives towards mutually beneficial relationships with US and China albeit contending with interfering and maybe contradicting agendas of its members.
Till the pandemic remains which will be the whole of 2021 export restrictions and additional tariffs will remain on the cards while governments try to protect their population and shore up their
Five – if the broad policy for 2020 could be summed up in one word, it would be ‘intervention’. COVID-19 made sure of it! This will not end anytime soon and especially not in 2021. Most countries will keep on looking inward and ensure that this general policy of intervention translates into empowerment of local businesses, domestic production and homegrown supply chains. Afterall, if the government intervenes and picks up the tab then it has the right to ask more of national industries! A point in case? Japan’s $2.8 billion offer to companies to re-setup locally. Others will follow suit.
Six – technology and data will be the centerpiece of the geopolitical climate for 2021 and beyond. US, China, EU, India and Japan will contest this landscape bitterly and will vie for export controls to back industrial and political goals. With so many technologies in play – for example the advancement in Electrical Vehicles (EV) – there will be strong tensions in setting standards to protect future technological leadership. US and China will be in opposing corners and will woo others to join their group so as to provide legitimacy to their framework.
If nothing else, the preceding hypothesis proves one thing – 2021 will turn out to be as turbulent a year as 2020! But for a variety of reasons and differing agendas the respite provided by the muted year-end celebrations will be short-lived at best. Gear up for another roller coaster of a ride in 2021!
