By Michael Clarke

It’s inevitable that the government’s ‘Integrated Review’ of external relations has gone on hold during the COVID-19 crisis, not least because the international environment is being changed, perhaps fundamentally, by it. Michael Clarke addresses the government’s key challenge – to work out the difference between those existing trends that are being exacerbated by the crisis and those that are possibly being created by it.

The COVID-19 Delay to the Integrated Review

The COVID-19 crisis has important consequences for the Integrated Review both in its timing and its scope.

• Timing. Necessary staff work cannot be done satisfactorily either during the official lockdown and its graduated lifting, nor during a period when the second order effects of the COVID-19 crisis will absorb much of the government’s attention.
• Scope. The crisis is demonstrably affecting world politics and the Integrated Review is having to scale itself against more rapidly moving political targets than normal, so it must necessarily pause before arriving at conclusions.

This may, however, be a silver lining. The crisis changes the landscape for all departments in Whitehall and some genuine soul-searching will be required from virtually all of them.[1] Past reviews normally involved a great deal of work in the MoD and the Cabinet Office but rather brief ‘inputs’ from other relevant departments, usually later in the process. Having to take more time – probably deep into 2021 – to synthesise new and revised thinking from all departments with a direct bearing on the UK’s external relations could become a clear advantage in conducting a genuinely thorough review; albeit that the UK’s external relations will be under intense pressures in the severe economic recession that is now anticipated.

The Immediate Policy Planning Task

The most useful task during this period of review hiatus is to distinguish between those existing international trends that are being exacerbated by the COVID-19 crisis, as opposed to those that may be emerging in quite different, and therefore more challenging, forms – or maybe even for the first time.

All reviews try to assess, alongside the advantages of the UK’s national position, the international challenges it must measure up against. Those that are already identified but are exacerbated by current events may certainly require more attention and resources. But those that emerge in different, or new, ways are conceptually challenging and more easily underestimated or overlooked entirely.

Exacerbated International Trends

US/China Antagonism Increases

• There is no sign that China is responding to its responsibility for the crisis with any new honesty or transparency. [2] It is now fully engaged in a ‘battle of the narratives’ with the western world; it is ramping up its own production again, but in an environment where the US and Chinese economies are already increasing their decoupling.[3] Chinese production will challenge US economic dominance in several regions and sectors; and it has shown an intent to use the distraction of the crisis to assert its military presence in the South China Sea, as its warships have confronted Indonesian, Filipino and Vietnamese fishing vessels as it asserts ‘coast guard’ rights over its manufactured and illegally-claimed island bases.[4]
• In the US election campaign, the bilateral relationship with China has rapidly become the most dominant foreign policy issue.[5] President Trump seeks to blame China for US economic damage and portray his opponent, Joe Biden, as ‘weak’ and compromised on China.[6] And US domestic protectionism will increase quickly during the campaign months as the president so urgently needs to get the US economy moving again.[7]
• Whatever the outcome of the election in November, Congress has become notably more antagonistic to Chinese behaviour in political, economic and now, also, in public health terms.[8]
  Any genuine economic rapprochement between Washington and Beijing looks to be impossible before sometime in 2021, at the earliest, whether the White House is run by Donald Trump or Joe Biden.

Global Protectionism Intensifies

US/China relations are not the only driver of global protectionism. Other drivers are also strengthening.

• The certainty of a global recession into 2021, on top of the highly disruptive effects of the present crisis, increases protectionist demands on virtually every government – especially through demands for state aid, regulatory relaxation, job creation schemes and short-term subsidies. The balkanisation of global capital markets is highly likely, at least for some time.[9]
• In addition, national reviews of economic and social resilience across the world will question some aspects of the free-market, globalised trade revolution of recent years. Exacerbating the existing, mild push-back against over-reliance on complex supply chains may stimulate the creation of shorter, and alternative, chains of supply; but will probably also see measures to ‘protect’ them or subject more of their functioning to state controls, probably with increased investment in ‘strategic industries’ or ‘national champions’.
• Consistent downward pressures on commodity prices have existed for some time and have now been severely exacerbated by the crisis.[10] This also adds to global protectionism. While downward pressures are an exercise in free trade pricing (consider how the biggest ever cut in oil output, attempting to fix a new price for oil among the ‘OPEC+’ group in April, had no impact on the collapsing market price); nevertheless the severe economic hit of low prices on commodity-producing countries foists massive structural change on them and drives them to protectionism; while big energy and agricultural producers in the rich world equally demand help to stay in business while prices are structurally low.

Greater Challenges to European Cohesion

Both NATO and the EU were facing different and strong challenges to their own cohesion before the crisis. The challenges have now been exacerbated in both cases.

• The NATO challenge is exacerbated by the preoccupation of the US Administration with the US election amid the COVID-19 crisis, and then the economic fall-out from it that will persist after 2020, making transatlantic unity more difficult to maintain. A ‘distracted US’ – under any President – will leave European allies more vulnerable both to external pressures and their own diminishing defence consensus inside the alliance.
• China and Russia have both been opportunistic in playing off European allies both within NATO and the EU through their COVID diplomacy, aggressive misinformation campaigns and in Russia’s case, also setting up direct challenges to NATO’s territorial integrity over the North Sea during the COVID crisis.[11]
• NATO cohesion will also likely be strained, both in transatlantic and intra-European domains, by the difficulties European allies will have in maintaining exiting defence expenditure. Their existing 2% of GDP defence spending commitments might – paradoxically – be upheld in the face of defence cuts if their GDP levels also decline by as much or even more. But defence expenditures will lose the political ring-fencing some of them have had since 2014 and it is impossible to believe there will not be a decline in real terms expenditure. Defence procurement will also probably be strained and deferred, particularly as aerospace industries struggle.[12] Another difficult period of defence industry rationalisation is on the cards for a while.
• EU unity faces a more profound exacerbation than NATO, however. The original health crisis damaged public confidence, to a degree yet uncertain, throughout Europe; even though health is a national prerogative. More importantly, the consequent economic crisis has raised again the, still unanswered, questions about the ability of the EU and the ECB to manage (extreme) divergence in fiscal policy, now under the pressure of the highest levels of public debt since the Second World War. The IMF anticipates a 7.1% contraction in Eurozone economies over 2020 as countries like France and Spain face economies shrinking by the fastest rate on record.[13] The ECB warns that the contraction could be as much as 15%.[14] The ability of the EU to remain a functioning – as opposed to a façade – supranational organisation for its 27 members must be in some doubt during a period when it will witness the primacy of national policies in many economic spheres that may hold the single market in suspension for some years. This will remain the case even if the ECB can prop up the Euro (with 750 billion euros, and counting) during that time.
• The prospects for a smooth Brexit process are diminished by the economic uncertainty on both sides of negotiations. Effective negotiating time has been severely curtailed by the crisis, but more importantly, neither the UK nor the 27 can be sure for some time what damage the crisis has done to their industries, their SME communities, fisheries, agriculture, transport sectors, leisure industries, and so on. The costs to the UK of no-deal were estimated at around 2% of GDP by the end of 2022. But this could might now be absorbed in the far greater losses of over 6% of GDP this year alone as estimated by the IMF. A deal that is so general as to create largely ‘no-deal’ conditions – requiring further negotiation and other sectoral deals – will leave the EU and the UK facing more economic volatility as they try to emerge from the COVID-19 crisis.

Distress in a Weakened Russia

Opposition to President Putin’s rule has been rumbling more strongly through Russian society – increasingly suppressed – and his spending reforms of 2019 have not turned around a large but failing economy. Nevertheless, President Putin has consolidated his hold on power until 2036 and continues to play an assertive diplomatic and military role on the world stage. But the COVID-19 crisis is exacerbating the underlying structural weaknesses of Russia.

• The full public health impact of the crisis on Russia has yet to be judged impartially. It may be very considerable in cities outside Moscow and St Petersburg.
• The collapsing oil price is a potential disaster for Russia, though Putin still plays power politics on oil prices with Saudi Arabia and against the US shale revolution. In 2019 and again this year, Russia boasted that its fiscal breakeven oil price could be as low as $40.[15] But in April 2020 oil prices went heavily negative for a while and the oil industry genuinely has no idea whether there will be a 2021 bounce-back to anything above $30, or else a period of exceptionally low prices that would simply leave Russia with accumulating budget deficits.
• Global economic disruption reduces energy demand in a structural way and 70% of Russia’s export earnings are in oil and gas. Its GDP growth had already halved in 2019 to 1.3% and was struggling just above that level when the COVID-19 crisis hit the world economy in February 2020.
  All the indications are that Putin’s grip on power in Russia is now indefinite and that his foreign policy ambitions will be undiminished even in an era of deepening structural economic weakness. That suggests greater potential opportunism and volatility in Russian policy abroad rather than a period of retrenchment.[16]

Regional Instabilities Worsening

There are major regional instabilities involving civil wars and insurgencies across the Middle East and North Africa, the Sahel, Central and East Africa, parts of West Africa, in Afghanistan and the Philippines and now, again, in Columbia. The major ‘arc of conflict’ that stretches from West Africa, through the Sahel, Central Africa, the Middle East and into South Asia contains over one billion people (15% of the global population), and even milder versions of the COVID-19 pandemic will have serious human consequences in conflict areas that adds to the existing dislocation in most of these societies.

• There is some patchy evidence that the effects of the virus, accompanying lockdowns, and the political distraction of leaderships, has had a dampening effect on some of these conflicts.[17]
• Any benefits of this, however, are likely to be offset by the fact that the world’s attention is firmly turned away from these regions, probably for quite some time. And neither the human costs nor the effects of some rapid and ruthless game-changing in them is likely to evince an effective international response.
• The direct impacts of the COVID-19 crisis on these troubled regions and the distraction of the international community increases the likelihood of more uncontrolled migration flows within regions and towards southern and south eastern Europe.

Potential New International Trends

Amid current uncertainties some new international trends may be taking shape – some of which could have a direct bearing on the assumptions the Integrated Review will be making.

Emergent Economies Take Biggest Relative Economic Hits

The biggest growth in world trade for the 2020s was assumed to be coming from the emergent economies, particularly in Asia. Between 2010 and 2015 trade with, and within, emerging markets already accounted for 62% of world trade (and 38% within the developed world).[18] But emerging market countries stand to take the biggest economic hits from the crisis.

• They are the most dependent on a properly-functioning global market for their growth with fewer alternative choices but to ‘serve’ the global market, which is likely to be heavily disrupted for some time.[19] The growth in world trade has been slowing relative to global GDP since 2012, and is now heading into negative territory while world growth dips from around 5% in 2018 towards zero at the moment.[20]
• ‘National lockdowns’ take place against the background of a patchy ‘international lockdown’ that will severely disrupt travel and investment and will likely be on/off into 2021 and perhaps beyond. That will affect emergent economies more than the developed ones.[21]
• Second and third wave reappearances of COVID-19, until there is a universally available vaccine, or else a global herd immunity, will have greater public health and societal effects on the emergent economies which are generally less able to combat the effects of the pandemic.
• This may all create unanticipated political instabilities in some emergent market countries, particularly in Latin America, West Africa and south and east Asia.

New Politics in Liberal ‘Leviathan’ States

Most western countries have involuntarily become ‘leviathan states’ in a matter of months, intervening massively in their own economies, effectively taking state ownership of large parts of it to preserve economic sectors during lockdowns and helping them get going again during recovery. They have undertaken massive levels of debt – which could turn out be sustainable if interest rates remain low for some years and the world economy grows steadily. But sovereign defaults are a near certainty if the world economy does not perform well in the coming decade. Most governments borrowed their way out of the 2008 crisis and have maintained high debt levels since; and if the global economy is depressed over a long period, some governments will find it impossible to service the even higher levels of debt they have now undertaken.[22] This may create new political forces in many states.

• Borrowing will not cover so much new government spending. All governments face unpalatable trade-offs between steep tax rises and steep public expenditure cuts, at a time when the state is also seen to be in control of large parts of the national economy. They will be seen directly to ‘own the problem’.
• In Britain, many parts of the economy might be permanently affected – ‘scarred’ – by the crisis, and it will be difficult for the government to withdraw quickly from a leviathan role. Britain is an 80% service economy, contains many SMEs, and depends greatly on imported capital and labour – all elements that are highly vulnerable to sudden dislocation and require external support to create conditions for their recovery.
• The same liberal governments will also be responsible for supressing second and third round visitations of COVID-19 through more centralisation and public surveillance, sporadic border closures and travel restrictions, the proactive use of contract-tracing and tracker apps; followed, it is assumed, by a strong (or even compulsory) population-wide push for vaccination as one becomes available.
• Under such pressures, liberal governments might also be faced with popular – even angry – grass-roots movements to re-evaluate their expenditure priorities in relation to health, social welfare, public safety, national security and defence. Many writers speak now of new ‘social contracts’ being forged.[23]
• ‘The near-term ‘judgements of history’ over how well individual governments handled the health and economic consequences of COVID may have uniquely mobilising popular effects on domestic politics throughout the democratic world. This may be supressed in autocracies, but will certainly take place in free societies.
• Similar global comparisons between the performances of the more autocratic and the democratic governments of the world will also become a focus of political argument within democracies, particularly where there may be strong populist elements. The fact that the COVID-19 crisis is also a ‘political reckoning’ for so many leaderships may play strongly into domestic politics, especially if COVID-19 remains a threat for some years.[24]

New Politics in Autocratic States

Autocratic states, from North Korea to Belarus or Iran, have used their own centralised systems to create national lock-downs and run public health campaigns. But they have also been subject to some frankly eccentric policies from their leaders that have made their COVID-19 responses very patchy and likely, in some countries, to create far more disruption in the second and third phases of the pandemic.

• Autocratic leaderships may find themselves under more popular pressure than they can easily handle, if their governments are seen to have been ineffective in dealing with the crisis and the evidence is clear to the population through, for example, collapsing health services.
• The Iranian leadership may prove vulnerable in this respect. The North Korea government can almost certainly ride out such a phenomenon if it occurs. Leaders in Belarus and in Russia’s Caucasian republics – if they are affected as badly as most of Russia may now be – could both struggle, provoking direct Russian interference to replace and shore up new governments.
• In some large countries with democratic governments and autocratic leaders, such as Turkey, Brazil or Venezuela, different sorts of popular uprisings cannot be ruled out, through democratic as well as undemocratic processes, as the health effects hit them alongside the – probably more destructive – global economic impacts of the crisis. Brazil, in particular, may be heading into a profound socio/economic crisis on the basis of very poor national leadership.

United States in a Manifest and Prolonged Socio/Political Crisis

The US election and President Trump’s own combative style have politicised the COVID-19 crisis in the US in ways that may obscure the deeper socio/political effects on the country. The symptoms of a deeper malaise lie in:

• The evident end of record-breaking expansion in the US economy over the last 11 years. The economy contracted by 4.8% in Q1 of 2020 and the Q2 contraction will be much steeper as the later lockdown effects are felt (anything from 30%-67%) making a certainty of US recession during 2020.[25] However the economy bounces back after the pandemic, the ‘peak to trough’ contraction of the economy caused specifically by COVID-19 will be greater than 12% – three times more than happened in the 2008 financial crisis.[26] The US may therefore fall into a long and deep recession that would structurally change the economy, creating new winners and losers (an ‘all delivery economy’ where small enterprises lose to rich ones; cities suffer disinvestment; tech giants win while heavy industries lose, and so on).[27]
• The COVID-19 crisis has already increased socio/political polarisation; cities with Democratic majorities suffering more than Republican-majority rural communities; Democrats looking to alternative political leaderships in key states such like New York, California or Washington State, while hard-line Republicans back the White House, but not the federal government. The COVID-19 crisis has become part of ongoing ‘culture wars’ in US society at several different levels – queues at gun shops and evangelical churches rejecting any COVID-19 evidence, through to politically-based opposition to lockdowns in several states.[28]
• The 40-year drawdown of federal government capacity left it poorly equipped to meet the COVID-19 challenge directly, and intense polarisation within Congress severely inhibited a bipartisan approach from the top, creating a noted degree of social anxiety.[29]

The importance for geopolitics of this malaise is that it may certainly destroy the Trump presidency and much of the assertive populism on which it was based, but without resolving any of the political tensions, or those reactions against globalism and responsibility, that have taken the US away from the front line of world politics. The effect might be to make the US ever-more introspective as it tries to recover its economy and deal with the demographic, societal and healthcare crises the COVID-19 virus created. In short, a deep COVID-19 crisis might act as the catalyst for an even more painful reckoning within US society that will effectively reduce its presence and power in world politics for some years. Most analysts reject the ‘America in decline’ thesis, but this crisis highlights some of those symptoms and may reverse, for some years, many of the assumptions other states make about the presence of the US in the world.

A Grassroots Demand for International and Rules-based Action?

This crisis may become an acid test for the direction of travel of the rules-based international order (RBIO) and the principles of international cooperation. The western-dominated RBIO has been under increasing pressure for years and COVID-19 has hit the world as scepticism over the efficacy of the RBIO and greater faith in purely national action was reaching a new peak. To some, the initial responses to COVID-19 were distressingly national – particularly in the matter of access to essential health care equipment and the scramble to buy up scarce international supplies. In the first phase of such a crisis, however, this was not surprising. Public health is a national responsibility and only national governments have the organisation and institutions to affect their own populations in detail – whether in preserving public health or imposing a lockdown. And only national governments can devote significant money and national resources in a crisis, along with the political legitimacy to make decisions stick.

A key test for the RBIO is whether in ‘phase 2’ – which will start quite soon – international institutions play a coordinating or even a mobilising role in directing national follow-up actions.

• No international organisation can itself take the political lead in phase 2. That must come from a major state. During Ebola in 2016 that was ‘naturally’ the US, but no longer seems to be possible.
• Otherwise, a group of key leaders might try to create a ‘core international policy’ for phase 2 through the G7, the G20 or even the UN Security Council – though there has been little sign of that to date. The WHO is not in a position to act as such a forum.
• On the trade front, Australia and Canada as well as the EU have made independent efforts to build a consensus against more protectionism, but their immediate prospects are poor and even the EU is subject to ad hoc internal protectionism on health equipment.[30]

These questions, however, may now interact with the vigorous international environmentalist agenda that has emerged strongly since 2015. It is not clear how this will play out as the trends are contradictory. On one hand;

• Countries may simply ignore their environmental commitments under pressure to get their economies moving again, on the assumption that environmental policies cannot now be afforded.
• Future national resilience planning may come down to entirely protectionist instincts, alongside the ability of governments to compete more aggressively for what they need in international markets.
• Dealing with the COVID-19 health crisis already undermines the growth of reusable materials, generates more waste, re-directs innovation and investment into public health, resilience and welfare projects, and makes it difficult for any environmental mass movement to express its political weight.[31]

On the other hand, however, it is also possible that;

• Global public opinion, at least in many G20 countries, makes a direct link between environmental degradation and the appearance of hostile pathogens such as coronavirus that creates COVID-19; seeing a pandemic like this as a sub-set of irresponsible environmental policies generally.
• Environmentalists are able to demonstrate the health advantages of cleaner air and lower pollution – globally – during the period of lockdowns; a dramatic demonstration of the upside of environmentalist arguments they could never have anticipated.[32]
• Environmentalists argue successfully that involuntary economic restructuring caused by the crisis provides fruitful and immediate opportunities to integrate environment-friendly economic policies into reconstruction efforts.[33]
• The social effects of lockdowns put the political emphasis on local communities as a focus for political direct action.

In total, the prospects of an international response to an international problem in the COVID-19 crisis are not as good as they might have been even 5 years ago, let alone before 2010. Insofar as there may be an international consensus to respond to the crisis far more collaboratively, it’s most obvious drivers will more likely come from grassroots political demands in some of the key countries. In this respect, the COVID-19 phase 2 response may come to seem like a fulcrum in the balance of the RBIO’s stability for the future.

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