The Financial Express

Choosing an alliance-in pursuit for an alternative  

| Updated: May 28, 2021 20:40:27

Choosing an alliance-in pursuit for an alternative   

Forming alliances for security and trade purposes has been with us for centuries. Such reality poses a policy dilemma to small or weak countries. Either they need to join one of the powerful alliances or are left out. And once you join, you follow the rules set by the powerful ones. Consequently, small countries are dictated, and they are allowed to pursue only those opportunities which the influential members of the alliance determine. Other than being left alone or joining an alliance, is there an alternative for small countries?

Historically, dictating weaker nations to serve the purpose of more powerful ones dated back to the colonial era. During the first and second industrial revolutions, colonial powers led by the British determined trading rules for colonies. In order to create the market of ideas of industrial products, colonies were given the role of producing natural resources and supply them to fuel the industrial economy of the United Kingdom and the rest of Europe. On the other hand, the USA provided labour supplying roles to Africa, forming the slave trade. For security reasons, several alliances were formed, like NATO (North Atlantic Treaty Organisation). In recent times, some trading blocks were formed like NAFTA (North American Free Trade Agreement). Moreover, Germany, the USA, and Russia used their military power to influence trade.  In all these exercises, powerful nations took advantage of weaker ones. As a result, weaker ones never find an opportunity to grow stronger to make powerful ones dependent on them. 

During the 3rd industrial revolution, particularly after the cold war, global politics was led by economic interest. Consequently, as opposed to military complexes, multinational companies (MNCs) started taking the central role. Hence, they started promoting globalisation to harness natural resources, labour, and also market from all over the world. Along with the fall of tariff barriers, the advancement of container shipping, telecommunication, and the Internet turned once fragmented markets into a single one. Moreover, job division, standardisation, and automation simplified the complexity of manufacturing tasks, enabling the low-skilled labour force to contribute to the global value chain. Hence, MNCs started sourcing manufacturing jobs to less developed countries, including China.

Among all other countries, China articulated the strategy of leveraging economies of scale and scope advantage. The speedy implementation of this strategy led to making China the central node in the global supply chain. In addition to supplying labour and natural resources, China also embarked on assimilating technology capability for replicating existing products and making them better. This journey has been fueled by carefully designed infrastructure projects, local market access with the joint venture, and investment in both academic and industrial R&D. Unlike other less developed countries like India, Bangladesh, Malaysia, or Vietnam, China focused on transferring technology and acquiring the capability of improving them further. For example, although China started high-speed trains by giving contracts to Japanese and Europeans, China now claims to be the supplier of better performing high-speed train networks to others. Similarly, China has emerged as the top 5G gear suppliers. In addition to being a factory for smartphone assembling and component manufacturing, Chinese firms have emerged as smartphone innovators.  Moreover, there are reports that China has been pursuing technologies for dual purposes-military and commercial. By the way, such a strategy was demonstrated by Germany and perfected as well as scaled up by the USA-and so far, thought to be non-imitable.

The uprising of China from labour and natural resource suppliers to be the technology leader in both the commercial and military sphere has become a cause of concern to the USA. To begin with, Trump Administration adopted the strategy of protectionism, creating trade barriers with China. As a follow-up, the current US administration has started forming a global alliance. The purpose of this alliance is to exploit commercial interest with the influence of military power-commonly termed as power trade. Countries having large domestic markets and military might are at the helm of such alliances. Weaker or smaller countries are given only one option-choose only one alliance and face the consequences. Does it mean that the hope of guiding development in the post-colonial era is fading away? Can small countries never grow stronger for making larger counterparts depend on them? Despite apparently insurmountable odds, there appears to be a silver lining. Fortunately, over the last 70 years, small geographies like Taiwan, South Korea, and Japan have demonstrated how to make powerful ones dependent on them.

After WW II, Japan's freedom of pursuing economic interests got limited. Particularly, Japan was not allowed to exploit technology possibilities by linking both military and commercial interests. But in reality, the military plays a vital role in the early phase of technology invention and advancement. As a matter of fact, the USA's technology superiority has been primarily rooted in the blending of military and commercial interests. Invariably, all great technologies like mobile phones, semiconductors, and airplanes started the journey in primitive form. For decades, there were no commercial prospects. The US military was the customer of primitive solutions of those technologies in the early days. This role was vital for giving incentives to the US industry to keep updating high-potential technologies to support civilian innovations. But in the absence of this support from the military, Japanese companies like Sony pursued emerging technology core, often invented by US labs, through the relentless journey of perfection for exploiting civilian market opportunities. In certain cases, they caused disruption to American industries making iconic success stories like RCA or Kodak bankrupt.       

On the other hand, South Korea focused on process innovation in improving the quality and reducing the cost of existing products and also components. Their journey of imitation followed by incremental innovation created success stories in many products, starting from TVs to Washing machines. Furthermore, Taiwan detected discontinuity in the semiconductor value chain. They created the entry as the 3rd party silicon wafer processing service providers in the 1980s. Soon after, firms for semiconductor testing and bonding, printed circuit board (PCB) designing, and supplying populated finished PCB started to show up-forming a high-performing cluster. The continued progression of intellectual assets in both products and processes has been leading to growing economies of scale and scope advantage. As a result, being the inventor, USA has lost economic edge in high-end semiconductors to Taiwan and South Korea. Similarly, China has become highly dependent on the supply of computer chips from tiny Taiwan. On the other hand, the whole world depends on Japan for an array of technologies like high-end semiconductor processing machinery, sensors, optics, LCD (liquid crystal display) display, LED (light-emitting diode) chips, lithium-ion battery, flash memory, and many more.

As opposed to seeking and comparing preferential treatments offered by alliances, small countries should be smarter. They should focus on a few critical technologies and products to make powerful big countries dependent on them. To pursue it, generic expansion of the education system and giving preferential treatment to replicate products for the domestic market is not good enough. Similarly, seeking debt and giving contracts to foreign firms in developing expensive infrastructure is not going to make them stronger. History tells that friendship with powerful nations or membership with an alliance will never offer the opportunity to less developed countries to reach developed status. They need to be on war footing to pursue opportunities in developing technology competence by creating a flow of ideas to make superpowers dependent on them. This is an extremely difficult proposition, but not impossible. Certainly, the journey will be long, demanding persistent collective smartness over decades. But this is the only option left for them to attain and enjoy true independence in prosperity.   

Rokonuzzaman, Ph.D is academic and researcher on technology, society and policy. [email protected]


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