2016 was a breakthrough year for populism, highlighted by the victory of the “leave” campaign in the UK’s Brexit referendum in June, and Donald Trump’s win in the US general elections in November. These events foreshadow possible populist victories in key elections in Europe next year, which could be pivotal to the continued survival of the European Union, and which in turn could have a drastic impact on global stability.
The US. The circumstances of Donald Trump’s electoral win highlight significant divisions in US society. While liberals have made much of the fact that while Trump won the electoral college, his opponent Hillary Clinton actually won the popular vote by a margin of 2.8 million votes, a deeper analysis of the numbers shows that her popular support came primarily from the coastal liberal enclaves of New York and California. Outside of those states, Trump has a 3 million vote lead in the rest of the union. These numbers indicate the difficulties the Democrats will face in their challenge to retake not just the federal trifecta of the White House and both Houses of Congress, but also governor’s mansions and state legislatures — the majority of which are now under Republican control — in the next election cycle.
Trump’s incoming administration promises significant change from the policies of the outgoing Obama administration. Should the Trump administration turn away from free trade and embrace protectionism, Canada, under the leadership of Prime Minister Justin Trudeau, is likely to remain a champion of free trade, and a nation that China can work with to rebuild globalization. The successful passage of the EU-Canada Comprehensive Economic and Trade Agreement stands in sharp contrast to the fate of the Obama administration’s Trans-Pacific Partnership (TPP), which Trump has announced he will scrap on his first day in office.
While the US was once the greatest source of global stability, it could become the greatest source of global instability. Trump’s choices in the coming years of his administration could undermine key political and economic relationships that have served as the foundations for global order since the end of the Cold War. One such relationship is the Sino-US relationship — Chimerica, in Niall Ferguson’s famous phrasing — whose economic symbiosis has long benefited both countries. Observers worry about the risk of the collapse of this productive relationship into one of hostile confrontation, especially over flashpoints like the South China Sea, as this will have global ramifications.
Trump has offered the position of US ambassador to China to Terry Branstad, the Republican governor of Iowa who has personally known President Xi since 1985, and who is understood to be an “old friend” of China; but Trump has also appointed the noted China hawk Peter Navarro as the chair of his new White House National Trade Council, suggesting that Sino-US relations under Trump will be a volatile mix of cajoling and confrontation.
China. Chinese President Xi Jinping was designated as the Chinese Communist Party’s (CCP) Core Leader during the party’s annual plenum in October. The coming months will see internal politicking within the CCP which will culminate with the party’s 19th National Congress in October 2017, during which Xi is likely to be voted into a second 5-year term in office. Some observers also expect Xi to maneuver towards a possible 3rd term in office, which will require changes to the party’s rules concerning term limits. Xi’s 2nd and possible 3rd terms in office will be important for him to achieve his ambitious reform agenda for China and the CCP.
While Xi’s “Belt and Road” global infrastructure investment initiative enjoyed progress in 2016, the Chinese economy encountered headwinds, including challenges like corporate debt, industrial overcapacity, and capital flight. External challenges emerged from China’s main trading partners — the US and the EU. In December 2016, the US Trade Representative’s Office included Alibaba’s Taobao e-commerce website in its list of global markets that are notorious for counterfeiting and piracy. In addition, both the US and the EU have refused to grant China market-economy status in the World Trade Organization, even though this risks triggering a trade war with China.
In China’s special administrative region of Hong Kong, November saw Beijing’s unprecedented intervention in interpreting Hong Kong’s Basic Law to bar two localist (pro-independence) lawmakers from taking office. This prompted civil unrest from pro-democracy and localist activists. Next year will mark the 20th anniversary of Hong Kong’s 1997 sovereignty handover from the UK to China, and political instability is likely to persist in the territory, especially with the Chief Executive elections that are scheduled for March. Given the success of localist candidates in capturing the youth vote in this year’s Legislative Council elections, localist activism will be expected to continue in 2017.
The EU. A series of events in 2016 transformed the EU into the epicenter for the global populist awakening, turning the region away from its core values of tolerance, openness, and diversity. This began with the 2015-16 New Year’s Eve celebrations in Cologne and several other cities in Germany which became the sites of mass sexual assaults by over 2,000 men, many of whom were later identified by their victims and witnesses as foreigners. Far-right activists quickly labelled these mass assaults as Europe’s “rapefugee” crisis, and the resulting spike in anti-immigrant sentiment was further inflamed following a series of “lone wolf” and coordinated terrorist attacks that subsequently occurred across the year in Western Europe, including the deadly December truck attack on a Christmas market in Berlin.
The very image of longevity of the EU was shaken in June by the success of the “leave” campaign in the UK’s Brexit referendum, which marked a significant political breakthrough for global populism. This was followed several months later by Trump’s electoral victory in the US, and more recently by the populist rejection of constitutional reform in a referendum in Italy. These events have given impetus to populist movements in Europe campaigning for major elections in 2017 in France, the Netherlands, and Germany. This surge in European populism — which can be traced back to the EU’s refugee crisis — may be strengthened should Turkish President Recep Tayyip Erdoğan make good on his threat to allow the estimated 3 million refugees currently being held in Turkey to cross the border into Europe. 2017 hence is poised to be a year of political upheaval for the EU.
Northeast Asia. 2016 saw increased tensions on the Korean peninsula, with provocations from Kim Jong-Un’s regime in North Korea, as well as South Korea’s decision — against opposition from Beijing — to allow the US to deploy the THAAD anti-ballistic missile system on its territory. The December impeachment of South Korean President Park Geun-hye and the corresponding corruption investigation into her administration’s dealings with South Korea’s business conglomerates like Samsung, Lotte, and Hyundai, had also exacerbated the country’s political instability. This will continue into 2017, as the Constitutional Court has until June to decide if the impeachment should be overturned.
In Japan, Prime Minister Shinzo Abe’s ruling coalition won the Upper House elections that were held in July, allowing him to continue his economic reform agenda. Sino-Japanese tensions increased in 2016 over their dispute in the East China Sea, and Japan intervened in the dispute over the South China Sea, even though it is not one of the claimants to that dispute. Japanese intervention in the South China Sea dispute may continue in 2017, especially if — as now seems likely — the Trump administration chooses to take a harder line against China.
Beijing successfully persuaded São Tomé and Príncipe to end its diplomatic recognition of Taiwan and to restore diplomatic relations with the People’s Republic of China.
In Taiwan, January saw the election of Tsai Ing-wen as the new President. The Tsai administration has since been rocked by challenges arising from strained cross-strait relations with mainland China as well as domestic and economic difficulties. Tsai’s second year in office is likely to be impacted by China’s increased assertiveness to push Taipei to adhere to the One China policy. This is especially given recent provocations from Trump. His acceptance of a congratulatory phone call from Tsai demonstrated his willingness to ignore diplomatic convention, and he has openly suggested that he may ignore the One China policy, to which China’s Foreign Ministry responded that should the One China policy be compromised, “there will be nothing to discuss on co-operation in major fields.” As a demonstration to Taipei of the seriousness to which it views this matter, in December Beijing successfully persuaded São Tomé and Príncipe to end its diplomatic recognition of Taiwan and to restore diplomatic relations with the People’s Republic of China. The increased diplomatic isolation of Taiwan — which is now recognized by only 21 states — will add pressure to the Tsai administration to accept the One China policy.
China’s increased assertiveness over the One China policy may also be seen in its recent relations with Mongolia. Following a visit to Ulaanbaatar in November by the Dalai Lama — whom the Chinese have long regarded as a renegade “splittist” — Beijing cancelled negotiations for a much-needed USD 4.2 billion loan package to Mongolia, raised tariffs on Sino-Mongolian commodity shipments, and closed a key border crossing in southeastern Mongolia used by the mining conglomerate Rio Tinto. In late December, the Mongolian foreign minister Munkh-Orgil Tsend apologized for the Dalai Lama’s November visit and stated that the government will not invite him for any future visit.
Southeast Asia. May saw the election of populist mayor Rodrigo Duterte as President of the Philippines, and even though his administration inherited the previous administration’s UNCLOS arbitration case against China over their dispute in the South China Sea, Duterte chose to downplay the Philippines’ win in the arbitration case in order to rebuild bilateral relations with China. At the same time, US-Philippine relations rapidly soured after US President Barack Obama criticized the Duterte administration for alleged human rights violations in its violent war on drugs, and Duterte has since leaned closer to China at the expense of the US. Following the US election, Duterte has signaled his positive opinion of Trump, and it is an open question whether Duterte will seek to strengthen US-Philippine relations once Trump comes into office next month. Observers will also be waiting to see if this possible US-Philippine rapprochement will affect Manila’s ongoing efforts to rebuild Sino-Philippine relations.
Trump has nominated retired Marine General James Mattis to be his Secretary of Defence. Mattis testified before the US Senate armed services committee in 2015 that “efforts in the Pacific to keep positive relations with China” must be “paralleled by a policy to build the counterbalance if China continues to expand its bullying role in the South China Sea and elsewhere.” Increased Chinese activity in the South China Sea in late 2016 indicates that there could be confrontation with the US under the Trump administration. Satellite images of the Spratly Islands released in December by the Asia Maritime Transparency Initiative revealed the installation of anti-aircraft and close-in weapons systems at Fiery Cross, Mischief, and Subi Reefs. In addition, in mid-December a Chinese warship seized an unmanned US Navy drone in international waters in the South China Sea, triggering a diplomatic incident with the US. Such incidents may be expected to escalate in 2017, as China and the US both seek to demonstrate to the international community that the South China Sea belongs to their respective spheres of influence.
2016 also saw the Malaysian government of Prime Minister Najib Razak pursuing closer ties with China at the expense of the US. In this case, the cause of the deterioration in US-Malaysian ties was the Obama administration’s facilitation of investigations into the escalating corruption scandal surrounding Malaysia’s 1MDB sovereign wealth fund. China, in contrast, has invested heavily in a series of megaprojects in Malaysia. As with the Philippines, it remains to be seen how the incoming Trump administration will impact US-Malaysian and Sino-Malaysian relations.
In the area of economic cooperation, China has taken advantage of the incoming Trump administration’s stated plans to scrap the TPP to push for two alternative regional trade agreements — the Regional Comprehensive Economic Partnership (RCEP) and the Free Trade Area of the Asia-Pacific (FTAAP). China has also been strengthening its bilateral economic ties with Southeast Asian nations, especially with projects under its “Belt and Road” infrastructure investment framework.
Given the rising prominence of China in Southeast Asia in 2016, ASEAN has seen its share of pro-China member states increasing from just Cambodia and Laos to include the Philippines and Malaysia. China has also been cultivating deeper relations with Timor-Leste, which is under consideration for accession to ASEAN. Should the incoming Trump administration prove to be more assertive over the South China Sea dispute, China may seek to increase its influence over ASEAN through an increased distribution of economic largesse, which would be a win-win scenario for the recipient nations.
South Asia. Tensions between India and Pakistan escalated in 2016 following attacks on Indian soil from Pakistani-based militants. China is entangled in the volatile Indo-Pakistani tensions as part of its China-Pakistan Economic Corridor megaproject passes directly through Gilgit-Baltistan, a region in Pakistan that has long been claimed by India. The threat of nuclear exchange between India and Pakistan, along with the complicating factors of China and the US (under the unpredictable Trump administration), leaves this region likely to remain a critical flashpoint in 2017.
India’s fears of Chinese encroachment into its traditional sphere of influence were also stoked in 2016 by China’s increased economic engagement with Sri Lanka and Bangladesh. Such fears are symptomatic of Sino-Indian geopolitical rivalry. As both China and India rise in economic strength and political influence, tensions arise in areas of geopolitical competition. This can be seen in regions like the Middle East and Africa where both India and China have dramatically increased their investments in recent years. While India has the traditional advantage of a deep history of cultural connections with these regions, China’s aggressive investment push — especially in infrastructure construction under its “Belt and Road” framework — has granted it significant inroads into these regions.
The Middle East. The geopolitical disorder in the Middle East was further complicated in 2016 with the reemergence of Iran from international sanctions, the waning fortunes of the Islamic State, and increased external intervention from the US, Russia, and Turkey.
The Iran Nuclear Deal came into effect in January, and Chinese President Xi was the first world leader to visit Iran following the lifting of international sanctions. US President-elect Trump had threatened to scrap the Iran Nuclear Deal during his election campaign, and US policy on Iran remains a major issue for his incoming administration.
Turkey suddenly become lost to the US in mid-July following a failed coup d’état against President Erdoğan, which Erdoğan quickly blamed on the cleric Fethullah Gülen who is living in exile in the US. US-Turkish relations soured after the Obama administration refused to extradite Gülen to Turkey. Russo-Turkish relations, which had broken down after the November 2015 Turkish downing of a Russian jet, enjoyed a rapprochement following the failed coup. (Russian intelligence had reportedly warned Erdoğan of the coming coup attempt.) It remains to be seen if the Trump administration will seek a rapprochement in US-Turkish relations.
Other major flashpoints in this region that Trump will take over from Obama include Syria, which has been complicated with intervention from Russia and Turkey; Afghanistan; Iraq; and Israel and the occupied territories. While the Islamic State’s fortunes have waned in 2016, the risk it poses to global order has increased with the diffusion back to their home countries of its indoctrinated and dangerously skilled and experienced foreign fighters. Returning IS-trained militants continue to pose major security risks in regions as diverse as Europe and Southeast Asia.
Russia. Russia has reportedly been disturbed by China’s growing economic influence in the Eurasian Economic Union (EAEU) of post-Soviet states, which it considers to be within its geopolitical sphere of influence. However Russian President Vladimir Putin appreciates the importance of economic cooperation, and during the November Asia-Pacific Economic Cooperation (APEC) Summit in Lima, Peru, both Presidents Xi and Putin agreed to accelerate their governments’ discussions on connecting the EAEU with China’s Silk Road Economic Belt infrastructure investment initiative. A similar situation can be found in Central Asia.
Geopolitically, the Central Asian nations are within the Russian sphere of influence, but they are also under the growing economic influence of China, especially the infrastructure projects of the Silk Road Economic Belt. With Trump potentially offering Putin the option of a US-Russia alliance against China, observers will be waiting to see how Putin will choose to align Russia vis-à-vis the US and China. While China may be viewed by Putin as Russia’s most significant geopolitical rival in Eurasia, a weakened China would in fact be detrimental to the Russian economy, given the significant revenues arising from Russian oil and gas exports to energy-hungry China.
Central and Eastern Europe (CEE). The CEE is an important investment destination for China’s Silk Road Economic Belt as it serves as the gateway to the EU. In addition, the CEE economies, which are less developed than those of the EU, are themselves promising markets for Chinese industrial and infrastructural investment. Both Chinese President Xi and Premier Li Keqiang made state visits to the CEE in 2016, highlighting the region’s importance to China. At the November 16+1 summit in Riga, Latvia of the heads of state of the CEE nations and China, Premier Li announced the creation of a EUR 10 billion China-Central Eastern Europe fund which will offer financing for projects in infrastructure construction, consumer and high-tech manufacturing, and other sectors. While such industrial investment would be welcome in the CEE countries, the establishment of Chinese industrial plant in the CEE will also facilitate China’s supply-side reforms by reducing its domestic industrial overcapacity.
Africa. The 2016 electoral calendar in Africa saw expected victories for established strongman leaders in countries like Uganda, Gabon, Zambia, Chad, Niger, and Equatorial Guinea, but also peaceful democratic transitions of power in Ghana, Central African Republic, and São Tomé and Príncipe. Elections in the Democratic Republic of Congo were postponed to 2018, effectively extending President Joseph Kabila’s term of office beyond December 2016, when it legally expires. Elections in the Gambia resulted in the surprising defeat of its long-time strongman leader Yahya Jammeh, who initially conceded defeat but later retracted his concession. Jammeh’s rejection of the election results was condemned by the African Union, the United Nations Security Council, and the Economic Community of West African States (ECOWAS). ECOWAS has threatened to stage a military intervention if Jammeh does not step down when his term of office ends in late January 2017.
The 2016 electoral calendar in Africa saw expected victories for established strongman leaders in countries like Uganda, Gabon, Zambia, Chad, Niger, and Equatorial Guinea.
During the US’ Global War on Terror, a secret network of US military bases was established across the African continent. It remains to be seen how US military and counterterrorism policy in Africa will change under the Trump administration, and how such changes will impact the operations and growth of Africa’s terrorist networks. Security will be a key issue for other interested powers like China and India as well, given their growing economic engagement with nations across the continent. Such foreign investment in turn will be needed to facilitate the economic growth of the African nations, including oil exporters like Nigeria whose economies have been severely impacted by reduced revenues arising from the global collapse in oil prices.
Latin America. November saw the expected reelection of Nicaragua’s strongman leader Daniel Ortega — his fourth term in office, and his third consecutive term. Ortega’s win was significant as Nicaragua is one of Latin America’s remaining leftist regimes from the “pink tide” that swept the region following Hugo Chavez’s electoral victory in Venezuela in 1998. The impeachment of leftist Brazilian president Dilma Rousseff in August saw the reduction of the “pink tide” from its peak of 15 countries to just 8. In June, Pedro Pablo Kuczynski, a cosmopolitan member of the business elite with experience on Wall Street and the World Bank, narrowly defeated Keiko Fujimori, the daughter of the country’s disgraced former president Alberto Fujimori, in the second round of Peru’s presidential elections. Kuczynski’s plan to stimulate the Peruvian economy includes a package of tax cuts and increased public spending on infrastructure construction projects. To that end, Kuczynski has pursued increased investment from China, and closer Sino-Peruvian relations were manifest during President Xi’s state visit to Peru following the November APEC Summit in Lima.
Like the nations of the CEE, China sees the nations of Latin America as important partners for economic cooperation, including trade and investment. This was highlighted by high-profile state visits to the region by President Xi and Premier Li. The failure of the TPP in particular has made the Latin American nations see greater value in their economic relationships with China, and some of these nations have expressed interest in joining the RCEP, which is currently under negotiation. If the Trump administration does embrace protectionism and reduce its economic footprint in the region, we may expect greater economic linkages to form between China and Latin America in 2017.
Australia. The Australian federal election held in July saw the return to power of Malcolm Turnbull’s Liberal/National Coalition, albeit reduced to a one-seat majority government. The global populist wave did not escape Australia, and Australian populist leader Pauline Hanson won a seat in the Senate. Hanson will be running candidates from her One Nation party in upcoming state elections in Western Australia, Queensland, Tasmania, and New South Wales. This populist surge could be strengthened by potential populist successes in elections in Western Europe in 2017, as well as the occurrence of events that further strengthen anti-immigrant sentiment, such as the foiled terrorist plot to attack Melbourne on Christmas Day.
While China has become a major investor in Australia, the Australian federal government’s decision in August to block New South Wales from selling the Ausgrid power network to China’s State Grid Corp based on concerns over national security triggered warnings from China that such protectionist measures will adversely impact future trade and investment opportunities. However, with the US expected to retreat into protectionism under the Trump administration, Australia is likely to increase its economic cooperation with China. The Australian government has already announced its support for the China-led efforts to complete negotiations of the RCEP and to work towards the FTAAP.