Challenges in 2017

On January 17, 2017, in a keynote address at the Raisina Dialogue in New Delhi, ASPI President The Hon. Kevin Rudd outlined ten major challenges facing the international community and the multilateral system. Below is the the text of the speech as prepared.

Distinguished guests, friends of India, colleagues, delegates.

It’s good to be back in this dynamic country once again. I’ve visited many times over the last 20 years as a member of Parliament, Foreign Minister, Prime Minister and now as the President of an American think tank based in New York.

It has been my privilege to work with Indian leaders in the G20, the UN, and the East Asia Summit.

It has been a privilege as well to observe the growing dynamism of India’s democracy, it’s economy, its civil society, and its place in the region and the world.

And it was a privilege for me on this visit to become global patron of a great Indian NGO, Barefoot College, providing sustainable help to the most remote villages of the world for the last 45 years.

India’s economic growth in recent times has been one of the few positive lights in an other wise gloomy global economy, which after a decade of being ensnared in a “low growth trap” is only beginning now to show some evidence of partial recovery.

The reform and sustainable growth of the Indian economy has become a core driving factor, not just for the future of your own country, but also for the region and the world at large.

And within this frame, all people of good will wish the Indian government well in this important global enterprise.

I’ve been asked today to address the topic of what are the “big politics and new challenges” for the year ahead.

It is not simply that all of us “feel” that we are living in in an increasingly uncertain world.

There are also long-standing, objective, measures of this, including the Global Uncertainty Index.

According to this survey, which looks at the totality of political, economic, and environmental risks on the planet, global uncertainty is now the highest in 16 years.

It is this uncertainty that radically effects the behaviors of individuals and their consumption decisions, firms and their investment decisions, and nation-states in their policy decisions.

Let me therefore identify what I believe to be the top 10 such challenges – some self-evident, others less so – in what I have chosen to call “2017: The year of living dangerously.”

Challenge Number 1: The Future Policy Direction of the Trump Administration

The truth is that none of us who follow these things closely can answer this question with any level of definitive accuracy. We have little insight into the policy detail of what the administration will do following the inauguration, or how quickly they will do it. Of course, that of itself adds to the uncertainty index.

We can, however, discern President Trump’s core convictions from what he has been saying consistently, both before and since the election campaign.

First, I believe the best way to describe Mr. Trump is that he is primarily a nationalist. Simply using the term “populist” does not materially add to our understanding of the nature of this presidency. “Making America great again” is very much about a re-birth of American nationalism.

Second, whatever the rest of us in the world may think or want, this will be overwhelmingly a domestic presidency. And within that, a domestic, economic presidency. This is likely to occupy more than three quarters of his time. It is the domain in which he is most comfortable. It is also the one most directly relevant to the remarkable political constituency he brought together to be elected president.

Third, President Trump has a profoundly negative predisposition against China.

Fourth, he has an entrenched predisposition to do whatever he can to normalize relations with Russia.

Fifth, he is likely to be a capital “P” protectionist, where there may be tensions with the American congress, but much less with the American people.

Sixth, he has a deep view that America’s central national security challenge is global Islamic terrorism.

Finally, he is deeply skeptical about the compatibility of the global rules-based order with his deeply nationalist agenda.
His excoriation of the UN is likely to be just one of many shots directed at the multilateral system in general in the future.

Challenge Number 2: Will U.S.-Russia Rapprochement Work?

Hard heads, both in Moscow and Washington, have some doubts. But the new President has made a simple conclusion that Russia does not represent a long-term threat to “making American great again,” as the only uncontested superpower in the world. He has, however, made the conclusion that China does constitute such a threat.

The question is whether intelligence scandals in the United States involving Russia will cause the Trump administration to begin “correcting against” the now widely expected normalization process with Moscow.

If “normalization” does proceed, we should look carefully at the nature of the deal which Mr. Trump has begun to outline in terms of sanctions removal on the one hand, in exchange for a new nuclear agreement with Russia on the other, in addition to what becomes possible in ending the war in Syria and dealing more effectively with global Islamist terrorism.

Challenge Number 3: The Future of the U.S.-China Relationship

In the months since the Presidential election, President Trump has engaged in a brutal public exchange with China on five core issues – the One China policy, the South China Sea, North Korea, Chinese cyber-attacks, and China’s “trade and currency manipulation” practices.

These have not been confined, as in certain previous presidential elections, to the campaign itself.

Despite early contact between the two sides, these issues have continued to escalate.

Although, how far Mr. Trump and his administration will push each of them remains to be seen.

The problem is that if political thresholds are crossed on the One China Policy, as opposed to the other problematic areas of the relationship, we may find ourselves in deep water sooner than we think.

As this audience knows well, the One China Policy is a matter of fundamental ideology and identity for the Chinese Communist Party. But President Trump seems to see the One China Policy as but one of a number of bargaining chips for use with the Chinese.

I would not therefore rule out the possibility, soon after the inauguration, of seeing US carrier deployments to the Taiwan Strait in response to Chinese deployment there last week.

As a student of escalation politics in international relations, I am concerned about the ability of the diplomatic machinery between the two countries to manage such escalation, given that overwhelming nationalist sentiment in both countries may overtake the rational processes of normal relationship management.

More broadly, President Trump, who has a keen ear of reading his country’s domestic politics, may well be riding the crest of a wave of growing, long-term anti-Chinese sentiment across all elements of American politics, society, and the economy, a sentiment lying well outside the foreign policy elites entrusted historically with the management of this relationship.

Challenge Number 4: The Future of the Strategic Triangle Between Washington, Moscow, and Beijing

It is unique that a President-elect of the United States of America has been voted into office on the basis of normalizing relations with Russia, and identifying Russia as a long-term strategic partner.

This turns on its head US presidential foreign and national security policy orthodoxies that have existed since 1945.

Equally, President Trump is proving to be unique in the case of China.

For the first time since 1972, the cornerstone of US-China relations [the One China Policy] has been thrown up in the air as a negotiating tool, rather than as a given in the relationship.

These two sets of policy departures, one on Russia, the other one on China, are of historical significance.

The open question for the year ahead is whether we’ll see concrete signs of this radical change in language leading to a radical “re-triangulation” of the strategic framework laid out in 1972, between Nixon and Mao – i.e. a US-China strategic accommodation against a common ideological, political and military foe, the then Soviet Union.

We should note that there have been a number of growing tensions in the China-Russia relationship, based on a Russian sense of strategic vulnerability in its far east, the continuation of the “the great game” for strategic influence in Central Asia, as well as unfulfilled Russian expectations for greater Chinese financial support during the last three years of Western financial sanctions against Moscow.

Would normalization and accommodation with the Trump Administration afford President Putin a new political and strategic freedom of maneuver in his dealings with Beijing – bearing in mind that many Russians have come to see the China-Russia relationship as a relationship of unequals?

Second, if President Putin’s Russia did seek to move in the direction of greater strategic distancing from Beijing, what counter measures will the Chinese seek to adopt to arrest any such strategic realignment between Moscow and Washington.

Or, third, is it more likely that President Putin, known for his agile diplomacy, will seek to locate Russia in a strategic “swing position,” equidistant from both Beijing and Washington.

These constitute, as Rumsfeld might have said, a number of “known unknowns” in the future construction of the triangular relationship between Washington, Beijing, and Moscow.

But my simple submission to you today is that this most fundamental part of the post 1972 strategic order is no longer fixed, but fluid.

Challenge Number 5: The Future of the Global Trade and Economic Order

President Trump, as we have already noted, is both a nationalist and a protectionist. And he sees nothing wrong with either.

President Trump’s explicit protectionism, however, represents a historic departure from the policies of successive U.S. administrations since the conclusion of the GATT in 1944.

If we accept the logic that post-war global trade has been a major contributor to increased global economic growth, poverty reduction, and radically improved individual living standards, the return of protectionism must command the attention of all of us in the international community.

President Trump’s threats of a trade and currency war with China, if executed, would have profound economic consequences for the global economy.

It would result in lost growth and lower trade and investment flows between the largest and second largest economies in the world, and between them and the rest of the world.

We are also familiar with President Trump’s position on both the TPP and NAFTA.

The core challenge is that given President Trump’s predilection for nationalism, protectionism, and what I would call a “new bilateralism,” based on the “Art of the Deal,” the future of the post-war trading order, currently anchored in the WTO, could well be thrown in the air.

Put bluntly, if unilateral action is taken by the United States against a state party of the WTO, and the WTO’s dispute resolution mechanisms are ignored by an incoming U.S. Administration, then it would not take long for the entire global trading system to unravel.

Similarly, on the possibility of currency wars, we must be mindful of the fragile consensus that underpins the International Monetary Fund on currency stability, and the financial regulatory reform agenda currently entrusted to the Financial Stability Board under the G20.

In summary, we need to be mindful of what would happen with the rapid unraveling of long established institutional arrangements currently underpinning international trade, investment, capital flows, and currency management.

In my own darkest moments, I am concerned about the reemergence of a Smoot-Hawley Tariff by stealth, or in slow motion, and by different means over the years ahead.

For those of us with a mind for economic history, Smoot Hawley did not end entirely well, either for the United States or the rest of the world, in the dark decade of the 1930’s.

Other Big Challenges

To conclude, I will briefly outline, in a single sentence each, five additional challenges for the year ahead.

First, the future of the European Union and NATO given the current dynamics with Brexit, upcoming elections in France and Germany, and a geopolitical realignment between Washington and Moscow, al though, I for one believe it to be foolish to reach the faddish conclusions that the EU is now in irreversible decline – if Fillon and Merkel win next year, Germany and France have enough critical mass between them to defend, advance, and reinvent the European project.

Second, what will the Trump administration mean for the rest of Asia, particularly, the Korean Peninsula, Japan, Indonesia [given Mr. Trump’s anti-Muslim rhetoric], and India, including the future trajectory of the India-Pakistan relationship.

Third, what is the possibility of a third intifada within Israel, accompanied by the collapse of the Palestinian authority, in the aftermath of any decision by the Trump Administration to formally move the capital of Israel to Jerusalem, as well as formal dissolution of the Two State Solution.

Fourth, what is the future of the overall global geopolitical order anchored in the United Nations, including the authority of the Security Council, given President Trump’s emerging hostility to the UN itself.

And finally, the continued unraveling of the now centuries-long Western democratic project, the collapse of the political center, the rapid rise of the far left and the far right in response to the pressures of globalization; and whether this in turn leads to a more comprehensive repudiation of globalization per se, or will we instead see readjustment of the globalization project to place human dignity and social stability at the center.


Each of the ten challenges that I have listed naturally gives rise to the question: what then should be done?

There is nothing inevitable about these challenges.

This is a question for all countries great and small.

It is question also for India.

Will India seek to focus primarily or even exclusively on what the Trump Administration means for the future of the Washington, Beijing, New Delhi, Islamabad sets of relationships?

Or given the larger set of forces for change in East Asia and the Indo-Pacific region, will India choose to take on a broader set of foreign and security policy responsibilities.

And as for the challenges to the global order itself – on international law, trade, and climate change, will India take on bigger responsibilities again to protect and advance a global rules based system.

These are questions of course for India itself.

And it’s not my place to suggest what India should do.

But my message for all of us today, is that given this year of living dangerously, 2017, where so many mega-challenges of great and complex dimensions are unfolding simultaneously, the demand of international political and policy leadership is now greater than any time since the end of the Cold War.