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The Third STD has accelerated the countries` involvement in the international division of labor, exchange of the products and information, which formed the basis for the emergence of the phenomenon of "open economy" in the second half of the XX century. At the beginning of this century, there were international companies, which, together with the application of computer technology and modern means of communication in the second half of XX century, were converted into the multi-complex productions at the global level.
A characteristic feature of the last three decades of this century was dynamic and depth of the socio-political processes. International economic relations system doesn`t only stand aloof from these processes, but is the integral it part, which interacts with them through a complex system of forward and backward linkages. Consistently, the degree of the openness of individual national economies is increased together with the economic interdependence and integrity of the world. As a result of this trend’s intense actions, now it can be clearly outlined the three main economic policies of the world.
These three poles are Japan, the USA, and the EU. They have a strong impact on economic development as a regional and a global attitude. The relationship between the same poles gives a strong reflection on the development of the international economic relations in other countries. Understanding these relationships helps to orient in a complex spectrum of modern international economic relations.
However, the forming of another union of “Big Four” countries, so called BRIC, which consists of Brazil, Russia, India and China, can change a lot in the situation in the global economy. In addition, recently in the news has appeared the evidence about the creation of the New Triad, which consists of the U.S., India and China.
Thus, the main objective of the essay is to evaluate current power forces in the global economy and to find out what are the most powerful of them.
Triad: the USA, the EU and Japan
Position in the Global Economy
The triad became very powerful source in the world`s economy. What is more, it had formed the main influence in the economy. In order to find out the position of the triad in the world arena, each country should be analyzed.
Japan takes the second place in the economy among the developed countries in the world. In terms of GDP (3550 billion U.S. dollars in 1991), industrial production and a number of other macroeconomic indicators, it takes the second place straight after the United States. By the middle of 80's it accounted 15% of the gross domestic products of the whole capitalist countries. The consistent leadership in economic growth, which is characterized by the postwar period, calculates that the share of the Japanese economy will grow, but it is unlikely to reach the U.S. level, and especially the level of the European Community. For purely quantitative macroeconomic performance it remains relatively weak side of the triangle the USA – the EU – Japan, but for many quality characteristics, it is already ahead of most of its rivals, and this gap may be even higher (Harrigan, 2003).
According to the tempo of the economic growth, the European Union is well ahead Japan, but it is greatly inferior to the USA and China. In 1990-2003, the Japan's GDP grew at an average of 0.3% per year, the E.U. - 1.6%, and the U.S. - 2.8% 5 (Harrigan, 2003). However, the Chinese economy was much more prosperous. According to Western estimates, its annual growth, over the past decade, has been an average of no less than 9%. Nevertheless, it should be taken into account that relatively low rates of the EU economic growth are caused by the EU policy. The European Union was preparing to introduce a single currency and deliberately “slowed down” the economic growth, giving the priority to the problems of limiting inflation, reducing public debt and deficits of the budget (Pop).
However, the EU still is the biggest player in the field of the international trade. The total external trade in the 15 EU countries in 2002 reached the 1.87 trillion dollars, at the time when the USA share of the world trade in 2002 was 18.5%, and China’s share was18.7%, with approximately 680 billion dollars of foreign trade turnover in 2002. It was far behind the EU and the USA. Its share in the world trade was 6.1%. Slightly more (7.4%) occurred in Japan in two and half times lower than the EU on this index (Harrigan, 2003).
The redistribution of the positions among the three global centers is a reflection of the important features of modern economic development and the competition in the global market. None of the countries today can ensure its complete superiority in all positions. Taking a leading position in the process immeasurably depends on the international division of the labor and is possible only in the certain areas of the world economy.
BRIC is a group of four world economies, the rapidly developing countries: Brazil, Russia, India, and China. The first BRIC acronym was proposed by Jim O'Neill, analyst of Goldman Sachs bank in November 2001. According to analysts, by 2050 the total economy of the group will exceed the total size of the economies of the richest countries of the world.
The world crisis has significantly weakened the developed of the countries has provided a chance to BRIC to posit itself as a force, able to formulate and defend ideas that are different from the West countries. The current financial, economic and political structure of the world does not only suit the developing of the countries, but does not promote the recovery of the world economy and theglobal development. It addition it proved the global crisis. In the mid-April, in the Chinese city Sanya, the third BRICS Summit took place. The high prices for food and the replacement of the national currencies to the dollar were, the main themes of the summit (Deresky, 2006).
Analyst Jim O'Neill, author of acronyms BRIC, in one of his reports he drew attention to a strange phenomenon: four not similar countries like Brazil, Russia, India and China for various reasons, has been developing very rapidly. According to the published this week IMF forecast, this year the total GDP of BRICS will exceed the GDP of the EU. The BRIC countries has 20 percent of the world`s economy (for comparison, the EU countries - only 16%) and about half of world reserves. Moreover, by 2025 the BRIC will own 40% of the global economic. According to statistics, released by General Administration of Customs of China, in the first quarter of 2011 the turnover in China in relationship to the BRIC countries totaled almost U.S. $ 60 billion, and 46% increased the same figure last year. Moreover, for some parameters BRIC countries are ahead of the “big seven”. Thus, Brazil's foreign debt in 2010 amounted to only 15% of GDP, Russia - 33%, India - 20%,China - 7% (for comparison, the U.S. - 97%, Germany - 159%, France - 188%, Japan - 162 %, the United Kingdom - 416%) (McGraw, 2010).
To sum, up BRIC countries somehow manage to develop very fast and can become the powerful force in the world`s economy.
The BRIC countries have also very strong positions. The potential of BRIC is very large.On the one hand, the union is orientated in the development of the general principles, due to it the countries will be able to change the global balance of power and weaken American influence in the world. On the other hand, the economies of China and India is largely dependent on the United States, which influence the fields of economics, politics and trade. A large number of Chinese, Indian and Brazilian goods and services come to the U.S. market. The U.S. dollar exchange rate is tied to the U.S. as the financial mechanism of the BRIC countries. That is why, the ability to create the new reserve of currencies, and some supranational currency seen to be poorly implemented (Deresky, 2006).
In addition, there are differences between countries in the BRICjunded from the deterioration in the economy during the crisis. China and India were affected by the global turmoil in the least degree. These two countries maintained the positive growth in 2011. Out of all BRIC countries, China plays the most stabilizing role in the global economy. Most likely, it will be the first country to exit the crisis, primarily due to internal factors of demand. As for Russia, because of the lack of diversification of economy, it can use internal tools to confrontation with the external crisis. This trend allowed to say about the fragility of BRIC association.
In terms of BRIC as the political association, it also raises some doubts. The countries in the association are not united geography or by the cultural or historical community. There is no politicaly similarity: when China rules the one-party communist regime, in Russia exists democracy, in Brazil and India is advanced pluralism. All these factors compounded the difference of the economic systems, it is difficult historical relations of India and China, the controversial leadership ambitions, and the lack of experience in multilateral negotiations and long-term cooperation within the BRIC.
The process integration of these countries could contribute to the unity of geopolitical interests. However, Russian interests lie in Europe, Chinese - in the Asia-Pacific, Brazil claims to primacyin the Western Hemisphere, and India is interested in strengtheningtheir position in South Asia
1. Possible Perceptive
“Also, China is one of the largest holders of the U.S. governmental bonds, but there is still a high level of economic, diplomatic and military mistrust and fear between the countries,” Sheth explains. “My hope and expectation is that India, China and the U.S. will set aside their remaining past differences to expand their economic and geopolitical cooperative efforts. This is something that should be encouraged by policy research institutes, NGOs, businesses, industries and citizens, both inside and outside of the three countries” (Sheth, 2010).
India China U.S.A. Institute was created in order to build up the permanent economical growth on the basis of the innovation technologies, entrepreneurship, openness, trade and investment.
Critical Evaluation of the Positions in the World Economy
The process of globalization is forcing the macro-regionalization in the economic system of the world. The countries are in the permanent process of development, which is why the constant process of increasing and changing the unions` advantages exists. The power position of the countries is also changing, thus, the new collaborations, which open the new opportunities, appear. The same process concerned founding the new triad that consists of the USA, India and China and the fast development of BRIC countries. However, the question is: will the new unions become more powerful than the existing triad.
From one point of view, the old triad had already formed the sustainable collaboration among the countries. What is more, the triad consists of the countries that are very powerful in the world economy and have a huge influence on it. The statistics show that the triad has lots of advantages and the possibilities for its increase within the same developing process. However, the problem can influence the USA that consists in two triads at the same time. Everyone assumes the impossibility of the existence of two powerful triads at the same time. Soon or late the policies of the triads can cross the position of each other. In this case the U.S. should choose in which of the triads to participate.
Actually the position of the USA is crucial to the old triad. In geographical terms, the foreign trade of Japan is focused on the U.S. (export - 28.4% in 1992, import - 22.6), the EU (18.4 and 13.4%) and Southeast Asian countries (30.2 and 21, 7%) (Harrigan, 2003). Trade with most countries and regions has a pronounced imbalance. Frequently, areas of import and export flows in value are not the same, and these disparities tend to have a chronic character. This means that in case of breaking the policies on the export and import, which are now regulated by the rules of the triad, Japanese economy will face difficulties.
From the other point of view, India and China have been arguing in terms of politics for a long time. India sees the first opponent in China. Rajiv Anantara, Indian Council for Research on International Economic Relations, said, “We are rivals for resources and geo-strategic influence”.
In recent decades, the economy of an authoritarian China has developed more rapidly. As Alka Ahari, Indian expert on foreign affairs, noted “to indicate an authoritarian regime is not under the question, and tight control over the implementation of the decisions tends to be more effective”.
The contradictions that exist between New Delhi and Beijing are fueled by the Indian political strategists and military experts. They often talk about the Chinese threat and thereby justify the process of weapons – from the atomic bomb and ending the current intensification of the CPA. In addition, our memory can still refresh the times of the military conflict between these two countries in the autumn of 1962, which ended with the Indian defeat (Kagan, 2004).
The formation of the BRIC made the situation in the dividing of the power sources in the world more complex. On the one hand, the BRIC consist of four major economics of the world and India, China and Russian population are more than only in India and China, thus BRCI has a benefit from both triads. On the other hand, the countries in BRIC are too different from each other. As in the case of the new triad, the controversy has India and China, judging from the political regime. In BRIC all four countries have different opinions on the politics and economy. In additions, if the countries of the new triad and triad try to establish the export and import relationships, the BRIC countries are competitions to each other in different fields. That is why, it is more likely that BRIC association will not last long.
To conclude, it is more likely, that the old triad will be the one, which will hold the main powers in the world economy. The major reason for this is that the triad has already established and proved the relationships among the member countries. The new associations can developing, however there are not many chances to establish good relationship. The purpose for the union of the old triad was to combine the three part of the world and establish import-export relationships. The purposes of BRIC or the new triad seemed to be only to become a power force.