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Globalization vs. Economic Sovereignty

China is often presented as a poster boy for successful globalization. But at least some intellectuals in China are not happy with the course globalization has taken. Chinese academic Pang Zhongying, writing in China Daily, points out that many countries, especially in the developing world, suffer an “erosion of permanent and exclusive privileges over [their] economic activities, wealth and natural resources.” In such an inequitable international system, accusations of neo-colonialism get thrown at its dominant players, particularly the United States. He says that developed countries apply their self-concocted theories like "human rights being superior to sovereignty" and "economic integration outweighing sovereignty" to force weak nations into conceding some of their inherent privileges. While countries inevitably cede some control over their economic sovereignty to external actors, Pang says, it is the “structural power” of sovereign states which still dictates the terms and tenets of globalization. Underlying the economic sovereignty debate “is a hidden power struggle on the world stage,” contested by a number of prominent countries who use the language of globalization in the pursuit of very national agendas. – YaleGlobal

Globalization vs. Economic Sovereignty

Pang Zhongying
China Daily, 2 December 2005

Almost all countries in the world have accelerated their tempo of economic opening up since the beginning of the 21st century.

With the initiative, they expect to inject a new driving force into domestic economic development, and to create new market opportunities. They hope to integrate their domestic economy into the global market, and to develop economic muscles that can punch a worldwide weight.

However, for any country, opening the economy to the outside world is by no means a free lunch. The policy will inevitably come at a cost.

The cost can be perceived to be a weakening of the nation's "economic sovereignty," namely the erosion of permanent and exclusive privileges over its economic activities, wealth, and natural resources.

A review of the world's history will find it is common that economic sovereignty of an individual member is from time to time influenced by global economic trends.

The increase of the number of international organizations and the expansion of their functions have undeniably restricted an individual country's sovereignty to certain extent.

The most typical example is the increasingly extensive involvement of the world's three leading financial institutions the World Bank (WB), the International Momentary Fund (IMF) and the World Trade Organization (WTO) in domestic economic affairs of their members.

The 60,000-plus transnational corporations, which developed rapidly in the latter half of the last century, are now sharing or "encroaching upon" individual country's "sovereignty" in the economic domain.

Owing to disorderly domestic economic establishments, many underdeveloped nations even have to resort to foreign assistance and intervention, leading to their governments being deprived of the control of their own economy.

Due to this, some scholars predicted the loss of their economic sovereignty under this form of neo-colonialism. More importantly, some of the world's leading economic entities, such as the United States, the European Union and Japan, by taking advantage of their predominant economic status, are affecting or infringing upon other countries' economic sovereignty.

Under these circumstances, an increasing number of scholars have concluded that the economic dominion of individual nations has come to an end.

Basing this assertion upon the penetrating systems and rules of the world's financial organs, some of them insist on a kind of theory such as state economic sovereignty being eroded. Some deny the long-existed doctrine of the "national entity being in a central position," by citing trade liberalization and economic integration tendency and thus advocate "ambiguity of economic sovereignty."

Also, some even assert that in the greater globalization picture, a country's economic sovereignty should be discarded and state sovereignty should be replaced by supranational law.

As the academic debate of the economic rights of a state reaches boiling point, the era of globalization begins.

However, while stressing the possibility of a nation's economic sovereignty being enfeebled in the course of economic globalization, many of these scholars have obviously forgotten that individual nations also have the ability to produce and mould international frameworks, rules, systems and orders, the ability that has been called a "structural power."

Late British international economist Susan Strange believed that this kind of power is embodied in the four basic international structures which are the security, knowledge, production and financial, as well as in some sub-structures such as trade.

After an analysis of the "structural power," we can see that in the economic globalization era, sovereign states have never lost control of their sovereignty. The power of international economic organizations originates from its transfer from individual members in the world community. And their birth is exactly the product of sovereign states' self-restriction and self-restraints in the economic realm.

Also, economic activities of transnational corporations have not brought about any essential restrictions on state sovereignty of individual nations.

So far, transnational corporations have not changed their legal status as legal entities under the jurisdiction of the state. And their worldwide business activities also have not changed individual countries' right to exercise their full sovereignty.

For this, the United States' move to disintegrate the Microsoft corporation years ago could serve as an example. Despite its economic strength being even larger than a number of individual nations, the world's largest software producer still lacked an effective means to influence American economic sovereignty.

Possibly, for the ones who strongly advocate the "end of economic sovereignty," the most convincing evidence is the debilitating of sovereignty of a host of economically weak nations.

However, this phenomenon is just the product of developed nations' unfair treatment of developing nations in the era of economic globalization.

Most of the time, developed countries turn to double standards in economic affairs and apply their self-concocted theories like "human rights being superior to sovereignty" and "economic integration outweighing sovereignty" to force weak nations into conceding some of their inherent privileges. However, these countries repeatedly stress that they should not accept international economic regulations at the sacrifice of weakening, infringing upon, and harming their own decision-making rights.

Thus, it can be concluded that the dispute about economic sovereignty is essentially a hidden power struggle on the world stage. Under the current context of "economic openness," outside economic influences upon individual nations are distributed in an unbalanced manner. Similarly, their ability to weaken the economic sovereignty of different nations also varies.

The author is a professor with Tianjin-based Nankai University

Source:China Daily
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