The risks of the trade war: will the SCO be an instrument of economic security?

« Back

The risks of the trade war: will the SCO be an instrument of economic security? 18.04.2018 14:06

The Shanghai Cooperation Organization (SCO) should turn into an effective tool for maintaining economic stability. As the correspondent of IA REGNUM reports, the candidate of economic sciences, Deputy Chairman of Vnesheconombank (VEB), former Deputy Minister of Economic Development of the Russian Federation Andrei Klepach announced this on April 17 at the Second Sochi Eurasian Integration Forum "Prospects for the Development and Strengthening of the Shanghai Cooperation Organization".

"The key task now is to avoid the world's slipping to a new round of trade wars. In this regard, the SCO and the economic partnership that is beginning to form on its basis - it can become an alternative to what is happening, and a carrier not only of political security but also of preserving economic cooperation, so that trade conflicts do not arise here", Klepach admitted.

According to him, at present the world is experiencing a period of dynamic changes in the balance of economic forces - Asia is gaining its power and in some ways is returning to the level it had in the world economy in the middle of the XIX century (the economies of China and India accounted for one third of the world GDP). But at the same time, we have to state that the world does not become more secure as a result of the unfolding changes.

"We see this in the splits of political, geopolitical and economic that occurs in Europe. This sanctioning struggle, which is being waged by the US and supported by their countries against Russia, is the elements of the trade war that will now go between the US and China, although I would like to hope that the real scale of the conflict will be less than what is now stated. Everyone remembers that one of the most important factors of the Great Depression of 1929 was precisely significant trade wars", he said.

In this context, the SCO has the opportunity not just to coordinate trade policies, infrastructure projects, but also in fact to build a space for economic cooperation in large Eurasia as a whole.

"The SCO could play a leading role in this regard. There are huge spaces of interaction and mutual enrichment with practices of development and solving those issues that exist in each of our countries", Klepach said.

At the same time, the issue of financial systems under the current conditions becomes a particularly acute and "toxic" issue.

"This is not the primary reason, but it is also an important incentive for the SCO countries, which account for more than half of the world's gold and currency reserves and a significant part of the financial flows, that they, despite the dominance of the European and American markets, jointly develop a new financial model, explained the economist.

"Certain steps to this were done within the framework of the Asian Bank for Infrastructure Projects, within the framework of the BRICS agreement on the pool of foreign exchange reserves. But in fact, this is only the beginning of the road. The same yuan, which China presents for mutual settlements, does not yet have sufficient liquidity. Therefore, I think that within the framework of the SCO and even outside its framework, on a bilateral basis, we have a great potential for cooperation in settlements in national currencies in order to remove currency risks", he stressed.

It should be noted that initially the Shanghai Cooperation Organization (SCO) was created as an organization whose activities are aimed at strengthening cooperation in the security sphere. However, at present, in the near future, it is increasingly being considered also as a platform for economic integration. Currently, the SCO countries in the "broad" (including Pakistan and India) account for about 30% of world GDP. According to IMF forecasts, by 2020 they will be about 34-35%. At the same time, according to VEB estimates, with such dynamics, by 2025 the volume of SCO economies will be equal to a share of 38-40% of GDP

The Second Sochi Eurasian Integration Forum "Prospects for the Development and Strengthening of the Shanghai Cooperation Organization" is being held on April 17-18. About 200 representatives of 17 SCO member countries, observer states and partners in the dialogue of this international organization take part in the forum. Experts from a number of other countries related to integration projects in the space of the "Great Eurasia" are also involved in the work of the forum.

Within two days, meetings are held at the summit sites on the topics: "Great Eurasia. The World Order, Security and the Fight against Terrorism", "The SCO and the Economic and Integration Processes in Eurasia. Economics, energy, transport and migration", "Interaction of cultures and religions. Ecology and preservation of the environment. Education and Science" and others.