Forget the failure of the South Asian Association for Regional Cooperation (Saarc), the swing to the far right across Europe with an anti-immigrant stance and Eurosceptic views shows a weakening of the European Union (EU)’s integration efforts. Furthermore, US President Donald J Trump’s protectionism, failure of global and regional organisations to maintain peace in the Middle East and failure of the International Monetary Fund (IMF) and World Bank to bring prosperity in underdeveloped countries have raised suspicions over free market and globalisation.

Diplomatic challenges ahead

Post-war US largely shaped a liberal world order and globalisation, but now the Trump administration desires to redefine the rules with protectionist policies. This will hit China, the largest beneficiary of the latest developments in trade liberalisation, Japan, Germany and some rising economies. It may even invite a trade war, relocation of manufacturing exports, economic crisis and destabilisation of governments in some countries. Though Trump showed some interest in cooperating with China just before his inauguration, his mostly anti-China posture generated by overlapping interests and a move towards Russo-US détente can be seen as an attempt to isolate and encircle China to project power over North Korea and Iran. These developments necessitate many countries to rethink their domestic and foreign policies.

If Trump uses a one-China policy as a bargaining chip, the Tibetan issue will be of no less importance for the US and its Western allies including India. They could be motivated to use their political leverage over Nepal and fund and fuel anti-China activities in Nepal. Since the reinstatement of multiparty democracy in Nepal, coalition governments usually have been the only option as no party has been able to get an absolute majority. The political parties have been exhibiting three stances—leftists have been pro-China, democrats either pro-India or pro-West (especially US), and moderates claim to be nationalists. In this political system, intervention by key international players in internal politics has been the norm. As a result, Nepal will face tough diplomatic challenges in adjusting its policies in accordance with a changing international environment.

Acknowledging realities

Nepal can become great again, but taking into consideration the reality of its geostrategic location amid rival powers, it will have to do more than maintain a neutral policy. As long as regional tensions persist, Nepal will be compelled to choose between the two sides, which will endanger its national interest. So, Nepal should seek to play a mediator’s role, or at least help create a platform for negotiations between the rivals, by taking advantage of its good relations with both.

Nepal’s myth-based foreign policy agenda ‘from a buffer towards a bridge’ is subjective vision of Nepali political leaders and bureaucrats. What makes a country a buffer?

We need to understand that Nepal was never a buffer state. Bridging the two economies is not possible.

As long as China and India consider that economic cooperation between them is vital to maintain their economic growth, political interest will never undermine economic interest, and maritime routes are their best option to conduct trade. And once China’s western provinces become economic centres, they can cooperate to build direct and efficient economic routes along their border instead of crossing the high Himalayan passes.

When Nepal’s key trading partners India and China are still a long way from having a so-called ‘liberal economy’ and impose a large number of trade barriers, opening up the economy unilaterally will only increase unfair trade. So, it is important for Nepal to opt for a trade balance by negotiating to make its exports more favourable or by imposing trade barriers on imports. Nepal needs to accord priority to infrastructure development, make the investment climate friendlier, make taxation more scientific and minimise fraudulence and corruption to attract investment to utilise its cheap human resources.

Way forward

Trade liberalisation and globalisation do not favour all countries all the time. Nepal should not hesitate to drop the conditions imposed by liberal institutions like the IMF and World Bank, the launch pads of Western interest. It has now been confirmed that liberalising Nepal’s trade and economy since the reinstatement of democracy has only made the country a net importer from a net exporter with a huge trade deficit.

Nepali currency must be unpegged from Indian currency, as a strong Indian rupee is unnecessarily increasing the value of the Nepali rupee, making Nepali goods uncompetitive in the world market. Labour-intensive manufacturing and service businesses should be given priority. Cottage and small industries should be favoured as they provide investment opportunities and jobs to many instead of large scale industries, which put the happiness of many in the hands of a few.

Free or affordable technical education will produce competent human resources to substitute manpower imports from neighbouring Indian states. Micro hydro projects are necessary to light up villages. Investing in export-led costly mega hydropower projects and gridlines with outside loans will only benefit foreign industries. Finally, in order to respond effectively to the international geopolitical situation, leaders in government must not rely solely on their own assumptions or obsolete ideas of bureaucrats. They should develop policies in consultation with multi-disciplinary teams composed of young and energetic people with some supervision by experienced old hands.

Shahi holds a master’s degree in international affairs and is a part-time lecturer at MIRD-TU