World Economic Forum to address rising risks

The 2019 World Economic Forum (WEF), which starts in Davos on Tuesday, coincides with rising geopolitical and geoeconomic risks. Yet, serious as these are, what may be most alarming is what WEF calls the resulting "crisis" from the world's diminishing ability to tackle major global challenges, especially on the environmental front.

This gloomy prognosis is the central message of WEF's 2019 Global Risks Report released last week. It points to a clear deterioration in the global landscape with a potentially toxic cocktail of trade disputes, environmental risks, cyber threats, and geo-political dangers. As the report lays out, what this means is that at the very time that coordinated, concerted action is needed to tackle these threats, there is less collective international will to do so.

Ironically, it is some of these mounting issues, from Brexit to the US political shutdown, which have led to key world leaders including Donald Trump, Theresa May and Emmanuel Macron pulling out of attending Davos this year. This leaves only three of the G7 leaders to be there - Shinzo Abe, Angela Merkel and Giuseppe Conte, while Vladimir Putin, Xi Jinping and Narendra Modi are also skipping this year's event.

Mr Abe, Mrs Merkel, and Mr Conte, alongside 3,000 other leaders from the public and private sectors such as Mike Pompeo, Jair Bolsonaro, Wang Qishan, and Steve Mnuchin, will discuss the multiple challenges now confronting the international order.

According to the WEF, it is environmental risks, such as biodiversity loss, extreme weather events, man-made disasters, natural disasters, and failure of climate change mitigation and adaptation, that are most urgent to tackle with the "world most clearly sleepwalking into catastrophe". On the global warming front, for instance, alarm bells were most recently sounded at last month's UN climate change summit where the post-2015 Paris treaty international consensus around tackling this issue was under attack by multiple key governments, including the United States, Brazil, Russia and Turkey. This threatens to slow the pace of global efforts to decarbonise, and it is clear that climate sceptics such as President Trump and Mr Bolsonaro now need to be faced down with their views.

Mr Trump and Mr Bolsonaro have lambasted the Paris agreement arguing it is either a grand hoax and/or unwelcome distraction, despite the now overwhelming evidence about the risks of global warming. Yet, even if, remarkably, it turns out that the vast majority of scientists in the world are wrong about global warming, what the Paris deal will help achieve is moving more towards gradually cleaner energies, making the world a less polluted and more sustainable place. And given that scientists are much more likely to be right in their conclusions than Mr Trump and Mr Bolsanaro, the consequences of a failure to act now, as climate sceptics advocate, will be the growing probability of devastating environmental damage to the planet.

The WEF report asserts that to effectively respond to climate change requires a significant increase in infrastructure to adapt to the new environment, enabling transition to a lower-carbon economy. Yet, by 2040, investment in global infrastructure is forecast to reach "only" US$18 trillion against a forecast requirement of almost US$100 trillion.

Outside of the environment, the meeting will also discuss geoeconomic concerns. Here, there are significant expectations in 2019 of further erosion of multilateral trading rules and agreements given the flailing commitment of the Trump team and other governments to the global trading system.

On the geopolitical front, the WEF report points to the growing risks of "political confrontations between major powers". The array of challenges here include Russia's annexation of Crimea, and the fact that Washington's relations with Moscow are perhaps now more strained than at any time since the collapse of Soviet Communism; the collapse of the Israeli-Palestinian peace process; US-China trade tensions; and continuing instability in Syria and Afghanistan.

HIGHER POLITICAL RISK

What this underlines is how in recent years the world has moved towards a reality in which authoritarian states such as Russia appear to many to be in the ascendancy. Meanwhile, terrorism remains a significant international concern almost two decades after 9/11, and several unstable countries, including North Korea have acquired nuclear weaponry.

Yet, while we may now be in a period of significantly higher political risk, the contemporary global landscape also contains multiple opportunities for potentially greater stability. One example is the 2015 global climate change deal.

While the agreement is by no means perfect, it nonetheless represents a welcome shot in the arm for attempts to tackle global warming and, crucially, a new post-Kyoto treaty framework has been put in place. Moreover, the review framework means that countries can toughen their response to climate change in the future, especially if the political and public will to tackle the problem increases with time. So Paris is a potentially very important stepping stone and what is now needed are well informed lawmakers from across the political spectrum to help ensure effective implementation and hold governments to account so that it can truly deliver.

Meanwhile, the rise of China - which has now surpassed the United States as the world's largest economy on purchasing parity terms - has potential to drive greater global stability in a fruitful G2 partnership, rather than a growing source of tension with Washington, as now.

During the Obama presidency, bilateral relations remained generally cordial with both nations recognising the super-priority of the relationship, and Washington pursuing a strategy that promoted cooperation on softer issues such as climate change, while seeking constructive engagement on vexed, harder issues such as South China Sea tensions.

Yet, under the Trump presidency, there are growing prospects of bilateral rivalry, rather than an increasing cooperation. And this is likely not just on the economic front, but also political realm if Beijing's military power continues to grow rapidly, and the country embraces an increasingly assertive foreign policy stance towards its neighbours in Asia.

Taken overall, while risks may be rising significantly, there are also significant opportunities too. Going forward, perhaps the biggest uncertainty is over the direction of the US-China bilateral relationship. While this is currently tense, a deeper, collaborative partnership remains possible if the two can resolve their economic and political disputes in a grand bargain that renews bilateral relations into the 2020s under Mr Xi and Mr Trump.