Preet Bharara:

From Cafe in the Vox Media Podcast Network. This is Stay Tuned in Brief. I’m Preet Bharara. Today we’re going to talk about swing states. No, not Arizona, Georgia, or Michigan, all critical to the upcoming US election in 2024, but rather geopolitical swing states. These are nations critical to the ongoing tug of war between the US and China for global leadership. Countries, including Vietnam, Brazil, and India are being heavily courted by Washington and Beijing. What can we learn from these geopolitical swing states, and why are they important? My guest this week, Jared Cohen, is president of Global Affairs and co-head of the Office of Applied Innovation at Goldman Sachs, which I should mention is a client of my law firm. He was previously Google’s first director of ideas and chief advisor to the company’s CEO. Jared’s latest article is titled The Rise of Geopolitical Swing States. Jared Cohen, welcome back to the show.

Jared Cohen:

Thank you Preet. It’s great to be here.

Preet Bharara:

So, let’s get right into your article because I think it’s very interesting. You say on page two, speaking of the US and China, you say, “As the US and China coexist, compete and confront each other to determine who will set the geopolitical rules, they will either court or thwart an emerging group of countries to gain an edge. This new class of influential nations are the geopolitical swing states of the 21st century.” So, we spent a lot of time on this podcast and otherwise in the world talking about the US, talking about China, what’s the deal with these other countries? Who are they? What are the factors that allow them to have influence, and how do they use that influence?

Jared Cohen:

Yeah, absolutely Preet. And look, I’d start with an assumption that the tensions between the US and China are likely to get worse for longer. But I reject the idea that this is Cold War II or a New Cold War. First of all, at any given time China is, the United States is second or third-largest trading partner. It doesn’t have the same ideological dimension, and neither country is trying to destroy each other. At the same time, these are two countries that are winners from the last chapter of globalization, and neither of them are all together happy with the outcome. So, there’s a perception from China that the US is abusing its privileged position with the dollar. The US is frustrated that China has an overconcentration of the world’s supply chains. And if this is going to be a sustained competition, neither side can gain the upper hand in that competition without courting other countries.

And so the question is, if US-China tensions are going to get worse for longer, which countries are well-positioned to take advantage of that moment? And my view is this category of geopolitical swing states, they’re basically countries that are relatively stable. They have global agendas that are independent of Washington and Beijing. And they possess an economic leverage that allows them to be multi-aligned and swing on an issue by issue basis. And so when I talk about economic leverage, it kind of falls into four non-mutually exclusive categories. The first is they may possess a differentiated part of the supply chain. And that can be everything from pharmaceuticals in India, low cost labor, it can be Indonesia with 22% of the worlds nickel, it can be the Gulf with energy resources, countries that have made themselves attractive for nearshoring, offshoring and friendshoring. Vietnam’s a great example of this, it’s surpassed the UK last year as the-

Preet Bharara:

Well, you’re going to have to explain those terms?

Jared Cohen:

So, as countries are looking… One of the consequences of US-China tensions is we’re seeing a once in a generation reorientation of supply chains. And as the United States is looking to move supply chains from China and put pressure on companies to shift their supply chains, the question is where, and that comes in different categories. Sometimes it’s just as simple as logical place to do it. Sometimes it’s about creating incentives for countries in close proximity. Other times it’s about creating incentives for countries that are close allies of the United States.

Preet Bharara:

That’s friendshoring.

Jared Cohen:

Yes. So, there’s certain countries that are well-positioned to do this. Again, Vietnam’s a good example of this. A lot of the Latin American countries are well-positioned to play this role. Then you have a third category of geopolitical swing states, and these are countries, they emerged from the last chapter of globalization with just a disproportionate amount of capital and the flexibility and willingness to deploy it in service of their global agendas. So, this can be countries like Norway, which has the largest sovereign wealth fund in the world. They’re deploying their capital to advance the sustainability agenda. Countries like Singapore are deploying their capital as a way to basically not get caught up in the US-China tension. So, it’s more of a survivalist approach. And then you get countries like Saudi Arabia, Qatar and UAE, which are deploying their capital where they see sort of voids in parts of the world where they want to grow their influence.

So, in Latin America and sort of China-adjacent countries in Asia, you’re seeing a growing reluctance to take Chinese capital because of the geopolitics. At the same time you’re seeing a western retreat of capital from China. And so these countries see these sort of openings in each of these countries. They see assets being relatively cheap. And they see an opportunity to grow influence through investment and align economic investment with geopolitical goals. And then the last category is a little more of a complicated one, but it’s basically developed countries who are led by a specific individual that has ambitions for the country that are at the same time constrained by multilateral architectures that they’re part of. And this is a way of explaining countries like France and Germany, which are both part of the European Union, but at the same time you’ll see them lean into either a political or an economic agenda that has them kind of operating a little bit outside of the norm. So, both France and Germany need access to Chinese manufacturing markets.

Preet Bharara:

I want to ask you a question about something that you mentioned earlier that I read from your article before we go back to the swing states. You use these three alliterating verbs with respect to the US and China as the US and China coexist, compete and confront each other. Do they do those in equal measure, or which of those things is more the case than the other?

Jared Cohen:

I would say it’s a function of the moment. So, I think the coexistence is something that at any given time, one or both of them might be in denial of the coexistence realities of this. But when you drill drill between the surface, I think one of the things that is a complicating aspect of these tensions is neither side is making the case for a total decoupling. By the way, neither side would argue that total decoupling would be anything other than mutually assured economic destruction, that the problem is the geopolitics are driving the economic interest, not the other way around. So, in service of short-term geopolitical goals, you’re seeing a lot of risk injected into the economic equation, which is why at times it seems like they’re biased towards confrontation over coexistence. The confrontation is a function of just whatever’s happening. So, a spy balloon ends up floating over a missile silo in Montana and all of a sudden the confrontation temperature goes up.

Preet Bharara:

But it’s subsided. Do you agree that it sort of seems to have subsided very quickly in some people’s minds too quickly?

Jared Cohen:

I think that it was less about a sustained problem emanating from the spy balloons and more about what the spy balloons revealed, which to me, they revealed a total breakdown of diplomatic crisis management infrastructure between the two countries. So, if the Secretary of Defense in the United States is picking up the phone to call as counterpart in Beijing and not getting a callback, that really tells you something. And I think we’re at risk of saying, “Well, Secretary Blinken went to Beijing, and Xi Jinping could have easily snubbed him and not met with him,” but that doesn’t replace the comprehensive full stack of relationship touchpoints that are required to turn the geopolitical temperature down. And I just don’t see that right now. And by the way, that’s before you get to the fact that there’s the executive branch, which right now seems incentivized to turn the geopolitical temperature down. And then there’s the legislative branch, which seems more focused on ratcheting it up.

Preet Bharara:

In the other direction.

Jared Cohen:

And I just don’t see a world in which we get to make that distinction towards… I assume Beijing views it as one and the same, and if we go into an election, you have both parties ratcheting the protectionist pressure up and turning the geopolitical volume up. Which is why I think that tensions between the US and China, they get worse for at least three years, two years of an election, and then one year of either a reelected administration or a new administration coming in and trying to prove its protectionist and tough on China credentials.

Preet Bharara:

What was the effect, or what should be the view of experts on the fact that Joe Biden recently called Xi a dictator?

Jared Cohen:

Look, I think rhetoric matters, but I think we’re kind of past the point where an individual comment or gaffe is going to change the equation.

Preet Bharara:

Was that a gaffe?

Jared Cohen:

Hard to tell. I mean, I think, unless you’re in the White House, you don’t really know he said it. Right? And when the president says stuff, I think you have to sort of conclude that they mean it, and I think that’s true with any country. But I think, look, that rhetoric that kind of, let’s call it excites the geopolitical moment, I would call them kind of micro doses into the geopolitical energy, not game-changing factors. I think the thing that would tell us that something is going awry in a really significant way is if either the United States or China reacts to something the other did in a way that seems out of the norm. So, what that means is if the US passes particular protectionist legislation or if there’s a provocation in the Taiwan Strait, it doesn’t translate into louder military exercise. We’ve become accustomed to military exercises.

But in an example of something that would be asymmetric and worrisome would be, for instance, if Beijing recognized that they control certain parts of the supply chain that cannot be reoriented, and they decide to as a retaliation, choke one of those supply chains. So, good examples of this would be around critical minerals or legacy chips. These are the chips that we have in our cars and home appliances. You could imagine a situation where there’s sort of a quality control recall. That would be an example of something asymmetric. And the challenge with all of this is as the geopolitical temperature goes up and the economic stakes get higher, higher not just because of where the economy’s at, but because the economy in an election is massively amplified. And higher because in China the economic reopening had a good first quarter and not a good second quarter, and so the jury is very much out on what that’s going to look like.

In that particular moment, the room for miscalculation is quite significant, and we should not fall victim to assuming that everything that Washington does and everything that Beijing does is perfectly thought through and perfectly strategic. At the end of the day, decisions may be, but the people who are executing these decisions and in and around these decisions, sometimes they’re 18, 19, 20, 21-year-olds flying a plane or manning a vessel. And if you’re not talking between the two countries with high frequency at all levels, you don’t have a lot of ways to deescalate that in real time.

Preet Bharara:

What about the race for quantum computing? Is that an existential threat to the world order?

Jared Cohen:

So, I would broaden it. I would say if you look at the US-China tech competition, I think part of the reason that tech has been one of the most pronounced battlefields in US-China sort of broader competition is the fact that the US basically had a three decade first mover advantage, and with everything except for the most part, semiconductors, it more or less ended in a tie. And that’s the trajectory that it seemed like we were on. I actually think less than quantum computing and more with generative AI, generative AI is actually given the United States a very significant lifeline in the US-China tech competition.

Preet Bharara:

Isn’t it also going to make the less wealthy, less resource lucky countries like some of the swing states, is it going to improve their lot?

Jared Cohen:

I think we’re early innings on generative AI. I think it’s too early to tell. Right? We’re at a bit of a fork in the road. So, one course of travel tells us that very expensive proprietary large language models that are hardware dependent are what are going to produce the better results, and you need access to those large language models to be able to unlock the benefits. There’s another course of travel, which just in my personal bias is the direction I think we’re going in, which says that no, it’s actually faster iterations of these models, context-specific data that produce better results. And in fact, the course of travel will be more of a scale down approach where it’ll be smaller open source models tailored to more context or vertical-specific data that produce the better outcome. If it’s the latter case, it’s less expensive, less hardware dependent and the benefits are more widely felt. But I think it’s still pretty early on this.

The reason right now I describe generative AI as a lifeline for the United States in the tech competition is China has a real uphill battle with generative AI. Part of that is unlike the previous chapter of AI, which is more software-driven, at least right now it’s more hardware-oriented, which means that the export controls levied against China in October of 2022 have resulted in a chip scarcity, particularly around GPUs. So, China doesn’t have the compute power to be able to run these large language models at the same scale. But then the second is a self-imposed one, which is Beijing has been reluctant to allow for training of large language models at internet scale given the firewall and censorship. And then there’s a cultural aspect too, which is China’s just much more uncomfortable with the unpredictability and ambiguity of these models.

So, they’re a bit of a black box in the sense that we don’t understand why the model produces what it does. And so for the US this is a really significant moment because prior to the advent of generative AI, it felt like China was surpassing the United States in one technological vertical after the next. And whereas the competition is defined, has been defined up until now as a series of mini battles, the battle over machine learning, the battle over quantum computing, the battle over semiconductors. It may be generative AI that’s the decisive battle that determines the outcome of the larger tech competition because generative AI is the thing that accelerates all other forms of technology.

Preet Bharara:

I want to talk for a second about one of the newly emergent geopolitical swing states in your words, given the recent trip to the United States of Prime Minister Modi of India. As you noted in your article, and as other people have noted, India is now the most populous country in the world. It is the fifth-largest economy in a short period of time, and it may move to the third-largest economy in the world. How will it exert its influence and how does it decide between the spheres of the communist world, China, Russia versus United States? And how do they operate? And how does the United States… It’s a multiple part question. How does the United States take advantage of or play to India’s emerging and evolving and increasing influence?

Jared Cohen:

Well, look, if you’re looking at what I think is the most uncertain geopolitical moment in more than two decades, India represents in some respects a degree of predictability and certainty in the sense that I don’t see a universe in which the US tempers its desire to lean in the direction of India. I mean, there’s no other meaningful alternative with a population that size in that locale other than China. So, as long as US-China tensions persist, it’ll be correlated heavily with a continued investment in India. India understands this quite well and recognizes the leverage that it gives them, and you’re already seeing them swing on an issue by issue basis. So, let’s take Russia’s invasion of Ukraine or war against Ukraine as a classic example of this.

When Russia invaded Ukraine, the Biden administration wanted to cast the war as the great battle between democracy and autocracy. And India, demographically as the world’s largest democracy stayed neutral, which made it very difficult and awkward for the Biden administration to sustain that argument, and you’ve seen them subsequently backpedal away from it. Then there’s certain economic realities that India has.

Preet Bharara:

Could we just pause on that for one second? Was that the logical and smart and wisest way for India to proceed given where it is with respect to its position and attitude about the war on Ukraine?

Jared Cohen:

I think what it shows you is this isn’t ideological and it’s not even political. So, India knows that it has the United States firmly in its corner as it pertains to its problems with China, and it’s just a mutually beneficial issue-based relationship over China.

Preet Bharara:

Right. So, India knows it has a good bit of leeway as the counterbalance to China from America’s perspective.

Jared Cohen:

Absolutely. Now, if we look at some of the economic realities, India gets roughly 90% of its weapons from Russia including a particular type of submarine that they need for deterrence against Pakistan. So, there’s a meaningful weapons relationship between India and Russia. Second, I was in the Gulf last week and they remind me it’s oversimplistic to look at what’s happened in Europe and say there’s been a reorientation of energy supply chains. And they point to India, and they say, “Look, it’s a mixture of reorientation and redistribution.” So, India is buying $12 crude from Russia. It gets paid for by India in rupees. So, then Russia’s stuck with a bunch of rupees that it doesn’t need. India then sells the crude to Europe at a profit, and then Russia has to turn back to India and buy things with those rupees when in actuality there’s not that much that they need.

So, just from an economic perspective, India is entangled in a lot of what has happened within the kind of existing wartime framework between Russia and Ukraine in a way that has, I don’t want to say awkwardly benefited them, but it plays to certain economic advantage, trade between India and Russia has gone up 400% since the war started.

Preet Bharara:

Is there any sort of emerging or prospective coalition of these geopolitical swing states that would allow them to be collective in their action with respect to China and the US, or are they all just being individual?

Jared Cohen:

So, it’s a great question. Here’s where I would distinguish between what we know as the non-aligned movement from the Cold War versus the geopolitical swing states. Non-aligned countries wanted to ban together. They even had a famous meeting that Tito convened in the former Yugoslavia. With geopolitical swing states, it’s much more of a go it alone. Because this is about leaning into an economic leverage to maximize certain advantages and interests in parts of their global agenda that will be harder to maximize if tensions between the US and China subside. And there’s not a lot of collective action there. I think instead of banding together, I think what you’re just going to see these geopolitical swing states do is they’re going to swing on an issue by issue basis. So, if they act collectively, it’ll be because they’re incentivized economically to act collectively on a particular issue, but it won’t be ideological in the way that we saw the non-aligned movement.

Now, I will say that not all geopolitical swing states will lean into that status in equally responsible ways. So, I think you’ll have any number of geopolitical swing states that sort of swing too hard and overplay their hand, and that may not be apparent early on, but they may pay a price for it later. You’ll have others that will just be purely transactional about it. And then you’ll have some that will just kind of do it more defensively as a way to just not get caught in the crossfire. I think what’s interesting is if you’re a business around the world, again, you’re seeing all this unpredictability, geopolitics is kind of a new thing that you have to react to that you never previously had to in this way. I think one of the values of the geopolitical swing states framework is, again, it gives you some GPS coordinates for where you have more certainty and predictability in an otherwise uncertain world.

Preet Bharara:

Does this dynamic that you describe of the geopolitical swing states, is it a net negative, a net positive, or neutral with respect to the fight against climate change?

Jared Cohen:

That’s a great question. I mean, I think that it’s a net benefit in the sense that a country like Norway has some additional leverage to lean into this. On the other hand, Norway on its own, even with all of its capital, can’t really move the needle at scale. I think, look, the reality with climate change is you’re not going to get a meaningful answer without collective action. And more specifically, you’re not going to meaningfully move the needle on climate change if you can’t get the United States and China working together. So, I guess given what I said about the geopolitical swing states being biased towards going it alone, I don’t see them kind of getting together saying, “We all have economic leverage.

This is our chance to get United States and China together on climate change.” In a fantasy world, I would want that to happen, but I don’t think it will. I think that it’s going to take the United States and China coming to the table in a sort of concerted effort to show joint leadership on this. It’s just a tough, tough geopolitical climate for that, no pun intended.

Preet Bharara:

Final question, given the rise of geopolitical swing states, and by the way, I’ve now plugged the title of your article like seven times.

Jared Cohen:

Thank you. Thank you, Preet. I appreciate that.

Preet Bharara:

Given that dynamic, what is the best strategy for the United States to promote its interests?

Jared Cohen:

Look, I think the United States has to recognize that the paradigm has shifted. So, for the countries that both the United States and China need the most, those countries are not going to be as easily pushed or swayed into comprehensively kind of joining the US position against China. You even see this again with geopolitical swing states like France and Germany where they’re kind of swinging back and forth on this issue, and so there is a paradigm shift that has to happen. I think the US also has to be careful if they push too hard with some of these geopolitical swing states, they might push them more in the other direction. I think this is a complicated aspect of the American-Saudi relationship right now. Look, I think one of the benefits of geopolitical swing states is the incentives are easier to understand. It’s a combination of understanding what each of these countries want individually and what leverage they have.

I think the US, there’s two things the US really needs to do right now. One is recognize that not all supply chains are as easily reoriented and redistributed, and really understand where there’s an opportunity to do that and where there’s not. The second is given that we can’t decouple the two economies, and given it’s in nobody’s interest to decouple the two economies, I think one of the most important things that we need to do now is define where does selective decoupling stop and where does the integrated economy start? There’s such a hyper-focus on the decoupling part that there’s a risk of that umbrella getting larger and larger, and we end up causing damage to the integrated parts of the economy that are absolutely essential. So, that kind of long-term thinking and kind of comprehensive thinking I think is fairly important. But look, the US needs a strategy for every single geopolitical swing state, and those strategies are probably fairly distinct on a country by country basis. That’s what I would focus on.

Preet Bharara:

That all sounds like a longer topic for another day. Jared Cohen, my friend, thanks for being on the show.

Jared Cohen:

Thanks, Preet. Appreciate it.

Preet Bharara:

For more analysis of legal and political issues making the headlines, become a member of the Cafe Insider. Members get access to exclusive content including the weekly podcast I co-host with former US attorney, Joyce Vance. Head to cafe.com/insider to sign up for a trial. That’s cafe.com/insider. If you like what we do, rate and review the show on Apple Podcasts or wherever you listen. Every positive review helps new listeners find the show. Send me your questions about news, politics, and justice. Tweet them to me at Preet Bharara with the hashtag AskPreet. Or you can call and leave me a message at (669) 247-7338. That’s (669) 24 Preet. Or you can send an email to letters@cafe.com. Stay Tuned is presented by Cafe and the Vox Media Podcast Network.

The executive producer is Tamara Sepper. The technical director is David Tatasciore. The senior producer is Adam Waller. The editorial producers are Sam Ozer-Staton and Noa Azulai. The audio producer is Nat Weiner. And the Cafe team is Matthew Billy, David Kurlander, Jake Kaplan, Namita Shah, and Claudia Hernandez. Our music is by Andrew Dost. I’m your host, Preet Bharara. Stay Tuned.