Category Archives: Globalization

‘Killing the Golden Goose’ – Integration in the Global Economy

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Originally, I started this piece lamenting the ‘failed’ effort to bring China into the global economy following the failure by the CCP – the Party, and the Chinese government to continue early encouraging domestic economic reform efforts in the Chinese economy. That failure has given rise to very negative consequences for the global economy and the central economic players – the United States and the other North American economies, Europe and various players in the Indo-Pacific including Japan, South Korea and others.  I was preparing this week’s Post, reviewing in part a very good piece by Michael Froman, former USTR. And, in fact, I’ll get to that tale in just a moment. But it is impossible right now to overlook the destructiveness that President Trump is now bringing to the global economy, especially to America’s economic allies and partners with his thoughtless tariffs on steel and aluminum, now automobiles and very soon apparently reciprocal tariffs against seemingly all goods on what he, Trump, has come to call ‘Liberation Day’. Some liberation!

It is hard to look at Trump’s most recent tariff actions vis a vis cars and not reflect on the long – decades long effort – to integrate the three North American economies – Canada, US and Mexico – and despair over Trump’s sudden unprovoked effort to tear down the integrated economies of North America.   At least in Trump 1.0 he had the decency to renegotiate NAFTA and agree on USMCA terms of trade raising the percentage of North American content. But who cares about such negotiated free trade  agreements under Trump 2.0? As described by Damien Cave and Steven Erlanger in their NYTimes piece, these are Trump’s current tariff actions:  

“Many of the countries most affected by the new levies, such as South Korea, Japan, Germany, Mexico and Canada, are already reeling from the Trump team’s disregard for free trade deals already signed and his threats to long-established security relationships.” 

 

“Prime Minister Mark Carney of Canada said on Wednesday that Trump’s move on tariffs was “a direct attack.” Ursula von der Leyen, president of the European Commission, said the result would be “bad for businesses” and “worse for consumers.” Robert Habeck, Germany’s acting economics minister, said, “It is now important for the E.U. to respond decisively to the tariffs — it must be clear that we will not back down in the face of the U.S.”” 

As these reporters pointed out, the Trump actions and allied responses could end in the following very negative way: 

“The tariffs, which threaten both American and foreign carmakers, increase the likelihood of a global trade war. A chain reaction of economic nationalism with tariffs and other measures — perhaps adding costs for finance and services — could suppress economic growth globally, spread inflation and add rancor to already testy negotiations with Washington about security.” 

Ugh, a global trade war. Just what the globe doesn’t need. But Trump policy marches on and there is the real prospect for cranking up the drama: 

“The Trump White House has sought to use every tool of American power, including its military support and consumer market, to extract what Mr. Trump sees as a better deal for Americans. But for countries that have spent decades trusting America and tying their economies and defense plans to Washington’s promises, this feels like a moment of reversal.”

 

“American influence, long built on pronouncements about values and the shared riches of free trade, has hardened into what many analysts describe as “all stick, no carrot.” In the Trump team’s thinking, critics argue, American gains require pain for others — friends included.” 

So that’s the immediate dismaying state of the global economy largely brought to you by Trump 2.0. But there is still reason to dwell a bit on the impact to the global economy of China’s dramatic global economic emergence. This dramatic and in part negative influence on the US, and Trump for sure, but others as well, has added to the downbeat actions from the US and others.  

We’ve never quite recovered from it – that is China’s incorporation into the global economy. Even today strong echoes of a now rather distant debate still can be heard. That debate was, and is, a hard discussion by both experts and former officials. That debate was, and is, over China’s incorporation into the global economy and the decision to provide China with membership in the WTO. I was reminded of this in a strong review piece of China’s integration into the global economy by Michael Froman. Froman is today President of the Council on Foreign Relations. He served, however, as U.S. Trade Representative (USTR) from 2013 to 2017 and before that he was Deputy National Security Adviser for International Economic Affairs from 2009 to 2013. In an article in Foreign Affairs entitled,  “China Has Already Remade the International System: How the World Adopted Beijing’s Economic Playbook” he reviews China’s integration and its consequences for the condition of the global economy. While there are outstanding questions on whether more should have been insisted on by WTO members especially in terms of reform of China’s economy before permitting its entry to the global economy, it is largely in the rearview mirror today. There was a long discussion and back and forth at the time of discussions for China’s accession to the WTO, especially between the  United States and China. Much of it concerned whether China was a market enough economy to enable it to integrate into the global economy and to gain membership to the WTO. As Froman notes: 

“Jiang [Zemin] and Zhu [Rongji] declared repeatedly that China would inevitably continue to open up. Many in the West went so far as to believe that this economic liberalization would lead to China’s political liberalization, that a capitalist society would become a more democratic one over time.” 

 

“That assumption proved false. China’s leaders never seriously contemplated political reform, but China’s economic advancement was impressive nonetheless. The country’s GDP grew from $347.77 billion in 1989 to $1.66 trillion by 2003 to $17.79 trillion in 2023, according to the World Bank. Hopes were high that integrating China into the rules-based trading system could lead to a more peaceful and more prosperous world.” 

 

“Then President Hu Jintao entered the picture, followed by President Xi Jinping. China’s economic trajectory turned out to be less linear and less inevitable than initially expected. Under Hu, China leaned more heavily into state intervention in the economy by aiming to create “national champions” in strategic sectors through massive subsidies. In other words, the government expanded its role rather than pursuing further market liberalization.” 

 

“In 2004, China made up nine percent of the world’s manufacturing value added, leapfrogging to a massive 29 percent in 2023, according to the World Bank.” 

I am particularly reminded of all of this because of a very small role I played in the lengthy effort to secure China’s accession to the WTO. I worked with a former trade official in trying to address various questions over China’s economy and its reform trajectory following the many Working Party meetings on China’s accession at the WTO in Geneva. It was a several years process. As a successful conclusion approached I remember, vividly, the comment by that official after all those many gatherings and discussions over several years  that it was a mistake to permit China’s accession at that time. That official had reached the conclusion that China was not ready for economic integration in the global trading system.

But China’s accession did occur. And it became clear that the market reform process in China had slowed and then died. And the US actions are now in part as a result. Again here is Michael Froman:   

“In 2009, the Obama administration led an effort to terminate the Doha Round—a multilateral trade negotiation under the WTO launched in 2001. It did so in large part because the resulting agreement would have enshrined China permanently as a “developing country” under WTO rules. This would have allowed China to enjoy “special and differential treatment,” which meant that China would have been able to avoid assuming the same level of obligations and disciplines—on market access, intellectual property rights protection, and other issues—as the United States and other industrial countries.”

 

“Similar concerns motivated the Obama administration to pursue the Trans-Pacific Partnership (TPP), a high-standard trade agreement negotiated among 12 countries around the Pacific Rim. This initiative was designed to give countries in the Asia-Pacific region an attractive alternative to the model China offered.” 

 

“By the time TPP negotiations were completed in 2015, however, trade agreements—even those designed to counterbalance China—had become politically toxic at home, and the United States ended up pulling out of the agreement.” 

As Froman then summarizes his trade role and his warnings to China: 

“From 2009 to 2017, I served first as deputy national security adviser for international economic affairs and then as U.S. trade representative. During that time, I consistently warned my Chinese counterparts that the benign international environment that had enabled China’s success would disappear unless Beijing modified its predatory economic policies. Instead, China largely maintained its course of action. If anything, it doubled down on its approach. When Xi came to power in 2012, he effectively ended the era of “reform and opening” that had already stalled under Hu, set China on a course to dominate critical technologies, increased production to the point of overcapacity, and committed to export-led growth.”

And he concludes: 

“Today, as the economist Brad Setser has noted, China’s export volume is growing at a rate three times as fast as global trade. In the automotive sector, it is on a trajectory to have the capacity to produce two-thirds of the world’s automotive demand. And its dominance extends beyond cars; China also produces more than half the global supply of steel, aluminum, and ships.”

 

“Eventually, even American businesses, which had always been the ballast in the bilateral relationship, soured on China as their intellectual property was stolen or forcibly licensed, their market access to China was severely restricted or delayed, and China’s subsidies and preferences for domestic firms ate into their opportunity. Without any semblance of reciprocity, the relationship deteriorated. Politicians of both parties and the American public hardened their stance on China. European and major emerging economies grew hostile to Beijing’s policies, as well. In short, the benign international environment disappeared.” 

So that then is in part how we got to the difficult situation we are now in in global trade and why Froman concludes that Trump global economic policymaking mirrors today China economic policy: “The United States and others are imitating China in large part because China succeeded in a way that was unexpected. Its success in electric vehicles and clean technology did not come from liberalizing economic policies but from state interventions in the market in the name of nationalist objectives. Whether or not the United States can compete with China on China’s playing field, it is important to recognize a fundamental truth: the United States is now operating largely in accordance with Beijing’s standards, with a new economic model characterized by protectionism, constraints on foreign investment, subsidies, and industrial policy—essentially nationalist state capitalism.” 

Where we are today is certainly not where advanced economies at least believed we should be. The Trump aping of state nationalist efforts through repeated rounds of tariffs and other protectionist measures has the feel and smell of defeat and bad, very bad Washington global economic policy making.  

Image Credit: it.china-office.gov.cn

This Post first appeared at my Substack, Alan’s Newsletter. https://globalsummitryproject.substack.com/p/killing-the-golden-goose-integration

The Many Possible Shapes for the Global Order: A Quick Look Back & Forward

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The Trump attack on interdependence – particularly economic – has felt foolish and destructive but without question – relentless. What appeared to be a stalling out with Biden’s ill-disguised protectionism, has now turned into repeated blows against an open trading system and a collaborative global order. 

MInouche Shafik, former president of Columbia University and the London School of Economics, and a member of the House of Lords referenced a well-known transformation in  a recent piece in PS: 

““The old world is dying, and the new world struggles to be born: now is the time of monsters.” This famous quote, often attributed to Antonio Gramsci, feels particularly pertinent today, as the international order that has defined the past century undergoes a profound shift.” 

What is passing away? And what is emerging? Joe Nye, the very well known International relations maven has examined exactly that in another  recent piece in PS.  As he describes Trump policy actions: 

“Globalization refers simply to interdependence at intercontinental distances. Trade among European countries reflects regional interdependence, whereas European trade with the US or China reflects globalization. By threatening China with tariffs, US President Donald Trump is trying to reduce the economic aspect of our global interdependence, which he blames for the loss of domestic industries and jobs.” 

Can globalization be reversed? Nye argues it certainly has in the past. As he describes: 

“But can economic globalization be reversed? It has happened before. The nineteenth century was marked by a rapid increase in both trade and migration, but it came to a screeching halt with the outbreak of World War I. Trade as a share of total world product did not recover to its 1914 levels until nearly 1970.” 

It is striking how long it took for global economic interdependence to recover to levels that matched the late nineteenth century. But what is also interesting is how not long ago in fact there was much attention focused on an enhanced global order. Take a look at this piece published in 2001. This Introduction was written by one of the book’s principal contributors, and a close colleague, Arthur Stein. Arthur, today, is a Distinguished Research Professor of Political Science at UCLA. Arthur has been a significant international relations force at UCLA for years now. He prepared the Introduction for the 2001 volume titled, “The New Great Power Coalition”. As an aside I played a minor role in the volume with a chapter on China’s entry into the WTO.  Now, back to Arthur’s examination. There is no missing the cautious but still optimistic tone that Arthur conveys for this era following the real tensions of the Cold War and the emergence of US leadership. As he writes: 

“In short, we believe that in this era following a global conflict, the prospects for global cooperation conflicts lie in the relations between the Great Powers. Constructing a Great Power concert would make possible the establishment of a cooperative world order and truly global international organizations.” …

 

“In more general terms, however, we conclude that the movement from unilateral to multilateral incentives, norms, and structures appears to be useful in enlisting members in an  encompassing coalition. The world is now in the process of creating new high-prestige and selective clubs in the fields of economics, politics, and even the military. Once enough of these clubs in the fields overlap (regionally and functionally), they will form a linked structure that could combine into an encompassing coalition, with the latter representing the sustaining cooperation developed in separate regions and issue areas.”

Returning to Minouche Shafik this is what she sees as the new global order, one that others, as well, have suggested is emerging: 

“The world today is very different. It is a multipolar world, with China, Russia, India, Turkey, Brazil, South Africa, and the Gulf states challenging the old order, alongside other emerging powers demanding a greater voice in shaping the rules of the international system. Meanwhile, belief in “universal values” and the idea of an “international community” has waned, as many point to the hypocrisy of rich countries hoarding vaccines during the COVID-19 pandemic and the response to the Ukraine war compared to the failures to act in response to humanitarian crises in Gaza, Sudan, and many other places.” 

 

“We may be heading to a zero-order world in which rules are replaced by power – a very difficult environment for smaller countries. Or it may be a world of large regional blocs, with the United States dominating its hemisphere, China prevailing over East Asia, and Russia reasserting control over the countries of the former Soviet Union. Ideally, we can find our way to a new rules-based order that more accurately reflects our multipolar world.”

Regional blocs may be in order. Or, possibly the reassertion of a form of geopolitical and ideological blocs. That seems to be what is described by colleague, G. John Ikenberry. In an article in International Affairs, penned at the beginning of last year, entitled, “Three Worlds: the West, East and South and the competition to shape global order”, John writes this about the emerging global order:

“Today, among the many impacts of Russia’s war on Ukraine, the most consequential may be that it marks the moment—the tipping-point—when history reversed course, pushing the world back in the direction of geopolitical and ideological groupings.” 

 

“Today, we might call these three groupings the global West, the global East, and the global South. One is led by the United States and Europe, the second by China and Russia, and the third by an amorphous grouping of non-western developing states, led by India, Brazil and others. Each ‘world’ offers grand narratives of what is at stake in the Ukraine conflict and how it fits into the larger problems and prospects for twenty-first century world order.” 

 

“Each offers ideas and programmes for the reorganization and reform of global rules and institutions. Each has its own constructed history, its own list of grievances and accomplishments. Each has its leaders, projects and ideological visions.” 

 

“These Three Worlds are not blocs, nor even coherent negotiating groups. They might best be seen as informal, constructed and evolving global factions, and not as fixed or formal political entities.”

 

“The Three Worlds are not best defined as poles so much as loose coalitions seeking to shape global rules and institutions. States in these three ‘worlds’ occupy different locations in the global system, creating shared interests and affinities that, taken together, shape patterns of interstate behaviour. The Three Worlds are defined in important respects by diplomacy— that is, by speeches, summit meetings and UN gatherings in which leaders advance their visions of world order. Each grouping has a loose political identity and a range of more-or-less consistent convictions about what constitutes a desirable and legitimate international order.”

I think it is difficult to know where we are at this moment, and more so where we are going. It is evident, however, that the world we have experienced over the last decades is being hammered out of existence especially by Trump 2.0. As David Wallace-Wells describes it in a NYTimes Opinion article, written just the other day: 

“But each declaration of imperial desire is that mercurial kind of Trumpist speech act, in which a given utterance can be both meaningless and full of portent at the same time, self-disavowing even as it also demonstrates the president’s world-shaping power.” 

 

“And whatever comes of Trump’s retrograde dreams of manifest destiny, the implicit challenge to the legacy geopolitical order is just as striking: If we want these things and these places, who is going to stop us?” … 

 

“What comes next? New paradigms rarely arise fully formed. But if we spent the last four years watching Joe Biden’s ineffectual attempt to revive some rickety version of the moralistic postwar order, it is supremely clear what Donald Trump would like to replace that pretense with: the principle that global chaos opens up opportunity for great powers long hemmed in by convention and deference.” 

 

“The MAGA riposte is, Let’s not be naïve and let’s not be suckers: We are all wolves on the world stage, and the game begins when we show our teeth.”

It would be valuable if new rules, principles, and norms emerged but at the moment what we can see is the dramatic impact of power on interstate relations. For the moment we are less driven by the emergence of order but by its opposite.  But we will come back here at Alan’s Newsletter to examine  – likely repeatedly – the shape of the global order as I think there may be surprises, possibly many surprises we have not anticipated given the immediate and dramatic attention to Trump.

The Post originally appeared as a Substack Post at Alan’s Newsletter

https://globalsummitryproject.substack.com/p/the-many-possible-shapes-for-the

All comments and subscriptions are welcome

 

 

The Trump Weakening of America and Multilateralism

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Well, I guess we shouldn’t have been surprised. But  since I’ve never spent time listening to Trump speeches – I thought I would listen to Trump’s Second Inaugural . As David Bernstein et al. at the Substack, “Good Politics/Bad Politics” called it: “An Ugly Speech”. And it was. On reflection, and notwithstanding his early invocation of, ““The golden age of America begins right now,” in fact it was really a version two of “American Carnage”. As David Bernstein and colleagues declared: 

“Normal inaugural addresses are inclusive. Trump? There was little or nothing in this speech for anyone but his strongest supporters. The framing of it was, as is always the case with Trump, outright insulting to everyone else: The nation has been absolutely horrible for the last four years, in his telling, with not even a hint that its leaders have been trying to do their best even if they differ on what to do.” 

 

“This ugly speech will be forgotten rapidly. But if there was anything there to even give him a bit of a honeymoon approval bump, I sure didn’t see it.”

 

“Trump’s inauguration speech was very much directed toward such supporters. Despite claims that unity would be a major theme, the speech was a typical Trump litany of gripes about the left, praises for his unique ability to fix things, and recitation of plans that can at best be called controversial.”

In the NYTimes, “Morning Briefing” Emmett Lidner declared just after the speech: 

“The golden age of America begins right now,” Trump declared in his Inaugural Address delivered at the Capitol, shortly after he took the oath of office. Much as he did eight years ago, Trump painted a grim portrait of a country on its knees that only he could revive.” 

And Paolo Magri of the Italian think tank ISPI put it this way: 

“Eight years after his first inaugural address, the one about “American carnage,” Trump returned with the promise of a new “golden age” for the United States. But much of that vengeful rhetoric was still there, in tones steeped in rancor and an almost messianic inspiration for his extraordinary political comeback. “I was saved by God to make America great again,” the tycoon said in reference to the attempted assassination he was the victim of last summer. In a speech full of imperialistic overtones, Trump then announced that he would restore America’s highest peak, Mount Denali, to its former name, Mount McKinley, in honor of the Republican president assassinated in 1901. He also reiterated his intention to “pursue our manifest destiny to the stars,” promising to plant the American flag on Mars, rename the Gulf of Mexico the “Gulf of America,” and reclaim the Panama Canal.” 

Finally, David French, among a number of other opinion writers, commenting on the Inauguration’s best and worst moments in the NYT said this about the Trump speech: 

 “The title of Trump’s speech should have been “American Carnage 2: Ultimate Carnage.” If possible, Trump’s second inaugural speech was darker than his first. Rather than seek to unite Americans, he painted the darkest possible picture of the state of the nation and the character of his opponents. And he set himself up as a kind of messiah figure, the man saved by God for the sake of national greatness. If you want to lay the groundwork for authoritarianism, that’s exactly how to do it.”

It was disheartening. Now I didn’t expect a wholesale conversion for the returning President but one could have hoped for some greater perspective with Trump 2.0. But no, I don’t think so. So, we are likely to see all his grievances and resentments dominating this President’s domestic and foreign policy. 

Now I was interested in various reactions to Trump’s reactions to American foreign policy both his ongoing remarks through the election campaign and then with his full-throated approach to US foreign policy on Inauguration Day. One person of interest to me was Ben Rhodes and his views. Rhodes is a political commentator, and a former Deputy National Security Advisor for Strategic Communications and Speechwriting under President Barack Obama. With Jake Sullivan, he is the co-chair of National Security Action, a political NGO. In FA Rhodes at the end of 2024, in a piece entitled, “Democrats Need a Foreign Policy That Can Work—and Win: How to Harness Populist Energy and Build a Better International Order” displayed a strong critique of Trump :

“While Trump casts himself as a radical disrupter, he is a familiar figure in today’s world: a far-right nationalist at a time when that brand of politics is ascendant, a strongman in a world full of them.” 

 

“Since his ascent in 2016, Trump has successfully tapped into a populist fatigue with American national security policies. He has consistently railed against forever wars, free trade, free-riding allies,an unaccountable “deep state,” and the harm that globalization has done to the working class. The irony is that, for a long time, the policies that produced these outcomes were more popular among Republicans than Democrats.”

 

“By fully embracing the mantle of hawkish defenders of the status quo, Democrats allowed themselves to be held responsible for the failures of the post-9/11 era.”

 

“At the same time, however, many Americans have come to see U.S. national security policy writ large as an instrument of a broader system that has not served their interests and is unresponsive to their concerns.”

I think it is fair to say that Trump has tapped in to that distaste for current US foreign policy and many Americans have glommed on to Trump’s strongman approach.  Now having said that Rhodes sharply critiques Trump policy directions making clear the hollowness of Trump’s strongman approaches: 

To be clear, the remedies that Trump is preparing to impose are not correctives to the grievances he has identified. An overuse of tariffs—combined with more sanctions and further decoupling of supply chains—would only exacerbate inflation while amplifying the geopolitical influence of China. A shift of that kind would also reduce the cost to China of a potential blockade or invasion of Taiwan. Mass deportations will tear at the social cohesion of American communities, drive up prices, and undermine the strength and vitality that the U.S. has traditionally drawn from immigrants. Tax cuts, deregulation, and a federal embrace of cryptocurrencies will fuel inequality and encourage oligarchy. The abandonment of action on climate change could have catastrophic consequences as the planet careens past a tipping point. U.S. alignment with the Israeli far right could lead to the annexation of parts of Gaza and the West Bank, with devastating consequences for Palestinians and perhaps the stability of neighboring states. The abandonment of Ukraine would lead to an end to that war on terms favorable to Russia while eroding U.S. influence in Europe. The dismantling of American national security agencies through unqualified appointments and purges of the civil and foreign service will concentrate power in the White House while undermining the long-term capacity of the government to protect the safety and interests of the American people. And these are just the things Trump has said he will do: if his COVID-19 pandemic response is any indication, there is little reason to trust that he will competently manage the inevitable crises to come. This is a harrowing thought in a world of great-power conflict.

But it is interesting to contemplate the consequences of Trump foreign policy. And of course there is no consensus here, I suppose not surprisingly. For instance, there was the recent FA piece by Richard Fontaine titled: “The Trump-Biden-Trump Foreign Policy: American Strategy’s Strange Continuity”. Fontaine, interestingly, is currently CEO of the Center for a New American Security but earlier in his career, he was a foreign policy adviser to U.S. Senator John McCain. Now interestingly Fontaine suggests a rather muted policy by Trump with continuity between the two administrations – Biden-Trump: 

“The two administrations [Trump, Biden] could hardly have been more different in style and rhetoric. In the underlying substance of their policies, however, there was more continuity than the casual observer might have appreciated.”

 

“Many such areas of constancy will almost certainly remain in the next Trump presidency. The incoming administration’s approach to Israel, for instance, will likely be broadly similar, combining military support with protection both from Iranian missiles and diplomatic attacks at the United Nations and elsewhere. Policy toward Saudi Arabia will be comparable now that Biden has embraced the government in Riyadh and seeks regional normalization. Under Trump, Washington is poised to continue to see China as its foremost global challenger and endeavor to build domestic sources of strength. Even as the new administration rails against U.S. allies on issues such as defense spending and trade, it is likely to seek tighter partnerships abroad, particularly in the Indo-Pacific, to better compete with Beijing.” 

 

“Trump will usher in departures, sometimes dramatic ones, in American foreign policy. But those changes will compose just a fraction of the total. The stability of U.S. interests and values, the role of Congress, and the realities of today’s world will demand a significant measure of constancy. Although it is bent on reversing Biden’s approach, the incoming team may itself be surprised to find out how much the two administrations share.” 

Now you’ll not be surprised that this view of similarity between the two administrations is not universally held. I was intrigued by my colleague Dan Drezner’s piece in WPR, where, apparently, Dan is now providing a monthly opinion piece. I was alerted to it by Dan at his Substack, Drezner’s World, rather chillingly titled, “A Great Power War is Coming: The implicit assumption behind a lot of recent rhetoric.” Dan was particularly sparked by Trump’s territorial threats – to the Panama Canal, Greenland and Canada. He reacted in the article this way:

“I have a very depressing answer: “Fear of a Great Power War Could Be Making One More Likely.” 

As he says the following is his thesis paragraph: 

“What is going on? There are some disturbing parallels between how great powers are behaving today and how they started behaving in the late 1930s. In both eras, the proliferation of economic sanctions and embargoes caused great powers to fear that they would be cut off from critical resources. Their reaction to that threat, in turn, helped to escalate great power conflict. The question today is whether history will repeat itself, or only rhyme.” 

He then provides the following conclusion: 

“For decades, the principal sources of great power peace have been clear: U.S. hegemony, commercial interdependence and nuclear deterrence. But really, there was a fourth pillar as well: whether elites in these countries were seriously contemplating the mechanics of a sustained great power war. For much of the post-Cold War era, that was inconceivable.”

 

“In 2025, U.S. hegemony looks wobbly, and great powers are falling all over themselves to reject interdependence unless it favors them asymmetrically. Increasingly, elites in the U.S. and China seem to be conceiving of how a war between the two countries would play out. Which means we may be about to test whether the last pillar of great power peace—the logic of mutually assured destruction—remains compelling or not.” 

Now I must say my initial reaction was – really! It is possible of course,  but I suspect not all that likely. My reaction to the proposition offered by Dan is in part driven by my caution when being offered historical analogies. They are superficially attractive, and frequently employed but such comparisons should be treated with strong caution. If you’re going to use an historical analogy you examine the similarities, of course, but you need to also look at the dissimilarities before declaring it an appropriate lesson. Few authors ever do; it takes a fair bit of work and rather deep historical knowledge. And I’m afraid it was done in this case, though practically few authors or experts do. Still in the end mark me skeptical. 

So we enter the age of ‘Trump 2.0’. Fasten your safety belts. It is going to be a bumpy ride, for sure.

Image Credit: NY Times

The New Global Leadership, perhaps

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So there is a lot of spinning now that it is clear – he’s coming back. And as we look out on the global order the current international system appears chaotic enough, even before Donald Trump returns to the White House. As described by Flavia Krause Jackson in Bloomberg: 

North Koreans are fighting in Europe for the first time. Israel is resisting US efforts to halt fighting with Hezbollah and Hamas. China regularly conducts military exercises surrounding Taiwan. Nuclear war is suddenly a risk amid surging tensions over Russia’s invasion of Ukraine.

And that’s even before Donald Trump returns to the White House.

What are possibly answers to this growing chaos? One very clear note appears to be Middle Powers and their capacity to gain influence and importantly perhaps maintain greater openness notwithstanding a world dominated by Trump 2.0.  And these tensions are already apparent as Flavia summarizes the just recently concluded Brazil G20 Summit:

This was the week Lula was supposed to cement his status as the preeminent leader of the developing world. Instead, the chaotic summit he hosted in Rio highlighted his inability to bridge growing divisions between global superpowers. In a surprise anti-climax, Lula even canceled his end-of-summit press conference two hours after it had been scheduled to start.

Still, the first big unknown is how chaotic the new Trump administration can wind up the international system and are there possibilities to ease some of this Trump chaos? How, and who, possibly will seek to temper the chaos and propel forward both global political and economic relationships. Here, Shiro Arnstrong in an EAF piece titled, “Trump-proofing economic security in Asia” sets the stage:

The United States has gone from enforcer to spoiler of the rules-based economic order as it deals with domestic challenges and threatens a return to its pre-World War 2 isolationism. The rest of the world has to avoid the United States dragging the global economy down with it.

In the presumed Trump withdrawal from alliances and partnerships, his determination to close the open trading world with Trump’s loud noises over America First, and its many tariffs, there is a noticeable attention shift to the potential role of Middle Powers in retaining and augmenting, possibly, the global economy for one.

Now, there are all sorts of questions surrounding this attention to Middle Powers and their influence in advancing  the global order. Needless to say it starts with who are the Middle Powers. And, not surprisingly, there is no agreement on who the likely actors are under that apparently highly fungible label. So we know there is the ‘traditional’  Middle Power label that describes at least Canada and Australia. Then there are the new ‘Big Boys’ today – Brazil, India, Indonesia, Malaysia, and at least for some South Africa and even Nigeria. And then there are the relatively close US partners, or other possible regional powers, so, Turkey, Mexico, Japan and South Korea.  What can I say, it is a recipe with the main ingredient up to the expert or analyst.

And then there is the logic and possible action of Middle Power policy. Now this is a tough category often rather muted in current analyses.  But Shiro gives us some direction here. He targets Trumpworld:

There will be pressure all over the world to ‘protect’ domestic production from a flood of Chinese and other goods shut out of the US and looking for new markets.

There will of course be pressure to cut losses by dealing with Trump 2.0:

The incremental choices of countries to do deals with Trump’s United States — managed trade deals and voluntary export restraints — may be diplomatically expedient but will weaken the rules that underpin global trade and are against their core long term interests. That would reinforce the trajectory of the global economy heading towards an economic nosedive of the kind it suffered in the 1930s.

The Middle Power alternative:

It will be up to the middle powers like Australia and Japan — that cannot change the status quo unilaterally but are large enough to mobilise coalitions of countries for change — to keep the global economy open and save the furniture of the multilateral trading system.

 

Middle powers must convince China and the European Union that their best course of action is to avoid large-scale retaliation and go in the other direction, opening up their economies further. That will make them better off and make the global economy larger, even with restricted access to the US market. …

 

The economic coercion that China deployed against Australia in 2020 and Japan earlier was blunted by the multilateral trading system which, despite its weaknesses, allowed Australian exporters, for example, to find alternative markets and provide an exit ramp from the problem, with the last of Chinese trade restrictions lifted in October 2024. The open global trading system crucially ensures that there are alternative buyers and sellers.

As Shiro concludes, enlarging if possible but at least maintaining the open trade world – with as wide a set of actors as possible, is slightly counterintuitively called for and the answer presumably to Trump tariffs:

The multilateral trading system is the biggest source of economic security for open trading nations. That includes Southeast Asia, which is more exposed than other countries with its high trade shares that are its source of prosperity and security.

 

Utilising platforms in ASEAN-centred institutions and connecting them to other efforts in Europe to promote collective action is where the strategic focus needs to be now, on trade, climate action and other global public goods, otherwise we risk a much smaller, poorer and less secure world.

Interestingly, and as noted earlier, there is a growing interest in Middle Power action in the face of the about to reappear Trumpworld. Another proponent for Middle Power action is Dani Rodrik. Rodrick, a deep thinker when it comes to the global system, has written recently on the role of Middle Powers in the evolving global order. Rodrik is the Ford Foundation Professor of International Political Economy at Harvard’s John F. Kennedy School of Government. He is co-director of the Reimagining the Economy Program at the Kennedy School and of the Economics for Inclusive Prosperity network. In a recent piece in Project Syndicate (PS),  Rodrik suggests that while Middle Powers are unlikely to become a bloc but rather quite possibly able to possibly shape a variety of paths prompting a far more multipolar environment:

While some American national-security elites seek continued US primacy, others seem resigned to an increasingly bipolar world. A more likely outcome, however, is a multipolar world where middle powers exert considerable countervailing force, thus preventing the US and China from imposing their interests on others.

 

The middle powers are unlikely to become a formidable bloc of their own, mainly because their interests are too diverse to fit into a common economic or security agenda. Even when they have joined formal groupings, their collective impact has been limited.

 

Perhaps the most important contribution middle powers can make is to demonstrate, by their example, the feasibility of both multipolarity and diverse development paths in the global order. They offer a vision for the world economy that does not depend on either America’s or China’s power and goodwill. But if middle powers are to be worthy role models for others, they must become responsible actors – both in their dealings with smaller countries and in promoting greater political accountability at home.

A world that does not depend on the leading powers that is the vision from Rodrik. For this, and other perspectives, the China-West Dialogue (CWD) has directed recent energies this fall to sessions on Middle Powers and Middle Power Diplomacy (MPD). With great thanks to our Lead Co-Chair, Colin Bradford CWD constructed a series of sessions on a number of key Middle Powers. We began this Middle Power Diplomacy series with a Zoom session on Japan with lead organizer, Mike Mochizuki of George Washington University. From there we turned our attention to Latin America in a Zoom session led by our good colleague Jorge Heine from Boston University and a number of colleagues who published a recent volume: “Latin American Foreign Policies in the New World Order: The Active Non-Alignment Option”. From there we shifted to a session on South Korea prepared by the lead organizer, Yul Sohn from Yonsei University. And most recently we turned our attention to Turkey with colleague Guven Sak as the lead organizer. Guven is from The Economic Policy Research Foundation of Turkey (TEPAV). Still, to explore are sessions on Australia and New Zealand with lead organizer Shiro Armstrong from ANU and EastAsiaForum (EAF) and Indonesia and ASEAN with lead organizer Monica Wihardja from ISEAS in Singapore.

There is much learning at hand and hopefully we will be able to draw out the means for Middle Powers to resist the more destructive Trump 2.0 efforts. We will return to these conclusions in the future.

This first appeared as a Substack Post at Alan’s Newsletter. Comments and subscriptions are welcome.

https://globalsummitryproject.substack.com/publish/posts/detail/152039338/share-center

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The Enduring Weakness of Multilateralism: An Aspect

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Though it was heartening to see the Presidential debate this past week with a strong performance by Vice President Kamala Harris, it was disheartening to see that Donald Trump remains a major force in US politics and still a strong contender notwithstanding some of his wild statements and his conspiracy theory assertions. While the event highlighted the ‘weirdness’ of Donald J Trump, the candidate, the game is not yet won. We may yet see him reoccupy the White House. Such an outcome would threaten the alliance(s) system, global trade and continuing US presence in the current multilateral system driven by Trump’s transactional model of US foreign policy behavior.

Trump’s return would likely drive current US foreign policy ‘over the cliff’. But changes have been underway for some time and many of them are weakening the multilateral system built over many decades. Many foreign policy analysts have focused on the structural elements – notably the decline in the international measures of power of the United States and its impact as a result on the global order. I was struck by a letter titled, “Muster Global Majorities”  prepared by Mark Malloch-Brown. This is just one of nine requested by FP to greet a new US president. Now, Malloch-Brown was the former deputy secretary-general of the UN well aware of the multilateral system and he targeted the decline of the US:

But whoever prevails on Nov. 5—and congratulations, by the way—this will not change the much deeper shifts underway in the distribution of global power and values alignment that are now surfacing at the U.N. and its Bretton Woods cousins, the World Bank and the International Monetary Fund (IMF). They have seen an approximate quadrupling of membership since their post-World War II founding; a more than tripling of global population; and a global GDP that is more than 10 times bigger.

 

But you must see there is a global shift underway, and the United States, more than ever, is not an unchallenged No. 1 but rather a precarious first among equals in a multilateral system and which in responding to wider intellectual and political change in the world resents any claim to monopoly leadership. As Shakespeare observed in his great play on succession and power, Henry IV, Part 2: “Uneasy lies the head that wears a crown.”

Malloch-Brown in his letter, in fact, is pointing to two evident declines: the decline in power of the US in the context of the global system, the structural elements with the rise of China and with the emergence of a number of the Large Emerging Powers, the likes of India, Brazil, Indonesia and more.  But the decline is also evident from a diminishment in US leadership in the global order, the behavioral aspect of any analysis.

While there is a relative decline in the power dimensions for the United States, it is the decline in policy leadership that is in some ways most evident. Take trade. As Alan Beattie has written just recently in the FT article entitled, “Can Globalization Survive the US-China Rift”:

Multilateralism is weak. The US is undermining the WTO by citing a national security loophole to break rules at will. The EU won a case against Indonesia over its nickel export ban, but the WTO’s dysfunctional dispute settlement system has delayed compliance.

 

But this does not mean regional or geopolitical trading blocs will start setting the rules of trade instead. The US talks a good game about building alliances, but the political toxicity of trade deals in Washington stops it offering market access to incentivise countries to join. The Indo-Pacific Economic Framework, the US’s main initiative in the Asia-Pacific, is widely regarded as all stick and no carrot.

Rather than a continued reliance on the multilateral rules and the WTO, the multilateral trade institution – of which the US is one of the primary creators –  responsible for managing trade and trade friction, the United States has chosen to neuter the global trade rules by collapsing the trade dispute mechanism of the WTO. The US has turned away as well from promoting freer trade and free trade agreements and has come to rely more and more on protectionism. As pointed out by Bob Davis in his FT piece, “How Washington Learned to Stop Worrying and Embrace Protectionism”, he described the US turn to protectionism:

… the president [Biden] made a decision that upended decades of Democratic White House rule. He ordered heavy new tariffs on Chinese imports of high-tech items and continued the massive tariffs he inherited from his Republican predecessor.

 

The significance of the moves—and the challenge that it presents to Biden’s successor—was obscured by the roller-coaster news cycle. But it bears noting: The Biden administration is the first since at least President John F. Kennedy’s time to fail to negotiate a major free trade deal, instead embracing tariffs. Even Trump, the self-proclaimed “Tariff Man,” concluded a significant free trade pact when he replaced the North American Free Trade Agreement with a U.S.-Mexico-Canada deal (USMCA), which toughened rules on auto imports but established liberal rules on digital trade. He also negotiated a smaller digital agreement with Japan.

 

The turnabout is emblematic of a broader change in the U.S. economic and political thinking that is unlikely to be reversed under either a President Trump or Harris. The era of hyperglobalization, which began around 1990 and saw global trade jump by 60 percent in 20 years as supply chains spread across the earth like spiderwebs, has come to an end. We are now in an era of growing protectionism, and as trade growth has stalled, the United States and many other advanced economies have hiked tariffs and begun subsidizing industries that they view as critical to their well-being.

The turnabout with an increasing reliance on tariffs and a more full throated rise of US protectionism in fact ties the US, that is US economic policy to its political-security policy and actions. Davis makes the pointed linkage today between the two for US policy action:

Peter Harrell, the White House’s former senior director for international economics, said the change marks a fundamental rethinking of U.S. trade policy. “We are in an era of geopolitical competition with China,” he said. “That means we aren’t going to accord China the same trading privileges and rights” accorded to allies—despite World Trade Organization requirements to treat members equally.

 

It boils down to the fact that the economic juice [from cutting tariffs] was not worth the political squeeze,” said Evan Medeiros, a Georgetown University China expert who had been an official on Obama’s National Security Council.

 

In the second part of its decision, the administration ramped up some tariffs to block Chinese imports in areas where the United States was spending billions of dollars on subsidies to create or strengthen a domestic industry.

Tariffs were quadrupled to 100 percent on Chinese electric vehicles this year, as [Lael] Brainard had advocated, doubled to 50 percent on Chinese semiconductors and solar cells, either this year or next, and tripled to 25 percent on EV batteries this year. Even low-tech Chinese syringes, which had previously been shipped duty-free, now face 50 percent tariffs as a spur to boost domestic production.

 

The primary reason for the U.S. turn to protectionism is the growing economic and military challenge from China. But it also reflects a profound change in ideology: The gains from trade—lower prices, overall improvements in living standards, greater competition—are no longer seen by many political leaders as worth the downsides in the loss of manufacturing jobs, dependence on imports from adversaries such as China and Russia, and political polarization. The Trump administration, packed with anti-free traders, gave a big push to this neo-protectionism; the Biden administration has confirmed and deepened the shift.

The bottom line is that geopolitical tensions, particularly the deep US-China competition, has undermined US commitment to a multilateral system that the US was a principal architect in creating and maintaining over many decades. This outcome to date is deeply troubling.

Image Credit: CNBC

Contemplating in these Early Days a Harris Foreign Policy

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With just over 70 days until the US election, and with the certainty now of a new 47th President – either Harris or former President Trump – it is not surprising that analysts are scrambling to assess the current US foreign policy course and eyeing its new possible directions.

Obviously, the impact of a return to Trump freezes one’s mind with its MAGA trumpeting, its distaste for allies, and its cozying up to autocrats whether in Russia or North Korea. I’m not going to go there for the moment: the consequences are too depressing to dwell on at this moment in the election cycle. While we may be driven to come back to this depending, of course, on the course of the next 70 days. But for the moment, and just coming out of the Chicago Convention, let’s focus on where we have recently been with a Biden Administration and what direction we might be pointed toward with a Harris win.

A number of folk, including some former Democratic officials, have put their ‘thinking caps on’ already and are analyzing the Biden foreign policy and extending it to a possible new Democratic Administration. It particularly has resonance as Harris has been involved in this Biden Administration.

We start with the current state of play of globalization. Many examining its immediate health focus in particular on US export controls on technology and the maintenance of tariffs against China by the Biden Administration. Analysts also focus on the dramatic increase in sanctions against Russia and those aiding Russia’s war against Ukraine. My colleague Dan Drezner from Drezner’s World focused in a recent Post on the immediate state of global economic integration:

There comes a point when one has to question the resiliency of globalization as we know it. The question is whether that point is right now. For example, the IMF recently noted that despite widespread perceptions, the current global economy is more globalized than a generation ago: “A global increase in the foreign value-added content of exports from about 19 percent in the mid-1990s to 28 percent in 2022 points to continued deepening of trade integration. Meanwhile, services are able to flow more easily across borders thanks to the rise of digital technology.

 

The hard-working staff here at Drezner’s World tends to be more sanguine about globalization persisting despite loud pronouncements that it has come to an end. Great power governments and violent non-state actors have done their darndest to push the world towards economic segmentation, and it just ain’t happening. Improvements in information and communication technologies have lowered the costs of cross-border flows. Even if states are erecting higher cross-border barriers, that has been counteracted by declining costs more generally. … I think analysts have to stop being surprised that global economic flows keep rising despite all the geopolitical shocks. Economic globalization continues to be the Economic Engine that Could.

So globalization is still in place. Now let’s turn to the Biden framing of foreign policy recognizing that the Vice President, and now the Democratic candidate for President has played a role in the foreign policy of this current Biden Administration. I was interested in the article by Ben Rhodes in Foreign Affairs, titled ““A Foreign Policy for the World as It Is: Biden and the Search for a New American Strategy”. Rhodes, by the way, served as U.S. Deputy National Security Adviser for Strategic Communications and Speechwriting in the Obama administration from 2009 to 2017. Ben underscored how difficult it has been to continue to lead, which it seems remained a Biden foreign policy goal:

It also suggested [the start of the Biden presidency] that the United States could reclaim its self-conception as a virtuous hegemon, that it could make the rules-based international order great again. Yet even though a return to competent normalcy was in order, the Biden administration’s mindset of restoration has occasionally struggled against the currents of our disordered times.

The shadow of Trump left this current Administration struggling to maintain a relatively benign leadership. But in addition, as Ben argues:

Second, the old rules-based international order doesn’t really exist anymore. Sure, the laws, structures, and summits remain in place.

 

But core institutions such as the UN Security Council and the World Trade Organization are tied in knots by disagreements among their members. Russia is committed to disrupting U.S.-fortified norms. China is committed to building its own alternative order. On trade and industrial policy, even Washington is moving away from core tenets of post–Cold War globalization.

Possibly most damaging  to the order – and US leadership – is US commitment to the maintenance of the international rule of law. Most pointedly in this regard is the failure of the Biden Administration to more forcefully insist with the current Israeli government that it cease and desist from Israel’s destructive actions against the civilian populations in Gaza in its quest to dismantle Hamas. Such a failure undermines claims to a benign leadership of the global order, if such is in fact possible.

Yet a number of notable analysts remain convinced that the Biden Administration has successfully navigated toward a more stable global order with strong US leadership. Take the example of Jessica Matthews who is currently Distinguished Fellow of the Carnegie Endowment for International Peace and is the former President of CEIP. In her recent article for Foreign Affairs for its forthcoming September/October issue, titled, “What Was the Biden Doctrine?: Leadership Without Hegemony” Matthew praises US foreign policy action even in the face of major power opposition. And Matthews writes:

But he has carried out a crucial task: shifting the basis of American foreign policy from an unhealthy reliance on military intervention to the active pursuit of diplomacy backed by strength.

 

He has won back the trust of friends and allies, built and begun to institutionalize a deep American presence in Asia, restored the United States’ role in essential multilateral organizations and agreements, and ended the longest of the country’s “forever wars”—a step none of his three predecessors had the courage to take.

 

All of this happened in the face of grievous new threats from China and Russia, two great powers newly allied around the goal of ending American primacy. Biden’s response to the most pressing emergency of his term—Russia’s brutal full-scale invasion of Ukraine in 2022—has been both skillful and innovative, demonstrating a grasp of the traditional elements of statecraft along with a willingness to take a few unconventional steps.

 

Biden’s approach to Beijing has occasionally reflected a disappointing degree of continuity with that of Trump and has fostered uncertainty over Taiwan, the most sensitive issue in U.S.-Chinese relations. But unlike the former president, Biden has embedded his China policy in a vigorous matrix of new and restored alliances across Asia. He has arguably pulled off the long-sought U.S. “pivot” to the region, without using that term.

 

Yet his legacy to date suggests the lineaments of a new approach well suited to today’s world. Most important among them is a resolve to eschew wars to remake other countries and to restore diplomacy as the central tool of foreign policy.

Matthews is strongly upbeat and concludes with this paean to Biden foreign policy:

No matter the answers, and despite the symptoms of debilitating political polarization at home, Biden has made profound changes in foreign policy—not to accommodate American decline but to reflect the country’s inherent strength.

Now it seems to me there are questions over the effective use of diplomacy of this Administration but that is for another day. In the current moment this upbeat assessment is carried forward by: the early days following the Harris nomination and in light of her initial positioning set out in her acceptance speech at coming out of Chicago. It appears that the general reaction to her speech was positive including her statements on foreign policy that seemed to position her as forceful on human rights but also on defense and the US security alliances.  From folks at Brookings, specifically Elaine Kamarck, a Senior Fellow of Governance Studies and William A. Galston, a Senior Fellow of Governance Studies, came the following analysis:

Surprising some observers, Harris laid out a tough agenda on defense and foreign policy, promising to maintain the strongest and most lethal fighting force in the world, retain our leading position in NATO, defend Ukraine against Russian aggression, stand up against Iran and North Korea, and take democracy’s side in the struggle with tyranny. She articulated a firm pro-Israel stance while mentioning the suffering of Gaza’s inhabitants and endorsing Palestinians’ right to dignity and self-determination.

 

Taken as a whole, Harris’s acceptance speech positioned her as a center-left Democrat in the mold of Joe Biden rather than Bernie Sanders. It embraced what she termed the pride and privilege of being an American. And, as if to show that Republicans have not cornered the market on patriotism and American exceptionalism, she told her audience that together, they had the opportunity to write the next chapter of the most extraordinary story ever told. She ended her speech in the most traditional way imaginable, by asking God to bless the United States of America.

And, finally, there is this slightly surprising insight from Michael Hirsh from FP where he describes a view that Harris brought great understanding of new technologies and the threats that such technologies bring to foreign policy:

There is not much time to know a great deal more about her approach to foreign policy. But it’s also clear that Harris has created her own path on foreign policy—and that she represents the next generation of national security experts steeped in newer, high-tech threats that the Cold War generation represented by Biden is less familiar with. These encompass an array of ​​cyber threats, including election hacking and surveillance from abroad, allegedly including from state-run companies such as China’s Huawei; threats from space, such as reported Russian or Chinese plots to disable GPS systems; and over-the-horizon risks from artificial intelligence and quantum computing.

In her speech at the Democratic National Convention accepting the nomination Thursday night, Harris briefly mentioned the high-tech threat while affirming that she would prove a tough commander in chief who would “ensure America always has the strongest, most lethal fighting force in the world.”

I will make sure that we lead the world into the future on space and artificial intelligence; that America, not China, wins the competition for the 21st century, and that we strengthen, not abdicate, our global leadership,” she said.

We may need to wait till she becomes President –  if that occurs – with November 5th. But we will continue to monitor what she says about a Harris foreign policy.

Image Credit: Vox

This Post originally appeared at my Substack, Alan’s Newsletter.

https://globalsummitryproject.substack.com/p/contemplating-in-these-early-days

The Trouble with Today’s Multilateralism: An Intro

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So in this week’s Post I was all set to hone in on the struggles over reenergizing faltering multilateralism in the current global order. Today’s  troubles encompass the formal institutions – the Formals – from the UN, and many of its specialized agencies to the international financial ones – the World Bank, the IMF and the WTO. And the troubles extend to the Informals, the G7, the G20 to the BRICS+ and more. The struggles over multilateralism are the flip side of the return, seemingly ever more strongly power politics – the wars in the Ukraine and Gaza, and geopolitics, especially the rise in bilateral tensions between China and the United States.

But before I could go there, I couldn’t ignore the just excellent article – recommended by my colleague, and China expert, John Gruetzner – in Foreign Affairs by Zongyuan Zoe Liu, titled, “China’s Real Economic Crisis: Why Beijing Won’t Give Up on a Failing Model”. This very good piece leaned strongly into the discussion I had raised in my previous Alan’s Newsletter Post, ‘China, Seemingly, Stays the Course’. The Post chronicled the disappointment expressed by analysts and experts in the West primarily but in a rather more modulated form in China as well. The disappointment according to these experts emerged over the failure in the Third Plenum to initiate significant economic reform in the Chinese domestic economy and a clear determination to tackle domestic consumption.

Liu gets it right:

The Chinese economy is stuck. … But there is a more enduring driver of the present stasis, one that runs deeper than Xi’s growing authoritarianism or the effects of a crashing property market: a decades-old economic strategy that privileges industrial production over all else, an approach that, over time, has resulted in enormous structural overcapacity.

 

Simply put, in many crucial economic sectors, China is producing far more output than it, or foreign markets, can sustainably absorb. As a result, the Chinese economy runs the risk of getting caught in a doom loop of falling prices, insolvency, factory closures, and, ultimately, job losses.

 

Since the mid-2010s, the problem has become a destabilizing force in international trade, as well. By creating a glut of supply in the global market for many goods, Chinese firms are pushing prices below the breakeven point for producers in other countries. In December 2023, European Commission President Ursula von der Leyen warned that excess Chinese production was causing “unsustainable” trade imbalances and accused Beijing of engaging in unfair trade practices by offloading ever-greater quantities of Chinese products onto the European market at cutthroat prices.

 

Despite vehement denials by Beijing, Chinese industrial policy has for decades led to recurring cycles of overcapacity. At home, factories in government-designated priority sectors of the economy routinely sell products below cost in order to satisfy local and national political goals.

Now there continues to be some contention over whether in fact production is below cost but I I was pleased by Liu’s ‘recommendation’ that the two – the West and China – consider options other than just piling on the tariffs. Liu correctly points out the negative consequences of such trade policy:

A China that is increasingly cut off from Western markets will have less to lose in a potential confrontation with the West—and, therefore, less motivation to de-escalate. As long as China is tightly bound to the United States and Europe through the trade of high-value goods that are not easily substitutable, the West will be far more effective in deterring the country from taking destabilizing actions. China and the United States are strategic competitors, not enemies; nonetheless, when it comes to U.S.-Chinese trade relations, there is wisdom in the old saying “Keep your friends close and your enemies closer.

That is why I have suggested negotiating – and one aspect in this case could be Voluntary Export Restraints or VERS. VERS are not super policy  actions – I get that  but they do encourage bilateral discussions rather than just unilateral penalties. As Liu suggest:

The U.S. government should discourage Beijing from building a wall that can sanction-proof the Chinese economy. To this end, the next administration should foster alliances, restore damaged multilateral institutions, and create new structures of interdependence that make isolation and self-sufficiency not only unattractive to China but also unattainable. A good place to start is by crafting more policies at the negotiation table, rather than merely imposing tariffs. … If the government [China] also implemented voluntary export controls, it could kill several birds with one stone: such a move would reduce trade and potentially even political tensions with the United States; it would force mature sectors to consolidate and become more sustainable; and it would help shift manufacturing capacity overseas, to serve target markets directly.

While working through the WTO might be preferable, and many analysts suggest such an approach for multilateral trade frictions, realistically that course of action is out of reach for the moment.

So there you are on the Third Plenum and global trade.  Let me at least turn to the original subject for this Post; let’s at least open the discussion on multilateralism and its problems. I was particularly attracted to a piece published recently by Pascal Lamy. Pascal Lamy (pascallamy.eu) is currently the Vice-President of the Paris Peace Forum, and coordinator of the Jacques Delors Institutes (Paris, Berlin, Brussels). Importantly, Pascal Lamy served two terms as Director General of the World Trade Organization (WTO) from September 2005 to September 2013. He is someone that is very familiar with critical aspects of the multilateral system. Recently his piece, ‘Reshaping the Global Order’ was published in a large edited volume by colleagues from the Center for China & Globalization, CCG,  Henry Huiyao Wang and Mabel Lu Miao, Enhancing Global Governance in a Fragmented World: Prospects, Issues, and the Role of China. Now Lamy sets out the critical structural issues that impair today’s multilateralism efforts. As he says:

The main long-term, structural factors at play can be summarized by sovereignty as a founding principle of an international order, by the obsolescence of the previous order, and by the US-China rivalry.

It is not surprising that he identifies ‘sovereignty’ as the first key to multilateralism’s problems:

Sovereignty has been, is, and will remain the main obstacle to building a fully fledged international order as long as it is accepted as the core principle of international law.

So many analysts acknowledge the burst in new actors in the international system: substate actors, regions and cities and also non-state actors like NGOs, large public and private corporations but all struggle against dominant state actors. National sovereignty dominates international relations and often leads to unilateral actions that undermines wider cooperation.

Then there is ‘obsolescence’.  This focuses around the elements of the system, especially the Formals that were put in place at the end of World War Two at a time when the Global South that has had such a recent impact on international relations existed primarily as colonies of the West:

Obsolescence has to do with the origins of the current global system, the architecture of which dates from arrangements made after the Second World War. The ‘universal’ nature of these arrangements is increasingly seen as a product of a past pattern of Western dominance at a time when new nation states are now reshuffling the old power distribution …

Lamy then targets the impact of the evolving international order:

All in all, the previous international order is being shaken by increasing North-South and East-West tensions and frustrations, and by a change in the balance between geoeconomics and geopolitics, the former losing the force it had gathered in recent decades, and the latter regaining its past dominance over world affairs. We are thus moving toward less of a rules-based system, and more toward the use of force. This context obliges us to consider new paths, tentative as they may be.

And finally Lamy underlines the rise of geopolitical tensions, especially between China and the United States, and the impact that these tensions have had on the current multilateral order:

The intensification of the US-China rivalry is the third main factor shaping the demise of the international order, as this rivalry increasingly pits the two main world superpowers against each other. Indeed, they now believe they have become dangerously vulnerable to each other—hence a change of view on both sides about globalization. Whereas the US and China previously celebrated the benefits of increased economic interdependence in fostering development and reducing poverty, they are now trying to address what today they consider as overdependence and have embarked on a decoupling journey which challenges the rest of the world with hard binary choices and which permeates international life in the form a sort of ‘cold war 2.0.’

So what is to be done? How can a multilateral system be revivified and made effective – bringing greater stability to the global order and energizing transnational global governance efforts?

That’s where we will start in the next Post.

Image Credit: Geneva Interdisciplinary Centre for Economics and Law

This Blog originally appeared as a Substack Post at Alan’s Newsletter – https://open.substack.com/pub/globalsummitryproject/p/the-trouble-with-todays-multilateralism?r=bj&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

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Challenging Leadership and Stability in the Global Order

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There are some recent insights worth examining. These insights underscore the current difficulties of US leadership in the global order. There are at least three critical issues that challenge US foreign policy leadership today. These include: the ‘shadow of Trump’; the continuing primacy demand of US leadership; and the harm inflicted by current US economic policy making. All three and more undermine continuing US foreign policy leadership in a changing global order.

First there is the ‘shadow of a Trump return’ to the US presidency. As quixotic as the first Trump term was, it appears that this prior Trump term likely will be a pale shadow of how a second Trump presidency will conduct itself. There are strong indications that Trump will direct retribution on those such as the Justice Department that he believes undermined his first term as President. And there will be others. And his inconsistent nationalist-isolationist impulses will likely once again be on full display in his relations with NATO, Ukraine, Russia and China. Buckle up!  It could be very ugly. But meanwhile the shadow of his return has caused friend and foe alike to hedge their relations with the US allies, Global South and Middle Power players, and, of course, presumed foes.

So, that is one source of current harm to US leadership. Then there is the continuing determination by the Biden Administration to maintain the US sole superpower leadership role. This can also be read as the US hegemonic position in the global order. The dilemma of US leadership in a changing power order is all too evident. And it is likely to carry forward into the next administration whatever the political stripe it is.

We were alerted to this dilemma really some time ago and by none other than former National Security Advisor, H.R.McMaster. McMaster was appointed in 2017 by President Trump and after leaving office he wrote about his career in: “Battlegrounds: The Fight to Defend the Free World”. There he raised the notion of ‘strategic narcissism”. While there is some contention over whether this concept was first voiced by the great international relations theorist, Hans Morgenthau, and McMaster raises that possibility, the point is the concept itself. Morgenthau did write an essay in 1978 called, “The Roots of Narcissism,” but McMaster in his book carried the concept forward in his description of ‘strategic narcissism’. For McMaster, ‘strategic narcissism’ was:

the tendency to view the world only in relation to the United States and to assume that the future course of events depends primarily on U.S. decisions or plans.

I believe this concept and its elaboration helps us with a central concept in US foreign policy making. This framing aids us in understanding US approaches to leadership in international relations. That view was underlined in the recent piece by Ben Rhodes. It is well worth reviewing the insights provided by Rhodes in this very recent Foreign Affairs (FA) article. Rhodes has been directly involved in US foreign policy where from 2009 to 2017, he served as U.S. Deputy National Security Adviser for Strategic Communications and Speechwriting in the Obama administration. He has been close to Democratic policymaking for a long time including being close with many in the current Biden Administration. As he wrote recently in the FA piece outlining what he sees as a needed reassessment of Democratic foreign policy making:

An updated conception of U.S. leadership—one tailored to a world that has moved on from American primacy and the eccentricities of American politics—is necessary to minimize enormous risks and pursue new opportunities. … Meeting the moment requires abandoning a mindset of American primacy and recognizing that the world will be a turbulent place for years to come. Above all, it requires building a bridge to the future—not the past.

In particular Rhodes points to the Trump ability in current presidential competition to build on the negative reaction to Democratic policy making in the period after the end of Cold War and the ‘triumph’ of US leadership:

Trump has also harnessed a populist backlash to globalization from both the right and the left. Particularly since the 2008 financial crisis,

large swaths of the public in democracies have simmered with discontent over widening inequality, deindustrialization, and a perceived loss of control and lack of meaning. It is no wonder that the exemplars of post–Cold War globalization—free trade agreements, the U.S.-Chinese relationship, and the instruments of international economic cooperation itself—have become ripe targets for Trump.

And these insights also alert us to yet another weakness in the international system – the fading of multilateralism, at least formal institutions. As Rhodes points out:

Second, the old rules-based international order doesn’t really exist anymore. Sure, the laws, structures, and summits remain in place.

But core institutions such as the UN Security Council and the World Trade Organization are tied in knots by disagreements among their members. Russia is committed to disrupting U.S.-fortified norms. China is committed to building its own alternative order. On trade and industrial policy, even Washington is moving away from core tenets of post–Cold War globalization.

Even the high-water mark for multilateral action in the Biden years—support for Ukraine in its fight against Russia—remains a largely Western initiative. As the old order unravels, these overlapping blocs are competing over what will replace it.

Finally, and raised by Rhodes in his article is the Biden Administration’s turn away from free trade and access to the US market as others lower their barriers to freer trade. Protectionism has become rife under the Biden Administration guise of ‘industrial policy’ and such protectionism has been defended, I’d say promoted by Biden folks such as Jake Sullivan. As Sullivan argued early in the Administration, in fact before that in fact, he promoted quite loudly a policy for the middle class. As reported by Michigan State Representative Mari Manoogian, Sullivan urged:

In February 2021, national security advisor Jake Sullivan clearly defined the overarching theme of President Joe Biden’s foreign policy strategy as “foreign policy for the middle class.” The Chicago Council for Global Affairs contends that this Biden doctrine “recogniz[es] the linkages between American domestic strength and U.S. ability to maintain international competitiveness.” Under this new framework, foreign policy decisions, Sullivan indicated, would use the following simple rhetorical question as a basic metric for success: “Is it going to make life better, safer, and easier for working families?

But as FTs Martin Wolf has been loudly pointing out for some time in fact this is a strategy of trade protectionism cloaked within the frame of industrial policy all too frequently.  As Wolf recently wrote at his FT column:

Industrial policy works if it changes the structure of the economy in a beneficial direction. Unfortunately, there are well-known reasons why the attempt could fail. Lack of information is one. Capture by a range of special interests is another. Thus, governments may fail to pick winners, while losers may succeed in picking governments. The more money is on the table, the more the latter is likely to be true. … So, how should we assess this shift in US policy towards industrial policies, matched, on the Trumpian right, by a desire to return to the high tariffs of the late 19th and early 20th centuries?… The answer is that there are now at least three bipartisan positions: nostalgia for manufacturing; hostility to China; and indifference to the international rules that the US itself created. This, then, is a new world, one in which the international trading order could reach a breaking point quite quickly.

All of this is a dramatic threat to the stability and prosperity of the current global order.

Image Credit: E-International Relations

 

 

 

Biden Trade Protectionism

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There is a continuing interest in capturing the state of the current global political economy and the global economic policymaking of the major states – the US, China, India, Brazil, Europe, Japan, Korea, and others. Not surprisingly the debate is most active in the US. Experts and officials alike are intent in describing current Biden Administration policy. Most recently some experts have been labeling the global economic framework as ‘post- neoliberalism’, defining it, apparently, in contradistinction to the previous dominant policy framework – ‘neoliberalism’.  The dilemma of course is a definitional one as much as anything else  – the terms are well known, their meaning not so much. 

Recently, colleagues of mine have kicked off a discussion. One, Dan Drezner, from the Fletcher School and the Substack ‘Drezner’s World’ has waded into the policy mix, actually in an article from Reason titled, “The Post-Neoliberalism Moment”. As Dan early in the piece thought to frame first neoliberalism he suggested the following: 

The term neoliberal has been stigmatized far more successfully than it has been defined. For our purposes, it refers to a set of policy ideas that became strongly associated with the so-called Washington Consensus: a mix of deregulation, trade liberalization, and macroeconomic prudence that the United States encouraged countries across the globe to embrace. These policies contributed to the hyperglobalization that defined the post–Cold War era from the fall of the Berlin Wall to Brexit.

Dan made it clear, however, that this economic model no longer dominates: 

In the 16 years since the 2008 financial crisis, neoliberalism has taken a rhetorical beating; New Yorker essayist Louis Menand characterized it as “a political swear word.” Until recently, no coherent alternative set of ideas had been put forward in mainstream circles—but that has been changing. 

And what has been the replacement, well Dan suggests that its the politicians and officials that have been most active in leaving neoliberalism behind:

These ideas are being shaped by powerful officials. The primary difference between Biden and Trump in this area is that Trump’s opposition to globalization was based on gut instincts and implemented as such. The Biden administration has been more sophisticated. Policy principals ranging from U.S. Trade Representative Katherine Tai to National Security Adviser Jake Sullivan have been explicit in criticizing “oversimplified market efficiency” and proposing an alternative centered far more on resilience.

For elements of this policy transformation one need only look to recent Biden Administration policies including the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act. As Dan concludes, the totality of these policy initiatives is: “all represent a pivot to industrial policy—a focus on domestic production.” 

In constructing this post-neoliberalism model, folks argue that there is a necessary trade-off between resilience and efficiency. As Dan suggests: “A key assumption behind post-neoliberalism is that policy makers can implement the right policies in the right way to nudge markets in the right direction.” 

Now another colleague of mine, Henry Farrell from Johns Hopkins, tries his hand at a definition in a recent Substack Post at his ‘Programmable Mutter’, titled, “If Post-Neoliberalism is in Trouble, We’re all in Trouble”. The Post partly responds to Dan, and further articulates Henry’s view of post-neoliberalism. As he describes it: 

A key assumption behind post-neoliberalism is that policy makers can implement the right policies in the right way to nudge markets in the right direction. … I see post-neoliberalism less as a coherent alternative body of thought, than as the claim, variously articulated by a very loosely associated cluster of intellectuals and policy makers, that markets should not be the default solution. … More generally, post-neoliberalism isn’t and shouldn’t be a simple reverse image of the system that it has to remake. It can’t be, not least because it has to build in part on what is already there.

The dilemma, as I see it, for understanding any of these  post-neoliberalism models, and also, though less intensely – neoliberalism, is pretty much all definitional. The base of the problem is not really understanding what ‘resilience’ and ‘efficiency’ really mean. And that in turn causes confusion over trying to then understand ‘globalization’.  And that unfortunately builds vagueness into our understanding of these economic models especially over what we are to understand to be – post-neoliberalism. 

But what isn’t so difficult to understand is the problem that has been created in this post-neoliberal period by current trade policy especially as seen in the United States. Layer it as much as you can but the Biden Administration policy is ‘protectionist’ and the Trump Administration, was, and will in all likelihood be, even more protectionist if Trump is returned to office in late 2024. As Inu Manak has written in a recent piece for the Hinrich Foundation in Australia – a foundation focused on global trade: 

Trade has become toxic, not just on the campaign trail, but in the way that it is discussed by both Democrats and Republicans. “Traditional” US trade policy, which began to form its nearly century-old roots under the leadership of President Franklin Roosevelt and his Secretary of State, Cordell Hull, has been described by US Trade Representative Katherine Tai as “trickle-down economics,” where “maximum tariff liberalization…contributed to the hollowing out of our industrial heartland. … The current US approach to trade, if it can be called an approach at all, risks weakening US influence abroad and economically disadvantaging Americans at home. It rests on the false belief that retrenchment of “traditional” US trade policy—by putting America First or catering to a select group of US workers and branding such efforts as “worker-centric trade policy”—will somehow restore the United States to a position of hegemonic dominance with no peer competitor. 

The Biden Administration’s allergy to new trade policy initiatives can be seen in its Indo-Pacific economic strategy – the IPEF – the Indo-Pacific Economic Framework for Prosperity. This framework is intended to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for the fourteen countries negotiating the IPEF. The countries included are: Australia, Brunei Darussalam, Fiji India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam with the United States. The IPEF partners represent 40 percent of global GDP and 28 percent of global goods and services trade. Negotiations have proceeded well for three of the four pillars including supply chains, clean economy, and fair economy pillars but the Biden Administration has decided not to proceed in negotiating for fair and resilient trade. As William Reinsch at CSIS described the situation: 

The commentariat is busy these days debating the future of the Biden administration’s trade policy in the wake of its effective abandonment of the trade pillar in the Indo-Pacific Economic Framework (IPEF) negotiations. (The administration says the talks will continue, and I imagine they will, but I don’t see a conclusion, at least before the election.) The policy is clearly a failure at this point, …

As colleague Ryan Haas of the Brookings Institution, and a former US official – from 2013 to 2017, Hass served as the director for China, Taiwan and Mongolia at the National Security Council (NSC) staff – underscored in his examination of trade policy in the Indo-Pacific: 

These constraints will be most visible on trade. The absence of a credible trade and economic agenda for Asia has been the Biden administration’s greatest weakness. Political and national security imperatives will continue to drive the United States’ approach to trade. Do not expect any outbreak of creativity or boldness on trade by the Biden administration in 2024.

The Biden Administration failed to roll back the tariffs imposed by the Trump trade folk. It is a major failure of US trade policy and an expression of the Biden SAdministration’s trade protectionism. It bodes ill for growing the global economy and achieving productivity gains for the United States and others.

Image Credit: E-International Relations

This Post originally appeared at my Substack Post Alan’s Newsletter – https://open.substack.com/pub/globalsummitryproject/p/biden-trade-protectionism?r=bj&utm_campaign=post&utm_medium=web&showWelcome=true

 

‘The Decline of US Hegemony and its Consequences for the Global Order’ – A Roundtable at the International Studies Association

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ISA 2023: Exhibit, Advertise, and SponsorSo, the International Studies Association (ISA) just concluded in Montreal  after a visibly energetic in-person gathering following several years of virtual meetings only.

I was fortunate enough to chair the roundtable. All sorts of good folk attended including panelists: Arthur Stein, UCLA, Lou Pauly, University of Toronto, Yves Tiberghien, University of British Columbia, and Kyle Lascurettes, Lewis and Clark College. Unfortunately, our colleagues, Janice Stein could not join but I was fortunate enough to receive her speaking note and I have tried to reflect some of her thinking with the notes from other colleagues.

What didn’t surprise me, of course, during the session was the recognition from all that we have a fraught period of transition in the international system. There is the obvious Russian aggression against Ukraine and the challenge by Russia to some of the basic tenets of the current order – most notably territorial integrity and national sovereignty. There is also the obvious growing leading power tensions between the US and China and the growing threat of confrontation and conflict especially over Taiwan that currently stock the relationship. There was the obvious attention to US determination to sustain dominance even in the face of a dramatic power transition with the emergence of China and more broadly the Global South – India and other Indo-Pacific nations including Indonesia, etc. and other Southeast Asian states and then, of course, the return of Lula to Brazil.

But raw geopolitics did not dominate the discourse of the Roundtable. Equally significant in our discussions was the acknowledgement of the continuance of the intergovernmental institutions and collective actions of states to advance global order and achieve collective action within the framework of the current and evolving Order. While some decried the faltering of the global institutions, nevertheless, there was general acceptance that regional and other informal order-based institutions continued advance policies in various ways. AS one of my colleagues Kyle Lascurettes noted: “There is a truly global rules-based order that stands a good chance of outliving American hegemonic decline. But the so called “liberal” or “Western” rules-based order is and will be in trouble.” Indeed, the liberal order or the Liberal International Order (LIO) disappeared, I’d argue with the Global Financial Crisis” in 2008 but the Global Order does indeed remain. And, as Yves Tiberghien focusing on the dramatic power transition suggested: “today is a time of disruption and transition – a special phase. Major shocks, change, crises, innovation will take place over the next 1-2 decades … Also shift in awareness. Western dominated order was an anomaly of last 200 years, with a rise phase for 300 years before that. Return of multiple voices all over the world. Return to a diverse, polymorphic, poly polarity.” As Jagannath Panda recently wrote in an EAF blog on March 20, 2023:  “Obituaries of the US-led liberal international order may be exaggerated, but the shift towards multipolarity is in motion.”

And what then do we have as the Global Order, and how will it advance. Arthur Stein recalled the fragile nature of the Order, which he described for me in his opening chapter of my 2008 edited volume – Can the World be Governed? The global order, he wrote then, and repeated at our Roundtable was:  ‘a weakly confederal world’. As he said at the time (2008, 52) : ”In fact, one could argue not only that multilateralism is an existential reality but that weak confederalism is the nature of modern reality.”

So the LIO has faded,  and what remains is the global RBIO (rules-based international order). Weaker and less collaborative – indeed as Arthur pointed out, the low hanging fruit of cooperation has passed and it is and will be increasingly difficult to reach collaborative solutions . But as Yves points out that there is continuing support for aspects of the Order including with China where Yves notes the significant China support for COP15 the Conference on  Biodiversity where the multilateral conference came together to agree on a new set of goals to guide global action through 2030 and to halt and reverse nature loss and the recently concluded agreement on the text for the critical High Seas Treaty. The challenge for the leading powers is to maintain a forward collaborative thrust, and as Lou Pauly warned, it is critical for the US to accept: “The challenge is to overcome perennial tendencies toward either insularity or spasmodic over-extension, toward temporizing on necessary decisions, toward shifting the costs of adjustment to the relatively poor internally, and toward exporting the rest of those costs to other countries.” It will not be easy; and Arthur reminded us that American domestic politics has been a problem since 1919 and continues today with the failure to approve through the US Senate, international agreements and the often strained effort to use executive power.

As Janice Stein alludes to in her notes: “Plurilateral and minilateral institutions – from AUKUS to IPEF to Trade and Technology Councils will be the principal sites of innovation. I have called this process “taking it offsite.” New institutions are being stood up, led by the willing, who set rules and invite others to join if they wish. One could argue that we are entering a period of start-up innovation in the creation of new, smaller, more flexible, and more focused institutions.

Although Janice may be a touch pessimistic over multilateral collaborative action, the Global Order has its worked cut out for it to avoid great power conflict and achieve critical global governance policies in climate, global finance, global health and much more.

 

Image Credit: ISA