Leadership – or Not

Posted on October 20, 2024 by Alan Alexandroff

The killing of Yahya Sinwar in Gaza, as many observers have suggested, may impact on the continuation, or a possible cessation of the conflict in Gaza. Some like Tom Friedman of the NewYork Times, and other commentators have even suggested that it could have possibilities beyond just the Gaza conflict. But all this rightly raises again the influence – and dare I say the leadership – of the United States. This question of US leadership brings attention not just to Israel and the region but beyond and raises real questions of US leadership with the global order.

On the Middle East front the US has expressed strongly its belief that it is time to end the war. As David Sanger of the NYTimes suggested in his analysis of the current state of relations:

Within hours of the death of the Hamas leader Yahya Sinwar on Thursday, President Biden and his aides scrambled to design one last push for a broad de-escalation of violence in the Middle East: a cease-fire and hostage deal in Gaza, a pullback from Israeli attacks on Hezbollah in Lebanon, a confident declaration of victory by Israel that might allow it to forgo a major retaliation against Iran.

It is time for this war to end,” Mr. Biden said as he emerged from Air Force One when it landed outside Berlin late Thursday. He added that he had called Prime Minister Benjamin Netanyahu of Israel and urged him to “move on” from the war and focus on building a new political landscape for the region.

Tom Friedman elaborated on what was required beyond just a ceasefire, if the cessation is to have a real impact on international stability:

The broad idea is for the Palestinian Authority president, Mahmoud Abbas, to agree to appoint the economist and former P.A. prime minister Salam Fayyad — or someone of his sterling reputation for incorruptibility — as the new Palestinian prime minister to lead a new technocratic cabinet and reform the Palestinian Authority, root out corruption and upgrade its governance and security forces.

Such a reformed Palestinian Authority would then formally ask for — and participate in — an international peacekeeping force that would include troops from the U.A.E., Egypt, possibly other Arab states and maybe even European nations. This force would be phased in to replace the Israeli military in Gaza. The Palestinian Authority would then be responsible for rebuilding Gaza with relief funds provided by Saudi Arabia, the U.A.E. and other Arab Gulf states, Europeans and most likely the U.S.

A reformed Palestinian Authority, with massive Arab and international funds, would attempt to restore its credibility in Gaza, and the credibility of its core Fatah organization in Palestinian politics — and sideline the remnants of Hamas.

The problem, at least immediately, however, is as David Sanger points out is that there is no interest by Prime Minister Netanyahu, it seems at this moment, to accept even a ceasefire let alone steps beyond:

Nothing in his face-offs with Mr. Netanyahu suggests that the Israeli prime minister will take his advice or seize the chance to turn the military victories into a lasting political accomplishment. One of Mr. Biden’s senior aides said the administration’s concern was that the killing of Mr. Sinwar, and before him the killing of the Hezbollah leader Hassan Nasrallah, ratifies in Mr. Netanyahu’s mind his certainty that he was right to deflect American calls for de-escalation over the past few months.

These observations seem to target the immediate difficulties that such a US plan envisages. But it is beyond that. The underlying question that is there, and ultimately more impactful, is the influence of the US in this situation but beyond it in other international arenas such as the Ukraine, the South China Sea and Taiwan. What is the capacity and policy chops of the US to influence and indeed to pressure allies and foes alike to accept outcomes that the US identifies as improving the state of relations and hopefully terminating conflict and stabilizing, or even possibly improving relations among the countries and more broadly the system?

As Ross Douthat of the NYT recently wrote in an article titled, “America needs a President”:

In neither case, though, does the world’s most powerful country seem to have a real handle on the situation, a plan that it’s executing or a clear means of setting and accomplishing its goals.

He further argues:

Scenarios where great powers end up led around by their allies and clients are not historically unusual. But it’s hard to escape the impression that America’s current difficulties are linked to a very specific problem: the vacuum at the heart of this presidency, the slow fade of Joe Biden from the normal execution of his duties, the general uncertainty about who is actually making decisions in U.S. foreign policy.

But it seems to me that a focus on the twilight of the Biden years as an explanation for US inability to shape conflict outcomes is a bit of a cop out. Rather as I see it, it seems to me that the US has come to a point where it is unwilling to fashion credible threats on friends and more importantly on foes. The key action mechanics of leadership – credible threats and equally credible assurances – are increasingly missing. As noted by Douthat:

Today’s restoration of deterrence could become tomorrow’s overreach or quagmire. For another, America has global responsibilities, not just regional ones, and a widening war in the Middle East could be bad for the American position in Asia and Eastern Europe no matter its outcome for the immediate participants. If the United States can’t exert real leverage over countries that it arms and supports, a weakening Pax Americana will end up hostage to too many interests not our own.

And that is the concern and the nub of the global order issue. And while there is a reflection, as noted above, that it is this President who has lost influence recently as he comes to the end of his Presidency, the weakness of America’s efforts extend beyond this, it appears to me.

The dilemma in my mind lies more with the rise of nationalist, even populist politics. We need not go to the most extreme versions of this populist view, as expressed by Donald Trump.The fact is it has spread to Democratic politics with Biden but it would appear with his advisers and to Democratic Presidential candidate, Vice President Harris as well. It can be seen most prominently with US trade policy. You need go no further than this administration’s determined effort to neuter the international trade dispute mechanism, the WTO. In addition, it extends to the growing willingness of US administrations, starting with Trump but infecting the Biden administration also to use tariffs, and increasingly so, as a trade policy. Michael Froman, currently President of the Council on Foreign Relations, and who served as the U.S. Trade Representative from 2013 to 2017 during the Obama Administration has examined current US trade policy:

For much of the last century, in response to the disastrous 1930 Smoot-Hawley tariffs, the United States’ international economic policy was focused on liberalization and integration. Competitiveness, efficiency, and growth were the metrics of success. This framework achieved many of its objectives, contributing to the biggest reduction in poverty in human history, opening vast new markets to U.S. exports, and greatly strengthening the comparative advantage of U.S. firms. At the same time, attention it paid to particularly vulnerable groups of workers and their communities. The advent of China as a strategic competitor further highlighted the limitations of that approach. The rules-based system was not designed to accommodate an economy that is so large and so integrated and yet is determined to follow a fundamentally different set of rules.

The result is the enlargement of protectionism signaled by National Security Adviser, Jake Sullivan:

April 2023, U.S. National Security Adviser Jake Sullivan delivered a critique of the neoliberal consensus that had served as the foundation for international economic policy for nearly a century. In a prominent speech, Sullivan suggested that the United States was moving on from an agenda of global integration and trade liberalization.

To protect Americans and to take on China, Sullivan contended, Washington would no longer shy away from raising tariffs, imposing restrictions on exports and foreign investment, and engaging in domestic industrial policy. It was an important speech for a number of reasons, not the least of which was that it was delivered by the national security adviser, not the treasury secretary, commerce secretary, or U.S. trade representative. …

Consistent with Sullivan’s framework, the Biden administration has embraced a range of economic tools: export controls, restrictions on inward and outbound foreign investment, tariffs, industrial policy, and antitrust enforcement. Many of these tools enjoy broad bipartisan support.

If they are to form the basis of a new, enduring Washington consensus, however, the next president—whether Trump or Kamala Harris—will need to develop a more systematic approach to using them. That means understanding their limitations, developing principles to guide their use, and grappling fully with the tradeoffs they involve.

But I am not heartened by this approach on trade, and the wider implications of a nationalist approach to policy well beyond trade policy. The direction of US leadership is troubling. We are only too aware of where it could go with Trump but the signals are not positive for a Harris administration either.

Image Credit: US Institute for Peace

The Enduring Weakness of Multilateralism: An Aspect

Posted on September 13, 2024 by Alan Alexandroff

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

The Trouble with Today’s Multilateralism: An Intro

Posted on August 9, 2024 by Alan Alexandroff

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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China, seemingly, stays the course

Posted on August 2, 2024 by Alan Alexandroff

It is hard to resist not commenting on Donald Trump’s views, so I will if just briefly. In this instance the comment is over Kamala Harris’s racial makeup. It is ‘weird’ as the Democrats have started saying. In fact that barely describes his comments on her. Mind you, I doubt that it is the last time we will hear such ‘jaw dropping insights’ from Trump when it comes to his likely opponent Kamala Harris.

All right, let’s turn to today’s focus – the state of US-China relations following China’s Third Plenum – really focusing on the Third Plenum. This gathering is the Third Plenum of the 20th Party Congress, which brought together the Party’s top leadership, including all the members of the Central Committee and the Politburo of the Chinese Communist Party. Third Plenums in particular have especially been closely followed. Why? Well, it really began with the Third Plenum of the 11th Party Congress in December 1978. That Third Plenum ushered in a series of policy changes championed at the time by Deng Xiaoping. This Plenum was in retrospect the start of the ‘Reform and Opening Era’ which was followed by the Third Plenum of the 14th Party Congress when the leadership identified the goal of creating a ‘socialist market economy’. And, at the 18th Party Congress in November 2013, the CCP emphasized in that Third Plenum, “the decisive role of the market in allocating resources,”. So, it is not unreasonable for experts, officials, etc. to look at each 5-year Third Plenum to identify signals for domestic economic reform which many then anticipate impacts on the global economy with China’s increasingly central role on the international economy.

It’s not a surprise, then, that there was a degree of anticipation for this Third Plenum which had been postponed for months, especially given the flagging Chinese economy. Our colleagues at CSIS including Jude Blanchette and Scott Kennedy described the tortured passage of policy creation:

According to a CCP website, the document went through 38 drafts. Right after the conclave ended, the CCP issued a communique (English, Chinese) summarizing the results of the meeting. On Sunday, July 21, the text of the full, far more detailed Decision (English, Chinese) was issued, which provides a stronger foundation for evaluating the meeting’s significance.

So where are we and what consequences are likely to follow the policy pronouncements?

There was a lot of anticipation. As pointed out by Bert Hofman in his Substack Post:

This year’s third plenum was highly anticipated due to several factors. The multitude of structural challenges that China’s economy is facing—debt, demographics, demand, deflation, and decoupling—require the robust economic reforms that third plenums tend to deliver. Second, China’s propaganda machine had built up the plenum’s importance, comparing it with breakthrough plenums of the pasts.

But for most analysts the outcomes have been rather disappointing. As pointed out, again by Bert Hofman, the hoped for policy tilt and more toward markets and/or greater domestic consumption is not evident in the Declaration:

This year’s plenum has dropped the decisive role of the market. Instead, it proposes that the party should “better leverage the role of the market.” This is hardly an encouragement of the private sector, whose confidence is still recovering from regulatory crackdowns and COVID lockdowns. At the same time, in a press conference after the conclusion of the plenum Han Wenxiu, deputy director of the Central Financial and Economic Affairs Commission’s general office, and a main drafter of the plenum decision document, said that it was “necessary to create a favourable environment and provide more opportunities for the development of the private sector” in China.

Nevertheless, the omission of the market’s decisive role is in line with the more statist view on development that has been gaining grounds under Xi Jinping, and that the private sector will be increasingly guided by the party and restricted by regulation.

But the nature of reforms has changed—whereas in previous plenums reforms were predominantly aimed at facilitating marketization and liberalization of China’s economy, they are now meant to strengthen the policies and institutions that underpin Xi Jinping’s view of the world.

The party-state dominance seems to be fully in charge. And China can be expected to stay the current course for domestic economic growth and prosperity. As Scott Kennedy argues:

The Communique and Decision give the distinct impression that despite the economy’s various structural problems and cyclical downturn, the CCP is not going to change course, but instead will intensify its efforts to steer the economy on to a sustainable long-term path. The central focus for generating “high-quality development” will be on expanding focus on advanced technologies, what are now ideologically described as “new productive forces” (新质生产力).

That said, the Plenum’s analysis and policy proposals on the economy are likely to draw a more skeptical reaction from a variety of corners, domestic and international, because of its deeply statist focus: 1) A strong emphasis on the central role of China’s party-state in directing the economy; 2) The prioritization on investment and production as the drivers of growth and far less attention to consumption and households; 3) Continued support for the “public sector” and state-owned enterprises (SOEs) even while pledging to create a level playing field for private firms; 4) A discussion of the global economy that proposed incremental expanded market access to China while stressing the need for China to leverage its large market for its own benefit; and 5) The expansive discussion of national security and the need to align economic policy with national security, which as Jude Blanchette notes, is centered around the security of the CCP.

Scott’s colleague at CSIS, Claire Reade, underlines that trade partners are unlikely to be fooled by this Plenum Declaration and trade tensions as a result are unlikely to abate and that’s without taking into account the likely economic earthquake of a second Trump Administration:

The latest Third Plenum Decision declares that “overall, we have accomplished the reform tasks” set out in 2013. Since this is patently not the case, it is particularly discouraging. The decision ironically then highlights the gap between its triumphant conclusion and reality by going on to pledge that by 2029, the market will determine the allocation of resources, and private domestic and foreign enterprises will obtain equal treatment with state-owned enterprises.

On balance, trading partners need to continue to be savvy and proactive in taking steps to protect their economies against this massive, state-heavy economy, and companies need to look carefully at their own risk management.

It is not surprising that various Chinese experts are suggesting that a more incremental approach was always a more likely approach of the President and the Party. Here is Huang Yiping, who is the Dean of the National School of Development at Beida, or Peking University, assessing on the Pekinology Substack Post the policy approach coming out of the Third Plenum:

The first point you probably all saw is that the Asian market dropped after the Third Plenum, especially after the full document was out. So some people felt a little bit pessimistic. My own sense, my take, is that the market was probably too optimistic about what they should expect.

So some people felt a little bit pessimistic. My own sense, my take, is that the market was probably too optimistic about what they should expect.

In fact, if you were paying attention to what the President himself was saying and the message government officials were trying to convey to the public. It was pretty clear this would not be a grand-scale liberalization program. This will be about reform, about modernization. But the key approach, the President outlined himself very clearly. He called it running towards the problems and trying to correct them. So it’s more like a down-to-earth and very practical approach—when you try to see the problems, you try to overcome them.

So when you say, well, the market is disappointed. That’s probably true, but either because the expectation was just overly too high or No. 2, I think the reason why investors are not very upbeat at the moment is because the macroeconomy is not doing particularly well.

Huang Yiping is aware, however, of the consumption problem:

Weak consumption causes two problems. No. 1 is you obviously would easily end up with a domestic overcapacity problem, right? You produce a lot, you invest a lot, and then the final consumption demand is very weak. That means there will be a certain portion of the capacity you cannot find domestic buyers for, and you call it overcapacity. That’s why during the last 45, 46 years of Chinese reform, we almost always had the overcapacity problem.

I think the macroeconomic problem is there is a macro imbalance. Consumption and demand and supply are not very balanced. So that’s one big issue.

So where does that leave us? I anticipate there will be continuing if not growing trade tensions with the US and with Europe as well as China continues its ferocious pace of manufacturing exports and fails to encourage greater domestic consumption. At least to constrain these tensions and protective trade actions in the absence of the WTO, it might be useful to try and negotiate VERs – ‘voluntary export restraints’ with China. It is not optimal – far from it – but it could avoid a trade ‘bloodbath’.

An important opportunity has been missed for the moment and may in fact be even more dramatically lost if Donald Trump wins the next election in November. Let’s hope the US electorate is smarter than that.

Image Credit: CNN

Challenging Leadership and Stability in the Global Order

Posted on June 21, 2024 by Alan Alexandroff

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

Posted on January 20, 2024 by Alan Alexandroff

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 March of Global Order

Posted on November 16, 2020 by Alan Alexandroff

This Post is a collaboration with Yves Tiberghien Professor of Political Science at UBC and RisingBRICSAM blogger Alan Alexandroff.both Principals at the Vision20. It underscores that key actors in Asia, Europe and elsewhere are not waiting on the United States to return to global collaboration and multilateral action.

Out of Asia there is a major push on various global governance fronts. The world is not waiting for the United States. And in fact Joe Biden, the President Elect and his people are going to have to think ‘hard’ about whether they are prepared to be ‘left behind’ in the march forward of various multilateral gatherings. Are the demands of domestic politics and the Democratic Party’s distaste for ‘free trade arrangements’ going to leave the Biden Administration lukewarm to rejoining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP? Lukewarm leaves the United States on the outside of efforts to integrate trade and investment in Asia and beyond.

While the Regional Comprehensive Economic Partnership (RCEP) is a limited integration of trade and investment, nevertheless the RCEP is the largest regional agreement concluded in Asia. The Pact covers 2.2 billion people and 15 countries . It includes China and other major economic actors including Japan and South Korea. As the NYTimes (2020) points out:

The pact will most likely formalize, rather than remake, business among the signatory countries. Its so-called rules of origin will set common standards to determine whether a final product qualifies for duty-free treatment, potentially making it simpler for companies to set up supply chains in several different countries.

While the RCEP lacks significant and needed steps to further liberalization and common regulation in key areas such as services trade, e-commerce, intellectual property protection and the elimination of manufacturing subsidies it is a key advance for the Asian region. As pointed out by Yves Tiberghien (2020) in a just published EastAsiaForum post:

RCEP will advance the acceleration of regional economic integration in Asia, and pushes back on Trump’s strategy of decoupling of US allies from China. While Southeast Asian countries, Japan, South Korea, and Australia may all be wary of China at the moment and seek diversity in their trade relations, they simply cannot sustain their prosperity without stabilisation of trade relations with China. Asia is criss-crossed by ever intensifying value chains, and China’s still an integral part of that. Vietnam and other ASEAN countries are rising as manufacturing hubs, but that’s a process accompanied by increased imports of intermediary goods from China.

But RCEP is also of global significance. The agreement, signed off in the middle of a pandemic and US–China trade war, reminds the world, first, that East Asia countries, unlike the Americas and Europe, have broadly succeeded in controlling COVID-19. That success, across different types of political regime, with a similar respect for science, expertise, and trust in government, was accompanied by general acceptance of mask-wearing and community rules.

Second, it also reminds the world that the biggest trading group in the world economy is doubling down on the rules-based multilateral system. Research by Homi Kharas shows that most of the increase in the global middle class until 2030 will take place in China and Asia.

RCEP also embeds the first trilateral agreement between China, South Korea and Japan, itself a huge deal. The common interests of these three countries have over-ridden tense geopolitical relations across the Asia Pacific. RCEP underscores the pragmatic efforts of Japan to balance its strong security stance on the South China Sea and in the East China Sea with stability in the bilateral relationship with China. After the completion of the CPTPP, the EU–Japan partnership, and the US–Japan agreement, this marks the completion of the Abe trade agenda (even though Japan would have preferred India to join RCEP). …

As well, RCEP brings significant institutionalization to Japan’s economic relations with China, including a new chapter on e-commerce (with a ban on data localisation requirements), rules on government procurement, and rules on intellectual property rights that go beyond WTO rules. The same calculations drive Australia’s readiness to sign RCEP in the midst of a bitter, but hopefully short-lived, trade fight with China.

The coming Biden Administration needs to rethink its reluctance to rejoin the CPTPP. If it fails to do this it could be on the outside of growing multilateral economic integration and possibly more.

Image Credit: Vietnam News Agency, via Associated Press.

Can the G20 Maintain Progress at Osaka in Global Governance – Part One

Posted on June 27, 2019 by Alan Alexandroff

Gathering for the G20 Osaka Summit

With this post RisingBRICSAM ‘returns to the air’. First up are the Vision 20 reflections on the impending G20 Osaka Summit. The Vision 20 principals include: Colin Bradford, Brookings, Yves Tiberghien, University of British Columbia and Alan Alexandroff, Munk School of Global Affairs & Public Policy, University of Toronto.

As we have expressed in the past, “Our ‘Visioning the Future Project’ focuses on defining the future by building a new blueprint of values and organizing principles for the global system.” The V20 is committed to a well-defined goal: a new and better articulation of the relationships between global, national, and local levels. We also emphasize new avenues for dialogue across cultural, regional, and North-South divides to avoid
a downward cycle of mutual misperceptions. The V20 has urged, principally through the Blue Reports, that G20 Leaders reach out with far greater efforts and with accessible messages that can better speak to their own publics and work to assist their publics to understand the collaborative efforts these Leaders and their officials strive to achieve through the G20.

And now to our examination of the Osaka G20 Summit.

Continue reading →

The Threat is Real – The Global Order and Its Travails

Posted on November 10, 2016 by Alan Alexandroff

Donald Trump greets supporters during his election night rally in Manhattan.

There is no doubt today about the threat to the Liberal Order. For decades we thought the the greatest threat to the Liberal Order was posed by those outsiders, the bad Russians, Mao’s China, other authoritarian adversaries.

But we were wrong!

The election of Donald Trump as the 45th President of the United States poses the greatest challenge yet to the Liberal Order the United States and its allies built after World War II. Gideon Rachman in the FT , yesterday, November 8th, expressed it well:

Mr Trump’s proposed policies threaten to take an axe to the liberal world order that the US has supported and sustained since 1945. In particular, he has challenged two of the main bipartisan principles that underpin America’s approach to the world. The first is support for an open, international trading system. The second is the commitment to the US-led alliances that underpin global security.