The United States remains the world’s sole superpower, the only nation capable of projecting military, economic, and soft power in every region of the globe. The US consumer market is still the world’s largest, bolstering the government’s diplomatic and economic influence. The dollar remains the world’s most important currency. The US is the world leader in spending on research and development. Its companies are among the most innovative. Its universities draw from among the world’s finest students and faculty members. Its workforce is not ageing nearly as quickly as counterparts in Europe, Japan, or China. The country’s openness, the reliability of its rule of law, and the ability of its corporations and investors to prosper in spite of Washington’s partisan political paralysis provide lasting competitive advantages. The US will remain the world’s sole superpower for the foreseeable future.
These advantages arm US policymakers with tools that do not depend for their effectiveness on support from others. US cyber capacity remains unrivalled. Its drone technology is without peer. Washington’s ability to “weaponise finance” – for example, inflicting severe damage on other countries by denying them access to the world’s largest consumer market, to key technologies, and to the use of the dollar to facilitate
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commerce – is without historical precedent. These tools have become increasingly important because the wars in Iraq and Afghanistan, the longest in US history, leave the public deeply reluctant to support any overseas intervention that might require long-term commitments of troops and taxpayer dollars. This is why the architects of US foreign policy have turned in recent years to “economic statecraft” or “geo- economics” – the use of economic tools to advance political goals. As secretary of state, Hillary Clinton effectively made the case for a geo-economic approach to foreign policy. That approach is sure to continue if she is elected president, and indeed it is the most likely path for next-generation US foreign policy no matter who wins in 2016. This is at least as much a matter of necessity as of political expediency. Europe’s most powerful governments are likely to follow a similar path, because the sheer range of internal and external challenges facing European policymakers will leave its peoples unwilling to accept the costs and risks that come with a more traditional foreign policy. China has already invested deeply in the geo-economic model, because it is the country’s market weight and economic power, not its military potential, which confer its growing international influence.
Unfortunately for the US, the Chinese and German governments are much better positioned than it is to implement effective economic statecraft. In Washington, it is the Pentagon, the intelligence community, and, to a lesser extent, the State Department that receive the lion’s share of government resources. The Commerce Department, the Energy Department, and the Office of the US Trade Representative face much better resourced competitors in other leading developed and developing countries. The Japanese government directly supports trade in ways that are not part of the US political culture. The Russian government uses energy exports as weapons of coercion in ways that are impossible in the US, where these resources lie mainly in private hands. The Chinese government supports corporate espionage on a scale unrivalled in the US or anywhere else.
In the US, it is the Treasury Department that implements economic sanctions. The Justice Department imposes fines on foreign banks and companies, but the motives for these penalties tend to be regulatory rather than political. This is another area where Secretary Clinton worked to sharpen the tools of economic statecraft, but the
State Department is still organised on a regional basis rather than by economic sectors, and there are surprisingly few officials within its bureaucracy with a background in business and investment.
Further complicating Washington’s ability to accomplish foreign policy goals through economic statecraft is the practical and cultural aversion many corporations have towards government involvement in their strategic planning. Here, the contrast with China and its 112 centrally controlled state-owned enterprises is most obvious. Decision-makers in US companies operating overseas must abide by Washington’s rules and regulations, but they ultimately answer to shareholders, not officials. Most alarming for those who favour a forceful and coherent US foreign policy is the growing tendency of Congress to actively sabotage elements of the president’s foreign policy agenda. It is one thing to oppose a major trade deal that the Senate has the right to vote on. It is quite another for a member of Congress to send a letter to a foreign leader designed to sabotage a deal before it is brought to lawmakers for a vote, as Republicans did in part of an effort to block the Iran nuclear deal. Long gone are the days when “politics stopped at the water’s edge”. Petty partisanship and post-Cold War complacency have plainly eroded any US president’s ability to build support for a durable foreign policy agenda – whether built on the projection of hard power or on grand geo-economic strategy.
US policymakers cannot afford to accept this sorry state of affairs if the country is to reverse the loss of its international influence. The challenge from China will grow in coming years, and competition and conflict are more likely to take place in financial markets and cyberspace than in traditional arenas of confrontation like the Taiwan Strait or the East China Sea. Washington must recognise this and adapt to meet the demands of a world in which power will increasingly be defined in geo-economic terms.