War by Other Means

by Robert D Blackwill

  Before fully discounting the possibility that TPP was crafted as a piece of foreign policy, however, there is one additional prospect to consider. Whatever the geopolitical benefits of a more geoeconomic-minded TPP, these benefits could also carry costs—costs that, from a foreign policy perspective, could outweigh the benefits. Perhaps for the United States, all things considered, upholding the rules-based system still remains the best strategy for maximizing present U.S. geopolitical objectives, and perhaps policy makers have further determined that the United States would be better off with a strategy that did not make this insight manifest. After all, the United States still supplies far more global public goods than any other country, including policing of the global commons; the rules-based system is in many ways meant to ease the cost of those tasks, and so the United States has more to lose if that system collapses on itself.

  To put the point another way, it might be the difference between what basketball fans call “big ball vs. small ball”—the difference between strategy and tactics. So while the United States does not transparently respond to the various geoeconomic displays by China or Qatar, it does so advisedly, in the belief that responding in kind would harm or jeopardize other, far larger geopolitical benefits accruing to the United States. And so just as John Maynard Keynes, Harry Dexter White, and other British and American officials deliberately came to a view that the formula they settled on at Bretton Woods in 1944 was in fact the blueprint most advantageous to U.S. national interests at the time, U.S. officials could well conclude the same still holds true, albeit for their own, contemporary reasons. However, arriving at this sort of conclusion after rigorously evaluating what sort of trade policy maximizes U.S. geopolitical goals is altogether different from coming to this same conclusion out of a reflexive belief that foreign policy considerations have no real standing in trade deliberations.

  In the case of TPP, which was it? Did U.S. officials opt to exclude foreign policy interests as falling outside of TPP’s scope after careful consideration, or were foreign policy objectives excluded out of neglect or on principle? Had the design choices in TPP been to any meaningful degree about geopolitics, one would have expected to see some concerted attempt to assess those relative foreign policy benefits against their costs. There is no evidence any such effort was made.

  Of course, just because TPP has not to date been a geopolitical exercise for the United States does not mean that Washington policy makers have shied away from invoking all arguments, including foreign policy and national security arguments, in seeking public and congressional support for the agreement. In fact, some of the same White House officials who oversaw the U.S. push to drop the term “strategic” from TPP’s official name have gone on to become the most vocal public champions for TPP on foreign policy grounds, calling TPP “the perfect example of how the economic and strategic logic of U.S. trade policy are mutually reinforcing.”19

  A strikingly similar story can be told for the Transatlantic Trade and Investment Partnership. Many in the White House and the Office of the U.S. Trade Representative voiced private disgruntlement in the fall of 2012 when Secretary of State Hillary Clinton pressed for TTIP as a strategic project, presenting TTIP as an “economic counterpart to what NATO represents on the security side.”20 The complaint was that such a portrayal of TTIP unduly geopoliticized trade policy. Yet eighteen months later, when Russian aggression in Ukraine and coercion elsewhere in former Soviet space became a rallying point for U.S. and EU trade officials, some of these very same U.S. policy makers mounted arguments on TTIP’s behalf before Congress and the public with calls for, of all things, an “economic NATO.”21

  Such a schizophrenic posture is not surprising. The U.S. government comprises a variety of institutions, each with its own mandate and bureaucratic culture, and when it comes to accounting for a given policy choice, the sorts of reasons that are allowed to count as valid differ across these institutions. So while the principal organizations and policy makers charged with crafting U.S. trade policy—those leading the design choices in TPP and TTIP, and those with a veto over whether or not to negotiate a free trade agreement with a certain country—generally do not regard geopolitical factors as valid considerations in their policy making, other institutions, notably Congress, have their own sets of considerations guiding their decisions. Foreign policy, while largely absent in the U.S. trade representative’s calculus, generally is included in Congress’s.22 “From a standpoint of national security, this agreement is important,” Senator Chris Murphy (D-Conn.) explained in a September 2013 public event on TTIP, adding that he had opposed previous trade deals when he was in the House of Representatives but supported TTIP.23 “The geopolitical concerns are what really put this over the edge for many of us.”24 In sum, tailoring a pitch to one’s audience is one thing; crafting trade agreements with geopolitical considerations at the forefront—that is, conducting geoeconomic statecraft—is quite another. The problem is not so much that U.S. policy makers did not see fit to fashion these two trade agreements into robust geoeconomic tools; it is that they did not even consider it. Worse, for many policy makers the thought never even crossed their minds.

  In urging the United States to reinvigorate its brand of geoeconomics, the point is not to argue for a certain outcome but to shift the terms of debate. It may or may not be the case that were U.S. policy makers to use geoeconomic tools more or differently, other important U.S. interests would be undermined. Answers will vary from case to case and depend on facts. Before those judgments can even occur, however, policy makers need to specify ground rules for debating geoeconomic options—especially the kinds of reasons that are allowed to count as valid arguments. Currently, when U.S. policy makers oppose a potential geoeconomic move, their grounds for opposition often do not even reference maximizing U.S. foreign policy interests. These debates do not now begin with a shared acceptance of a common geopolitical purpose; it is not as if opponents of a given geoeconomic proposal simply prefer a different route to maximizing U.S. foreign policy interests. Instead, these critics often argue by reference to a set of inviolate economic principles and institutions. Whenever a given geoeconomic action is deemed to risk undermining these economic principles, or sometimes even just when it comes uncomfortably close to doing so, these principles are invoked as sacrosanct. Rarely is there any onus to prove that these economic principles are indeed at risk, let alone that privileging them over a given geoeconomic proposal best serves U.S. foreign policy objectives. The mere invocation of threats to the existing rules-based order are, for too many, sufficient to summarily end the debate.

  The result is that certain geoeconomic alternatives are never fully considered—and over time they fail even to be seen as possibilities. This dangerously circumscribes the scope of debate, impedes clear thinking, and deprives policy makers of the fullest accounting of all relevant options. Ironically, stifling debate in this way also poses a risk to the very economic rules and institutions that the more reflexive opponents of geoeconomics seek to defend. Like all laws and institutions, the international economic order and the institutions charged with administering it must have some permeability to politics; that is how they evolve and adapt. In too closely insulating these institutions from the tactical impulses and demands of U.S. geopolitical interests, in couching objections to certain geoeconomic options purely as threats to the institutional health of these organizations, the defenders of these institutions risk relegating them to irrelevance. To ask the United States (or any other country) to defend the institutional health of, say, the WTO or IMF for the sake of these institutions alone serves neither U.S. interests nor the interests of the institutions themselves.

  Of course, there is still plenty of room to argue, without standing atop sacrosanct economic principles, that the rules-based system remains America’s strongest geopolitical asset.25 In practice, however, this argument suffers from two problems. The first is that it tends to imagine that the system’s early benefits have continue
d unchanged and undiminished down to the present. This is not the case. However well this system performed as a U.S. geopolitical asset in the decades following World War II, it is delivering less and less in the way of strategic returns as rising powers (often through geoeconomic attempts of their own) undercut it.26 China has already set up more than a dozen parallel structures that analysts say are designed to systematically realign the international order away from the United States and toward Beijing.27 “This has been a power struggle,” one senior European official explained after the United States failed to dissuade some forty-six countries—including all but one of America’s treaty allies—to join China’s new Asian Infrastructure Investment Bank.28 “And we have moved from the world of 1945.”29 The second problem is that if indeed U.S. policy makers were rejecting various geoeconomic options out of deliberate concern for the rules-based system and the geopolitical value it holds, then one would expect to see U.S. foreign policy expending equally significant political weight and energy trying to shore up that system.

  Shortly after leaving office as chairman of the Joint Chiefs of Staff, Admiral Mike Mullen gave an account of what this might look like. Asked for his feedback on an early-stage draft of Secretary Clinton’s Economic Statecraft vision, Mullen answered that it “successfully paints the mountain.” The next major task is “translating this into a new vision to organize our foreign and economic policy.” Mullen went on to liken this task in scope and ambition to America’s foreign policy after World War II. Just as in the immediate postwar years, when all U.S. officials understood that all of their efforts—military, economic, or diplomatic—were to advance a liberal economic order, Admiral Mullen argued that the United States now needs a new organizing vision to succeed the frayed post–Bretton Woods consensus. It needs to articulate why and in what ways our values and interests have changed as a result of the past ten years.30

  If U.S. policy makers were in fact convinced that the “rules based order” represented one of America’s greatest geopolitical assets, the task that Mullen describes would be unnecessary, for we would see efforts to reinforce that order similar to what was seen in the years following World War II. But it is not as if the current U.S. national security advisor and the secretaries of state and defense are spending their days working toward some updated blueprint to Bretton Woods. In fact, quite to the contrary, U.S. leaders have allowed an IMF reform deal that is nearly form-fitted to U.S. interests—notably, the deal would allow China a greater role in the institution while still protecting America’s unique veto position—to languish, the United States being the only remaining holdout refusing to agree to it. As Chinese international lending has soared, Washington has moved in the opposite direction, with Congress nearly dismantling the U.S. Export-Import Bank and the financing the bank offers for overseas customers. Nor has the U.S. government proven willing to put even a fraction of the diplomatic muscle it routinely expends on political and security crises in the Middle East toward curbing China’s plans to implement a multilateral alternative to the World Bank. “I’ve been searching for a word to describe it, and the one I use is ‘withdrawal,’ best I can come up with,” said Edwin Truman, a former Treasury official now with the Peterson Institute for International Economics. “We’re withdrawing from the central place we held on the international stage.”31

  Of course, this neglect of geoeconomics matters only when foreign policy considerations and economic considerations advise diverging courses. As Chapter 6 noted, for the past few decades a convergence of U.S. foreign policy interests and liberal economic prescriptions has meant that such different prescriptions were rare. But as the recent TPP experience suggests, this happy moment may be coming to an end. As it does, it is reasonable to expect more and more divides between economic and geopolitical interests.

  This, then, raises a crucial question: assuming geoeconomics does somehow manage to regain better standing in policy debates, how should U.S. policy makers think about what constitutes acceptable and unacceptable forms of geoeconomic statecraft?

  Certainly, having a clearer baseline would help. Ironically, for all of their efforts to distance trade policy from foreign policy considerations, U.S. trade negotiators are very much working in a realm that, from its most basic component parts on up, reflects U.S. power. To paraphrase Harvard economist Dani Rodrik: Imagine it was Bangladesh or Mozambique that designed our global trading system. What are the chances that this system would look rather different from the one in effect today?32 It is precisely because the system works to America’s advantage that U.S. policy makers have all the more incentive to hold up as neutral the disciplines of trade, investment, and finance that together comprise rules-based order, vesting them with the authority of Rawlsian impartiality, blind to the national interests of any one country over any other.

  However fiercely the United States (or any other country) sees fit to bind itself to this rules-based order, and however much internal authority and logic such a system might assume, the problem is that internal authority only goes so far. “Those who seek to design a free market on a worldwide scale,” philosopher John Gray reminds us, “have always insisted that the legal framework which defines and entrenches it must be placed beyond the reach of any democratic legislature. Sovereign states may sign up to membership of the World Trade Organization; but it is that organization, not the legislature of any sovereign state, which determines what is to count as free trade, and what a restraint of it. The rules of the game of the market must be elevated beyond any possibility of revision through democratic choice.”33 Such, at least, has been the vision that the WTO’s champions have sought to realize. But there is no escaping the fact that the WTO’s authority ultimately remains derivative—loaned to it by its member states, and therefore subject to the same underlying geopolitical realities governing how these states interact in other realms.

  Likewise, not only do global financial markets also depend ultimately on U.S. power, but these markets would look vastly different were it not for the shaping hand of U.S. geopolitical considerations. Gulf countries admit to the purchase of U.S. securities as the price of their U.S. security reassurance, just as Germany did before them during the Cold War. The eurozone was at least as much a geopolitical project for the United States as an economic one. And as the starkly different fates of Mexico and Argentina can attest, geopolitics certainly becomes a distinguishing factor in U.S. decisions regarding sovereign bailouts and swap lines.

  Coming to a clearer understanding of how U.S. power and interests underpin the present system, though, is not to suggest that the present system works only to the advantage of the United States. To the contrary, the largest beneficiary of current practices may well be China. By 2011, ten years after joining the WTO, Chinese imports from other WTO members had grown substantially, with an average annual net increase of more than $100 billion.34 China also saw its dollar GDP quadruple and its exports almost quintuple over this decade.35 At the same time, however, the fact that China and others are working so hard to undermine the U.S.-led system ought to be a clue that there are certain system-level reforms that, if made, would better advance these countries’ national interests.36

  Beyond muddy parameters for debate and misguided baselines, a third problem impeding U.S. policy makers’ overall comfort with geoeconomics centers on faulty comparisons and double standards. Arguments against geoeconomics often treat decisions as if policy makers were operating in a “first-best world,” when the reality is almost always one of a second-best world (or, often, worse). Such arguments tend to fixate on the costs associated with a given geoeconomic technique of statecraft, for instance, without assessing these costs in terms of the next-best alternative, or in many instances without considering any alternative at all. Indeed, “choices are costly,” David Baldwin once noted. “Choosing to use economic statecraft—or any other kind of statecraft for that matter—costs something.”37

  Moreover, where there is some effort to compare costs, the compa
rison is often not so much between options as between states. This line of reasoning is seen, for example, in arguments against a certain geoeconomic policy move on the grounds that “it costs us more than it costs them.” Similarly, when it comes to questions of expected benefit, there is a tendency to arrive at a pessimistic view of the efficacy of a given geoeconomic policy without any attempt to consider how alternatives stack up; for example, we were told that sanctions were unlikely to work against Iran, but the alternatives—war or resignation to Tehran’s nuclear ambitions—were not discussed.38 Success is usually a matter of degree, especially in foreign policy, and a certain geoeconomic course may have a low likelihood of success, but it may still be the best option available.

  Finally, criticisms of geoeconomic approaches often fall into the trap of judging geoeconomic outcomes by economic ends rather than geopolitical ones. President Carter’s decision to freeze Iranian assets during the hostage crisis came despite stiff opposition from the Treasury Department and the U.S. banking community, which warned that the move would deter foreigners from maintaining deposits in American banks. As the Wall Street Journal wrote at the time, the freeze “reinforced a widely held opinion around the world that this administration is not as serious as it should be about the integrity of the U.S. dollar and the sanctity of private property.” In fact, former Treasury official Robert Carswell, utterly convinced of the large costs that such measures would entail, argued the measures should be considered only after exhausting “every possible avenue of multilateral cooperation,” even if this means “substantial modification in U.S. objectives.”39 This gets guiding objectives backward. Rejecting unilateral action may be “a fine way to protect the dollar, but it would not have been a very effective way to demonstrate resolve in the hostage crisis.”40