The U.S. would benefit from doing the hard work of updating and strengthening global economic rules of its own inspiration—making them even more American—not by turning its back on cross-border economic engagement.
The idea of “global economic order” may sound far away from the concerns of the average citizen, but it means something both simple and important: that it is better for trade, investment, and other forms of commercial activity to take place according to agreed-upon rules, and that those rules should reflect the principles of the United States, Germany, and other liberal economies in Europe, Latin America, and Asia. “Liberal” in this case signifying not a position on a right-left political spectrum, but rather a set of ideas that encompasses the rule of law, openness to change, and the primacy of the individual vs. state authority.
When the AICGS Geoeconomics Strategy Group met on February 22 for its inaugural meeting in Washington, which focused on global economic order and disorder, it took place against the backdrop of the UK’s decision in June 2016 to leave the European Union (Brexit) and the U.S. presidential election campaign, both of which revealed a weakening of public support for the rules-based economic order in its current form.
The populist Right, in both the U.S. and Europe, seems to believe that the global economic order is at best self-governing (so not requiring any government attention), probably unnecessary (national laws are sufficient to guarantee prosperity), and at worst contrary to the national interest (China wins, and the U.S. loses).
The populist Left appears to share several of these views and concerns, but with greater emphasis on the lack of justice in the current economic order—the assertion that existing economic rules benefit corporations and financial institutions rather than the average citizen. In Germany and other parts of the EU, this idea was behind much of the opposition to the Transatlantic Trade and Investment Partnership (TTIP) launched in 2013 and now on indefinite hold.
While the right kind of global economic order can be a multiplier of U.S. values and principles, and help enhance prosperity and security based on them, it cannot be expected to replace or compensate imperfect domestic policies.
The current international economic system is not perfect, but that does not mean that the U.S., Germany, or the EU would advance their interests by withdrawing from it—or even more disruptively, seeking to overturn it. The fact is that the most consequential international economic institutions (the World Trade Organization, World Bank, and International Monetary Fund), the economic principles underlying most free trade agreements around the world, as well as informal norms and codes of conduct like the OECD’s anti-bribery convention are “Made in America” ideas. The U.S. would benefit from doing the hard work of updating and strengthening these global economic rules of its own inspiration—making them even more American—not by turning its back on cross-border economic engagement.
Although a reformed global economic order holds considerable potential for liberal trading nations like the United States and Germany, that case needs to be made more effectively. A new narrative for the role and importance of a rules-based international economy is required—one that inspires hope and fear in equal measure. The hope that new ideas, products, services, and technologies produced by the U.S. and its economic partners can lift their economic well-being with the right set of updated global rules. The fear that upending the current economic order without first having a convincing strategy to replace it would inevitably lead to uncertainty and conflict—and the economic impoverishment that has accompanied such unguided turns throughout history.
For such a narrative to be successful, it will be important to understand and communicate what international economic rules can and cannot do. While the right kind of global economic order can be a multiplier of U.S. and European values and principles, and help enhance prosperity and security based on them, it cannot be expected to replace or compensate imperfect domestic policies. The 70-year old international economic system is not to blame if governments fail to provide workers the education and training programs they need to prepare for and adapt to change, neglect to modernize infrastructure and advance STEM education, or forego fiscal and monetary policies that promote investment over consumption. For two generations, the global economic order has done what citizens should reasonably expect from it—no more, and no less.
Peter S. Rashish is a Senior Fellow and Director of the Geoeconomics Project at AICGS.
Made possible by the support of Commerzbank