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American Foreign Policy

 Note: The Original outline was 14 pages long, I have cut few parts off, so you can make your own.

The US Strategy and Potential Challengers 

By Empereur Wu Wei 10/02

I. Introduction

·                               

                               In this paper, I will first examine the links between US global strategy and US economic strategy, and then analyze the potentiality for the European Union (EU) and China to challenge the title of world economy leadership. 

II. However, could we argue that this time is different?

A.  Overview of US foreign policy with respect to the US economy

·                                Most analysts today believe that we are in a unipolar system, which is called the US hegemony or Pax-Americana. However, cases of study show that is not really true.

For the US foreign policy is unilateral oriented - based solely on its self-interests, and hence endangering the formation of a new world system. However, the phenomenon of globalization has minimized nation states’ perimeter, thus put the US administration’s ability to project its power into a dilemma, making its position much more complex than the ideal of hegemony represents.[2]

·                                As the result we are living in a confusing world system

Is it “unipolar,” as Charles Krauthammer suggested; “multipolar” as many have argued, or “uni-multipolar,” as Samuel Huntington inferred?

B. Yet, no one is willing to challenge the US leadership: due to the US economy

Yes, the US has no rival in any dimension of power. Nevertheless the US role as only superpower and unilateral player is criticized domestically and internationally, because the will of the US is imposed upon the world affaires. However, no one can do anything about it for every one realize the benefits under the US leadership – especially from an economic aspect.

·                                The US is a democracy and by measuring the US power, one must realize the benefits under the US world leadership.

1. Due to economic, political, and normative frameworks shared by powers in Europe, Americas, Japan and other non-democratic regimes, one appreciate the nature and robustness of US economy. This proves that the US economic strategy vis-à-vis of its foreign policy is on the right track.  

2. The idea of free trade, the core notion of the US economic strategy represents a common interest among world nations. As Professor Michael Doyle of Princeton called “the logic of a separate peace”, the relation between the US and major world powers is based on common republicanism, mutual respect, interdependence, and common interests.[3]

3. In the post – Cold War world, North Americas, Europe and Japan have coalesced into a global center underpinned by interests and values. James Goldgeier and Michael MacFail argued that these advanced democracies form the core in world politics, the “great power society,” wherein members embrace democratic values, subscribe to liberal economic ethos, and share an “in-group” mentality.[4]

4. Only the US has the size, strength: including military, economics, and politics, role in international institutions, multiracial population, history of nonaggression, and democratic traditions that in combination enhance the effectiveness of global leadership.[5]

5. United States has an “on-again, off-again” world leadership.

6. The strategy of refusing to play the “gendarme” of the world allows the US to reserve its economic wealth. Indeed, with power, comes responsibility. However, because it is a democracy, the US has an internal opposition to regulate any long time hegemonic behavior. As a result, due to internal pressure, the U.S. government frequently does not want to accept responsibilities. “Washington tends to shrink from accepting the financial, military, and especially the domestic political burdens of sole pole status.”[6]

·                                Consequently, we could argue that this time is different. The US as a leading democracy has political and economic systems which are at constant mutation. Therefore, it will not fallow ancient empires’ path.

III. The US as world economic locomotive and its consequence

·                                Negative aspect

The US national security strategy will be based on a distinctly American internationalism that reflects the union of our values and our national interests.[7] The American world leading position with a US - centered economic strategy will ultimately undermine its global leadership, hence, the power and prosperity of the US because the US economy is dependent to the world market.

1. The US – centered strategy. The US pursues its interests in more narrowly nationalistic terms. US domestic economic interests have faster positive outcomes for the policy makers than international interests. Thus it undermines the Grand Strategy at the macro-level.

2. Special Interests. It is believed that policy making shall not be influenced by private business interests. However, US corporations are influencing policy making with material interests in order to protect its’ prosperity.

3. Manipulative strategy. Too often, the US promotes its’ economic interests and beliefs on the world stage using its all-encompassing power through organizations such as the International Monetary Fund (IMF) and World Bank (WB) without considering the long-term implications for smaller scale and weaker economies. This causes backslash which undermines the US world leadership and its image among foreign citizens.

·                                Positive aspect

A strong world economy enhances our national security by advancing prosperity and freedom in the rest of the world. We will promote economic growth and economic freedom beyond America’s shores.[8]

1. Showing off strategy. Show to the world it is proven that the US economic management style is the best - most productive and cost effective, while promoting aboard higher labor protection system, management skill, and developing native social infrastructure. This helps to promote a positive image of the American world leadership while boosting trade partners’ development. Because the future market for the US goods is in the developing countries.

2. Promoting free trade, the rule of law and a freer world as an economic strategy. In order for the US to maintain its’ economic and political leadership, it must have access to all international markets. David Ricardo's theory of comparative advantage believes that freer markets contribute to greater economic strength and autonomy.

3. Developing high Tech economy as strategy. The US government and IT firms create technology that ultimately benefits every one on the planet. Enhancing US economy while promoting US world economic leadership. 

4. The US foreign economic assistance as strategy. US agencies such as USAID are potentially a key instrument in helping to assure that other powers are willing to accept, or at least tolerate, a US-centered world order.[9]

·                                Conclusion for the US foreign policy with respect to the US economy

The reality is that people prejudge the “American Empire.” Yet just because it is an empire, we shall not prejudge this empire.

1. The exceptionalism of America represents national pride and the American experience, which is exceptional indeed in terms of human history, and there is nothing wrong about it. After all, the Chinese believed once that they were at the center of the world, and the French still believe they have the best culture - at least in terms of cuisine.

2. The US is not a hegemon. Hawks in Washington often neglect to mention that though powerful; America has neither territorial ambitions nor imperial aspiration, and America is a peace loving country. As President Bush said “We have our best chance since the rise of the nation-state in the 17^th century to build a world where the great powers compete in peace instead of prepare for war.”[10]

3. It is simply not in America’s national DNA to impose Pax Americana, because the very reason for its existence is to maximize freedom. The US is looking for trade partners, not foreign agriculture land.

4.  Alexis de Tocqueville doubted whether democracy is conducive to effective foreign policy, thus it is difficult to design and execute a coherent US global Grand Strategy. Therefore, the US as a democracy is unable to become a global hegemon.

IV. Challengers

A. Condition for conflict

Interstates conflict based upon military engagement as we known is no longer likely to happen within the future international political arena. The future conflict among antagonists in terms of state will be more likely engaged with economic means. Globalization decreases chance for military based conflict but increases possibility of dispute for interests.

1. A challenger has acquired the capability and ready for a major conflict, that is, when the economic, technological and military capabilities of the rising state come close to the hegemon or paramount.

2. A rising state which has acquired the capability will challenge the paramount only when their elites groups perceive benefits by doing so, and the society is able to bear the cost.

3. No respect: The paramount is unwilling to consider the rising state with the same status.

4. When a rising state’s interest is undermined by the paramount’s preventive actions: such as containment or encirclement; however, in the twenty first century, the mounting power is more likely to raise an economic war subsequently against the paramount rather than a direct military clash.

5. The paramount is unwilling to be treated equally, unwilling to step down as a regular member of the international community. This engenders a coalition of antagonistic force.

·                                Why only the EU and China could be the potential challengers?

1. Because Russia, Japan and others lack the necessary resources or/and audacity.

V. The potentiality of the European Union and why

The Europe as we known is vanishing. The European Union (EU) is a new political entity combined of states that already have capacities which in many fields equal those of the US. The question is whether European bourgeois elites who are envying American world leadership are willing and capable to challenge?

·                                An Economic Competitor: the European Union vs. the United States

Source: Global Insights Inc., Goldman Sachs & Co. and Economist Intelligence Unit.

1. We could argue that the ability to organize a multinational state such as the EU is itself a major innovation for the next hegemon.

2. The world economy has become increasingly bipolar between the US and the EU. The European states are mainly industrial - export oriented economies, competing against the US for market.

3. As a result of EU’s further enlargement, Europe’s future GNP and GDP may equal and surpass American economic scale, thus rebecoming the center of the world economy.

·                                Political Competitor: the European Union vs. the United States

1. European bourgeois elites who are unwilling to be ranked as the second or even the third envying American world leadership. Bourgeois and federalists pushing the European Parliament to have a single foreign policy to allow it equal in debates with the US.

2. With a common policy on defense, finance and foreign policy, the EU will have a united economic and political system, thus stronger and independent from the US umbrella.

3. In the year 2004, it is planned to add new members, mostly from the former Soviet Block, undoubtedly seeking influence in central Europe and its market.

4. The European populations have been manipulated by their bourgeois elitists who are envying American leadership. They have been manipulated to believe that what’s going on wrong in the world is the fault of the Yankees, not incompetence and hypocritical European politicians. Thus create domestic support for a US opposition.

5. The EU will become independent Core, competing for clients against the US in the world system.

6. The US will lose the Great Britain (GB) - the only pro-US European state due to EU common policies system,  hence has quasi no say in the EU policy making.  

·                                The most likely trigger for a US vs. EU competition

US foreign policy and the ideal of American exceptionalism refute American European cooperation. The European political institution was build upon the idea of cooperation known as “concert of power,” according to President Wilson, and America as the superpower shares the same equality in accordance with democratic value. Yet American exceptionalism believes that America is a place apart, protect by God and oceans, and America acts as such because it has a US centric tradition and because it can.

·                                An arrogant unilateral manner will provoke the others into forming a balancing coalition. Case in point:

1. Franco - Russian coalition in regards of UN resolution on Iraq. The Franco-Russian obstructionism can be understood as a response to: I. The Bush administration’s hawkishness on Iraq. II. Its doctrine of preemption. III. Its drift toward unilateralism.

2. Chirac: President of France, Chirac was asked if there is Chirac and Schroeder on one side, and Bush and Blaire on the other? Chirac responded, “The fact is there are Bush and Blaire on one side and the rest.”[11]  

3. Germany for the first time since WWII said NO to the US. German Chancellor Gerhard Schroeder openly declared that Germany won’t support US military action against Iraq.

·                                Conclusion

1. As Francis Fukuyama argued, “Americans are largely innocent of the fact that much of the rest of the world believes that it is American power, and not terrorists with weapons of mass destruction, that is destabilizing the world. And nowhere are these views more firmly held than among America’s European allies.”[12]

2. A theoretical explanation. Americans believe that no cause can be higher than the interests of the nation states, on the other words, this is the American exceptionalism. However, the Europeans think that democratic legitimacy, based on the interests of the international community is higher than the concept of the nation state.

3. Solution: Washington needs to explain to the rest of the world that Washington rejects the idea of international community because it is too abstract. Regarding to national security, only a nation state could care for itself.

4. Remember: The American economy benefit unquestionably from international institutions and collaboration among members of the international community. However, as Kissinger said, “In the end, it is important to keep in mind that consultation is a process; it is leadership that brings about a better world.”[13]

VI. China as a competitor

A. Overview China issue

·                                China surely will have conflict of interests with the US in the future.

·                                The key solution is the character of the Sino-US relationship, thus Washington must have an accurate vision of China and act with an adequate policy.

·                                Why China issue is important? A stable China is crucial for regional as well as global interest of the US. Major social and/or political chaos in China will interrupt the order in Asia and the rest of the world.

·                                China issue is a puzzle. Not only because it represents a dilemma, a strong China will likely challenge the US national interests, but in addition, today’s situation in China is contradictory and imperceptible.

·                                Hence, unlike with the EU, we cannot predict how the game will be played with China. Or what China will become?

·                                The US – long preoccupied with a rising China could become a “peer competitor” – has paid scant attention to the prospect that China’s weakness, rather than its feared strength, poses the graver and more difficult challenge to American national interests.[14]

B. Why it is a dilemma? What to do about China?

·                                People assert that trading the communist China would transform it by creating a middle class, introduce capitalist ideology and democratic aspiration. So China, the alleged next challenger to the US world dominance will turn into a democracy, a strategic partner, not a competitor. However, skeptics argue that this could be true in long term strategy planning, but in the short run, the globalization of the Chinese economy, under its communistic anti-West leadership could be strategically harmful to the US.

1. What will happen to US investments? The US companies have a huge investment stake in China, but China is facing fundamental structure problem at systemic level. Its “socialist market economy” is at the edge of collapsing.

2. The US corporations maintain the regime in Beijing. The US investment in China represents a major amount of foreign cash asset, this is an important cash flow for maintaining the failing Chinese Communist state. 

3. Playing with nationalistic ideology is a dangerous policy. The Chinese Communist Party (CCP) is using nationalism to hide social problems and as source for legitimacy. The CCP also uses Russian failure to justify its unchanging non-democratic rule.  

4. Chinese communist leaders are antagonistic toward democratic values, they believe on the principal of elitism, authoritarian rules and oligarchy. Yet they are seeking the US export market and sending children to live in the US.

5. Beijing has a mounting military build-up program aiming the US as the target.

6. A regime change in China is impossible. No one is willing and capable to occupy a China with its 1.3 billion inhabitants.

C. The problem: Failing Chinese Economy and rotten governance

·                                The country’s dysfunctional fiscal system conceals the largest political issues: the state’s fragmenting authority and progressive loss of control over local governments.[15]

·                                Optimists often neglect to mention that China faces a huge army of unemployed urban workers, impoverished peasantry and a national banking system at the eve of collapse. Therefore, China will become no strategic competitor, but a source of global instability, causing danger to US national security and global economic growth.

·                                In order for Washington to formulate an adequate policy towards China, it needs to have a clear analysis on the Chinese economy, which can be classified into three categories: urban industrial, rural agriculture, and financial sector.

D. Chinese Economy

·                                Urban Economy

Due to China’s WTO entry, in addition to its rotten system, the Chinese industrial sector is not as prosperous as it promised.

1. It is true that China technically has an annual GDP growth of about 7%, but such data often neglect to show the cost for maintaining such growth rate with respect to labor and natural resources consumption. Some experts argue that the Chinese real growth is 0% if not negative.

2. The CCP has a plan to privatize or close China’s 75,000 State Own Enterprises (SOE) so that Chinese economy could double to $ 2 trillion within 10 years. It is estimated by the Chinese National Bureau of Statistics that non profitable SOEs have lost $70 billion in 2001. They produce less than 30 per cent of China’s total industrial output, but employ more than 40 per cent of Chinese work force.

3. It is estimate by scholars that at least 7-8 percent of China’s urban work force is unemployed. Including dependents of all unemployed urban work force, the affected urban population could be mounting to 100 million.

4. Morgan Stanley has predicted that as many as 40 millions are apt to be thrown out of work within the first five years of China’s entry into the WTO.[16]

·                                Chinese Agriculture sector

Chinese agriculture sector is considered as the golden egg, heavily taxed because the state needs for cash. The sector has been deteriorating a decade. 

1. During the first fifteen years of reform, peasants around the costal line had about double digit income growth on average. However, during recent years, it has been dropped from 4.6 percent in 1997 to 2.1 percent in 2000.[17]

2. Experts estimate there are now about 80 million peasants moving between rural and urban labor market for seasonal works, this is known as “blind flow”, a result of marketization process and bad income.

3. The major reason for decline is due to over taxation, imposed at three levels of administration: central, township and village.

Source: Ray Yep. Maintaining Stability in Rural China: Challenges and Responses. Center for Northeastern Asian Policy Studies. The Brookings Institution. (May 2002.)

·                                The Chinese financial sector

The failing Chinese banking institution’s impact to the US economy and national security is immeasurable. It will be bigger than the Japanese banking crisis.  

1. “There are two things to know about the banking system in China. First, the major state banks, the so-called Big Four, are insolvent. Second, the effort to bail them out is not working. Everything else is simply detail.”[18]

2. The “Big Four” are Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China, all of which facing bad loans problem.

3. According to Minister Khaw Boon Wan of Singapore, the Non-performing loans (NPLs) in Chinese state own banks are huge, probably larger than NPLs in all the ASEAN countries put together.[19] It is also generally believed among experts that Chinese NPLs is much higher than Japanese one.

4. The main issue about the Chinese banking system is the intransparent transaction. No one knows the condition of the Big Four today. The central bank claims that nonperforming loans fell during last year by US$11.0 billion to 25.37 percent,[20] but observers guess it is now about 50 percent of Big Four's portfolios.

·                                Why China could be a threat to US national interests?

1. China is growingly involved with the world economy, but it has an alarming social economic instability. If an economic crisis takes place in China, what would happen to the US investments, and how would the US domestic economy react?

2. Combined with endemic corruption and rapidly rising income inequality, it just a question of time before the regime to face serious internal crisis. What the US going to do?

3. Domestic tensions induce the ruling elites to embark on more assertive nationalistic policy, hoping for a “rally around the flag” effect. But where the imagine threats could come from?

4. China’s authoritarian system, its intransparent decision making structure, its anti-West ideology, nationalism and mounting military build up will undoubtedly incite distrust and antagonism between the US and China.  

5. The US is also encircling the Chinese influence in Asia Pacific. The US has warm relations with Pakistan, India, Russia, Japan, South Korea, Taiwan, and Australia. China will unlikely accept such situation.

·                                Conclusion

1. A China with or with out a democratic political system will challenge US influence. However, a China with pro - Western democracy regime will be in competition with the US based upon international laws and civilized behavior.

2. The Bottom line is: the nature of regime in Beijing is the fundamental problem. A clash of political difference is inevitable. So a political transformation of regime is the answer, this is in the interests of Chinese and American people as well as global peace and security.

3. Unlike the EU, China will cause danger to US national security and global stability. However, this much depends on the outcomes of future Chinese domestic political progress. China will not become a threat to the US national security and world stability if its political system becomes more transparent and accessible to those Chinese interests groups that prefer a multilateral relation system based on free trade and democracy.      

4. The US need to work with the fourth generation of Chinese leadership, pressing and guiding to system reform.

VII. Conclusion

make your own 

Note from the author:

They all draft papers; the overall quality is ‘acceptable.’  If you liked it, please leave me a note by email, if not, may be it is about time to make your own.

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