“A Multilateral and Strategic Response to International Predatory Economic Practices.”
Introduction
Let me begin by commending the Subcommittee for highlighting--through this hearing and S.2757, the National Economic Security Strategy Act of 2018, co-sponsored by the Chairman and Ranking Member--the strategic role of economics in foreign policy and national security. Economics is often an uncomfortable topic for foreign policy experts, who prefer to leave these complex issues to finance or trade practitioners. But economic statecraft is a vital part of the diplomatic toolkit and can serve a country's broad strategic ends--from positive ones like advancing a rules-based order to more sinister ones like coercing smaller countries to follow a larger country's will. Enhancing understanding of "strategic economics"--America's and other countries'--is essentially the mission statement of my program at CSIS, and I welcome the opportunity to lay out some of my thinking on the subject today.
Strains on
Since World War II,
Today, the international economic order--and
The China Challenge
Among the new powers, China poses a unique and fundamental challenge to
On the other hand,
Under President and
Since 2015, these efforts have been guided by "Made in
At the same time,
Responses to Date
Since the opening with China in 1972, the approach of successive
Recent administrations have used a range of bilateral, regional, and global tools to address economic differences between the two countries. These include:
Bilateral
* Since the opening of bilateral relations, all administrations have set up some kind of formal process for managing economic differences and pursuing opportunities for deeper economic ties. There has been a succession of high-level dialogues, from the
* The Bush and Obama administrations also devoted consider time and energy trying to negotiate a bilateral investment treaty (BIT) with China to liberalize and create more certainty in direct investment flows between the two countries. These negotiations bogged down over a range of difficult issues and have effectively been abandoned by the Trump Administration.
* There have also been more forceful efforts to respond bilaterally to problematic Chinese economic practices, from direct pressure at the presidential level (e.g.,
*
Global
* Successive administrations have also worked across a range of international institutions to manage competition with China. These efforts have included the filing of trade cases at the
* Administrations have also worked through the
Regional
* In the region of the world where
* Since 1989, the Asia-Pacific Economic Cooperation (APEC) forum has been the principal venue for advancing these objectives. APEC's non-binding, consensus-based approach to decision-making can be tedious and deliver few tangible short-term results, but the forum has resonance in an Asian context and has proven over time to play a useful role in promoting
* At the heart of
Key Elements of Successful Economic Statecraft
Individually these bilateral, global, and regional approaches by recent administrations have been more or less effective, as discussed above. Missing so far in the Trump Administration's approach is a comprehensive international economic strategy that would have a broader effect in shaping Chinese actions in a way favorable to
Fact-based analysis
Smart economic strategy starts with cool-headed analysis of the challenges and opportunities that face
We should also be careful not to view all aspects of Chinese economic strategy as equally threatening to
Moreover, China is not as capable or coordinated as it appears to many outsiders, and it is far from certain that
None of this is an argument for complacency; the challenges are real. But a
Playing offense and defense
In addition to being based on clear-eyed analysis, a successful economic strategy must contain both offensive and defensive elements. Every baseball fan knows that winning consistently requires both great pitching and great hitting. As suggested earlier, there is a worrisome tendency in
Also on the defensive side of the ball,
Second, we need to use the right tools--and use them judiciously. Unilateral tariffs are likely not only to impose heavy costs on our consumers and downstream businesses, but also to violate our international obligations, do harm to the rules-based order, and punish key allies like
This leads to the other side of an effective economic strategy: smart offense.
In the absence of initiatives like
Two other areas for further work include pulling China into international arrangements that would help to constrain their problematic behavior. China is not a member of the
China is also not a member of the
Whole of government, whole of nation
Smart economic statecraft draws on all the resources of the
It is not just the Federal government that needs to contribute to a successful economic strategy.
Rebuilding domestic foundations
Finally--and arguably more important than another element--we need to invest in ourselves. A strong, competitive economy is the essential foundation for a successful international economic strategy. We need to rediscover the winning formula that brought us such success in the postwar period: modern infrastructure, education and skills training to prepare workers for the new economy, and investment in basic research and development critical to leadership in industries of the future.
At the moment we are failing in all these areas. As other nations race ahead to build new infrastructure, ours remains vastly underfunded and continues to deteriorate. A McKinsey report from
These are areas where CSIS plans to do more work in the period ahead, in an effort to help rebuild domestic support for our international economic engagement.
The Role of
There are other ways
Resources also mean people, and the
Against this backdrop,
Finally, in my view it will be important for
Conclusion
Again, I commend the Subcommittee for shining a light on problematic practices in the international economy today and on the role of "strategic economics" in foreign policy and national security. With the right analysis, tools, and resources--and confidence in our position--
I thank you for the opportunity to offer my thoughts and look forward to answering Members' questions.
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Read this original document at: https://www.foreign.senate.gov/download/goodman-testimony-050918&download=1
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