According to certain tales, we all live in the shadow of the “Washington Consensus“. The term was coined in 1989 by an economist at the Peterson Institute for International Economics, a think tank in Washington that would later be considered one of the most important drivers of globalization and free trade. At the time, the phrase referred to a series of policy decisions made by Latin American leaders to stem their debt crises, which were backed by Washingtonbased institutions such as the US World Bank and the IMF.
This policy of solution included some important and wellknown recipes controlling public spending, privatizing stateowned enterprises, liberalizing trade, deregulating the corporate sector and opening up to foreign investment. They were bound by classically liberal dogmas of market primacy and an international order forged by US financial and military prominence US. And they envisioned a world where shared economic interests would ease the sordid inconveniences of geopolitics.
After Cold Warthe “consensus” became global orthodoxy the basis of a “single” world in which history was “finished”. Its heyday, as Financial Times columnist Edward Luce recently noted, may have come more than two decades ago, when the US celebrated accession China at World Trade Organization. It heralded a wave of globalization that is now largely viewed negatively in the West, in which, as China has become the world manufacturing center and a rising global power, deindustrialization and rising inequalities pressure societies on both sides of the Atlantic.
Jake Sullivan, White House Secretary of Homeland Security Photo: Andrew Harnik/AP
The ramifications of the old Washington Consensus hang over the Biden administration. “The socalled ‘China shock,’ which has hit the pockets of our manufacturing industries particularly hard with large and lasting repercussions, was not adequately foreseen and not adequately addressed as it unfolded,” China’s national security adviser said last week. White House, jake sullivan. “And together, these forces have eroded the socioeconomic foundations on which every strong and resilient democracy stands today.”
In Sullivan’s view, addressing this legacy and the near and longterm challenges of the pandemic and climate change “requires that we forge a new consensus.” Speaking at the Brookings Institution on Thursday, he delivered a speech widely viewed by analysts as the clearest yet illustration of the Biden administration’s broader vision of the way forward and the dilemma of confronting China.
Continued after the ad
Sullivan is the main supporter of the President’s “middleclass foreign policy.” Joe Biden, an approach that structures US interests abroad around strategies that revitalize the country at home. Its defining elements to date have been legislation such as the gargantuan AntiInflation Act and the Chips Act, which mark an agenda that, as Sullivan put it, “invests in the sources of our economic and technological strength” and “uses capital to do so.” bring public benefits, in areas such as the environment and health”.
However, critics see the government’s recent enactment of industrial policy as a return to an era of dangerous protectionism with devastating effects on the global economy and the future of international trade.
“Business leaders have criticized Biden for not pursuing trade deals, which often give other countries special access to the US market in exchange for similar benefits for US exporters,” explained my colleague David Lynch. “Instead, the President proposed ‘mandatory’ agreements Asia and further Latin Americathat would connect U.S. trading partners in a collaborative agreement that includes standards for digital trade and measures to foster stronger supply chains.”
The new exemption, argued the Financial Times’ Luce, is “pessimistic” as the US “cannot strike trade deals, negotiate global digital rules, fail to comply with WTO decisions and (…) lose confidence in economic multilateralism.” He added: “The old consensus was a positivesum game; when one country got rich, other countries got rich too; the new game is a zerosum game, where one country’s growth comes at the expense of another.”
Sullivan, who appeared to have read Luce’s column before delivering his speech, dismissed the dichotomy. He said that “the idea that a ‘new Washington consensus’ (…) is somehow the US alone, or the US plus the West excluding others, is utterly misguided,” and offered a wellnuanced view of the current state of affairs .
Sullivan acknowledged that despite all the tensions and confrontations with Beijing, USChina trade remains resilient, hitting record levels over the past year. And repeated the rhetoric of the President of the European Commission, Ursula von der Leyenwho spoke of “reducing risk” from overexposure of European supply chains to China, rather than “decoupling” from what some indicators already suggest is the world’s largest economy.
Continued after the ad
The American move to limit trade with the Chinese in goods that can foster artificial intelligence and technological excellence in China is, by Sullivan’s definition, the exception, not the norm. “Our export controls will be strictly focused on technologies that can change the military balance,” he said. “We are simply making sure that US and our allies’ technologies are not used against us. We are not destroying trade.”
And yet he believes the present moment must force a revision of the “oversimplifying assumptions” of the past including restoring acceptance of more targeted government intervention when needed and supplanting the assumption of trade liberalization as an end in itself. “Economic integration has not prevented China from expanding its military ambitions in the region, nor has it Russia to invade neighboring democracies,” Sullivan said. “None of these countries became more responsive or more cooperative.”
A group of Biden administration supporters agreed with Sullivan on a panel recently organized by the leftwing Roosevelt Institute. “It became very clear that decades of free market fundamentalism had left our country really vulnerable and weakened our national security and that we were no longer able to produce essential goods like chips and medicines,” said Sameera Fazili, a former board of trustees White House National Economy Official.
Jennifer Harris, a former National Security Council economist, said it was in the US interest for other countries to adopt its industrial policies and green technology subsidies. “Not only do you have our permission to do this, but we need you,” she said. “And we will begin to reframe American foreign policy to globalize the idea of green industrial policy.”
It’s an ambitious project that Sullivan says will require a “dedicated commitment” in the years and decades to come, both in building cooperation abroad and in overcoming bitter divisions and polarizations at home. What Sullivan envisions “requires approval from a broad group of domestic actors and related economies,” tweeted Emily Benson, a trade expert at the Center for Strategic and International Studies in Washington. “It also takes time that is not on the side of the government.” / TRANSLATION BY AUGUSTO CALIL