 National security adviser Jake Sullivan during a news briefing at the White House on April 24. (Demetrius Freeman/The Washington Post) |
In some tellings, 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 Washington think tank that would eventually be seen as a leading cheerleader for globalization and free trade. At the time, it referred to a slate of policy choices adopted by leaders in Latin America to grapple with debt crises; they were undergirded by support from Washington-based institutions like the World Bank and International Monetary Fund. These policy solutions involved some key, familiar prescriptions — reining in public spending, privatizing state enterprises, liberalizing trade, deregulating business, and opening up for foreign investment. They were tethered to classically liberal dogmas on the primacy of the market, as well as to an international order shaped by American financial and military preeminence. And they presupposed a world where mutual economic interests would smooth over the nasty inconvenience of geopolitics. In the aftermath of the Cold War, the “consensus” became the global orthodoxy — the foundation for a “flat” world where history had “ended.” Its high-water mark, as Financial Times columnist Edward Luce recently noted, may have come more than two decades ago as the United States cheered on China’s entry into the World Trade Organization. That prefigured a wave of globalization that is now viewed in broadly negative terms in the West, where, as China became the manufacturing hub of the world and a rising global power, deindustrialization and mounting inequity gripped societies on both sides of the Atlantic. The impact of the old “Washington consensus” hangs over the Biden administration. “The so-called ‘China shock’ that hit pockets of our domestic manufacturing industry especially hard, with large and long-lasting impacts, wasn’t adequately anticipated and wasn’t adequately addressed as it unfolded,” White House national security adviser Jake Sullivan said last week. “And collectively, these forces have frayed the socioeconomic foundations on which any strong and resilient democracy rests now.” In Sullivan’s view, reckoning with that legacy, as well as the near-term and long-term challenges of the pandemic and climate change, “demands that we forge a new consensus.” He was speaking at the Brookings Institution on Thursday, delivering an address that was widely viewed by analysts as the clearest illustration yet of the Biden administration’s big picture view of the way forward and the dilemma of confronting China. Sullivan is the leading champion of President Biden’s “foreign policy for the middle class,” an approach that structures U.S. interests abroad around strategies that revitalize the country at home. Its signature elements, so far, have been pieces of legislation like the mammoth Inflation Reduction Act and the Chips Act, which mark an agenda that, as Sullivan put it, “invests in the sources of our own economic and technological strength” and “deploys capital to deliver on public goods like climate and health.” Critics, though, see in the administration’s newfangled embrace of industrial policy a return to an era of dangerous protectionism that has grim implications for the global economy and the future of international trade. “Business leaders have criticized Biden for not pursuing any new trade deals, which generally offer other nations improved access to the U.S. market in return for similar benefits for American exporters,” my colleague David Lynch explained. “Instead, the president has proposed ‘framework’ agreements in Asia and Latin America, which would link U.S. trading partners in a cooperative arrangement involving standards for digital trade and measures to promote stronger supply chains.” The new dispensation, argued the Financial Times’s Luce, is a “pessimistic” one where the United States “cannot make trade deals, cannot negotiate global digital rules, cannot abide by WTO rulings and … has lost faith in economic multilateralism.” He added: “The old consensus was a positive sum game; if one country got richer others did too. The new one is zero sum; one country’s growth comes at the expense of another’s.” Sullivan, who seems to have read Luce’s column before delivering the speech, rejected the dichotomy. He said “the idea that a ‘new Washington consensus’ … is somehow America alone, or America and the West to the exclusion of others, is just flat wrong,” and laid out an arguably nuanced view of the prevailing state of play. Sullivan acknowledged the fact that, for whatever the growing tensions and confrontation with China, trade between the two countries remains robust and reached record levels last year. And he echoed the rhetoric of European Commission President Ursula von der Leyen, who has spoken of “de-risking” Europe’s supply chains from overexposure to China rather than fully “decoupling” from what, by some indicators, is already the world’s largest economy. The United States’ moves to curb trade with China in goods that could boost Beijing’s artificial intelligence and tech prowess are, in Sullivan’s framing, an exception rather than the norm. “Our export controls will remain narrowly focused on technology that could tilt the military balance,” he said. “We are simply ensuring that U.S. and allied technology is not used against us. We are not cutting off trade.” And yet he thinks the current moment has to force a revision of “the oversimplified assumptions” of the past — including restoring an acceptance of more targeted state interventions when necessary and dispelling an embrace of trade liberalization as an end in of itself. “Economic integration didn’t stop China from expanding its military ambitions in the region or stop Russia from invading its democratic neighbors,” Sullivan said. “Neither country had become more responsive or cooperative.” A coterie of Biden administration alumni concurred with Sullivan in a recent panel event hosted by the left-leaning Roosevelt Institute. “It was very clear that decades of free market fundamentalism had really left our economy vulnerable and weakened our national security, and we no longer had the capacity to produce essential goods” like chips and pharmaceutical ingredients, said Sameera Fazili, a former official of the White House’s National Economic Council. Jennifer Harris, a former economics expert on the National Security Council, said it was in the United States’ interests for other countries to mimic its industrial policies and subsidies for green technologies. “Not only do you have our permission to do it too, we need you to do it too, and in fact, we’re going to help you,” she said. “And we’re going to start reorienting U.S. foreign policy around taking the idea of green industrial policy global.” That’s an ambitious project, which Sullivan recognized will take “dedicated commitment” to realize in the years and decades to come, both in building cooperation abroad and navigating polarization and bitter divides at home. What Sullivan envisions “requires buy-in from a broad constituency of domestic actors and foreign allied economies,” tweeted Emily Benson, a trade expert at the Center for Strategic and International Studies in Washington. “It also requires time, which isn’t on the administration’s side.” | 
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