China’s Economic Reckoning
The Price of Failed Reforms
THE GENERATIONAL CHALLENGE
The terrorist attacks of September 11, 2001, that killed nearly three thousand Americans were signposts of a new era, a turning point in our history. Terrorism is a historic and existential challenge that redefines traditional notions of security, and combating it must be at the top of the nation's agenda and therefore at the core of a Republican foreign policy. But the war on terrorism cannot be considered in isolation, without taking into account the wider crisis of governance throughout the developing world, especially in the greater Middle East.
In taking military action against al Qaeda and the Taliban in Afghanistan, President George W. Bush understood that the war on terrorism must be more than the rightful use of military force. There must be a U.S. purpose commensurate with our use of power. As President Bush told a joint session of Congress on January 29, 2002, "we have a greater objective than eliminating threats and containing resentment. We seek a just and peaceful world beyond the war on terror."
A wise foreign policy recognizes that U.S. leadership is determined as much by our commitment to principle as by our exercise of power. Foreign policy is the bridge between the United States and the world, and between the past, the present, and the future. The United States must grasp the forces of change, including the power of a restless and unpredictable new generation that is coming of age throughout the world. Trust and confidence in U.S. leadership and intentions are critical to shaping a vital global connection with this next generation.
The challenges to U.S. leadership and security will come not from rival global powers, but from weak states. Terrorism finds sanctuary in failed or failing states, in unresolved regional conflicts, and in the misery of endemic poverty and despair. Rogue regimes that support terrorism seek legitimacy and power through the possession of weapons of mass destruction, rather than from the will of their people. Terrorism and proliferation go hand in glove with the challenges of failed and failing states.
Five billion of the world's six billion people live in less developed regions. Most of the world's population growth in this century will come from these regions, where nearly one in three people is under the age of 15. As this younger generation grows into adulthood, it will be the greatest force for change in world politics in the first half of the twenty-first century. Many governments in the developing world, especially in Africa, the greater Middle East, and Asia, will not be able to meet the basic demands of their growing populations for jobs, health care, and security. Although poverty and despair do not "cause" terrorism, they provide a fertile environment for it to prosper. The strains of demography, frustrated economic development, and authoritarian governments contribute to radicalized populations and politics. The developing world's crisis of governance thus cannot be separated from the United States' greater global interests. This is the context in which discussions of current foreign policy must be understood.
A REPUBLICAN FOREIGN POLICY
Traditionally, a Republican foreign policy has been anchored by a commitment to a strong national defense. The world's problems will not be solved by the military alone, but force remains the first and last line of defense of U.S. freedom and security. When used judiciously, it is an essential instrument of U.S. power and foreign policy. Terrorists or states that attack the United States should expect a swift and violent response.
Republicans recognize that strength abroad begins with strength at home. U.S. resources require wise and judicious management. Deficits and entitlement programs, if unchecked, will undermine confidence in our economy, impede economic growth and investment, make the United States less competitive, and erode our position as a world economic leader. U.S. policymakers will then be forced to make hard choices between national security and domestic priorities.
Americans must be educated about the realities of the global economy and the commitments of global leadership. Our education policies should emphasize foreign languages, culture, and history, and create more incentives and programs for study abroad. We must also prepare students and workers for those industries and services that will provide the United States a comparative advantage in the global economy in the first part of the twenty-first century.
Republicans understand that a successful foreign policy must be not only strong but sustainable. A sustainable policy requires a domestic consensus and commitment. This begins with strong presidential leadership and vision about the United States' role in the world. The president's national security team must be unified and cohesive. That does not mean different points of view should not be tolerated; different perspectives are imperative in the formulation of any sustainable policy. But once a decision has been made, palace intrigues and personal dramas must not be allowed to infect policy and the implementation of that policy. Only a president can bring this effort together. Congress also has a constitutional role and responsibility to help shape U.S. foreign policy. Without congressional engagement and support, U.S. foreign policy will lack legitimacy and sustainability.
A lack of consensus at home means foreign policy trouble abroad. This was one of the lessons of Vietnam, where the United States, divided at home and isolated abroad, failed to succeed in Southeast Asia.
Republicans also know that a successful foreign policy must be clear and comprehensive, with the flexibility to respond to the uncertainties, nuances, and uncontrollables that are the everyday occurrences of foreign policy. The U.S. force structure and resources should match the security and foreign policy commitments required for the next generation. That may require some form of mandatory national service. If in fact the United States is engaged in a generational war, then all of us should share the burdens, sacrifices, and costs of this national challenge.
Taking all of this into account, a Republican foreign policy for the twenty-first century will require more than traditional realpolitik and balance-of-power politics. The success of our policies will depend not only on the extent of our power, but also on an appreciation of its limits. History has taught us that foreign policy must not succumb to the distraction of divine mission. It must inspire our allies to share in the enterprise of making a better world. It can do so by remaining true to seven principles.
PRINCIPLES AND PRACTICE
First, the United States must remain committed to leadership in the global economy. The rule of law, property rights, advances in science and technology, and large increases in worker productivity all have contributed to the United States' leading edge in global markets. Increased productivity may mean fewer workers in some sectors, such as manufacturing. But over time these gains mean more and better jobs and investment in high-growth, high-tech sectors. As Michael Porter wrote in his classic work The Comparative Advantage of Nations, "a nation's standard of living in the long term depends on its ability to attain a high and rising level of productivity in the industries in which its firms compete."
This means that the United States must expand free and fair trade agreements and encourage intraregional trade and investment in developing regions. Trade is the driving force for sustained economic prosperity, security, and job creation, both in the United States and throughout the world. During periods of uncertainty and change, countries may close markets and protect certain domestic industries. Americans are not immune and have in the past sought refuge in an insular political tradition that has contributed to isolationism at home and instability abroad. These temptations must be resisted, and hard-earned lessons should not be forgotten.
U.S. foreign policy must also promote good governance, the rule of law, investment in people, private property rights, and economic freedom. The United States can continue to set an example, not arrogantly, but cooperatively, through strong leadership and partnership. All nations can share in the prosperity that comes from sound economic governance practices and trade-based growth policies. That is the purpose of the Millennium Challenge Account (MCA), established by the Bush administration as a "compact for global development" between developed and developing countries.
Second, U.S. foreign policy cannot ignore global energy security. Discussions of U.S. energy policy are often detached from economic and foreign policy. The United States has an interest in assuring stable and secure supplies of oil and natural gas. According to the Department of Energy, the United States imports nearly 60 percent of its crude oil. Twenty percent of U.S. imports come from the Persian Gulf; by 2025, this share is estimated to grow to 26 percent. The share of American oil imports from the members of the Organization of Petroleum Exporting Countries (OPEC) is also expected to grow from 40 percent to 53 percent. But even if U.S. dependence on Middle Eastern oil were to decrease, instability and conflict in the Persian Gulf would still affect us, since oil markets operate on a global basis. U.S. national security therefore depends on political stability in the Middle East and other potentially volatile oil- and gas-producing regions. In addition to helping assure such stability, the United States must develop alternative fuel sources; expand natural gas production, networks, and facilities; and take greater advantage of nuclear power, clean coal technology, and more aggressive conservation programs.
Third, the United States' long-term security interests are connected to alliances, coalitions, and international institutions. A Republican foreign policy must view alliances and international institutions as extensions of our influence, not as constraints on our power. No single country, including the United States with all its vast military and economic power, can successfully meet the challenges of the twenty-first century alone. Winning the war on terrorism, for example, will require a seamless network of relationships.
The United States must therefore help strengthen global institutions and alliances, beginning with the United Nations and NATO. Like all institutions, the UN has its limitations. It needs reform. Too often, the UN, especially the General Assembly, succumbs to the worst forms of political posturing and irresponsible action. But the UN is more relevant today than it has ever been. The global challenges of terrorism, proliferation of weapons of mass destruction, hunger, disease, and poverty require multilateral responses and initiatives.
The UN has an essential role to play in postconflict transitions, providing international legitimacy and expertise in places such as East Timor, the Balkans, Afghanistan, and Iraq. Helping to bring stability and democracy to those troubled areas requires an immense international effort. At times the United States can and must lead, but it would be wise to share the authority for -- as well as the burdens, costs, and risks of -- such operations with others.
At the core of the United States' alliance network must be a recommitment to the transatlantic partnership. The common interests of the United States and Europe reach beyond the Cold War. As President Gerald Ford said at the 1975 Conference on Security and Cooperation in Europe in Helsinki, "We are bound together by the most powerful of all ties, our fervent love for freedom and independence, which knows no homeland but the human heart."
NATO must remain the central alliance in U.S. global strategy. The end of the Cold War has meant a shift in NATO's strategic focus from the defense of Europe to the greater Middle East, Central Asia, and Africa. It will therefore require a new strategic doctrine for the twenty-first century. As NATO adjusts to both new members and new strategic circumstances, its members must address gaps in military capabilities and expenditures. The United States cannot be expected to continue to shoulder a disproportionate share of the costs. This means that our allies will have to redefine their commitments to the alliance. Military power will continue to play a vital and central role, but the future success of NATO will be determined by its members' ability to deepen and expand their cooperation in the command and control, intelligence, law enforcement, economic, diplomatic, and humanitarian fields.
The fourth principle of a Republican policy should be that the United States must continue to support democratic and economic reform, especially in the greater Middle East. We cannot lose the war of ideas. In many developing countries and throughout the Muslim world, we are witnessing an intracivilizational struggle, driven in part by the generational challenges of demography and development. This is not a clash of civilizations, as in Samuel Huntington's score, but one within cultures and societies about models of governance. States are not built from the outside in; they are built from the inside out. Many Islamic societies are seeking a path that balances modernity, tradition, and the demands of a younger generation for greater political freedoms and economic opportunities. Iran, Pakistan, Saudi Arabia, Afghanistan, Indonesia, and Iraq are all bellwethers of this struggle.
Initiatives to promote political reform should be based on realistic assessments of the needs and dynamics of each country, not on ideological orthodoxy. As Henry Kissinger has noted, "a foreign policy to promote democracy needs to be adapted to local or regional realities, or it will fail. In the pursuit of democracy, policy -- as in other realms -- is the art of the possible."
We should support democratic change through partnerships with friendly governments and democrats abroad, developed through consultation, diplomacy, economic incentives, human rights standards, and performance-driven measures for success. A model of foreign policy success in this area is Georgia, where U.S. support for democratic institutions and anticorruption initiatives over time helped contribute to the success of the "Rose Revolution" of 2004.
The Bush administration's "Forward Strategy for Freedom" for the greater Middle East, including the Middle East Partnership Initiative and increased funding for the National Endowment for Democracy, is a good start on an ambitious and pragmatic program for change in this region. Sustainable democracy will depend on institutions that support education, women's rights, and private-sector development. But it will also depend on progress toward the resolution of long-standing regional disputes such as the Israeli-Palestinian conflict. This problem does not stand still, it worsens -- and as it does, it increases the capacity for radical politics and extremist acts of violence throughout the region and the world.
The United States and its allies must therefore develop a regional security order for the greater Middle East that includes Israel, our Arab allies, Iraq, Turkey, Pakistan, and Iran. Regional security can be a bridge to a U.S. dialogue with Iran and another means to address Iran's support for terrorism and its nuclear program. Dealing with regional security in the greater Middle East, and especially with Iran and Iraq, will require intensive cooperation with our European and regional allies. The decision by Libyan leader Muammar al-Qaddafi to give up his nuclear ambitions and join the community of nations could be an example for Iran and other potential proliferators in the Middle East and elsewhere.
Fifth, the western hemisphere must be moved to the front burner of U.S. foreign policy. The process of economic integration that began with the North American Free Trade Agreement (NAFTA) must evolve into a comprehensive program for the entire western hemisphere. Energy, trade, transportation, and immigration, as well as terrorism and illegal narcotics, are all critical to our national security interests.
The relationship with Mexico, in particular, is as critical as any in U.S. foreign policy. Mexico has nearly 100 million people and a 2,000-mile border with the United States; it is the bridge between North and South America and a strategic pivot for our economic and security relationships in the western hemisphere. The United States should therefore encourage reforms there, including the liberalization of Mexico's foreign investment laws, especially in the energy sector. The commitment to reform in Mexico should be seen as an investment in our shared security and prosperity, not foreign aid.
Those who have criticized NAFTA have missed one of the most important developments of the past decade in U.S. foreign policy. Total trade among the United States, Mexico, and Canada more than doubled in NAFTA 's first ten years. We must continue this progress. Multilateral trade agreements such as the U.S.-Chile Free Trade Agreement will build on the success of NAFTA by promoting the rule of law, private property rights, open government and regional cooperation. The Central America Free Trade Agreement (CAFTA) and the Free Trade Area of the Americas (FTAA) are important steps to deeper political and economic integration among all 34 nations of the western hemisphere.
The United States' cultural integration with the western hemisphere has been progressing for many years. More than 50 percent of U.S. immigrants are from Latin America. By 2050, nearly 25 percent of the U.S. population is projected to be Hispanic. As part of this larger agenda, the United States and Mexico must work together on immigration policies that are based on strength, not fear. Immigration is a vital part of U.S. strength and vitality. A more prosperous and stable Mexico and Latin America will help curb illegal immigration and improve the climate for trade and investment throughout the region.
Sixth, the United States must work with its allies to combat poverty and the spread of disease worldwide. This is one of the core challenges of governance in the developing world. Avian flu, severe acute respiratory syndrome (SARS), HIV/AIDS, tuberculosis, malaria, and other possible pandemics can begin as acute crises in Africa and Asia but quickly acquire global reach and implications. The historian William McNeill wrote in his book Plagues and Peoples that infectious disease is "one of the fundamental parameters and determinants of human history." The speed of international travel today reduces the time for containing another outbreak of avian flu or SARS. And Africa will be unable to achieve sustainable development without a historic initiative to control and eradicate AIDS, the number one killer in sub-Saharan Africa.
The seventh and final principle of a Republican foreign policy is the importance of strong and imaginative public diplomacy. The coin of the realm for leadership is trust and confidence, and popular discontent and questioning of U.S. foreign policy intentions will undercut our efforts in the war on terrorism and initiatives in the greater Middle East.
Public diplomacy initiatives require strategic direction. The answer does not lie in a flashy media campaign or more air time devoted to high-profile American performers. Instead, more Foreign Service public affairs officers are needed to engage the publics in their host countries, meet the people, listen to what they have to say, and coordinate this information into an effective public diplomacy strategy. Professional and educational exchange programs, meanwhile -- the bedrock of public diplomacy for years -- were set back by homeland security and visa policies after September 11. This was an understandable reaction in the short term, but renewed exchange programs and immigration reforms that pay due weight to both security and openness are now required.
Public diplomacy is the link between U.S. policies and the perception of its purpose. The United States' purpose in world affairs must always be anchored by its interests and values but balanced by the understanding that U.S. interests are not mutually exclusive from the interests of friends and allies. President Dwight D. Eisenhower put it well in his farewell address to the nation:
Throughout America's adventure in free government, our basic purposes have been to keep the peace; to foster progress in human achievement, and to enhance liberty, dignity, and integrity among people and among nations. To strive for less would be unworthy of a free and religious people. Any failure traceable to arrogance, of our lack of comprehension or readiness to sacrifice would inflict upon us grievous hurt both at home and abroad.
Republicans understand that U.S. foreign policy in coming years will require careful attention to four vital relationships -- those with the European Union (EU), Russia, India, and China. The United States' relations with these major powers will be critical to global stability and security.
The EU will represent one of the most significant power blocs of the twenty-first century. U.S. foreign policy should recognize the EU as a geopolitical force in its own right, distinct from, although connected to, the NATO security alliance. Washington's relationship with NATO will in fact be strengthened through recognition of the diplomatic and economic significance of the U.S.-EU relationship.
The EU comprises 25 nations with internal borders open for trade and investment. U.S.-EU commerce constitutes the largest trade and investment relationship in the world, with more than $1 trillion exchanged annually. Beyond increasing this already immense economic connection, the United States and the EU can benefit by teaming up to address the global issues of the coming era. Both would also benefit from Turkey's eventual membership in the EU.
Since the implosion of the Soviet Union in 1989, meanwhile, Russia has been struggling with political and economic reform. The United States must continue to support Russia's reform efforts. President Vladimir Putin has worked closely with the United States over the last four years to bring greater political and economic reforms to Russia while on the road to joining the World Trade Organization, but Russia must do more.
Strengthening the U.S.-Russian relationship means developing more effective bilateral trade, which would ultimately create additional jobs, security, and prosperity in both countries. The United States should engage Russia as a strategic energy partner. Russia has proven oil reserves in excess of 60 billion barrels and natural gas reserves reaching some 1,700 trillion cubic feet. As U.S. energy policy seeks to ensure diversified sources of energy to meet the United States' needs, we must seek a policy that includes Russia as a strategic trading partner.
With over one billion people, India is set to become the most populous nation in the world by the middle of the twenty-first century. The world's largest democracy, it faces many of the challenges of governance and demography described above, but it also has great potential. A U.S.-Indian strategic relationship will produce benefits for U.S. interests not only in Central and South Asia, but more broadly as well. For the relationship to achieve its full potential, however, the government of India must liberalize its economy and continue to work with Pakistan to seek resolution of the Kashmir conflict. Our strategic relationship with India need not come at the expense of our relationship with Pakistan; the United States must work with both countries to prevent further regional instability and conflict.
Regarding China, it was in these pages in 1967 that Richard Nixon foreshadowed his historic opening of relations. He gave no ground in his opposition to communist China's politics and policies, but concluded that, "for the long run, it means pulling China back into the world community -- but as a great and progressing nation, not as the epicenter of world revolution." Successive presidents have followed Nixon's lead, and to good effect. The challenge for the United States today is how to ensure that China stays on the path of normalization and stability. Home to almost 1.3 billion people and a world power with nearly unlimited economic potential, China must continue to be encouraged toward even greater regional integration and global responsibilities.
The United States and China will not always agree, and the United States should not shy away from voicing its concerns about human rights and the rule of law. But its voice will be heard most clearly and constructively in the context of a bilateral relationship that is generally strong and confident. Trade, a major common denominator between the two countries, should be seen not as an excuse for deferring tough decisions or excusing troubling behavior, but rather as an opportunity to build a stable relationship in which other issues can also be discussed.
Three areas in particular will determine whether relations between China and the United States will continue to deepen. First, China's role and influence will be critical in helping contain the nuclear ambitions of North Korea. China's special relationship with North Korea allows it to play a unique role in encouraging Pyongyang to make the right choices. Without China, our influence with North Korea is reduced.
Second, China will be instrumental in global efforts to reduce proliferation of missile and dual-use technologies. The Chinese government recently published regulations on missile-related export controls and dual-use biological agents and technologies. But China must enforce its own rules more vigorously and transparently, holding its own companies and individuals accountable for any violations that may be discovered.
Third, the United States supports the peaceful resolution of differences between the People's Republic of China and Taiwan. The strengthening of cross-strait economic linkages is one of the most positive trends in the region. However, the continuing deployment of missiles and other armed forces targeted against Taiwan generates suspicion and increases tension. The United States is committed to the "one China" policy, and to its obligations under the Taiwan Relations Act. Secretary of State Colin Powell said it best when he noted that "whether China chooses peace or coercion to resolve its differences with Taiwan will tell us a great deal about the kind of role China seeks with its neighbors and seeks with us."
"LIT BY LIGHTNING"
Seizing opportunity in crisis has been the hallmark of great leadership. Thirteen years ago, President George H.W. Bush took the measure of Saddam Hussein and not only reversed Iraq's annexation of Kuwait, but in the process also charted a course for the post-Cold War world. In seeking Soviet cooperation against Iraq, Bush told Soviet President Mikhail Gorbachev, "I want to go to the American people tomorrow night to close the book on the Cold War and offer them the vision of this new world order in which we will cooperate."
At the turn of this new century, Republicans believe that the United States must continue to be a force for humanity, freedom, and progress. They know that a U.S. foreign policy that clearly represents our identity, our beliefs, and our vital interests is the legacy of 200 years of Americans' faith in their destiny. The United States has been a central force for a free, prosperous, and peaceful world. As the Greeks noted centuries ago, "character is fate."
In words that could be delivered today, President Ronald Reagan captured in his second inaugural address the optimism that lies at the heart of U.S. foreign policy. He described the world as "lit by lightning. So much is changing and will change, but so much endures, and transcends time." Now as then, the United States' purpose in foreign policy is to chart a new course in a world "lit by lightning." U.S. foreign policy must convey the dynamism and urgency of this new century. This purpose reflects neither the hubris that comes with great power nor the conviction that our power and resources are without end. A Republican foreign policy should unite us at home and gather friends and influence abroad for the great project of making a better and freer world for the next generation.
This is the third in a series of commissioned essays on foreign policy concerns for the next president.