China’s Economic Reckoning
The Price of Failed Reforms
The warnings started long before Donald Trump was even a presidential candidate. For at least a decade, a growing chorus of foreign policy experts had been pointing to signs that the international order was coming apart. Authoritarian powers were flouting long-accepted rules. Failed states were radiating threats. Economies were being disrupted by technology and globalization; political systems, by populism. Meanwhile, the gap in power and influence between the United States—the leader and guarantor of the existing order—and the rest of the world was closing.
Then came Trump’s election. To those already issuing such warnings, it sounded the death knell of the world as it was. Even many of those who had previously resisted pessimism suddenly came to agree. As they saw it, the U.S.-led order—the post–World War II system of norms, institutions, and partnerships that has helped manage disputes, mobilize action, and govern international conduct—was ending for good. And what came next, they argued, would be either an entirely new order or a period with no real order at all.
But the existing order is more resilient than this assessment suggests. There is no doubt that Trump represents a meaningful threat to the health of both American democracy and the international system. And there is a nonnegligible risk that he could drag the country into a constitutional crisis, or the world into a crippling trade war or even an all-out nuclear war. Yet despite these risks, rumors of the international order’s demise have been greatly exaggerated. The system is built to last through significant shifts in global politics and economics and strong enough to survive a term of President Trump.
This more optimistic view is offered not as comfort but as a call to action. The present moment demands resolve and affirmative thinking from the foreign policy community about how to sustain and reinforce the international order, not just lamentations about Trump’s destructiveness or resignation about the order’s fate. No one knows for certain how things will turn out. But fatalism will become a self-fulfilling prophecy.
The order can endure only if its defenders step up. It may be durable, but it also needs an update to account for new realities and new challenges. Between fatalism and complacency lies urgency. Champions of the order must start working now to protect its key elements, to build a new consensus at home and abroad about needed adjustments, and to set the stage for a better approach, before it’s too late.
In a world where the major trends seem to spell chaos, it is fair to place the burden of proof on those who claim that the current order can continue. Yet well before Trump, it had already demonstrated its capacity to adapt to changes in the nature and distribution of power. Three basic factors account for such resilience—and demonstrate why the emphasis now should be on protecting and improving the order rather than planning for the aftermath of its demise.
First, most of the world remains invested in major aspects of the order and still counts on the United States to operate at its center. The passing of U.S. dominance need not mean the end of U.S. leadership. That is, the United States may not be able to direct outcomes from a position of preeminent economic, political, and military influence, but it can still mobilize cooperation on shared challenges and shape consensus on key rules. In the years ahead, although Washington will not be the only destination for countries seeking capital, resources, or influence, it will remain the most important agenda-setter.
Some context is important. The U.S.-led order was built at a unique moment, at the end of World War II. Europe’s and Asia’s erstwhile great powers were reduced to rubble, and a combination of dominance abroad and shared economic prosperity at home allowed the United States to serve as the architect and guarantor of a new order fashioned in its own image. It had not just the material power to shape rules and drive outcomes but also a model many other countries wanted to emulate. It used the opportunity to build an order that benefited itself as well as others, with clear advantages for populations at home and abroad. As the international relations scholar G. John Ikenberry has put it in this magazine, the resulting system was “hard to overturn and easy to join.” The end of the Cold War and the fall of the Soviet Union served to reinforce and extend American preeminence.
This precise state of affairs was never going to last forever. Other powers would eventually rise, and the basic bargain would one day need to be revisited. That day has arrived, and the question now is, do other countries want a fundamentally different bargain or simply some adjustments? A comprehensive 2016 RAND analysis found that few powers display an appetite for dismantling the international order or transforming it into something unrecognizable. And while Trump’s election has forced countries to contemplate a world without a central role for the United States, many still view the president as an aberration and not a new American normal, especially given that the United States has bounced back before.
Even China has concluded that it largely benefits from the order’s continued operation. Around the time of Trump’s inauguration, breathless reports interpreted Chinese President Xi Jinping’s comments on an open international economy and climate change as indicators that China planned to somehow take over for the United States. But what Xi was really signaling was that China does not want near-term radical change in the global system, even as it seeks to gain more influence by taking advantage of the vacuum left by Trump. And to the extent that Beijing has set out to construct its own parallel institutions, particularly when it comes to trade and investment, thus far these institutions largely supplement the existing order rather than threatening to supplant it.
Other emerging powers chafe at certain features of the order, and some seek a more prominent place in institutions such as the UN Security Council. Yet rhetorical flourishes aside, they, like China, talk in terms of reform rather than replacement—and their continued participation sends a similar message. For example, leaders of the major emerging powers eagerly accepted U.S. President Barack Obama’s invitation to join the first Nuclear Security Summit, in 2010; less eagerly but still willingly, they joined the global sanctions regime against Iran’s nuclear program. Richard Fontaine and Daniel Kliman of the Center for a New American Security quote a Brazilian official who captured a broader sentiment among emerging powers: “Brazil wants to expand its room in the house, not tear the house down.” And indeed, Brazil has taken on a leading role in defending important aspects of the order, such as the multistakeholder system for Internet governance. Emerging powers’ quest for a greater voice in regional and global institutions is not a repudiation of the order but evidence that they see increasing their participation as preferable to going a different way.
The second factor accounting for the order’s resilience is that the United States has managed the transition from dominance to leadership more effectively than most appreciate. Over the past decade, U.S. diplomacy has facilitated a shift from formal, legal, top-down institutions to more practical, functional, and regional approaches to managing transnational issues—“coalitions of the willing” (in the real, non-Iraq-war sense of the term). This shift has not only expanded the prospects for shared problem solving; it has also made the rules-based order less rigid, and therefore more lasting.
Consider climate change. Formal legal structures, such as the Kyoto Protocol, which failed largely because the United States refused to participate and emerging powers were exempt, have given way to less formal structures, such as the Paris climate accord. Unlike Kyoto, Paris achieved broad-based participation because its substantive commitments are voluntary and states have flexibility in how to meet them. It can survive a temporary U.S. withdrawal because other countries had already factored their targets into their national energy plans and because the United States can meet or exceed its own targets even without the help of Washington (points Brian Deese, a former climate adviser to Obama, has made in this magazine).
On nuclear proliferation, formal Nuclear Nonproliferation Treaty review conferences have not advanced the ball on new legal norms. But during the negotiations that led to the Iran nuclear deal, the P5+1 (the five permanent members of the UN Security Council plus Germany) joined together to develop a rules-based plan to address a major global proliferation problem. The resulting agreement, the Joint Comprehensive Plan of Action, involved practical commitments from the negotiating parties but also incorporated key international institutions—the International Atomic Energy Agency and the Security Council—for oversight and enforcement. And although Trump may eventually withdraw from the agreement, the broad participation and buy-in that it achieved, and the fact that it is working as intended, have thus far constrained him from doing so, despite his claim that it is “the worst deal ever.”
On trade and economics, although universal rule-making in the World Trade Organization has stalled, “plurilateral” and regional initiatives of various shapes and sizes have proliferated, from the East African Community to Latin America’s Pacific Alliance. The United States is not party to some of these platforms, but it has helped promote them with technical and diplomatic support. Viewed from this perspective, Beijing’s establishment of the Asian Infrastructure Investment Bank is largely in line with the “variable geometry” that the United States has encouraged. (Washington erred in resisting the AIIB rather than working to shape its standards.) And on global health, the World Health Organization has recognized the need for more flexible arrangements to deal with major health crises, including public-private partnerships, such as the Global Fund to Fight AIDS, Tuberculosis and Malaria and Gavi, the Vaccine Alliance. Meanwhile, various emerging regional and subregional arrangements are playing larger roles in local problem solving.
One could add other examples to the list, but the point is this: the overall trend toward practicality and flexibility, encouraged by the United States, has generated more resilience in the rules-based order. For one thing, more practical and flexible approaches are better suited to handle the diffuse and complex nature of transnational challenges today. For another, the rest of the world can continue to participate even when the United States pulls back. The new structures are designed to extract greater participation and contributions from a greater number of actors in a greater number of places—even when the most important of those actors temporarily relinquishes its leadership role.
There is a concern about whether this trend will water down rules. But the record so far suggests this is not the case. For example, the 11 nations currently pursuing the Trans-Pacific Partnership without U.S. participation might produce a trade agreement with weaker labor or environmental provisions than those in the U.S.-brokered version, which the Trump administration withdrew from last year. But those provisions would still represent an improvement over existing rules, and a new baseline against which future rules would be measured. Nor is this broader trend mutually exclusive with action in the UN system. The rise of informal mechanisms of cooperation has not detracted from basic global standard-setting on issues such as civil aviation. To the contrary, the informal and the formal can be mutually reinforcing. Progress conceived in smaller formats outside the UN system can help catalyze universal action.
Finally, although Trump has created a temporary vacuum of global leadership and keeps raising questions about his basic fitness for office, he has thus far been unable to do the level of systemic damage in foreign affairs that he threatened on the campaign trail. He has—again, thus far—been constrained by Congress, by his own national security team, and by reality.
Consider the U.S. alliance system, a central feature of the U.S.-led order. Trump continues to deride U.S. allies as free riders. But Washington’s policy toward its alliances in both Europe and Asia has been marked more by continuity than change. Trump’s advisers have helped ensure that, as have outside advocacy and congressional oversight. And European leaders have sought to sustain the alliance, despite their misgivings about Trump, by working around him. Similarly, whatever the administration’s desire to ease pressure on Russia for violations of Ukraine’s territorial integrity—a foundational norm of the rules-based order—Congress overwhelmingly approved new sanctions, tying Trump’s hands. (The administration subsequently surprised most observers by announcing that it would provide lethal assistance to Ukraine, a move pushed by top members of Trump’s national security team.)
Perhaps most important, Trump has found that whatever his contempt for the rules-based order, he needs it. Here he follows a line of American politicians who have chafed at perceived limits on U.S. freedom of action but ultimately recognized that the order protects and advances U.S. interests. To counter North Korea, he needs both strong Asian alliances and a working relationship with Beijing (contrary to everything he said during the campaign). To defeat the Islamic State (also known as ISIS), he needs the allies and partners that made up the coalition, built during the Obama administration, that helped eject ISIS from Mosul and Raqqa. Trump has therefore been forced to embrace elements of the order he would rather dismiss.
Trump’s own lack of focus has helped. The international relations expert Thomas Wright is correct to warn that “since World War II, the foreign policy of every administration has been defined by the character and opinions of its president,” not anybody else. And Trump’s worst impulses may yet win out, with disastrous consequences. But unlike his predecessors, Trump has displayed relatively little interest in translating his impulses into consistent policy actions. That can potentially allow the system around him, including voices outside government, to play a more powerful constraining role than usual.
The system’s resilience should not be the end to a comforting story; it should be the starting point of a badly needed effort to reinforce and update the international order and address the real threats to its long-term viability. That must begin with the most serious challenge today: growing disillusionment with some of its core assumptions. This disillusionment has been stoked by forces of nativism and illiberalism, but it is rooted in the lived experience of many who have seen few promised benefits flow to them.
The United States built the order on three foundational propositions: that economic openness and integration lead to greater and more widely shared prosperity; that political openness, democratization, and the protection of human rights lead to stronger, more just societies and more effective international cooperation; and that economic and political openness are mutually reinforcing. All three propositions are now contested.
As the political scientists Jeff Colgan and Robert Keohane have argued in these pages, the link between globalization and shared prosperity is no longer clear. The current international economic system is “rigged,” in their telling, and a new set of rules is needed to better advance the interests of middle classes around the world. Meanwhile, a growing reaction in the West treats global integration as a threat to national identity and economic vitality.
On the merits of the open political model, democracy is now on the defensive—from within, thanks to self-inflicted wounds and the gathering strength of populist political parties, and from without, thanks to what the National Endowment for Democracy calls the “sharp power” of authoritarian states, a mix of strategies to undermine political pluralism and open elections. Russian President Vladimir Putin’s interference in the U.S. presidential election likely helped secure Trump’s victory, and in the years ahead, Russian “active measures” and Chinese influence operations will continue seeking to destabilize democratic systems.
And when it comes to the interaction between economic and political reform, the Chinese Communist Party has been trying to prove—including to receptive audiences in developing-world governments—that economic openness is perfectly compatible with a closed political system. Unlike the Soviet Union, which relatively few aspired to emulate, China offers what many see as an attractive alternative. Xi has described his country’s model as a “new option for other countries.” Audiences in Africa and Asia, and even some in Europe, are paying attention.
These trends preceded Trump, and they are now being compounded by new threats to democracy, including a wholesale assault on the very idea of truth. But they are not irreversible. The year 1989 did not bring the end of history in one direction; neither did 2016 in the other.
The liberal part of the rules-based international order has always been imperfect and will remain so. As Ikenberry has pointed out, the current order is actually a blend of the traditional Westphalian system (founded on state sovereignty) and a more liberal variant that emerged first with British hegemony in the nineteenth century and then deepened under U.S. leadership in the twentieth. This combination has always involved an uneasy balance between sovereignty and noninterference, on the one hand, and universal values and multilateral cooperation, on the other. A shift in emphasis toward the former does not spell the end of the entire order.
The liberal part of the rules-based international order has always been imperfect and will remain so.
Moreover, the developments of the past two years—Brexit, Trump’s election, the rise of right-wing parties in Europe, foreign interference in democratic politics—have served as a wake-up call. There are new and urgent conversations in Western democracies not just about how to resist pressure from abroad but also about how to address social and economic dislocations at home and the distributional consequences of globalization and automation. Whether this brings about a genuine recovery of strength for liberal democracy over time remains to be seen. But there are promising signs. Trump’s excesses have generated energetic efforts to push back against them. In Europe, the EU has proved more cohesive, and its economic foundation stronger, than most anticipated, and although populist movements continue to make some progress, they have also met considerable resistance (as the French far-right candidate Marine Le Pen discovered). Democratic nations have not lost the wherewithal to manage and alleviate the strains of authoritarian populism. If the West can succeed in restoring some of the appeal of the democratic model, the weaknesses and contradictions in the authoritarian model—which, after all, rests on the systematic suppression of basic human freedoms and is usually accompanied by debilitating corruption—will come back into sharper focus. In this regard, the major disconnect between Beijing’s outward projection of confidence and its deep insecurity at home is telling.
Along with weaknesses within the West, the order is facing challenges from without, starting with renewed great-power competition. Indeed, the Trump administration’s National Security Strategy explicitly makes competition—in opposition to order—an organizing principle. It taunts previous administrations for seeing great powers as “benign actors and trustworthy partners” and assuming that “competition would give way to peaceful cooperation.” But the Trump team is wrong to frame this as an either-or proposition. As a prescriptive matter, abandoning the postwar order is a strange concession for a status quo power to make, since the order’s existence is a major competitive advantage. Defending it, and mobilizing its assets, is essential for contending with Russia and China. And as a predictive matter, it is by no means inevitable that great-power competition will upend the order in the foreseeable future. To understand why this is the case, it’s necessary to distinguish between the two primary great-power competitors.
Russia under Putin does want to undermine U.S. leadership, as well as the cohesion of Washington’s democratic allies. But so far, the Kremlin has proved to be more of a spoiler than an existential threat. Yes, Putin brazenly violated Ukraine’s territorial integrity, but he was met with a common transatlantic response that kept him from pulling Kiev back into Moscow’s orbit, as well as with new NATO forward deployments to resist further Russian aggression. Yes, Putin’s intervention in Syria assisted Syrian President Bashar al-Assad’s butchery on an industrial scale and gave Russia a brokering role there, but that has not translated into a broader role as security manager for the region, and it likely never will. And on the global level, Russia simply does not have the power to decisively shift the course of international trade and investment regimes or scuttle multilateral efforts to deal with such challenges as climate change. That will be increasingly true going forward, given Russia’s fragile economy and unfavorable demographic trends. The United States has to avoid the trap of underestimating Putin, but also the temptation to overestimate him.
China is a different story. It has far greater capacity to upend the global order—but will be cautious in attempting to do so in the near term. For all of Xi’s rhetoric, China cannot be expected to replace the United States at the center of a newly constituted order. As the China scholar David Shambaugh has noted, Beijing remains a “partial power.” Its basic global strategy has been to act, to borrow a phrase from the former U.S. official Robert Zoellick, as amended by Hillary Clinton as secretary of state, as a “selective stakeholder,” picking and choosing which responsibilities to take on based on a narrow cost-benefit analysis. This strategy proceeds from the assumption that the United States will remain the burden bearer of last resort.
China will clearly seek greater influence in the operation and evolution of the order. Other emerging powers will, too. That will require adjustments by both the United States and emerging powers, but not something fundamentally new.
That still leaves the question of whether China’s competitive posture in its region will over time translate into a more fundamental global challenge—especially if Beijing succeeds in building a sphere of influence in East Asia. That China aims to change the balance of power in Asia, reducing the United States’ role and increasing its own, is evident in its military buildup, its activities in the South China Sea, its coercive economic diplomacy, and the expansion of its influence through such efforts as the Belt and Road Initiative. And the Trump administration is helping in this cause, by neglecting Asian security and economic institutions.
But the United States and its partners have plenty of cards to play. The demand for an enduring U.S. presence in Asia, from key treaty allies and others resistant to Chinese hegemony, will likely block any aspirations Beijing has for an Asian Monroe Doctrine, or anything close to it. Even in areas where China has made significant strides, such as the South China Sea, the United States and its partners still have the capacity to protect regional prerogatives and global norms such as freedom of navigation and unimpeded lawful commerce. Ultimately, a return to an effective Asia strategy, anchored in Washington’s historical alliances and contemporary partnerships, could sustain the U.S. role in Asia and manage regional competition while promoting global cooperation with Beijing.
Finally, the paroxysms of violence across the arc of instability from North Africa to South Asia have led some observers to conclude that disorder in the Middle East could threaten the entire global order. But Middle Eastern instability has been a feature, not a bug, of the system since the fall of the Ottoman Empire after World War I. In just one 30-year stretch—the period from the early 1970s to the first decade of this century—the region saw the Yom Kippur War, the Lebanese civil war, the Iranian Revolution, the dawn of the modern age of terrorism with the siege of Mecca, the Soviet invasion of Afghanistan, the Iran-Iraq War, the first Lebanon war, two Palestinian intifadas, the Persian Gulf War, the war in Iraq, and a Yemeni civil war.
Today, it is true that the combination of weak state structures, violent ideologies, and Iranian-Saudi competition has transformed a number of local conflicts into a regional crisis. In addition to the horrific human toll, this has had the spillover effects of sending refugees flowing to Europe and inspiring jihadist attacks across the West. At the same time, the United States is no longer as willing or able to play the external role it played before, for reasons relating to both the supply side (reduced U.S. willingness to invest resources, especially troops) and the demand side (reduced regional enthusiasm for U.S. involvement). Yet the roiling waters of the Middle East have not swamped the whole system. U.S.-led efforts against ISIS have rolled back the biggest threat to the international community, the existence of a terrorist state in the heart of the Middle East. Europe is learning to manage the refugee crisis. And despite Tehran’s advances on several fronts, the basic power politics of the region tilt toward the eventual emergence of an uneasy, sometimes messy balance between Iran and its proxies on one side and a Saudi-led Sunni bloc on the other. Effective statecraft can help manage, contain, and reduce regional instability over time.
None of this is an argument for complacency. In Washington, checking Trump’s destructive instincts requires constant work, which will only get harder as he looks more often to the global stage to score points. And the internal constraints often come down to a few individuals who could easily be replaced by less responsible voices. Internationally, the difficulties are accelerating, not abating, among them the technology-driven challenge to state supremacy itself. The resilience of the rules-based order offers just a window of opportunity to get things right. It will eventually close.
Many of the most crucial steps require that the United States get its own house in order, which would create more fertile ground for consensus building on national security. But there is also a clear task for foreign policy leaders, in both parties: to strengthen and adapt the postwar international order so that it responds to current needs and reflects new realities but still secures a central U.S. role. That will require new ideas and productive advocacy to ensure that globalization delivers more widely shared prosperity. It will require effectively managing strategic competition with Russia and China by protecting U.S. prerogatives without descending into all-consuming rivalry or outright conflict. And it will require convincing governments and citizens around the world that in spite of the current president, a strong majority of Americans remain committed to working closely with other nations to secure shared interests through common action and rules.
A temporary American absence is survivable; sustained American absence is not.
A temporary American absence is survivable; sustained American absence is not. In the long run, the international order will still need leadership, even in the best-developed areas of international cooperation. Who is going to make sure that countries increase their emissions reductions under the Paris accord when the next round of pledges comes in 2023? Who is going to pull the world powers together to execute a follow-on agreement to the Iran nuclear deal? American leadership is even more critical in emerging areas where the rules have not yet been developed or where previous solutions no longer work. How will updated trade and investment arrangements account for the endurance of state-managed economies, the changing nature of work, and rising income inequality? What should be done to counter trends in state fragility that could lead to even more profound migration flows in the future? What new norms will govern cyberspace and artificial intelligence?
The world cannot count on undifferentiated collective action. Nor can it count on China, which has neither the instincts nor the inclination to take on such a role in the foreseeable future. The United States is the only country with the sufficient reach and resolve, and something else as well: a historical willingness to trade short-term benefits for long-term influence. It has been uniquely prepared to accept a leadership role of an international order in which it feels as though the maxim from Thucydides’ famous Melian Dialogue is often inverted: the strong suffer what they must and the weak do what they can.
All of this underscores the United States’ window of opportunity. Taking advantage of this window does require getting past the current presidency, which is why Trump must not be handed another term. The difference between one and two terms of Trump might not be 1x versus 2x, but more like 1x versus 10x. For one thing, Obama needed two terms to get to the ideas he campaigned on in 2008, and if the same proves true for Trump, his second term could be cataclysmic. For another, his reelection would confirm that Trumpism is in fact the new normal in the United States, not an aberration, causing other countries to take more decisive steps to rearrange their relationships and commitments. It would be an especially severe blow to the long-term health of U.S. alliances; many of the United States’ friends would more seriously contemplate following through on German Chancellor Angela Merkel’s comment about going their own way. On the other hand, the election of a new president in 2020 would say something quite different—and allow the United States to resume its leadership role.
The U.S. foreign policy community should prepare for this world after Trump. It is tempting to conclude that all hope is lost. That conclusion, however, is not only unproductive; it is also wrong. In every dimension—from technology to security, development to diplomacy, economic dynamism to human capital—the United States’ advantages are still significant. The opportunity remains to reconstitute the old consensus on new terms.