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National security in a post-American economic order

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US President Donald Trump speaks to the media on his way to address the Conservative Political Action Conference in Washington DC, US, 23 February 2018 (Photo: Reuters/Jim Bourg).

In Brief

After the Second World War, the United States and its allies built a global, rules-based economic order. These days, there is much spruiking about the global rules based order and how it is at the core of the national security interests of liberal democracies. Less well understood is that the rules that matter most for global security are the economic rules of which America, seventy years ago, was the primary architect. This order, combined with comprehensive military power, was the American world order.


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There are, of course, many other rules and institutions that govern non-economic affairs under the United Nations framework, such as nuclear non-proliferation, chemical warfare and the right of passage through the seas. None of them is so comprehensive or so entrenched in the management of behaviour between states as those of the rules-based economic order. None are so critical to economic prosperity, which under their aegis has seen hundreds of millions of people lifted out of poverty and the establishment of a confident basis upon which to engage in large-scale trade and economic exchange. None is so important to political security through the alleviation of the incentive to military conflict and political aggrandisement. The post-war economic regime opened the opportunity for even the smallest and poorest countries to realise their national potential without the fear of economic coercion by powerful neighbours.

The rules-based economic order redefined the global system for all those who signed on to it. It contrasts markedly from the world of empire and conflict that defined the system before the war. There is still conflict and chaos outside the global economic order. But even in the presence of that conflict, the American economic order has underpinned the expansion of global prosperity and security.

In a brutally objective analysis in the March/April issue of Foreign Affairs, Adam Posen concludes that that order is today under threat from US President Donald Trump. Trump ‘has rejected the idea that the world’s economies all benefit when they play by the rules. Instead, he has decided that putting “America first” means withdrawing from supposedly bad deals, on which he believes the system is based’.

America hasn’t been dudded by the current system: it has reaped massive benefits, though it may not have distributed the gains terribly well. In reality, the United States supplies by itself only two essential aspects of the economic order: it extends an umbrella of security guarantees and nuclear deterrence for US allies, and its military ensures free navigation of the seas and airspace for commerce subject to some rules that are largely set by the United States.

While Trump has so far failed to follow through on his most destructive policy ideas, Posen says the damage from those he has effectuated has already begun to show. ‘His administration has hobbled the World Trade Organization (WTO), encouraged China and other autocratic regimes to lean on their smaller neighbours for economic loyalty, undercut agreements on tax evasion and climate change, and pushed even major US allies to negotiate free-trade and cross-border investment deals without the United States’.

There is no binary choice between security and economic interests for countries trying to manage the uncertainties of the post-American economic order, Gordon de Brouwer reminds us in our lead essay this week. The challenge is complex, risky and high-stakes. Australia, he points out , with its deep alliance ties with the United States and its huge economic and political partnership with China, has much at stake in correctly framing the complex and risky choices that it has to make in this new environment.

‘The idea that Australia can opt for security with the United States by winding down its economic relationship with China does not bear scrutiny. This move would make Australia weaker (a strong economy is a bulwark for security), it would lessen Australia’s ability to influence China’s engagement and interests, and it would increase the likelihood of conflict with China. Similarly, the idea that Australia can pursue its economic interests with China by opting out of its security relationship with the United States is not on the table’.

De Brouwer makes the point that in Australia ‘too often, “strategic policy” is used exclusively to define security interests, with economic interests treated as an add-on. Economic interests sound unstrategic and are dismissed in the USChina debate as just the pursuit of business’. Far from it, as Posen makes clear. Economic engagement is an ‘essential element in building national wealth and power as well as in reinforcing and habituating a rules-based and market-oriented international order. Defining and implementing strategic policy inclusively as the fulcrum of security and economic interests broadens the range of strategic options available to policymakers’, says de Brouwer.

The economic and the security elements of government are central to strategic interests. This is true not only in the Asian region but also globally. In Asia, Australia (which supplies over 60 per cent of the externally procured input into East Asia’s steel industry and a quarter of non-oil imported industrial resources to the region’s top industrial powers) plays a crucial role in this complex global economic and political security system. It was not always the case that Japan, South Korea or China had the inclination or the confidence to depend on free international markets to deliver strategic raw materials to their heavy industries in this way or on this scale. That confidence, and the mutual confidence of traders around the world in globalisation, was built within the framework of collective commitment to the WTO rules-based trade regime.

As Posen says, this regime is best seen as a ‘club that promotes a common set of beliefs to which its members broadly adhere: the ability to export to, import from, and invest in markets around the world’. Neither military power nor alliance structures are sufficient to protect this system.

The top strategic priority in Asia and around the world today is to protect a global economic order that is under threat. This is particularly so for Asian nations — including China — which are locked into the club and which (because of their scarce resources) are more dependent on integration into the global economy than are other countries. Declaring a position against Trump on the multilateral system at APEC in Vietnam and a commitment to concluding the Trans-Pacific Partnership despite the United States’ withdrawal were the first two important steps. Pulling off the negotiation of an ambitious Regional Comprehensive Economic Partnership in East Asia needs to be the next.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

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