or the first time, the United States is engaged in a global security contest with a rival of near-equal economic weight. China is predicted to overtake the United States as the world's largest economy within the decade. The complexity of the contest is manifest in the extraordinary integration of the global economy. The clash between the American-led system of democratic governance institutions and Chinese autocracy will determine whether international economic relations adhere to the rule of law or be reshaped by the Chinese Communist Party in its autocratic mercantilist image. The stakes could not be higher.
To meet the challenge, the United States must radically reorient and fortify its policies and institutions and make changes within the structure of government itself, much as we did after the Sept. 11 terrorist attacks. The U.S. is well-positioned to prevail against the Chinese military threat for now but is behind in its ability to address the economic threat. Without addressing this economic threat, the U.S. cannot maintain its military edge.
Lessons from recent history are instructive. In the 1980s, structural impediments to joint military operations in Iran and Grenada led to the Goldwater-Nichols legislation that reinforced the Joint Chief’s office and the chain of command from the President to the Secretary of Defense to the field commander. As a direct result, the United States now boasts the most advanced coordinated joint operations across services of any nation in the world. The attacks of 9/11 laid bare the lack of coordination among national agencies for intelligence and law enforcement respectively. The Office of the Director of National Intelligence and the Department of Homeland Security were established to address the coordination failures. Similar coordination is needed across the various U.S. agencies charged with international development and economic engagement.
There are three major U.S. global economic development activities: promoting commercial sales of American products and services, offering risk mitigation loans to U.S. investments overseas, and bolstering a free and open business environment in emerging markets. These activities are carried out by a slew of bureaus across the Departments of State, Commerce, Treasury and Agriculture, as well as smaller agencies: the Development Finance Corporation, the Export-Import Bank, the Millennium Challenge Corporation, the U.S. Trade and Development Agency and the U.S. Agency for International Development.
This highly fragmented structure is not up to the formidable task of advancing a rules-based global economic order and countering the CCP’s economic coercion and mercantilism. Similar considerations have led close U.S. allies to modify their institutions, namely Australia’s new Department of Foreign Affairs and Trade which includes its development office and the U.K.’s new Foreign, Commonwealth, and Development Office.
The United States should establish a new Department of International Economic & Development Cooperation (EDC) to coordinate the efforts of the current diverse panoply of American agencies. EDC’s primary objective would be to ensure that the economic prosperity of most nations is integrated into - and benefitting from - the U.S.-backed global economic order. EDC would act as an umbrella department over existing agencies including USAID, USTDA, DFC, EXIM and MCC. EDC would include a new agency, the U.S. Agency for Economic Diplomacy (USAED), drawn from select offices of the Departments of Agriculture, Commerce, State and Treasury. The new agency would coordinate activities in the emerging field of technology diplomacy. EDC would work in close coordination with State, Treasury, Commerce and the Office of U.S. Trade Representative (USTR) to articulate and achieve U.S. global economic diplomacy and development goals and policies.
The cumulative impact of EDC with current resources ranges between $200 billion and $250 billion with EXIM and DFC authorized for annual exposure of $135 billion and $60 billion respectively. In leveraging private investment at three or four-fold, the global impact may be over $1 trillion. Additional leverage will come from close coordination with counterpart agencies of G7 nations and other like-minded nations. The full impact of EDC activities will present a robust alternative to China’s foreign assistance program, the Belt and Road Initiative, which is a key component of the regime’s program for leveraging its economic clout toward dominating other nations. EDC’s goal would be to become the preferred partner for emerging nations as they advance their digital and physical infrastructure needs and associated economic growth aspirations.
EDC should ensure that the U.S. partners with industries across liberal, open economies in preserving the global economic order. Predictable policies and open discourse are integral to industry cooperation. President Eisenhower established the Council for Foreign Economic Policy to coordinate the development of U.S. foreign economic policy. In 1970, President Nixon called for the Commission on International Trade and Investment Policy for recommendations to meet the challenges of the changing world economy. EDC, informed by the experience of these initiatives, would chart a new course to collaborate with industry in meeting the economic challenges of the present times.
To prevail in this systemic contest with Communist China and to preserve the rules based global order, the United States must address all aspects of the contest: diplomatic, military and economic. The State and Defense Departments are clear leads to address two of the three areas. American global economic and development efforts are presently diffused and disaggregated, an indulgence the United States cannot afford. A new EDC, informed by recent history, would address this important institutional and policy shortcoming. EDC represents a necessary armament, along with Defense and State, to rebut Communist China’s efforts to reshape rules based global order in its autocratic image.
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A Lead Agency to Counter the Chinese Economic Threat
Photo via Unsplash.
May 10, 2022
To successfully compete against China and sustain the rules-based international system the U.S. must radically reorient its policies. This includes creating a new department to coordinate U.S. economic diplomacy efforts, write Kaush Arha and Lester Munson.
F
or the first time, the United States is engaged in a global security contest with a rival of near-equal economic weight. China is predicted to overtake the United States as the world's largest economy within the decade. The complexity of the contest is manifest in the extraordinary integration of the global economy. The clash between the American-led system of democratic governance institutions and Chinese autocracy will determine whether international economic relations adhere to the rule of law or be reshaped by the Chinese Communist Party in its autocratic mercantilist image. The stakes could not be higher.
To meet the challenge, the United States must radically reorient and fortify its policies and institutions and make changes within the structure of government itself, much as we did after the Sept. 11 terrorist attacks. The U.S. is well-positioned to prevail against the Chinese military threat for now but is behind in its ability to address the economic threat. Without addressing this economic threat, the U.S. cannot maintain its military edge.
Lessons from recent history are instructive. In the 1980s, structural impediments to joint military operations in Iran and Grenada led to the Goldwater-Nichols legislation that reinforced the Joint Chief’s office and the chain of command from the President to the Secretary of Defense to the field commander. As a direct result, the United States now boasts the most advanced coordinated joint operations across services of any nation in the world. The attacks of 9/11 laid bare the lack of coordination among national agencies for intelligence and law enforcement respectively. The Office of the Director of National Intelligence and the Department of Homeland Security were established to address the coordination failures. Similar coordination is needed across the various U.S. agencies charged with international development and economic engagement.
There are three major U.S. global economic development activities: promoting commercial sales of American products and services, offering risk mitigation loans to U.S. investments overseas, and bolstering a free and open business environment in emerging markets. These activities are carried out by a slew of bureaus across the Departments of State, Commerce, Treasury and Agriculture, as well as smaller agencies: the Development Finance Corporation, the Export-Import Bank, the Millennium Challenge Corporation, the U.S. Trade and Development Agency and the U.S. Agency for International Development.
This highly fragmented structure is not up to the formidable task of advancing a rules-based global economic order and countering the CCP’s economic coercion and mercantilism. Similar considerations have led close U.S. allies to modify their institutions, namely Australia’s new Department of Foreign Affairs and Trade which includes its development office and the U.K.’s new Foreign, Commonwealth, and Development Office.
The United States should establish a new Department of International Economic & Development Cooperation (EDC) to coordinate the efforts of the current diverse panoply of American agencies. EDC’s primary objective would be to ensure that the economic prosperity of most nations is integrated into - and benefitting from - the U.S.-backed global economic order. EDC would act as an umbrella department over existing agencies including USAID, USTDA, DFC, EXIM and MCC. EDC would include a new agency, the U.S. Agency for Economic Diplomacy (USAED), drawn from select offices of the Departments of Agriculture, Commerce, State and Treasury. The new agency would coordinate activities in the emerging field of technology diplomacy. EDC would work in close coordination with State, Treasury, Commerce and the Office of U.S. Trade Representative (USTR) to articulate and achieve U.S. global economic diplomacy and development goals and policies.
The cumulative impact of EDC with current resources ranges between $200 billion and $250 billion with EXIM and DFC authorized for annual exposure of $135 billion and $60 billion respectively. In leveraging private investment at three or four-fold, the global impact may be over $1 trillion. Additional leverage will come from close coordination with counterpart agencies of G7 nations and other like-minded nations. The full impact of EDC activities will present a robust alternative to China’s foreign assistance program, the Belt and Road Initiative, which is a key component of the regime’s program for leveraging its economic clout toward dominating other nations. EDC’s goal would be to become the preferred partner for emerging nations as they advance their digital and physical infrastructure needs and associated economic growth aspirations.
EDC should ensure that the U.S. partners with industries across liberal, open economies in preserving the global economic order. Predictable policies and open discourse are integral to industry cooperation. President Eisenhower established the Council for Foreign Economic Policy to coordinate the development of U.S. foreign economic policy. In 1970, President Nixon called for the Commission on International Trade and Investment Policy for recommendations to meet the challenges of the changing world economy. EDC, informed by the experience of these initiatives, would chart a new course to collaborate with industry in meeting the economic challenges of the present times.
To prevail in this systemic contest with Communist China and to preserve the rules based global order, the United States must address all aspects of the contest: diplomatic, military and economic. The State and Defense Departments are clear leads to address two of the three areas. American global economic and development efforts are presently diffused and disaggregated, an indulgence the United States cannot afford. A new EDC, informed by recent history, would address this important institutional and policy shortcoming. EDC represents a necessary armament, along with Defense and State, to rebut Communist China’s efforts to reshape rules based global order in its autocratic image.
