America is reshaping the global economy. Report Ft
Central to the new American thinking is the strategic rivalry with China and the intention to revitalize the middle class and democracy. All this, however, according to some wary allies would be to their detriment but, given the current geopolitical situation, this is not the time to enter into an argument with the United States… The Financial Times article
An unheralded revolution has taken place in the American approach to the international economy. The new thinking that is emerging is reshaping the global economy and the Western alliance. Writes the Financial Times .
The approach was most clearly set out in a speech by Jake Sullivan on April 27. The fact that Sullivan is President Joe Biden's National Security Advisor is a clue. The strategic rivalry with China is at the heart of the new thinking.
But Sullivan's speech went far beyond geopolitics. It was a very ambitious effort to bring together the Biden administration's domestic and international goals and transform them into a coherent whole. The United States intends to use a new strategic industrial policy to simultaneously revitalize the American middle class and US democracy, while fighting climate change and establishing a lasting technological lead over China.
Many of America's allies fear that the side that escaped the table is that of foreign interests. They fear, in particular, that hundreds of billions of dollars in subsidies to American industry and clean technology under the Inflation Reduction Act will come at the expense of European and Asian producers and workers. Some also fear that pressures to "de-riske" trade with China could seriously disrupt international trade. And many fear that US calls to reform the World Trade Organization will cripple the guardian of free trade.
US officials dismiss these suggestions, noting Sullivan's repeated references to the interests of Western allies and the Global South in his speech. They argue that America is finally taking the lead in the fight against climate change and that this should be welcomed around the world.
Sullivan was also quick to point out that “de-risking” doesn't mean cutting China out of global supply chains. Speaking to me last week, he said: “We are trying to build a world where there is more than one source for critical products…”. We're not saying that China shouldn't build iPhones or produce solar panels, but that other countries should as well."
Sullivan wants to convince America's friends that this "new Washington consensus" can work for everyone. He believes the US made substantial progress at the recent G7 meeting in Hiroshima, arguing that the summit took a "really significant step forward". In particular, he believes America's allies are now reassured about green transition subsidy plans and have embraced a similar approach. The push for clean energy, he argues, "will be more of a source of cooperation than friction in the future."
It is evident that in the G7 communiqué there was a significant convergence of language and approach on issues ranging from de-risking to supply chains.
However, speaking with American allies – both within the G7 and beyond – it is clear that there is still concern about US policy. One of the most recurring concerns is that America will continue to adopt measures aimed at China that its "allies and partners" will then be subjected to strong pressure to adopt them.
Lawrence Wong, deputy prime minister of Singapore – America's closest ally in Southeast Asia – recently warned that: "If de-risking is carried too far…we will end up with a more fragmented and decoupled world economy." . In Europe there are still fears that the new global economic architecture designed by Washington will inevitably favor US producers and workers.
Different US allies are responding in different ways. Within the EU there has always been a lobby that favors the creation of European champions, through an industrial policy. This lobby has been strengthened by the American turn towards industrial policy. Last December, the EU pledged to deliver “an ambitious European industrial policy” for the green and digital transitions.
But there are also Europeans who fear that, if the European Union goes down the subsidy route, it will undermine its own single market. The EU has far less financial firepower than the US government, so it could be sidelined in a race for subsidies.
America's allies outside the EU, such as Britain, Japan and Canada, have another concern. They fear that if US-EU negotiations become the primary way of establishing consensus in the "global West," those outside the two main blocs will be disadvantaged. As one diplomat puts it, the EU and the US are "like two giant pandas". They mate very rarely. But, if they do, they risk having an exclusive relationship (even though, technically speaking, pandas aren't monogamous).
In response to the panda problem, Canadians are examining the possibility of giving the G7 a formal role in proposing and crafting new rules for the global economy.
Britons are intrigued by Sullivan's speech on 'new innovative international economic partnerships'. During his trip to Washington this week, British Prime Minister Rishi Sunak will explore areas where the UK could enter into this kind of partnership with the US, including defense technology and artificial intelligence regulation.
Over all these economic discussions hangs a cloud of geopolitical fear. Russia is waging a war on the borders of the EU. The Japanese fear China. All sides look to Uncle Sam for military protection. America's allies still have reservations about the Sullivan Doctrine. But this is not the time to get into arguments with the United States.
(Excerpt from the foreign press review by eprcomunicazione )
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/lamerica-sta-rimodellando-leconomia-globale-report-ft/ on Sun, 11 Jun 2023 05:23:01 +0000.