War by Other Means

by Robert D Blackwill

  96. Remarks by Robert M. Gates at the U.S. Military Academy, West Point, N.Y., February 25, 2011.

  97. Interview with Robert Zoellick.

  98. These measures included an end to the system of import quotas, the deregulation of natural gas prices, and incentives to expand domestic energy production. Michael L. Ross, “How the 1973 Oil Embargo Saved the Planet,” Foreign Affairs, October 15, 2013.

  99. Attended by thirteen industrial and oil-consuming nations, the meeting was meant to send a clear signal to producers that consuming countries could also organize themselves for collective action. That said, there is no record of panic among OPEC governments regarding what was largely a rhetorical exercise by Washington.

  100. Richard Nixon, “Address to the Nation about Policies to Deal with the Energy Shortages,” November 7, 1973.

  101. Leading up to formal relations with Beijing, Nixon announced that he had asked for a “list of items of a nonstrategic nature which can be placed under general license for direct export to the People’s Republic of China. Following [his] review and approval of specific items on the list, direct imports of designated items from China will then be authorized.” His decision was met with an overwhelmingly favorable public reaction; not even one month later the various economic departments implemented Nixon’s new policy, and by June, the president formally ended the twenty-one-year export embargo and lifted import control. Nixon Project, WHCF CO box 19 folder: CO 34-2 PRC (Red China) 1/1/71–5/31/71, Nixon Statement April 14, 1971, and Theodore L. Elliot Jr. to Kissinger on April 17, 1971.

  102. Whereas economic incentives embedded in détente significantly moderated Soviet behavior. See Jean-Marc F. Blanchard, Edward D. Mansfield, and Norrin M. Ripsman, eds., Power and the Purse: Economic Statecraft, Interdependence and National Security (London: Routledge, 2000), 33.

  103. China’s economic integration has produced asymmetric relative gains even with its larger trading partners, such as the United States, thus creating the awkward situation where Washington contributes toward sustaining Beijing’s economic growth and, by extension, accelerates its rise as a geopolitical rival. See Robert D. Blackwill and Ashley J. Tellis, “American Grand Strategy toward China,” Council on Foreign Relations special report, 2015.

  104. Robert Zoellick, “The Currency of Power,” Foreign Policy, October 8, 2012.

  105. See also Daniel Sargent, A Superpower Transformed: The Remaking of American Foreign Relations in the 1970s (New York: Oxford University Press, 2015); Dobson, US Economic Statecraft for Survival; Francis Gavin, Gold, Dollars and Power: The Politics of International Monetary Relations, 1958–1971 (Chapel Hill: University of North Carolina Press, 2007).

  106. Destler, “Foreign Economic Policy Making under Bill Clinton,” in After the End: Making U.S. Foreign Policy in the Post-Cold War World, ed. James M. Scott (Durham, N.C.: Duke University Press, 1998), 92.

  107. Ibid.

  108. In Grewal’s account—from the time of Adam Smith roughly up to 1945—there is a tension between the positive-sum logic of neoclassical economics, which favors liberalization, and the logic of politics, which generally tends toward the zero-sum. He examines this tension in David Singh Grewal, Network Power: The Social Dynamics of Globalization (New Haven, Conn.: Yale University Press, 2008), 235–237.

  109. David Singh Grewal, e-mail message to author, August 22, 2015.

  110. Ibid.

  111. See David Allen Baldwin, Economic Statecraft (Princeton, N.J.: Princeton University Press, 1985); Dobson, US Economic Statecraft for Survival; and Grewal, Network Power, 235–237, 361. Certainly, Keynes was acutely aware of this interplay between economic thought and underlying realities of state power. In 1933 Keynes squarely rejected the classical economic views of Normal Angell and others who, right to the very onset of World War I, remained convinced that economic interdependence would assuage threats of war. For Keynes, this “age of economic internationalism was not particularly successful in avoiding war; and if its friends retort that the imperfection of its success never gave it a fair chance, it is reasonable to point out that a greater success is scarcely probable in the coming years.” John Maynard Keynes, “National Self-Sufficiency,” Yale Review 22, no. 4 (June 1933): 755–769.

  112. Dobson, US Economic Statecraft for Survival.

  113. Zarate, Treasury’s War.

  114. Grewal, e-mail message to author.

  115. This point, along with this chapter’s broader arguments around the evolving relationship between neoclassical economics and American foreign policy, owes much to exchanges with Sasha Post.

  116. Granted, the term neoclassical was only coined after Keynes’s time, as a synthesis of Keynesian and classical economics. Keynes did not deny the economic logic espoused by Angell and other classical economists; he only cautioned that it might depart from “the cause of peace.” He wrote, “There may be some financial calculation which shows it to be advantageous that my savings should be invested in whatever quarter of the habitable globe shows the greatest marginal efficiency of capital or the highest rate of interest. But experience is accumulating that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.” Better, thought Keynes, to be “our own masters” rather than “at the mercy of world forces working out, or trying to work out, some uniform equilibrium according to the ideal principles, if they can be called such, of laissez-faire capitalism.” Keynes, “National Self-Sufficiency.” For Keynes, the creation of the Bretton Woods system, far from eliding prevailing global power realities, was precisely aimed at taming these “world forces,” or at least embedding them within the prevailing power realities of the time (what international political economist John Ruggie calls “embedded liberalism”). For a detailed account of Keynes’s views, as well as those of Harry Dexter White, on the degree to which Bretton Woods should be understood as answering geopolitical (in addition to economic) imperatives, see Benn Steil, The Battle of Bretton Woods (Princeton, N.J.: Princeton University Press, 2013).

  7. America’s Geoeconomic Potential

  1. For instance, G. John Ikenberry, “The Rise of China and the Future of the West,” Foreign Affairs, January/February 2008; Carl Minzer, “The Rise of China and the Interests of the U.S.,” Ripon Forum 41, no. 2 (April 2007); Michael D. Swaine, America’s Challenge: Engaging a Rising China in the Twenty-First Century (Washington, D.C.: Carnegie Endowment for International Peace, 2011); Kira Zalan, “The Rise of China and the Global Future of the U.S.,” U.S. News and World Report, January 3, 2013. Robert D. Blackwill and Ashley J. Tellis, Revising U.S. Grand Strategy toward China (New York: Council on Foreign Relations, 2015).

  2. Henry A. Kissinger, “Rebalancing Relations with China,” Washington Post, August 19, 2009.

  3. Leslie H. Gelb, “Hillary Hits the Mark,” Daily Beast, October 14, 2011.

  4. Ibid.

  5. See, e.g., Michael Froman, “The Geopolitical Stakes of America’s Trade Policy: Why Trade Matters More than Ever for U.S. National Security,” Foreign Policy, February 17, 2015. Froman wrote the piece in his official capacity as the U.S. top trade representative, and its February 2015 release came as part of a broader Obama administration push to secure Congressional fast-track authority necessary to conclude both trade deals; borrowing from similar efforts on past trade deals, the Obama Administration put national security arguments at the center of its push. See generally Mary Circincione, “Kerry: Trade Accords Enhance National Security,” Military Times, April 23, 2015; Patrick Cronin, “A Matter of National Security: America Must Support TPP,” Real Clear Defense, March 17, 2015; Daniel W. Drezner, “The Trans-Pacific Partnership Is about More than Trade,” Washington Post, May 7, 2015.

  6. Guy Molyneux, “NAFTA Revisited: Unified ‘Opinion Leaders’ Best a Reluctant Public,” Public Perspective, January/February 1994, 2.

  7. See, e.g., Zhonghe Mu, “TPP’s Impacts a
nd China’s Strategies in Response,” Stanford Center for International Development Working Paper, January 2014.

  8. Among trade experts, this dynamic is known as “competitive liberalization.”

  9. Ian F. Fergusson, William H. Cooper, Remy Jurenas, and Brock R. Williams, “The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress,” Congressional Research Service, December 13, 2013.

  10. See Chapter 5 for more discussion on the rise of the renminbi.

  11. Noel Quinn, “China’s RMB Liberalisation: The Growing Influence of the Currency on Asean Markets,” International Business Times, November 6, 2013. See also “Yuan for the Money,” Economist, February 9, 2013.

  12. Barry Eichengreen, “Renminbi Internationalization: Tempest in a Teapot,” Institute for New Economic Thinking, July 2013.

  13. Robert Zoellick, “The Trans-Pacific Partnership: New Rules for a New Era,” lecture, Wilson Center, Washington, D.C., June 19, 2013. According to Zoellick, geopolitically “TPP and TTIP could be America’s economic bridges to eastern and western boarders of Eurasia.” Therefore, “the need to strengthen trans-Pacific ties is pretty apparent.” See also Fred Bergsten, “Submission to the USTR in Support of a Trans-Pacific Partnership Agreement,” speech, Peterson Institute for International Economics, Washington, D.C., January 25, 2010.

  14. See, e.g., C. Fred Bergsten and Joseph E. Gagnon, “Time for a Fightback in the Currency Wars,” Financial Times, September 3, 2012; C. Fred Bergsten, “Addressing Currency Manipulation through Trade Agreements,” Policy Brief 14-2, Peterson Institute for International Economics, January 2014; “Currency Wars: Economic Realities, Institutional Responses, and the G-20 Agenda,” Peterson Institute for International Economics, April 2, 2013. Another frequently cited counterargument against including currency provisions in a trade agreement like TPP is it would be difficult to distinguish undesirable practices of currency manipulation from other, more desirable monetary policy interventions, notably the quantitative easing measures enacted by the U.S. Federal Reserve, which, while not targeting any particular currency value, nonetheless have the effect of weakening the value of a given currency. These objections seem less founded, however, as there are a number of ways to distinguish stimulative monetary policy from currency manipulation. At the most basic level, the two have different aims: unlike the explicit exchange rate targets that some countries maintain, neither the U.S. Federal Reserve’s nor the Bank of Japan’s quantitative easing policies target specific exchange-rate values. Second, not only are these quantitative easing aims not about currency values, they are fundamentally demand-stimulating—in a sense, growing the pie for everyone—which stands in marked contrast to the zero-sum nature of currency manipulation. Finally, the two use different tools. In particular, the Bank of Japan and the U.S. Federal Reserve are confining their efforts to monetary policy tools. That is, a central bank’s decision to purchase a country’s own long-term bonds, while no doubt unconventional monetary policy, is still monetary policy.

  15. The cover pages of the Treasury’s reports to Congress on International and Economic and Exchange Rate Policies explicitly state that each report “is submitted pursuant to the Omnibus Trade and Competitiveness Act of 1988.” See, e.g., www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/2014-4-15_FX%20REPORT%20FINAL.pdf.

  16. “State Firms Barred from Vietnam Contract Bids,” South China Morning Post, June 9, 2014.

  17. Xu Liping, an expert on China’s relations in Southeast Asia at the Chinese Academy of Social Sciences, told reporters at the South China Morning Post that Beijing may be trying to put economic pressure on Vietnam’s government. “Any measure to enhance China’s investment in Vietnam is inappropriate with the current political tension,” said Xu. “This is a sign that China is playing the economic card. How effective will it be? We will have to wait and see.” Ibid.

  18. “SINGAPORE—Trans-Pacific Partnership (TPP) ministers during a four-day meeting here agreed to scale back the scope of proposed disciplines on state-owned enterprises (SOEs) so that they do not apply to services provided by an SOE in its home country market. The SOE decision was one of several rules issues on which ministers made progress here, U.S. Trade Representative Michael Froman told reporters, without addressing the specifics.” “U.S., Other TPP Countries Agree to Narrow Scope of SOE Chapter,” Inside U.S. Trade, February 28, 2014. See also “Open Letter from Rep. Michael Michaud (D-ME) to U.S.T.R. Michael Froman,” expressing concern that the TPP SOE chapter “will not in practice level the playing field for American companies, particularly our small and medium-sized enterprises, trying to compete against SOEs.” Michaud goes on to cite “several components of the SOE disciplines that will be critical to the disciplines’ effectiveness and accessibility to American companies.” He “urge[s] the United States Trade Representative (USTR) to ensure any SOE disciplines are subject to a dispute settlement mechanism that will provide accessible, timely, and effective relief for American businesses and workers.” Available at http://michaud.house.gov/press-release/rep-michaud-presses-ustr-state-owned-enterprises-tpp.

  19. Michael Froman, “Strategic Importance of TPP,” Office of United States Trade Representative, remarks delivered on September 18, 2014. Transcript available at https://ustr.gov/about-us/policy-offices/press-office/speeches/2014/September/Remarks-by-Ambassador-Froman-at-US-Chamber-CSIS-TPP-Event.

  20. Hillary Clinton’s remarks at Foreign Policy’s “Transformational Trends” forum in Washington, D.C., November 2012, http://foreignpolicy.com/2012/11/30/hillary-clintons-remarks-at-fps-transformational-trends-forum; also see Clinton, “The Transatlantic Partnership: A Statesman’s Forum with Secretary of State Hillary Clinton,” speech delivered at Brookings Institution, November 2012. Transcript available at http://www.brookings.edu/~/media/events/2012/11/29-clinton/20121129_transatlantic_clinton.pdf.

  21. David Ignatius, “A Free-Trade Agreement with Europe?,” Washington Post, December 5, 2012.

  22. Robert Zoellick is perhaps the most notable exception.

  23. William Mauldin, “U.S., U.K. Politicians Eye Strategic Aims of Trans-Atlantic Trade Talks,” Wall Street Journal, September 25, 2013.

  24. Ibid.

  25. See discussion by Benn Steil and Robert Litan on tools of American financial statecraft, include value of economic rules-based system and structures in their Financial Statecraft: The Role of Financial Markets in American Foreign Policy (New Haven, Conn.: Yale University Press, 2008).

  26. James Roberts, research fellow for Economic Freedom and Growth at the Heritage Foundation, summed it up well: “The U.S. isn’t losing soft power,” he said. “The Bretton Woods institutions serve a purpose, but not on such a grand scale as in previous decades.” Ian Talley, “In Democrats’ Eyes, Republicans Are Helping Foster Chinese Power,” Wall Street Journal, March 27, 2015.

  27. Ibid. Sebastian Heilmann and colleagues argue that “while current crises in the Ukraine, Syria, Iraq and West Africa have moved to the centre of global attention, China is advancing with a restructuring of the international order. While Beijing remains an active player within existing international institutions, it is simultaneously promoting and financing new parallel structures. The goal of these efforts is a greater autonomy primarily vis-à-vis the U.S. and an expansion of the Chinese sphere of influence beyond Asia. Some of these parallel structures … may also come to compete directly with existing institutions.” Sebastian Heilmann, Moritz Rudolf, Mikko Huotari, and Johannes Buckow, “China’s Shadow Foreign Policy: Parallel Structures Challenge the Established International Order,” China Monitor 18 (October 28, 2014). “China,” Theresa Fallon said, was offering a “whole economic and political package that provides an alternative to the creaking international structures shaped by the U.S. in the postwar period.” Others see the point underscored by the faltering TTIP, once hailed as “the marquee project of trans-Atlantic solidarity,” but which “has lost much of its momentum in the face of fierce hostil
ity from European politicians and activists opposed to American-style capitalism.” Andrew Higgins and David E. Sanger, “3 European Powers Say They Will Join China-Led Bank,” New York Times, March 17, 2015.

  28. Higgins and Sanger, “3 European Powers Say They Will Join China-Led Bank.”

  29. Ibid. In the same piece, Higgins and Sanger later note that the decision by “Germany, France and Italy that they would follow Britain and join the Chinese led venture delivered a stinging rebuke to Washington from some of its closest allies. It also called into question whether the World Bank and International Monetary Fund … will find their influence diminished.”

  30. Author communication with Admiral Michael Mullen.

  31. Jonathan Weisman, “At Global Economic Gathering, U.S. Primacy Is Seen as Ebbing,” New York Times, April 17, 2015.

  32. Dani Rodrik, “The Global Governance of Trade as if Development Really Mattered” (paper submitted to the United Nations Development Programme, New York City, July 2001), http://www.giszpenc.com/globalciv/rodrik1.pdf. See also, Dani Rodrik, “How to Make the Trade Regime Work for Development,” working paper, Kennedy School, Harvard University, 2004; and David Singh Grewal, Network Power: The Social Dynamics of Globalization (New Haven, Conn.: Yale University Press, 2008), 240–246.

  33. David Singh Grewal, Network Power, 241.

  34. Sun Zhenyu, “Joining WTO Was a Positive Move,” China Daily, June 1, 2011.

  35. “China’s Economy and the WTO: All Change,” Economist, December 10, 2011.

  36. There is ample evidence that China’s grand strategy is designed to undermine the U.S.-led system and to replace the United States as the primary power in Asia. Summarizing examples cited elsewhere in this book, PRC officials have been explicit about their goals to weaken the U.S. alliance system in Asia (see, e.g., Chapter 4). They also seek to undermine the confidence of Asian nations in U.S. credibility, reliability, and staying power—seen in efforts to stand-up multilateral alternatives to the Bretton Woods institutions—the Chinese-led BRICS Bank and the Asian Infrastructure Bank, moves that, according to U.S. officials and a wide consensus of experts, are aimed in no small part at weakening U.S. global economic leadership. PRC officials also use China’s economic power to pull Asian nations closer to PRC geopolitical and policy preferences, as Chapter 4 details. Increases in PRC military capability, meanwhile, are specifically tailored to strengthen deterrence against U.S. military intervention in the region. In its bilateral diplomacy, Beijing has long sought to ensure that U.S. democratic values do not diminish the CCP’s economic potential or its hold on domestic power (see, e.g., discussions of Chinese efforts in Angola, Venezuela, Sudan, and Zimbabwe in Chapters 2 and 3). And more recently, they have begun to stand up multi-lateral alternatives to the Bretton Woods institutions—the Chinese-led BRICs Bank and the Asian Infrastructure Investment Bank—moves that, according to U.S. officials and a wide consensus of experts, are aimed in no small part at weakening U.S. global economic leadership (see Chapter 3).