Monday, September 30, 2002

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PAGING THE FOREIGN ECONOMIC POLICY TEAM! STAT!: In the early days of the Bush administration, it seemed that policymakers recognized that our foreign economic policy matters were inseparable from our overall foreign policy. Both Condoleezza Rice and Colin Powell made it clear that they intended to play a greater role in these issues.

This was a promising trend. When the U.S. realizes the link between our security and our trade, aid, and finance policies, the result has usually been the introduction of visionary policies that pay long-term dividends. Bretton Woods, the Marshall Plan, CoCom, NAFTA, and the WTO are powerful examples of this sort of vision. These economic policies enhanced our security because they bolstered our allies and laid out a clear message to the rest of the world: play by the rules and reap the rewards.

Unfortunately, this initial spark of interest does not seem to have lasted. Indeed, since 9/11, our foreign economic policy has not been pretty:

1) We maintained trade barriers against imports vital to the Pakistani economy;
2) We passed a gut-busting farm bill that the IMF now predicts will have a calamitous effect on African economies;
3) Let’s not talk about the steel tariffs. Really, they’re just an embarrassment.
4) According to William Safire, at the same time the administration is trying to crack down on Iraqi weapons of mass destruction, it is eager to relax export controls that would encourage other dictators to develop such weapons;
5) The administration has flip-flopped more times on how the IMF should deal with Argentina that I’m honestly not sure what our policy is at the moment.
6) The G-7 could charitably be described as adrift, and uncharitably described as out of touch.
7) On the plus side of the ledger? An extra $5 billion in aid to poor countries, some improved tracking of terrorist financing, and trade promotion authority that makes it clear the U.S. has little intention of liberalizing the sectors that matter to developing countries – agriculture and textiles.

If our national security strategy is devoted to the building up of weak states into open economies with strong governments, our foreign economic policy seems designed to thwart that goal at every significant opportunity.

Who’s to blame? The latest issue of Time magazine suggests Karl Rove, who clearly affected the steel and agricultural decisions. But that’s too easy – Rove is just doing his job. No, the blame lies with the heavyweight foreign policymakers who, as the Time article indicates, are firm about denying Rove input into security decisions but seem less perturbed by his interference in equally vital economic matters. Blame also rests squarely on Paul O’Neill, who is either unwilling or unable to be the lead Bush spokesman on these matters.

Politics can never be divorced from foreign economic policy. But as we're waging a global war on terror and trying to attract allies for dealing with Iraq, how about a trial separation?

UPDATE: The Economist on the underwhelming Bank/Funds meetings (link via Brad DeLong)

posted by Dan on 09.30.02 at 12:11 PM