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1. China's Belt and Road: Implications for the United States

Author:
Jennifer A. Hillman and David Sacks
Publication Date:
03-2021
Content Type:
Special Report
Institution:
Council on Foreign Relations
Abstract:
The Belt and Road Initiative (BRI), Chinese President Xi Jinping’s signature foreign policy undertaking and the world’s largest infrastructure program, poses a significant challenge to U.S. economic, political, climate change, security, and global health interests. Since BRI’s launch in 2013, Chinese banks and companies have financed and built everything from power plants, railways, highways, and ports to telecommunications infrastructure, fiber-optic cables, and smart cities around the world. If implemented sustainably and responsibly, BRI has the potential to meet long-standing developing country needs and spur global economic growth. To date, however, the risks for both the United States and recipient countries raised by BRI’s implementation considerably outweigh its benefits. BRI was initially designed to connect China’s modern coastal cities to its underdeveloped interior and to its Southeast, Central, and South Asian neighbors, cementing China’s position at the center of a more connected world. The initiative has since outgrown its original regional corridors, expanding to all corners of the globe. Its scope now includes a Digital Silk Road intended to improve recipients’ telecommunications networks, artificial intelligence capabilities, cloud computing, e-commerce and mobile payment systems, surveillance technology, and other high-tech areas, along with a Health Silk Road designed to operationalize China’s vision of global health governance.1 Hundreds of projects around the world now fall under the BRI umbrella.
Topic:
International Trade and Finance, Infrastructure, Hegemony, Conflict, Belt and Road Initiative (BRI), and Regionalism
Political Geography:
China, Asia, North America, and United States of America

2. Adapting International Trade Institutions to New Realities

Author:
Felix Pena
Publication Date:
02-2018
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
The institutional order governing world trade is going through a critical period. Debate over its future form and design will be a dominant theme on the global agenda for the coming years. The Donald J. Trump administration has questioned the benefits of the multilateral trading order and is pulling the United States back from its traditional leadership role. In December 2017, the Eleventh Ministerial Conference (MC11) of the World Trade Organization (WTO) ended in disappointment with no substantive multilateral achievements. The shift in economic power from the West to the East and the growth of nonstate actors further complicate the search for consensus on international trade rules, leading to a so-called multiplex world. In a multiplex world, actors with different cultural values and relative power inequalities—such as nation-states, international and regional institutions, corporations, and nongovernmental organizations—compete against each other. To ensure a resilient trading system, multilateral trading rules and institutions need to be adapted to these new realities of trade, investment, and the distribution of global power. Unlike the international system as it functioned after World War II, today’s trading system does not reflect the interests of a single power or an alliance of powers with sufficient clout to impose their will on others in a sustained way. This is not a Group of Twenty (G20) or Group of Seven–led world: it is a G-Zero world, with no established lineup of who should be invited to the table where decisions are made. In this vacuum of global leadership it is increasingly difficult to identify who will create the new rules of international competition. Actors pursue their own self-interest, which results in less certainty for the international trade system.
Topic:
International Trade and Finance, Multilateralism, Trade Wars, and WTO
Political Geography:
Global Focus

3. Managing Global Disorder: Prospects for U.S.-China Cooperation

Author:
Council on Foreign Relations
Publication Date:
04-2018
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Emerging challenges to international order require cooperation between the United States and China, two countries that share a common interest in preventing the world from becoming more dangerous and disorderly. U.S.-China relations are becoming more strained and antagonistic, however, and the prospects for cooperation appear to be receding. To explore whether there are still grounds for cooperation on issues of common concern between the two countries, in March 2018 the Center for Preventive Action (CPA) at the Council on Foreign Relations convened a group of fifteen experts from the United States and China for the workshop “Managing Global Disorder: Prospects for U.S.-China Cooperation.” CPA partnered with Peking University’s School of International Studies in Beijing for the workshop and also met with experts at the China Institutes of Contemporary International Relations in Beijing and the Shanghai Institutes for International Studies in Shanghai. During the workshop, President Donald J. Trump announced plans to impose about $60 billion in new tariffs on Chinese imports. While trade was a major topic of discussion, it was by no means the only area discussed. Workshop participants assessed conflicting views of the sources of global disorder and examined areas of global governance such as international trade, development, the environment, and the future of various multilateral institutions. They also discussed the most pressing security challenges in East and Southwest Asia. Participants highlighted the need for a greater understanding between the United States and China on the evolving international order. No major transnational problems will be solved without some cooperation between the two powers. It is therefore imperative that the two countries avoid a further deterioration of the relationship and instead identify areas of potential cooperation.
Topic:
International Cooperation, International Trade and Finance, Tariffs, and Social Order
Political Geography:
United States, China, Asia, and North America

4. The U.S.-Southeast Asia Relationship: Responding to China’s Rise

Author:
Council on Foreign Relations
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Although the Barack Obama administration rhetorically made Southeast Asia a centerpiece of its “rebalance to Asia” strategy, the administration still largely focused on the Middle East and Europe, and Southeast Asia remained a low U.S. policy priority. The Obama administration did try to boost U.S. economic ties with Southeast Asia in 2016 by forging the Trans-Pacific Partnership (TPP), but that trade deal was broadly unpopular in the United States. The following year, the Donald J. Trump administration ended U.S. participation in the TPP, and it also suggested launching punitive economic measures against Southeast Asian states currently running trade surpluses with the United States. Many Southeast Asian leaders now worry that Washington has no clear security or economic strategy for the region, other than applying pressure on Beijing to respect freedom of navigation in the South China Sea. In this perceived void of U.S. leadership and strategy, workshop participants assessed how Southeast Asia might change as China becomes an increasingly dominant regional security and economic actor. They also discussed the future of U.S. strategic and economic relationships with important partners in the region, including Indonesia, the Philippines, Singapore, Thailand, and Vietnam. Participants further considered how China might use its growing leverage in Southeast Asia, and whether Beijing’s tactics could backfire. Finally, several workshop participants posited that the United States, China, and Southeast Asian states could cooperate on at least some nontraditional security issues, such as combating piracy and terrorism.
Topic:
Diplomacy, International Cooperation, International Trade and Finance, and Economic Cooperation
Political Geography:
United States, China, Asia, and Southeast Asia

5. Global Monetary Policy Divergence and the Reemergence of Global Imbalances

Author:
Daniel Gros
Publication Date:
06-2018
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Developed economies are paying remarkably little attention to coordinating their monetary policies. This is an unavoidable consequence of the independence of central banks, which faithfully follow their purely domestic mandates except in times of crisis. As a result, global monetary policies have reached unprecedented levels of divergence. This divergence is set to widen—primarily due to differences in the relative strength of labor markets—while global current account imbalances return. Meanwhile, exchange rates have not reacted as economists expected; the dollar has weakened even as policy rates have increased. Economic tensions will likely become more disruptive the longer global imbalances go uncorrected. Likewise, the global economy will become more vulnerable to shocks. Yet by focusing on bilateral trade imbalances, the United States has mistakenly singled out China when the global imbalances between the United States and the eurozone is the more critical issue. The growing global imbalances are reflected more in the eurozone current account surplus and U.S. fiscal policy than in China’s shrinking surplus.
Topic:
International Trade and Finance, Monetary Policy, Exchange Rate Policy, and Economic Inequality
Political Geography:
Global Focus

6. Global Governance to Combat Illicit Financial Flows

Author:
Council on Foreign Relations
Publication Date:
10-2018
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
International efforts to curb illicit financial flows (IFFs) resemble post–Cold War collaboration in other issue areas that have risen on the global agenda: climate change, global health, internet govern- ance, and cybersecurity. Nongovernmental actors, including private corporations and nongovern- mental organizations (NGOs), have often driven agenda-setting in those domains. The focus has shifted over time, as new issues have been added and as older issues have assumed renewed im- portance. That reshaped agenda has in turn affected the institutional ecosystem of global action, which is captured only in part by formal and informal intergovernmental institutions. These new is- sue areas are characterized not by a single dominant institution or core set of institutions but by mul- tiple clusters of institutions that have each claimed a segment of the agenda and the instruments of cooperation. The result is a fragmented landscape with disjointed actors and organizations that often compete, collaborate, and act in parallel in pursuing their collective ends.1 The term of art for such an institutional landscape, one with several institutional or legal founda- tions, is “regime complex.”1 The regime complex for combating IFFs differs in its complexity from other, similar issue areas. Defining IFFs produces disagreement among researchers, activists, and policymakers. “Illicit” captures a normative judgment perhaps broader than “illegal.” For law en- forcement, IFFs are framed by predicate crimes, activities that are illegal in one jurisdiction or anoth- er and often of greater interest to authorities than IFFs. For those interested in broader global out- comes, such as the effects of IFFs on economic development, “illicit” could include cross-border fi- nancial flows associated with activities that they believe should be forbidden, such as tax avoidance by multinational corporations (MNCs). Those activities may not be illegal, however.2 These categories shift over time: bribery of foreign officials by corporations based in Organization for Economic Co- operation and Development (OECD) countries was made illegal in the United States well before it was criminalized in other industrialized countries. Variations in national treatment of both IFFs of certain kinds and the underlying predicate crimes have made harmonization of national policies and their implementation in many IFF domains difficult. IFFs are also one of the most important features of globalization’s dark side. Unlike other illicit or dangerous cross-border flows, however, IFFs bear almost no markers in and of themselves: pecunia non olet. Tainted food, endangered species, and dangerous individuals all present fewer problems of identification. For IFFs, it is suspicious activity rather than a characteristic of the funds themselves that generates the attention of those attempting to curb the flows. These definitional and identification problems make measuring the effectiveness of counter-IFF policies more difficult than assessing the effectiveness of policies in other issue areas. As many skep- tics and critics have pointed out, without a clear grasp of the scale of underlying flows, the scale of effects, though perhaps not the direction, of policies to counter those flows cannot reliably be deter- mined.3 If the costs of enforcement and compliance or unintended negative effects are included in estimates, the balance sheet becomes even more uncertain. International collaboration to curb IFFs and domestic measures to support that collaboration are directed to a wide array of predicate crimes that produce IFFs (drug trafficking, terrorism, or tax eva- sion) or to negative externalities (global “bads,” such as corruption) that both support IFFs and are sustained and promoted by them. This diversity of IFF sources and effects, and the public policy goals that follow, mobilize an unusually large number of actors: law enforcement agencies, financial super- visors and ministries, private financial institutions, and NGOs. These actors are interested more in certain IFFs and predicate crimes than in others. The links between specific crimes or categories of crime and larger global outcomes of interest, whether economic development or international securi- ty, are often second or third order. As a result, political attention to these issues—and willingness to bear the costs of implementation—fluctuates over time and across jurisdictions. As Peter Reuter and Edwin M. Truman observed in their classic 2004 account, the anti–money laundering (AML) regime (a subset of the complex countering IFFs) “reflects shifting priorities, compromises, and trade-offs.”4 This variation over time is particularly important in combating IFFs, because enforcement depends largely on national governments and both their incentives and their capacity to enact anti-IFF poli- cies. Financial markets and naming-and-shaming campaigns can strengthen those national efforts; they can also direct attention and effort against particular IFFs. However, they cannot substitute en- tirely for government action. What follows is a summary and introduction to organized international efforts to combat IFFs. In order to limit the policy universe, the narrower definition of IFFs used by the World Bank—“money illegally earned, transferred, or used that crosses borders”—will be used to define the wider interna- tional regime complex to combat IFFs.5 Mapping the institutions and actors involved in this issue area over time will capture the evolution of the global IFF agenda and the politics surrounding its de- velopment and implementation.
Topic:
International Trade and Finance, Governance, Institutionalism, and Illegal Trade
Political Geography:
Global Focus

7. How Anonymous Shell Companies Finance Insurgents, Criminals, and Dictators

Author:
Jodi Vittori
Publication Date:
09-2017
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
The Panama Papers leak of eleven million documents in April 2016 revealed that former Iraqi Prime Minister Ayad Allawi, the brother-in-law of Chinese President Xi Jinping, longtime friends of Russian President Vladimir Putin, drug kingpins, and even a soccer megastar had something in common: they all channeled money through anonymous shell companies. Anonymous shell companies are entities that usually employ few or no workers, do not conduct any substantive business, and allow their owners to store or route money while hiding their identities. Because of the secrecy they can provide, anonymous companies represent an important nexus of corruption, money laundering, transnational organized crime, and terrorism, which directly harm U.S. interests. As one of the main facilitators of anonymous companies, the United States should pass legislation to disclose ownership information for all companies, increase federal contract transparency, and boost other business and government transparency mechanisms at home and abroad. Doing so would significantly cut back on the ability of terrorists, criminals, and their ilk to use American corporations, real estate, and trusts to finance activities that harm the United States and its foreign interests.
Topic:
Corruption, International Trade and Finance, Transparency, and Panama Papers
Political Geography:
Global Focus

8. What the Trump Administration’s NAFTA Priorities Get Right (and Wrong) About Digital Trade

Author:
Anupam Chander
Publication Date:
09-2017
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Digital commerce and trade are increasingly important to the global economy. Seven of the ten most valuable firms today are technology companies (Apple, Alphabet, Microsoft, Amazon, Facebook, Alibaba, and Tencent). Data, according to some analysts, is the new oil. A major study concluded that the internet has powered some one-fifth of recent economic growth within the leading economies. Jobs are increasingly dependent on digitization; digital skills are needed for all but two job categories [PDF] in the United States: dishwashing and food cooking. Just as national economies are becoming more digitized, barriers to digital trade are being erected. These barriers limit opportunities for consumers to access global providers and for small- and medium-sized enterprises to reach new customers. It is not only technology firms that suffer; all enterprises with international operations need cross-border data flows to process, analyze, and transfer data about employees, customers, and operations. Global supply chains depend on the flow of goods, data, and services across borders. Moreover, commitment to the free flow of information across borders is essential to freedom of expression. Digital trade is about more than access to markets; it is about access to information. The renegotiation of the North American Free Trade Agreement (NAFTA) is an excellent opportunity to set the gold standard for digital free trade. Despite public pronouncements about the harm free trade causes to the steel and automobile industries, the Donald J. Trump administration, to its credit, recognizes the importance of removing digital trade barriers in its stated objectives for the NAFTA renegotiation [PDF]. In its negotiations with Canada and Mexico, the Trump administration should seek rules limiting data localization, promote a balanced approach to intellectual property protections, support cross-border privacy rules, and remove barriers that hinder the trade of services.
Topic:
International Cooperation, International Trade and Finance, Digital Economy, and NAFTA
Political Geography:
United States, Canada, North America, and Mexico

9. Writing New Rules for the U.S.-China Investment Relationship

Author:
Jennifer M. Harris
Publication Date:
12-2017
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Chinese outbound investment is on the rise, and much of it is finding its way into the United States. Be- tween 2010 and 2015, China’s foreign direct investment (FDI) inflows to the United States grew by an average of 32 percent annually.1 Within the past two years alone, Chinese foreign investment inflows to the United States increased four-fold, and available data suggests 2017 will see the second highest annual investment on record, after 2016.2 This is not a two-way street: the United States and other foreign investors do not enjoy similar open market access in China. China maintains a dizzying assortment of formal and informal barriers to for- eign investment—from outright restrictions and quotas to mandatory joint ventures, forced localization measures, and domestic licensing regimes. Despite years of negotiations, these barriers are, if anything, growing more cumbersome in many sectors. U.S. firms paint a darkening picture of the business climate they face in China. U.S. FDI in China has slowed considerably in recent years: after growing roughly 180 percent from 2002 to 2007 (albeit from a low baseline), U.S. FDI flows into China have declined since 2012.3 The one-way surge of Chinese investment into the United States comes against a backdrop of strategic mistrust between Washington and Beijing. Ongoing accusations of state-sponsored cyber predation of U.S. firms, Beijing’s increasing aggressiveness over territorial disputes, its systematic efforts to under- mine the U.S. alliance system in Asia, and mounting tensions over North Korea all contribute to a dark- ening mood in the U.S.-China relationship. And, like so much involving China, this investment is simply different. Rarely, if ever, has the United States seen an increase in investment of this magnitude—espe- cially from a non-ally and especially from one where the lines between state ownership and private own- ership are so inherently blurred. For all the concern surrounding Japanese investment in the United States in the 1980s—coming as it did amid fierce economic competition—those debates ultimately re- mained under the umbrella of the U.S.-Japan military alliance. All of this raises questions about whether the United States needs to tighten its stance on Chinese in- bound investment; proposals to that effect have bipartisan support in the Congress. The Donald J. Trump administration has signaled its desire for a tougher approach in its economic dealings with China, which U.S. businesses seem to welcome. One foundation for such an approach is the principle of reciprocity. Roughly two dozen sectors in China—construction, mining, banking, insurance, and so on—remain effectively off-limits to American investment, because the Chinese government protects its domestic companies through regulations and financial subsidies. Even in sectors that technically allow foreign investment, discriminatory industrial policies tilt the playing field in favor of Chinese firms. Until this changes, Washington would be justi- fied—even obligated—to limit Chinese investment in the U.S. market. However, U.S. policymakers do not have a consensus on what a policy of reciprocity would entail, and different policy interpretations could spell quite different economic and foreign policy consequences for the United States. The United States should aim for a version of reciprocity that allows it the flexibility to maximize pressure on the broad range of Chinese industrial policy concerns while leaving a clear route to negotiations. The United States should also encourage European and other Western countries, many of which are seeing similar increases in Chinese investment, to adopt this new approach.
Topic:
Diplomacy, International Cooperation, International Trade and Finance, and Foreign Direct Investment
Political Geography:
United States, China, Asia, and North America

10. Arctic Imperatives: Reinforcing U.S. Strategy on America’s Fourth Coast

Author:
Thad W. Allen, Christine Todd Whitman, and Esther Brimmer
Publication Date:
03-2017
Content Type:
Special Report
Institution:
Council on Foreign Relations
Abstract:
"The United States, through Alaska, is a significant Arctic nation with strategic, economic, and scientific interests," asserts a new Council on Foreign Relations-sponsored (CFR) Independent Task Force report, Arctic Imperatives: Reinforcing U.S. Strategy on America's Fourth Coast. With the Arctic "warming at twice the rate as the rest of the planet" and melting sea ice opening up this resource-rich region to new trade routes and commercial activities, the report stresses that "the United States needs to increase its strategic commitment to the region or risk leaving its interests unprotected." The report notes that while Russia has numerous ice-breaking vessels and China is building a third icebreaker, the United States owns only two operational icebreaking ships—one heavy icebreaker and one medium-weight icebreaker—to serve both the Arctic and the Antarctic. Asserting that "icebreakers are a national capacity" required for a range of maritime missions to support U.S. security, economic, and commercial needs, the Task Force recommends that the United States fund and build additional icebreakers. The report also finds that the United States needs greater investment in Alaskan infrastructure, including deepwater ports, roads, and reliable telecommunications, to support economic development and a sustained security presence in the region. Currently, "almost no marine infrastructure is in place within the U.S. maritime Arctic."
Topic:
Climate Change, International Trade and Finance, Infrastructure, Hegemony, and Conflict
Political Geography:
Russia, China, Europe, Asia, North America, Arctic, and United States of America