Can the New Washington Consensus Go Trans-Atlantic?

Todd N. Tucker

6 mins - 2 de Junio de 2023, 07:00

In April, the US’ National Security Advisor Jake Sullivan delivered what was perhaps the most significant foreign policy speech of the Biden presidency thus far. At a talk at the DC think tank Brookings Institution, he identified four fundamental challenges facing the US and other countries: hollowed out industrial bases, geopolitical competition, climate crisis, and rising inequality that was hollowing out democracy. To respond to these pressures, Sullivan called for new forms of international economic cooperation, or what he termed “a foreign policy for the middle class.” The centerpiece of this agenda is an encouragement of active government-led industrial policy at home and abroad, all while boosting investments in emerging economies, protecting foundational technologies, and remaking trade policy so it can help meet labor, environmental, and other objectives that tariff reduction can’t or won’t solve.

[Recibe los análisis de más actualidad en tu correo electrónico o en tu teléfono a través de nuestro canal de Telegram]

In his speech, Sullivan did not label the paradigm that Biden is seeking to replace, but observers quickly filled in the blanks. Eric Levitz, writing in New York magazine, claimed that “The Biden Administration just declared the end of neoliberalism.” On Substack, the economist Noah Smith hailed the speech as part of the “end of the free-trade consensus [and] also the end of the laissez-faire consensus.” Finally, at the Daily Beast, former Clinton administration official David Rothkopf called the administration “revolutionary”, adding:

“Biden is the man who finally slew Reaganomics and the huckster’s brew of “trickle-down” and “the markets know best” policies at its core. He is the one who at last put an end to the “Washington consensus” that has served the rich worldwide and left the poor to struggle with too little support. He, at last, ended the slavish deference of Washington neoliberals to Wall Street, and the consequent grotesque growth in inequality and injustice it has fueled.”
This intellectual shift was years in the making. In pre-administration writing for Foreign Policy magazine in 2020 with the geoeconomics expert Jennifer Harris (who would go on to join Sullivan at Biden’s National Security Council), he was more candid: “Today’s national security experts need to move beyond the prevailing neoliberal economic philosophy of the past 40 years… foreign-policy experts must dispense with the notion that what’s good for U.S.-based multinational corporations is necessarily good for the United States.” Indeed, Sullivan, in spite of (or perhaps because of) his experience as a lead Hillary Clinton advisor, was part of a cohort of Generation X and millennial advisors that responded to the trauma of Donald Trump’s election by organizing and rethinking their fundamental assumptions about what good policy looked like. This started in 2017, when Sullivan told the Washington Post that Democrats’ perceived support of the Trans-Pacific Partnership (TPP) was part of why Donald Trump won and a sign of the intellectual exhaustion of foreign policy elites.

As European lawmakers and publics think about how to engage with the United States going forward, it’s important to understand that structural and generational factors make it unlikely that neoliberalism will be restored. The climate crisis will require as much if not more government shepherding of the economy than the 1940s, as growing numbers of observers from the center-right to the left in the United States agree, even if the specific strategies are still in formation. Further to the right, whence Donald Trump attracts votes, there’s greater embrace of protectionism, and signs of restiveness against an ill-defined “woke” capitalism.

These ideational shifts on the West side of the Atlantic will pose challenges for those on the East side. As the historian Quinn Slobodian has documented, the European Union’s implicit and sometimes explicit operating theory is that important economic decisions must be insulated from democratic contestation. A more democratic and effective Union needs “new rules” to free up public investment, as the economist Joseph Stiglitz has written. More fundamentally, as a 2022 Chatham House report notes, it will require a renewed faith in the value of democratic input into policymaking. And as Jennifer Harris observed in a recent Roosevelt Institute report, American policymakers are sometimes slow to push their European counterparts on the fundamental disconnect between neoliberal ideology and the most salient challenges of the 21st century.   

Still, there are concrete steps that both partners can take to make a down payment on further cooperation. 

First, European governments and corporates must refrain from lobbying against pro-worker, pro-environment policies that the US seeks to enact. Unfortunately, they bear some responsibility for watering down protections for unionized workforces that were contained in the original 2021 version of the Inflation Reduction Act / Build Back Better Act, as I wrote for the Brookings Institution. European companies, who often have unionized workforces back home, should extend the same respect and protections for their US workforces. And this obligation to “do no harm” goes the other direction as well. It is noteworthy that, unlike the Obama administration, Biden has not tried to gut efforts where Europe is moving ahead of the US on climate, such as the carbon border adjustment mechanism, even though that policy may negatively affect US multinationals (recall the Sullivan-Harris quote above).

Second, both sides must reach for high-ambition sectoral agreements. In late 2022, the Biden administration proposed a framework for a Global Arrangement on Sustainable Steel and Aluminum. This deal would incentivize US and EU heavy metals producers to invest in decarbonization, by providing trade protection against dirty and over-subsidized imports from third countries. As I wrote with the law professor Tim Meyer in El Grand Continent, the initial reaction from the EU has been frosty, and focused on second-order questions of WTO compatibility. There are serious questions on whether those trading rules are fit for purpose in the 21st century. But, as Meyer and I argue, there is a clear roadmap for defending the Arrangement under environmental, security, and commodity club exceptions to the WTO rules. If the EU is serious about its commitment to resuscitating the Geneva trade institution, developing a joint interpretation with the US on environmental safeguards are an important opening for doing so. Sectoral deals on critical minerals are another avenue for advancing cooperation, as would be a “peace” on trade and investment law disputes over green industrial policies.

The US and EU have many more in common than what set them apart. From anti-democratic right wing movements, to climatic crisis, to lagging public investment, these allies face common challenges. Sullivan’s speech, and the concrete ideas now surfacing for deeper collaboration, offer a North Star for the journey ahead. 

¿Qué te ha parecido el artículo?