Pompeo Defends Unilateralism
The U.S. is committed to leadership and national interest in a changed geopolitical landscape, said Michael Pompeo, Secretary of State, in a special session at the World Economic Forum Annual Meeting this week.
“Disruption is a positive development,” asserted Pompeo via video link, with the Lincoln Memorial in the background. “Over the past few years, all around the world, voters have tuned out politicians and political alliances that they thought weren’t representing their interests,” he said, citing the examples of Brexit, the rise of the five-star movement in Italy and the election of Donald Trump. (Trump abruptly scrapped plans to join other world leaders at the Forum being held in Davos, Switzerland, due to the ongoing government shutdown.)
Populations are questioning whether economic globalization is in their interests, he pointed out, and whether political protection is adequate against threats such as terrorism. “New winds are blowing across the world. Do they signal fair weather or foreshadow storm?”
“Nations matter,” Pompeo said. “No international body can stand up for a people as well as their own leaders can. Strong borders are the key to strong nations.”
He stressed the need for “sturdy alliances, built on key principles,” and noted that “economic security is national security,” citing the U.S.’ GDP and wage growth.
Questioning multilateralism, Pompeo said that global institutions, if they are to be preserved and strengthened, must be “reflective of the world order as it sits today. If they are not, we need to change them, we need to update them, we need to bring them into this century.”
Pompeo also addressed myriad threats around the world, foregrounding “China’s state-centered economic model, its belligerence toward its neighbors and its embrace of a totalitarian state at home.”
“There are those who say that superpower conflict between our two countries is inevitable,” he expanded on Sino-U.S. relations. “We don’t see it that way.”
While expressing optimism about the outcomes of trade negotiations, he warned that “the course of the relationship will be determined by the principles that America stands by: free and open seas, the capacity for nations to take their goods around the world, fair and reciprocal trade arrangements.”
“Investments in our two countries should be reciprocal,” he stressed, criticizing IP theft and forced technology transfer – “those aren’t fair arrangements, they’re not reciprocal agreements, they’re not the way free and fair trade ought to be conducted.”
Slowdown is Not Collapse
The recent trade disputes between the U.S. and China raise a number of questions about declining exports for both countries. “The trade war has come as a benefit in disguise,” says Jin Keyu, Professor of Economics, London School of Economics and Political Science, in a session at the World Economic Forum Annual Meeting. Jin argued that the dispute has provided external pressure on China to make needed reforms and open its economy.
For example, much of China’s credit remains in the financial sector or goes to state-owned enterprises. Implementing reforms to make credit more available to Chinese households could help unleash the “latent dynamism of the private sector,” Jin says. Greater consumption from Chinese households could, in turn, offset declining consumer demand in other nations – one potential bright spot for the global economy.
Another source of risk involves high levels of government debt in the U.S. “We have a real problem in terms of the quantity of debt we have to sell to the world over the next several years,” said Ray Dalio, Chairman of Bridgewater Associates.
Historically, China has been a major international buyer of U.S. debt, but the recent trade dispute has raised questions about bilateral relations. However, Fang predicted that the political dispute would not affect the Chinese government’s interest in buying U.S. debt. “I don’t think China will in any way significantly reduce its investment into the US bond market,” he noted.
Slowing growth could pose risks for the global economy in 2019, as experts predict flattening or declining rates for economies ranging from the U.S. to Europe to China. However, “slowing down in China is not a collapse,” said Fang Xinghai, Vice-Chairman of the China Securities Regulatory Commission. Economic experts predict six percent growth in China for 2019, which is still relatively strong.