Patrick J.

McDonald

Revitalizing Grand Strategy: America’s Untapped Market Power

he costs and unmet expectations of the democracy promotion project in Iraq and the wider Middle East have sparked a broad debate about the future of U.S. grand strategy. In the chorus for change, some suggest that the United States should return to such principles of liberal internationalism as multilateralism and financial beneficence, which marked the golden era of U.S. diplomacy in the years immediately following the end of World War II. Others insist that U.S. foreign policy needs to be reestablished in a more pragmatic realism that responds to the global balance of power and resists the overuse of military muscle to promote democracy around the world. Greater reliance on U.S. economic power can inject more prudence into foreign policy without abandoning the historical U.S. goal of promoting freedom and political reform around the world. The United States possesses the largest and most vibrant market in the global economy and can integrate this unique political asset more effectively in the larger global struggle against terrorism and radical Islam. Unilaterally eliminating trade barriers on imported goods from moderate Islamic states critical to combating terrorism, such as Bangladesh, Ethiopia, Indonesia, Kenya, Malaysia, Mali, Mauritania, Nigeria, Pakistan, the Philippines, Tanzania, and Turkey, could strengthen Washington’s capacity to promote political moderation and cultivate local influence within these countries. As foreign businesses and workers come to depend on U.S. consumers for profits and jobs, they become important allies in internal struggles taking place around the world between the forces of modernization, globalization, and tolPatrick J. McDonald is an assistant professor in the Department of Government at the University of Texas at Austin. He would like to thank Jason Brownlee, George Gavrilis, Ron Krebs, and Peter Trubowitz for their input and Mark La Brayere for his outstanding research assistance. He may be reached at pjm438@gov.utexas.edu. © 2007 by The Center for Strategic and International Studies and the Massachusetts Institute of Technology The Washington Quarterly • 30:3 pp. 21–35. THE WASHINGTON QUARTERLY

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Joseph Schumpeter. Cobden saw eliminating protective barriers to international trade as a device to empower a burgeoning middle class in their challenge to a political order that was hostile to democratic reform. Trading for Influence Classical liberals such as Adam Smith. 60 years of European integration have transformed the long rivalry between France and Germany into a strong partnership. Developed economies governed by the industrious middle class. introversion. economy has created textile jobs in places such as Bangladesh and China that in turn have enhanced the autonomy of women living in the maledominated political orders found in many rural or developing societies. Governments overseeing large economies can also draw on their market power to enhance their political influence over other states. Governments can also use economic inducements. In addition. a process that has occurred today in Taiwan and South Korea.S. As part of its broader economic strategy that included Marshall Plan aid. democracy. These reforms had the unintended effect of decreasing the dependence of peasants on the landlord for subsistence. the enormous U. McDonald erance against those of tradition. Baron de Montesquieu.1 In mid–nineteenth-century United Kingdom. Smith argued that new market opportunities induced large landholders in the pre-industrial era to introduce reforms such as devolving more ownership rights to peasants to enhance productivity. Richard Cobden. namely granting preferential access to home markets. vindicating Cobden’s and Schumpeter’s beliefs that democratic pressures unleashed by free trade would ultimately eliminate incentives for war. and peace between states. Expanded access to the U. to cultivate local political allies within target countries.2 Economic sanctions are often used to induce political concessions from targeted states. and hatred. smaller outlets for their goods. This strategy relies on the material interest generated by possessing such access and on the domestic pressure its beneficiaries are willing to levy on their home governments to maintain such ties. they argued. The United States adopted such a strategy throughout the Cold War. Similarly. who must otherwise seek alternative. and Friedrich von Hayek long ago recognized that capitalism and the emergence of global markets can enhance individual liberty. consumer market cultivates an enduring foundation for common political interests with the United States by creating jobs and economic opportunities in potential havens for terrorist activity while strengthening liberty and domestic political reform abroad. curtailing the latter’s authority.S.l Patrick J. simply have no interest in the excessive waste and cost of conflict. Washington tolerated undervalued currencies that discriminated against its 22 THE WASHINGTON QUARTERLY ■ SUMMER 2007 .

form of political compromise with the mainland or declare independence. U. and delays on restoring current account convertibility in Europe in order to stabilize economic conditions in its allies. markets to war-torn economies in Western Europe and Japan fostered economic recovery. the liberalization of intra-European trade. stopped the spread of communism.S. Because fruit production is concentrated in southern Taiwan. Iran. For example. trade policy should not be debated only in terms of lost market opportunities or jobs. import jing has strategically opened components of barriers can promote its market to influence the internal debate political moderation in within Taiwan over whether to pursue some key Islamic states. the mainland eliminated tariff restrictions on imported fruit from Taiwan. liberal trade policies have the potential to create important political dividends for the United States. and established firm economic foundations for stronger political ties in the Western bloc. in a very public signal in the summer of 2005.S. As these experiences suggest. Recent electoral developments in Bolivia. This strategy of using economic ties to cultivate local political support compares favorably to the existing policy of democracy promotion. but it does not protect the policy outputs of this process. the Palestinian territories. a traditional political stronghold for pro-independence forces. making allies of foreign businesses and workers who come to depend on U. Beiliminating U. the mainland hopes that new outlets for these products will lead farmers to support greater accommodation with the mainland. consumers for profits and jobs.S.S. and Venezuela illustrate one of the challenges of relying too heavily on democracy promotion as a device to enhance national security. however. China is using access to its domestic economy to shape the internal political debate in Taiwan by targeting key constituencies and fostering greater support for its interests. Democracy protects the process by which societies choose their political leaders. clearly illustrate that E THE WASHINGTON QUARTERLY ■ SUMMER 2007 23 .S. This does not necessarily imply that the United States should halt its current strategy of democracy promotion. which has publicly taken credit for numerous terrorist attacks in pursuit of its broader political goal: the destruction of Israel. For example. The opening of U. ally. the recent mix of democratization and global frustration with the militarism of U. The opening of U. a close U. If anything.S. foreign policy has proven to be an effective recipe for empowering groups hostile to U.Revitalizing Grand Strategy: America’s Untapped Market Power l exports. the last Palestinian election granted a political mandate to Hamas.S. China has also used such carrots to break the stalemate across the Taiwan Strait. interests.S. In short. It does. markets should also be viewed as a device to promote national security.

l Patrick J. making up 3. and Turkey respectively ranked sixth. Countries targeted to receive preferential access to the U. U. As the Iraqi experience suggests. Similarly.S.S.9 percent of its GDP and more than 26 percent of its total 24 THE WASHINGTON QUARTERLY ■ SUMMER 2007 . interests once the political transition has occurred or in the absence of such a transition. In Pakistan and Bangladesh. encourages foreign direct investment. consumers offers the United States an opportunity to cultivate broader grassroots political support abroad. reducing subsidies to U. Expanding exports to the U.5 The textile sector accounts for a substantial amount of economic activity within these developing economies. accounting for 3. 4 Many of these imports come from battleground states in the broader war against terrorism. the United States cannot depend solely on toppling autocratic leaders to build broader support around the world for its policies.7 The relative importance of textile exports to the United States is even larger for Bangladesh. McDonald a grand strategy centered on promoting institutional reform in other societies must simultaneously incorporate instruments capable of building support among the local population for U. would help to raise world prices and stimulate new production in the developing world.S. Indonesia. In many cases. consumers and increase imports into the United States.S.S. 3 Alternatively.5 billion in 2005. market for national security reasons would have the largest impact in textiles and agriculture. market stimulates economic growth. and promotes further economic liberalization. interests around the world.3 percent of its gross domestic product (GDP) and more than 20 percent of its total exports. consumer appetites for clothing and textile imports are substantial.S. such as in cotton production. the Philippines. They totaled nearly $2. eliminating import barriers on goods from a host of strategically important countries can create substantial economic gains for these countries and offer important political opportunities to the United States. Pakistan.S. The Power of Positive Economic Statecraft The political and economic costs of the Iraq war illustrate the dangers associated with an overreliance on military force to promote U. Annual textile imports to the United States totaled more than $95 billion in 2005. textile production constitutes nearly 60 percent of the industrial base. fourteenth. tenth. particularly West Africa. Eliminating tariffs on textiles and agricultural products such as sugar and corn would lead to a decline in prices paid by U. Bangladesh. seventh. and twenty-first in textile exports to the United States in 2005. a public already resistant to foreign aid casts doubt on the feasibility of launching a new Marshall Plan for the Middle East or Africa.S. Perhaps most importantly. farmers.6 Pakistan’s textile exports to the United States totaled more than $3 billion in 2005. access to U.

markets despite facing average tariffs today between 15 and 20 percent.S. The Central America Free Trade Agreement. Profit margins in textiles can be quite small. to shape the political T-shirts face a tariff of 19. State-owned textile factories in China report profit margins from 5 to 7 percent.6 percent. has already led the Taiwanese government to encourage their businesses to invest in places such as Nicaragua and Honduras. pants are taxed 16.000 new jobs there.9 percent.14 Eliminating trade barriers would stimulate foreign direct investment by entrepreneurs seeking to take advantage of preferential access to the U. A $1 billion increase in Bangladesh’s textile exports to the United States—slightly more than 1 percent of total U. Commerce Minister Humayun Akhtar Khan of Pakistan estimates that every $1 billion in export growth yields 200. Two of the largest categories of textile exhina is using access to ports from Bangladesh to the United States its domestic economy are in men’s cotton shirts and men’s pants.5 and 20. Jordan’s exports to the United States in 2000 totaled $72.Revitalizing Grand Strategy: America’s Untapped Market Power l exports.8 Low labor costs help textiles exports from these countries to remain competitive in U. Pakistan’s top textile export to the United States. and debate in Taiwan. The free-trade agreement concluded between the United States and Jordan in 2001 illustrates these economic possibilities. By 2005. Indonesia. for example. 9 Bed linens.27 billion.6 percent.S. face tariffs between 2. 13 Tariff reductions of 15 to 20 percent for those countries would thus carry the potential to shift production out of China and slow the growing economic disparity within the developing world. and Turkey relative to global textile industry leader China. the Philippines. textile imports—would increase economic growth there by nearly 1. consumer.000 jobs. 11 Although job creation for Jordanians has been somewhat limited because textile firms rely heavily on foreign workers.12 Creating free-trade areas would also dramatically enhance the competitiveness of countries such as Bangladesh. Pakistan. market into these capital-scarce economies. this export figure had increased by a factor of 17. 10 The elimination of these duties would dramatically reduce the costs of textiles to the U.S.7 percent. some estimates credit this industrial growth with creating nearly 50.8 million. Declining consumer prices would in turn stimulate even more demand and employment opportunities in these countries as their economies expand to meet these new production needs. Similarly. to $1. Proindependence politicians urge the diversion of Taiwanese capital away from the Chinese mainland to reduce the political risks associated with investment C THE WASHINGTON QUARTERLY ■ SUMMER 2007 25 .S.

Additionally. economy and higher levels of foreign direct investment also create opportunities for expanding individual freedom and political development. cash infusions. M 26 THE WASHINGTON QUARTERLY ■ SUMMER 2007 . and unemployment rose. including Marshall Plan aid. while reaping the economic benefits derived from Central American trade pacts that ultimately offer preferential access to the U. goals. such as in Argentina. they may also serve as informal representatives for U.16 Sparked by the U. only occurs at low levels of economic development.S.S.S.18 If these firms depend on access to the U. Local political influence stems from their capacity to create jobs by opening new factories.l Patrick J. market. France and Italy helped to stimulate U. McDonald there. as firm managers and employees come to depend on access to the U. they could also develop a broader affinity for the United States. Brazil. Owners of Taiwanese firms have already generated extensive influence with local politicians in Central America as a result of their investments there. Rather than stimulating development. This opportunity to stimulate popular support contrasts with economic carrots such as the sale of military hardware or foreign aid. Very real fears of Communist Party electoral gains in against terrorism.S. consumer. interests in these countries. market for providing income growth and jobs. Freetrade agreements with the United States would enlist the global private sector as allies in support of sustainable development and democracy in strategically important countries. industrial capacity remained in the broader war underutilized. market for their profitability.S. or Greece in the 1960s.S. The architects of the Cold War order understood how difficult it would be to any textile rely on democracy as a device to prevent Soviet imports come from expansion toward Western Europe if the postwar battleground states recovery stagnated. Expanding economic opportunities created by preferential access to the U.S. capital inflows and job creation that extends to all income levels could promote grassroots support for U. Recent research shows that the collapse of democratic regimes. multinational corporations operating in these countries are also likely to act as interest groups supporting U. into these countries. such resources are often spent on coercion and serve as lightning rods for nationalist or Islamic opposition forces. interests in these countries.S. Surveys conducted in Beijing show that higher income levels and support for free trade both correlate with higher levels of amity toward the United States. 15 Promoting sustainable economic growth encourages democracy where it has yet to take hold and sustains it where it has.17 Moreover.S.

and Pennsylvania in the 2006 midterm elections by associating substantial layoffs with globalization and Republican support for President George W. initiative that allows these countries to carve out their own development strategies. particularly emergency lending. Democrats made electoral gains in Ohio.S. economy for the purpose of building allies would not come without significant political costs and risks at home and abroad. it shifts the distribution of income within it. jobs as Benedict Arnolds. As textile firms relocate production activities to low-wage countries such as Bangladesh. Much of the political resistance to globalization emerges from these distributional pressures. One of the most powerful sources of globalization backlash has been the view that Western aid. sharp. Eliminating trade barriers or the closure of state-owned enterprises incapable of competing with private multinationals creates the same negative employment effects. concentrated costs fall on import-competing industries. PREEMPTING RESISTANCE ABROAD Much of this resistance in the Muslim world could be preempted by the unilateral nature of the proposed U.S. jobs in these industries are eliminated.S. These concentrated losses tend to provoke vigorous political opposition to further liberalization of the domestic economy. Moreover. As globalization often increases the aggregate income of societies. The debates over outsourcing in the 2004 U. in target countries such as Indonesia and Pakistan. For example. Obviously. the benefits of globalization. Bush’s free-trade initiatives. Moreover. such as cheaper T-shirts.S. insufficiently compensate unemployed textile workers. elections illustrate the perils that such a free-trade initiative faces in a hostile. or Vietnam. carries conditions such THE WASHINGTON QUARTERLY ■ SUMMER 2007 27 .S. Quite simply. China. The developing world is not immune to such pressures.Revitalizing Grand Strategy: America’s Untapped Market Power l Launching the Initiative Opening the U. Michigan. further exposure to globalization could generate local resistance and political opportunities for Islamists in their ongoing struggle against Westernization and secularization. in the United States these costs of globalization have recently fallen hard on labor-intensive industries such as textiles production. domestic political climate that demonizes CEOs who export U. U. some groups win and some groups lose. the primary political agents of globalization such as the United States and the International Monetary Fund have often been accused of accelerating these trends in the developing world while ignoring the dramatic social costs of economic liberalization. Although the elimination of tariffs and quotas tends to reduce the prices of tradable goods and thereby expand the real income for most consumers.

instead strengthen the political forces that the United States is attempting to weaken.21 An awareness of the benefits provided by economic development and a desire to challenge secularism have already spawned public and private efforts to insert components of Islamic identity into commercial activities in Malaysia. namely job loss in inefficient industries. and trade liberalization that widen the income disparity between the developed and developing world. such initiatives have sought in- T 28 THE WASHINGTON QUARTERLY ■ SUMMER 2007 . they mobilize domestic political supbacklash by imposing port for policies that limit economic and culconditions on its tural exchange with the West.22 Instead of eliminating the role for markets in allocating scarce resources. market. To counter such globalization threats. jobs are eliminated in importcompeting industries as regulatory barriers such as tariffs that insulate these firms from greater global competition are removed.S. If the United States does not insist that the target countries offer any reciprocal concessions that liberalize their own domestic economies.” such initiatives have eliminated some forms of interest common to commercial lending in the developed world. justice. local industries producing for home markets would not be exposed to greater competition from U. McDonald as government spending cuts. the pursuit of profit is not inconsistent with Islamic thought. risks community among Muslims. Labeled “Islamic economics” or “Islamic finance. 20 Islamic fundamentalists decry the selfish pursuit of profit and corruption that thrive under capitalism and threaten to erode the bonds of he U. On one hand. and consumers pay lower costs for products produced more efficiently abroad. 19 The United States risks accentuating this backlash with tough bargaining that imposes harsh political or economic conditions in exchange for liberalizing access to the U. By increasing exposure to globalization. Pakistan. income redistribution through a tax on wealth or income. trade barriers. and encouraged such norms as honesty. equality. A potent source of backlash against globalization that could strengthen political Islamists.S. this initiative may market liberalization. capital account liberalization.S. would be reduced by the unilateral elimination of U. Such problems may be compounded in the Muslim world. and the right to be treated fairly in economic interactions. exporting industries receive new outlets for their products. Any trade agreement that involves reciprocal concessions offers both benefits and costs to an economy.l Patrick J. The unilateral nature of this initiative can preempt much of the upsurge against globalization in the targeted countries. and Sudan. On the other hand. firms.S. where globalization already carries connotations of Western cultural imperialism. fostered zakat. Moreover.

the unilateral elimination of trade barriers enables governments to choose whether or not to liberalize their domestic economy to foreign direct investment. support for this compromise by offering new markets.S. could help to lessen the appeal of radical political Islamists seizing on any globalization backlash. and the administration’s recently lukewarm support for free trade cast doubt on its current commitment to this strategy. It has proposed a free-trade area for the Middle East and has publicly criticized proponents of protectionism in the United States for their failure to grasp the potential for peace and tolerance created by international commerce. consumer to change societies around the world. Unilaterally eliminating U.S. and Turkey. trade barriers would allow the targeted governments to continue pursuing such local economic strategies capable of carving out a middle ground between the sometimes conflicting pursuits of growing the economy and strengthening Islamic communal identities. Pakistan. Republicans have grown averse to spending increasingly scarce political capital on controversial trade-liberalization initiatives that only seem to mobilize the Democratic base. The 2004 and 2006 elections illustrate how concentrated job losses created by factory closures around the country activate traditional Democratic skepticism toward globalization and provide an opportunity to recast the political agenda away from security debates that have played to Republican advantage since the September 11 attacks. One of the long-extolled virtues of the Marshall Plan was the decision to let Europeans in concert craft their own strategy to rebuild their economies after the war and to determine independently how U. Indonesia.23 The limited nature of the current proposal.S. without insisting on concessions that threaten such Islamic development strategies. however. At the same time. or implement an export-led growth strategy. indirect U. COUNTERING RESISTANCE AT HOME The Bush administration has acknowledged the opportunities created by relying on the U. allow rapid migration into cities to take advantage of new manufacturing jobs. Lukewarm THE WASHINGTON QUARTERLY ■ SUMMER 2007 29 .24 This wavering commitment to trade liberalization is also a function of declining support within the American public and of partisan strife.Revitalizing Grand Strategy: America’s Untapped Market Power l stead to make secular commercial exchanges more Islamic by encouraging them to be governed by communal norms common to Muslim societies. These countries could continue to carve out their own Islamic development strategies and maintain mechanisms that influence the pace by which their local economies integrate into the broader world economy.S. aid would be spent. Moreover. Similarly. which excludes nearly two-thirds of the world’s Muslim population by leaving out the critical countries of Bangladesh.

S. agriculture is also the last heavily protected sector in developed economies. The collapse of the Doha round of multilateral trade negotiations in the summer of 2006 demonstrates the political hurdles faced by such trade initiatives in U. These programs raise the global competitiveness and production of U. stands as the largest hurdle to a comprehensive agreement. such as declining consumer prices.l Patrick J. The political goal of shrinking the gap between the global rich and poor necessarily placed agriculture at the top of Doha’s agenda. namely those of Europe. and Pakistan paying their employees less than $1 an hour.26 The Bush administration’s authority to pursue a series of bilateral free-trade agreements initially depended on a 215-214 vote in the THE WASHINGTON QUARTERLY SUMMER 2007 30 ■ .S. farmers to achieve a broader breakthrough in the Doha round is not the only source of opposition to more-open trade policies in the United States.S. Washington’s trade negotiators were unwilling to make cuts to these programs necessary to achieve success in the Doha round without receiving greater access for U.25 Because of their geographic concentration. It thus stands as the developed world’s last bargaining chip in multilateral trade negotiations designed to open the global economy. market access for U.S. China.S. This unwillingness to sacrifice the interests of U. subsidies defray the costs and risks of agriculture production. The Doha round was the first specifically targeted at generating economic growth in the developing world. textile sector as well. and West Africa that threaten federal support for domestically produced sugar and cotton would likely activate similar political resistance from agriculture interests in the United States. farmers to markets that are still heavily protected. tariffs on agricultural products are lower than those of many developed economies in Europe and Asia. The question of market access. in particular. textile interests in the United States have been successful at slowing the massive onrush of new imports from low-cost competitors. Textile firms in North Carolina paying employees $12 an hour simply cannot be competitive with firms in Bangladesh. farmers. Free-trade agreements with Pakistan. that are too small to generate large activist coalitions behind trade initiatives. politics today.S.S. farmers. McDonald public support stems partly from the diffuse benefits of globalization.S. Although U. The costs of globalization have been felt dramatically by the U. firms either to outsource laborintensive operations to these countries or simply to halt production. The lure of cheap labor costs abroad or the inability to compete with the surge of cheaper textiles from places such as China has led U. U. Most of the key parties blamed Washington’s intransigence on subsidies as the principal source of the July 2006 breakdown of the talks. the Philippines. which in turn raises global supply while depressing global prices. Although providing a key source of comparative advantage for many developing countries.S.

Pakistan initially requested tariff cuts and larger quota allotments. Ethiopia. Beyond those costs and benefits accruing to the relevant import-competing and exporting industries. in the days following September 11. reduce the risks of a political backlash. and prosperity in the Muslim world. such as cheaper T-shirts and underwear. Nigeria. the textile industry shaped the mix of economic incentives offered by the Bush administration to Pakistan for its support in the struggle against terrorism and the Taliban in Afghanistan.27 Similarly. free-trade agreements with Bangladesh.Revitalizing Grand Strategy: America’s Untapped Market Power l House of Representatives that required a significant concession to the Congressional Textile Caucus. and Turkey should similarly be debated as attempts to enhance national security by promoting liberty. Mali. the Philippines. access to the world’s largest consumer market can create substantial political benefits for strategically important countries in the broader struggle against terrorism. politics. the benefits of free trade should not solely be cast in economic terms. Second. Tanzania. A decision to ignore this political resistance risks generating a protectionist backlash in the United States capable of reversing such an initiative. Indonesia. Malaysia. These sectors can be compensated so as to raise the domestic economic benefits of trade. lution to the United States. Large numbers of jobs would be lost in these industries as imports explode and subsidies fall. Pressure from the textile lobby led the Bush administration to offer only minimal quota expansions and no tariff relief. democracy. Pakistan. the integration of two key principles into the broader debate over the costs and benefits of globalization might help to build a stable bipartisan coalition behind this new. A THE WASHINGTON QUARTERLY ■ SUMMER 2007 31 . Given such domestic constraints. Mauritania. First. Kenya.S. radical Islam. 28 Such an example illusgriculture is the last trates the political difficulties of trumpeting the heavily protected virtues of cheaper T-shirts and underwear for sector in developed all Americans at the cost of losing an industry often credited for bringing the Industrial Revoeconomies. trade-based grand strategy. peace. given that the national security benefits of such an initiative accrue to all Americans. and ultimately improve the competitiveness of the American worker in the dynamic global economy of today. Given the salience of national security in post–September 11 U. and anti-Americanism. its costs should not be borne solely by those working in the textiles and agriculture sectors. given the significance of textile production to its economy. The architects of the Marshall Plan believed that public support for that enormous aid expenditure could be generated by highlighting the central role of postwar European reconstruction in the larger struggle against communism. 2001.

S. corporations in their appetite for shifting production or operations abroad. A recent trend has emerged among U.30 Together. enabling both Republicans and Democrats to meet traditional demands from their respective bases. This trend has begun to include skilled jobs in information technology along with call-center and manufacturing jobs. Corporations often receive local incentives in the form of tax abatements and low property prices. such a federal program carries with it the added incentive of making a T 32 THE WASHINGTON QUARTERLY ■ SUMMER 2007 . Democrats could secure greater federal spending on trade adjustment assistance. could dramatically help to create jobs and raise the global competitiveness of workers in these U. A recent study of rural sourcing in information technology concludes that partnerships with local universities are crucial to the success of these ventures.31 Republicans could champion tax cuts to reward corporations and individuals moving to these rural areas.S. and retraining benefits. A federal initiative to encourage this outsourcing trend to rural America rather than China or India could generate even more employment opportunities for workers displaced out of textiles and agriculture jobs. these possibilities suggest that federal tax incentives for companies to move to rural regions. that wo key principles compensates workers displaced by globalizamight help a tion. which includes health care benefits. For example. customer service problems sparked by cultural and language barriers. regions.l Patrick J. 29 Both parties could also claim political bipartisan coalition victory from a broad rural-development initiafor a new tradetive that responds directly to widespread concerns about outsourcing. legal delays to startup. travel expenses. earnings insurance. Finding unanticipated costs in management difficulties.S.32 Apart from compensating workers for the trade initiative. Such a proposal is likely to find broad-based populist support in rural areas where federal spending on agricultural subsidies is distributed predominantly to the largest farms. in combination with federal support and scholarships to public universities in rural areas. economy. and the difficulties of conducting intrafirm business across multiple time zones. and they also benefit from lower wage levels and cheaper housing markets for their employees. McDonald A supportive bipartisan coalition of congressional Democrats and Republicans could be constructed via a domestic aid package that compensates groups asked to shoulder the adjustment costs associated with the unilateral liberalization of the U. Any compensation package could take on multiple forms. based grand strategy. firms are increasingly exploring cost-saving “offshore” alternatives in rural America. and Democrats could secure more federal funding on education that accompanies this new competitiveness initiative.

history. real incomes would increase as the costs of tradable goods decline and new investments are made in U. democracy. consumers would help to promote support for Washington’s interests in places such as Bangladesh. and Turkey while demonstrating that U. political influence in strategically important countries around the world.S. and peace. Those opposed would be forced to vote against a proposal that carried with it the potential to bring hundreds of millions of federal dollars to their state or congressional district and to build U. taxpayer dollars would instead be spent at home on policies that enhance the competitiveness of U.S. or squandering foreign aid payments as corrupt governments fail to disburse them broadly to their citizens.S.Revitalizing Grand Strategy: America’s Untapped Market Power l long-term investment in U.S. Policies that would today be labeled as “unfair trading practices” by domestic interests favoring protection were countenanced then in light of the larger political struggle being waged against the Soviet Union. the Truman administration recognized the dangers of shutting off U.S.S. interests in the Muslim world extend beyond oil.S. workers that enhance their competitiveness in the global economy.S.S. Unilaterally opening the U.S. At home.S. influence in battleground states in the broader war against terrorism.S. workers while promoting development and U. The political costs of such a spending initiative are significantly cheaper than the alternatives of a massive foreign aid program or the deployment of thousands of troops in the Middle East and Central Asia to stabilize governments and promote democratic reform. Indonesia. THE WASHINGTON QUARTERLY ■ SUMMER 2007 33 . Finally. U. consumer in the larger campaign to promote freedom in the struggle against terrorism and radical Islam would build on the enormous capacity of markets to encourage development. In the early stages of the Cold War. Deploying Consumers in the War on Terrorism The forbearance associated with unilaterally liberalizing U.S.S. Pakistan. U. Congressional officials supporting such an initiative could tout it as a plan to battle Islamic extremism first by strengthening the home front and then by promoting reform across the Muslim world. markets to paralyzed European and Japanese economies. Preferential access to the powerful spending habits of U. deploying the U. markets is not without important historical precedent in U. grand strategy should utilize all the political and economic resources at its disposal to transform societies at risk of plunging into war or in the process of escaping it. paying for reconstruction in Iraq. economy could release untapped market power capable of accomplishing multiple goals. Ethiopia. workers that will help them thrive in the global economy that includes a rising China and India. Instead of funding more soldiers. In light of war costs in Iraq and the emergence of terrorist networks spanning the globe.

Globalization and Its Discontents (New York: Norton. U.” The Washington Quarterly 29. 2000). “U.” National Interest 83 (Spring 2006): 43–49. p.cia.: University of California Press. Lawrence. December 3. no. 4. Effort to Counter Terrorism With Trade May Backfire. 7. Anatol Lieven. 6. 8 (2002). 20. http://www. 19. no. Gresser. chap. “Reviving Muslim Economies. 6 (2004): 84–96.” Washington Post.” NAICS codes 313.” Foreign Affairs 83. Sachs. 14.” https://www.usitc. Economic Statecraft (Princeton. International Trade Commission’s Tariff Database. Calif. 13. March 2006. 3 (Winter 2002–03): 5–29. Taiwanese legislative officials. Will Marshall (Lanham. Robert Lawrence. N. 5.S. Ibid. 78. Alastair Iain Johnston. Derek Chollet and James M.: Wiley. See Timur Kuran. 21.J. The Travels of a T-Shirt in the Global Economy (Hoboken. 2004). interview with author. p.census. http:// www. Robert Looney.” Strategic Insight 1. U. 5. CIA. Adam Przeworski et al. McDonald Notes 1.gov/foreign-trade/statistics/country/sreport/textile.: Princeton University Press. December 2005.S.J. See Jeffrey D. Census Bureau. N.: Peterson Institute for International Economics. Beijing. Paul Blustein.. 17.navy.ccc. 4 (2003): 5–56. Goldgeier. “World Factbook: Pakistan. 2005).” Middle East Policy 10.J.” in With All Our Might. See Michael Mousseau. See http://dataweb.S. interviews with author. Geoffrey Garrett. “Foreign Trade Statistics.C. 315.html. 2004. “Problems in Using Trade to Counter Terrorism: The Case of Pakistan. Pietra Rivoli. 314.S. “The Faulty Premises of the Next Marshall Plan. Baldwin. “Globalization’s Missing Middle. The End of Poverty: Economic Possibilities for Our Time (New York: Penguin. 15. Ibid.l Patrick J. Derived from information found on the U.: Princeton University Press. 16. A U.–Middle East Trade Agreement: A Circle of Opportunity? (Washington. Democracy and Development: Political Institutions and Well-Being in the World. 34 THE WASHINGTON QUARTERLY ■ SUMMER 2007 . p. “Is China a Status Quo Power?” International Security 27.html. 3 (Fall 2003): 112–120. 9. 2. pdf. Md. 11. See Joseph Stiglitz. E1. 105. Free-Trade Deals Include Few Muslim Countries.gov/cia/publications/factbook/geos/ pk. 2005).” International Security 27. 2002).” p. Moore and Andrew Schrank.asp. no. David A. See Pete W.nps. no.S. ed. 105. See Albert O. “A Difficult Country: Pakistan and the Case for Developmental Realism. 1 (Winter 2005–06): 7–19. “Reviving Muslim Economies. National Power and the Structure of Foreign Trade (Berkeley. no. 10. 2006). 1980).-Middle East Trade Agreement. Islam and Mammon: The Economic Predicaments of Islamism (Princeton. 8.S. Hirschman.mil/si/oct02/southAsia. Manager of a Chinese state-owned textile factory.: Rowman and Littlefield. 3. p. 18.gov/scripts/tariff. 12. 2006). “Market Civilization and Its Clash With Terror. D. Edward Gresser. no. Taipei. N. 76. “Commerce and Conflict: U. 1985). 1950–1990 (New York: Cambridge University Press.

A5. 2004. “Rural U. A13. Clement M. Robert B.HTM. See Gresser.utexas.html. 158–161. Zoellick. 2005).” http://www. January 11.” Investor’s Business Daily. http://www. Department of Labor.ewg. Ethical Realism: A Vision for America’s Role in the World (New York: Pantheon Books. Seeks Place on IT Map: An Outsourcing Option.census. Environmental Working Group.org/farm.: Princeton University Press. Travels of a T-Shirt in the Global Economy.S. Pam Losefsky. 2005. 2004). U.S. 2006). Ibid. p.” New York Times. THE WASHINGTON QUARTERLY ■ SUMMER 2007 35 . 23.J. Department of Labor.Revitalizing Grand Strategy: America’s Untapped Market Power l 22. 30. 158. See Douglas A. 28.S. p. “Reviving Muslim Economies”.htm (hereinafter “May 2005 Employment and Wage Estimates”).. Ibid. “Farm Subsidy Database. “May 2005 National Industry-Specific Occupational Employment and Wage Estimates. Firms.S. “May 2005 Employment and Wage Estimates. U.” http://www.” 2006. edu/features/2006/homeshoring/index. 29. Census Bureau. 25.. “Coming Home: Business Students Find That Moving Outsourced Jobs to Rural America Is a Viable Alternative for U. pp. June 12. Rivoli. N. pp. U. Irwin.” http://www.gov/oes/current/naics3_313000. Free Trade Under Fire (Princeton. 24.bls. p. 113–123.gov/econ/census02/guide/EC02_31. “2002 Economic Census Geographic Area Series Manufacturing.. Anatol Lieven and John Hulsman. eds. 31. 32. Henry and Rodney Wilson. “When Trade Leads to Tolerance. 26.” 27. Doug Tsuruoka.S. The Politics of Islamic Finance (Edinburgh: Edinburgh University Press.

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