US Unilateralism and International Economic Security
The United States has taken many unilateral actions on the international scene in the last few decades due to its economic, political, security, and military position, leading to a trend in its foreign and economic policies. This unilateralist approach to foreign and economic policies has had its peaks and troughs post-World War II throughout most US administrations, but seems to be on the upswing under Donald Trump.
Ever since Trump took office at the White House in 2017, he revived the nationalist slogan of Warren G Harding (the 29th US president from 1921 until his death in 1923) – America First – and adopted unilateral anti-institutional policies, leaving multilateral and regional treaties such as the Paris Climate Agreement, Unesco, the New York Declaration for Refugees and Migrants, the United Nations Human Rights Council, and the Joint Comprehensive Plan of Action (JCPOA). Trump has also treated bilateral treaties in the same manner as multilateral treaties; for instance, the unilateral withdrawal of the United States from the Intermediate-Range Nuclear Forces Treaty (INF) with Russia on 1 February 2019 is one of these.
Trump’s unilateralism does not only apply to his anti-institutional policies. He has attempted to apply it to different issues. One such example is his adventurous action in naming Jerusalem the capital of the Zionist regime, also announcing the Golan Heights as part of this regime and totally disregarding the sovereignty of Palestine and Syria and their right to determine the fate of the people of the occupied territories which is a principle of international law. It must be noted that prior to this action by the US, no other countries had officially recognized this due to international resolutions, such as UN Resolution 242. From an international viewpoint, these are considered occupied lands.
Another example of US unilateralism can be observed in the international economy. This has also accelerated in the Trump administration and even spread to the traditional allies of this country. Although unilateralism is a concept in politics and international relations and has no place in the economy, it can be extended to this area due to the strong role of politics and security in the economy. This note seeks to answer the question of what will be the impact of US unilateralism on the security of international economy. It seems that by resorting to tools available in international trade, international investment, and international political economy, the US has taken steps towards unilateralism with implications for the security of the international economy.
US Unilateralism in International Trade
Trade is competitive by nature. All countries have the right to exercise sovereignty and obtain greater benefits in this sector. But anti-competitive behaviors such as monopolies, cartels, protectionism, dumping, and creating tariff and non-tariff barriers must take place within the accepted framework of free international trade.
An example of US unilateralism under Donald Trump can be seen in international trade. In recent years, this country has been working to improve US trade indices with its anti-competitive tools, particularly by creating tariff barriers for its trading partners. The volume of tariff barriers is so high that many economists have called it a tariff war. In line with this policy over the past year, the US has imposed a 25 percent tariff on imported goods from China worth USD 250MM. Trump has claimed to impose a further 10 percent tariff on Chinese imports worth USD 300BN in September 2019. This would cover all goods imported from China.
This situation persists in one form or another between the United States and the European Union (EU) in the steel and aluminum trade, the automotive industry, aviation, and foodstuffs. For instance, in 2018, Trump threatened the EU with a 25 percent tariff on the import of its cars. This will spike prices on imported cars from Europe, particularly from Germany, and has been a focus of talks between top political and economic officials of both countries.
The US has also altered or pulled out of deals based on international trade principles of which it was a founder and member country. This move has inflicted loss on other countries, because they had invested in infrastructures based on these deals. The North American Free Trade Agreement (NAFTA) can be pointed to here. This is an agreement between the United States, Canada, and Mexico designed to remove tariff barriers between the three countries. It was modified by applying certain tariff and non-tariff restrictions and renamed to the new United States-Mexico-Canada Agreement (USMCA). Another such example is the Trans-Pacific Partnership (TPP) signed between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam to reduce tariffs.
US Unilateralism in International Investments
Investment lays the groundwork for the production of goods and services, and trade expansion. Trade and production, in turn, are the economic driving force in every country. Hence, countries compete on the basis of their relative advantages to attract investment. International investment is overall attracted to countries with low investment risks. The most significant of these advantages are 1) comprehensive, documented information on economic capacities, 2) relative economic transparency, 3) regulations facilitating investment such as trade, work, insurance, tax and other laws, together with less red tape and complicated administrative procedures at high cost, 4) currency transfer facilities, 5) developed financial markets, 6) predictability of the host country's monetary, fiscal, and currency policies, 7) safety and stability, 8) suitable infrastructures and logistics, 9) skilled, low-cost manpower.
With a share of over USD 21TN Gross Domestic Product (GDP) of a total USD 88TN global GDP, the US is the world’s largest economy. But China is closely following on its heels with its expanding economy and a GDP of USD 14TR. It is forecast to take over the US in 2030. The US also absorbs the most foreign investments at an estimated rate of USD 226BN, showing however, a drop as compared to previous years. Its new competitors are China, the UK, Hong Kong, Singapore, Spain, Holland, Australia, Brazil, and India. The US may lose its top standing if this trend continues.
This volume of investment attraction gives its leaders the opportunity to adopt policies such as the depreciation of the dollar against other currencies, the issuance of bonds, and interest rate cuts to further influence the international economy and provide the necessary platform for attracting more investment. Such economic policies over the past few decades, which are the outcome of its leaders totalitarian and unilateralist approach, have prevented other countries from equal opportunities in attracting investment, leading to economic crises. Trump seems to be moving in the same direction by highlighting the same policies. To cite an example, in August 2019 he criticized that the Chair of the Federal Reserve, Jerome Powell, impeded cuts in interest rates and dollar depreciation. But it seems that Trump himself is planning to adopt the same policies for the US. If he succeeds, it will facilitate investment attraction. This is taking advantage of a strong dollar on the global scene rather than a natural competitiveness among countries. It is also taking advantage of inequalities, resulting in losses for other countries.
UN Unilateralism in Political Economy
Another prime example of US unilateralism in political economy is the country’s attempts at advancing its economic goals under the guise of politics and security. The US administration tends to accuse its rival or non-aligned countries of political and security threats or human rights abuses, and sanctions them within the framework of legal and political systems (national and international) to weaken their economies and force them to accept its conditions, hence advancing its economic goals.
Although the US has used sanctions as a tool to advance its foreign policy and economy in recent decades, it use has been intensified under Donald Trump primarily in line with its political economy. Many analysts believe that in imposing tough sanctions on Iran and Venezuela, economic goals are also pursued in addition to political goals (regime change or behavior change). Energy prices have spiked over the past decade so that extracting shale oil in the US has become feasible. Congress lifted the ban on US oil exports in December 2015. After Trump’s election and the Republicans coming to power, an increase in US shale oil and gas exports was placed on the agenda which, in turn, can boost Donald Trump's job creation policy. This has led to the US seeking new markets.
Eliminating Iran and Venezuela from the oil market has increased US chances to replace them. For instance, US oil exports increased from less than 100 bpd at the end of 2012 to nearly 2MM and 500 thousand bpd by the end of 2018. As a former market for Iranian oil with imports of over 500 thousand bpd, South Korea became the largest market for US oil. Some analysts believe that given the US power to resolve the Qatar crisis, it is inclined to let Saudi Arabia and the UAE continue sanctioning Qatar to realize its own economic objectives, because difficulties in transporting LNG gas produced by Qatar to Japan and East Asia will provide the grounds for replacing it with US gas on these markets.
This policy is not solely applied to energy and involves other sectors such as technology and sanctions imposed on China’s Huawei. This is an innovative, multinational technology company which sells telecommunications equipment and consumer electronics. It has been providing advanced services to various countries in recent years and contesting the US technology and telecommunications market by disrupting its monopoly. In the opinion of many experts, the US administration sanctioned this corporation under the pretext of bypassing US sanctions and working with Iran while it intended to curtail its development and the development of China in innovative technologies.
Consequences of US Unilateralism in International Economics
US unilateralism in various sectors, especially in economics, has devastating regional and international effects and can impact the security of the international economy. The most important of these are:
- Transforming Unilateralism Into An International Norm: The history of international relations has shown that any time countries have leaned towards multilateralism, peace and security have become bolder in international politics; and anytime they have moved towards unilateralism, especially the big powers, instability has increased in international politics. It seems unilateral actions by the US in various sectors, especially in international economy, will turn this into an international norm. The long-term consequences of this will be instability in international politics.
- Insecurity resulting from underdevelopment: According to most international security experts, underdevelopment will cause permanent crises in one area and extend to other parts of the world due to their fluid nature. For example, US sanctions against Venezuela have triggered an economic crisis and underdevelopment in this country. In turn this has led to a security crisis in Latin America which may spread to North America in the coming years. One such crisis resulting from underdevelopment is that of refugees. Its damages are directed towards developed countries, especially the United States.
- Outbreak of War: Economic unilateralism using sanctions and tariff wars will fuel the crisis between the US and the targeted country; this will increase the possibility of war. For example, sanctions imposed on Iran and the tariff war with China has triggered crises in the Persian Gulf and the China Sea. A small event can trigger a limited or widespread war.
- Disrupting the International Trade Process: By using tariff and non-tariffs measures, the US is attempting to reduce imports and increase exports to improve its trade balance. But this will create challenges and economic crises in other countries, disrupting international trade. In the long term, widespread economic crises will emerge internationally due to the domino effect in economy.
Conclusions and Recommendations
US unilateralism has intensified, especially in the Trump administration. It has appeared in various sectors, the most important of which is international economy in terms of international trade, international investment, and political economy. Sanctions, interest cuts in the US, playing with the value of the dollar, and tariff and non-tariff barriers are the usual tools used in this unilateralism. This entails regional and international consequences and increases instability in particular on the scene of international politics and trade. A number of recommendations can be made to counter US unilateralism in international economics:
- A driving force for the United States in adopting unilateral economic policies in the international arena is the superiority and popularity of the dollar in international trade. It seems that using alternative currencies to the dollar in international trade can prevent US unilateralism to a certain extent in the medium and long terms.
- A significant economic and foreign policy tool in the US is imposing sanctions against non-aligned, rival countries. By adopting an active diplomacy, especially through regional and international agencies, a US consensus can be prevented in these agencies to impose international sanctions, because US unilateral sanctions, although highly effective in light of its economic strength, are less effective than international sanctions.
- Iran should welcome mediation by other countries to show its interest in peace and security and prevent a coalition against itself. It should also be able to bypass the threat of sanctions by buying time to amortize it.
- It seems the current sanctions conditions against Iran are different from those prior to the JCPOA in that the US is applying maximum pressure to bring Iran’s oil exports to zero from the source and strictly control financial mechanisms which allow it to transfer money. Given this, it seems that while working to circumvent sanctions, there is a need to focus on other approaches to strengthen national resilience. These include accelerating the reduction of budget dependence on oil exports, tax increases, decreasing energy subsidies, genuine privatization, facilitating tourism especially from neighboring countries, and stopping the import of unnecessary goods even with free-floating exchange rates for the dollar (to prevent foreign currency from leaving the country and focus on providing essential commodities required by the people.)