Sullivan’s speech sounds US retreat from free trade over China

Author: James Curran, University of Sydney

The speech in Washington in late April by US President Joe Biden’s National Security Adviser Jake Sullivan is critical to the United States’ future, US–China relations and Australia. But the speech barely registered in Australia.

In his address, Sullivan gave renewed expression to the administration’s commitment to running a ‘foreign policy for the middle class’. It shows how much the spectre of a hollowed out US heartland — which helped Donald Trump win the presidency in 2016 — also shapes how this White House thinks about the relationship between trade, economics and national security.

Sullivan put on record what has been apparent since Biden’s election: in key trade and economic areas the United States is retreating into industry policy, heavy subsidies for manufacturing and high technology and trade restraint on its partners.

Cast adrift, then, is the rules-based order of the World Trade Organization (WTO), which remains vital to Australia because of the country’s lack of big power weight.

The United States is getting out of the business of being an accommodating economic partner and market.

The reaction from some in Washington is savage. Distinguished foreign affairs analyst Walter Russell Mead said it represented a yearning for a ‘return to the system of relatively closed and highly regulated national economies that characterised the immediate post-Second World War era’.

Ryan Hass, of the Brookings Institution, says it reduces the United States’ capacity to ‘serve as an agenda setter on the international economic stage’. Sullivan’s speech shows that the United States’ arguments rage not only within its polity — that is hardly new. But they argue against its own history.

Sullivan’s ‘new Washington consensus’ disowns former US president Bill Clinton’s trade policies, such as the North America Free Trade Agreement, the creation of the WTO and China’s admission to it. It torches Francis Fukuyama’s ‘end of history’ thesis.

Fukuyama argued that with the collapse of the Berlin Wall in 1989, liberal democracy and Western capitalism had triumphed. All that was necessary now was to spread that gospel to the poor benighted lands which did not have it.

Yet Sullivan was not talking about the triumph of the rules-based order but the havoc it is supposed to have wrought. As former US treasury secretary Larry Summers observes, this administration is ‘in a tradition somewhat different than the tradition that we followed after the Second World War, which was much more multilateral and global in its approach’.

It excludes the United States from any possibility of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This speech, and another in late April by Treasury Secretary Janet Yellen, attempt to knit together the various threads of the Biden administration’s China policy. They stress Washington is not out to ‘decouple’ from Beijing but to ‘derisk’. They both talked about not wanting conflict with China, about areas for cooperation. But neither seriously challenges the escalatory fever gripping Washington over China.

Sullivan also gave expression to a frequent US lament: bringing China into the international economic fold did not change its values. Sullivan’s speech acknowledges transparently the dissatisfaction and discontent of a middle America that ‘lost ground’. But whether a ‘foreign policy for the [US] middle class’ means engaging in a war with China over Taiwan is uncertain.

It is also unclear whether a future administration after 2024 will upset this vision of relative trade and economic isolation, or whether there is a new permanence of protectionism in the United States. Other questions arise, even if they were not explicitly addressed in Sullivan’s remarks.

One is whether US allies and partners will head in the same direction. Most — notably Japan, which rescued the CPTPP — remain committed to the kinds of trade agreements that Sullivan tossed onto his neoliberal bonfire. Most are pushing for more market access, not less.

Some US allies and partners appear to be in Sullivan’s field of vision, others not. The statement includes the European Union as an important partner, despite the European Union’s ire over the car industry protectionism of Biden’s Inflation Reduction Act. Canada is included as a partner of consequence but South Korea and Japan got only lip service.

And his speech has surely reinforced the Southeast Asian desire to avoid committing to one side or the other.

The United Kingdom and Australia, despite all the AUKUS noise, were not included. If Australia can be left out of these remarks, the US view of Australia’s economics needs and goals is uncertain.

Briefings to US policymakers would surely note the following Australian pluses: it exports lithium and nickel, provides funds for the US arms industry and is a market for US arms exports and it has some influence in the Pacific, Japan, South Korea and parts of Southeast Asia. On the negatives, and under US sufferance, Australia exports critical resources and agriculture to China, Washington’s enemy. But then, so does the United States itself.

These questions concerning trade and security arising from the ‘new Washington consensus’ must be surely under consideration in Tokyo, Seoul, Taipei and, of course, Beijing. There needs be evidence, and fast, that it is front of mind in Canberra, too.

James Curran is Professor of Modern History at the University of Sydney.

A version of this article was originally published here in the Australian Financial Review.

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