The United States is typically a very self-absorbed nation. As the largest economy in the world, and separated by two oceans, US based news and the opinions it shapes have always been centered on domestic concerns projected out into the world. This has only been exacerbated by the a pathologically self-absorbed president.
Because of this problem, the simple fact that the world is fleeing away has escaped many Americans. What has been a growing practical reality as the US share of the world economy slips is becoming a necessity thanks to severe foreign policy mistakes, all of which cater to a domestic audience. “All politics is local” remains true, even though it clearly should not be.
The two biggest foreign policy areas, a trade war with China and sanctions against Iran, appear to be two different situations with the US at the center of both. They are not, and increasingly will become less and less about the US. This simple fact is going right past us, too – making our policies even more ridiculous and harmful to our own interests.
The announcement that the trade war between the US and China has been put on hold has been universal greeted with relief. Is it possible that the two nations will now get along? Is Trump securing a huge victory against a grossly unfair trading partner?
The short answer to both questions is an obvious “No.” China is clearly biding its time while it strengthens its hand. Key disputes, such as respect for intellectual property under Chinese law, have been put on hold. At this point, there are only vague promises. Wil there more? It’s unlikely.
China also has ambitions. They are also domestically driven. But they have a new opening to realize them, and they are exploiting it heavily.
The US simply no longer has a position of supremacy in the world economy. Now less than a quarter of world GDP, Europe is essentially the same (especially with the UK added) and China is growing rapidly to the same size. There is no reason to think that the US can throw its weight around without other effects. As we attempt to force policy on the rest of the world, the most reasonable course of action is becoming, more and more, to simply ignore the US as much as is possible.
The rejection of the Iran nuclear deal was an historic blunder for many reasons. As predicted, Iran is aligning its economy with the Euro world and about to write contracts for oil priced in Euros. This breaks the hegemony of the US Dollar, the greatest strength of the US. Europe is heavily pushing back on US demands that it follow suit with sanctions against Iran, firing up the “Blocking Statute” that provides a shield to European companies dealing with Iran.
In response, US National Security Adviser John Bolton has threatened that the US may impose sanctions on Europe. This is unlikely to survive even in this Congress, but the damage is already being done. Europe is being given no choice but to write off the US if it wants to have its own policies in their own interests – and, of course, they do.
But this is not the only way in which Iran is becoming a greater problem for the US. The Shanghai Cooperation Organization (SCO) is a group founded by China for the purposes of bolstering China’s trade and diplomatic standing with key neighbors. Membership includes China, Russia, the Central Asian Republics, and curiously both India and Pakistan. China has seen this as a way to encourage peace and trade through the region, but Russia has tried to turn it into a military mutual defense pact.
The next SCO summit in Qindao, China, will be on 5 June. It is expected to welcome Iran as the newest full-time member. Why Iran?
China has many things going for it, but oil is not one of them. Its economy relies heavily on oil imports, all of which have been priced in US Dollars. It is the primary reason that China has to maintain a large reserve of US Dollars, usually held as interest bearing US debt. If it can secure oil on its own terms, China’s dependency on the US naturally declines.
This is also true of South Korea and Japan, two nations whose largest trading partner is China. They hold a routine tri-nation summit to discuss issues like the economy. At the most recent summit in Tokyo, North Korean issues occupied most of the time. But the growing trade, especially in semi-finished high tech goods, is drawing these economies together, as is their need for oil.
If Iran starts writing contracts in Renminbi, China suddenly has unique access to the one resource their region needs. With the potential construction of a canal across Thailand to make oil deliveries to East Asia cheaper and easier, the integration of Iran and China will be complete. Note that the total share of world GDP of China, South Korea, and Japan is already about the same as the US even without high growth.
If Russia gets its way at the Qingdao summit, the admission of Iran will be about much more than oil. A mutual defense pact would turn US military intervention in Iran from extremely costly to plain suicidal.
The problem for the US an extremely simple one – the rest of the world is growing to the point where the US is not as important as it used to be. Between China’s ambition to not be thrown around by the US (or anyone) and Europe’s growing need to find its own way, the relevance of US policy is going to wane no matter what. Ignoring this reality is only making the situation worse.
China and the EU have been increasing cooperation and trade dramatically, and will without any doubt grow closer. Centering on Iran, and the possibility of oil outside the US Dollar world, the two have a strong common interest. It will move forward, and it already is.
The self-absorbed US? So far, most Americans aren’t even aware that this is happening.
Good blog. The damage appears to be irreversible.
Thanks. it is irreversible at this point, it’s only a matter of how fast our position will melt down.
It appears that this will be quick. We have this statement today:
(Note: This is not possible, given that the SWIFT network will remain connected.)
You are right, I have not heard any of this in the media. And it is so scary. What will China do as a world power, can we trust they will not be warlike? Don’t they have what you call ambitions too?
I think that they have a path to promote China through economic and diplomatic power. I expect them to stay with that. Their ability to project power outside their borders is very limited. Even with the sea trials of the (unnamed) second aircraft carrier they really can’t create too much havoc.
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