This report presents strategic choices America faces regarding the international economy over the term of the next U.S. administration, focusing on policy choices in the areas of maintaining and improving the rules-based international economic system; working with China and better integrating it into the existing system; supporting economic growth of allies and partners; and using sanctions to change unwanted behavior and counter adversaries.

U.S. International Economic Strategy in a Turbulent World

Howard J. Shatz

ResearchPublished Jun 21, 2016

The upcoming U.S. presidential election presents an opportunity to confirm, better define, or redefine America's role in the world. Economic power and policy will have an important place in any conception of the United States' role in the world. This report presents the strategic choices America faces regarding the international economy over the terms of the current and next U.S. administrations. The goal of U.S. international economic policy is to contribute to national economic growth and prosperity. Although the United States faces many choices regarding the global economy, this report focuses on policy choices in the areas of maintaining and improving the rules-based international economic system; working with China and better integrating it into the existing system; supporting the economic growth of allies, friends, and partners; and using economic tools to change unwanted behavior and counter adversaries.

Key Findings

The United States Remains a Leading Player in Global Economics

  • U.S. growth prospects are better than those of any other major developed country.
  • Nonetheless, the U.S. share of the global economy has been falling somewhat, largely because numerous developing countries are growing more rapidly.

The World Economy Faces Numerous Challenges

  • Growth in most major economies either has slowed or is slowing; a major multilateral trade round has fallen through; global debt is increasing, especially that of emerging markets; and developing countries are slowing as well, stemming in part from China's economic slowdown.
  • In addition, parallel institutions are emerging, with unknown effect.
  • Still, the rules-based international system that has evolved since the end of World War II is as beneficial now as it has ever been, and should be maintained and improved by key players.

The Rise of China Will Affect the United States

  • U.S.-China trade and investment have grown rapidly. U.S. companies serve the China market primarily through their foreign affiliates in China, rather than trade.
  • The United States will benefit most if China's rise can be accommodated within the current global system. Not only are the two economies are intertwined, but many U.S. allies have sizable trade and investment relations with China.
  • It is less clear how the United States should approach new China-led development institutions, specifically the Asian Infrastructure Investment Bank and the New Development Bank.

Recommendations

  • With the dual goals of liberalizing trade and maintaining the legitimacy of the World Trade Organization (WTO), the United States should aim to restart a new broad-based multilateral negotiating round; if that is impossible, then the goal should be agreements negotiated with smaller groups of countries that provide benefits to all WTO members.
  • U.S. policymakers should strive to complete and approve some version of a broad Pacific trade and investment agreement and a broad Atlantic trade and investment agreement.
  • China should continue to be integrated into the global rules-based system based on high standards of openness and adherence to commitments; two mechanisms include developing an on-ramp for joining the broad Pacific agreement and completing a bilateral investment treaty.
  • Aid can serve as a valuable tool for improving well-being and supporting growth. Expanding it should be matched with regular evaluations of its effects.
  • Sanctions can serve as a valuable tool for changing unwanted behavior. Their use should be continued and turned into multinational efforts when possible, but balanced against the damage they can cause populations in targeted countries and against damage to U.S. standing in the global economic system.

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Document Details

  • Copyright: RAND Corporation
  • Availability: Available
  • Year: 2016
  • Print Format: Paperback
  • Paperback Pages: 174
  • Paperback Price: $29.50
  • Paperback ISBN/EAN: 978-0-8330-9454-4
  • DOI: https://doi.org/10.7249/RR1521
  • Document Number: RR-1521-RC

Citation

RAND Style Manual
Shatz, Howard J., U.S. International Economic Strategy in a Turbulent World, RAND Corporation, RR-1521-RC, 2016. As of September 17, 2024: https://www.rand.org/pubs/research_reports/RR1521.html
Chicago Manual of Style
Shatz, Howard J., U.S. International Economic Strategy in a Turbulent World. Santa Monica, CA: RAND Corporation, 2016. https://www.rand.org/pubs/research_reports/RR1521.html. Also available in print form.
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