The State Department is hard at work integrating economics into U.S. foreign policy.
- By Heidi Crebo-RedikerHeidi Crebo-Rediker is adjunct senior fellow at the Council on Foreign Relations and former chief economist at the U.S. State Department. She co-manages the consultancy, International Capital Strategies.
In his excellent Foreign Policy essay, "The Currency of Power," Robert Zoellick gives voice to a critical mission for 21st-century American foreign policy. His call to integrate economics into our national security framework resonates on both sides of the political divide, and we applaud his argument.
He says it all, with one major oversight: We’re already doing it.
Reintegrating economics into American foreign policy is a top priority in the Obama administration’s National Security Strategy ("[a]t the center of our efforts is a commitment to renew our economy, which serves as the wellspring of American power," the document notes) and for the State Department in particular.
In fact, a cornerstone of Secretary of State Hillary Clinton’s tenure has been the full embrace and implementation of the very agenda Zoellick describes — one she has outlined in a series of major speeches on what she calls "Economic Statecraft." Secretary Clinton recognizes that "America’s economic strength and global leadership are a package deal" — that just as the drivers and tools of global power evolve to emphasize economics, so must America’s foreign policy.
As Secretary Clinton put it, "We have to position ourselves to lead in a world where security is shaped in boardrooms and on trading floors as well as on battlefields." To realize these goals, she launched and championed a wholesale reintegration and reprioritization of economics, investment, and markets in the State Department and its missions around the world.
This commitment has produced a number of initiatives, including my own office, the Office of the Chief Economist, which is staffed by individuals with deep macroeconomic, microeconomic, and financial experience who are tasked with making sure our diplomacy deals in what Zoellick calls "the currency of power." We operate in both the economic and foreign-policy realms, connecting the dots when economic issues influence our diplomacy and vice versa. We also provide a strategic view of long-term economic drivers of political change and frame recommendations to the secretary through that prism.
The State Department’s Economic Statecraft agenda has two overarching objectives. The first is to fuse strategic thinking about political and economic power while adding economic tools to our diplomatic kit. Trade and capital flows are continuing to rise, and emerging nations are composing an ever-greater share of the world economy. As economic links between countries expand, it is just as likely for foreign-policy disagreements to be expressed by restricting trade in critical minerals or shutting out foreign companies from government procurement as by military force. In this climate, we are updating America’s diplomatic arsenal and our very perception of U.S. interests.
In the process, we’re getting better at tapping market solutions to solve strategic problems, partnering with the private sector to achieve shared goals, and laying out rules of the road for the global economy. We’re recognizing that many of the issues we traditionally characterize as first-order security objectives — from the success of democratic transitions in the Middle East to territorial disputes in the South China Sea — hinge on important economic dimensions.
Our second objective is to use the State Department’s diplomatic "boots on the ground" around the world to support the U.S. economy. We recognize that our domestic economic strength will determine our ability to project power in the future, and we are convinced that U.S. foreign policy can and should be a force for economic renewal at home. From three free trade agreements to the cutting-edge Trans-Pacific Partnership, this administration has committed to a foreign policy that drives our economic recovery in the United States. Recognizing that there is no such thing as a purely domestic recovery, we’ve turned embassies and consulates into platforms for the president’s National Export Initiative and drivers of foreign direct investment in the United States. Our economic and commercial officers are fighting to give American companies a fair chance to compete in markets around the world.
In this work, we are focused on opportunities as well as threats. We cannot expect U.S. firms to compete on their own when governments steal intellectual property as a matter of national policy, state-owned and "national champion" competitors enjoy subsidized financing, and entire industries remain off-limits to imports and investment. The men and women who serve in our embassies understand that these systemic distortions aren’t just business problems but also political and economic problems.
I agree with Zoellick that we have a lot more work to do to reintegrate economics into our diplomacy. Internally, we are changing how we do business — our priorities, our tools, our interests, and even how we hire, train, and promote our own Foreign Service Officers — to ensure that our capacity for Economic Statecraft only grows in the years ahead.
I also agree with Zoellick that we have a lot to learn from history. When dictators fell during the Arab Spring, we turned for inspiration to the policies that had proved effective after the fall of the Berlin Wall, when we needed to encourage grassroots entrepreneurship in Central and Eastern Europe. In the Middle East, we’re launching enterprise funds, extending credit to small- and medium-sized businesses, and establishing programs such as the Overseas Private Investment Corporation’s franchising facility in Tunisia to support innovation and investment. We’re bringing U.S. businesses to the region — most recently in September, when the State Department led the largest U.S. business delegation ever to Egypt to discuss jobs, investment, and the reforms that both require. And we’re promoting enhanced engagement with multilateral development banks, something I am certain Zoellick supports.
Zoellick begins and ends his article by expressing concern about the United States getting its act together economically. I would respond: We realize the importance of understanding and harnessing global economic forces to support the U.S. economic recovery and furthering our national interests in the increasingly competitive global arena, and we recognize that our response has to play to our inherent strengths.
Zoellick offers a terrific lesson on the origins of America’s political economy, from the Boston Tea Party through the Cold War. But he could strengthen his message about the overlap between economics and diplomacy by paying equal attention to the exciting developments taking place at the State Department today. I thank Zoellick for so eloquently elevating the issue, but one must give credit where credit is due.