Washington Embraces Neo-Mercantilism: A New Era

In a recent address at the esteemed Brookings Institution, US National Security Advisor Jake Sullivan announced a significant shift in US trade policy. Sullivan emphasized that national security and industrial policy would now be the guiding principles for US trade, marking a departure from the market-oriented Washington Consensus of the past.

However, his presentation was laced with softer language and catchy phrases, aiming to present the new approach in a more palatable manner.

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One key aspect highlighted by Sullivan was the move away from the notion of "decoupling" and the adoption of "de-risking" instead. While decoupling involves severing ties with certain countries or industries, de-risking focuses on reducing potential risks associated with trade partnerships.

Sullivan emphasized that the goal was not to engage in a technology blockade against China but rather to create a level playing field. This approach seeks to strike a balance between protecting US security interests and promoting fair competition.

Neo-mercantilism is an economic ideology that emphasizes the pursuit of a nation's self-interest through protectionist measures and strategic economic policies. It shares similarities with historical mercantilism but incorporates contemporary economic principles. Neo-mercantilism has gained traction in some countries as they seek to assert their economic dominance in an increasingly competitive global market.

Supporters of Sullivan's stance, such as Todd Tucker of the Roosevelt Institute, applauded the embrace of industrial policy and the departure from what they saw as stagnant neoliberalism. However, Oren Cass of American Progress argued that decoupling remained essential and urged Sullivan to take the ascendancy of national security and industrial policy even further.

While Sullivan and his supporters champion their approach, they often overlook some fundamental facts. The post-war era of liberalization, combined with advancements in transportation and communications, has led to improved living standards for billions of people worldwide.

The United States alone enjoys annual gains exceeding US$2 trillion, equivalent to approximately 10 percent of its GDP. Surprisingly, Sullivan's vision of "modern trade agreements" fails to align with the Indo-Pacific Economic Framework, an agreement that lacks economic incentives and enforcement mechanisms to achieve the goals he commends.

Furthermore, the decision-making process for determining threats to US national security remains shielded from public and judicial scrutiny. Economic costs are often disregarded, and Sullivan only lightly acknowledged the World Trade Organization, failing to call for US leadership in building a rules-based trading system that respects market principles.

The advent of neo-mercantilism in Washington heralds a new era in US trade policy. The emphasis on national security and industrial policy marks a shift away from the previous market-oriented approach.