American Foreign Policy: The Rest of the Story
Is American foreign policy too militarized? Former U.S. Secretary of Defense Bob Gates says yes. In Exercise of Power, Gates says that the inability of U.S. presidents to understand how to use non-military power largely explains why American foreign policy keeps failing. Gates quotes Russian General Valery Gerasimov who says the rules of war have changed. The role of nonmilitary power has grown and has often exceeded military power.
After Russian aggression in Ukraine, the US opted for economic coercion and exclusion against Russia. The U.S. promised sanctions and isolation would bring the Russian bear down to its knees. That did not happen.
Instead, a resurgent Russia ran economic rings around the US. Putin applied counter sanctions on food imports to jump-start Russian agriculture. That market signal inspired Russian farmers to boost output. Russian agricultural production soared, and Russian food imports fell 33%. In 2019 Russian wheat production was the highest ever recorded. Russia earned a record $24 billion in agricultural exports in 2019. That is over twice what Russia made from exporting arms.
Unlike the US, all three levels of Russia’s government ran a budget surplus in 2018 and 2019. Russia boosted its foreign reserves by 50% the past four years. Russia’s foreign reserves rose to the fourth largest in the world. Russia’s sovereign wealth fund rose to 7.3% of GDP.
Admiral Michael Mullen once said that the U.S. national debt was the greatest threat to US national security. In 2020 the U.S. national debt was an alarming 105% of GDP while Russia’s national debt was only 20% of GDP in 2020.
When the US tried economic coercion to isolate Russia, a resilient Russia simply pivoted from Europe to Asia. Russia’s overall trade with China has risen 53%. The Sino-Russian energy partnership is now robust. The past three years, Russian crude oil exports to China rose 6-fold and Russia’s oil exports to China via pipeline doubled. Since 2016, Russia has surpassed Saudi Arabia as the largest oil exporter to China. Russia’s huge Yamal LNG project began shipping gas China in 2018. The Power of Siberia natural gas pipeline started to export gas to China in Dec 2019.
Back in the 5th Century BC, Chinese General Sun Tzu wrote in the Art of War, “The supreme art of war is to subdue the enemy without firing a shot.” That advice still resonates in Beijing. In fact, China is winning a war against the US without firing a shot. For instance, in 2020 China overtook the U.S. as world’s leading destination for foreign direct investment. Foreign companies are optimistic about China's future domestic demand prospects. In contrast, foreign investment flows into America nearly halved in 2020.
Gates argues that China has a strong advantage over the US. He notes that China has a more flexible system that enables it to use state-run banks and state-run enterprises more effectively than the U.S. can. For example, Gates says that nothing the US is doing compares to the scale and impact of China’s Belt and Road Initiative (BRI). The World Economic Forum notes that China’s BRI could see up to $8 trillion invested across 68 countries in the next two decades.
The state-run BRI is a huge transcontinental public investment project. It includes a global network of infrastructure, railroads, highways, airports, bridges, ports, oil, and gas pipelines. President Xi calls it China’s top foreign policy priority.
If building infrastructure is a good way for the U.S. to promote influence overseas, why is the US not more competitive with China in building infrastructure? After all, the US has impressive investment banks and amazing entrepreneurs in Silicon Valley. Gates says the problem is Silicon Valley and Wall Street are in the private sector. And the US presidents struggle to mobilize the private sector to compete overseas against China when it comes building infrastructure.
Some say the US Government’s International Development Finance Corporation (or USIDFC) is a good start. This USIDFC finances private development projects with $60 Billion in capital to loan. But $60 Billion is a drop in the bucket compared China’s $8 trillion.
Bob Gates criticizes the U.S. for offering China what he calls “open field running” in its pursuit of BRI. Gates says the big bureaucracies offer few incentives for people at lower levels to challenge conventional wisdom. The process is nearly always lethal for the bold idea (and sometimes for the career of the originator). Those words resonate with me years later.
China has also been outcompeting the US when it comes to trade and investment with Taiwan. The share of Taiwan’s total trade involving the US has halved, falling from 23% to 12%, from 1998 to 2018, while China’s share doubled from 15% to 31%. And the total amount of Taiwanese investment in China has accumulated to $180 billion – 10 times the Taiwanese investment in the US during the same period. It took Covid-19 and the disruption of the global supply chain to prompt Taiwan to decouple a bit from China in 2020. But the US is still far behind.
Trump blamed China for his trade war that he said was designed to “bring back American jobs.” The problem is that there is almost nowhere to bring U.S. manufacturing jobs back from. That’s because a Ball State study shows that 85% of US manufacturing jobs were lost to technology rather than trade.
President Trump’s nationalistic America First trade philosophy was really America Alone. America Alone meant withdrawing from the Trans-Pacific Partnership (or TPP). China filled the gap by attracting 14 other Asian countries to join China in forming the Regional Comprehensive Economic Partnership (or RCEP) on 15 Nov 2020. RCEP includes 30% of the World’s GDP and 1/3 of the World’s Population. The RECEP unites China, Japan, and South Korea in a trade deal for the 1st time. It also includes 10 Southeast Asian countries plus Australia and New Zealand.
And by antagonizing China and Russia simultaneously, the U.S. is now the “odd man out” in this strategic triangle. If global conflict breaks out, the US now faces a far more dangerous two-front war.
In addition, Bob Gates omits economic evidence that would strengthen his thesis. As a former Full Professor of Economics at the U.S. Army War College, I will provide what Paul Harvey used to call “the rest of the story.”
For instance, the day before the Syrian Civil War broke out, U.S. intelligence and security analysts kept telling me not to worry about Syria. It was “stable and immune from Arab Spring.” What did Obama’s “experts” miss?
- If Syrian ballistic missiles were launched somewhere in the Middle East, shared early warning systems would alert affected nations while the missiles were airborne.
- But when Syria grossly mismanages its agricultural production, has no resiliency plan to mitigate climate change, and year after year makes itself increasingly vulnerable to a massive drought, acute food insecurity, mass migration and rising social unrest and political protests, these same U.S. intelligence analysts dismiss these leading socio-economic indications and warning of conflict as just a quaint little humanitarian setback.
John Kerrey’s brilliant diplomacy in Iran froze its nuclear program for 15 years. But the prophet is never honored in his own country. President Trump throws it all away and without a replacement. By reneging on the deal, Trump hurt Syrian reformers like Rouhani and helped the hard liners that kept saying you cannot trust the US.
Foreign businessmen hoped the nuclear deal would pave the way for a flood of new business deals, opening foreign investment and international trade in crucial sectors such as oil and gas, car production, aviation, tourism, technology, mining the stock market and banking. Iran’s potential emergence from economic isolation could have been the most significant opening of an economy since the fall of the Soviet Union and President Nixon’s rapprochement with China.
The business opportunities in Iran are huge. As one of the last markets to be opened to the world, its allure is unmistakable. Its nearly 80 million residents – 60% of whom are under 30 years old – already have an affinity for Western brands, especially American ones like Coca-Cola and Chevrolet. Some shops in affluent urban areas, particularly the nation’s capital, are full of Western-made products, from sunglasses and designer jeans to laptops.
In addition, the Iranian population is tech-savvy. Internet penetration is 53% across the population and 77% in Tehran. About 11 million Iranians have mobile Internet access. Many senior businesspeople were educated in the US and still prize American engineering. Iran’s market for technology products and services is roughly $4 billion a year.
If sanctions were lifted, the market would rise to $16 billion annually, which makes it comparable to that of Saudi Arabia. Overall consumer expenditures are projected to be about $176.4 billion a year, with annual disposable income pegged at about $287 billion. But Trump squandered all these amazing international business opportunities as well.
Instead, Trump demonized Iran with historic determinism. He argued that it was “inevitable” that Iran would use the lion share of its $100 billion in unfrozen assets to fund instability.
But the past does not have to be a precedent for the future. In fact, Iran has a choice. Option one is to use the money to finance more instability. But option two is to use the money to rebuild its infrastructure and revive its economy.
Iran’s support for instability is not inevitable. It can choose re-entry into the global economy. The United States is also not a helpless bystander. President Biden could work with the US private sector and shape Iran’s decision to benefit from being a responsible stakeholder. The United States could use Bob Gates non-military power to tilt the playing field in a positive direction and shape’s Iran’s decision to pursue option two.
In a broader sense, a new US president in 2020 needs to work closely with the US oil companies, US carmakers, etc. to boost investment and trade with Iran. When this happens, a web of economic interdependence occurs. In this case, Iran develops a stake in shared prosperity. Once Iran becomes a responsible stakeholder, it will think twice before it does anything blatant to destabilize the region and throw it all away.
Back in 2014 the Iraqi economy looked promising. The war was over. And investors were pouring money into Iraq’s economy. Corporate earnings were booming. Oil exports hit a post-2003 high. Iraq was one of the hottest commercial markets in the world. The Economist Intelligence Unit said Iran had the highest growth potential in the world. But economic appearances can be deceiving. This was all a false dawn.
What did US intelligence experts miss? US military doctrine says that after the combat arms phases of the war plan (phases 1 and 2), stabilization and reconstruction (phases 3 and 4) need to take place. But Hans Binnendijk and Stuart Johnson point out that there’s a widening gap between these successful combat arms phases and stabilization and reconstruction phases. Bad things happen in this gap, such as the rise of ISIS because there is no critical mass of shared prosperity between Shia and Sunni in Iraq.
After this same cycle of optimism in 2016, pessimism occurred again. Bob Gates is frustrated and eventually concludes that US prospects in Iraq are mission impossible.
I respectfully disagree. Jean Monnet used social inclusion and shared prosperity to turn longstanding French and German enemies into friends. Shia Iran and Sunni Qatar enjoy shared prosperity because they peacefully share the biggest natural gas field in the world.
Similarly, there have been amazing success stories in parts of Iraq as well:
- From 2006 to 2008, then Lt. General John Allen and Colonel Sean MacFarland created a strategic triangle of shared prosperity, good governance and security in the Sunni Awakening to create peace and stability in Al Anbar province, previously the most violent area in Iraq.
- General David Petraeus was the Accidental Statesman when he used his 101st Airborne Division to foster stability and shared prosperity in Mosul, Iraq in 2003.
- General Petraeus says the Surge in Iraq in 2007 was misunderstood as just more troops. Petraeus argues that the most important part of the surge was protecting the human terrain and fostering shared prosperity for those people Petraeus touched in Iraq.
What is missing in Iraq is the U.S. political will to scale up the success stories and sustain the progress across all of Iraq.
The final item is the Rise and Fall of the U.S. New Silk Road Initiative which began long before China’s Belt and Road. In the years ahead, historians may well ask: How was China able to turn the tables on America? During the first half of 2010, China was on the sidelines. In contrast, General Dave Petraeus, and his U.S. Interagency Task Force at the CENTCOM were front and center, creating an inclusive New Silk Road strategy with plans for infrastructure that would go through Afghanistan and turn enemies into friends and aid into trade. As the New Silk Road Task Force Commander, I remember talking about the New Silk Road at John Hopkins. After my presentations, Chinese diplomats would say to me, “Dr. Rosenberger, we really liked your New Silk Road idea. But you know, we had the Old Silk Road. I replied, “Yes, and your Old Silk Road was also amazing.”
The New Silk Road high point occurred on 20 July 2011 when US Secretary of State Hillary Clinton gave speech in Chennai, India promoting our New Silk Road. But without top cover from General Petraeus in CONUS, the critics of our New Silk Road started to circle our wagon. We have met the enemy and he is us. General Mattis ultimately zeroed out our funding at CENTCOM for the New Silk Road. About a decade later, I recall the words of Henry Kissinger, “Opportunities can’t be hoarded. Once past, they are usually irretrievable.”
Shortly thereafter China turned the tables on America by filling this gap with the Belt and Road. Why was China so successful in turning the tables on America? And why was the U.S. so reluctant to implement its version of the New Silk Road plan? The short answer is that China understands how to connect shared prosperity and security. In contrast, American foreign policy keeps shred prosperity and security in separate silos. America waives the shared prosperity white flag and tries to solve conflicts in the world either militarily or with economic coercion.
Once in a blue moon and almost by mistake, someone like a George Marshall or a Dave Petraeus will come along to connect shared prosperity and military dots at a high level. Unfortunately, the shared prosperity/security connection is not institutionalized. So, when Dave Petraeus leaves the scene, foreign policy problems once again become militarized, and America looks for hammers to pound nails. In short, too many American strategists do not understand the importance of connecting shared prosperity and security.