US Isolationism: A Prospect for the Future?
Between the negotiations of the latest US-China and US-EU trade agreements, policies surrounding the repatriation of US jobs, and the country’s affairs in the middle-east, political unrest has the consequence of national uncertainty, leading to more and more hesitation from businesses in regards to legal risks and economic confidence.
The US is today undergoing one of the potentially most nation-changing shifts in its political and cultural history, with the ongoing presidential election, and all the other baskets the US has its hands in.
Below, Bill Waite, CEO of The Risk Advisory Group, a London-based leading, independent global risk management consultancy, attempts to amalgamate the extent of said potential, and gives his expert opinion on the prospective of an ironically ‘isolated’ United States of America.
In terms of legislative reform, what would you say are currently the biggest concerns pertaining to the possibility of greater political and cultural isolation of the US in years to come?
Clearly, the world as it stands is a place of great uncertainty. From the US Presidential election, to Brexit, to a resurgent China developing its outreach policy in Asia and turmoil in the Middle East, there are a number of unanswered questions with regards to the political and cultural situation in the US, and its place in the world more broadly.
Businesses rely on certainty, or at least as close as they can get to it, in order to make key decisions, and that is proving difficult to come by at the moment. In a legislative sense, the Trans-Pacific Partnership (TPP) between the US and China, for instance, isn’t being supported by either of the two main US Presidential candidates, making ratification seem increasingly unlikely.
Similarly, the Transatlantic Trade and Investment Partnership (TTIP) between the US and EU looks unlikely to reach any sort of agreement, owing to a lack of enthusiasm on the part of primarily France and Germany. They argue that the US is unwilling to give up any concessions, rendering the bi-lateral aspect of the deal somewhat questionable.
Ultimately, this uncertainty is creating an environment of enhanced risk, subsequently impacting on everyone doing business and their decision-making processes. As a result, we find that businesses are prioritising research into local political environments and stakeholders, in order to gain as much insight as they can into how these occurrences are affecting the individual countries and regions in which they operate.
Given the isolationist policies touted by Donald Trump, what do you think the US can expect if he is elected President? What would be the advantages?
Perhaps the most notable of Donald Trump’s touted policies from an isolationist perspective is his pledge to force other members of NATO to contribute more to the organisation financially, or otherwise risk the US failing to respond to acts of international aggression. It would seem as if Trump is questioning the very heart of NATO in making the statements that he has.
The most concerning thing is that as soon as the US steps back and says “we might not intervene,” it sends a strong and dangerous message to any non-allies in the region. This, coupled with the fact that Vladimir Putin has made a point of testing boundaries in the past, through his advances into Crimea and other countries’ airspaces, does add a sense of peril to the position that Trump adopted.
But in terms of potential advantages, there is certainly an argument that having a US President maintaining an open and frequent dialogue with Vladimir Putin, as Trump has also pledged to, could have a positive effect on international relations. Engagement, even on points that they do not agree on, would ultimately appear to be a more constructive option than complete separation.
On the other hand, what might Hillary Clinton’s policies set forth if she is to be elected? And in this case, what would be the benefits?
Hillary Clinton’s policies with regards to isolationism are probably slightly more nuanced. While she has reversed her position on free trade agreements, coming out in opposition to the ratification of TPP, having originally been a proponent of it, TTIP, and more historically NAFTA, her position towards broader international alliances is less hawkish.
Much of Clinton’s recent opposition to free trade appears to be down to political expediency, but perhaps owing to her time as Secretary of State, and an international profile that generally appears to be more positive than her domestic one, there doesn’t seem to be any evidence that she will adopt the same positions as Trump on issues such as NATO.
However, it must be said that if both Trump and Clinton continue to take a short-term view towards the negotiation and ratification of trade agreements, in terms of what will gain most favour in election time rather than the broader economy, it is likely that the US will ultimately suffer for it in the long-term.
Do you believe either presidential nominee has policies that would prove significantly challenging in A. passing and B. logistically being implemented? Please explain.
On Clinton’s side, perhaps the issue most worth mentioning is the Iranian nuclear deal. While there has been some backlash against the deal in US Congress, she appears to remain committed to it being passed. After several years of supporting the deal in her capacity as Secretary of State, and her successor John Kerry’s continued endorsement of it, she would probably require some relatively compelling evidence to reverse her position at this point.
Ultimately, this would appear to be a sensible position for the US to take. Reengagement with nations with which the US has experienced friction in the past, and the stimulation of trade with those nations, would appear to be a positive in that it creates a sense of mutual interest that can be referenced should relations turn sour for any reason.
To add to that, there are numerous economic benefits to entering the Iranian market, and indeed our client base has expressed significant interest in the country from an investment perspective. As a country of almost 80 million people, with a highly educated population and access to significant resources, both natural and financial, there are clear opportunities for Western businesses.
As for Trump, his well-publicised policy of building a wall along the US-Mexico border is one that bears some scrutiny. The assertion that Mexico will make a substantial capital investment in a wall that is to be built on US soil is a difficult one to comprehend if it is considered critically, and without answering how he is going to make it happen, Trump certainly faces a logical and logistical challenge.
Both candidates are likely to face challenges from likely Congressional obstructionism. The Republican Party is facing a difficult fight to retain control of the Senate in the face of Trump’s unpopularity in several key states, but it appears likely that the House of Representatives will remain in Republican hands. Hence, even if elected President, Clinton will face an uphill battle in terms of enacting her policy agenda. However, the picture could prove worse for Trump if elected, even with a Republican Congress, given the widespread hostility towards him within his own party.
In terms of employment, both parties are under pressure to repatriate employment to US citizens. How do you believe this could affect investment in the US? What else could be impacted?
The repatriation of US jobs is a policy that clearly garners a lot of favour amongst the US public, particularly in the so-called ‘Rust Belt’ that have perhaps felt the effects of globalisation hardest in terms of the outsourcing of jobs overseas.
Ultimately, it is a policy that is unlikely to be delivered within the lifespan of one Presidency. It would take too significant an investment domestically in terms of capital, infrastructure and training in order to be viable within that time span. But American corporates are acutely aware of stakeholder pressure, not only from government, but also from their consumers and the people who live in the communities in which they operate, and so there is likely to be a response at some point.
If we look through the economic cycle, rising costs and wages in the jurisdictions that US jobs were initially outsourced to, the demand for high-quality talent, and corporate social responsibility programmes will mean that jobs will most likely start to come back, but most probably in the longerterm.
Thinking about existing agreements like the North American Free Trade Agreement (NAFTA) that have accelerated the process of outsourcing, their fate appears at this point to be dependent on the success of each US Presidential candidate. Should Trump be elected, he has said that he would walk away from NAFTA, but this is unlikely in the case of Clinton. While her stance on TPP suggests that there will be something of a stop with regards to free trade agreements, at least in the nearterm, there is unlikely to be any withdrawal or walk-back.
With the TTIP coming to an alleged failing conclusion, and the UK opting for a Brexit, what does the future of the US’ relationship with Europe look like, and what are the current economic and legal challenges ahead?
Perhaps the most high-profile recent example on this front is the implementation of the EUUS privacy shield, which lays out certain regulations pertaining to data transfer between the two blocks.
However, while this has been successfully implemented for the moment, it would be a stretch to connect it with TTIP, as TTIP goes so much further in terms of its effect on the day-to-day political and economic environment in Europe. The privacy shield was a complete necessity, because so much business depends on the transfer of the data in question, but there
is so much trade and reciprocal FDI between the EU and US that conversely, the absence of TTIP simply represents ‘business as usual’.
If we are to consider the most recent example of EU-US relations being questioned, that of the $14.5 billion Apple fine that was recently announced by the EU, this is unlikely to have a significant effect either. While it will probably ensure that not many businesses are rushing to Ireland to incorporate, it is not likely to affect US FDI into Europe. Tax is a factor in such decision-making, but it is not the only factor.
How would you say is the US’ retreat from the international stage becoming more and more of a concern in terms of global economic powers?
Isolationism rarely has a positive effect on a country’s economy, and in terms of the free trade agreements that we have discussed that is most likely the case. Free trade generally represents a more positive course of action, economicallyspeaking. If a country retreats from international trade, and attempts to service its own market purely domestically, the more likely we are to see a weakened global economy.
What further challenges does the US face in terms of isolationism, especially on the back of its activity in the Middle East and its relationship with non-American/ Western cultures?
Neither US nor Western policy in the Middle East has appeared to have a positive effect over the last 15 years or so. If we consider interventions in Libya, Syria, Iraq and Egypt, there has never
been a particularly favourable outcome from an attempt to affect regime change, neither via the overwhelming force of the Bush administration, nor the more targeted attempts under Barack Obama.
There needs to be a significant amount of effort from both sides in order to engender any sense of stability in a region that is geographically and strategically at the centre of the world.
Ultimately, isolationism is not the way to go, but neither are the recent interventionist strategies and policies that we have witnessed in the region. A lack of thought around some dramatic foreign policy decision making has created a great deal of instability in a short amount of time. Extremism is a very slender branch of that, but one that has undoubtedly also created a large amount of political, economic and geopolitical instability in the recent past.
