The Debate | Opinion

Can the US Forge a New ‘Washington Consensus’?

Increasingly alarmed by China’s rise, Washington is trying to backtrack on decades of economic principles to rebrand China as an enemy.

Can the US Forge a New ‘Washington Consensus’?
Credit: Depositphotos

In the late 1980s, the United States, supported by its dominant position in the International Monetary Fund (IMF) and the World Bank, proposed and widely advocated for the so-called Washington Consensus, which, among other ideas, called on governments to implement a free-market economy that emphasizes less government intervention. It has also been argued in academia that the real purpose of the Washington Consensus is to take full advantage of the United States’ hegemonic position in the world political and economic system and to further promote the political and economic influence of the U.S. through the channels of capital and markets in Eastern Europe, Latin America, and even around the world. The U.S., using its superior position in capital flows, managed the operation of the whole world economy, and thus maintained its dominant position in the global political and economic system.

Of course, China’s huge population, labor force, and consumer market became the focus of U.S. capital’s attention after the reform and opening up. However, as China’s economy has grown, especially since its accession to the World Trade Organization (WTO), China’s role and position in the global economic system have been promoted, and the U.S. perception of China’s overall power has changed profoundly ever since.

It’s very clear that Washington believes China has gradually shifted from being a partner and collaborator to posing potential and even substantial threat and challenge to broad U.S. interests worldwide. This is well illustrated by the gradual evolution of China-U.S. relations from the periodic ups and downs of the past to the substantive and fundamental changes of recent years.

It is not exclusively the growth of China’s power and its corresponding ambition that is driving profound changes in China-U.S. relations. More importantly, there has been a profound shift in the perception of a rising China at the political and psychological levels of U.S. elites of both parties in Washington.

The rapid growth of China’s comprehensive national power after its accession to the WTO has not brought about any significant change in its governing philosophy and development path model – unlike what the U.S. and the West might have expected. Instead, China’s increasing prosperity greatly enhanced its strategic confidence in dealing with various regional and global issues.

Thus, as China continues to play an increasingly important role in the existing international political and economic system advocated by the United States – and even begins to create a Chinese-led system of regional and international institutions – the American attitude toward China’s integration into the international community is gradually changing from one of acceptance and welcome to one of caution, rejection, and resistance.

But, despite all the difficulties at the current moment and in the near future, economic globalization and interdependence are still the consensus of most countries. Moreover, traditional U.S. allies are largely important trading partners of China, and a vast number of developing countries have increasingly close political and economic ties with China. Given that, it is unrealistic to implement a worldwide political, economic, and ideological rejection of China in the short to medium term, as this would also do more harm than good to U.S. interests.

Thus, without being able to immediately exclude China completely from the international political and economic system, Washington seems to have decided to pursue a strategy that we can tentatively describe using the Chinese idiom of “步步为营”: for every step forward in its strategic competition with China, Washington sets up a fortress to secure its position.

These metaphorical fortresses can be interpreted in two ways. First, at the level of industrial technology, these strongholds include the semiconductor supply chain, new/green energy, artificial intelligence, the digital economy, and so on. In fact, especially since the Trump administration, Washington has not only formulated many strategic plans to revive the United States’ high-tech industries, but also strengthened its cooperation with allies, calling for the return of some industries to U.S. soil while building a “resilient supply chain,” for example, through the implementation of “friend-shoring” to secure its dominant position in these industries.

Second, at the geographic level, especially in China’s neighborhood, building these fortresses includes activating or reconstituting a number of U.S.-led minilateral mechanisms, such as the Quadripartite Security Dialogue (Quad), the Indo-Pacific Strategy (including the Indo-Pacific Economic Framework, IPEF), the Australia-U.K.-U.S. alliance (AUKUS), trilateral cooperation between the U.S., Japan, and South Korea, promotion of Taiwan-U.S. relations, the continued internationalization of the South China Sea issue, including the establishment of new military bases in related countries, and so on. Moreover, the Americans seem to believe that building and consolidating these bastions will help maximize U.S. “strategic deterrence” or “strategic dissuasion” of China in a scenario where the United States is unable to fully sever its bilateral relationship with China.

The problem, however, is that not all countries are as eager as the United States to engage in strategic competition with China. Most countries, especially traditional U.S. allies in Europe such as Germany and France, intend to balance the political and economic risks of China-U.S. strategic competition in their dealings with China, in order to directly or indirectly safeguard their own economies and their geopolitical interests in the region.

In any case, in the face of China’s continued growth in comprehensive power and strategic confidence, Washington urgently needs to change its view of China as merely the world’s factory, a huge consumer market, and a self-proclaimed peacefully rising power. The United States wants to increase global buy-in of its own view of China as a major threat to the West and the world at large. Therefore, there is a need to seek a new type of “Washington Consensus,” which the U.S. can use to reengage allies and partners to cooperate in its strategic competition with China on a wide range of political and economic issues.

Under the old Washington Consensus, neoliberalism’s strong stance against government intervention, along with its insistence on trade and financial liberalization, provided the United States with indispensable facilities for accessing global markets and thus maintaining its full hegemony. However, especially under the impact of several large-scale financial crises, people began to reflect on the stability of the system and the effectiveness of regulation in the late 1990s. A new wave of policymakers put forward the so-called “post-Washington Consensus,” which placed more emphasis on institutional factors.

Of course, the “New Washington Consensus” discussed here does not refer purely to the mode of operation of the regional and world economy but is more of an ideological, political, and public opinion offensive against China. In other words, the economic rationale is backfilled to meet the overall goal of “countering China.”

Thus, at the level of international relations, U.S. policymakers are determined to put Washington back on the map as the “leader of the free world.” They are seeking a new consensus between the United States and its allies and partners that China is no longer simply the engine of the world economy, but is a strategic competitor that poses a continuing and profound threat to both the existing U.S.-dominated international political and economic order and the prevailing universal values. For Washington to effectively deal with such a competitor, it must unite all the forces it can, such as calling on “like-minded” countries to assist each other to jointly advance the overall strategic competition with China, especially using siege tactics.

Predictably, China will not back down in such a strategic confrontation but will seek to respond selectively and effectively, including by strengthening its relations with neighboring countries. The recent G-7 summit in Hiroshima, Japan, and the simultaneous China-Central Asia Summit in Xi’an, China, are a noteworthy contrast in that regard.

Given that both sides have sufficient strategic willpower and patience, can the United States ever get wide acceptance of a “New Washington Consensus”? What would be enough to resolve the conflicts and grievances between the U.S. and China?