US foreign policy: a new direction? Terence O'Brien comments on the likely shape of US foreign policy under President Obama.

• Author: O'Brien, Terence

It is very rash, in these early times of a new administration, to predict with confidence, anything about the ultimate direction and substance of American foreign policy under President Obama. No leader in recent history has entered office with a greater weight of expectation on his shoulders. His campaign eloquence about the vital need for change in and by America has sharpened anticipation inside the United States but also beyond, where eight fairly abrasive years of the Bush presidency left a mark on America's leadership reputation in the world.

But no leader in recent history has entered office when the financial and economic prospects for America, and for the world, have appeared so bleak. The economic crisis completely enveloped the presidential election campaign. It is impossible to discount the conclusion, moreover, that responsibility for this gravest threat to global economic order rests principally with America itself, in particular with its weak regulatory oversight of its financial system and the ravenous speculation and risk taking that implicated as well European institutions and agencies, where similar negligence prevailed.

By their very nature and complexity, the impacts of this crisis will consume the new administration as it shapes policies. American foreign policy will be conditioned entirely by the crisis. What is true for the United States applies as well to the rest of the international community, New Zealand included. The financial and economic crisis will influence foreign policy for everyone.

America's strengths have traditionally resided in its ability to re-invent itself, to respond with energy and resourcefulness to new challenges, even those which have erupted with little or no warning. The US economy remains a vital and indispensable force if global recovery is to be achieved. But the current acute problems were a long time in the making, and they will not be resolved in quick order. America's economic and financial leadership, either directly or through institutions like the IMF, has been severely tarnished. Accountability, transparency, effective governance have all been extensively and tenaciously promulgated from Washington, as well as London, Paris and elsewhere to the world at large. There is a conspicuous irony that the causes of the present grave recession lie with the failure of the powerful to practise what they preach. The financial and economic crash amounts to a substantial geo-political setback for the United States and Europe. Neither possess the resources or credibility to play the role in world affairs that they might otherwise have done. (1)

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The rescue packages being devised now vary from one country to another. The world's most important economies (the G20) are seeking to co-ordinate responses, but there is no one silver bullet which suits all. Colossal sums of taxpayer money are being mobilised to stimulate economies, to shore up defaulting banks, credit and insurance agencies and to protect employment. There is no guarantee that differing remedies will work. Large quantities of toxic debt remain embedded in the financial system. The signs of economic nationalism are widespread. In such a climate the dangers from a reversion to trade protectionism have become very real.

The pathway that America chooses in these circumstances will be crucial. Democratic and Republican law-makers are deeply divided doctrinally over components of President Obama's rescue package. He has promised that under his foreign policy America will listen to other nations. The continuing message that Washington must hear, including from New Zealand, is the crucial need to avoid resort to trade protectionism. But it is a message, too, that must be repeated, clearly and insistently, in European capitals and elsewhere. The temptation for major powers to curb trade is never far below the surface, as witnessed in the 'Buy American' provisions of Obama's rescue package and recent EU protectionist moves, including to reinstate some of the egregious features of their prohibitive common agricultural policy.

It is very difficult to remain optimistic about the ability of major powers to summon the collective will to pursue yet further trade liberalisation through the so-called Doha Round of trade negotiations under the WTO. These stalled, of course, well before the full weight of the present crisis engulfed us. But if unchecked, economic nationalism could produce a genuine political crisis out of financial disorder, and threaten the world with depression. (2)

Broad outlines

The new US administration is only just commencing to sketch broad outlines for US foreign policy--first in a major speech by Vice President Biden delivered in Germany, and centred on security, broadly defined; (3) second by way of the first overseas visit by the new Secretary of State, Hillary Clinton, in February to East Asia; third, by Obama's announcement of the intention to withdraw all US military from Iraq by the end of 2011, and his promise of a new era of US engagement and leadership in the Middle East.

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The Biden speech affirmed that, notwithstanding the deep financial and economic crisis, the United States intends to continue to exercise leadership in the world, even as it promises a new tone for this leadership. This affirmation was a gentle retort to French assertions that we in fact no longer live in a world with a single great power, but one with a number of 'relative powers' in which co-operation and solidarity are paramount. Biden urged US-European solidarity in matters of security (he did not mention Asia) but the message between the lines of a wholly Atlantic-centred address was that the United States remains resolutely in charge.

Biden stressed that US force of arms has traditionally protected its freedoms, and this will not change. Nowhere amongst the tumult of American measures devised so far to confront the economic crisis is there clear indication of how or whether America will cut defence spending, which now exceeds effectively that of the rest of the...