US National Security Advisor, Jake Sullivan, recently delivered a speech outlining US international economic policy strategy. The speech highlighted that national security determines economic strategy, making it the message. The most repeated words in the speech were industry, infrastructure, investment, technology, American workers, and supply chain. However, public debt and budget deficits were noticeably missing from the speech.
The new economic policy outlined by Sullivan is focused on national security, resilience, and inequality, actively using tariffs, subsidies, and sanctions, and is also focused on investment and saving. It is a middle-class foreign policy, putting the United States first and everything else, including allies, second. This is ironic, as this new strategy increasingly resembles the economic policies China has pursued for decades.
The speech marks the first clear deployment of America’s new national security doctrine, with the aim of slowing down China’s technological progress in the semiconductor field. This interventionist policy, which prioritizes national security and climate goals, not growth and financial stability, determines economic policy.
Europe needs a fiscal framework aimed at maximizing support for new economic policies, not fiscal rules aimed at reducing debt. Strategic autonomy and decarbonization are common European goals, and their implementation is partly articulated through European public goods that can achieve the necessary scale and avoid widening economic disparities between countries.
Without European public goods, fiscal rules would need to include exceptions to large national investment budgets, which would reduce European oversight, increase the potential for inefficient spending, and widen economic disparities between countries. The European fiscal framework will determine if Europe wants to be a star or a sideline in this new geopolitical contest.
The United States and China have decided to prioritize investment, making them world leaders, and Europe will have to decide if it wants to follow suit. The European fiscal framework needs to focus on the quality of fiscal policy and the state of the business cycle, rather than arbitrary and inefficient quantitative criteria that are doomed to fail.
Ultimately, the new economic policies being implemented globally will have a significant impact on the future of geopolitical relations.