The Foreign Service Journal, February 2011

20 F O R E I G N S E R V I C E J O U R N A L / F E B R U A R Y 2 0 1 1 Federal Reserve should seriously consider. Conversely, State must convey U.S. thinking about the management of other countries’ economies to their authorities. The rise of the emerging nations was one of the most significant events of the last 20 years. In my work today as senior international policy adviser at Covington & Burl- ing, I routinely turn for advice and information to the U.S. embassy in Brasilia, New Delhi, Moscow or Beijing if I have a client issue involving one of the so- called BRIC countries. Much of the U.S. private sector does the same. American diplomats in these embassies, and embassies in other G-20 member-states, interact at close range with economic officials who shape perceptions and policies in countries that profoundly shape the global economy. The department rightly has increased staffing for the eco- nomic sections of these embassies and for the offices in State that backstop those missions. The State Department necessarily plays an essential role in the management of bilateral economic relation- ships with the emerging countries. In relationships like the Strategic & Economic Dialogue with China and com- parable dialogues with India, Brazil, Russia and Mexico, U.S. diplomats build personal relationships with the offi- cials who will make policy, leading to greater understand- ing of the goals each side pursues and the strategies that will make those goals achievable. Adopting new and more compatible economic growth policies is a political, society-wide issue; fundamentally, it is a learning process. U.S. diplomats, who have daily con- tact with foreign policymakers and citizens, can reinforce the reality that economic growth is essential and interna- tional competition increases productivity and advances living standards. In short, it is a win-win proposition, not a zero-sum game. China, for instance, can grow in a more sustainable way if it raises consumption and moves away from a policy of depressing the value of its currency. Relying to an unsus- tainable degree on exports as a source of economic growth is dangerous for Beijing and for the international system. The subsidization of Chinese exports through a variety of mechanisms is a crutch that takes resources away from more urgent national priorities. The PRC’s growth will become more balanced and more sustain- able once the country opens its capital market to foreign invest- ments, promotes investment in do- mestic infrastructure, and encour- ages somewhat higher levels of household consumption by provid- ing a basic social safety net, among other measures. Chinese purchases of U.S. Treasury bonds have been wel- come at a time when the U.S. government has been bor- rowing heavily. In the future, however, Chinese purchases of U.S. government paper should gradually give way to increased investments in productive business assets in the United States and Europe —which must welcome those productive investments. Establishing a strong bi- lateral framework of protection is an important task for the Strategic and Economic Dialogue. In our various economic dialogues with the European Union and Japan, State and Treasury should encourage each to place more emphasis on achieving growth, in- cluding through regulatory reform. The State Depart- ment and its diplomats have traditionally taken the lead in our economic cooperation with these strong U.S. allies; we must continue to do so in the future. It will be a political challenge, of course, for the U.S. and major economic partners to acknowledge that their national economic policies can and must be formulated in full consideration of the interests and policies of others. Already, American families have been reducing their bor- rowing and the share of their income devoted to con- sumption. The problem is that the U.S. government has not done the same. Energy Security The State Department has played a crucial role in pro- moting energy security for the last 40 years, including through creating and strengthening the International En- ergy Agency. State officials understand that “energy in- dependence” is a myth and that security is a collective good that can only be attained through concerted action with other countries. Today, the threat of global climate change provides a new rationale to undertake concerted policies to move to F O C U S Resolving the perceived tension between promoting growth and combating climate change will be a key challenge for economic-coned FSOs.