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Remarks: The New Geopolitical Paradigm—Global and Latin America Trends

November 14, 2017

Remarks by
Vice President of Americas Society/Council of the Americas
Eric Farnsworth

At the Latin America Steel Conference

November 4, 2017

***As Prepared***

Thank you very much, Oscar (Machado), for your warm welcome and for your leadership on these issues. It is a real pleasure to be with you and your Alacero colleagues. Together, you are helping to establish the new terms of debate and a mandate for action during these turbulent, uncertain times, and I am confident that your discussions here this week will prove both meaningful and productive.

Of course, it goes without saying that I’m delighted to have the opportunity to be with you here in Cancun, one of the crown jewels of Mexico and also of the Caribbean. And we’re also pleased to be able to be supportive of Mexico’s vibrant tourism industry by participating in this timely event.

It should probably also go without saying that I’m pleased to have the opportunity to be outside Washington. It’s a complicated, increasingly partisan city that has become even more divided politically in recent years. It’s always been a tough place; former President Harry Truman as all of you know once said that if you want a friend in Washington, you need to get yourself a good dog.

But the real reason I’m so pleased to be outside Washington these days, to be honest, is because it shows that I have the freedom to travel, which means that I may be one of only a handful of citizens not already under indictment...

Still, the basic point must be made if perhaps in a more sober manner: Washington is a divided city, and the United States is divided politically perhaps more deeply and more fundamentally than we have been at least since the Vietnam War and the Watergate Era. At some point, the ship of state will right itself, but for now we are in heavy political seas. And this is having a profound, lasting impact on the emerging new geopolitical paradigm.

Since the end of the Second World War, the United States has essentially served as the main pole holding up the tent of the global commons, willing to bear any burden, in John Kennedy’s famous phrase, in the promotion of political liberty and open markets abroad.

The United States was not always a perfect partner, and we made some mistakes as all of you well know, both here in Latin America and in other parts of the world. But we were willing to bear the costs of leadership in order to uphold certain principles, and to work for the success of others. The peace and prosperity of others was thought to benefit us as well, and we sought to assist other nations tangibly, because development led to more compatible societies and strengthened partnerships, which was, and is, in the U.S. interest.

That, at least, was the theory that Washington pursued, on a bipartisan basis, until the recent past. In the respective phrases of the times, we went from being present at the creation of a new world to the end of history, when the attractiveness of open market democracy was thought to have prevailed over competing systems.

But a funny thing happened. As we fell into a self-congratulatory mood after the Cold War, nobody thought to tell the Chinese that authoritarianism was dead or that their historical project was overtaken. And nobody thought to alert disaffected populations in the Mideast that the West had prevailed. And nobody thought to warn us in the developed world that the risks of unbridled financial manipulation could lead to a global economic crisis unmatched since the 1930’s. And not even the futurists or the science fiction writers could predict how fundamentally and how quickly our world has been changed—indeed turned upside down—by technology.

Yet these things and others have all occurred. And collectively, they are remaking the world that we thought we knew, even as nation after nation pursues policies in response that look inward rather than outward.

For years, the United States, in fact, has been heading in this direction. The current president may have amplified and accelerated the trends, and taken them to new levels unpredicted by most and, it must be said, undesired by many. But this president and this administration do not operate in a political or economic vacuum.

September 11, 2001, really did shake the United States from a security perspective. China’s entrance into the WTO really has impacted US and global manufacturing and production. The financial crisis in 2008 and 2009 really was a terrible reckoning that cost millions their jobs while feeding the impression, rightly or wrongly, that the economic system was rigged in favor of the powerful and the connected. And the explosion of new media, social media, and non-traditional, push-message media—some from outside the United States such as Russia—really have changed the rules of politics and led to further polarization and, in my view, increasing incivility across the board.

Of course, in such uncertain circumstances, people can begin to lose their optimism, and seek someone to blame for their circumstances; domestically, the migrant community for allegedly taking away jobs from U.S. citizens, and abroad, by blaming trade agreements such as NAFTA for the movement and creation of jobs outside the United States. It’s an overly simplistic narrative which nonetheless resonates with many voters.

Populism is a powerful current. As we’ve seen in many other nations, including across South America from the beginning of the century until the recent past, the populist current ebbs and flows, and at some point, presumably, the United States will again reject the populist impulse.

But in the bigger picture, a populist United States has implications not just for my country, but for the international order as well, and we are seeing that truth manifested daily.

In fact, it was almost exactly a year ago that I saw this for myself, in dramatic fashion. At the APEC meetings in Peru, China’s Xi Jinpeng arrived with a large business delegation and, astoundingly, essentially declared that China was the new protector of the trade and investment order in the Pacific region. He also invited Latin America to consider joining the Belt and Road Initiative, despite Belt and Road being an infrastructure development initiative for Eurasia. His rhetoric was ambitious and expansive.

Meanwhile, even as the APEC delegates met in Lima, President-elect Donald Trump let it be known that the United States would pull out of the Trans-Pacific Partnership as soon as he took the oath of office, a promise he subsequently kept.

You could literally feel the geostrategic ground shift under your feet. One after another, the assembled leaders, including the presidents of host Peru and Mexico, the prime minister of New Zealand, and a number of others, explicitly felt the need to affirm that the United States was each of their preferred partner, but that they would partner with those who actually wanted partnership. If that meant China, well, then, so be it. The old established order was no longer assumed.

In practice—think about this—this means that the balance of global governance and economic initiative may be in the process of shifting away from the United States, as the world’s largest economy and traditional beacon of democratic governance, toward the world’s largest authoritarian dictatorship, China, which openly pursues predatory economics as an economic development strategy, in the words of Secretary of State Rex Tillerson, in an effort to dominate productive capacity in strategic sectors, including steel.

This, in my view, is not necessarily an upgrade, in either political or economic terms. But the problem is that you cannot fight something with nothing, and if the United States and Western allies are not actively advocating for a different approach, others’ begin to look more and more attractive. This is the new reality we face.

The U.S. president, as you know, is in Asia right now, this week, and he will have a State Visit in China among other meetings. President Xi will receive him from a newly strengthened position, having just been elevated during the recent Party Congress to the same status of Chairman Mao and Deng Xiaoping in the Chinese political firmament. In real time, this week is critically important in understanding the next steps in the global economy, and global governance, and the outlines of the new geostrategic environment that faces us all. To quote noted geostrategist Bob Dylan, the times they are a-changing.

And these themes are playing out across Latin America, too. Here in Mexico, you see the very real, lasting harm that the abrogation of NAFTA would cause, and you see the lost opportunities from the lack of TPP. And you also see the government’s efforts to develop deeper links with China and also across the region, within the context of the Pacific Alliance and with the nations of MERCOSUR.

You also see, quite tangibly, the expanding economic engagement from China, with real implications for your industry. Regrettably, nations with weak institutions, particularly the rule of law, are sometimes unable to absorb and channel these new trade and investment patterns effectively. And even those with strong institutions can be hard-pressed to do so.

There are also broader implications for regional governance and the maintenance of norms and expectations including democracy. Take Venezuela, for example, once Latin America’s wealthiest nation, now a nation in full scale collapse, where the private sector has shriveled, where the economy is shrinking rapidly, and the authoritarian government has removed even the last vestiges of democracy. But the ability of the international community to affect positive change within Venezuela has been dramatically impacted by the fact that China has provided Venezuela with tens of billions of dollars of loans, and Russia is helping finance debt payments as they come due. We would not have seen this scenario in previous years. Meanwhile, the Venezuelan people continue to suffer, without adequate food, schooling, or basic medical care, as the international community casts about for ways to offer meaningful assistance.

This coming year will tell an even more interesting story across the region as a whole. Through the democratic process, Latin America has changed dramatically, and we are just now entering another round of regional elections that will set a course for the next several years. In Chile and Honduras this year, and Brazil, Colombia, Costa Rica, Paraguay, perhaps Venezuela, and of course, here in Mexico, scheduled presidential elections will be critically important, and others will hold parliamentary or municipal elections as well.

And, while most Latin American voters who go to the polls will vote based on their own aspirations and circumstances, the Trump effect, especially here in Mexico, may very well impact the outcome of some of these, at least on the margins. And that is something that I think most of official Washington continues to overlook, even as we debate whether to build a wall on the border with Mexico, or to end NAFTA, or to target foreign nationals for repatriation from the United States.

Maybe the Chinese are on to something when they wish that their opponents live in “interesting” times. And I would also add uncertain. Ladies and gentlemen, we are all living in both interesting and uncertain times.

But it is nonetheless my hope that if we reapply ourselves with purpose and resolve to the tasks at hand, we will be better positioned to meet head on and indeed shape the challenges that confront us, turning them around into the opportunities that will sustain us.

To do so, we need your help, goodwill, and cooperation, because in my view, the only path forward into a brighter future for the Americas is the strengthening of the open market, democratic principles that have made this region strong. But we can only do this in a manner that supports our broader geostrategic interests if we build bridges to bring us together rather than building walls to keep us apart. And those bridges must be made with steel, which will make them strong and enduring, and build our region as the strongest, most dynamic and prosperous region of the world.