The United States has a new approach to international economics, which is central to its strategic rivalry with China. This approach was outlined by Jake Sullivan, President Joe Biden’s national security adviser, in a speech that seeks to use a new strategic industrial policy to revitalize the American middle-class and US democracy, combat climate change, and establish a technological lead over China. However, America’s allies worry that subsidies worth hundreds of billions of dollars to American industry and clean technology will come at the expense of producers and workers in Europe and Asia. They also fear that pressure to “de-risk” trade with China will severely disrupt international trade. Additionally, there is concern that US demands for reform of the World Trade Organization will end up crippling the guardian of free trade. Sullivan is keen to persuade America’s friends that this “new Washington consensus” can work for everyone. While recent G7 meetings have achieved a “really significant step forward” on issues ranging from de-risking to supply chains, there is still uneasiness about US policy among its allies. Different US allies are responding in different ways, with some EU members favouring creating European champions, while others are concerned that subsidies will undermine their own single market. To address these concerns, the Canadians are examining giving the G7 a formal role in proposing and crafting new rules for the global economy, while Britain is exploring areas where it might strike up innovative new international economic partnerships with the US.
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