Foreign Policy

Does U.S. Bloated Foreign Policy Provide Tangible Economic Benefits? One Empirical Test


Daniel Drezner at Foreign Policy questions vague assertions that projecting U.S. power everywhere at crippling expense pays great dividends and finds some interesting things:

In the latest Foreign AffairsStephen Brooks, John Ikenberry, and William Wohlforth argue strongly in favor of "deep engagement."  They proffer a number of reasons why the U.S. benefits from current grand strategy—but one of the more intriguing ones is that the U.S. receives direct economic benefits from its security arrangements… 

Brooks, Ikenberry et al. specifically talk about how the U.S. got Germany and South Korea to agree to economically beneficial policies by its security commitments. But Drezner says:

With respect to West Germany, it's certainly true that Washington was able to get Berlin to accommodate to U.S. preferences—but only for a few years.  The Bretton Woods system ended in 1971 because the Germans finally said "Nein!!" to U.S. inflation.  So the economic benefit wasn'tthat great. 

The South Korea case is more intriguing, because it's present-day and there's a real, live policymaker quote there.  If a U.S. administration official asserts that the security relationship mattered, then it mattered, right? 

Well…. no.  We need to compare KORUS with something equivalent to provide a frame of reference.  If security really mattered that much, then the Korea-United States free trade agreement should contain terms that are appreciably more favorable to the United States than those contained in, say, the Korea-European Union free trade agreement, which was negotiated at the same time.  This is a great test.  After all, the U.S. is the most important security partner for South Korea, whereas the only thing the European Union could offer to Seoul was its large market.  So if Brooks, Ikenberry and Wohlforth are correct, the U.S. should have bargained for much better terms than the E.U.  Right?

After going into the specifics of the trade deals in some detail, Drezner concludes:

the U.S. got better terms on the export sectors it cared about more, and the E.U. got better terms on the export sectors it cared about more.  Both agreements are comprehensive in scope and contain roughly similar terms across most other sectors.  Indeed, both the Congressional Research Service and U.S. Trade Representative's office acknowledge the basic similaritry between the deals, as well as the areas where the Europeans did better.  So, in other words, America's ongoing security relationship with South Korea did not lead to any asymmetric economic gains. 

U.S. throwing its military weight around the globe surely provides economic benefits to the people employed to run (and to be apologists for) that brand of expansive foreign policy, and to those who sell weapons and services to our military complex. But that is a different matter.