Global Policy Forum

By David Roche

Even as the United States displays its military might in Iraq, American power shows significant signs of cresting. As a result of what is widely perceived as U.S. unilateralism, international mistrust of America is deepening, key alliances are weakening and terrorism will intensify. The policy of the neoconservatives in the Bush administration is to project the U.S. model abroad, if necessary through regime change and preemptive military action. Syria is under pressure but North Korea may be next in the firing line.

Such action will increase the cost of extending American influence and undermine the strength of the U.S. economy. The Cold War peace dividend has already gone into reverse. The costs of war and of rebuilding affected countries will bloat U.S. defense spending and budget deficits. Private sector investment in the United States will be crowded out and the productivity growth rates that were achieved in the technology revolution of the 1990s will be damaged.

Global economic reform based on an open market model was the most successful U.S. export. But that model is now widely rejected abroad, called into question at home and no longer practiced by the Bush administration. Instead, the administration has applied policies that are protectionist, market meddling and involve the biggest public spending since the Vietnam War. Before President George W. Bush took office, global trade benefited dramatically from U.S.-led liberalization. Now, with deep rifts between the United States and Europe, Russia and China over Iraq, protectionism is likely to be used as a political weapon.

The Doha round of negotiations to liberalize world trade is on the rocks. For how long will China continue to have open access to its key export market in the United States if Beijing refuses to support U.S. efforts to disarm North Korea of weapons of mass destruction? The dollar will be a victim of U.S. economic weakness and international tensions. In the bull market of the 1990s, the United States was seen as an attractive place in which to invest. But the United States no longer offers the returns needed to sustain this investment, which is already equal to 7 percent of the savings of the rest of the world and must rise sharply as the U.S. budget and balance of payments deficits increase. The dollar will fall as the troubles of the U.S. economy deepen.

Rather than making the United States invulnerable, U.S. military superiority will cause fear, hatred and growing extremism in many parts of the world - and will invite further terrorist attacks. If military action were a solution to terrorism, Israel would have been at peace years ago.

David Roche, chief global strategist at Independent Strategy in Hong Kong and London.

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