The global era and the end of foreign policy

In the past foreign policy mainly consisted of adjusting relations between states – what they will do with or to each other. Now foreign policy mainly consists of adjusting the domestic policies of different states – of what they will do with or to their own people.

It is a simple argument, but if fully understood its ramifications are significant. It is commonplace to read that America is going through a period of retrenchment, with a focus on domestic policy. But the same could be said of other major powers, including China, India, Japan, and all of Europe. Yet today foreign policy need not recede

Domestic, of course, is often just the national face of an essentially global system. Moves to save global capitalism, for instance, change nominally domestic matters, like bank capital adequacy or fiscal policy. But take the point further: the most pressing concerns of global firms, beyond formal trade rules, are issues like government procurement, competition policy, product safety rules and intellectual property law.

Consider the case of development assistance. Large-scale transfers, in the form of foreign aid, are actually a historical anomaly. During the 200 years in which most of the world’s capital assets and infrastructure were constructed, private capital flows – and often also international capital flows – usually provided the funds. London was a traditional clearing house. After the Great Depression, private capital flows were inhibited, and public capital took on a greater role, including income transfers between countries. Institutions and habits of thought changed, while capital controls and Cold War rivalries reinforced reliance on foreign aid. But in the last 20 years, the traditional flows have returned on far larger scales.

According to a recent report from the McKinsey Global Institute, since 1990 global foreign investment assets have increased by nearly 1000 per cent, to $96,000bn. But our institutions and habits of thought have not adjusted. To do so, the agenda will once again need to seem “domestic”, in devising new ways to manage risk for investors and creditors while satisfying local political concerns.

Here modest, no-cost changes in lending rules at agencies like the US Overseas Private Investment Corporation, or perhaps the World Bank, might leverage movement of huge sums. There lies much of the future agenda for development – an agenda that will resonate to Asians, as well as Americans and Europeans concerned with poorer nations.

Think too about security issues. Protection of cyberspace in the US seems like a domestic issue, though officials know it is transnational. Chinese-origin cyber exploitation of – and theft from – US agencies and companies is a major iceberg of a problem, mostly beneath the surface of public knowledge. Yet action on this issue involves questions that seem domestic: monitoring networks, conducting criminal investigations or setting new standards for internet architecture and the home country’s internet service providers.

Likewise, countering terrorism is principally a discussion of local policing and justice systems, whether in Pakistan or neighbourhoods of London. US drug and gun control policies, which Americans regard as domestic, are at the centre of the most dangerous foreign policy issue in North America, as thousands are murdered in Mexico. Then there are the great issues of energy and ecology, or public health and the rising capabilities for manipulation of human and animal genetics. Again, a traditionally conceived foreign policy negotiation founders on the inability to reconcile domestic policies. The Copenhagen failure in 2009 was a sad example.

The diplomats on the front lines working these topics rarely are the officials who, back home, have the authority or expertise to act. Knowledge and responsibilities for such issues reside principally in private sector or public institutions thought of as domestic. Governments pile on more summits in the hope that heads of state can do it all, but to make real progress foreign ministries must often be sidelined.

Hard times in government budgets should not discourage those who are interested in the rest of the world. Instead the US should think harder about the domestic agendas so many leading countries have in common. This implies a model of distributed foreign policymaking, in which many ministries and non-governmental organisations will move into the foreground of diplomacy.

By necessity this is often already happening, as when the US Homeland Security department talks to the UK’s Home Office about database rules. But rather than fight the trend, foreign ministries should welcome it, train professionals with different skills, and concentrate on agenda setting, convening, and supplementing gaps in capabilities – all duties now left too often to the overwhelmed staffs of presidents.

Rather than being co-ordinated by a central authority, policy will mainly be concerted in loose, common frameworks, that sometimes defer to “sovereignty hawks.” These birds are at least as numerous in China and India as they are in the US. And traditional power politics will still be part of the picture. But our world has changed in deep ways. As many firms know, crises can be an occasion to change older ways of doing business. The domestic-foreign dichotomy is anachronistic. Urgent agendas of domestic renewal on every continent turn out to be a common agenda, for global renewal.

FT