The US can lead on trade despite storms of criticism over Gaza

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“No eternal allies and no perpetual enemies, just eternal and perpetual interests” is a foreign policy maxim that’s been worn to cliché from repeated use. But its lesson endures even in a time of heightened strategic rivalry where the US in particular is attempting to build a geopolitical camp.

It’s now widely acknowledged that many low- and middle-income countries are transactional rather than ideological, recognising neither allies nor enemies but only business partners.

This is a tendency for which the US might now be grateful. It finds itself the target of fierce international criticism, particularly among developing economies, for aligning itself with Israel during the bombing of Gaza. Even India, diplomatically close to Israel and which at one point tried to ban pro-Palestine demonstrations, supported December’s UN resolution calling for an immediate humanitarian ceasefire.

There’s a belief that America’s credibility in something called the “liberal international order” will also be damaged and that with it, the global trading system will be fragmented and politicised.

But the US’s previous history of facing international opprobrium, together with Russia’s recent experience after the Ukraine invasion, suggests that, even in these supposedly geopoliticised days, countries are quite capable of compartmentalising their economic interests and their foreign policy stances.

Ironically, Russia’s Ukraine invasion should give the US some comfort. The action was condemned by a solid majority of states at the UN. But most developing countries declined to follow the US’s perceived logical conclusion of imposing economic sanctions. Russia has evaded oil and grain blockades with some ease by trading with India, China and other middle-income economies.

Emerging markets are already practised in riding two horses, albeit economic rivals rather than (thus far) actual military combatants. The US is trying to unpick China from its supply chains and deprive it of sensitive technology. But some supposed US allies or near-allies like Mexico and Vietnam have seen this rather as an opportunity to interpose themselves in the supply chain rather than choosing one power over another.

Somewhat more distant history also suggests countries can walk politics and chew trade at the same time. Twenty years ago the US’s international standing also plummeted — including among some of its leading European Nato allies — when George W Bush’s administration unleashed chaos by leading an invasion of Iraq in 2003 looking for non-existent weapons of mass destruction.

Yet the US, impatient with slow-moving multilateral trade talks, shortly afterwards embarked on a successful string of preferential trade deals. In 2004 it signed a bilateral agreement with Morocco, despite public approval of the US in the north African country having fallen from 77 per cent of respondents in 2000 to 27 per cent in mid-2003.

In 2007, with its international reputation still in the basement in Europe and elsewhere, the Bush administration launched the Transatlantic Economic Council with the EU, which became the Transatlantic Trade and Investment Partnership. (TTIP ultimately failed, but under a different president and after the US’s global standing had recovered.) In 2008 the Bush administration also brokered the creation of the Trans-Pacific Partnership, bringing together 11 countries, including some emerging markets.

At present, a good test of whether the US is too toxic to play a leading role in trade diplomacy is the stance of Indonesia, a country always careful about taking geopolitical sides. Joko Widodo, its president, mindful that Indonesia is the most populous Muslim nation on Earth, made some waves during a visit to the White House in November by calling on Joe Biden to support a ceasefire in Gaza.

At the same time, Indonesia elevated its engagement with the US to a “comprehensive strategic partnership” and has been actively engaged as a member of the Biden administration’s Indo-Pacific Economic Framework (IPEF), its trade initiative in the region. The fate of that agreement shows the US’s real weakness in the trading system. A few days after the meeting with Widodo, Biden put what was already a weak agreement into limbo because of the toxicity of anything that looks like a trade deal to certain parts of the Democratic party and Congress.

Observers and officials say that many Asia-Pacific nations have been crying out for years for US engagement in trade in the region to counterbalance China, and would almost certainly respond positively to substantive new initiatives despite Gaza. Washington’s weakness in trade diplomacy — also reflected in the World Trade Organization, where it is single-handedly preventing the institution’s dispute settlement system from working properly — is a discrete issue, not unavoidable collateral damage from its foreign policy.

There is no single “international order”, liberal or otherwise, that necessarily aligns geopolitical power with economics and trade. The real threat to Washington’s economic leadership lies in its domestic scepticism of liberalisation and the institutions that might deliver it. The US can be a closer trading partner with countries whether they regard it as a political ally or not. Its isolation in trade diplomacy is its own choice.

alan.beattie@ft.com