Recommended Weekend Reads
U.S. – China Trade Policy in the New Trump Era, Why Governments Can’t Pay Their Way To Higher Birth Rates, Zambia’s Debt Turnaround, and How Water Security Is A Risk for A Quarter of the World’s 500 Largest Cities
January 31 - February 2, 2025
Please find below our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend. And let us know if you or someone you know wants to be added to our distribution list.
U.S. – China Relations in the Trump Era
Advancing U.S.-China Coordination amid Strategic Competition Ryan Hass, Ryan McEleveen, and Lily McElwee/Center for Strategic and International Studies
Frictions between the United States and China are intensifying, yet even past geopolitical rivals found ways to collaborate on shared challenges where it squarely served national interests. In November 2022, the CSIS Freeman Chair in China Studies and the Brookings John L. Thornton China Center launched a project to explore safe and effective methods for collaboration among nonstate actors on key challenges facing both nations. The following brief distills takeaways from this work, which included historical case studies of collaboration during the Cold War, workshops with U.S. and PRC experts, and a track 2 dialogue on climate-smart agriculture designed to probe emerging findings.
Meeting China’s Trade and Tech Challenge: How the US and Europe Can Come Together Daniel S. Hamilton/Center for European Policy Analysis
This series analyzes the impact of China’s rise on transatlantic ties and presents ideas about how to forge a constructive partnership to meet the China challenge. It is based on a yearlong series of CEPA-sponsored workshops of leading European and US experts that I chaired together with Lucinda Creighton under the Chatham House Rule. The basic question we addressed is whether Donald Trump’s new administration and Europe’s new leaders believe their own bilateral disputes are more or less important than the need to adopt joint or complementary approaches to China. Does the Trump administration believe it can and should fight predatory Chinese economic practices on its own, or forge a broad coalition of countries that could impose far greater costs on China than individual efforts? Are Europeans willing and able to bridge their own considerable differences over both China and Trump’s America to help lead such a coalition?
Can Trump Seize the Moment on China? Ryan Hass/Brookings Institution
The U.S.-China relationship President Donald J. Trump inherited is vastly different than the one he handed off to the Biden administration in 2021. China continues to expand its global influence and industrial output, but it also faces challenges at home from a softening economy and an increasingly sclerotic and centralized political decision-making process. Trump’s team holds a variety of viewpoints on how to maximize America’s leverage or even on what objectives America should pursue in its competition with China. Left unaddressed, this variance in views risks leading to policy incoherence. To overcome this risk, Trump will need to set a firm direction, identify specific objectives, and put his advisors on notice that they will pay a cost for actions that undermine his goals. Trump has an opportunity to craft a strong policy to move the U.S.-China relationship toward becoming fairer and more equitable. Whether he seizes this opportunity may depend upon the degree to which he acts with purpose, maintains focus, and imposes discipline over a sprawling set of actors within his administration who will implement America’s China strategy.
U.S. and Global Economics
Dysfunction in Federal Budgeting: Structural Factors and Selected Reforms James Capretta/American Enterprise Institute
Abstract: Both major US political parties want to avoid the responsibility of reducing projected future budget deficits, which are expected to persist indefinitely. Having stronger leaders would help, but the primary causes of ongoing fiscal deterioration run deep and will not be easily addressed. Multiple federal laws govern budget decisions, but there is no regularized pathway for Congress and the president to agree on binding fiscal plans. Further, the budget is now dominated by benefits paid directly to individuals, which has changed the candidate-voter relationship. Finally, the United States’ unique approach to health care makes identifying bipartisan cost-saving reforms challenging. Policymakers must think strategically about changes that account for these structural factors. They should focus on the statutory facilitation of legislative-executive budgetary agreements, long-term fiscal stability rather than fleeting near-term objectives, automatic solvency adjustments in Social Security and Medicare, stronger price competition in health care, and sustained funding increases for critical military accounts.
Sovereign Debt Restructuring with China at the Table: Forward Progress but Lost Decade Risk Remains Gregory Makoff/Théo Maret/Logan Wright Harvard Kennedy School Mossavar-Rahmani Center for Business and Government
Sovereign debt restructuring deals have not been smooth sailing over the last few years. They have moved slowly, been marked by bickering between China and G7 stalwarts, and the outcomes have been inconsistent. Recent policy innovations, however, have successfully accelerated the pace at which deals are being completed — that’s the good news. The bad news is that China remains highly reluctant to grant permanent debt relief. Deals are coming faster, but debt relief may be insufficient to avoid repeat restructurings. This is deeply unfortunate in the post-Covid-19 context, with many lower income countries at or near debt distress.
America First Trade Policy The White House
President Trump issued a memorandum on January 20th outlining his overall trade and global economic policy views and objectives. Overall, the President states: “Americans benefit from and deserve an America First trade policy. Therefore, I am establishing a robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
The Baby Gap: Why Governments Can’t Pay Their Way to Higher Birth Rates Financial Times
The decline in fertility rates threatens to lead to deep economic malaise. Fewer babies and more older residents lead to a lower proportion of people of working age, denting tax revenues at the same time as costs associated with aging societies, such as state pensions and healthcare, increase. Without sufficient policy action, analysts at rating agency S&P Global estimated in 2023 that fiscal deficits would balloon by 2060 from a global average now of 2.4% of GDP to 9.1%. The global net government debt to GDP level would very nearly triple.
The Global Challenge to and Race for Access to Natural Resources
From Water Supply Crises to Building Urban Water Security Rand
Secure, affordable, and equitably delivered high-quality water supplies are central to human health, well-being, and economic development—especially in urban areas. Despite efforts by many policymakers to invest in healthy ecosystems and responsible management practices, a quarter of the world’s 500 largest cities already experience water stress, affecting nearly 400 million people and $4.8 trillion in economic activity. Because of varied combinations of climate change, population growth, overextraction of natural resources, and pollution, cities around the world have had to navigate severe water supply crises. Many cities have been to the brink—they have had to confront near-catastrophic risks to their water supplies.
Africa
Zambia’s Debt Turnaround Institute for Security Studies (South Africa)
In November 2020, Zambia became the first African nation to default on its debt during the COVID-19 pandemic, a stark warning of the dangers of economic over-reliance on commodities like copper. Zambia’s 2020 debt crisis resulted from years of structural weaknesses and external shocks. For decades, the country relied heavily on copper mining, a sector prone to global price fluctuations. While Zambia experienced a copper boom in the 1960s, later decades saw unstable prices that strongly disrupted its fiscal and trade balance. To diversify its economy, Zambia began investing in infrastructure in the late 2000s. Many of these initiatives were funded by external borrowing, including significant loans from Chinese lenders. These borrowing patterns contributed to rising debt levels and unsustainable interest payments, compounding Zambia’s fiscal challenges.Despite these setbacks, projections for 2025 are optimistic, with anticipated GDP growth rates ranging from 4.1% by the World Bank to 6.6% by Zambia’s Finance Minister. However, long-term success depends on several key issues, including the need for economic diversification, improved governance and enhanced resilience to climate change.