„ROUNDUP
5 Issues to Watch in 2024
Our columnists share the most important developments on their radar in the year ahead.
By James Crabtree, Zongyuan Zoe Liu, Edward Alden, Agathe Demarais, and C. Raja Mohan
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JANUARY 1, 2024, 7:00 AM
At the start of each year, Foreign Policy asks some of our columnists which developments they’ll be paying special attention to in the year ahead.
This year, it goes without saying that most of us here at Foreign Policy will be watching the U.S. election—a contest that could fundamentally reshape the foreign policy of the United States and forever change Washington’s role in the global order. (You can see a lookahead of some of the most important elections here.) Similarly, the wars in Ukraine and Gaza continue to be top of mind, and we’ve published plenty of sharp analyses by our writers and reporters about where these conflicts could head.
For this survey, we asked five of our columnists to look beyond these obvious topics and tell us what else is on their radar in 2024. It’s an admittedly small poll, but there’s a unifying theme connecting security with economics—suggesting even deeper convulsions in the global system to come.—Stefan Theil, deputy editor
The Year Trade Breaks Down
By James Crabtree
The recent decision of global shipping companies to avoid attacks in the Red Sea and take the longer, costlier, 18th-century route around Africa is only the latest reminder of the fragility of the global trading system. This theme is likely to become more prominent in 2024.
At one level, the Red Sea standoff emphasizes the way much of Eurasia’s economic prosperity ultimately relies on the backstop of U.S. hard power—a fact that many in the region seem to have conveniently forgotten. The Red Sea route is responsible for the bulk of Asia-Europe trade but has much less economic significance for the United States, which trades with East Asia mainly across the Pacific.
But the standoff also highlights growing threats to the globalization-era trade system more generally, which will be a major challenge next year. Rising tensions in the West over Chinese industrial overinvestment and overproduction will lie at the heart of the issue, as Chinese President Xi Jinping struggles to shift to an alternative model to revive his country’s flagging economy.
The European Commission is busy investigating Chinese electric vehicles subsidies. It may introduce countervailing duties or tariffs against China next year, a step that underlines alarm in Europe over threats to the continent’s own industrial model. Other sectors in which China is investing heavily, including petrochemicals and other technologies linked to the energy transition, will become a source of tension too. Perhaps most troubling of all will be China’s rapid progress in less advanced forms of semiconductors, an area where Beijing could soon become a dominant player, with implications for a range of struggling Western sectors, not least German auto companies.
The impotence of the existing World Trade Organization system to deal with mounting trade tensions will be cruelly on show at the organization’s major February meeting in the United Arab Emirates. By the end of next year, the result is likely to be something akin to the return of the trade wars that dominated attention during the Trump administration.
And then, of course, there is the possible return of the man himself. Trade will feature heavily in any Joe Biden-Donald Trump election campaign for the U.S. presidency. Former President Trump’s advisors are already preparing radical new measures—including proposed universal and reciprocal tariffs targeting China, with Europe in the crosshairs as well—that would all but certainly put an end to the global trading system as we have known it over recent decades.
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A Fork in the Road for China’s Economy
By Zongyuan Zoe Liu
In 2024, China’s economy will continue to face both domestic and international headwinds. Beijing’s recovery challenges—a substantial debt overhang, anemic domestic demand, fast-aging demographics, and Western de-risking policies that seek to reduce supply-chain dependence and limit Beijing’s access to cutting-edge technology and markets—remain unresolved.
First, which policy measures Chinese leaders choose to take in 2024 to stabilize debt and raise consumption will influence confidence in the Chinese economy. While the People’s Bank of China and Ministry of Finance have signaled favor for helping local governments address hidden debt problems, Chinese authorities have not shown much appetite for direct household support. If Beijing continues to prioritize state-led investment in infrastructure and manufacturing over private consumption, as the leadership announced at the recent Central Economic Work Conference, Chinese households keeping a tight lid on their expenditures would expose the economy to greater risk of a confidence trap.
Second, whether China can make progress in reducing its dependence on the U.S. dollar is also up for a test in 2024. In the near term, greater progress in de-dollarization hinges upon two factors: first, whether Chinese entities dealing in energy and other commodities can settle more trades using the renminbi through China-based commodities exchanges; second, whether more commodities exporters outside China, such as Saudi Arabia, will join the renminbi-based financial orbit.
Third, the successes and setbacks of Chinese electric vehicle makers and telecommunications firms as they seek to expand exports around the world will shape both the Chinese economy and global markets. Unresolved trade tensions, continued supply chain diversification, and expanding industrial policies in major Western economies mean that Chinese products will not have smooth sailing. As Chinese companies move supply chains overseas in response to Western efforts at “nearshoring” and “friendshoring,” domestic unemployment problems may worsen, especially if the private sector does not generate adequate job opportunities for Chinese college graduates.
Finally, 2024 will show whether the U.S.-China agreement to crack down on illicit fentanyl flows can generate tangible results, which in turn could shape the trajectory of U.S.-China relations. The bilateral relationship remains fragile and vulnerable to abrupt shocks, such as cyberattacks and industrial espionage. Attaining tangible progress in jointly cracking down on illicit fentanyl trafficking could add incremental momentum toward stability.
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Will Americans Believe Their Own Lying Eyes?
By Edward Alden
The first six months of 2024 should make clear whether the United States has pulled off an extraordinary feat: a rare “soft landing” that brings inflation back under control without driving the economy into recession. The U.S. Federal Reserve raised short-term interest rates from 0.25 percent in March 2022 to 5.5 percent in July 2023, and there have been only a handful of times in the past 75 years that monetary policy has been so sharply tightened without crashing the economy. No soft landing has yet been achieved in circumstances as trying as those of the last two years, which have included wars, natural disasters, and supply-chain disruptions.
A soft landing would leave the United States in a much stronger position as it steps up economic and strategic competition with China and tries to funnel aid to Ukraine in its grinding war with Russia. And if the American people believe the numbers—a big if, to be sure—it could put U.S. President Joe Biden in a strong position to win reelection in the fall.
By the numbers alone, the U.S. economy has rarely looked better. Economic growth neared 5 percent in the third quarter of 2023, and full-year growth is now expected to be 2.6 percent. That shattered the consensus expectation of economists, who predicted the economy to shrink by 0.1 percent in 2023. In December, the Dow Jones stock index touched record highs. Under Biden, the United States has created more than 14 million jobs, the best job market in more than half a century. New job formation has slowed to what appears a more sustainable rate, while unemployment remains at historic lows below 4 percent. Headline inflation, which peaked at more than 9 percent in July 2022, was down to roughly 3 percent in October and November, just slightly above the Federal Reserve’s target rate. And wage growth has been especially strong among lower-wage workers.
Despite such strong numbers, however, Americans remain in a gloomy mood. A recent Wall Street Journal poll showed voters are still unhappy with the economy under Biden. More than half said they had been personally harmed by the administration’s economic policies, with only 23 percent saying they had been helped. The anxiety is especially prevalent among younger voters. Much of this despair likely comes from the novelty of inflation: Americans well into middle age had not seen significant inflation in their lives. Even though price increases are slowing, the pain is evident at the grocery store, gas pump, and other places providing daily necessities. And rising mortgage rates and stubbornly high home prices have put home ownership even further out of reach for many.
The first half of 2024 will determine which of these narratives takes hold. If inflation stays low, interest rates hold steady or drop, and employment remains strong, then economic optimism may catch up with what the data says is a historically robust economy. That would put Biden in the best possible position for a November victory. But if prices spike again or growth sharply contracts—perhaps a delayed impact from interest rate hikes or a new bout of geopolitical turbulence—the gloom could deepen. And as single-term presidents from Jimmy Carter to George H. W. Bush can attest, the prospects for reelection in a recession year are dismal.
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The Next Phase of the West’s Uneasy Separation From China
By Agathe Demarais
De-risking from China was all the rage in 2023, reflecting Washington’s aims of slowing the technological advances of Beijing’s military and reducing reliance on Chinese firms for critical goods. Three predictions are easy to make on the de-risking front for 2024. First, calls for a complete decoupling are dead, reflecting the Biden administration’s realization that fully cutting economic ties with China is both impossible and undesirable. Second, de-risking will remain the unifying theme for U.S. economic, foreign, and security policy in 2024, highlighting a bipartisan consensus on the need to tackle China’s economic and military rise. Third, U.S. calls for the European Union to impose controls on the exports of advanced technologies to China will remain unheeded; at this stage, most of that bloc’s members do not share Washington’s assessment that Beijing poses an existential threat.
More interesting, perhaps, are three unknowns for de-risking in 2024. The first question revolves around potential additional sectors for export controls. After semiconductors and artificial intelligence technology, Washington could set its sights on quantum computing and—if the Republicans in the U.S. Congress have their way—clean tech. The second unknown has to do with the United States’ ability to partner with emerging economies to reduce reliance on China for the sourcing of raw materials that are crucial for the digital economy and energy transition. Last, there remain doubts about whether de-risking works. Statistics show that U.S. firms are doing less business with China—a win for de-risking, on paper. Yet the other side of the coin is that U.S. companies are now trading more with Southeast Asian firms, whose ties with China are deepening. This suggests that Southeast Asia is increasingly serving as a transit hub for Chinese exports to the United States, making it harder to track the reality—or illusion—of de-risking.
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Artificial Intelligence Regulation Goes Global
By C. Raja Mohan
As the pace of technological development in artificial intelligence (AI) quickens—and the massive economic opportunities and potential social harms triggered by the new technology come into view—the challenge of coming up with effective governance of AI has become paramount. The second half of 2023 saw a burst of regulatory activity: the European Union’s AI Act, the Biden administration’s executive order on AI, and new Chinese rules on generative AI. Multilateral institutions, including the OECD, G-7, G-20, Global Partnership on Artificial Intelligence, and Artificial Intelligence Safety Forum, have gotten into the AI regulation game as well. These efforts are likely to gain even more traction in 2024 as all kinds of applications for AI proliferate.
Given AI’s military implications, the question of limiting and controlling the technology’s weaponization has moved to the top of the agenda. All major powers are investing in military applications of AI while also seeking ways to develop restraint. At last November’s U.S.-China summit in California, Biden and Xi initiated a dialogue on the risks of military AI, especially related to the control of nuclear weapons. These talks could be as consequential as the arms control dialogue between the United States and Soviet Union during the Cold War. Also in November, the U.N. General Assembly passed the first-ever resolution on the dangers of autonomous robotic weapons and called on Secretary-General António Guterres to submit a report addressing the issue, which could become the basis for international negotiations to limit the weapons’ use.
As discussions on AI regulation intensify in 2024, a number of familiar challenges in governing advanced technologies will come to the fore: innovation versus regulation, state imperatives versus individual rights, and economic benefits versus protection from harm. The challenges at the global level are many: how to guardrail great power military competition, how to insert a firewall between civilian and military uses of AI, and how to prevent the proliferation of AI technologies to bad actors in the international system. Underlying the regulatory challenge is the huge disconnect between the rapid pace of technological development and the slow construction of law. If the past is any guide, overcoming the tensions generated by AI will sharpen multiple fault lines within and across states.
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James Crabtree is a columnist at Foreign Policy, a former executive director of the International Institute for Strategic Studies-Asia, and the author of The Billionaire Raj: A Journey Through India’s New Gilded Age. Twitter: @jamescrabtree
Zongyuan Zoe Liu is a columnist at Foreign Policy and the Maurice R. Greenberg Fellow for China Studies at the Council on Foreign Relations. Her latest book is Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions (Harvard University Press, 2023).
Edward Alden is a columnist at Foreign Policy, the Ross distinguished visiting professor at Western Washington University, a senior fellow at the Council on Foreign Relations, and the author of Failure to Adjust: How Americans Got Left Behind in the Global Economy. Twitter: @edwardalden
Agathe Demarais is a columnist at Foreign Policy, a senior policy fellow on geoeconomics at the European Council on Foreign Relations, and the author of Backfire: How Sanctions Reshape the World Against U.S. Interests. Twitter: @AgatheDemarais
C. Raja Mohan is a columnist at Foreign Policy, a senior fellow at the Asia Society Policy Institute, and a former member of India’s National Security Advisory Board. Twitter: @MohanCRaja“
https://foreignpolicy.com/2024/01/01/foreign-policy-lookahead-predictions-issues-conflicts-2024/
