The Transactional Trap | Foreign Affairs

The post–World War II order is dead. In its place, countries are fast adopting a values-neutral, transactional approach toward foreign policy. China was the progenitor of this approach to international relations: for over a decade, Beijing has pursued quid pro quo arrangements with countries around the world to create new markets and enhance its economic reach, generating diplomatic ties with both autocratic and democratic states. It has established itself as a great power through a model of state-capitalist economic development that eschews universal human rights or concerns about its trading partners’ system of government. Its lending practices may be predatory, but the recipients of Chinese loans and infrastructure projects have willingly, if sometimes begrudgingly, participated in its model.

The United States has, in recent months, pursued its own version of a transactional foreign policy. During his second term, President Donald Trump has rejected the framework of great-power competition. Washington has punished allies, partners, and enemies alike with exorbitant tariffs in order to gain diplomatic leverage, extract resources, and win concessions on trade. And he has pursued deals with countries as varied as Argentina, China, Japan, South Korea, Saudi Arabia, and South Korea, without regard to those countries’ regime form, and relentlessly attacked the institutions (such as NATO) that undergirded the rules-based order. Most recently, after capturing and extraditing the Venezuelan leader Nicolás Maduro, he appears eager to secure deals with Maduro’s successor to benefit U.S. oil companies.

The future into which China and the United States are leading the world resembles the past—specifically, the nineteenth century, in which a handful of empires competed for economic spheres and resources and territorial control in the absence of effective multilateral institutions and international law that could constrain avaricious and authoritarian behavior. But world leaders should think twice before they resurrect that century’s transactional politics, whose fundamental instability created the urgent need for a better world order. As the historian Odd Arne Westad has argued, conflict between great powers, and the prospect of it, loomed large over the nineteenth century. And nineteenth-century-style politics cannot simply be superimposed onto the twenty-first century. The world is much more multipolar now than it was then, with smaller states exerting greater influence on the global stage. A transactional approach to foreign affairs will yield not stable spheres of influence but instability characterized by competition over who can extract the most from the international system in terms of trade and resources—and it will inhibit the development of solutions to global problems that demand collective engagement.

THE TRADE-OFFS OF TRANSACTIONALISM

The values of the Enlightenment formed the basis of the vision of the rules-based order. But for centuries, those values—democracy, human rights, and the rule of law—did not actually undergird international order. The 1648 Peace of Westphalia emphasized stability, sovereignty, and great-power alliances above other aims. Enlightenment values came second, if they were considered at all. European powers’ quest to achieve a balance of power led them to openly exploit communities in Africa, the Americas, and Asia.

The 1814–15 Congress of Vienna envisioned a so-called concert of Europe in which five empires—Austria-Hungary, the United Kingdom, France, Prussia, and Russia—generally agreed to respect each other’s sovereignty following the devastating Napoleonic Wars. But it is a mistake to imagine that this agreement, or the subsequent explosion of international trade in the second half of the nineteenth century, brought stability to the world. It failed to prevent wars beyond Europe’s metropoles, and it encouraged sea skirmishes that often led to conflagrations on land. The nineteenth century was, in fact, characterized by a form of multipolarity: the parochial interests of empires—their wish to extract resources from colonies, mostly—drove foreign affairs. No universal laws yet governed their conduct. As the historian Jürgen Osterhammel has written, “there was no sign yet of world government or of supranational regulatory institutions.”

British and French leaders had begun to speak of their empires as liberal, geared toward spreading a “civilizing mission” and individual rights around the globe. But they saw no contradiction in repressing populations in Algeria, India, Kenya, and Vietnam. The more openly illiberal empires of Prussia and Russia held territories in Africa and North America respectively, even if they were minimal and less profitable. Even after the Ottoman Empire ceded many of its European territories to the Austro-Hungarians, it retained control of Iraq and Syria.

The nineteenth century’s race to empire yielded instability.

This “age of empire” empowered transactional trading relationships, and the prioritization of economic interests blurred lines between competitors and partners. The British and Dutch had long been rivals, but starting in the 1820s, they became cooperative trading partners who mutually recognized each other’s colonies in Asia. The 1860 Cobden-Chevalier Treaty, which historians consider the first modern free trade agreement, led the United Kingdom and France to lower tariffs on commodities and consolidate their imperial holdings and overseas markets. After Germany’s 1871 victory in the Franco-Prussian War, France and Germany became especially bitter rivals, but even so, the two countries became reliant on each other’s manufactured goods.

This liberalization of trade, however, yielded its own uncertainty and instability. Transactional economic exchange and military belligerence coincided with and reinforced each other, and suspicion and animosity ran deep. Every great or rising power knew they needed access to the products and markets controlled by their rivals, yielding economic nationalism and self-serving, short-term diplomatic arrangements. The deepening trade relationship between France and the United Kingdom, for instance, dialed up their competition over Sudan and other African colonies. So-called small wars to suppress colonial uprisings metastasized into widespread violence in Africa and Asia. As the century drew to a close, Japan embarked on its own imperial project, colonizing Taiwan and then Korea. The United States acquired the Philippines, Puerto Rico, and Guam after the Spanish-American War of 1898, solidifying its imperial status.

This “race to empire” helped lead to the devastation of World War I. Nationalism, protectionism, expansionism, and racial supremacy returned in the 1930s, and the Axis powers brought the world into war again. Both of these world wars finally made it clear that an order premised on more universal rights, sovereignty, and emancipation from territorial acquisition was badly needed. It is true that the benefits conferred by the postwar rules-based order proved elusive for many countries, particularly those in the so-called global South. The United States dominated its institutions, and Washington’s actions in the Vietnam War, the Iraq war, and most recently, the conflict in Gaza have rightly called into question its dedication to upholding the order’s values. But it nevertheless provided the potential for interstate cooperation and collaboration with U.S. institutions to effectuate outcomes that benefited global democracy.

TURNING BACK THE CLOCK

But in the broader sweep of history, the notion that values ought to undergird a global order is an aberration. And the world now appears to be returning to a nineteenth-century model in which it is supposed that economic relationships and short-term diplomatic and financial deals can undergird interstate stability. Like the empires of the nineteenth century, the United States and China are both competitors and partners—reluctant economic rivals who fear war just as much as they prepare for it.

Both nations are seeking to independently strengthen their global and regional influence while acknowledging their reliance on one another. China’s internal and external development projects, including the Belt and Road Initiative, reflect a familiar nineteenth-century imperial effort focused on regional hegemony, even if these imperial means are directed toward domestic ends. The Trump administration, meanwhile, has again made the Western Hemisphere a focus of U.S. national security and revived the rhetoric of “Manifest Destiny,” preoccupying itself with the southern border and suspected drug boats in the Caribbean.

Perhaps it is no surprise that the United States and China are behaving as great powers often do. More interesting is how many other states appear to be acquiescing to the end of the post–World War II rules-based order and accommodating a more transactional, nineteenth-century model of world affairs. Consider two of the United States’ closest allies, Canada and France. Both countries now seek to maintain their long-standing economic and diplomatic ties with the United States while recalibrating their relationship to China. Although French President Emmanuel Macron has put new tariffs on China, he has also encouraged fresh Chinese investment in Europe and pushed for the loosening of restrictions on Chinese tech imports to the European Union. Canadian Prime Minister Mark Carney, meanwhile, announced a new approach to trade and diplomatic relations with China.

A transactional world order tends to stymie regional cooperation.

Other U.S. partners have also shifted into a more transactional mode. India is projected to become the world’s third-largest economy by 2030, and it will remain a key exporter and trading partner of the United States. But it has sought closer cooperation with China and Russia in recent months. India’s actions channel its historical commitment to nonalignment but are adapted for a multipolar order in which interests override values and ideology has less hold on world affairs. They also reflect an acknowledgment that internal autocracy increasingly aligns with external growth.

In the global South, African states such as Nigeria and South Africa are also adjusting to a new reality. Trump’s claim to ideological beefs with each country—with South Africa, for purportedly pursuing “woke” domestic policies, and with Nigeria, for allegedly condoning the “mass slaughter” of Christians—obscures the reality that both remain close trading partners with the United States. At the same time, South Africa remains dependent on Russia for oil and fertilizer, and South African President Cyril Ramaphosa has touted new Chinese commitments and investment in his country’s economy; Nigeria is also strengthening its relationship with China, whose technology is powering Nigeria’s push to build large-scale solar power installations and mine materials for future technologies.

As it did in the nineteenth-century imperial order, transactionalism tends to stymie regional cooperation. Nigeria and South Africa are well positioned to increase their collaboration on trade, but their dependence on great-power dynamics between China and the United States is inhibiting them from doing so. The same dynamic is at play in the relationship between the Philippines and Vietnam. The two countries are deepening their defense cooperation and trade relations, but each remains most focused on how to manage the U.S.-Chinese rivalry to their benefit. Trump’s trade war has pushed Vietnam closer to China, but it continues to rely on the United States for security and an export market; exports to the United States constitute 30 percent of Vietnam’s GDP. Like other countries in a transactional order, Vietnam is trapped between two powers that cannot fully serve its interests. The Philippines is in a similar situation, declaring to U.S. officials that Manila and Washington face a “common threat” in Beijing while striving to avoid outright confrontation with China, on whose markets it depends.

Even countries that try to resist a transactional age are forced to succumb to it. Under President Luiz Inácio Lula da Silva, Brazil sought to elevate its status as a leader of a new global order. Yet it cannot afford to give up its economic partnerships with either the United States or China, and it lacks the economic clout to create countervailing institutions in which middle powers can collectively overcome the dominance of great-power rivalry.

BRASS TACKS YIELD BRASS KNUCKLES

Many analysts—not only Trump—seem to believe that a “transactional” approach to foreign affairs may yield even more peace than an idealistic one, presuming that costly fighting is not in most countries’ economic self-interest and that the reality of global trade ties will keep great powers from outright enmity. They tend to assume that transactionalism engenders pragmatism, which will mitigate conflict, and that nuclear deterrence will prevent new world wars. This year, Chinese leader Xi Jinping convinced Trump to back down on his plan to place exorbitant tariffs on Chinese goods. The United States struck deals with China over access to strategic minerals. Parochial interests forced an end to a looming U.S.-Chinese trade war, suggesting that a transactional era could sustain peace.

But it is far from clear yet that a new transactional age will be more peaceful than the nineteenth century was. Already, the regional wars, naval skirmishes, and imperial violence that defined the nineteenth century are resurfacing. India, for instance, has already proved willing to take on more risk, a stance highlighted by its seven-day conflict with Pakistan last May (the first time it used cruise missiles against its western neighbor) and its growing border conflicts with China. The United States attacked Venezuelan ports and boats, overthrew Venezuela’s president, and now threatens to annex Greenland and preemptively attack Iran. China, for its part, stepped up military drills around the coast of Taiwan after Washington’s decision to send an aid package worth more than $11 billion to the island, even as Trump has praised Xi Jinping and touted his personal relationship with the Chinese leader.

In the nineteenth century, small powers forced to acquiesce to Western dominance violently resisted empire. But instability does not take only the form of outright violence. Resistance now takes multiple forms—for instance, backing revanchist Russian-led de-dollarization projects, lawfare through the International Court of Justice, or seeking membership in BRICS+ or the Shanghai Cooperation Organization. These actions may not directly mirror the nineteenth century’s violent resistance against colonialism, but they do reflect a growing ability possessed by smaller powers to push back against greater ones through institutional means.

Even if the aim were to return to a nineteenth-century model of world order, doing so would not be possible. The twenty-first century has its own special conditions, particularly those that give smaller nations much more influence than their nineteenth-century counterparts: today’s most strategic minerals, such as coltan and lithium, are more concentrated and often not located in great powers’ territory. In the coming decades, climate change will wreak havoc on many U.S. and Chinese trading partners in the global South, forcing both countries to respond to the economic fallout. The threat of pandemics continues to loom and will mean that the concerns of smaller states cannot be easily ignored.

These new, twenty-first-century challenges will demand international frameworks. The diffusion of resources in a multipolar world presents policymakers with the potential to reframe a world order around the concerns of weaker states that are also vital economic partners. And they must do so: the truth is that today, the absence of any international order, even if imperfect, would be a problem for global stability. A world premised on one-off transactions between nations will prevent the development of the kind of long-term, grand strategic thinking required to ensure that the exploitation, imperialism, and violence of the nineteenth century does not simply resurface—or even reemerge in a worse form.

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