Gatehouse Commentary

October 2023

The United States is well known for exercising its power beyond its borders to influence other countries’ choices or to punish their unwelcome behaviour. The weight of Washington’s extraterritorial reach exceeds that of any other state – most often, though not exclusively, expressed through the use of sanctions. To what extent has this policy been net positive, and what are its downsides?

Let’s first consider the context. The world is now well past the era when the US was unquestionably king of the geopolitical castle. The Americans still outspend the rest collectively on military strength, but the use of force overseas is fraught with problems in the modern age – as Iraq, Afghanistan and Ukraine have demonstrated. Their economic hegemony and soft power leadership is steadily diminishing. With the key ingredients of Joe Nye’s ‘Smart Power’ malperforming, the US has been searching for alternative levers of influence.

Regional blocs/clubs and ‘global’ institutions have proven effective force multipliers for American extraterritorial ambition. The Ukraine war has given new impetus to Western security cooperation, especially via NATO, and the transatlantic relationship more generally has flourished under President Biden. But the rest of the world now has a far wider range of alignment and policy choices, and each capital can pursue its perceived interests by selecting from an à la carte menu of partners, as the subject-matter and the circumstances dictate. A multi-aligned world does not need, and is not looking for, US leadership, and is now more capable of resisting it.

The American extraterritorial reach started to expand some decades ago through a wish to control tax revenues from globalised economic and commercial activity connected with its dynamic domestic base. Other governments have thought similarly, but US control of key financial systems and the global dominance of the dollar afforded Washington a distinct power. Washington developed this approach further in the ‘war’ against terrorism, to restrict the financial opportunities being exploited by terrorist, trafficking and other international crime groups. More recently, as policymakers sought ways of constraining its adversaries without the use of kinetic force, the US expanded the use of sanctions to punish and threaten.

The results, in part, have been powerful. Fear of American repercussions has deterred the private sector in a whole range of commercial relationships and interactions. Crime groups have had to change their ways; and terrorist organisations have found it harder to transfer funds under the radar screen. Iran and Russia have felt the sharp edge of this; and China has appeared to think twice about the dangers of being cut off. Being an adversary of the US can have significant material downsides.

This American approach carried particular weight when the West had designed and managed the infrastructure of the global institutions. The non-western world, even when it formed the non-aligned movement and the G77, could rail against the system but was still subject to it. That age has not fully passed, but changes to it are accelerating. The most recent Gatehouse Signal – marking the scorecard of the expanding BRICS group of nations – describes the build-up of alternative institutions to the Western-dominated ones. In response to America’s persistent exploitation of global systems, multi-alignment is taking on a more organised character.

Increasingly, then, extraterritorial action is causing resentment and damaging the effectiveness of the older institutions – the UN, the Bretton Woods organisations and the global trading arrangements. Reaction against globalisation has been part of the drive for change, but the strength of the sheer wish in the Global South to have other options may have been underestimated. Non-Western economies have been incentivised to find ways round the American reach (sanctions, the dollar, financial infrastructure, supply chains) and to try to formalise their alternatives.

The broader US extraterritorial playbook has also been mimicked by autocratic powers. The use of cyber, disinformation and assassination tactics abroad have expanded in this era of hybrid extraterritoriality. And the Russian and Iranian deployment of proxies to extend their reach overseas have echoes of US support for insurgent forces in Central America and Afghanistan.

China has attempted to construct its own extraterritorial effect. It is determined to deter and, if necessary, punish those who show favour to Taiwan, and it likes to react sharply to criticism or trade restrictions. Australia has been a notable target in recent years. Yet China has been more innovative than the US in searching for new relationships and institutional arrangements that reflect the geopolitical trends – not least the fading appeal of the US outside the Western bloc. There are plenty of countries that do not want to be dominated by China either, but its size, speed of action and (until recently) deep pockets create a strong alternative pole.

None of these developments are either decisive or monolithic. Choices mean choices; and many countries will want to stay within reach of the West’s markets and development funding. But the US needs to take account of the damage being done to its soft power image – and its depth of leverage – if its extraterritorial activity reflects only its national preferences and US-centric judgments. Power is much more distributed nowadays and counter-measures can disrupt Western interests.

Moreover, America and Europe could drastically narrow their trade, security and raw materials partnerships if they take too hostile an approach to the behaviour of others. The EU has spotted this, though its policymaking is often inconsistent and not aligned amongst member states. The tendency in Brussels to ‘lead on standards’ is seen elsewhere for what it is: a protectionist instinct shrouded in do-goodery; and it will need to think more strategically about its Carbon Border Adjustment Mechanism, the external effects of which could cause more resentment than its climate-changing value is worth.

Legitimacy lies so strongly with and within sovereign states that the acceptability of action from a distant power is diminishing with each year that passes. Throwing your weight around no longer looks like a net plus – especially if your real-world influence is declining.