To me, the latter is an outcome of the former. So the ultimate goal is to integrate the nation in a subordinate role into the western system, and a range of pressures levied against nations that refuse that. Investor rights is a key part of that because it means foreign capital floods into the country, buying up assets, funding political parties and local NGOs. The result of that is that western satellite offices offer the best jobs for local elites. It completely changes the local society and aligns the interest of local elites with western interests.
Once a nation is integrated into that system, the US can, for example, disrupt their economy by freezing assets or imposing sanctions because now the elites will lose their jobs, and this is often enough to change the government policy. In this way, we exert enormous control over the domestic politics of other countries. We do not care so much about deindustrialization in the US or the foreign nation losing key industries. This is basically how the US pulled Armenia into its orbit, but not only Armenia, many other countries have been subordinated to US interests in this way.
It's similar to how, in the European financial crisis, the European Central Bank was threatening to destroy the banking systems of Ireland or Spain if they didn't adopt certain political policies that Brussels wanted. They caved. The ECB would not have the power to do this if these nations refused to adopt the Euro or to be integrated into that system. The same thing was done to Greece. First a rush of foreign investment into Greece, then a debt crisis, and now the EU is dictating domestic political outcomes in Greece. Remember that foreign investment is just another way of saying foreigners hold your debt and own your assets.
This is why China has strict limits on foreign capital inflows. It does not want to be integrated as a subordinate role into the Western system. Russia also has adopted this role. I am not saying this as an enemy of China or Russia, nor am I an an apologist for them. What I'm saying is that their policy is rational, just as the east asian nation's mercantilist development model was also rational. It worked! This despite the classical economic critique. That tells me we don't really know the full story when it comes to trade and development.
I'm also not saying that classical economic welfare arguments for trade are entirely wrong. A trade restriction should have an effect of raising prices and reducing output. But clearly a 15% rate is not particularly noteworthy, given that 70% of our economy is services. The freakout about the tariffs was primarily political, because the tariffs were levied against allies not enemies, and they were levied with the aim of encouraging domestic production, not overthrowing geopolitical rivals. This is why the Europeans, in particular, were so offended by the tariffs. It was certainly not love of free trade, given the rising number of sanctions enthusiastically adopted by Brussels.
Once a nation is integrated into that system, the US can, for example, disrupt their economy by freezing assets or imposing sanctions because now the elites will lose their jobs, and this is often enough to change the government policy. In this way, we exert enormous control over the domestic politics of other countries. We do not care so much about deindustrialization in the US or the foreign nation losing key industries. This is basically how the US pulled Armenia into its orbit, but not only Armenia, many other countries have been subordinated to US interests in this way.
It's similar to how, in the European financial crisis, the European Central Bank was threatening to destroy the banking systems of Ireland or Spain if they didn't adopt certain political policies that Brussels wanted. They caved. The ECB would not have the power to do this if these nations refused to adopt the Euro or to be integrated into that system. The same thing was done to Greece. First a rush of foreign investment into Greece, then a debt crisis, and now the EU is dictating domestic political outcomes in Greece. Remember that foreign investment is just another way of saying foreigners hold your debt and own your assets.
This is why China has strict limits on foreign capital inflows. It does not want to be integrated as a subordinate role into the Western system. Russia also has adopted this role. I am not saying this as an enemy of China or Russia, nor am I an an apologist for them. What I'm saying is that their policy is rational, just as the east asian nation's mercantilist development model was also rational. It worked! This despite the classical economic critique. That tells me we don't really know the full story when it comes to trade and development.
I'm also not saying that classical economic welfare arguments for trade are entirely wrong. A trade restriction should have an effect of raising prices and reducing output. But clearly a 15% rate is not particularly noteworthy, given that 70% of our economy is services. The freakout about the tariffs was primarily political, because the tariffs were levied against allies not enemies, and they were levied with the aim of encouraging domestic production, not overthrowing geopolitical rivals. This is why the Europeans, in particular, were so offended by the tariffs. It was certainly not love of free trade, given the rising number of sanctions enthusiastically adopted by Brussels.