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Economic policy isn't just a domestic issue any more. That is the conclusion we should draw from the market volatility this week, including the shift by Standard & Poor's to a negative outlook for U.S. government debt, and the meeting last weekend of the International Monetary Fund and World Bank.

This is a familiar fact for smaller countries. The emerging-market nations have long understood that judgments made on Wall Street or at the IMF headquarters in Washington often had more power to shape their economic policy than the proposals of their own finance ministers and central bankers. That is a lesson that fiscally weak Western countries such as Greece, Ireland and Portugal have been learning, too.

Now, as the relative power of the United States in the global economy declines, it is a fact of life that Americans need to get used to. That is one of the important messages of the S&P decision to put the United States on a negative outlook - essentially a warning that the ratings agency is no longer certain the United States will maintain its triple-A rating.

There are many reasons the S&P call should be taken with a grain of salt. For one thing, the ratings agencies hardly covered themselves with glory in the runup to the financial crisis, and surely no longer deserve oracular status, if they ever did.

For another, the S&P warning wasn't new news. With a budget deficit coming in at 10.6 per cent of gross domestic product last year and with gross national debt at 91.6 per cent of GDP, it has been obvious for some time that U.S. public finances are a mess. The debt and deficit have become a Main Street issue and have dominated the political debate in Washington for months.

But there is one good reason the S&P's negative outlook attracted so many headlines. It was a reminder that U.S. economic policy is no longer just about debates in Washington or what plays in Iowa. U.S. economic policy needs to pass muster with global markets and with foreign lenders, too.

That is an old story for every other country in the world. But the United States has been accustomed to being the world's dominant economy and to owning the printing press of its reserve currency. Both are still true, but less so than before. Moreover, for all its size, its massive debt means it is already dependent on the confidence of foreign buyers of U.S. Treasury securities, including governments running massive surpluses, such as China.

That means national economic decisions, such as the level of government spending or the rate of taxation, aren't purely national issues any more. In the proud days after the collapse of the Berlin Wall and the triumph of Western capitalism, American pundits and policy makers got used to issuing edicts about how emerging markets should run their economies. The reverse is not yet true, but the S&P move is a sign that the United States will need to start thinking about how its economic policy moves play in Beijing and Dubai.

As the IMF and World Bank meetings revealed, one of the consequences of globalization has been to give national economic decisions a more powerful international wallop. U.S. complaints about China's exchange rate policy and its strategy of export-driven growth are a vivid example of the public's conviction that one country's domestic economic strategy is a legitimate - indeed central - issue for international debate.

Now the rest of the world is starting to take the same view of the United States. In Washington last week, Brazilian Finance Minister Guido Mantega complained that the policies of the Federal Reserve, designed to help the United States recover from the gravest financial crisis since the Great Depression, are having unintended and malign consequences in other parts of the world.

Low interest rates in countries such as the United States, Mr. Mantega warned, are the "primary trigger of many of today's economic woes."

When we think about the thorny questions in foreign policy, we think first about the rocky intervention in Libya or the agonizing war in Afghanistan. But the really big challenge in managing relations between countries is the problem pointed to by S&P and leaders like Mr. Mantega - managing a world in which my domestic economic policy solution is your foreign economic tsunami.