agriculture, China, commodities, diplomacy, energy, Iran, Kim Jong Un, LIbya, Made in China 2025, manufacturing, Muammar el-Qaddafi, North Korea, nuclear weapons, Our So-Called Foreign Policy, Russia, Saddam Hussein, Saudi Arabia, South Korea, tariffs, technology, Trade, trade deficit, tripwire, Trump, Ukraine
Diplomacy has sure taken a beating these last few days. And revealingly, that looks like a good thing.
Let me explain: I have no problem whatever with countries trying to resolve their differences peacefully, through dialogue and compromise. But in the nuclear age, and especially after America’s Vietnam debacle, this age-old concept has turned into a foreign policy magic bullet in the United States – including among the nation’s bipartisan globalist establishment. So the collapse (for now) of plans for a summit between President Trump and North Korean dictator Kim Jong Un, and the failure so far of the President to make any headway in curbing China’s predatory trade practices, could be welcome developments. For these developments could remind Americans of diplomacy’s limits in promoting U.S. national interests (the overriding priority of the nation’s foreign policy), and how even on crucial issues of war and peace, it can be completely pointless and even dangerously distracting.
On North Korea, there have always been strong grounds for skepticism that negotiations could achieve America’s main objective – the complete elimination of Kim Jong Un’s nuclear weapons. It’s true that Kim has appeared more interested in economic reform than his father or grandfather – who preceded him in power. Therefore, in principle, he would be more responsive to economic carrots and sticks. On the one hand, he might be amenable to surrendering his arsenal in exchange for foreign investment and aid (along with security-related concessions from the United States like formal recognition of his regime, a peace treaty ending the decades-long state of war between Pyongyang and its enemies). On the other hand, he might be more concerned about the impact of the sanctions that President Trump has both broadened and intensified.
Yet it was always difficult to believe that Kim would prize any of these considerations above his regime’s defense against overseas threats, and for these purposes, nuclear weapons are hard to beat. As widely noted, he’s surely been impressed by the gruesome fates of fellow autocrats who gave up their nuclear hopes (Libya’s Muammar el-Qaddafi) or who hadn’t the chance to develop these weapons (Iran’s Saddam Hussein).
Further, Kim also is no doubt aware of a third recent example of a country paying heavily for signing away its nuclear weapon status: Ukraine. In 1994, that nation agreed to dismantle the large nuclear force stationed on its soil when it was part of the Soviet Union, and left there after the USSR’s demise. In return, it received security promises from the United States, the United Kingdom, and Russia that its territorial integrity would be respected. A quarter century later, Moscow has seized effective control over much of the country’s eastern half.
Moreover, if a Trump-Kim summit and follow-on negotiations resulted in a compromise that left the North with some kind of nuclear arsenal, this “victory” could eventually become disastrous for America and its homeland. For there would be no guarantee that Kim would have truly abandoned his family’s goal of dominating the Korean peninsula through nuclear-aided conquest or intimidation of the South. And as long as large U.S. ground forces remained in South Korea, the outbreak of war would still threaten to draw Washington into a conflict with a foe capable of hitting its territory with nuclear warheads.
That still-live prospect should be an awfully powerful reason for switching to a strategy I’ve long advocated – ditching diplomacy, withdrawing the U.S. troops in South Korea that expose the United States to nuclear danger, and permitting North Korea’s neighbors to handle Kim and his nuclear ambitions any way they wish.
Trade diplomacy with China doesn’t threaten to turn an American city into a glowing ruin. But it’s all too likely to result in open-ended talks that do as little to combat the economic and security threats created by Beijing’s trade predation as previous negotiations involving President Trump’s predecessors. As I’ve recently written, even if his administration could come up with a coherent set of priorities, adequately verifying any Chinese compliance with U.S. positions is a pipe dream.
But this latest American attempt at trade diplomacy faces two other seemingly insuperable obstacles. First, the President’s objective of reducing the U.S.’ massive bilateral trade deficit with China appears to neglect the makeup of this deficit – which matters more than its size. Specifically, his proposals to date envision narrowing the trade gap mainly by boosting American exports of farm products and energy to China.
Both sectors of the U.S. economy are obviously important. But neither can become a major driver of sustainable American prosperity, because they’re essentially involved in producing commodities – which have never added nearly as much value to national economy as manufactures. That’s why developing countries invariably view a transition from agriculture to industry as the key to their hopes for rising living standards, and why even wealthy energy producers like Saudi Arabia have resolved to focus more on manufacturing and other higher value activities.
And P.S. – that’s no doubt why the Chinese clearly consider this American demand the most appealing on the Trump agenda.
As for the intertwined threats of continued and rampant Chinese intellectual property theft, and of China’s master plan to lead the world in a wide array of “industries of the future” (the Made in China 2025 program), U.S. tariffs on the goods and services these policies already enable Beijing to produce and export could well deal its ambitions a major blow. And clearly, that’s the Trump administration’s aim.
But if so, why negotiate over these matters? The United States has made reasonably clear what it wants China to do. And it’s declared its intent to retaliate with trade curbs if China balks. If the Trump administration is serious about this approach, and confident that it will succeed, what is there left to talk about? Either the Chinese accede (in which case, as I wrote this week, towering verification challenges would remain), or they dig in their heels and the tariffs follow.
Further talks, unless they’re simply aimed at clarifying American positions, can only muddy the waters and encourage endless Chinese foot-dragging – including regularly throwing Washington a few crumbs of market share – by telegraphing a Trump reluctance to pull the trigger. All the while, the Chinese tech prowess ostensibly alarming Americans across the political spectrum will keep growing.
And as with the case of the Korean crisis, a far better American approach would be disengagement – i.e., a series of measures aimed at reversing the disastrously wrongheaded twenty-year U.S. effort to more closely link the nation’s fate to a country with which mutually beneficial commerce was never possible. The Trump administration has already taken some important steps in this direction. Chiefly, it has greatly tightened restrictions on Chinese takeovers of economic assets in the United States. And the President’s threatened tariffs have induced some factories to move from China to the United States. But as previously indicated, the administration also seems bent on helping U.S. companies invest more in the Chinese economy, which can only further widen the trade deficit and hand China more cutting edge American technology. And it’s given no hint of a comprehensive strategy to bring manufacturing supply chains now concentrated in China back to the United States.
The latter task, in particular, will entail a long-term effort – not exactly the American governing system’s strong suit these days. And success will also depend on thoroughgoing domestic policy reform. (See this article for one sensible list.) But compared with the apparent belief that, over any policy-relevant time frame, China’s will become an economy compatible with America’s, it’s the height of realism.
Perot Conservative said:
You cut President Obama a lot of slack for his mediocre or poor economic record. Comparing Apples, Obama had the slowest economic recovery since WWII. This despite cheap energy, free money, and failed Stimulus and Car Buy programs. His policies put a milestone around the economy … the Affordable Care Act for one, and I believe I heard 5,000 new regulations a year.
Using another Apple, Obama left us his last quarter with a 1.6% GDP rate, anemic. Trump has had several quarters at 3% or more, and the Atlanta Fed is estimating Q2 at 4.0%!
Undoubtedly, Obama’s ACA, Paris Accord, tax increases, restrictive energy policies and gargantuan additions in regulations hurt manufacturing and the economy! Big Government failed.
His policies weren’t loved by business, and led to pessimism. In direct contrast, Trump’s tax and regulations cuts and optimistic, pro-American, pro-growth attitude helped business confidence soar. I saw it first hand, as commodity prices for copper, etc jumped 10-15% within weeks of his election. President Trump has been the first POTUS in decades to focus on manufacturing like a laser beam.
With all due respect, Trump appears to have some sharp tigers negotiating trade deals, and I and many Americans are perfectly fine with President Trump using trade components and or “maximum pressure” as part of his strategy to denuclearize the Korean Peminsula. This is another major problem that has festered for decades, and President Trump has made great progress. He gas also gotten 17 hostages released without paying bribes with Billions in foreign unmarked currency. Ridiculous! (An Iranian official has threatened to tell us what American politicians received kickbacks.)
I think you mistyped, Krugmam eas erong with Bush Jr. 9 times. whiz. POTUS can be given big credit for spurring our growth in energy, manufacturing, GDP, and unemployment. But we may agree to disagree.
Perot Conservative said:
Did I miss it?
No reference here to President Trump directing his top trade advisors to open a trade investigation on auto tariffs / trade, just as the NK summit / prospects heat up.
President Trump undoubtedly has short and long tetm goals. I think it is safe ti say he’ll give more leeway to China if we can reach a settlement with North Korea.
BTW, US business competitiveness just jumped back up to number one, ahead of Hing Kong and Singapore?
Alan Tonelson said:
Thanks for the question/comments. The auto tariff announcement was made just as I was finishing up this post. Since these U.S. trade law investigations can take months to complete, and since the final presidential steel and aluminum decision was delayed several times, it was far from clear that the announcement would significantly affect my conclusions – if at all. I hope you’re right re Mr. Trump’s numerous goals, but I’ve seen little evidence of coherence in his trade policy strategy yet. And I continue to believe that it’s a terrible mistake to link his China trade policy with Beijing’s assistance on North Korea. I hadn’t seen that new competitiveness report, and that’s an interesting finding. But I feel some skepticism is justified since the US move to the top spot apparently stemmed in part from the state of its infrastructure: https://www.imd.org/news/updates/the-us-overtakes-hong-kong-at-first-place-among-worlds-most-competitive-economies/
Perot Conservative said:
Let’s take a step back, and look at what the President inherited.
1. $600B trade deficit w China? He didn’t create that. I believe there will be short term and LT gains, and the President is using leverage with China to get peace with their proxy, North Korea.
2. Manufacturing jobs declined under Obama. Over 300,000 new jobs under President Trump!
3. Good deal with South Korea, not perfect, but better.
4. President Trump establishing relationships with China, SK, NK, Japan, before trade moves. Nortk Korea peace highest priority.
5. Trump has his tigers renegotiating NAFTA. My understanding is the backdoor for other nations is through Canada and Mexico. Look for changes there.
6. Paul Krugman predicted a Recession at least nine times under George Bush Jr. Not so sharp, but married well.
Alan Tonelson said:
Thanks again, but 1. Even the goods trade deficit with China alone never even came close to $600 billion annually. 2. Obama can’t legitimately be blamed for most of the net manufacturing job decline during his term in office. He became President as the Great Recession triggered by the financial crisis that broke out near the end of his predecessor’s administration neared its depths. From the trough of manufacturing employment (March, 2010) till January, 2017, its payrolls grew by 916,000. Since Feb. 17 Trump’s first full month) till April (the latest data), manufacturing employment rose by 265,000. So the pace has been moderately faster. In general, though, the soundest way to compare economic trends over time is to use an apples-to-apples approach – recessions versus recessions, and recoveries versus recoveries. 3. The South Korea trade deal has gotten somewhat better. 4. Establishing linkage between the North Korea crisis and U.S. trade relations with any of its neighbors has been a major mistake, which can result either in Trump rewarding countries for something they would have done anyway, or those countries stringing him along endlessly with promises of cooperation on one or both fronts. 5. There is no basis for predicting any outcome from the NAFTA revamp talks. 6. The fact that Krugman was wrong about Trump’s economic record doesn’t mean Trump is an economic policy whiz. Finally, I’ll believe the gloves are off on the China tariffs when they’re actually imposed, and when Trump rejects most domestic interests’ request for exemptions.