Following Up: Biden’s Cave-In on Ukraine, Russia, and Germany and Why It Matters

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Adam Schiff, alliances, allies, America First, Angela Merkel, Democrats, Donald Trump, energy, Eric Swalwell, Following Up, Germany, impeachment, NATO, natural gas, Nord Stream 2, North Atlantic treaty Organization, Russia, Ukraine, Vladimir Putin

Earlier this month, I wrote about the weirdness of the Biden administration’s seemingly blasé attitude toward Ukraine’s security, given the President’s long record of support (including military aid) for its independence from an expansionist Russia, and especially given the determination of the entire Democratic party to impeach Donald Trump largely because his allegedly blasé attitude toward Ukraine security treasonously endangered America’s own security.

Today I can report that the situation has grown even weirder – and in the process, raised major questions about the administration’s view of smooth alliance relations as a top foreign policy priority, and about its adults-in-the-room reputation itself for foreign policy competence itself.

As explained in my March 17 post, the issue at hand is the Nord Stream 2 pipeline, That’s a natural gas transport project that the Trump administration opposed because it threatened to, among other problems, increase Europe’s energy dependence on Vladimir Putin’s Russia, provide this aggressive autocrat with a big new source of revenue and therefore of funds for his military, and ace Ukraine itself out of natural gas earnings, thereby weakening its economy and ultimately its ability to defend itself.

So why is Nord Stream 2 being built? Two main reasons. First, lots of big German (and other European) companies have been involved in its financing and nearly finished construction, and will profit from its operation. (See here and here for good summaries.) Further, the German government is obliged to cover the multi-billion dollar losses that would result from cancellation. Second, Chancellor Angela Merkel;s government views the project as a means of keeping Germany, and Europe in general, economically engaged, influential, and therefore at peace with Russia.

The Germans also say they need the new gas because of its plans to de-nuclearize and de-carbonize its economy. Berlin also has the option of filling the looming energy supply gap by purchasing more gas from the United States than at present.  But Germany seems more impressed by the fact that higher transport costs make the U.S. product more expensive than Moscow’s.

You’d think, therefore, that Germany would be facing heavy pressure to cancel the pipeline from the Biden administration and especially from the impeachment enthusiasts in the Democrats’ Congressional ranks – like California’s Adam Schiff, the lead House manager for the first Trump impeachment trial, who described Ukraine’s sovereignty and safety as nothing less than a vital interest of the United States.

Not a peep about Nord Stream has been heard from Schiff or from other Trump impeachment hard-liners, like California Democratic Congress Member Eric Swalwell – confirming suspicions that their main concerns all along during both the Trump-Russia collusion and impeachment dramas were somehow ousting Trump for purely partisan or possibly simply deranged reasons, not safeguarding America’s security or democracy.

But Mr. Biden’s stance is more puzzling and disturbing – the latter since Presidents matter so much more than individual legislators. As my earlier post noted, his administration has seemed more relaxed about Nord Stream even though it, too, has claimed to harbor major concerns about Ukraine’s fate.

In fact, as recently as a few days ago, Secretary of State Antony J. Blinken declared that “President (Joe) Biden has been very clear, he believes the pipeline is a bad idea, bad for Europe, bad for the United States, ultimately it is in contradiction to the EU’s own security goals, It has the potential to undermine the interests of Ukraine, Poland and a number of close partners and allies.”

Yet just this morning, when asked whether Washington could (and by extension, actually would) do anything to stop Nord Stream 2, Blinken “Well, ultimately that is up to those who are trying to build the pipeline and complete it. We just wanted to make sure that our … opposition to the pipeline was well understood.”

In other words, “La de dah.”

Such quick and complete turnabouts by America’s top diplomat are disturbing in and of themselves, but the real problems with the Biden Nord Stream stance go far beyond the impotence claimed (and therefore advertised) by Blinken.

After all, avoiding a showdown with Germany on the pipeline would be understandable and even smart if Mr. Biden really didn’t view Ukraine’s security, and/or Russia’s aims and power, as terribly important in the first place, or if (as I offered as a possibility in my previous post), this decision reflected some broader administration conclusion that relations with Russia should be improved in order to outflank the stronger and more dangerous Chinese.

But not only is the President a strong believer in deterring Russian designs on Europe. He recently seemed to go out of his way to antagonize Putin by calling him a “killer.”

So the most reasonable conclusion to draw is that, at least for now, Mr. Biden is so determined to keep America’s wealthiest European ally happy that he’s given it a veto on a matter he himself has deemed a major U.S. interest. Worse, he seems indifferent to Trump’s (correct) complaint that Germany evidently has no problem with enriching Moscow while continuing to rely on the U.S. military to defend it from Russia. This doesn’t necessarily leave the President guilty of carrying out an “America Last” foreign policy. But it makes you wonder how far he’ll drift from from putting America First.

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Glad I Didn’t Say That! International Cooperation Doubletalk from Germany

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Angela Merkel, CCP Virus, coronavirus, COVID 19, Davos, European Union, export controls, Financial Times, Germany, Glad I Didn't Say That!, globalism, multilateralism, nationalism, vaccines, Wuhan virus

“Angela Merkel, the German chancellor, said the coronavirus

pandemic has been the ‘hour of multilateralism’, as she used her

speech to plead for more international collaboration to defeat the

virus.”

– Financial Times, January 26, 2020

“Germany is pressing the European Commission to give member

states the power to block the export of coronavirus vaccines

produced in the EU as tensions mounted over shortfalls in supply.”

– Financial Times, January 26, 2020

 

(Sources: “Davos highlights: European leaders urge Biden to extend efforts to reignite international co-operation,” by Guy Chazan et al, Financial Times, January 26, 2020, https://www.ft.com/content/02465195-1957-490d-a3c8-4c54d45469a9 and “Germany presses Brussels for powers to block vaccine exports,” by Guy Chazan et al, Financial Times, January 26, 2020, https://www.ft.com/content/ed0059c9-1ea5-4ba9-a1ff-88004b59e71d)

 

Making News: Back on National Radio Tonight, a New Podcast…& More!

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Angela Merkel, Cato Journal, CCP Virus, China, collusion, coronavirus, COVID 19, election 2020, Germany, Gordon G. Chang, Joe Biden, journalism, Making News, manufacturing, Market Wrap with Moe Ansari, natural gas, Nord Stream 2, presidential debate, recession, recovery, reshoring, Russia, stimulus package, Ted Galen Carpenter, The John Batchelor Show, Trade, trade war, Trump, Trump-Russia, Wuhan virus

I’m pleased to announce that I’m scheduled to return to national radio tonight when I guest on The John Batchelor Show.  The subjects for John, co-host Gordon G. Chang, and me will be China, trade, manufacturing, and the election.

The pandemic is still forcing John and Gordon to pre-record segments, so I’m not yet sure about air-time.  But it seems that you can listen live to the show on-line at this all-purpose link starting at 9 PM EST.  And of course, if you can’t tune in, I’ll post a link to the podcast as soon as one’s available.

In addition, yesterday, I was interviewed on the popular Market Wrap with Moe Ansari radio show on the election (including the debate!), trade policy, the future of the entire U.S. economy, the fate of CCP Virus relief legislation, and a surprising recent example of collusion with Russia.  To listen to the podcast, click here and then on the show with my name on it.  My segment starts at about the 23:38 mark.

Finally, my friend Ted Galen Carpenter has just published in the Cato Journal a fascinating piece on the history of U.S. news coverage of U.S.-China relations – which certainly has seen its ups and downs in recent decades.  It was great, moreover, to see Ted cite two of my writings along the way.  Here’s the link.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Glad I Didn’t Say That: So Who Exactly is Colluding with Russia?

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allies, Angela Merkel, energy, Germany, Glad I Didn't Say That!, Nord Stream 2, Russia, The New York Times, Trump, Vladimir Putin

““President Trump, for reasons that remain one of the top mysteries of his administration, has largely closed his eyes to Mr. Putin’s serial transgressions….”

—The New York Times, September 22, 2020

““The surest sign of European anger [over Russian trangressions] would be cancellation of the Nord Stream 2 pipeline, a gas conduit from Russia to Germany under the Baltic Sea. But the project is nearly completed, and Angela Merkel, the chancellor of Germany, is reluctant to take a step that would be costly for Europe and that would look like bowing to threats from the Trump administration, which has demanded cancellation of the pipeline.

– The New York Times, September 22, 2020

 

(Sources: “Vladimir Putin Thinks He Can Get Away With Anything,” The New York Times, September 22, 2020, https://www.nytimes.com/2020/09/22/opinion/vladimir-putin-navalny-poisoning.html?action=click&module=Opinion&pgtype=Homepage )

Our So-Called Foreign Policy: The Main Threat to U.S. Alliances Sure isn’t Trump

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alliances, allies, America First, Angela Merkel, Belarus, Blob, China, David Brin, free-riding, Germany, globalism, natural gas, Nord Stream 2, Our So-Called Foreign Policy, Philippines, Russia, science fiction, South China Sea, Trump, Ukraine, Vladimir Putin

Here’s how widespread the charge is that President Trump has been destroying America’s longstanding foreign policy alliances – and for no good reason: I just saw it made on Facebook by David Brin. (I hope this link works.)

In case you’re not a science fiction fan like me, Brin is one of the truly great modern masters of this genre. A few years ago, I read his novel of the near future Kiln People, and was just blown away. And his achievements are hardly limited to literature, as this bio makes clear. In other words, he can’t be written off as some hysterically virtue-signaling, Never Trumper know-nothing celebrity. And even if he was, he has every right to express these or any other views. But clearly foreign policy isn’t his wheelhouse.

But here’s how deeply ignorant this comment is: It, and others like it from sources with more than a passing familiarity with U.S. foreign policy and world affairs, keep ignoring just how feckless the countries America’s allied with – and to whose defense the United States is pledged – have long been, and remain. For anyone who cares about The Facts, two major examples of their cynicism and unreliability have appeared in the last month alone.

The first came from the Philippines, whose president, Rodrigo Duterte, is no decent person’s ideal of a national leader. But his island archipelago country is located on the eastern edge of the South China Sea, which has turned into a major regional hotspot and theater of U.S.-China rivalry due to Beijing’s efforts over the last decade or so to assert more and more control over its economically and strategically important sea lanes. So as with decades of pre-Trump presidents and their relations with authoritarian allies, the current administration has overlooked Duterte’s domestic record for the sake of national security.

Duterte, however, hasn’t exactly reciprocated. As a foreign policy realist, I can’t blame him for trying to placate China (which is right in his neighborhood) while continuing to enjoy the protection of the United States (which is far away). But as an America Firster, my main concern is whether the United States has any reason to feel confident about counting on Duterte when the chips are down and shooting starts, and the Filipino leader’s fence-sitting clearly shows that the answer is “No.”

In fact, in February, Duterte went so far as to announce the ending of one of the deals in the web of official U.S.-Philippine defense ties that regulates exactly what American forces can and can’t do on Filipino territory. Because of the Philippines’ location, this so-called Visiting Forces Agreement inevitably impacts how effectively the U.S. military can operate to counter China – and defend the Philippines itself. But Duterte’s spokesman boasted that it was time that Filipino’s “rely on ourselves” and “strengthen our own defenses and not rely on any other country.”

Funny thing, though. In the six-and-a-half months since, Duterte’s confidence seems to have evaporated. Because late last week, his foreign secretary announced that if China attacks, “say a Filipino naval vessel … [that] means then I call up Washington DC.” So maybe there’s some merit to Trump’s insistence that these relationships be reexamined from head to toe?

But in case you think that double-dealing and hypocrisy is limited to “our bastard” types like Duterte…stop. For the second such instance comes courtesy of no less than Germany’s Angela Merkel, who has been anointed as the current champion of the global liberal order by much of the globalist U.S. foreign policy Blob and the Mainstream Media journalists who drink its Kool-Aid.

This lionizing of Merkel, however, is mocked mercilessly by Germany’s continued refusal to make serious military contributions to the defense of Europe, by its huge, global growth-killing trade surpluses, and by its rush to ban exports of crucial medical equipment as soon as the CCP Virus hit the continent.

But Merkel-worship seems to be just as devoted – and unjustified – as ever judging from this report in yesterday’s Financial Times. “Angela Merkel warns Vladimir Putin against intervention in Belarus,” the headline declared.

The article itself, however, made clear that nothing of the kind happened. The German Chancellor simply expressed the “hope” that the Russian leader wouldn’t send troops to quell pro-democracy protests that threaten to topple the longtime leader of this compliant Russian neighbor.

Just as worrisome, earlier this month, Germany reacted with indignation to U.S. attempts to punish and therefore give pause to an increasingly aggressive Russia by ending a pipeline deal that would bring natural gas directly from Russia to Germany.

This Nord Stream 2 project would greatly enrich Putin’s regime (and make more resources available to his military) – and at the expense of alternative gas supplier Ukraine, another Putin target. German companies, however, are heavily invested in the project. So Merkel has responded to suggestions that the country pull out of the deal to protest what looks like Putin’s latest attempt to assassinate a political rival by arguing that the two matters should be “decoupled” because linking an “economically driven project” to the alleged assassination wouldn’t be “appropriate.”

Again, I’m a realist, and won’t criticize these allied leaders for wanting their cake and eat it, too. Their job is to protect and advance their countries’ interests. So if they judge that accomplishing this mission requires fence-sitting and free-riding – and thereby increasing risks to the United States – (especially the risks of rushing to their defense and even of nuclear attack on the U.S.homeland) – they should go ahead,

But by the same token, an American chief executive’s job is protecting advancing and protecting U.S. interests. And the charge – whether by the Brins or the Blobbers of the world – that Mr. Trump is gratuitously endangering venerable relationships that unquestionably make America safer and stronger – belongs in the realms of science fiction and fantasy, not fact..

Im-Politic: Biden’s CCP Virus Fairytales

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Angela Merkel, CCP Virus, contact tracing, coronavirus, COVID 19, election 2020, Germany, Im-Politic, Jobs, Joe Biden, lockdown, reopening, shutdown, testing, unemployment, Wuhan virus

I totally get that Joe Biden would want to throw cold water all over this past Thursday’s U.S. jobs report (for June), whose reported massive gains smashed expectations for the second straight month. He’s virtually certain to be formally named the Democrats’ presidential nominee this year. Therefore, he naturally has a strong interest in portraying the state of the nation, including its economy, in the worst possible terms.

I also totally get that the nation’s media would report Biden’s gloom-mongering. He’s a major political candidate, and what he says is by definition news.

What I totally don’t get is how none of the country’s pundits and other political analysts have caught the glaring weakness and equally glaring internal contradiction in Biden’s core claim that a million more Americans “would still have their job if Donald Trump had done his job.”

The weakness: Biden apparently is charging that the President should have shut down the economy and strongly recommended mask-wearing and social distancing measures (which of course inevitably have their own, independent economy-depressing effects) much earlier than he did (the first such Trump action – a stay-at-home guidance – came on March 16). As a result, he suggests, the U.S. jobs market would be in much better shape. 

But as reported in this Washington Post examination of Biden’s CCP Virus record, nothing of the kind had issued from the former Vice President or his camp by that time. So much, therefore, for any contention that he’s been especially prescient when it comes to the virus’ impact on the economy and on employment in particular.

The contradiction: Let’s say that Biden had indeed recommended a much earlier shutdown – and that the Trump administration had taken his advice immediately. And let’s suppose that the President’s record had been much better in terms of testing and contact-tracing – which Biden has called “the key to restoring enough confidence for businesses to reopen safely and consumers to reengage with the economy” (as opposed to what he has described as the President’s reopening plan: “just open”). Would the massive job losses suffered by the U.S. economy have been avoided, as Biden has suggested? Would even “a million more Americans” be employed – and presumably safely employed (a number whose source I haven’t found, and that represents a small fraction of the 15 million jobs that remain lost since the CCP Virus’ full effects began to be felt)?

Biden and many Americans clearly would like these claims to be true. But good luck finding any supporting evidence. Indeed, everything we know about the anti-virus efforts even of countries that allegedly have dealt much better with the pandemic reveals those expectations to be wholly unrealistic.

Germany is probably the best example – since it’s not a totalitarian dictatorship like China that can lock down massively while truly trampling on the few individual liberties it ever allowed the slightest breathing room. Even so, it’s been widely depicted as the gold standard for anti-virus success.

To summarize, on March 22, Chancellor Angela Merkel imposed on the country one of Europe’s strictest lockdowns. A cautious easing began on May 6. And how have the country’s workers fared? Take a look at the chart below (from Bloomberg.com). That joblessness spike looks an awful lot like America’s. P.S. These figures don’t include millions of German workers not officially counted as unemployed only because of Bonn’s work-sharing programs, which has kept them nominally at work via wage subsidies.

Moreover, practically no sooner did Germany’s reopening begin, than significant virus case flareups began.

In other words, even Germany’s experience makes clear that if you favor maximum anti-virus efforts, like pervasive lockdowns, there’s no avoiding massive unemployment. And given the disease’s transmission rates – which may have worsened, possibly due more to mutation than to any reopenings, even as its never extreme lethality may be weakening – anyone insisting on the contrary deserves to be seen as just another cynical politician peddling fairytales.

 

Our So-Called Foreign Policy: Laughable Mainstream Media Ignorance on U.S. China Policy

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Angela Merkel, China, George W. Bush, H.R. McMaster, international order, Mainstream Media, Mark Landler, North Korea, Ooffshoring Lobby, Our So-Called Foreign Policy, responsible stakeholder, Robert Zoellick, The New York Times, Trump, Ukraine

Bad as it was, the worst aspect of Mark Landler’s New York Times piece yesterday about the first year of President Trump’s foreign policy wasn’t his contention that “liberal, rules-based international order” is a reasonable way to describe the international scene in recent memory. I mean, anyone seen much order out there lately? Or any country paying much attention to rules?

Nor was it endorsement of the conviction held by German Chancellor Angela Merkel – and much of the U.S. foreign policy establishment – that Ukraine is “a vital part of the trans-Atlantic relationship.” That’ll come as news to anyone remotely familiar with the history of either the United States or Western Europe from 1924 to 1989 – when the region was a part of the Soviet Union and its admittedly tragic fate had absolutely no discernible impact on any member of the Atlantic alliance whatever.

Instead, the worst aspect of Landler’s thinly disguised paean to the globalist approach to international affairs was his choice of former President George W. Bush’s top trade negotiator, Robert Zoellick as an authority on dealing with China.

Actually, I agree with Zoellick (though for somewhat different reasons) that Mr. Trump has made a major mistake in basing America’s China trade policy on Beijing’s efforts to help resolve the North Korea nuclear weapons crisis peacefully (and on acceptable terms of course). This week, even the president may have acknowledged this, as he’s tweeted criticism of China based on reports that Beijing has been violating UN sanctions by continuing to sell crude oil to the Kim Jong Un regime.

But the choice of Zoellick to make this accusation is laughably ignorant. Of course, it was the entire foreign policy establishment – as well as the offshoring-happy multinational corporations that finance so much of it – that made the historically foolish and dangerous mistake of assuming that indiscriminately expanding the world’s trade and other commercial ties with China would turn the People’s Republic into a country fundamentally easier to deal with on all fronts, and promote economic and political reform of its communist system.

Zoellick, however, took this naivete to a whole ‘nother level. For he was the American leader who, in 2005, declared that the time was ripe to turn China into a “responsible stakeholder” in the “international system.” The then-U.S. Trade Representative acknowledged that China had a long way to go reach this objective.

But this high profile address (to a quintessential Offshoring Lobby organization) unmistakably signaled the U.S. government’s belief that it was eminently attainable (along with the development of a relationship built on “shared interest and shared values”), and specified that its fate depended on the U.S. side on a campaign by that Offshoring Lobby to pacify those Americans who “perceive China solely through the lens of fear.” Is it any surprise that years of coddling China on trade and national security issues followed (including praise for China’s “constructive role” vis-a-vis North Korea)?

And upon considering Beijing’s ongoing refusal to curb its North Korea trade dramatically and its expansionism in the South China Sea, not to mention its intensified crack down on dissent at home and ever more brazen violation of global economic and commercial norms, can anyone reasonably doubt that Zoellick has been spectacularly wrong?

Interestingly, at one point in his article, Landler quotes Trump national security adviser H.R. McMaster as admitting that, on foreign policy, the president “has moved a lot of us out of our comfort zone, me included.” It’s a move that Landler, and most of his Mainstream Media colleagues, would be well advised to make.

(What’s Left of) Our Economy: More Evidence of Germany’s Stealth Protectionism

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Angela Merkel, consumers, consumption, developing countries, Financial Times, Germany, Global Imbalances, globalization, imports, Matthew C. Klein, protectionism, savings, taxes, Trade, Trump, value-added taxes, VATs, wage suppression, wages, {What's Left of) Our Economy

President Trump’s charges that the United States has signed terrible trade deals in recent decades, and that foreign economies have been the main beneficiaries, inevitably have triggered a potentially useful debate over which major countries are most open to trade and which are tightly closed. Unfortunately, such arguments won’t actually be useful until “open” and “closed” are properly defined, and a new Financial Times column on Germany’s economic policies nicely illustrates how remote that goal remains.

I’ve previously made the case that accurately measuring protectionism – and thus accurately gauging which countries are contributing adequately to global prosperity and which are free-riding – entails much more than adding up individual trade barriers. Such simple counts also mislead on the equally important question of which countries the United States can reasonably hope to trade with for mutual benefit, and which countries can’t possibly qualify.

And because Germany’s government has both taken trade fire from Mr. Trump and vigorously replied, I’ve used it to illustrate the above points. In a short op-ed for USA Today and a much more detailed RealityChek post, I’ve noted that, as with many other leading foreign economies, the main problem with Germany as a promising trade partner stems at least as much from its overall national economic strategy as from its specific trade practices. That is, countries like Germany, which heavily emphasize growing by saving, producing, and exporting, can’t possibly be good trade matches for countries like the United States, whose priorities have been the diametric opposites.

Of course, those national economic strategies manifest themselves in specific practices and policies. (How else could their focus be established?) But the links to trade flows aren’t always clear. For example, there’s widespread reluctance to acknowledge the trade impact of value-added taxes (VATs), which promote exports and penalize imports. The role played by other German policies, like suppressing wages or skimping on infrastructure spending, has been even less apparent.

What the new Financial Times post adds to the mix is a generally neglected form of wage suppression: Germany’s taxes on low-wage workers – which author Matthew C. Klein describes as “among the highest in the world” since at least the turn of the century.

These taxes inflict an outsized blow on Germany’s imports – and on the the world economy as a whole – in at least two important respects. First, economists tend to agree that the lower an individual’s or household’s income, the higher the share of that income will be spent (as opposed to saved). If they’re right, then these taxes ave been hitting Germany’s overall consumption and import levels especially hard. Therefore, these levies look like notable contributors to the bloated German trade and current account surpluses that are not only detrimental to America, but that could threaten the entire world’s financial stability.

Second, as supporters of pre-Trump U.S. trade policies constantly point out, much of what low-income consumers buy is produced and exported by low-income countries (e.g., apparel or school supplies or furniture). So since high taxes on low-wage workers in Germany prevent them from importing as much from the developing world as they could, third world countries need to focus more on customers in more promising markets – like America’s.

Germany and its leader Angela Merkel lately have been basking in the glow of praise from the political classes in the United States and abroad, which have anointed them as among the new, post-Trump champions of free trade and all its purported benefits. (China’s another alleged globalization champion, but that’s another story.) Its lofty taxes on low-wage workers add to the evidence that these titles are wildly premature.

Following Up: Germany’s Merkel on NATO and Defense May be Leading, but Could Lack Followers

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allies, Angela Merkel, Europe, Following Up, Germany, NATO, North Atlantic treaty Organization, Pew Research Center, polls, Russia, Trump

German Chancellor Angela Merkel, who’s not known as a bomb-thrower, at least chucked a pretty good sized grenade into newly volatile relations between the United States and the European members of the North Atlantic Treaty Organization (NATO).

Merkel told a crowd at a political rally today that “The times when we could fully rely on others have passed us by a little bit, that’s what I’ve experienced in recent days.” She clearly was referring to her experience with President Trump, a longtime skeptic of the Atlantic alliance, at NATO’s summit last week. And Merkel continued, “For that reason,” Merkel continued, “I can only say: We Europeans really have to take our fates in our own hands.”

These remarks don’t count as full-fledged bombs for several big reasons. First, as I noted in a recent post, the Trump refusal to endorse explicitly NATO’s Article Five pledge to aid militarily any member under armed attack might have the transatlantic foreign policy crowd in a state of hysteria, but the clause is ambiguous and German and other European leaders have always known – and fretted – about this.

Moreover, U.S. allies repeatedly have discussed creating a meaningful defense capacity of their own with varying degrees of independence from the United States. So far, they’ve never followed through – mainly because American leaders typically responded with renewed pledges of undying loyalty. So the allies understandably felt perfectly free to continue free-riding.

But let’s say that This Time It’s Different (and sometimes it is, otherwise, we’d have no history). What’s interesting to say the least is that Merkel is going to face some major obstacles with her own people and many others in Europe. How do we know this? Let’s simply look at that Pew Research Center NATO poll I posted on yesterday.

Now some sharp RealityChek readers may be wondering why I’m using this Pew data, since yesterday’s post demonstrated many fatal flaws. Here’s the answer: My criticism of Pew focused on its failure to inform American respondents that the nation’s NATO commitments created any risks. That’s important given how ignorant so many Americans remain about even major foreign policy realities, because they’re so physically isolated and insulated from the rest of he world.

But European publics – which were also surveyed by Pew, and whose views I’ll discuss below, are substantially different. After all, they live much closer to Russia, NATO’s main concern. So even if they’re by no means foreign policy experts, the continent’s war-torn past is something much more apparent to them, and especially to their parents and grandparents. Just as important, they’re the ones who will have to live with the worst consequences of poor governmental national security decisions. And if the views they expressed to the Pew researchers are representative, Merkel could well find it almost impossible to help create an independent European defense effort worthy of the name.

Interestingly, Merkel herself implicitly acknowledged that not all the forces jeopardizing European unity are coming from Washington. As she observed, the United Kingdom just voted to withdraw from the European Union last year. And of course she knows how strong anti-EU sentiments remain throughout Europe, and how many stem from resentments over the outsized role Germany has played in dealing with (and allegedly contributing to) recent economic crises like the one that’s engulfed Greece.

Yet what Merkel may not yet know about her compatriots and other Europeans should trouble her even more. For example, according to Pew, German support for NATO is strong (67 percent view the alliance favorably). But only 40 percent of Germans agree that their country should use military force to defend a fellow NATO ally under attack. Fully 53 percent would want Germany to sit out the conflict.

Merkel might draw some comfort from seeing that Germany’s commitment to NATO’s core mission is the weakest among the countries surveyed. But it’s not whoppingly lower than the support for going to war registered in the two other major European military powers, the United Kingdom (45 percent) and France (53 percent). Further, the Pew results show that a distinct minority of those surveyed in NATO’s European members view Russia as a “major threat to their nation.”

Merkel, however, isn’t the only national leader who should be paying close attention to these Pew findings. If they’re accurate, President Trump and the rest of Washington need to ask themselves whether America can count on any prompt, significant assistance from NATO Europe if push comes to shove.

(What’s Left of) Our Economy: Why ‘Less Can be More’ in Trade with Germany – & Others

Tags

Angela Merkel, currency manipulation, euro, Eurozone, Germany, mercantilism, non-tariff barriers, public investment, Trade, trade barriers, Trump, wages, {What's Left of) Our Economy

This week’s first meeting – in Washington, D.C. – between German Chancellor Angela Merkel and President Trump is being billed as a confrontation between polar opposites due to apparently clashing positions on immigration, trade, alliances and international organizations, and contrasting personalities. Actually, notwithstanding the penchant of the mainstream media and bipartisan policy establishment for Trump hysteria-mongering, one of the divides between Mr. Trump and Ms. Merkel may actually be more fundamental than recognized. Growing trade tensions might be signaling that the two economies simply aren’t structured to trade with each other in mutually beneficial ways – at least not at current levels.

So far, the mounting trade row – which could already be the most serious since American ire at an allegedly undervalued deutschemark during the Nixon era – has produced a now-predictable policy debate. The Trump administration is accusing Germany’s powerful economy of unfairly benefiting from a euro that’s kept weak because of the economic problems of its partners in the eurozone. As a result, goes the American complaint, its goods enjoy major price advantages over their U.S. competition all over the world for reasons that have little to do with market forces.

Germany and its sympathizers counter that the country simply makes terrific products, especially advanced manufactures, and that its trade barriers are actually on the low side. Another argument raised in Germany’s defense – in part because of a strong inflation-phobia created by the disastrous experience of the 1920s and by the population’s natural frugality, Germans tend to be low spenders and high savers.

All of the pro-German positions have merit. And the Trump administration case is further complicated by Germany’s consistent calls for eurozone economic policies that would tend to strengthen the common currency.

Yet Germany’s free trade record is at the least open to dispute. Although its tariff levels are generally low, like most other U.S. trade partners, it uses a value-added tax that effectively raises the prices of foreign goods headed for its market and reduces the prices of its exports via the rebates they receive. Moreover, even before President Trump took office, the U.S. government repeatedly reported that non-tariff barriers maintained by Berlin “can be a difficult hurdle for companies wishing to enter the market and require close attention by U.S. exporters.” The country’s government procurement market appears to pose special problems. According to the American Commerce Department under former President Obama:

“Selling to German government entities is not an easy process. German government procurement is formally non-discriminatory and compliant with the GATT Agreement on Government Procurement and the European Community’s procurement directives. That said, it is a major challenge to compete head-to-head with major German or other EU suppliers who have established long-term ties with purchasing entities.”

Nonetheless, the more closely the German economy is examined, the less amenable to standard trade policy remedies it looks. For Germany has long decided to create a national economic and business model that seeks both to maximize net exports and depress consumption at home. Two examples should suffice to make the case.

First, although Germany’s is, as frequently noted, a high-cost, high-regulation country, upon adopting the euro, its government put into effect a series of policies that put its labor costs on a much slower growth path than those of the rest of the eurozone and the high income world as a whole (including the United States). As many critics of Germany have charged, the resulting wage repression has overpowered the euro-dollar exchange rate and in fact amounted to an “internal devaluation” that produced the same effects as currency manipulation.

Second, Germany has also limited its consumption levels in part through very low expenses on infrastructure and other public investments. Moreover, according to one former European Central Bank official, the country’s external orientation has been so pronounced that “private investment in Germany’s aging capital stock has been weakened by many German companies’ desire to invest abroad.”

Revealingly, some of the harshest attacks on these and similar German policies have come from the eurozone itself. In particular, members like Greece and other southerly countries have accused Berlin of conducting a mercantilist campaign to grow at their expense by flooding them with exports and denying them comparable opportunities to supply the German market.

Without taking sides in this dispute, it’s clear that because the eurozone is a currency union, its success arguably depends on members conducting both their domestic and foreign economic policies in mutually compatible ways. So in principle, Germany’s eurozone fellows have grounds for complaining about the totality of the German national model. (The reverse holds as well in principle.)

The United States also should be perfectly free to ask Germany to change its priorities. Unlike eurozone members, however, it has no legitimate claims to influence over this vital aspect of German sovereignty. Germans apparently have decided that their choices work for them, and are absolutely correct to insist that aside from the rules of the World Trade Organization or other international legal arrangements, they have no obligations to accede to foreign demands for reform. Berlin, moreover, has a point when it notes that the United States should look to domestic practices of its own that might be hampering its global competitiveness, rather than placing the burden of change on others.

This German argument, however, is not dispositive. After all, if America’s national business and economic model emphasizes consumption and domestic-led growth rather than promoting net exports, that’s a choice that its own political system has been entitled to make. Moreover, it’s a choice that makes considerable sense for a big, continent-sized economy with great potential for more national self-sufficiency in a wide variety of goods and services. Germany has no more right to dictate U.S. preferences than vice versa.

The decisive difference between the two countries is that Germany has been happy with the pre-Trump status quo, and the United States has not. Washington of course has the right to press complaints about possible German violations of world trade law and other trade agreements. But it also needs to recognize that such conventional approaches are dwarfed by the breadth and depth of Germany’s approach to economics. Promoting German reform isn’t likely to work, either – given the above sovereignty concerns, and given the sheer difficulty facing even so powerful a country as the United States in urging domestic reform on another powerful country – especially one that views itself as a success.

So what to do?

First, in general terms, understand that, however legitimate Germany’s sovereign decisions, they create problems to which the United States is equally entitled to respond

Second, without continuing to hector or nag Germany, figure out the most effective response and act accordingly.

Third, depending on Germany’s counter-moves, decide what combination of unilateral carrots, sticks, and negotiations, might achieve progress (including some acceptable compromise), while preserving approximately current levels of trade.

But fourth, recognize along the way that Germany’s legitimate sovereign economic decisions simply may not permit bilateral trade to continue at those levels with acceptable results for the United States. If need be, then, revert to whatever unilateral strategy can preserve or enhance interests America has identified as its own priorities.

The new status quo would put the ball in Germany’s court, and grant it full scope to accommodate the United States if it’s dissatisfied, or make whatever other changes are needed to achieve whatever new objectives it chooses.

In other words, Washington should deal with Germany through an ongoing process of give and take, employing a variety of tactics and tools in flexible, agile ways. The aim would be to capitalize on its considerable leverage but also understand where it can and can’t hope to succeed at acceptable cost and risk. This approach clearly has a less impressive upside than efforts to produce grand bargains, or than more extensive international economic integration schemes — both of which can in theory maximize bilateral commerce. But its very modesty means that it’s less likely to risk angry misunderstandings and consequent major blow-ups, and more likely to result in trade and investment that’s sustainable not only economically, but politically, socially, and culturally.

President Trump can think of this new policy framework as the Less is More Strategy. And he should realize that its usefulness extends far beyond Germany.