(What’s Left of) Our Economy: Trump-Like China Trade War Advice – from China!

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America First, Asia, China, Clyde V. Prestowitz, free trade, globalism, Japan, Long Tongyu, managed trade, protectionism, South China Morning Post, Trade, trade talks, trade war, Trump, {What's Left of) Our Economy

When I first entered the trade and manufacturing world, I worked for a fellow named Clyde V. Prestowitz, Jr., who was shaking up American attitudes on international economic policy (in a good way) with sharp critiques of the prevailing dogma and often ingenious ideas for reform and even transformation. (The most complete statement of his views – this 1988 book.) 

And one of his most intriguing thoughts held that died-in-the-wool protectionist Asian governments like Japan’s would much rather deal with an openly economic nationalist U.S. President than with a standard preacher of free trade. So imagine my (pleasant) surprise to see this morning that a former senior Chinese economic official who still clearly retains much influence express substantial agreement – and in the process light the way for an American approach toward China’s trade transgressions that moves from what might be called a “Trump Lite” strategy that only partly reflects the President’s sharpest instincts to a much more thoroughly America First-oriented policy.

These views can be found in an interview in Hong Kong’s South China Morning Post describing the views of Long Tongyu. This retired Vice Minister led China’s successful decade-and-a-half effort to join the World Trade Organization (WTO) – a top Beijing priority because membership provided the People’s Republic with valuable insulation from unilateral and other foreign efforts to retaliate against its wide range of predatory practices. And although he’s no longer on active duty, he would never, ever make public statements at odds with the beliefs of current Chinese leaders. In fact, folks in his position often float trial balloons for the regime and serve in other ways as unofficial spokespeople.

According to the Post, Long stated that “We want Trump to be re-elected; we would be glad to see that happen.” And why would Beijing prefer to deal with a President who’s imposed tariffs on hundreds of billions of dollars worth of exports on which China depends to achieve adequate growth rates, rather than with Democratic rivals who oppose such measures?

As Long explained, “Trump talks about material interests, not politics.” Further clarifying, he contended that “He makes the US decision-making process efficient and transparent, because he basically says what it is. The pros of [having Trump] outweigh the cons. We don’t need to spend so much time figuring out what Americans want any more, or search for each other’s real thoughts in the dark, like we used to.”

Even more specifically, according to the Post‘s paraphrase, “Despite his fickleness, Trump is a transparent and realistic negotiator who is concerned only with material interests such as forcing China to import more American products, on which Beijing is able to compromise….”

Although Long didn’t use this phrases, it’s clear that he was lauding a Trump trait denounced by the President’s globalist critics – an approach to foreign policy described as “transactional.” In other words, Mr. Trump is more interested in securing relatively immediate, tangible, specific goals when dealing both with allies and adversaries than with more ambitious objectives valued by globalists for their supposed potential to promote U.S. interests most effectively over the long term, whatever the short-term risks or costs – like preserving American alliances and international institutions, and keeping other relationships (i.e., with China) on an even keel. (See this early post-Cold War article of mine for a more complete analysis of such conceptual differences.)

In the process, it’s clear that Long was also endorsing Prestowitz’ belief (which he based on his own personal experiences as a U.S. trade negotiator during the 1980s) that Washington could not hope to succeed with fundamentally different systems like Japan’s (his interlocutor) or, by extension, China, by demanding that these governments agree to American demands for more openness to imports, or broader structural changes that would lead indirectly to better sales for U.S. products and services.

Instead, Washington was much better advised to seek less grandiose but more concrete commitments – specifically, to increase imports by specific amounts.

This shift to “managed trade” or “results-oriented trade” ostensibly horrified the U.S. policy establishment. But the Prestowitz proposal was adopted by former President Ronald Reagan in 1986 in negotiations with Japan over semiconductors, and achieved its objectives of expanding American companies’ share of Japan’s market.

Further, Prestowitz’ main rationale was also echoed in Long’s remarks. He didn’t justify managed trade mainly for the relatively easy verification challenge it presented – although he did emphasize that Washington would be much better able to monitor promises to boost buys of specific products than foreign promises to convert to free trade principles. Nor did Prestowitz stress that such sweeping U.S. demands were unrealistic, and that protectionist countries would respond by simply stonewalling.

Rather, Prestowitz contended that Asian protectionists were genuinely bewildered and frustrated by standard American positions, primarily because the ideas behind them were so alien to their experiences. Similarly, and in line with Long’s views, they didn’t comprehend how negotiations could resolve or bridge differences that ultimately are philosophical or ideological. They much more clearly understood pragmatic haggling over quantities, and Prestowitz argued quite sensibly that superior U.S. leverage could be counted on to persuade these export-dependent economies to treat American imports more generously.

As a result, the implications for Trump trade policy couldn’t be clearer. The United States should drop its demands that China change its policies fundamentally, whether on the intellectual property front or the technology extortion front or the illegal subsidy front or various other non-tariff barrier fronts. (As I’ve previously written, there’s no chance of verifying even genuine Chinese compliance satisfactorily.)

A much better response would be a combination of (1) severely punitive tariffs to make sure that Chinese products benefiting from these practices don’t enter the American market, and harm American-owned producers; and (2) other threatened or imposed tariffs aimed at obliging Beijing to purchase much greater amounts not only of agricultural products, but the full array of advanced manufactured products.  The first set of tariffs would center on those advanced manufactures, the second on more labor-intensive Chinese products – which Beijing relies on heavily to keep employment high enough to keep China’s masses content economically.  

That first set of tariffs would not only prevent U.S.-owned producers from having to deal with heavily subsidized and/or copycat Chinese competition. It would surely prompt China to send these exports elsewhere – and finally pressure the rest of the world to get its own act together in responding to China’s excess capacity building and dumping, rather than relying on the United States to soak up these surpluses.

The second set of tariffs would need to be accompanied by a resolve not to let Beijing off the hook with claims that its own economy simply can’t absorb greater supplies of American goods across the board. Rather than enable China to use free market-oriented excuses after decades of (continuing) state planning and other interventionism, Washington should tell Beijing that, for all the United States cares, it can stick these products into warehouses if genuine customers can’t be found.

This new approach shouldn’t represent the totality of a smarter new U.S.-China economic policy. In particular, the Trump administration should keep sharply restricting Chinese purchases of American hard assets, whether defense-related or not – because why should a basically free market economy welcome state-controlled and bankrolled entities that can only further distort free market forces? And controls on exports or other transfers of advanced technology to Chinese entities will need to be further tightened.

But a shift to managed trade is nothing less than essential. And assuming that Long Tongyu reflects Beijing’s thinking, with enough American consistency and resolve, China would go along before too long.

Our So-Called Foreign Policy: America’s Asian Alliances Have Become More Dangerous Than Ever

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alliances, allies, Asia, China, deterrence, Japan, North Korea, nuclear weapons, Our So-Called Foreign Policy, South Korea, tripwire

With all the uproar generated, at least among globalist foreign policy professionals, by President Trump’s various verbal attacks on America’s alliance arrangements, it’s easy to forget their most important purpose. It’s not to protect allies for their own sakes, much less to “uphold the liberal global order” or to “promote American values”  or to “preserve international stability.” 

Their most important purpose is to increase via the use of the allies’ military forces the odds that if a conflict breaks out in a particular neighborhood deemed crucial to America’s own interests, that the United States will prevail. The other aforementioned objectives can of course line up with this overriding military objective, and they can of course result from its attainment. But the alliances’ fundamental raison d’etre is to help the United States on the battlefield in a region whose freedom from foreign domination is considered crucial to America’s own security and/or prosperity.

Further, this military assistance once the shooting starts matters a lot because such support can go far toward preventing these regional conflicts from triggering the use of nuclear weapons, and thereby preventing possible nuclear attacks on American territory.

All of which is why recent trade tensions between Japan and South Korea – America’s two leading allies in East Asia – should be of such urgent concern. For the feud, which has just prompted South Korea to pull out of a military intelligence sharing agreement it had recently reached with Japan, could not be a clearer sign that none of Washington’s longstanding assumptions about such crucial military support from these two countries remains valid – if they ever were – and that these arrangements are now not only outdated, but dangerously outdated.

For the quarrel’s outbreak and intensification represent the most important evidence to date that both Japan and South Korea care little about providing such support in an effective way – which unavoidably requires them to work together. How can they cooperate, and thereby effectively reinforce U.S. military operations, if they literally won’t even talk to each other about current or emerging battlefield conditions and threats?

And if Japanese and South Korean assistance will remain marginal at best (a conclusion supported by the relatively modest size and capabilities of their own forces, which have long been unable to repulse regional aggression without American assistance, despite the huge size of their economies) then the odds of keeping any regional conflict non-nuclear – and keeping the U.S. homeland safe from North Korean or Chinese nuclear attack – become unacceptably low for the United States.

At one time, the United States could have eased this dilemma satisfactorily by spending still more money on conventional forces for the defense of countries that are alarmingly blasé about defending themselves – however dubious this option is on military grounds alone. (For how promising are efforts to protect countries that are so determined to avoid risks and costs?)

But because of the emergence and improvement of the nuclear forces of North Korea and China, respectively, even that option will no longer squares the circle adequately.  Which means that the alliances (including in the North Atlantic Treaty Organization – NATO – on the other side of the world) have reached the point of becoming net threats to U.S. national security, not net boosters.

Worst of all is American policy on the Korean peninsula.  It remains unchanged  from the days when North Korea arguably could be deterred by threatened U.S. nuclear weapons use from attacking with its own superior conventional forces because it lacked nuclear retaliatory capability.  As a result, it continues to station nearly 30,000 American troops right near the border of the aggressive and volatile North for the express purpose of creating a “trip wire.”  In other words, North Korea might now be able to destroy U.S. cities with its own nuclear bombs, or soon might be able to in response to American nuclear use. But Washington still recklessly seeks to prevent any such attack by the North in the first place by placing these troops in imminent danger and leaving nuclear use the only realistic option of saving them if hostilities ever did break out.  

If a standard globalist President was occupying the Oval Office, it would be understandable that he or she would be responding to the Japan-South Korea feud and its alliance implications by wishing it away. But Donald Trump is an avowed America First President – and has demonstrated many instincts along these lines. Why is he waiting to long to take this latest, massive hint, and leave these increasingly unreliable countries to their own (considerable) devices?

Our So-Called Foreign Policy: America’s Foreign Policy Blob Challenged from Within

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alliances, allies, America First, Asia, Blob, burden sharing, Chas W. Freeman, East Asia, East Asia-Pacific, establishment, globalism, Japan, North Korea, nuclear deterrence, Our So-Called Foreign Policy, South Korea, Trade, Trump

Chas [that’s not a typo] W. Freeman isn’t exactly a household name. He’s even far from the most prominent member of the U.S. foreign policy “Blob” – the bipartisan establishment of current government bureaucrats, former officials, think tank-ers, academics, and journalists whose members for decades have both constantly changed exchanged jobs as their particular political patrons have rotated in and out of elected office, and helped keep the nation’s approach to international affairs on a strongly activist, interventionist (i.e., globalist) course for decades.

That is, they’ve succeeded in this mission until Donald Trump’s election as president, and even he hasn’t managed to throw off their grip completely. (See this 2018 article of mine for an explanation of how globalism and the “America First” approach touted by Mr. Trump differ, and examples of how his foreign policy decisions have reflected both strategies so far.)

But Freeman is a card-carrying member of the Blob – as one look at his bio should make clear. And that’s what makes this recent speech of his so interesting and important.

The address, delivered to a world affairs conference in Florida, has attracted the most attention (especially on Twitter) for its critique of President Trump’s China policy. And that makes perfect sense given the Freeman literally was present at the creation of the Nixon-era outreach to the People’s Republic that ended decades of Cold War hostility and set the framework for bilateral relations from the early 1970s until the Trump Era began.

But in my view, the China portions are eminently forgettable – amounting to a standard (but less oft-stated these days) Blob-y claim that the PRC is being scapegoated for chronic failures of U.S. domestic economic and social policy.

What really stands out is this passage – which clashes violently with the Blob’s defining worship of America’s security alliances and dovetails intriguingly, albeit only partially, with my own views of how America’s economic and security strategy toward China and the rest of East Asia should evolve.

According to Freeman (and he’s worth quoting in full):

“President Trump has raised the very pertinent question: Should states with the formidable capabilities longstanding American “allies” now have still be partial wards of the U.S. taxpayer? In terms of our own security, are they assets or liabilities? Another way of putting this is to ask: Do our Cold War allies and their neighbors now face credible threats that they cannot handle by themselves? Do these threats also menace vital U.S. interests? And do they therefore justify U.S. military presences and security guarantees that put American lives at risk? These are questions that discomfit our military-industrial complex and invite severe ankle-biting by what some have called ‘the Blob’ – the partisans of the warfare state now entrenched in Washington. They are serious questions that deserve serious debate. We Americans are not considering them.

“Instead, we have finessed debate by designating both Russia and China as adversaries that must be countered at every turn. This has many political and economic advantages. It is a cure for enemy deprivation syndrome – that queasy feeling our military-industrial complex gets when our enemies disorient us by irresponsibly defaulting on their contest with us and disappearing, as the Soviet Union did three decades ago. China and Russia are also technologically formidable foes that can justify American R&D and procurement of the expensive, high-tech weapons systems. Sadly, low intensity conflict with scruffy ‘terrorist’ guerrillas can’t quite do this.”

If you ignore what I view as the not-very-informative shots against the “warfare state,” you can see that Freeman comes close to exposing some of the main weaknesses and even internal contradictions of both main factions in the national China policy debate, and (unintentionally, but unmistakably) provides some support for the America First set of priorities I’ve proposed.

Specifically, supporters of pre-Trump China trade policies generally have insisted that China and the rest of East Asia are crucial to America’s economic future because of their huge and fast-growing markets and overall dynamism. But although they staunchly back maintaining the U.S. alliances in the East Asia-Pacific region that has long aimed to secure the political independence of its non-communist countries and thereby keep their economies open to American exports and investment, they keep ignoring three major problems created by this approach.

>First, the trade and broader China economic policies they’ve stood for have greatly enriched and strengthened the country posing the greatest threat to East Asian security. (See, e.g., this column.) 

>Second, because of the growth and increasing sophistication of Chinese and North Korean nuclear forces, America’s alliances in the region have brought the U.S. homeland under unprecedented threat of nuclear attack from both of these rivals.

>Third, despite the alliances, countries like Japan and South Korea have remained highly protectionist economies whose trade predation has damaged America’s overall economy and particularly its manufacturing base. In fact, there’s every reason to believe that U.S. security objectives have enabled this allied trade predation, by preventing Washington from retaliating effectively for fear of antagonizing Tokyo and Seoul.

The Trump policy mix strikes me as being much more internally consistent. In large measure because of fears of growing Chinese military might, it’s trying to use both trade and investment policy to curb Beijing’s use of intellectual property theft and technology extortion in particular to gain regional parity with U.S. forces and thus make America’s alliance commitments much more dangerous and costly to fulfill. The administration also deserves credit for recognizing the purely economic damage Asian trade predation has caused America.

But for all the president’s complaints about defense burden-sharing, he, too, appears determined to keep the alliances intact. Hence his recent insistence that South Korea pay more of the costs of the U.S. troop deployments on its soil despite his repeated claims about the alliance’s necessity. Just as important, although the Trump Asia policies have sought more balanced trade flows with regional allies, these very efforts make clear how unsatisfactory these economic relationships have been. As a result, they sandbag the case that the United States must run major military risks to preserve them.

Freeman’s speech suggests support for a different set of priorities. In one sense, they’re logical: If, as he suggests, its security alliances in East Asia are no longer good deals for the United States, then it’s indeed not such a big deal from a security perspective if America’s economic policies toward China are helping Beijing increase its military power – and boost the odds that it will someday control the region to America’s economic detriment.

Yet Freeman’s apparent priorities fail on the purely economic front, as they seem to propose doing nothing whatever to combat the Chinese policies that have harmed America’s economy.

And that’s why the America First recipe I’ve proposed makes the most sense:

>First, disengaging from an increasingly hostile and economically dangerous China (largely because no trade deal can be adequately verified).

>Second, recognizing that trade with the entire East Asian region has been a loser for the United States and certainly not worth the growing military risks to the American homeland – and thereby concluding that the U.S.’ still-overwhelming economic leverage is likeliest to secure whatever improvements in trade and commercial relations are needed.

>Third, wherever possible, using this economic leverage to shift jobs offshored to Asia but not likely to return to the United States (because they’re too labor-intensive and therefore “low tech”) to Mexico and Central America. The resulting new economic opportunities could go far toward solving the Western Hemisphere’s immigration problems.

Unfortunately, because the Trump administration has its Asia priorities so confused, optimism regarding major changes is tough to justify. But Freeman’s willingness to challenge from within the Blob’s fetishization of U.S. alliances, however flawed, is a ray of hope. And who was it who said that a journey of a thousand miles begins with a single step?

(What’s Left of) Our Economy: With Allies Like These….

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allies, Asia, auto tariffs, China, Europe, Germany, intellectual property theft, Japan, Robert J. Samuelson, South Korea, steel tariffs, tariffs, The Washington Post, Trade, Trump, value-added taxes, {What's Left of) Our Economy

Nationally syndicated Washington Post columnist Robert J. Samuelson intended this week’s essay to show how foolish, and possibly disastrous, President Trump’s emerging new trade policy will be – including for the national security goals the administration has set. That’s why it’s so ironic that his column instead unwittingly revealed how thin a reed the nation’s long-time security strategy has been, and nowhere more so than in the importance it’s assigned to its long-time security alliances in Europe and Asia.

Samuelson’s piece conveys a warning that the administration’s trade policy moves so far are on course to undermine national security in two related ways: by ignoring the alleged imperative of enlisting its major allies in a multilateral campaign to discipline predatory Chinese intellectual property and related trade and industrial policies that need curbing; and by actually antagonizing these countries and thereby jeopardizing the very existence of those alliances.

This argument conveniently overlooks several big trade and security fundamentals. First, globalist pre-Trump American leaders themselves have insisted that they’ve long tried to create multilateral pressure on China’s rogue economic behavior for years before Mr. Trump became president – though it’s unclear how serious these efforts were. For example, the Trans-Pacific Partnership (TPP) trade deal largely touted by the Obama administration for its potential to curb China’s influence contained a back door for numerous imports with major levels of Chinese content.

Second, it’s anything but obvious that U.S. alliances strengthen American security on net. As I’ve pointed out frequently (including this past week), they continue to expose the American homeland to the risk of nuclear attack even though the Soviet-style kinds of global threats their nuclear guarantees were intended to counter have been (literally) gone for nearly three decades. Moreover, as has been widely reported, the militaries of many of these allies have deteriorated so markedly that their potential as force multipliers for the United States is open to serious doubt.

But Samuelson’s analysis makes no sense even if these considerations are put aside. The key is in his own portrayal of leading U.S. allies – which he describes as livid about recent American steel tariffs, and sure to become even angrier is levies are imposed on their motor vehicle exports to the United States. Indeed, he worries, major auto-exporting countries like Germany, Japan, and South Korea could well become so upset with the United States that they not only retaliate in kind, but unhesitatingly move to supply China with whatever high tech goods and services Washington embargoes or restricts.

In other words, these allies would redouble their efforts to feed the Chinese beast even though all of them face China trade, technology, and/or national security threats of their own, and even though the United States continues to provide them with crucial military protection – including, in the case of Japan and South Korea, from Chinese designs. But these same allies were supposed to be amenable to cooperating with Washington to deal with China? Even more revealing, the allies would choose to intensify confrontation with the United States instead of (finally) proposing concrete steps to deal with the China problem over which they profess concern.

And they would display no interest whatever in meaningfully removing the formidable obstacles they have created to block American automotive exports. (The recently reported German auto-makers’ proposal to eliminate all tariffs in the sector on both sides of the Atlantic would leave in place towering European value-added taxes – e.g., 19 percent in Germany – on motor vehicles and most other imports. No such U.S. equivalent exists either for autos or for light trucks and sport utility vehicles.)

No one can fault these European and East Asian countries from acting in their own perceived interests – or even for trying to have their cake and eat it, too. Indeed, for decades, globalist American foreign policies have encouraged and actively enabled precisely this kind of free-riding. What these countries should be faulted for is posing as allies (let alone allies with justifiably hurt feelings), and worse, as paragons of sobriety and free market values nobly resisting a wrecking ball of an American President. As for any Americans and U.S. leaders who keep fooled by this act for so long and, more important, failing to take the policy hints – shame on them.

(What’s Left of) Our Economy: Why Trump was Still Right to Nix Obama’s TPP Trade Deal

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Asia, Barack Obama, bilateral trade agreements, China, export-led growth, mercantilism, multilateral trade agreements, non-tariff barriers, rules of origin, subsidies, tariffs, tech transfer, TPP, trade surpluses, Trans-Pacific Partnership, Trump, {What's Left of) Our Economy

At first I was irritated with President Trump for his expressions of interest this year in reviving U.S. efforts to join the Trans-Pacific Partnership (TPP) – the Pacific Rim-wide trade agreement that former President Barack Obama couldn’t persuade Congress to ratify, and that Mr. Trump removed from America’s policy agenda during his first week in office.

I still wish the President had kept the TPP consigned to the proverbial ash heap of history. But I do see one silver lining in his apparent about-face: the new opportunity it creates to remind how awful the Obama TPP was, and in particular how cynical the case that it represented a masterful ploy to contain the rise of Chinese power regionally and globally, and even shape it to serve America’s goals of sustaining an open world trading system.

In fact, it’s entirely possible that Mr. Trump’s apparent new openness to TPP results at least partly from widespread claims from mainstream politicians and analysts that its multilateral nature endowed the deal with much more potential to curb China’s trade predation than the unilateral tariffs he’s announced.

Yet this contention is the one that’s most easily refuted. First, the version of the treaty signed by Obama contained a wide open back door for many Chinese exports by allowing goods that contained high levels of content produced outside the TPP zone to be traded freely within the zone. Given how central China is to Asia-wide production chains, these loose rules of origin were bound to enable China to enjoy crucial benefits created by the TPP without incurring any of the obligations.

Second, until the eve of its departure from office, neither the Obama administration nor any TPP supporters in Congress or the mainstream media or the think tank world lifted anything more than the occasional pinky even to protest perhaps the principal source of China’s rising economic and military power – the massive transfer of cutting edge knowhow, along with capital, from U.S. tech companies to Chinese business partners or other institutions, either voluntarily (including through shortsighted training programs and investments in Chinese entities) or involuntarily (due to Beijing’s widespread practice of linking access to the China market to the handover of critical technology).

The sudden transformation of these corporate panda-huggers and their hired American guns into China skeptics and even hawks has demonstrated nothing more than that national security is the last refuge of a trade policy scoundrel – especially since by all accounts, U.S. technology and investment continue pouring into China – including defense-related tech. (See here and here for some evidence.)

Third, there’s no reason to believe that most of the other key TPP members have any interest in turning China into a free-trading economy. Quite the contrary. Whether it’s Japan or Singapore or Vietnam or Malaysia, most of the treaty’s most important countries have followed China-style economic development models (except when they’ve borrowed from Japan’s somewhat different but of course much earlier blueprint). And economic openness emphatically isn’t in the recipe. What’s central to these strategies is amassing trade surpluses with the United States and the rest of the world to help generate adequate levels of growth and employment.

The bottom line: Most TPP countries knew that effective disciplines on the trade predation largely responsible for China’s surpluses could be used against their own subsidies and non-tariff barriers. Conversely, it’s surely the reason that these economies accepted the paper curbs on mercantilism that are mandated by TPP. They’re rightly confident that thanks to the secretive bureaucracies that keep their economies effectively closed – and their barriers difficult for outsiders even to identify, much less litigate – none of these curbs is remotely enforceable.

Even better for TPP’s mercantile majority, the treaty’s dispute-resolution system ensured that the United States would be repeatedly outvoted when it sought to advance or defend its interests.

That’s why the TPP was so likely to supercharge America’s already enormous and economically damaging trade deficits. The TPP mercantilists’ liberalization promises would do nothing substantial to open their markets and increase U.S. export opportunities. But America’s TPP commitments, carried out by a government characterized by transparency, would be very effective guarantees that the American market would remain wide open to the TPP majority’s products.

President Trump has demonstrated that he recognizes many of these fatal flaws in the Obama TPP. His stated preference for bilateral over multilateral trade deals suggests an understanding that the former give the United States much more legal authority in dispute resolution. Moreover, he has explicitly tweeted that he’d only back rejoining the TPP if major fixes were made.

Precisely because he’s the only American President in recent memory to show any interest in changing the nation’s ill-considered trade status quo, and any awareness that the United States retains ample leverage to achieve its trade objectives unilaterally, I can’t rule out the possibility that Mr. Trump might turn TPP into a winner for the U.S. domestic economy (as opposed to the importing and offshoring lobbies).

But the main lesson that should be taken from decades of American trade diplomacy with Asia is that economies structured to promote exports and limit imports are going to stay substantially closed no matter what promises they make. Therefore the best course for the United States to make is to expend its energy and resources on reducing its economic engagement with Asia, rather than trying to remake the region in anything like its own image.

Our So-Called Foreign Policy: Desperately Needed Common Sense About North Korea and Asia

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alliances, Asia, Australia, China, deterrence, Hugh White, Indo-Pacific, National Security Strategy, North Korea, nuclear weapons, Our So-Called Foreign Policy, Trade, Trump

How nice it would be if the United States had, like forever, or even close, to figure out how to resolve the North Korea crisis safely and peacefully. That’s far from the case, of course, which is why I found this recent Bloomberg interview with a noted Australian strategist so bittersweet to read.

One the one hand, although he didn’t address the scary situation on the Korean peninsula created by the Pyongyang regime’s progress in building nuclear weapons that can strike the American homeland, this strategist did join me in asking the key question that American leaders have so irresponsibly ignored at least since the Cold War came to an end. On the other hand, it’s awfully late in the game, and official Washington is still in evasion mode.

The big question broached by Hugh White, a former top adviser to the Australian government and leading writer on Asian security affairs: Whether it should be a top American priority to preserve its decades-long position as East Asia’s leading power against a steadily intensifying challenge from China.

For all its alleged and even sometime stated determination to disrupt the central assumptions underlying U.S. foreign policy since not only the Cold War but even the end of World War II, the Trump administration has answered this question with an emphatic “Yes.” According to its National Security Strategy document, released last December, the Asia-Pacific region (which it now calls the “Indo-Pacific,” in order to emphasize India’s importance in achieving U.S. aims:

“The region, which stretches from the west coast of India to the western shores of the United States, represents the most populous and economically dynamic part of the world. The U.S. interest in a free and open Indo-Pacific extends back to the earliest days of our republic.” And for good measure, it discusses American policy in this area before it turns to Europe.

The document also explicitly states that the main challenge to this freedom and openness so long prized by the United States comes from Beijing. China is accused of “using economic inducements and penalties, influence operations, and implied military threats to persuade other states to heed its political and security agenda” and of mounting “a rapid military modernization campaign designed to limit U.S. access to the region and provide China a freer hand there.”

And the President himself has insisted that America’s alliance with South Korea – and the need to protect it from its northern neighbor despite the growing nuclear threat to the United States – “is more important than ever to peace and security on the Korean Peninsula and across the Indo-Pacific region.”

As I’ve repeatedly written, I completely disagree – especially given not only the quantum leap in the North Korean nuclear threat, but China’s impressively growing nuclear capabilities as well (which of course mean that the U.S.’ determination to keep the South China Sea free of Chinese control has become much more dangerous, too). So it is more than high time for American leaders to fall out of love with diplomatic boilerplate and start asking themselves what possible benefits – whether in the national security or economic fields – can possibly compete with the risk of nuclear warheads landing on American soil.

Because White is a big name in the field, it’s encouraging to see him making a point like this – which directly clashes with the conventional wisdom that the United States would face disaster if China gained the ability to set the framework for doing business in the Indo-Pacific, or whatever you want to call it. If China prevailed, White told a journalist this past week:

“Of course America will remain a major economic player globally, and in Asia, for as far ahead as we can see….Its position will be like that of the Europeans, who trade and invest massively in Asia without any real strategic presence there.

“Of course, that will mean that America will have to engage economically within the terms set by a regional strategic order led by others — presumably by China. That won’t be ideal for America, but it would be better than the alternative, if the alternative is to confront China in a bitter all-out contest for regional leadership in which China enjoys many asymmetric advantages. A contest like that would most likely be much more damaging to America economically than accepting the rules in Asia as set by China.”:

For the record, I can’t imagine that even a U.S. military withdrawal from East Asia would result in China “writing the economic rules” for the simple reason that the United States would remain such a supremely important market for the region’s economies – which remain heavily dependent on racking up export sales and trade surpluses for their growth. Indeed, given the massive deficits America keeps amassing with these same countries, and the towering trade barriers maintained by allies like Japan and South Korea, it’s hard to understand the argument that the U.S. military presence has created any net benefits for the American economy at all during any period.

But White’s point about possible economic losses paling before potential security disasters is of paramount importance – precisely because the threats now posed by American adversaries are nuclear in nature.  And this development makes the case for an American military pullback even more compelling. That’s why we should all hope like heck that someone with some influence on the Trump administration reads these statements by White. The stakes of getting U.S. Asia policy right are rapidly approaching the life and death zone for millions of Americans.. 

Our So-Called Foreign Policy: The Blob Keeps Discrediting Itself on Trump and Asia

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alliances, allies, Asia, Bloomberg View, China, David Ignatius, foreign policy establishment, Hal Brands, Our So-Called Foreign Policy, Soviet Union, The Johns Hopkins University School of Advanced International Studies, Trade, Trump, Washington Post, Yalta

President Trump’s recent Asia trip – or, more specifically, the chattering class commentary it keeps generating – is the gift that keeps on giving, especially for a blogger. I can’t remember a foreign policy event that has generated so much material from so many mainstays making of the nation’s foreign policy blob making so clear how systematically they fail tests of basic competence, common sense, and even internal consistency .

It’s long been clear that you don’t get ahead in America’s bipartisan foreign policy establishment with thinking that even peeks outside the box, but I had always thought that this hidebound crowd at least valued minimal knowledge. The November 14 essay by the Washington Post‘s David Ignatius casts doubt even on that proposition.

As Ignatius sees it, “Trump’s trip may indeed prove to be historic, but probably not in the way he intends. It may signal a U.S. accommodation to rising Chinese power, plus a desire to mend fences with a belligerent Russia — with few evident security gains for the United States. If the 1945 Yalta summit marked U.S. acceptance of the Soviet Union’s hegemony in Eastern Europe, this trip seemed to validate China’s arrival as a Pacific power.”

I had to read this passage several times before convincing myself it was actually written. For although it’s entirely legitimate to question Mr. Trump’s approach to China, the historical comparison indicated is jaw-droppingly ignorant. In fact, it amounts to endorsing a narrative about the beginning of the Cold War that’s been emphatically rejected by all students of the period outside the ranks of the lunatic right.

After all, evoking Yalta as an example of appeasement requires believing that the United States (with or without the help of the United Kingdom and France) could have done something to prevent the Soviet Union from establishing control over what would become the Iron Curtain countries. Why is this preposterous? Because literally millions of Red Army soldiers were occupying the region. Can anyone this side of sane really suppose that, after nearly four years of costly conflict with Nazi Germany – and with six months left of brutal combat against Japan – American leaders were going to turn on Moscow?

Just as important, although nothing done by President Trump indicates any desire to recognize China as a superior or even a co-equal in the Asia-Pacific region (as made clear here), there’s no question that China has been catching up to the United States economically and militarily. So why didn’t Ignatius broach the question of “Why?” Could it be because the reckless trade expansion with China backed enthusiastically by the entire foreign and economic policy establishment has transferred literally trillions of dollars worth of trade profits and defense-related technology to Beijing? So there’s another test Ignatius has flunked – that of intellectual honesty. (Interestingly, Ignatius himself seems to have been silent on the issue when it was being debated heatedly in the late 1990s and into 2000.)

Hal Brands’ Bloomberg View essay on the same subject two days later shows off another feature of establishment foreign policy thinking that’s all too common: trafficking in euphemisms aimed at hoodwinking the public – and, no doubt, unsophisticated politicians. According to Brands, a senior professor at The Johns Hopkins University School of Advanced International Studies, the Trump visit reminded Americans and Asians once again that the president

“is blind to the importance of trade and commercial openness in underpinning America’s key security relationships. The president praised America’s tradition of defense cooperation with Japan, yet he continued to harangue Tokyo over its trade surplus with the U.S. Administration officials sought to foster enhanced multilateral cooperation on regional security issues, yet Trump reiterated his previous condemnations of the multilateral trade deals that previous administrations had seen as necessary complements to those defense relationships.”

Further, Mr. Trump seemed oblivious to how, “In the broadest sense, U.S. security and economic relationships have long gone hand-in-hand. Liberal trade practices have provided the economic lubricant for military partnerships, and reinforced the idea that America’s interactions with its closest friends are positive-sum rather than zero-sum.”

“Likewise,” he Brands writes, “allies have deferred to Washington on geopolitical issues not just because of the military protection the U.S. provides but because of its critical role in advancing an open international economy from which those allies benefit enormously.”

“Trade deals that [have] been “necessary complements to…defense relationships.” “Liberal trade practices [that] have provided the economic lubricant for military partnerships.” “Allies deferring “to Washington on geopolitical issues not just because of the military protection the U.S. provides but because of its critical role in advancing an open international economy from which those allies benefit enormously.”

Judging from these phrases, the longstanding status quo in East Asia has been so farsighted, so mutually beneficial, and even so warm and fuzzy and pleasingly symmetrical, that only a knave, a fool, or both would want it undermined. But translated into plain, euphemism and metaphor-free English, what Brands is saying is that the arrangements he believes Mr. Trump wants to shake up require the United States not only to bear the vast bulk of the burden of (rapidly growing, and increasingly nuclear) military risk, but most of the economic costs as well (both in the form of outsized defense spending and wildly lopsided trade flows).

And despite the “enormous” benefits enjoyed by the allies, if the United States doesn’t keep delivering on both grounds, these Asian countries will (a) be fully justified in questioning Washington’s reliability, and even telling the Seventh Fleet and the U.S. nuclear umbrella, to pack up stakes and return home; and (b) will be sorely tempted to do so.

Brands has every right to argue that the United States should expose itself to the ever greater danger of nuclear attack (from North Korea or China) on behalf of countries that insist on remaining free to shut American producers out of their markets, and that subsidize the destruction of U.S. jobs and output. He also has every right to contend that these allies will threaten to abandon security cooperation with the United States (and leave themselves more vulnerable to Chinese power) if Washington simply starts defending its legitimate economic interests.

But Brands has a corresponding obligation to state these views explicitly rather than follow well-worn establishment practice and cloak them in soothing cliches. While he’s at it, he might deign to explain to us peons how these approaches to Asia can possibly enhance the safety and well-being of the American people. And if he and the rest of the foreign policy blob refuse, the various media outlets that for so long have carried their work and helped propagate their messages should force them to lay their cards on the table – and at least expose the con job they’ve been pulling on the public.

Our So-Called Foreign Policy: Is Trump Isolating the U.S. in Asia? Apparently No One’s Told the Asians

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alliances, Asia, Australia, Barack Obama, China, India, Japan, Our So-Called Foreign Policy, Quadrilateral Security Dialogue, Susan Rice, TPP, Trade, Trans-Pacific Partnership, Trump

Ever since President Trump kept his campaign promise and nixed U.S. participation in the Trans-Pacific Partnership (TPP) trade agreement, America’s chattering classes have been charging that his decision has opened the door wide to China to expand its influence in East Asia at America’s expense, and shunted the United States to the sidelines of the regional and international economy. Mr. Trump’s just completed visit to Asia has revived all these accusations – and not so coincidentally, afforded yet another opportunity to demonstrate just how ludicrous they are.

Most embarrassingly, if the president’s approach to “this vital region,” in the words of Barack Obama’s national security adviser, Susan E. Rice, even has much potential to leave “the United States more isolated and in retreat, handing leadership of the newly christened “Indo-Pacific” to China on a silver platter,” no one seems to have told Asia’s leading powers. For they have been hard at work helping Washington develop a new grouping that’s obviously aimed at frustrating Beijing’s ambitions.

So even as Rice and the rest of the foreign policy establishment were bemoaning the United States’ supposedly declining influence in the first year of the Trump presidency, representatives of Japan, Australia, and India were meeting with American counterparts in the Philippines, site of the latest series of regional summits, to breathe life into longstanding plans to foster greater cooperation among their four democracies.

And if you don’t think that the effort is amply capable of worrying the Chinese, don’t take my word for it. Take China’s. Just as the meeting was concluding, Beijing was out with a statement warning that no joint ventures among regional countries should target or damage a “third party’s interest.”

Just as interesting: Plans for such a “Quadrilateral Security Dialogue” were first advanced by Japan in 2007. But Australia and India weren’t especially interested – the former for fear of antagonizing the Chinese. Apparently nothing that Washington did during the ensuing Obama years changed their minds. Now, however, they’re at the table.

At least two overlapping developments appear to be responsible. First and most unmistakably, America’s pushback against China under Obama on both the national security and economic fronts was so feeble and ineffective that the PRC’s power grew tremendously. So the Australians and Indians no doubt now view the need to contain China more seriously. Second, it’s entirely possible that President Trump’s indications that the United States will no longer assume the bulk of the burden and risk of maintaining Asian security while getting shafted continuously by Asian trade policies has convinced those two countries in particular that they’d better get into a proactive mode.

And maybe most interesting of all, the Trump decision to exit TPP (whose signatories included Australia and Japan) apparently did nothing to discourage Canberra, New Delhi, or Tokyo from teaming up with the United States.

The main reason could not be more obvious (except to the American establishment): Keeping America engaged however possible is the only alternative conceivable for the time being to greater Chinese control. And herein lies a crucial lesson that Mr. Trump may have grasped but that his establishment critics have unmistakably ignored: The United States is not a superpower because of what it does on the world stage. It’s a superpower because of what it is.

That is, the source of American strength is not how many alliances it joins or trade treaties it signs or international regimes it creates – or even how many conflicts it enters. Instead, the source is strength itself – in all of its interlocking forms: military, economic, and technological.

So as long as the United States maintains this strength – which of course can be and has been greatly undercut by the kind of Asian mercantilism winked at by American presidents for decades but protested loudly by President Trump – it will remain a player wherever it wishes. But nothing is likelier to limit America’s global reach – and threaten its interests – than the apparent establishment belief that international activism per se can somehow substitute for power.

Not that I’m a supporter of what may be an emerging American strategy here. For as I’ve written, the nation’s essential interests in East Asia are economic – creating satisfactory terms of trade and commerce. And as long as the United States serves as an irreplaceable final market for Asia’s export-heavy economies (that is, as long as it remains soundly and sustainably wealthy), it will be able to lever that power to achieve its goals whoever runs Asia politically.

And as I’ve also written, East Asia’s major powers (e.g., Australia, Japan, and India) should be strong enough, especially together, to resist China’s designs on their own. Further, to give them an extra edge, the United States can always sell them advanced weapons, and if need be drop its insistence that they forswear (in the case of Australia, Japan, and South Korea) nuclear weapons.

But if Mr. Trump is going to double down on the United States’ traditional strategy of Asia’s stabilizer and defender, his apparent understanding – expressed most often during the campaign – that America’s economic ties with the region will need to change dramatically provides the only hope of enduring success.

(What’s Left of) Our Economy: Trump’s Muddled Asia Trade Speech

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Asia, globalization, Obama, rule of law, sovereignty, Trade, Trump, Vietnam, World Trade Organization, WTO, {What's Left of) Our Economy

There were so many important points in President Trump’s speech today in Vietnam on trade and globalization that urgently needed to be made. What a shame, then, that they could well be undercut by massive contradictions in the president’s message. Two in particular stand out. The first concerns Mr. Trump’s critique of the current rules-based global trade system. The second concerns a key aspect of that critique and its relationship to his views on national sovereignty.

Mr. Trump was absolutely accurate in his description of the problems that have plagued the world trade system as it’s evolved to date, and especially its ostensible focus on organizing global economic activity according to universally accepted and followed rules and norms. Who, after all, can reasonably argue with his proposition that “Organizations like the WTO [the World Trade Organization] can only function properly when all members follow the rules and respect the sovereign rights of every member. We cannot achieve open markets if we do not ensure fair market access. In the end, unfair trade undermines us all.” In fact, it’s so uncontroversial that every one of Mr. Trump’s recent White House predecessors has made the same seminal point (including President Obama’s administration).

The Trump trade approach toward the WTO so far has differed from those of Presidents Clinton, George W. Bush, and Obama mainly in that it’s criticized the organization’s workings much more intently, and actually taken some actions to gum up its works.

But the President will be repeating their fundamental mistakes if he believes that the solution to today’s flawed rules-based system is constructing a better rules-based system. That goal faces so many insuperable obstacles. For example, few of the countries involved in the system accept Anglo-American rule of law principles in their own political and legal systems, or the economic practices that flow inexorably from them.

Mr. Trump praised governments represented in his audience in Vietnam today for pursuing “visions of justice and accountability, [promoting] private property and the rule of law, and [embracing] systems that value hard work and individual enterprise,” along with seeking partnerships “directed toward mutual gain.”

Yet anyone who knows anything about most East Asian economies know that this description is at best seriously misleading. Instead, the region’s recipe for impressive economic success was based largely on practices that the president highlighted just a few paragraphs later in his address. Not that they’ve been alone, but it’s been the Asian economies that have masterminded “product dumping, subsidized goods, currency manipulation, and predatory industrial policies.” It’s they who have so systematically “ignored the rules to gain advantage over those who followed the rules, causing enormous distortions in commerce and threatening the foundations of international trade itself.”

And just legally speaking, why would these same countries do an about-face and start treating foreign businesses more equitably than they treat their own people?

Even more bizarre, the President specified (correctly) that “Such practices, along with our collective failure to respond to them, hurt many people in our country and also in other countries. Jobs, factories, and industries were stripped out of the United States and out of many countries in addition. And many opportunities for mutually beneficial investments were lost because people could not trust the system.”

In principle, the United States can use its economic power – stemming from the overwhelming importance of its market to an Asian region and indeed entire world heavily dependent on growing by amassing trade surpluses – to convert other economies to its values and policies. But at least for the foreseeable future, this strategy would require the United States – not an international organization created to reflect a global consensus on appropriate economic behavior that clearly is nowhere to be seen – to enforce these rules energetically and continuously until genuine conversion takes place.

Further, that conversion seems a remote prospect. For as the President himself has repeatedly stated, just as he feels obliged “to put America First,” he expects other national leaders “to put your countries first” – a remark evidently applauded by his audience.

Moreover, leaving aside the enormous administrative challenge of this enforcement mission, the process would clash violently with the President’s promise to Asian countries to “respect your independence and your sovereignty. We want you to be strong, prosperous, and self-reliant, rooted in your history….”

Far more promising for President Trump to dispense entirely with the idea of rules-based trade systems, whether regional or global, and use the nation’s (still) unmatched economic leverage to lay down the rules of access to its market, enforce them unilaterally, and leave other economies free to accept them or seek prosperity without the privilege of doing business with the United States.

This approach would generate a major strategic benefit as well – the conceptual freedom to use trade and broader economic diplomacy to offer better deals (which would still benefit the domestic economy) with countries or regions of special importance, whether economic or geopolitical or both. One possible example – creating a genuine North American trade bloc capable of strengthening Mexico’s economy, society, and political system, and/or broader arrangements to enrich other close hemispheric neighbors whose problems often become America’s.

In fact, Mr. Trump’s trade speech sounds like it’s two dramatically different speeches stapled together – something like a famous address on U.S.-Soviet detente delivered by former President Jimmy Carter decades ago. Carter’s apparent refusal to make up his mind reinforced his image as a worrisomely confused leader. Unless President Trump understands that “to govern is to choose,” he could well suffer Carter’s one-term fate.

Making News: Podcast On-Line of Last Night’s Batchelor Interview on Trump & China – & More!

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Asia, China, Gordon G. Chang, IndustryToday, Making News, multinational companies, supply chains, The John Batchelor Show, Trade, Trump

I’m pleased to announce that the podcast of my interview last night on John Batchelor’s nationally syndicated radio show is now on-line. Click here to access a lively discussion among John, co-host Gordon G. Chang, and me, about the China phase of President Trump’s Asia visit.

Also, it was great to see IndustryToday.com this morning run my recent post about multinational companies’ hypocrisy when it comes to the likely effect of Trump-ian trade policies on their global supply chains. Here’s the link.

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