(What’s Left of) Our Economy: Trump’s Real China Currency Blunder

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airstrikes, alliances, America First, chemical weapons, China, currency, currency manipulation, dollar, exchange rates, North Korea, nuclear weapons, predatory trade, Syria, Trade, trade barriers, Trump, Xi JInPing, yuan, {What's Left of) Our Economy

What was worst about President Trump’s decision yesterday to let China off the currency manipulator hook (for now) was not the scrapping of a long-time campaign promise it represented. What was worst about the decision was its geopolitical rationale – that is, Mr. Trump’s judgment that major Chinese cooperation in reining in North Korea’s nuclear program could be secured if his administration moderates or delays various efforts to counter Beijing’s trade predation.

Nonetheless, some recent developments also presage reasons for modest optimism that a sounder approach to currency manipulation by China (and other countries), at least, will eventually emerge if it becomes clear Beijing is welshing on this deal.

The president’s new China policy makes least sense from a pure negotiating tactics standpoint. After all, what course of action could now be more tempting than for China to keep stringing America along with promises to get tough on North Korea, and even with token actions suggesting that meat is being put on these bones? Think “Charlie Brown,” “Lucy,” and “football.” And how will the president decide that his gamble has failed?

Moreover, Mr. Trump’s own views of China’s clout with North Korea seem confused, at best. On the one hand, the president must (logically) believe that China can make much more of a difference in resolving the North Korea situation than it’s so far chosen to. Why else would he offer China the valuable benefit of better terms of trade than it would otherwise receive? On the other hand, Mr. Trump said in an interview with The Wall Street Journal “After listening for 10 minutes [to Chinese leader Xi Jinping at their summit a week ago], I realized it’s not so easy. I felt pretty strongly that they had a tremendous power [over] North Korea. … But it’s not what you would think.” So here he’s indicating that Beijing can’t help decisively at all.

Related Trump statements point to another major negotiating No-No: Rewarding interlocutors for steps they would take anyway. The president is now on record as stating that Xi “means well and wants to help” on North Korea. But this confidence raises the question, “Why?” It’s of course possible that Chinese policy has entered a new, more charitable phase. It’s more likely, however, that Beijing is becoming increasingly worried about the situation in its next-door neighbor spinning out of control and triggering a conflict that could go nuclear right on its borders.

Indeed, a recent editorial from its own government-controlled press clearly signals that those dire concerns are China’s main motivator: “China…can no longer stand the continuous escalation of the North Korean nuclear issue at its doorstep. Instead of accepting a situation that continues to worsen, putting an end to this is more in line with the wish of the Chinese public.”

Even more revealing, the same editorial made plain as day that official Chinese nerves have been frayed further by Mr. Trump’s willingness to go-it-alone militarily in Syria (when he ordered airstrikes in the middle of his meetings with Xi), by his threat to take a similar course of action against North Korea, and by his dispatch of a powerful American naval force to Korean coastal waters. In other words, the president’s apparent comfort with using force already has caught China’s attention.

Better yet, some concrete evidence of this success has appeared. China seems to be reducing its imports of coal from North Korea – one of Pyongyang’s few major sources of foreign exchange – and it abstained yesterday from voting on a UN resolution condemning Syria’s government for the chemical weapons use that prompted the U.S. cruise missile attack. Until then, China had vetoed similar UN resolutions. Why, therefore, would Mr. Trump sweeten the supposed deal further with trade breaks?

At the same time, these latest Trump decisions are sending signs about the president’s national security strategy and overall priorities that are equally disturbing. Principally, during his campaign for the White House, Mr. Trump displayed a keen awareness of the burgeoning nuclear risks being run by the United States by maintaining its defense commitments in East Asia. In numerous remarks that were pilloried by an ossified bipartisan American foreign policy establishment, candidate Trump quite sensibly suggested that the United States should transfer much of this risk to the local countries (like China) most directly threatened by the North Korean nuclear program. Yesterday, Mr. Trump endorsed America’s longstanding Asia strategy even though the North can increasingly call the U.S. nuclear bluff on which regional deterrence has been based with forces of its own that can strike American targets.

Even more striking, Mr. Trump’s new quid pro quo has demoted policy options that can deliver major economic benefits to his core voters and the entire U.S. economy (more trade pressure on China) back to their longstanding position subordinate to national security strategies that primarily help other countries (the Asian allies covered by the American nuclear umbrella). Far from the type of America First strategy he touted during his campaign and especially in his Inaugural Address, these new Trump moves add up to an America Last strategy.

All the same, Trump’s new approach could set the stage for improved U.S. anti-currency manipulation strategies should circumstances require them. Although unmistakably disheartening to many trade policy critics, this latest American China currency decision was defensible on its own terms. It’s true that substantial evidence continues indicating that China’s yuan is significantly undervalued versus the U.S. dollar – and still enables producers in China (including those owned by or linked with U.S. and other foreign-headquartered companies) to offer their goods for artificially low prices in markets around the world. Nonetheless, it’s also true that China has permitted its (surely dollar-dominated) foreign currency reserves to drop by about 25 percent since 2011 – largely because it’s been selling those reserves and buying yuan in order to curb worrisome capital flight. In other words, Beijing has been trying to support the yuan versus the dollar, and keep its value higher than it would be were it freely traded.

Yet there’s absolutely no reason for trade policy critics – or the U.S. government – simply to conclude that ambiguous circumstances simply force America to accept the status quo. In fact, such shoulder-shrugging would amount to rewarding China currency cheating that the conventional wisdom now admits lasted for years, and whose cumulative effects continue to undercut the price competitiveness of domestic U.S. manufacturers and other producers.

So what to do? According to at least one press report, the Trump administration is considering revamping currency manipulation policy in ways that would appear to abandon the current, blinkered approach in favor of one that takes these cumulative effects into account. Specifically, a Reuters article last week suggested that one option that’s attracted the administration’s attention would involve lengthening “the time period for reviewing currency market interventions from 12 months to several years, capturing more past interventions by China….” At least logically, this shift would signal recognition that the impacts of these interventions (to suppress the yuan’s value) are dynamic, and long-lasting.

Even better, however, would be to recognize that, important as it’s been because of its effects on prices across the Chinese economy, currency manipulation is only one form of trade predation practiced by China, and that such individual policies can easily frustrate current legalistic countermeasures by virtue of the powerful and secretive Chinese bureaucracy’s ability to turn them on and off at will – often with little more than a phone call. More important, China has successfully used these ploys in the past. And P.S.: Other Asian economies are just as skilled as China’s at pulling off these scams.

In other words, the various mercantile measures used by China and others to distort markets are completely fungible. Dealing with them effectively therefore requires Washington to become much more agile and flexible in response. And the critics need to stop focusing so tightly on currency manipulation and keep the much bigger, more important China and global trade picture in mind.

For the entire U.S. economy has a big stake in the Trump administration putting these changes into effect before Chinese and other countries’ trade predation sucker punches even more of its most productive sectors – whether they interfere with the president’s new North Korea strategy or not. So, in all likelihood, does Mr. Trump’s political future.

Our So-Called Foreign Policy: A Non-Hysterical View of Trump’s Syria Strikes

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air strikes, America First, Bashir Al-Assad, chemical weapons, China, Middle East, Our So-Called Foreign Policy, Russia, summit, Syria, Trump, Vladimir Putin, Xi JInPing

I love the idea of the “procustean bed.” It’s a phrase inspired by Greek mythology that’s come to describe the deceptive practice of depicting every notable event or feature of reality as fitting into a preconceived view of how the world works. It’s become standard operating procedure in our highly balkanized, increasingly fact-challenged, and ever more hysteria-prone political culture, and it nicely explains most of the commentary and analysis that’s followed President Trump’s decision to attack a Syrian air base following chemical weapons use in that country’s tragic civil conflict.

I have absolutely no inside information here, but strongly believe that the likeliest explanation is one that can’t easily be spun to advance any particular agenda, and that focuses on a crucial variable bound to be neglected when the main objective is political.

Not that I’m ruling out any of the sets of talking points being pushed so aggressively by the nation’s chattering class. It’s entirely possible that the Syria decision shows that the president never intended to carry out the kind of broadly stand-aside foreign policy he most often (but not always) touted during his campaign, and that he has cynically betrayed his core, non-interventionist, voters. Or that he simply has a learning curve and is wisely admitting that the dangerous world he’s operating in doesn’t permit an America First approach to be carried out safely.

The Syria strikes could reveal how fundamentally incoherent his worldview and agenda are – and are likely to remain. Or how pragmatic he has become. Or how emotionally and thoughtlessly he reacts to perceived challenge or betrayal (specifically, by a client state of a Russian government he’s supposedly coddled until now). Or how cunningly he’s decided to undercut charges that he’s a puppet of Moscow’s. Or, given Mr. Trump’s utter unpredictability on so many fronts, the Syria attacks could simply underscore how he continues to be just as utterly unpredictable in the Oval Office as he was on the campaign trail – which could mean that the Trump move means absolutely nothing at all.

But although all these takes on Syria could in theory be true, I doubt their veracity mainly because they pay absolutely no attention to considerations that would weigh heavily on the mind of even the least competent chief executive (or presidential aides) – the international circumstances staring him in the face once the chemical weapons news came through.

That’s why there’s such a strong case for the following as the prime determinants of the Trump decision – and as reasons for interpreting its long-term effects with extreme caution. Specifically, when the president ordered the strikes, he was in the middle of a summit with the leader of a foreign power – China – that had rapidly emerged as America’s foremost economic challengers and as at least a potential strategic rival. The day before the summit with Xi Jinping began, North Korea conducted the latest of a series of ballistic missile tests it’s conducted since President Trump’s inauguration, and in defiance of multiple United Nations resolutions. And the day before that came the chemical weapons attack – which itself preceded a meeting in Washington, D.C. between Mr. Trump and King Abdullah of Jordan.

So during a week when the global spotlight shone on President Trump with unprecedented intensity came two apparent provocations. (I’m purposely leaving open the possibility that Syrian dictator Bashir Al-Assad is not to blame for the chemical weapons bombing, though I believe the evidence – particularly the reported flights of fixed-wing aircraft over the site – point to Syria’s guilt.) Further, both provocations came very early during the first Trump term – a period when foreign leaders would naturally feel strongly tempted to test a new president, and when all countries would view him with great uncertainty even were he a more conventional politician.

In my view, all these circumstances combined to convince the president that a forceful response of some kind was needed. And since North Korea can credibly threaten American allies with conventional military and even nuclear attacks, and Syria can’t, Assad was the inevitable target.

In other words, the Trump strikes right now are best seen as a simple message-sending exercise. And the messages itself were simple as well. Not that, “I’ve changed my foreign policy stripes” and not that “I’m ready to plunge much more deeply into the Syria and other Middle East conflicts” but that “I have my limits” and “I have no intrinsic qualms about using the vast military arsenal at my disposal.”

Because the extreme shortage of competent policy analysts with a Trump-ian worldview has left the president little choice but to rely heavily on conventional thinkers for briefings and advice on foreign policy and other matters, it’s entirely possible that his air strikes presage a more activist Middle East or overall international strategy. At the same time, nothing about the strikes makes such a transformation inevitable, and especially far-fetched (as they always have been) are claims that individual uses of military power are pointless (at best) unless carried out as part of a broader plan of action meant to win or acceptably resolve a foreign conflict.

Particularly in the case of the Middle East, where history and recent American experience clearly teach that no constructive solutions are possible (or at least not at acceptable cost and risk), and where due to developments such as the U.S. domestic energy production revolution, the national interests at stake are no longer unquestionably vital, individual military actions that send uncomplicated messages can have significant value in their own right – and all the more so as they inevitably will be heard in many other regions, including those that matter more.

So everyone is best advised to hold their horses as they go about interpreting the Trump Syria strikes and especially about what futures they supposedly guarantee and rule out. Indeed, no one should heed this kind of advice more closely than President Trump.

Our So-Called Foreign Policy: Obama’s Dangerously Mixed Message on Afghanistan

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Afghanistan, chemical weapons, credibility, Middle East, Obama, Our So-Called Foreign Policy, red line, Syria, Taliban, Theodore Roosevelt

Theodore Roosevelt, one of my favorite presidents (though not beyond criticism), made one of his lodestars, “Speak softly and carry a big stick.” President Obama really needs to take heed, even though his presidency ends in less than a year-and-a-half. For he repeatedly follows exactly the opposite course, and in the process raised big questions about his own credibility in international affairs and his country’s.

You’d think the president would have learned this lesson following his humiliating decision to declare Syria’s use of chemical weapons in suppressing its ongoing, metastasizing rebellion to be a “red line” that would trigger American military retaliation – and his failure to pull the trigger. Yet you’d be wrong, at least judging from his announcement that he’s scrapped his plans to cut the U.S. troop deployment in Afghanistan roughly in half by late 2016, and will keep the deployment at just under 10,000.

Instances of the president “speaking loudly”? In his remarks, Mr. Obama insisted that he would “not allow Afghanistan to be used as safe haven for terrorists to attack our nation again” as was the case leading up to the September 11 strikes. He added that “Afghanistan is a key piece of the network of counterterrorism partnerships that we need, from South Asia to Africa, to deal more broadly with terrorist threats quickly and prevent attacks against our homeland.” In other words, the stakes of U.S. military operations in Afghanistan couldn’t be higher – they involve directly protecting the security of the American homeland.

And then came the small stick – or at least that’s the impression the president unavoidably conveyed to domestic and foreign audiences, allies and enemies alike – especially elsewhere in the Middle East. For Mr. Obama several times emphasized that American soldiers were engaged only in two “narrow” missions – training Afghan forces and “counterterrorism” efforts against Al Qaeda “remnants.”

Moreover, in a completely befuddling statement, the president reminded assembled reporters, “As you are well aware, I do not support the idea of endless war, and I have repeatedly argued against marching into open-ended military conflicts that do not serve our core security interests.” But if protecting America itself against large-scale terrorist attacks isn’t a “core security interest,” what is?

And if despite the Mr. Obama’s hint, keeping terrorists in Afghanistan at least incapable of launching such attacks is part of American security’s core, why raise the specter of open-ended conflicts in the first place? If anything, defending a vital interest would logically lead a president to prepare the nation for even more protracted involvement – especially given his acknowledgment that “in key areas of the country, the security situation is still very fragile, and in some places there is risk of deterioration.”

Near the end of his statement, President Obama made clear that he hopes to square this circle by fostering a political settlement to the Afghanistan war that would stem from talks between the current government in Kabul and “the Taliban and all who oppose Afghanistan’s progress….” But even here, the incentive he dangled most prominently before these extremists was “the full drawdown of U.S. and foreign troops from Afghanistan.”

What Mr. Obama apparently hasn’t asked himself is why they would seek to achieve that goal through a give-and-take process of negotiation when he’s all but told them they can eliminate this obstacle to their victory simply by waiting him out?

Our So-Called Foreign Policy: Desperately Seeking Real Retrenchment

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Afghanistan, American exceptionalism, Asia-Pacific, Baltic states, Bashir Al-Assad, boots on the ground, Charles Lanes, chemical weapons, defense budget, defense spending, Earl Ravenal, George W. Bush, international law, Iraq, ISIS, isolationism, Middle East, multilateralism, national interests, NATO, Nixon Doctrine, Obama, Our So-Called Foreign Policy, pivot, Poland, Richard Nixon, Russia, sequestration, Soviet Union, Stephen Sestanovich, Syria, Ukraine, Vietnam War, vital interests, Vladimir Putin, Washington Post

Washington Post columnist Charles Lane has just done an excellent job of demonstrating how powerfully universalist America’s bipartisan foreign policy establishment remains – even as powerful reasons keep multiplying for climbing down from this wildly ambitious approach.

According to Lane, a new book by former American diplomat and Columbia University political scientist Stephen Sestanovich bears out President Obama’s claim to be a kindred spirit with Richard M. Nixon as a “retrenchment” president – one of the chief executives who has sought to “correct the perceived overreaching of their predecessors and free up U.S. resources for domestic concerns.” In fact, says Lane, Sestanovich has written that post-World War II U.S. foreign policy has been marked by a “constant pendulum-swing between administrations that aggressively pursued U.S. goals abroad” (who the author calls “maximalists”) and those Nixon- and Obama-style retrenchers.

I hate to comment on books I haven’t yet read. But Lane’s description of Mr. Nixon and Mr. Obama both qualify as retrenchers reveals a mindset so enthusiastic about massive and potentially open-ended U.S. involvement in literally every corner of the world if necessary that it sees even talk about a more discriminating approach as a major departure.

Judging by the record, it hasn’t been. In fact, both the Nixon talk and the Obama talk about retrenchment have been overwhelmingly that – talk. Just as important, and closely related, what have arguably looked at least superficially like exercises in retrenchment have in fact been exercises in wishful thinking. Both presidents have actually agreed that the security, stability, and even prosperity of the entire world are U.S. vital interests. They’ve simply differed with the maximalists in insisting that these interests can be defended through means that are less dangerous and violent, and more globally popular, than the unilateral U.S. use of military force.

To cite the leading historical example, the ballyhooed Nixon Doctrine of 1970 was never a decision to cross Vietnam or any part of Asia off the list of vital U.S. interests – those whose defense was thought essential for maintaining America’s own security and prosperity. As explained initially by Earl C. Ravenal shortly after the Doctrine’s declaration, Mr. Nixon had decided, in the absence of any evidence, that this vital set of objectives could be defended without an early resort to U.S. military involvement – chiefly, by the militaries of America’s regional allies.

Therefore, Ravenal wrote:

“the Administration’s new policies and decision processes do not bring about the proposed balance [between the country’s foreign policy ends and the means to be used to attain them]; in fact, they create a more serious imbalance. Essentially we are to support the same level of potential involvement with smaller conventional forces. The specter of intervention will remain, but the risk of defeat or stalemate will be greater; or the nuclear threshold will be lower.”

President Obama has given us a different version of such dangerous wishful thinking. More accurately, he’s given us several different versions. His original 2008 candidacy for the White House was largely motivated by a conviction that the overly unilateralist and militaristic tendencies of George W. Bush had produced disaster in Iraq, and were actually undermining U.S. security by damaging America’s international image.

That’s why Mr. Obama focused so much attention on repairing that image. He never indicated that he would scale back that list of U.S. vital interests. He simply suggested that they could be better defended if need be by acting multilaterally, with international approval, rather than by going it alone. And he conveyed the clear impression that challenges could be prevented in the first place if only America became more popular in regions like the Middle East.

Once in office, Mr. Obama did try to establish a hierarchy of U.S. worldwide interests that would have operational impact. He decided that the nation had been so preoccupied with Middle East wars that it had been neglected the Asia-Pacific region, which he considered at least as important. So he launched a “pivot” that would transfer some American forces from the former to the latter.

But the president never apparently judged the Middle East to be less important to America’s fate. He simply concluded that, with the Afghanistan and Iraq wars supposedly winding down, it had become less dangerous. Having been proven wrong by the rise of ISIS. in Afghanistan, he’s (gradually) boosting the American military presence in region again. The president is claiming, moreover – based on as little evidence as Mr. Nixon required – that any remaining capabilities gap can be filled by the armed forces of regional countries. Worse, many of his Republican critics, who are just as reluctant to deploy many more U.S. “boots on the ground,” agree with Mr. Obama’s fundamental assessment.

Further, the president has actually expanded the list of circumstances in the Middle East (and presumably elsewhere) that should justify American military responses – the kinds of chemical weapons attacks launched by Bashir Al-Assad against Syrians revolting against his dictatorship, along with similar major violations of international law.  (This effort, so far, has not yet won over the public.)

Nor does that exhaust Mr. Obama’s efforts to lengthen the list of U.S. vital interests. He has understandably responded to Russia’s recent provocations against allies in the North Atlantic Treaty Organization (NATO) by strengthening U.S. forces and deploying them more conspicuously in new NATO members like Poland and the Baltic states, former Soviet satellites clearly in Moscow’s line of fire. Less understandable have been the Obama administration’s numerous suggestions that the security of Ukraine, too, is a matter of urgent American concern – even though this country was actually part of the old Soviet Union for decades with no apparent effects on U.S. safety or well-being.

Yet like the debate over countering ISIS, that over dealing with Vladimir Putin spotlights one major difference between President Obama and his (mainly) Republican foreign policy critics: Many of them have strongly backed big boosts in the U.S. military budget (if not always using these forces), including aggressive moves to circumvent spending caps established by the sequestration process. Mr. Obama has not sought comparable increases.

The president unquestionably has often spoken in terms that seem to support a smaller U.S. role in the world – e.g., his remarks suggesting that America’s exceptionalism isn’t all that exceptional, and reminding that much of the world has legitimate historical grievances against the West, and in some cases against the United States specifically. But his strategic walk has never matched this talk, and the continuing flood of contentions to the contrary in the punditocracy and even academe (if Lane’s Post column is accurate) plainly are serving their (partly) intended purpose of preventing searching debate on foreign policy fundamentals.

Given the nation’s resulting over-extension militarily, therefore, when the chattering class powers-that-be start labeling presidents or most other politicians as retrenchers or minimalists (an improvement to be sure over the hackneyed charge of “isolatonism”), the only legitimate reaction is a thoroughly exasperated, “If only.”