Our So-Called Foreign Policy: Could U.S. Protectorates in Asia Finally Become Real Allies?

Tags

Afghanistan, alliances, allies, Asia, Asia-Pacific, AUKUS, Australia, Biden, China, credibility, Donald Trump, extended deterrence, globalism, Indo-Pacific, Japan, nuclear umbrella, Our So-Called Foreign Policy, semiconductors, South Korea, submarines, Taiwan, transactionalism, United Kingdom, vital interests

Lots of stuff going on lately in security affairs in the Asia-Pacific region (which foreign policy congoscenti have been calling the Indo-Pacific region, reflecting India’s new prominence). And I’m not just talking about the new agreement (which goes by the awkward acronym “AUKUS”) by which Australia will acquire nuclear-powered submarines provided by the United States and the United Kingdom (acing out the furious French in the process), and gain access to lots of advanced militarily-relevant American technology, like artificial intelligence and quantum computing.

I’m also talking about long overdue signs that key U.S. allies in the region are starting to take the threat they face from growing Chinese aggressiveness as seriously as the United States has been taking it. The interesting policy questions are (1) why they seem finally to be waking up and (2) what if anything the United States can or should do to convince Japan, South Korea, and Taiwan in particular to assume more of the burden of defending themselves, thereby enabling America to take a less risky, less costly role in the region.

For the time being, unfortunately, the United States is going to have to stay deeply involved in the defense of these countries, and to keep accepting a degree of nuclear risk that I’ve long described as unacceptable, and still consider unnerving. I’ve changed my mind, however, because the globalist and free trade-happy U.S. foreign policy establishment and the tech companies that write so many of its members’ paychecks boneheadedly let South Korea and especially Taiwan seize global leadership in the manufacture of the world’s most advanced and powerful semiconductors.

These devices are simply too valuable to the American economy as a whole and to its continuing military superiority to take the chance that the relevant Taiwanese and South Korean facilities and knowhow fall into Chinese hands. As for Japan, it continues to produce many of the materials and equipment on which cutting-edge semiconductor production relies, so it’s got to be kept safe from the likeliest threat it faces from China – which is some form of blackmail. (See this recent Biden administration report, and especially pp. 45 ff.)

As a result, until the United States gets its semiconductor act back together, the American nuclear umbrella needs to remain over Japan and South Korea – which means that America could well be sucked into a nuclear war with China and especially North Korea if hostilities break out. And such “extended deterrence” may need to be extended to Taiwan (which Washington is not yet as tightly committed to defend).

That’s why it’s not good that not only the Australians will be getting nuclear-powered (but not – so far – nuclear-armed) submarines. Because of their superior capabilities, these which will add quantitatively and qualitatively to the forces China would need to think about when contemplating, say, moves to increase its sway over the regional sealanes through which so much of the world’s trade flows.

It’s also good that South Korea has decided to build (so far non-nuclear) ballistic missiles that can be launched from its own submarines (in response to North Korea’s progress toward the same capabilities). Deserving of applause as well are Japanese and Taiwanese plans to boost defense spending – and acquire some impressive weapons along the way. Japanese officials are even talking seriously about what steps Tokyo can and should take to help defense Taiwan if the stuff hits the fan with China – although nothing like a clear decision had been made.

Defense spending levels in all three countries are still measly, especially considering what dangerous neighborhoods they live in. And it’s not as if time is necessarily on their side. But something new seems astir, and I’m not convinced that China’s worsened behavior is entirely responsible. Some credit undoubtedly goes to the Trump administration. Since his initial White House campaign, the campaign, the former President insistently asked why Americans should risk their own security for that of allied freeloaders, and foot so much of the bill. And throughout his presidency, he kept so much pressure on that the Asia allies clearly worried that the Uncle Sucker days were over, and that Trump’s complaints reflected much and possibly most American public opinion. (See, e.g., here.)

President Biden deserves some credit here, too – but I would argue in part in spite of himself. Mr. Biden of course is a card-carrying globalist who for the entirety of his long career in public life has agreed wholeheartedly with the need to maintain strong U.S. alliance relationships. Hence it was no surprise that during the 2020 campaign and immediately after his inauguration, he took great pains to assure U.S. allies that the United States would “be back” after years of Trump-ian neglect. And indeed, earlier this year, Mr. Biden showed every sign of coddling continued Asian defense free-riding.

But ironically, the biggest Biden spur to more Asian defense burden-sharing might be his botched withrawal from Afghanistan. In other words, whereas the Asians (and other allies) were worried mainly that Trump would cut them loose because he was unwilling to protect them if they didn’t change their deadbeat ways, it’s entirely possible that they fear Mr. Biden won’t be able to ride to their rescue – at least not in any effective way.

I know that there’s little evidence of such mistrust in official Asian rhetoric so far. And of course, one of the President’s main stated reasons for leaving Afghanistan in the first place was to free up more American energies and resources to focus on China. But some unofficial Asian voices seem less sure, and it would be surprising to see any governments pushing the panic button in almost any circumstances. And could it be a total coincidence that the aforementioned spate of Asian defense decisions came in the wake of the Afghanistan pullout?

I seriously doubt it.  And as a result, if Mr. Biden wants to turn America’s Asian protectorates into genuine allies, he should continue his own strategy of stepping up exports of advanced weapons to them (and to many of their neighbors, depending on each one’s solidarity), signaling his willingness to go even further (as with this excellent decision) and employ some of the Trump-ian “transactionalism” that’s had so many globalists clutching their pearls for so long. 

But instead of threatening American withdrawals if they don’t pony up more defense-wise, the President should promise them more hardware if they do.  Casually floating the idea of OKing the acqusition of nuclear weapons by various allies wouldn’t hurt, either.

And he should stop pretending that none of this activity is directed against China. Not only does such rhetoric signal credibility-shaking skittishness. It contradicts yet another example of transactionalism that should become part of the Biden strategy: Making clear to China that staying on its current belligerent course will be a great way to guarantee that it’s ringed with ever more neighbors that are armed to the teeth.        

Im-Politic: So Far, Milley’s Sure Acting Like He’s Guilty of Treason

Tags

25th Amendment, Bob Woodward, China, Constitution, Defense Department, Donald Trump, election 2020, Im-Politic, Jen Psaki, Joint Chiefs of Staff, Mark Milley, military, Pentagon, Peril, Robert Costa, treason, Washington Post

I’d bother to advise General Mark Milley to lawyer up – fast – except I can’t imagine that even Johnnie Cochrane (Google “O.J. trial”) – ultimately could get the Chairman of the Joint Chiefs of Staff off the hook for treason charges if claims made by an upcoming book on the Trump administration’s final months are true. Worse, the President of the United States seems just fine with such behavior from the person who’s both the top military advisor to the chief executive and to the Pentagon.

It should go without saying that Milley, as with every other American, deserves a presumption of innocence. But his behavior since the publication of excerpts from Peril, by Washington Post correspondents Bob Woodward (of Woodward and Bernstein Watergate fame) and Robert Costa decidedly resembles that of someone who’s guilty as sin.

As stated by another Post reporter, according to Woodward and Costa, Milley called his Chinese counterpart last October 30 and told him, “General Li, I want to assure you that the American government is stable and everything is going to be okay.”

Allegedly, Milley continued, “We are not going to attack or conduct any kinetic operations against you.” (With this phrasing, Milley for some reason might have been trying to exclude cyber-attacks from his promise.) 

And here’s the key passage: “If we’re going to attack, I’m going to call you ahead of time. It’s not going to be a surprise.”

Again, if true, any number of aspects of this phone call could be shocking and disgraceful for any number of reasons centering around the possibility that the General shattered the principles of civilian control over the military by taking an unauthorized initiative with major implications not only for U.S. national security but overall U.S. foreign policy as well.

And whether Milley was completely freelancing or not, the notion that former President Trump’s dangerously unstable state of mind excuses this behavior is utterly unacceptable. The Constitution’s 25^th Amendment lays out procedures for dealing with situations like this, and none of them were invoked before Milley picked up the phone.

Worse, keep in mind that Milley made the first of two phone calls to Beijing was made October 30, before Election Day and well before Trump set off alarm bells with his behavior in the voting’s aftermath. In addition, if Milley really believed that Trump would order an unprovoked attack on China, his own sanity needs to be questioned.

Even if you fear that a Trump victory last November would have freed him to make all manner of reckless decisions, there’s no reason to think that China would have been placed in any danger unless Beijing set the stage for war by, say, invading Taiwan. In fact, one of the most common (however bizarre, given the massive tariffs and damaging sanctions he’d imposed) criticisms of the former President’s China policy at the time was that in order to preserve his 2020 trade deal with the People’s Republic, he’d been treating China and especially its dictator Xi Jinping with kid gloves. The Biden camp itself was making this accusation as late as last September.

But none of Milley’s supposed offenses compare with the claim that he told China’s top military officer that if Trump decided to strike, he’d warn the Chinese. Talk about providing “aid and comfort” to an enemy – a centerpiece of American law’s definition of treason. And from a real world standpoint, what if Milley got wind of such plans a few days before the attack was scheduled? Would he have given the Chinese that much warning? Which would have given them a chance to launch their own preemptive strike? How do you think that would have worked out?

Further, what if Milley was simply worried that Trump might try this, with no concrete evidence, or less-than-conclusive evidence? Just because he thought Trump was crazy. Would he have warned China in this circumstance? Who can tell?

For these reasons, the Woodward-Costa claims are so jaw-dropping that you’d expect an innocent Milley to deny them specifically and indignantly – with wording on the order of “I never told General Li or any other Chinese official that I would warn them about an impending U.S. attack.” If I was him, I’d threaten a slander suit, too, if the authors didn’t recant (and probably even if they did).

Milley, however, hasn’t done anything close. The only statement issued (and not by him, but by his spokesman) ignored the charges. And almost as interesting, his allies in the government haven’t denied these charges expressly, either, when speaking (anonymously, of course) to other journalists. Most disturbing of all, White House Press Secretary Jen Psaki issued similar remarks yesterday – which must mean that Mr. Biden himself isn’t interested in getting to the bottom of this crucial matter.

The good news is that soon, neither the President nor the General may have a choice. On September 28, Milley’s scheduled to testify (under oath, natch) before the Senate Armed Services Committee on the Afghanistan debacle. You can be sure that the Woodward-Costa charges will come up, too. And if Milley deides to keep playing footsie, don’t be surprised if you see an attorney at his side – and even counseling him to take the Fifth.

Making News: New National Interest Article on Why the Foreign Policy Establishment Was Always Overrated

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academia, Afghanistan, alliances, Blob, Bretton Woods, China, Cold War, foreign policy establishment, forever wars, global financial crisis, globalism, Iran, liberal global order, Mainstream Media, Making News, Max Boot, Richard Haass, Soviet Union, The National Interest, think tanks

I’m pleased to announce that The National Interest has just published my latest article for an outside publication: an essay on why recent defenses of America’s bipartisan globalist foreign policy establishment (AKA, “The Blob”) wouldn’t hold any water even if this powerful, durable in-crowd hadn’t botched practically everything about Afghanistan. Here’s the link.

Also, a new twist today: Unfortunately, I thought some of the edits undermined the flow of the piece. I’m going to try to get at least some of them corrected. But in the meantime, to show careful readers what they were, I’m presenting below the draft as I sent it off. Let me know if you think I have some grounds for grousing. (P.S. I’m just fine with their title and love the subhead’s reference to the “poisoned well”!)

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

Why the Blob Really Has Been Unimpressive

by Alan Tonelson

So the Blob is starting to fight back. The bipartisan globalist national foreign policy establishment is being blamed both for President Biden’s hellaciously botched withdrawal from Afghanistan, and (including by the Blob-y Mr. Biden himself), for pushing the transformation of a necessary anti-terrorist operation into a naively grandiose nation-building project.

It’s time, the argument goes, to marginalize – or at least view more skeptically – this hodgepodge of former diplomats and Congressional aides, retired military officers, genuine academics, and think tank hacks that has shaped American diplomacy in two critical ways: by being used as the main personnel pool for staffing presidential administrations and House and Senate offices on rotating bases, and for serving up informal advisers for these politicians; and by dominating the list of sources used by overwhelmingly sympatico Mainstream Media journalists to report and interpret the news, and thus define for the public which foreign policy ideas are and aren’t legitimate to discuss.

“Don’t throw the baby out with the bathwater!” Blob-ers are responding.

“The foreign policy establishment did get it wrong in Iraq, where the U.S. overreached,” allowed Richard Haass, who as President of the Council on Foreign Relations would arguably win a contest for Blob-er-in-Chief. “We got it wrong in Libya, we got it wrong in Vietnam. But over the last 75 years, the foreign policy establishment has gotten most things right.”

Washington Post pundit (and neoconservative apostate) Max Boot similarly has declared that “we can confidently say that, overall, the foreign policy establishment has served America well over the past 76 years.”

In other words, look past not only Afghanistan and Libya and Iraq and Vietnam but also the failure to anticipate the September 11 terrorist attack; and the long-time cluelessness about the emergence of security and economic threats from China (following the stubborn, decades-long determination to antagonize China after 1949); and a peacekeeping debacle in Somalia; and the Bay of Pigs fiasco; and the blind loyalty to an Iranian Shah hated by nearly all his subjects. Focus instead on all the – presumably more important – successes. (I’m excluding the numerous Blob-y decisions to back all manner of dictators, primarily in the developing world, and ignore human rights considerations because whatever their ethical flaws, only the Vietnam and Iran policies undermined American interests significantly.)

Paramount among them: victory over the Soviet Union in the Cold War; the protectorate-alliances, foreign aid, and open trading system that keyed this triumph – in the process pacifying and democratizing Germany and Japan – fostering recovery in these former enemy dictatorships as well as the rest of Western Europe; and ushering in decades of record prosperity in these regions.

One obvious rejoinder: Today’s Blob and its most recent forerunners merit zero credit for those achievements because almost none of its members simply weren’t around or in power then. Meaning maybe America simply needs a more competent Blob?

At the same time, there’s inevitably been personnel continuity in the Blob’s ranks over time (think of recently deceased centenarian George Shultz, and the 98-year old Henry Kissinger, both still influential well into their golden years). Moreover, today’s establishment was largely groomed in Blob-y institutions, claims to be acting in that original Blob-y tradition, and has clearly remained stalwart in its advocacy of tireless international activism, and support for what it calls the liberal global order and its constituent institutions created by the older Blob generation. As a result, including those decades-old developments in judgements of today’s Blob is eminently defensible.

And in retrospect, what’s particularly revealing but neglected about these achievements is the extent to which they stemmed from circumstances almost ideally suited for foreign policy success, rather than from Blob-er genius. Globalists of the first post-World War II decades unquestionably faced serious domestic political obstacles to breaking with the country’s historic aloofness to most non-Western Hemispheric developments.

But they also enjoyed enviable advantages. Especially important was global economic predominance, which blunted much criticism on the home front by permitting subsidization of both the security and well-being of enormous foreign populations without apparent cost to American living standards or national finances.

It’s no coincidence, therefore, that as this advantage eroded, and the core Blob tactic of handling problems literally by throwing money at them and refusing to choose meaningfully between guns and butter became more problematic, the Blob’s record worsened – and undercut the intertwined domestic political and economic bases of active and passive public support for its strategies.

In fact, post-Vietnam, it’s difficult to identify any important foreign policy decision that Blob-y leaders have gotten right, or even handled reasonably well, with the exception of the first Persian Gulf War. (Ronald Reagan’s dramatic military buildup certainly helped spend and innovate the Soviets into collapse, but it was opposed by much and possibly most of the Blob, which favored continued containment and the simultaneous pursuit of arms control and detente.)

Just as important, this Blob’s very profligacy meant that many of its biggest post-Vietnam failures were economic in nature. Two leading examples – the messy collapse of the early World War II international monetary system and structural inflation and long sluggish growth that followed; and the 2007-09 global financial crisis and ensuing Great Recession.

Both crises were brought on fundamentally by global financial imbalances stemming from the Blob-ers’ stubborn refusal to support even minimal budget discipline on the foreign policy side; and from their failure to require reciprocal market access for traded goods either in the early post-World War II Bretton Woods monetary system or into its patchwork successors. And both revealed the Blob’s obliviousness to the intertwined imperatives of maintaining the national economic power needed to pay for their preferred policies responsibly; and of defining U.S. interests realistically enough to avoid needless costs and addiction to debt, inflation, or both.

Do today’s attacks, then, mean that the Blob’s demise is in sight? Not nearly likely enough. After all, it’s survived its decades-long string of blunders with its status pretty much intact. It’s bound to be keep being replenished by the same elite universities whose relevant faculty members are overwhelmingly Blob-y themselves. There’s no sign that their corporate funders are backing away from the think tanks that keep its many of its members employed when they’re out of public office. And its record will surely keep being reported principally by a news media that’s thoroughly Blob-y itself. That – frighteningly – leaves a foreign policy catastrophe inflicting lasting damage on the nation as America’s best hope for replacing the Blob even with simply a more genuinely diverse source of experience and expertise.

Making News: Video of China Panel Presentation Now On-Line

Tags

China, conservatives, economics, Intercollegiate Studies Institute, Making News, national security, Trade

I’m pleased to announce that the podcast is now on-line of my participation in a late July panel discussion on “China, Geonomics, and Great Power Competition.” Here’s the link.

The event was especially interesting because it was held as part of a conference put on by the conservative Intercollegiate Studies Institute (ISI), and because for decades intellectually honest conservatives have been torn over the question of how and even whether to respond to China’s wide-ranging economic predation. (As with liberals, other conservatives have simply served as corporate-funded backers of coddling China.)   

On the one hand, many have recognized that growing national economic power (which China has amassed largely through its tariffs, technology blackmail, intellectual property theft, and other practices having nothing to do with free trade or any form of free markets) tends to translate into growing national military power. Therefore, some limits on doing business with the People’s Republic have always been considered justified (e.g., no arms sales). On the other hand, even these conservatives’ fundamental opposition to limits on economic activity has bred a decided reluctance to endorse any but the most threadbare curbs – which folks like me have viewed as pathetically inadequate (for reasons I lay out).

As ISI has explained, the purpose of the overall conference was to “hash out what a conservative approach to the economy should look like today” – which reflects its admirable willingness to reexamine longstanding dogmas. So IMO, the Institute deserves a lot of credit for including China policy on this list, and I’m grateful to have been included in this piece of the process. P.S.  I attended most of the rest of the conference, and found the treatment of other issues fascinating. If ISI posts the entire event at one link, I’ll pass it along as soon as I can find it.   

In the meantime, keep checking in with RealityChek for news of upcoming media appearances and other developments. 

(What’s Left of) Our Economy: U.S. Manufacturing Hiring’s Sloughing Off Delta – For Now

Tags

aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, Boeing, CCP Virus, China, coronavirus, COVID 19, Delta variant, electrical equipment, Employment, fabricated metal products, food products, healthcare goods, Jobs, logistics, machinery, manufacturing, medical equipment, metals, non-farm payrolls, pharmaceuticals, plastics and rubber products, PPE, private sector, semiconductor shortage, supply chains, tariffs, transportation, vaccines, {What's Left of) Our Economy

This morning’s official monthly U.S. jobs report (for August) brought a notable departure from recent trends. Athough the overall results were lousy (as total employment rose by just 235,000 during the month), manufacturing hiring soared by 37,000.

It’s true that nearly two-thirds of these gains (24,100) came from the automotive sector, which has been roiled recently by a shortage of semiconductors that’s wreaked havoc on the output of today’s increasingly electronics-stuffed vehicles. It’s also true that this progress might be snuffed out soon by the still widening spread of the CCP Virus’ highly infectious Delta variant and whatever new curbs on economic activity and consumer behavior it might keep prompting.

But it’s also true that domestic industry’s strong hiring in August came during a month when Delta had already become front-page news – which surely expains much of the much-weaker-than expected rise last month in overall non-farm payrolls (NFP – the U.S. jobs universe of the Labor Department that produces the employment data).

And it’s true as well that the major upward revision revealed to the July manufacturing jobs increase (all the way from 27,000 to 52,000 – the best such performance since last August’s 55,000) entailed much more than the vehicles and parts sectors (where the hiring advance was judged to be 10,500 instead of merely 800).

For example, July’s machinery jobs gains were upgraded from 6,800 to 9,100 (its strongest monthly result since last September’s 12,200); those for electrical equipment and appliances was estimated at 1,500 instead of 200; and employment in the plastics and rubber sectors was pegged at 2,300, not 300.

Despite its last excellent two months, U.S.-based manufacturing remained a job-creation laggard during the pandemic period as of August. But it became less of a laggard. Since the deep CCP Virus- and lockdowns-induced downturn of March and April, 2020, when manufacturers shed 1.385 million jobs, these companies have boosted employment by 1.007 million – erasing 72.71 percent of those losses. That share of regained jobs is up from the 68.74 percent level it reached in July.

That’s faster improvement than registered by the private sector, whose regained job percentage rose from 76.96 to 78.72, and by the total non-farm economy, where the advance rose from 74.50 percent to 76.60 percent.

Moreover, it’s important to remember that during the economy’s spring, 2020 woes, manufacturing employment suffered less than payrolls in the rest of the economy. Its job levels fell by 10.82 percent, compared with 16.46 percent for the private sector and 14.66 for the entire non-farm economy.

As with the July revisions, the list of significant manufacturing employment winners in August was hardly confined to the automotive industry. Among the major industry categories used by the U.S. government, fabricated metal products payrolls increased by 6,600 on month (the highest sequential boost since March’s 10,100); plastics and rubber products by 3,100 (its best such performance since February’s 4,500); and food manufacturing (1.600).

The biggest July jobs losers were electrical equipment and appliances (down 3,100, for its worst hiring month since January, when its payrolls fell by 3,400) and miscellaneous durable goods (a category containing personal protective equipment – PPE – and other medical supplies crucial for fighting the CCP Virus), whose 1,800 jobs lost were the worst such total since the entire economy’s spring, 2020 meltdown.

Also somewhat discouraging – job creation in the machinery sector, whose products are used elsewhere in manufacturing and throughout the rest of the economy, flatlined in August following its big 9,100 July spike.

The most detailed employment data for pandemic-related industries is one month behind those in the broader categories, but their July job-creation performance was decidedly mixed. In surgical appliances and supplies (the sector containing PPE and similar goods), May’s previously reported payroll decline of 900 is now judged to be a drop of 1,900, but June’s 500 jobs increase remained intact and was followed by an identical improvement in July. As a result, employment in this crucial national health security sector is now 9.22 percent above immediate pre-pandemic levels.

The overall pharmaceuticals and medicines industry saw hiring slow down notably in July – from a downwardly revised 2,300 in June to 400. May’s downwardly revised loss of 300 jobs stayed intact. These changes left payrolls in the sector 4.72 percent above February, 2020’s immediate pre-pandemic levels.

The story was little better in the pharmaceuticals subsector containing.vaccines. Its May and June employment gains are still judged to be 1,000 each, and no jobs at all were added in July. But its workforce is still 10.21 percent higher than just before the pandemic.

The July results showed that aircraft industry employment is still on a roller coaster, since Boeing is still struggling to overcome the manufacturing and safety issues it’s faced in recent years, along with the CCP Virus-related slump in business and leisure travel. May’s 5,500 monthly plunge in employment was unrevised in this morning’s figures, June’s 4,500 increase was upgraded to 4,700, but payrolls retreated again in July – by 1,500. Due to all these fluctuations, aircraft employment fell to 8.08 percent below its levels just before the pandemic arrived in force in the United States.

The aircraft engines and parts industries added 200 employees on month in July, but June’s previously reported increase of 500 was downgraded to 400. As a result, payrolls are down fully 14.80 percent since immediate pre-pandemic February, 2020.

It’s still possible that the Delta, or some other, CCP Virus variant will lower the boom on domestic manufacturing employment going forward – both because economic activity and therefore demand for manufactured goods will stagnate or drop not only in the United States, but in industry’s important foreign markets. Supply chain snags are no sure bet to clear up any time soon, either.

Nonetheless, U.S.-based manufacturing is still clearly benefiting from the Trump tariffs continued by President Biden that are pricing huge amounts of metals and Chinese-made goods out of the domestic market. Vast amounts of economic stimulus are still pouring into the American and foreign economies. And there remains tremendous pent-up demand among U.S. consumers and businesses alike, due to the lofty heights that household savings have reached and to clogged logistics systems. (A “hard” infrastructure bill will help U.S.-based manufacturers, too. But despite efforts to speed up the permitting process, regulations that can long delay the launch of new projects still may mean that the much of the new work will take months and even years before they’re “shovel ready.”)

And as I keep pointing out, those with the most skin in this game – domestic manufacturers themselves – keep professing optimism. (See, e.g., here and here.) That last consideration still tilts the balance toward manufacturing bullishness for me.

(What’s Left of) Our Economy: Even Pre-Delta, the CCP Virus Kept Roiling U.S. Trade Flows

Tags

CCP Virus, China, coronavirus, COVID 19, Delta variant, exports, goods trade, imports, Made in Washington trade flows, manufacturing, non-oil goods trade deficit, services trade, supply chains, Taiwan, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

Today’s official monthly U.S. trade figures (for July) revealed once again how the tumultuous stop-start nature of the nation’s CCP Virus-era economy keep greatly complicating figuring out its real health and whether it’s improving. That goes double for assessing whether the economy is returning to pre-virus normality.

As you may remember, last month I wrote that the June data “brought to an end for the time being the pattern this calendar year of the total U.S. deficit and goods shortfall statistics stabilizing on a monthly basis, along with the crucial non-oil goods gap data.” (The non-oil goods numbers represent that portion of U.S. trade flows most heaviy influenced by trade policy decisions – which is why I’ve dubbed this category “Made in Washington” trade.)

The reason: The U.S. Census Bureau, which tracks the trade flows, reported that the combined goods and services trade gap widened by 6.70 percent, to $75.75 billion in June – an all-time high that broke the $72.72 billion record set in March.

Today, however, the June total trade shortfall was revised down to $73.23 billion – a record till this morning, but 3.33 percent lower (a downgrade that’s really big by Census Bureau standards). Moreover, the July overall trade deficit came in at just $70.05 billion, which is right in line with the January-May average that so encouraged me last month.   

These fluctuations came mainly before the virus’ Delta variant struck the United States with full force, so such progress could vanish by next month. All the same, it’s reasonable to observe that the combined deficit shrunk for the best combination of reasons from a U.S. standpoint. Total goods and services exports climbed by 1.31 percent to $212.83 billion, the highest such level since May, 2019’s $213.97 billion. And overall imports dipped by 0.15 percent, from June’s slightly downwardly revised $283.31 billion to $282.88 billion – a total that’s still the second highest ever.

Even better, this deficit’s 4.34 percent sequential decline was achieved even though the long-time U.S. services trade surplus plunged by 11.77 percent on month. Of course, services have been the segment of the American and global economies that have been hit hardest by CCP Virus-related disruptions (think, especially, travel and transportation in general). But it’s still noteworthy that this July level was the lowest since September, 2012 (way before the pandemic), and the monthly decrease was the biggest since August, 2008’s 14.03 percent plummet, in the midst of the Great Recession that followed the global financial crisis.

At the same time, the services trade surplus number reported today for June ($20.03 billion) was revised up a mind-boggling 14.94 percent from the previously judged level of $17.43 billion. So that’s another reason to suspend judgment on any of these most recent virus-era economic data.

Keeping this (big) caveat in mind, the goods trade numbers released today were definitely good news. The chronic deficit in this portion of America’s trade flows (by far the biggest) sank sequentially by a healthy 5.93 percent, to $87.72 billion. That’s the lowest such total since April’s $87.09 billion, and the new June figure was revised only slightly higher, so this decline looks genuine so far.

In addition, goods exports in July, which increased by 1.83 percent on month, to $148.59 billion, set their fourth straight monthly record. July goods imports were off 1.20 perent sequentially from June’s all-time monthly high of $239.18 billion. But the $236.31 billion total was still the third highest ever.

The deficit reduction in that non-oil goods trade category was encouraging as well. At 6.91 percent, it was bigger than that for goods overall, and the greatest monthly fall-off since February, 2020’s 7.91 percent – when the original outbreak of the CCP Virus was still keeping much of China’s export-heavy economy at a standstill.

Of course, continuing snags in global supply chains are doubtless holding down U.S. exports, imports, and deficits, so they add up to another virus-related reason for caution in interpreting any single month’s trade data. But these disruptions have marked the entire CCP Virus period, so the July improvements can’t be written off entirely.

That goes for China-related trade flows as well. Especially important is that the July bilateral goods deficit of $28.65 billion was just 2.89 percent larger than June’s $27.84 billion, and represents the eight straight month when these results have stayed in the same neighborhood. That development sure looks like a sign that the Trump administration tariffs that President Biden has continued are still impeding China’s access to the U.S. market. So does the fact that, on year, the China goods trade shortfall has risen much more slowly (14.98 percent) than the total U.S. non-oil goods shortfall that’s its closest global proxy (21.39 percent).

The news on the U.S. trade manufacturing front was good, too – but only in relative terms. Despite the 3.12 percent monthly decrease in domestic industry’s huge, chronic trade deficit from last month’s record $114.06 billion total, the July figure of $110.50 billion was still the second biggest on record.

On month, manufacturing exports dipped by 1.90 percent, from $97.06 billion to $95.22 billion. But the much greater amount of imports was down 2.56 percent, from $211.11 billion to $205.72 billion.

Year-to-date, the manufacturing deficit is up fully 25.42 percent this year, to $732.62 billion, and is on track to shatter the annual record of $1.11277 trillion set just last year.

From January-to-July, 2020 to the same seven-month stretch this year, manufacturing exports have jumpe by 18.80 percent, to $642.16 billion. But the much greater amount of manufacturing imports has surged by 22.24 percent, to $1.37477 trillion.

In other notable July trade developments, the U.S. goods deficit with Taiwan, now the world’s leader in semiconductor manufacturing technology, hit its fourth straight monthly record ($3.62 billion), and the goods gap with Japan, another tech and manufacturing powerhouse, rocketed up month-to-month by 27.43 percent, to $6.29 billion. This total was the highest since last November’s $6.78 billion. And the Canada goods deficit retreated by 22.05 percent from as June total of $5.46 billion that was its highest since October, 2008.

Making News: Podcast of National Radio Interview on China’s Economy Now On-Line

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CCP Virus, China, coronavirus, COVID 19, Delta variant, Donald Trump, exports, globalization, Gordon G. Chang, logistics, Making News, supply chains, tariffs, The John Batchelor Show, Trade, trade war, transportation, Wuhan virus

I’m pleased to announce that the podcast is now on-line of my latest interview on John Batchelor’s nationally syndicated radio show. The segment, which aired last night, can be found here, and focused on China’s economic performance lately – which John, co-host Gordon G. Chang, and I all agreed is showing definite signs of struggling.

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

Making News: Back on National Radio Tonight Analyzing China’s Economy

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CCP Virus, China, coronavirus, COVID 19, debt, Delta variant, exports, Gordon G. Chang, Making News, supply chains, tariffs, The John Batchelor Show, Trade, trade war, Wuhan virus

I’m pleased to report that I’m slated to return tonight to John Batchelor’s nationally syndicated radio show. Our subject:  how well or poorly China’s economy is handling a CCP Virus surge among its own population and in many countries that are major markets for its exports.

I’m not sure exactly when the segment is scheduled for tonight’s program, but John’s show is on the air week nights from 9 PM to 1 AM EST, and it’s always provocative and informative. You can listen live to our China conversation – including co-host Gordon G. Chang – at this link. And for those of you who can’t tune in, I’ll post a link to the podcast as soon as one’s available.

Also – keep checking in with RealityChek for news of upcoming media appearances and other developments

Our So-Called Foreign Policy: Biden’s Just Blundered on Taiwan, Too

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ABC News, Afghanistan, alliances, allies, Article Five, Biden, China, Cold War, Congress, credibility, George Stephanopoulos, Japan, NATO, North Atlantic treaty Organization, Our So-Called Foreign Policy, Republic of China, semiconductors, South Korea, Taiwan, treaties, vital interests

Last week I tweeted that I was worried that President Biden would do something stupid and reckless to try to establish or reestablish (depending on our viewpoint) his global chops following the Afghanistan military withdrawal his administration has so disastrously conducted. As known by RealityChek regulars, American Presidents have followed this course before – notably John F. Kennedy.

And sure enough, on Wednesday he at least came uncomfortably close. No, Mr. Biden didn’t invade or threaten another country, or even move U.S. military forces into provocative positions versus, say, China or Russia or Iran or North Korea. But he did say something that should worry all Americans. In his interview with ABC News’ George Stephanopoulos, the President suggested that Taiwan now enjoys the same status in American eyes as Japan, South Korea, and the members of the North Atlantic Treaty Organization (NATO). That is, they’re allies in whose defense against external aggression the United States is treaty-bound to fight.

Specifically, when asked by Stephanopoulos if China could credibly tell the Taiwanese – who they claim run a renegade province that Beijing has vowed to bring back into its fold with force if necessary – “See? You can’t count on the Americans,” Mr. Biden’s response included:

“We have made– kept every [defense] commitment. We made a sacred commitment to Article Five that if in fact anyone were to invade or take action against our NATO allies, we would respond. Same with Japan, same with South Korea, same with– Taiwan. It’s not even comparable to talk about that.”

The President is right about NATO. In fact, that Article Five he mentioned is the keystone of the treaty that established the alliance. In 1949, the signatories agreed

“that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all and consequently they agree that, if such an armed attack occurs…will assist the Party or Parties so attacked by taking forthwith, individually and in concert with the other Parties, such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area.”

The Japan-U.S. Security Treaty of 1951 contains its own Article Five. The key section:

“Each Party recognizes that an armed attack against either Party in the territories under the administration of Japan would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional provisions and processes.”

The promise to meet aggression with U.S. military force is a little looser here – and notice that the treaty creates no Japanese obligation to aid the United States with its own military if American territory comes under attack. The reasons are complicated – for example, in 1947, Japan, then under U.S. military cooperation, adopted a constitution containing a proposal from Supreme Allied Commander General Douglas MacArthur that pledged “never” to “maintain” “land, sea and air forces, as well as other war potential.” The idea, of course, was to prevent Japan from ever reemerging as the type of threat it became in the 1930s. And at that point, it wasn’t even a fully sovereign nation, much less an armed one.

Nonetheless, as the Cold War developed, and Washington’s priorities in East Asia shifted toward using any actual and potential assets available to resist communist aggression, the United States proceeded to push Japan to rearm and add to the regional forces that could fight the Soviets or the Chinese or the North Koreans. But even though Japan continuously balked, the United States’ determination to defend Japan could never be seriously doubted as long as tens of thousands of American servicemen were stationed on Japanese soil, representing a “tripwire” whose presence and possible vulnerability to the superior conventional militaries of potential regional aggressors would guarantee an armed U.S. response – poentially complete with the use of nuclear weapons – against an attack on Japan. 

A similar U.S. commitment – complete with unequal obligaions and tripwire forces – has been made to South Korea.

There’s now clearly a case for adopting the same policy toward Taiwan. From 1954 to 1979, the U.S. security relations with Taiwan were governed by a assymetrical defense treaty, too, complete wiith an Article Five American commitment. But since the United States decided to recognize the People’s Republic of China (yes, the Communists) as China’s sole legitimate government, its approach toward Taiwan’s defense has been informally called “strategic ambiguity” – which is just as fuzzy and plastic as it sounds.

Yet whereas that posture arguably made sense for most of the post-1979 period, since the People’s Republic has grown so much stronger and more important economically than Taiwan (which still calls itself the Republic of China), the island can now legitimately claim to boast an asset vital to America’s own national security and prosperity – world leadership in the manufacture of the world’s most advanced and powerful semiconductors.

At the same time, extending Article Five-type status even to a technological powerhouse like Taiwan isn’t a decision to be made on the spur of the moment. The impact on China – which has significantly closed the military gap with the United States especially in its own backyard (where Taiwan is located) – needs to be carefully considered. And more important, it’s a move that the United States can’t make by presidential fiat. Congress needs to approve.

On Thursday, a “senior Biden administration official” told reporters that American “policy with regard to Taiwan has not changed.” And the usual supposed experts and talking heads said that Mr. Biden had simply added to his long record as a “gaffe machine.” But who the heck is this senior official, anyway? Why should anyone believe him or her if they’re not willing to speak for attribution? And why should the Chinese take this walk-back seriously, or take comfort in (unofficial) assurances that the President was just Biden-ing again – especially since “strategic ambiguity” has become a lot bolder under both him and President Trump?

Moreover, if they’re not aware of it already, the Chinese should know that Presidents have used all sorts of ways short of formal treaties to tie the nation militarily to foreign countries, and even to use military force (Google “Tonkin Gulf Resolution,” or “Authorization for Use of Military Force”), and that timely, effective Congressional resistance is anything but a sure thing. That could go double for a national political establishment that today is united by a sense of humiliation due to the Afghanistan debacle – and possibly spoiling for an opportunity to regain global confidence.

Again, I’m not against a treaty commitment to Taiwan. But it needs to be made with full consideration of all the pluses and minuses, and according to clear Constitutional procedures. And it certainly shouldn’t result from an out-of-the-blue comment by a Chief Executive under heavy political fire, however richly deserved.

Our So-Called Foreign Policy: Toward Avoiding New Afghanistans

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Afghanistan, Al Qaeda, America First, Antony J. Blinken, Barack Obama, Biden, China, credibility, globalism, Jack Keane, jihadism, Our So-Called Foreign Policy, Taliban, terrorism, Washington Post

The humanitarian calamity seemingly sure to erupt in Afghanistan now that the Taliban have taken over means that this is no time for I-told-you-so-type gloating – even by long-time critics of U.S. military involvement and nation-building since these jihadist extremists were driven from power in late 2001.

So as one of those long-time critics, I offer the following two observations simply as an attempt to help avoid repeats of this disaster going forward. And interestingly, they’re both inspired by a single Washington Post article.

The first concerns a statement from early this month by a spokesman for the Chinese defense ministry. According to one Colonel Wu Qian, Washington “bears an unavoidable responsibility for the current situation in Afghanistan. It cannot leave and shed the burden on regional countries.”

There’s no doubt that the U.S. military withdrawal could have been handled much better – especially for the local U.S. allies who will be left to the mercy of violent, reactionary, misogynistic Islamists. In particular, as retired U.S. Army General Jack Keane asked on Friday, why did President Biden decide to complete the pullout in the middle of Afghanistan’s fighting season – when the weather is warm enough to permit aggressive, large-scale Taliban military campaigns? Why didn’t he wait till the winter – when, as has consistently been the case, the cold has prevented such operations?

But this notion that America “cannot leave and shed the burden on regional countries”? What on earth is Colonel Wu talking about? Not only can the United States do exactly that. It should have done exactly that long years ago, once the main mission was accomplished of ousting the Taliban regime that permitted Al Qaeda to turn the country into a base for launching terrorist strikes like the September 11 attacks.

And the reason is pretty simple: As I recently posted, Afghanistan is in China’s neighborhood. Not to mention Russia’s and Iran’s. And it’s as far away as it can be from America’s neighborhood. As a result, it’s always been the case that once the United States left, it would have been the regional countries’ burden, and therefore, these countries (which aren’t exactly weak mini-states) would have had no choice but to figure out how to deal with a Sunni Muslim jihadist-led country capable of causing big problems for all of them.

How could this be done? Frankly, that’s not America’s problem. Because the only valid reason Americans ever had to have any significant self interest in who runs Afghanistan had to do with its terrorist base potential. And once the Taliban was gone, along with the unique threat it posed of giving sovereign-state shelter to a terrorist organization, that challenge has always best been handled with a genuine America First strategy: genuinely securing the U.S. border (something Washington can reasonably hope to control) rather than (1) chasing jihadists around a Middle East so dysfunctional that it’s bound to keep breeding new extremist groups faster than existing groups can be neutralized by the American military; much less (2) trying to build nations where none have existed before.

At the same time, more than cynicism and opportunism may be responsible for that Chinese statement. For it comes against the backdrop of decades of Washington acting like Afghanistan’s political makeup and regional behavior indeed mattered more to the United States than it mattered to Afghanistan’s neighbors.

Just as important, the statement also comes against the backdrop of decades of pre-Trump, globalist U.S. politicians, like Mr. Biden, prattling on about how America is and must be the world’s leader and “indispensable nation.” It seems perfectly reasonable, therefore, to suppose that even countries like China, which clearly has some global leadership ambitions of its own, have taken the idea seriously, at least on some subliminal level. That is, the indispensable stuff looks like it’s backfired big-time in the case of Afghanistan. So maybe Washington, and especially the globalists, could bring such bloviation, and the cluelessness and hubris behind it, to an end?  

The second statement that I hope can guide wiser post-Afghanistan U.S. foreign policy decisions (sort of) came today none other than Secretary of State Antony J. Blinken. According to the Washington Post‘s account:

“…Blinken rejected criticisms that the withdrawal damages U.S. credibility. He said staying mired in a conflict that is not in the ‘national interest’ would do far more damage.

“‘Most of our strategic competitors around the world would like nothing better than for us to remain in Afghanistan for another year, five years, 10 years, and have those resources dedicated to being in the midst of a civil war,’ Blinken told CNN. ‘It’s simply not in our interest.'”

I said “sort of” because if you look at the transcript of the interview from which this statement came, Blinken didn’t make the global credibility connection explicit. But since Mainstream Media news organizations like the Washington Post play such a big role in creating dominant narratives on issues like this, he might as well have.

And this connection matters, because it essentially echoes my main point from yesterday’s post: America’s global credibility depends most not on trying to stamp out every foreign challenge that arises, and even less on sticking with obviously lost causes. In fact, pretensions of omnipotence that are just as obviously groundless, and an unwillingness to cut losses, are likeliest to be seen, and have been seen, as signs of lousy judgment.

The real source of U.S. global credibility is demonstrating the wisdom to avoid plunging into conflicts or problems in low priority areas in the first place, and correcting such mistaken moves ASAP.

Former President Barack Obama put it cogently: “Don’t do stupid sh– (stuff).” It seems like a low bar for American foreign policy to meet. But especially as long as the country is led by globalists – like Mr. Biden – who for decades characteristically have viewed security and prosperity as internationally seamless wholes that will unravel disastrously if a single thread becomes loose, any sign that his administration may be learning the Obama lesson is unmistakably encouraging.