(What’s Left of) Our Economy: Good – & Promising – News on Manufacturing Reshoring

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Canada, China, Commerce Department, East Asia, Forbes.com, GDP-by-industry, Kearney, Kenneth Rapoza, manufacturing, manufacturing production, manufacturing trade deficit, Mexico, North America, Trade, Trade Deficits, {What's Left of) Our Economy

When two separate sources of information agree on a conclusion, the conclusion obviously becomes a lot more important than if it’s got only a single supporter. That’s why I’m excited to report that a major economic consulting firm has just released data showing that American domestic manufacturing has been coping just fine with all the challenges it faces from Trump tariffs aimed at achieving the crucial goal of decoupling U.S. industry and the the broader economy from China.

I’m excited because these results track with my own analysis of U.S. trade and manufacturing output data – which I’ve been able to update because of a new Commerce Department release measuring manufacturing production through the end of last year. And you should be excited, too – because the more self-reliant U.S.-based industry becomes, the better able it will be to add to the nation’s growth without boosting its indebtedness. In addition, the more secure the country will be both in terms of traditional national security and America’s ability to provide all the military equipment it needs, and in terms of health security and its ability to provide all the drugs and medical equipment it needs to fight CCP Virus-like pandemics.

The consulting firm data comes from Kearney, and I need to tip my hat to Forbes.com contributor Kenneth Rapoza for initially spotlighting it. According to the company, its seventh annual Reshoring Index reveals that last year, imports from low-cost Asian countries like China (well, none are really “like China,” but you get it) as a percentage of U.S. industry’s output hit its lowest annual level since 2014. The decrease was the first since 2011, and the yearly drop was by far the biggest in percentage terms since 2008.

What’s especially interesting is that the Kearney figures show that manufacturing imports from Asia made inroads even during much of the Great Recession. Last year, their prominence dwindled notably even though the American economy as a whole was growing solidly. And although domestic manufacturing output slowed annually last year – due partly to the inevitable short-term disruptions and uncertainties created by major policy shifts, and partly due to the safety problems of aerospace giant Boeing – the Kearney report noted, it “held its ground.”

Kearney reported even better news on the “trade shifting” front, and its findings also track with mine. One major criticism of the Trump China tariffs in particular entails the claim that they won’t aid American domestic manufacturing because they’ll simply result in the U.S. customers of tariff-ed Chinese products buying the same goods from elsewhere – especially from Asian sources.

The Kearney study refutes that claim, reporting that not only did the role of Asian imports decrease in 2019, but that due to the tariffs, this decrease was led by a China fall-off, that production reshoring rose “substantially,”and that a major import shifting beneficiary was Mexico – which is good news for Americans since it means that the globalization of industry is now doing more to help a next-door neighbor whose problems do indeed tend to spill across the border. (I’ve also found important trade shifting away from East Asia as a whole and toward North America – meaning both Canada and Mexico.) 

As for my own research, the release Monday of the Commerce Department’s latest Gross Domestic Product by Industry report, combined with the monthly trade statistics, these data also shed light on the relationship between U.S.-based manufacturing’s growth, and the economy’s purchases of manufactured goods from abroad.

The big takeaway, as shown by the table below: The relationship has continued its pattern of weakening – suggesting less import dependence – during the Trump years, although production growth did indeed slow because of that aforementioned tariff-related disruption and the Boeing mess.

The figure in the left-hand column represents U.S.-based manufacturing’s growth during the year in question (according to a gauge called “value added), the middle column represents the growth that year of the manufacturing trade deficit, and the right-hand column shows the ratio between the two growth rates (with the trade gap’s growth coming first). The higher the ratio, more closely linked manufacturing output growth is to the expansion of the manufacturing trade deficit. All figures are in pre-inflation dollars.

2011:             +3.93 percent              +8.21 percent                2.09:1

2012:             +3.19 percent              +6.27 percent               1.97:1

2013:             +3.36 percent              +0.77 percent               0.23:1

2014:             +2.93 percent            +12.39 percent               4.23:1

2015:             +3.72 percent            +13.22 percent               3.55:1

2016:              -1.19 percent              +3.07 percent                 n/a

2017:             +3.99 percent              +7.22 percent              1.81:1

2018              +6.23 percent            +10.68 percent              1.71:1

2019              +1.67 percent              +1.09 percent              0.65:1

Domestic manufacturers obviously haven’t completed their adjustments to the new Trump era trade environment, and the CCP Virus crisis clearly won’t make this task any easier. But Kearney expects that the pandemic will wind up moving more U.S.-owned or -related manufacturing out of China, and so do I. And although the Kearney authors don’t say so explicitly, it’s easy to read their report and conclude that the crisis and the resulting national health security needs will help ensure that the domestic U.S. economy will keep getting a healthy share.

Our So-Called Foreign Policy: A China Fork-in-the-Road Coming for America First-ers?

Tags

allies, America First, Barack Obama, China, deterrence, East Asia, globalism, industrial policy, Marco Rubio, national security, North Korea, nuclear deterrence, Our So-Called Foreign Policy, South Korea, Trade, tripwire, Trump

Something’s been bothering me for some time about the way that the national debate over dealing with China has been evolving.

Don’t get me wrong – it’s been great to see the major shift in the conventional wisdom since President Trump took office toward genuine recognition that the People’s Republic poses major economic and national security threats to the United States, that many of these threats are closely related, and that they have to be dealt with both on the economic and national security policy fronts.

That’s tremendous progress from the pre-Trump – and globalist – consensus that greater U.S. economic engagement with China was promoting more economic and political freedom in China, and more peaceful international behavior (or definitely would in some indefinite future), and that any dangers emanating from Beijing in the national security sphere are best coped with by increasing America’s military presence in East Asia (e.g., former President Barack Obama’s “pivot to Asia,” largely rhetorical though it was), cooperating more closely with the country’s allies in the region, or some combination of the two.

You don’t have to be an avid follower of world affairs to realize that the sharp distinction drawn by this globalist consensus between China economic and China national security policy was already producing a mind blowingly idiotic result: Washington was still resolving to resist any expansionist ambitions of Beijing’s in East Asia while continuing to help send China’s way floods of money and defense-relevant technology bound to turn into formidable military equipment that U.S. and other allied forces would face if conflict broke out.

Further, as I began pointing out years ago, because of the impressive progress made by both China and North Korea in developing intercontinental-range nuclear weapons, the globalist approach was exposing the American homeland to an ever increasing threat of nuclear attack – and mainly because even the U.S.’s wealthiest regional allies refused to field the (admittedly) expensive conventional military forces that could repel aggression from Beijing or Pyongyang without American help.

So everyone should be encouraged by the growing, bipartisan support for limiting the flow of U.S. resources and technology to China – even though many allegedly converted globalists continue hoping in vain that this goal can be achieved without setting limits (like tariffs) on trade and investment between the two economies.

My problem? Many of the new China hawks (and the leading example here is Florida Republican Senator Marco Rubio, who deserves considerable credit for his out-front role waking up other conservatives to the need for changing course on China) apparently believe that new U.S. trade, investment, and technology transfer curbs are mainly needed to shore up America’s decades-long position as the national security kingpin of East Asia. In other words, they’re hoping that America First-type China economic and technology policies can buttress globalist East Asia policies.

Maybe they’re right.  And if they succeed, it will at least become less likely that American troops will be killed in battle by Chinese weapons developed with dollars and knowhow from the United States.

Unfortunately, too much of the nuclear danger to the United States will remain in place – because the free-riding instincts of America’s East Asian allies inevitably will be reinforced. That is, the more confident they stay in America’s determination to protect them, the less military effort they’ll feel the need to make, and the longer U.S. military forces in places like South Korea will be needed to play tripwire roles – deterring aggression due to their vulnerability to attack and the chances that their imminent destruction will pressure a U.S. President to save them with nuclear weapons use that could trigger a similar retaliatory strike on the United States.

As I’ve written repeatedly, because taking every step possible to prevent a nuclear weapon from landing on American soil should be a much higher priority for Washington than protecting free-riding allies, it’s best for the United States to pull its troops back from the front-lines in East Asia and force its allies to defend themselves. And if this means okaying their own decisions to build nuclear forces, fine with me. I’d also sell them any conventional weapons they’re seeking – which would achieve the added benefit of improving American economic growth and employment.

Does this mean that an America First China policy would or should lack any national security dimension? Not at all. For as I first explained in this recent interview, staying ahead of China technologically will stay imperative for the United States to protect itself from the kinds of cyber-attacks Beijing is already capable of waging and has probably been sponsoring. And the threat is hardly limited to the hacking of U.S. government agencies or private businesses that originates from China. The more Americans (including individual Americans possessing valuable knowledge) use Chinese technology products because these goods have become the world’s best or cheapest, the more their privacy will be vulnerable to Chinese surveillance and ultimately blackmail. The advanced telecommunications equipment produced by Huawei is of course the most important example so far.

There’s another technology-based national security issue that purist America First-ers of my ilk need to deal with as well, and one that I haven’t sufficiently thought through. Nothing’s changed my mind about the United States being a big net loser from trade with East Asia, or about how it can retain the clout if needs in the solely from its role as a final consumption market these export-dependent economies will desperately need.

But thanks largely to failed globalist trade policies, most of the world’s semiconductor manufacturing capacity and capability is now located in East Asia – particularly in Japan, Taiwan, and South Korea. It may be tempting to believe that these countries will become more resistant to China’s power if the United States withdraws militarily from the region. But prudence counsels against simply assuming the best.

So as America First leaders start and keep offering these countries all the military hardware they need to rebuff Chinese advances, they will also need greatly to step up efforts to restore U.S. self-sufficiency in these key building blocks not only of high tech industry, but increasingly of all high value manufacturing and services. (To their credit, Rubio and some other new China realists also understand the need for redoubled American industrial policy efforts to achieve these goals.)

Attempts to reorient U.S. foreign and trade policies in America First directions are still at such an early stage that concern about these differing emphases might look premature. But events have a way of forcing major decisions much earlier than expected – either because crises erupt sooner, or because lead-times to implement new strategies can be longer, than is convenient. So all America First-ers should agree at least agree that the earlier this potential division in America First ranks is addressed, the better.

(What’s Left of) Our Economy: Can Free Trade Nowadays Really Maximize Global Well-Being?

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China, East Asia, economics, free markets, free trade, globalization, Trade, {What's Left of) Our Economy

As nearly every economist worth their salt can tell you, as far as their profession is concerned, the prime end goal of liberalizing global trade as completely as possible is maximizing the entire world’s economic well-being. And theoretical, purely economic criticisms of the freest possible global trade have been dominated by questioning whether efforts to achieve this goal have truly have kept this promise, or are capable of doing so.

I don’t mean to minimize the importance of this debate, or others focusing on related but distinctive issues bringing into play non-economic considerations – like whether trade and broader economic policies need to broaden their definition of well-being to include goals like increasing feelings of happiness and security, or like fighting climate change and other threats to the environment, or like preserving America’s national security, or like ensuring that the economic well-being being created is more equitably shared.

But these days, it seems that American policymakers in particular need to ask themselves a more fundamental question: Assuming the goal can be reached, is the greatest possible worldwide economic (that is, material) well-being actually a goal that the global trading system should be trying to reach? And all peoples and governments of good will, not simply the United States, have a vital stake in figuring out the right answer – especially if they place noteworthy value on free markets.

The presence of the word “governments” in the previous sentence points to a central complication that the welfare-maximizing enthusiasts seem to be missing.

Specifically, no one of good will could reasonably oppose maximizing the economic welfare of all the world’s individuals (assuming, of course, that whatever non-economic challenges caused by high growth – e.g., environmental threats – aren’t ignored).

But even leaving aside strategic and national security considerations, the organization of the world’s individuals into governments creates a big problem with this objective. Specifically, many of these governments have organized their national economies in turn around principles and practices that have nothing to do not only with free trade, but with free markets or any aspect of economic liberalism themselves – the idea that individuals and other economic actors (like businesses) have the right to make the (legal) economic choices they regard as serving their own best economic and/or non-economic interests.

China is the obvious example. Its system holds that, even though at a very local or micro level, individual and other actors (because of the point I’m about to make, I’ve always hesitated to use the word “businesses” or “companies” to describe any Chinese goods- or service-producing entities) can be permitted to act on their own impulses, any such economic decisions with broader effects should be made or be subject to the control of the state. And all resources related to the economy are ultimately accountable to the state as well.

There’s no legitimate doubt that freer trade has helped lift hundreds of millions of Chinese out of poverty, and of course contributed to the economic well-being of myriad non-Chinese individuals and businesses and other entities that sell to this huge, burgeoning market, the growing prosperity of Chinese individuals. But there can also be no legitimate doubt that this free trade has also greatly strengthened a Chinese government whose practices clearly amount to a broad rejection of free trade and the rest of free market thinking.

Until now, it’s been easy to argue that whatever Beijing’s interventionist record, freeing up trade between China and the rest of the globe has improved the world’s wealth on net, even though China may have been the greatest beneficiary, and even though workers in high-income countries (to cite one prominent example) may have paid an economic price on net. 

But all this wealth creation unquestionably has strengthened this command-and-control Chinese system, its global footprint, and its influence over the world economy. If you believe in the virtues of free markets, how can this kind of development possibly keep increasing overall world economic well-being over any significant period of time (as opposed to spurring the kinds of brief boom periods that tend to become busts)? And if it can (and statist China has been a big global economic player for many years now), then maybe it’s time to rethink faith in free markets to begin with?

Of course, it’s important to keep in mind a long-time standard explanation of how China’s economic rise can be squared with support for continual global trade liberalization. It’s the confidence that more and freer trade with China will promote a liberalization of China’s domestic economy that will inevitably loosen the state’s grip trade and other foreign economic policies. But as known to anyone who’s been following China issues in recent years, Beijing has been reasserting control over much of the paltry amount of economic activity that it had previously ceded. Moreover, this trend didn’t begin with current leader Xi Jinping. So at the very least, the optimists are now under a heavy burden of proof to show that continuing to free up trade with China, or even fighting Trump-ian American backsliding, will maximize global welfare indirectly, by fostering Chinese internal economic liberalization.

Given China’s immense size, a China exception to the trade-spurring-welfare-maximization claim would be crucial enough. But it’s not just China. Economic intervention even dwarfing that practiced by the United States (including but hardly limited to the massive response to the financial crisis by the Bush and Obama administrations, and especially the still considerable stimulus supplied by the Federal Reserve) is common the world over. Gradations vary considerably, but fascinatingly, and perhaps revealingly, its strongest in East Asia, the region that, even leaving China out, almost everyone agrees has been the biggest net winner from trade liberalization going back to the early post-World War II period.

Unlike China, some of the leading East Asian beneficiaries of freer global trade, like Japan and South Korea, are U.S. security allies. But they conform with no reasonable definitions of free market systems, either. Should American policy, and the policies of other more market-oriented economies, support making these countries and their highly interventionist systems stronger, richer, and more influential as well?

China’s rise and increasingly anti-American actions on many fronts have prompted speculation that current bilateral tensions might eventually split today’s highly integrated global economy into separate, Cold War-like U.S.- and Chinese-dominated spheres. In fact, this may be a Trump administration goal. So far, this talk has emphasized the intertwined technology and national security reasons for pursuing this goal. But if free markets are all they’re cracked up to be, it may also be warranted for solely economic reasons.

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?

Our So-Called Foreign Policy: The Establishment’s Korea Nuclear Cover-Up Continues

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alliances, allies, Chicago Council on Global Affairs, East Asia, free-riding, missiles, North Korea, nuclear war, nuclear weapons, Our So-Called Foreign Policy, polls, South Korea

If a pollster asked respondents a question on the order of “Would you favor the government handing Americans unlimited amounts of money?” without specifying that “it might destroy the economy,” you wouldn’t take it very seriously, would you? In fact, you’d probably (and rightly) condemn the survey as a con job.

And that’s exactly the reaction you should have to a new “finding” by the Chicago Council on Global Affairs that this year, for the first time [since 1990, when the organization began asking the question], “a majority of Americans express support for using US forces to defend South Korea” if it was attacked by North Korea. According to the Council, moreover, this figure has risen sharply since 2015 – from 47 percent to 62 percent.

If you’re a RealityChek regular, you know why this question is fraudulent. It doesn’t tell respondents that North Korea is terrifyingly close to being able to retaliate against such U.S. military involvement by destroying an American city or two with nuclear-tipped intercontinental ballistic missiles.

In fact, the question doesn’t mention anything about specific consequences for riding militarily to South Korea’s rescue. Even granting that the public realizes that wars are not picnics, the Council’s full phrasing was inexcusably anodyne:

“There has been some discussion about the circumstances that might justify using US troops in other parts of the world. Please give your opinion about some situations. Would you favor or oppose the use of US troops if North Korea invaded South Korea?”

Like the issue was simply being debated in a seminar.

Nor did the Council tell Americans why their country would need to risk blood and treasure to aid South Korea. It’s because, even though the South’s economy is vastly larger than the North’s, and even though the North actions have been threatening for decades, this long-time U.S. protectorate spends a negligible fraction of its wealth on its own defense.

So here’s what the Council should have asked:

“For nearly seventy years, the United States has pledged to defend South Korea militarily from attack by communist North Korea. But this promise was made when it created no risk for the American homeland, when the South was dirt poor, and when Washington feared that communism was on the march worldwide. Now it’s clear the North will very soon be able to launch a successful nuclear attack on the United States if it keeps its promise to the South. Since the alliance was formed, South Korea has skimped on its own defense spending even though it’s become one of the world’s richest countries. And communism is dead as a global military menace. Would you favor or oppose using U.S. troops to defend a free-riding South Korea if the result could be the nuclear destruction of an American city?”

Of course, my phrasing could be toned down. It could also add the argument American trade and other forms of business with economically dynamic East Asia would suffer if major war broke out anywhere in the region (although it’s easy to argue that business with the region has been a big net loser for the American economy), and that so far, the U.S. military presence and commitment have helped keep the peace. And to be fair, the Council didn’t mention any pro-interventionist arguments, either.

But the main point is that it’s hard to imagine any consideration surrounding the decision to intervene in a Korean war remotely comparing with this development: Until recently, Americans could be certain that their own territory would remain unscathed. Now such involvement could kill and maim millions of their compatriots, and turn important metropolitan areas into radioactive wastelands.

As I’ve long written (along with others), the American foreign policy establishment has been so irrationally wed to the country’s alliances that it’s concealed the catastrophic, and sometimes suicidal, (in the case of Europe, where the antagonist has been the Soviet Union and now Russia) dangers they have inevitably created. The only useful information contained in this Chicago Council on Global Affairs Korea finding is that, wittingly or not, this group is participating in the cover-up.

Our So-Called Foreign Policy: The Uses and Mis-Uses of Thucydides

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balance of power, China, Destined for War, East Asia, foreign policy, geopolitics, globalism, Graham Allison, international order, internationalism, Our So-Called Foreign Policy, realism, strategy, The History of the Peloponnesian Wae, Thucydides, Thucydides Trap

It’s always great to learn that U.S. leaders are working hard to use history to inform their policy decisions – unless they’re completely misreading the relevance of lessons of the past to America’s current circumstances, as could well be the case with senior Trump administration officials and their fascination with Thucydides’ History of the Peloponnesian War.

Don’t get me wrong: This chronicle of conflicts between ancient Athens and Sparta is a genuine classic both of military history and international relations theory. I hold it in particularly high regard because it contains a seminal argument for viewing the latter through a “realist” lens, emphasizing that countries act, in the words of one recent description, “out of pragmatic self-interest, with little regard for ideology, values or morality.”

But according to an account that came out last week (and that hasn’t been denied), top Trump foreign policy and national security aides are viewing Thucydides as a valuable guide to answering the question of whether war between the United States and China is inevitable. And their interest in the History has been encouraged by the work of a leading modern scholar, Harvard University’s Graham Allison. Allison has applied what’s widely regarded as Thucydides’ main conclusion – that established powers find it intrinsically and understandably difficult to deal with rising powers peacefully – to the U.S.-China situation, and in the process, he’s drawn a lot of attention in Beijing as well as Washington.

But there’s a major problem with focusing on whether the United States and China are stuck in a “Thucydides Trap” that makes war just about inevitable (Allison is not nearly so pessimistic), and examining past international rivalries for insights (his major contribution to the debate). As with so many mainstream analyses of American foreign policy for decades, Allison – and the Trump-ers apparently paying him heed – have completely forgotten the distinctive geopolitical and economic advantages the United States brings to international relations.

As I’ve written previously, the United States enjoys the kind of geographic isolation, military power, and capacity for economic self-sufficiency that enables it to view most overseas developments with relative indifference – provided that it maintains these strengths. And for all the important nuance he brings to his treatment of U.S.-China relations, it’s clear that Allison has overlooked what’s genuinely special about the American position, too.

Although I haven’t read Allison’s full Thucydides Trap book yet, I have read this lengthy magazine version. And it shows unmistakably that his warning that “Based on the current trajectory, war between the United States and China in the decades ahead is not just possible, but much more likely than recognized at the moment” accepts the same longstanding American globalist assumptions that have led to so many costly U.S. foreign policy mistakes since the end of World War II.

For example, Allison has a great deal to teach if it’s true that the United States has an intrinsic need to worry greatly about developments or questions like

>”a rising power…threatening to displace a ruling power”:

>”a rapid shift in the balance of power between two rivals”:

>”the rising power’s growing entitlement, sense of its importance, and demand for greater say and sway”;

>the fact that “Never before in history has a nation risen so far, so fast, on so many dimensions of power”:

>whether China is “restored to its rightful place, where its power commands recognition of and respect for China’s core interests”;

>whether “the growing trend toward a multipolar [as opposed to a U.S.-led] world will not change”;

But nowhere has he made this case for these concerns. Indeed, by and large, like other mainstream analysts and leaders, he simply assumes their crucial importance, without explaining how they could affect the nation’s safety, independence, and well-being directly and decisively.

Allison (along with the rest of the foreign policy mainstream, whose dominance is as complete on the conventional American Left as on the Right) gets more specific, and his analysis becomes more useful, when he raises questions like: ”Could China become #1? In what year could China overtake the United States to become, say, the largest economy in the world, or primary engine of global growth, or biggest market for luxury goods?”

And he identifies and expresses even more concrete core mainstream worries:

>First, whether China’s “current leaders [are] serious about displacing the U.S. as the predominant power in Asia?”’

>Second, both more broadly and more centrally “the impact that China’s ascendance will have on the U.S.-led international order, which has provided unprecedented great-power peace and prosperity for the past 70 years.”

But like the first set of worries, even these concerns should be treated as first-order issues by Americans only if they assume that, as with much less secure and inherently wealthy powers, either their security, prosperity, and independence are crucially reliant on the international environment, or that these aims are much more safely and efficiently achieved through international activism than through enhancing their abilities to deal with challenges and withstand crises acceptably in a turbulent international environment.

If the long-held globalist views stressing America’s relative vulnerability or dependence are accepted, then all of Allison’s questions remain vital – from the least tangible (like whether China wins more influence overall) to the most (whether China wants to replace the United States as Asia’s kingpin). And the fate of that “U.S.-led international order” (including preserving American primacy in Asia) ultimately matters most of all because it’s seen to be the only acceptable or only feasible guarantor of a satisfactory national future.

If, however, that assumption about the present international order is fatally flawed, then even subjects like the relative overall balance of power between the United States and China become secondary. They would logically cede pride of place to the issue of whether America’s power (in any dimension) is adequate to achieve specific national objectives or maintain valued national advantages. For even though relative power will of course influence success or failure, in the final analysis, the decisive consideration is whether that power is sufficient to achieve those particular successes and maintain those particular advantages, not whether America in some general sense “matches up” with other countries.

As always with these posts on overall foreign policy strategy, the main takeaway here isn’t that Allison and the other globalists are wrong and that I’m right. The main point is that the globalist school has – wittingly or not – long not only opposed, but defined out of existence, alternative approaches to security and prosperity that dovetail well with many of the nation’s most conspicuous strengths.

Here’s another way to put it: In his article, Allison expressly states that his detailed look at “16 cases over the last 500 years in which there was a rapid shift in the relative power of a rising nation that threatened to displace a ruling state….” But all entailed “the struggle for mastery in Europe and Asia over the past half millennium….” When globalists like him can explain why the geopolitical and economic similarities between the United States and these historic powers – or between ancient Athens and Sparta – count much more than the differences, they’ll be entitled to claim victory in their on-again-off-again debate with those favoring less ambitious over America’s foreign policy strategy. Until then, however, their opponents will be entitled to claim that they’ve managed to avoid the biggest questions.

Our So-Called Foreign Policy: Why Establishment Thinking About Containing China Remains Far from Serious

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allies, American Enterprise Institute, Asia, burden sharing, China, Daniel Blumenthal, defense budget, East Asia, entitlements, foreign policy establishment, free-riding, Japan, Our So-Called Foreign Policy, RealClearPolitics.com, South Korea, taxes, tech transfer, Trade

Congratulations to the American Enterprise Institute’s Daniel Blumenthal for coming up with some genuinely new insights into the U.S.-China balance of power and especially its relationship with the evolving economies of the two countries. Unfortunately, Blumenthal’s new essay for RealClearPolitics.com also shows that gaping blind spots remain in establishment thinking about the China challenge its members claim to be analyzing seriously.

For the purposes of this post, let’s grant Blumenthal’s mainstream assumption that it matters greatly to the United States which great power dominates East Asia politically. I disagree, but the point here is that if America does want to fend off a China challenge, greater policy changes will be needed than Blumenthal and other conventional wisdom-mongers seem ready to contemplate.

The author’s main theme is that the United States has no legitimate reason to doubt its economic capacity to prevent China from becoming Asia’s kingpin, and his new wrinkle involves measuring economic power by looking more at national wealth, and less at national economic growth. Since the U.S. wealth levels are both much greater than China’s, and since the gap has just resumed growing according to statistics he cites, America can easily afford the military forces needed to put China back in its place. And he blames China’s recent and impressive catch-up on this score on Americans’ recent (Blumenthal doesn’t specify the time frame) political decision to skimp on military spending while continue to devote exorbitant sums to entitlement spending – which has indeed long dominated the budget outlays (along with, as he’s noted, interest payments on the resulting ballooning national debt).

According to Blumenthal, Americans and their leaders as a result have chosen to elevate “the intergenerational transfer of wealth” over national security. Strictly speaking, he’s right. But other interpretations of national priorities seem just as legitimate.

For example, as the author briefly notes, the U.S. population is aging. So a major national retirement funding challenge will face even the most defense-minded politicians. That doesn’t let American leaders or the recipients of these entitlements off the hook in terms of making sacrifices needed to safeguard national security. But it’s bound to raise the question of whether the burden of sacrifice should be limited to middle class Americans. The great increase in national wealth mentioned by Blumenthal makes clear that the nation has many other resources on which it can draw to fund a bigger military – especially since the private economy’s wealth has led the surge. In other words, why not tax the rich or corporations more heavily to pay for new personnel and weapons?

One obvious rejoinder is that modest levels of taxes on wealthy Americans and on American companies are needed to ensure the economic growth needed to keep national wealth levels robust. But even accepting the doctrinaire trickle-down economics underlying this assumption, should upper-level individual incomes and business profits be completely exempted from any responsibility to pay for the military? If so, why? And wouldn’t that policy greatly loosen the relationship between national wealth and military capability emphasized by Blumenthal?

The author also neglects another big pool of resources that can be brought to bear on countering China: the wealth of America’s regional allies. Stunningly, after decades of American pleading for greater burden-sharing, countries with a far greater stake than the United States in resisting Chinese regional domination continue free-riding on U.S. defense guarantees. Why should American entitlements recipients see any reduction in benefits before Japanese and South Koreans pay at least as much for their own security (relatively speaking) as the much more geographically distant United States does? And their contributions could be immense. Japan alone, for example, is the world’s third largest national economy (behind the United States and China, respectively). 

Finally, as with nearly all the rest of the establishment, Blumenthal completely neglects the opposite side of the U.S.-China defense resources equation: The decisive extent to which American economic policy continues enriching China, and therefore continuing to enable it to afford lots of both “guns and butter” (as economists and political scientists have dubbed military and social spending). Thanks in part to literally trillions of dollars of earnings from the trade surpluses it’s long run with the United States, the Chinese pie keeps expanding strongly (that’s the economic growth whose importance Blumenthal softpedals). As a result, more new resources are generated for whatever priorities or combination of priorities the Chinese government chooses.

Even worse, as I’ve long noted, recklessly lax tech transfer policies on America’s part have for decades given the Chinese much of the knowhow needed to turn out increasingly advanced weapons and other military systems. Some signs of official concerns about this outflow have appeared in Washington lately, but U.S. leaders (and the rest of the establishment) remain woefully behind the curve.

When America’s East Asia security strategy stops bolstering the Chinese threat it depicts as such a huge concern, when it insists that local countries act like they have at least as great a stake in remaining independent of China as does the United States, when the wealthiest Americans are required to devote more of their recent immense windfalls to the common defense, and if all of those changes still leave China closing fast on the combined forces of the United States and its neighbors, it would become legitimate to ask Main Street Americans to start shouldering greater burdens. Until then, the U.S. working and middle classes will be entirely justified in demanding that the nation’s Asia strategy pass a minimal seriousness test first.

Our So-Called Foreign Policy: The Establishment’s Hypocritical China Cassandras

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allies, cabinet, China, confirmation hearings, East Asia, island building, national security, Our So-Called Foreign Policy, Rex Tillerson, Secretary of State, South China Sea, tech transfer, Trade, Trump

Since Donald Trump’s cabinet choices appeared at their Senate confirmation hearings last week, critics have rightly observed that the president-elect and his picks to run his foreign and national security policies seem to disagree sharply on some major issues.

Less noticed is how the Trump nominees’ statements have revealed worse incoherence in the ranks of most critics – who sit overwhelmingly in the nation’s bipartisan foreign policy establishment. An unusually worrisome example has been the near-firestorm over Secretary of State-designate Rex Tillerson’s statement that “We’re going to have to send China a clear signal that, first, the island-building stops, and second, your access to those islands also is not going to be allowed.”

Tillerson’s remarks referred to an especially brazen aspect of Beijing’s expansionism in the South China Sea – centered on territorial claims that no one else in the region accepts. In an apparent effort to create irreversible realities “on the ground,” China has been capitalizing on the local topography literally to turn existing rocks and similar features into mini islands. Beijing has gone on to place various kinds of facilities – including some with military capabilities – on them, and to declare the immediately surrounding waters to be Chinese territory.

As widely noted, there’s at best considerable tension between Tillerson’s warning and several suggestions made by the president-elect during the campaign that he’s worried that America’s security relationships in the East Asia/Pacific region have become too dangerous militarily (since its adversaries are developing increasingly potent nuclear forces) and too one-sided economically (since the United States runs huge trade deficits with most regional countries).

Also completely weird, however, have been the alarm bells set off in establishment ranks to the effect that Tillerson had suddenly moved America dramatically closer to war with China over the South China Sea. For many of these voices have thoroughly upbraided Mr. Trump for failing to appreciate the crucial importance of U.S. alliances for safeguarding American and global security.

Establishment voice FOREIGN POLICY magazine ran a piece ominously asking, “Is Tillerson Ready to Go to War Over the South China Sea?” Only slightly less melodramatic was this Wall Street Journal sub-headline: “If carried out, Tillerson’s proposal to bar Beijing from some South China Sea islands would likely trigger military battle, experts say.”

A Christian Science Monitor headline sounded a similar alarm, and its article reported that “[T]he policy would dramatically reshape US thinking on Chinese expansionism, drawing a hard new territorial line in China’s backyard and, experts say, invite a military confrontation with Beijing.”

And even though they weren’t predicting imminent conflict, the experts interviewed by The Los Angeles Times still apparently fretted that Tillerson, “without diplomatic experience, had engaged in a flight of hyperbole in keeping with the tough rhetoric about China favored by Trump.”

These would all be defensible views except for one consideration: The American security strategy in the East Asia/Pacific region that all these experts have endorsed as a group for decades depends first and foremost on a credible threat to use military force to deter the kind of aggression in which China is engaged.

It is completely legitimate to question whether or not China’s island-building is the best casus belli, or circumstance for drawing a “red line.” But it is the height of hypocrisy to condemn – or even tut-tut over – a statement emphasizing that the United States has long considered maintaining freedom of the seas in East Asia to be a vital security interest (including by the Obama administration), and that China is on a course that will require U.S. military responses unless Beijing stops or changes direction sharply.

Or are all these American Asia experts confident that China will even slow its land and sea grab at some point down the road without firmer U.S. counter-moves than have been seen to date? If so, it’s time that they explained their reasons why – and how these rationales relate to their long-time insistence that major American military deployments in this region are essential to maintain peace and stability.

So the incoming administration looks to be a house divided on dealing with China’s strategic ambitions in Asia. That’s disturbing, but at least from the little known so far, the leading factions will be internally consistent (though the hawks still need to show that they understand the need to stop adding to China’s wealth and power through dangerously shortsighted trade and tech transfer policies, and Mr. Trump needs to understand more completely that even greater defense burden-sharing by the Asians could still leave America with unacceptable nuclear risks).

But the outside critics have just about disqualified themselves from any role in this debate – unless they can offer something more than hopelessly scattershot whining.

Our So-Called Foreign Policy: North Korea Nuke Progress Shows Trump’s Right on Asia Strategy

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2016 elections, alliances, Donald Trump, East Asia, escalation dominance, Japan, missile defense, North Korea, nuclear deterrent, nuclear weapons, Obama, Our So-Called Foreign Policy, South Korea, submarine-launched missiles

All that was left out of the (minimal) press coverage of North Korea’s latest weapons test were the two most important – and intimately related – aspects. First, Pyongyang’s apparently successful launch of a ballistic missile from a submarine further undermines the grand strategy pursued in the East Asia-Pacific region by the United States for half a century — by bringing the North a big step closer to the ability to drop nuclear bombs on the American homeland. Second, as a result, the American people and their leaders need to start taking Donald Trump’s critique of this strategy much more seriously right now.

Although everything North Korea does is shrouded in mystery, the U.S. military said its “systems detected and tracked what we assess was a North Korean submarine missile launch from the Sea of Japan.” South Korea’s military seemed to agree, and added that what appeared to be a ballistic missile traveled about 19 miles from its naval platform.

Now 19 miles obviously doesn’t get the North’s weaponry very close to American territory. And the Pentagon conspicuously added that the launch  “did not pose a threat to North America.”  But these points are completely beside the point. Pyongyang’s last such test – at the end of last year – evidently was a flop. So progress has clearly been made. And the U.S. Army’s commander in the Pacific has testified to the Senate – in public, for attribution – “Over time, I believe we’re going to see [North Korea] acquire these capabilities [to strike the United States with nuclear weapons] if they’re not stopped.” The big question is, “Why would any responsible American leader assume the opposite?”

Shockingly and scarily, however, that’s exactly what every prominent figure in U.S. politics and policy seems to be doing – except for Trump. For their criticisms of the Republican front-runner’s challenge to America’s alliance strategy in the Far East all assume that America will indefinitely retain escalation dominance in the region. As I’ve explained, this means that the United States will be able to keep deterring aggression from the North with threats to use nuclear weapons against Pyongyang that would be credible because U.S. territory would remain safe from any comparable danger.

As I (and many others) have reported, escalation dominance on the Korean peninsula has been fading for years, as Pyongyang has moved steadily toward building land-based missiles capable of delivering nuclear warheads on U.S. soil. But submarine capabilities greatly magnify even this terrible threat, as the near-impossibility of finding these vessels – unlike land launchers – rules out the possibility of knocking them out in a preemptive attack. And although the United States keeps working on missile defenses, their test record so far shouldn’t inspire any confidence.

In other words, according to the nation’s leaders and the rest of its foreign policy establishment (not that they dare make this point overtly), they’ve yoked the United States into a policy of risking Los Angeles to defend Seoul, Trump calls this “a position that at some point is something that we have to talk about,” and he’s the irresponsible one.

Even more ludicrously, the establishment (including President Obama) insists that it’s Trump’s comments – not the mounting dangers to U.S. survival created by Washington’s current approach – that are undermining the long-term American goal of keeping nuclear weapons out of Japanese and South Korean hands. What these supposed experts either don’t know or won’t admit is that these allies are bound to go nuclear because the increasingly suicidal nature of America’s Asia strategy is so glaringly obvious and literally unbelievable to them. Indeed, Japan is widely thought capable of manufacturing a working nuke in six months. It’s true that the Japanese – responding to U.S. pressure – are transferring much of their existing large stockpile of weapons-grade and near-weapons-grade nuclear fuel to American facilities. But it’s also true that they’re still planning to build new facilities to make more.

The establishment is almost certainly correct in arguing that, all else equal, the fewer nuclear powers in the world the better. But all else hasn’t been anywhere near equal for years. Despite his personal flaws, Americans already owe Trump thanks for calling out an economic elite whose policies have disastrously failed the nation and world. Arguably, he deserves even greater thanks for calling out a foreign policy elite that’s now unmistakably – and needlessly – exposing the United States to literal destruction.

Our So-Called Foreign Policy: On U.S. Alliances, Trump’s the Voice of Responsibility

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2016 election, alliances, China, Cold War, Donald Trump, East Asia, escalation dominance, extended deterrence, foreign policy establishment, Germany, Japan, North Korea, nuclear weapons, Our So-Called Foreign Policy, Russia, smothering strategy, South Korea, Soviet Union, Western Europe

Foreign policy devotees like yours truly have rarely seen salad days like the last few weeks. On the heels of a long and remarkably candid interview of President Obama summarized in an Atlantic magazine piece have now come two comparably detailed and revealing sessions on the subject between Republican presidential front-runner Donald Trump and reporters from first the Washington Post and then The New York Times.

I wrote last week on Trump’s Post remarks on America’s approach to the North Atlantic Treaty Organization (NATO) embodied far more realism and indeed wisdom on the subject of U.S. alliances than the bipartisan American foreign policy establishment has demonstrated in decades. His latest statements to The Times confirm this superior judgment – and on elements of U.S. alliance doctrine that are as fundamental, longstanding, and arguably reckless as they have been thoroughly soft-pedaled in public. Specifically, Trump is challenging the decades-long policy that, a quarter century after fall of communism, is still exposing the United States to the risk of nuclear war to protect Japan, Western Europe, and South Korea.

One reason for threatening to unleash armageddon to maintain the freedom of major treaty allies was always made reasonably clear to the American voter during the Cold War: Western Europe and Japan were actual and potential concentrations of economic, industrial, and therefore military might. Therefore, they needed to be kept out of Soviet (and Communist Chinese) hands at literally all costs or else the global balance of power would tip fatally against the free world. And central features of American foreign policy quite naturally became deterring communist aggression both by deploying hundreds of thousands of American soldiers and heavy conventional weapons overseas, and by placing literally thousands of nuclear weapons on allied soil.

What was never made remotely clear to the U.S. public was a second, equally crucial reason for this alliance strategy – and the reason it has survived the complete transformation of the global strategic environment since the Soviet Union collapsed and China started integrating with the world capitalist economy instead of seeking its overthrow. Extending the American defense umbrella over the allies was also deemed essential to prevent these countries – and especially the former Axis powers Germany and Japan – from ever becoming global security threats themselves again.

The ultimate military guarantees provided by Washington were central to a strategy of what I’ve called “smothering” the allies. The United States literally would eliminate the need for them to carry out independent foreign policies ever again by meeting all the major needs that spur countries to conduct foreign policies in the first place. Washington would shield them from military attack and provide huge markets for the surplus production they needed to foster ever-rising levels of prosperity.

The economic dimension of this strategy have been problematic enough – but let’s save that discussion for another post. But the military dimension has become downright irrational in recent years. Put simply, yoking America’s very survival to that of foreign countries is easily defensible at a time when mortal threats to U.S. alliances are difficult to find – as in the early post-Cold War years, when Russia was weak, China seemed tamed, and North Korea’s development of nuclear forces that could strike the American homeland seemed a remote prospect even to worrywarts.

What Trump has been telling his media interlocutors is that those relatively halcyon days are gone. As events are making clear, the weaknesses of the military smothering strategy have become most apparent in East Asia. As I’ve written, the U.S. approach is logically defensible for America only if the United States maintains escalation dominance – nuclear superiority so overwhelming that even a questionably rational regime like North Korea’s would understand that it would come in a distant (and completely destroyed) second if these terrible weapons were ever used.

But as I’ve also written, this American escalation dominance is weakening, as the North has made progress in developing both nuclear weapons able to strike U.S. targets, and weapons mobile enough to survive limited American preemptive strikes aimed at taking them out. Here’s an update on Pyongyang’s nuclear programs. In other words, it’s one thing for an American president to promise to risk Los Angeles for Seoul (the South Korean capital), when there’s no real risk to Los Angeles. It’s quite another to make this vow when southern California is a real target. Recent Chinese nuclear weapons progress presents a similar dilemma, especially with China more aggressively asserting territorial claims in the South and East China Seas – including islands also claimed by Japan.

The point here is not that America’s current approach to alliances should be changed immediately. It’s entirely possible that such “extended nuclear deterrence” is the nation’s best overall bet for continued security and prosperity even in a post-Cold War world in which potential adversaries possess increasingly formidable nuclear capabilities. But contrary to the sneering, harrumphing – much less indignant – responses of foreign policy establishmentarians, the smothering strategy is anything but a slam dunk any more, either.

So it’s anything but crazy or irresponsible for Trump to be raising the prospect of Japan and South Korea acquiring their own nuclear deterrents. Indeed, as Trump told New York Times reporters David E. Sanger and Maggie Haberman, it’s essential for Washington to start thinking about these possibilities precisely because better Chinese and North Korean capabilities are – understandably – raising doubts among Japanese and South Korean leaders themselves about the credibility of U.S. nuclear guarantees. That is, they’re no longer solidly convinced that Washington would risk Los Angeles for Seoul or Tokyo. And if you think about these matters seriously, how could they be?

Indeed, Trump’s remarks about U.S. alliance policy have performed a major public service. For decades, a series of at-least-questionable decisions bearing on American national life and death have been common knowledge among U.S. leaders and foreign policy professionals, allied leaders, and adversary leaders. But they’ve been practically unknown to most Americans. Now what has clearly been a secret kept through countless acts of omission is starting to come out. The establishment is clearly being discomfited, but given its longtime record of often disastrous incompetence, why should anyone outside its coddle ranks care? For all other Americans, and especially those truly supportive of accountable, representative government, Trump’s challenge to the nation’s alliance strategy can only ultimately be an unalloyed good.