Our So-Called Foreign Policy: Fair-Weather U.S. Allies?

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alliances, allies, China, East China Sea, Eastern Europe, France, Germany, globalism, internationalism, Japan, NATO, North Atlantic TYreaty Organization, North Korea, nuclear deterrence, nuclear weapons, Our So-Called Foreign Policy, Pew Research Center, Russia, South Korea, Soviet Union, United Kingdom

Establishment analysts and commentators have looked at the results of the Pew Research Center’s recent survey on overseas attitudes towards U.S. foreign policy under President Trump and decided that their most important findings are that his America First approach is costing America valuable influence on the global stage.

Even if you don’t find those conclusions transparently self-serving – since the vast majority of these analysts and commentators are staunch supporters of a more traditional globalist or internationalist approach – consider this alternative interpretation: The Pew survey strongly suggests that the globalist strategy, which has been in place for decades, has failed miserably in a crucial respect. Even though its core principles have required that the United States accept enormous cost and risks (including nuclear) on behalf of allies all over the world, the Pew researchers have found that even under President Obama – a pretty run-of-the-mill globalist – the populations of these same allies had little appreciation for these American burdens.

For me, the most glaring example is South Korea. As RealityChek readers know, for years I’ve been noting that the rapid recent progress of North Korea’s nuclear weapons program means that the United States’ longstanding commitment to use nuclear weapons if necessary to defend the South from a northern invasion or simply to deter such an attack is now qualitatively more dangerous than in the past. For if North Korea has not already developed the means to launch a nuclear strike that could take out an American city – or two or three – it’s not far from achieving that goal.

The North’s progress was glaringly obvious in 2013, when Pew last asked South Koreans if they believed that “In making international policy decisions, the U.S. takes into account the interest of countries like ours a great deal/fair amount.” Yet that year, only 36 percent of South Koreans answered “Yes.” This year, only 24 percent of South Koreans gave that answer.

Japan is also protected by an American nuclear umbrella – at least in principle. As with the case of South Korea, it hosts large American military forces whose presence aims to bolster the credibility of that promise. And North Korea has actually fired missiles over Japanese territory – meaning that the threat it poses to Japan and to those U.S. forces is anything but merely theoretical. (If only because the American forces in Japan that defend the islands are supposed to help their comrades-in-arms if war breaks out on the Korean peninsula.) Japan is also alarmed by Chinese encroachments in the East China Sea.

But in 2013, only 38 percent of Japanese agreed that American foreign policy takes their interests into account even a fair amount. This year, that number is down to 28 percent.

The security situation in Europe is not nearly as fraught. But Russia has certainly taken actions that arguably threaten the security of new members of the North Atlantic Treaty Organization (NATO) that used to be part of either the old Soviet Union or the Soviet bloc. And as NATO allies, these countries are also entitled to nuclear protection from the United States even though their fates had never before been considered vital American interests and even though Russia retains nuclear forces more than large enough to devastate the United States many times over.

Yet although the new NATO members either border Germany (like Poland) or are located pretty close by, and even though Germans presumably would not want to see Russia reestablish dominance, even in 2013, only 50 percent of Germans believed that Washington takes their interests significantly into account in its foreign policy. The 2018 figure? With Russia at least as menacing? Nineteen percent. And the Germans are anything but outliers, as Pew found roughly the same trend in France and in the United Kingdom (although the share of their populations detecting any meaningful American regard for their interests in 2013 was a good deal lower than in Germany – just 35 percent and 40 percent, respectively).

A common retort by globalists and by allies is that allied populations have no reason to be especially grateful to the United States because these alliances serve crucial American interests, too. But what they forget is that populations (especially from countries whose governments have been champion security free-riders) that don’t believe the United States cares much about them aren’t likely to be populations likely to support the American military when push comes to shove in their regions – as opposed to calling for some version of accommodating the aggressors.

Not that I’m criticizing allied populations. At least in their initial stages, any conflicts will take place almost exclusively on their territories. And P.S. – these kinds of strains were troubling alliance relations for decades before Trump. But the by the same token, the Pew results underscore two truths about U.S. alliances that should be disturbing globalists more than ever.

First, the nuclear risks they still appear to be entirely satisfied with are being run for stakes (the security of relatively small, unimportant countries, as opposed to Japan and the entirety of Western Europe) that are less rationally justifiable than ever. And second, when the United States needs to lead the resistance to aggression, it may have fewer followers than ever.

Im-Politic: Some European Immigration Lessons for Americans

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assimilation, asylum seekers, Daniel Gros, Europe, European Union, Germany, Im-Politic, Immigration, Lily Hindy, migrants, Open Borders, refugees, The Century Foundation

With all the hubbub lately about supposed insiders writing and speaking about the Trump administration’s supposed dangerous dysfunction, the upcoming U.S. midterm elections, Brett Kavanaugh’s nomination to the Supreme Court, the ongoing American pro football national anthem controversy, Big Tech’s growing power over our lives and politics, and approaching hurricanes, it’s hard to remember that the nation still has a major unsolved illegal immigration problem –  and that the longstanding, often emotional debate about how to fix it (including its migrants and refugees dimensions) could re-erupt at any time.

When it does, all participants would do well to consider some important points contained in some recent research and writing about Europe’s struggles with borders-related issues. Here are a few that stick out especially prominently in my mind.

Two stunners come from a recent post by leading French economist Daniel Gros. First, he contends:

“The rate at which migrants are arriving has diminished considerably almost everywhere in Europe since the huge inflows seen in 2015….It is largely the result of EU [European Union} efforts, such as the agreement with Turkey to prevent Syrians from crossing into Greece, its cooperation with Libyan militias, and the massive pressure it has placed on the Sahara transit states to close their borders. Thanks to these measures, Europe has become a de facto fortress against migration.”

Yes, the migrants situations facing the United States and Europe differ considerably. But could you come up with any more convincing evidence that tough and smart border enforcement measures can work even when the underlying political and social “sending” pressures remain intact?

It seems that once European leaders mustered the political will – mainly to keep themselves in office – intractable problems got a lot more tractable. And P.S.: I’d argue that Europe’s immigration and refugee challenges are far more difficult than America’s, as it’s located near or relatively near both the economically failed states of North and Sub-Saharan Africa, and conflict-ridden Syria, Iraq, and Afghanistan. Add Libya to that second list, too.

Gros also notes that “In the last three years, men – many of whom are aged 18-35 – comprised more than two-thirds of all people seeking protection in Germany.” Moreover, this lopsided gender ratio seems to hold throughout Europe. Such figures make it awfully difficult to claim that migrants flows are triggered mainly by humanitarian catastrophes befalling so many developing countries. If these worries were the case, wouldn’t women and children be much more prominently represented? Even if picking up stakes while single (or individually) is much easier to do than making these journeys as families? Instead, the disproportionate representation of men, and especially younger men, among migrants signals that economics is a major motivator as well – which is a much less compelling justification for liberal admissions policies.

Some other key insights have been provided by a recent Century Foundation study of Germany’s efforts to assimilate the enormous populations of migrants it’s let in from the Middle East, Africa, and Central Asia. According to author Lily Hindy, her research on “what a determined government can accomplish if it commits to a policy of welcoming a massive influx of refugees” found that

“While Germany’s experience so far is checkered, on the most important counts, it has been a success. Fears that refugees would spur an increase in terrorism proved unwarranted. So did worries that the refugee influx would derail Germany’s economy. Despite the tensions and setbacks detailed in this report, Germany has managed to reap national benefits from a welcoming policy, implemented despite major political, economic, and social risks.”

All the same, many of those “checkers” look pretty sobering. For example, Hindy reports that the German government pegs the refugee unemployment rate as roughly 40 percent and estimate that, by 2020, only “half of the refugee population that arrived in 2015 would be working.” And this in a country with a world-renowned system of vocational training.

Further, however welcoming it’s been, Germany’s government doesn’t seem big on promoting multi-culturalism. Since 2005, the country has legally required “all immigrants from non-European Union countries to participate” in cost-free (at least to the refugees) “integration courses” that “include 600 hours of German language instruction and a sixty-hour ‘orientation course’ including information on German law, history, culture, and values.”

What if refugee vocational students don’t show up? If they miss these integration classes without valid excuses, or who simply rack up too many absences, they face curtailed government benefits, including in their monthly educational subsidies and food vouchers. And it’s clear from Hindy’s report that many Syrian newcomers in Germany aren’t entirely happy with these assimilationist efforts, charging that they require too much surrendering of their culture and their religion – including keeping women in clearly subordinate positions.

Perhaps most important to keep in mind: Germany has engaged in this massive effort at integration, and achieved what Hindy calls “impressive” successes, at a time when its economy has performed strongly. And even so, in response to political protests, Germany has dramatically reduced refugee admissions over the last two years.

Hindy is surely correct in writing that “barring a reopening of large-scale conflict in Syria, there should be some less chaotic years ahead in which the communities will more easily be able to settle” in Germany. But I wonder how many open and closet, diversity-happy Open Borders enthusiasts in the United States – who tend to pillory calls for any restrictions, or concerns about national identity, as racist and xenophobic – will recognize the loud “proceed with caution” message inherent in her observation.

(What’s Left of) Our Economy: The IMF (Unwittingly) Explains Why Trade Deficits Really Do Matter

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China, current account, current account surplus, current deficit, Germany, Global Imbalances, globalization, IMF, International Monetary Fund, Japan, tariffs, The Netherlands, Trade, Trade Deficits, Trump, {What's Left of) Our Economy

One of my greatest professional disappointments has been my failure to help make many converts to the idea that one of the biggest – and possibly the biggest – reason that trade deficits matter a lot (contrary to the insistence of most economists) is that they can lead to global financial crises like the one that struck in 2007 and 2008. The idea is that these deficits lay at the heart of the broader economic imbalances run up during the previous decade – which flooded borrowing- and spending-happy economies (especially America’s) with oceans of cheap credit, and inevitably produced the reckless use of such credit and the inevitable – and terrifying – bursting of the resulting bubbles.

You see? It’s a thesis that’s tough to summarize briefly – even though it’s widely accepted by some of the world’s leading economists, who nonetheless remain reluctant to acknowledge any connection to trade flows.

So I’m gratified that the International Monetary Fund has just lent additional support to this thesis, but I’m under no illusions that the determinedly oblivious conventional wisdom is going to budge – especially since the Fund goes out of its way absolve lopsided trade flows of any blame.

According to the Fund’s new External Sector Report (click here for a link to the PDF), these imbalances (measured in their broadest form, the current account) stayed at about the same share of the world economy last year as they did in 2016 (some 3.25 percent). Yet in the IMF’s view, between 40 and 50 percent of these imbalances were “excessive (that is, not explained by countries’ fundamentals and desirable polices).”

Why should anyone care? Because, as the Fund explains, “Large and sustained excess external imbalances in the world’s key economies—amid policy actions detrimental to external balances—pose risks to global stability.” Specifically, “Over the medium term, sustained deficits, leading to widening debtor positions in key economies, could constrain global growth and possibly result in sharp and disruptive currency and asset price adjustments.”

That last reference to “sharp and disruptive currency and asset price adjustments” is a fancy, and deliberately understated, way of saying “financial crisis.”

The danger is underscored by Figure 1 from the Report (on page five) – which shows how the world’s current account situation has changed over time. Optimists might take comfort from the fact that the overall global imbalance today (showed by the thick, solid line), is considerably smaller as a share of global output than it was at the peak of the last decade’s bubble. Also of interest: China’s current account surplus has shrunk in relative terms, while those of Japan, Germany, and the Netherlands have remained about the same. (For evidence that the better Chinese numbers are largely smoke and mirrors, see this analysis from the Council on Foreign Relations – not exactly a hotbed of protectionist thought.)

But here’s what the pessimists would note – and what should worry everyone: Although the total worldwide current account imbalances is down, so is global growth. During the peak bubble years, it was about 4.30 percent annually after inflation. During the current recovery, it’s been much lower, and last year, it was 3.15 percent. Worse, a new slowdown may well be in the cards.

That is, the world economy seems to be facing all the dangers of a new financial crisis without having received many of the (dubious) benefits of a preceding bubble.

The IMF has a solution: The persistent surplus countries should spend more (which will presumably pull in more imports from the deficit countries) and the deficit countries should take “actions to strengthen public and private sector balance sheets” (that is, in large measure, spend less).

And it sends a warning: “[P]rotectionist policies should be avoided as they are likely to have significant deleterious effects on domestic and global growth, while limited impact on external imbalances.”

These are pretty standard prescriptions. The trouble is, as usual, neither the surplus nor the deficit countries are showing any interest in following them. Moreover, the IMF’s views on the relationship between trade flows on the one hand, and national borrowing and spending and savings rates on the other, seems to repeat the canard that net savings levels determine trade flows. Nowhere do its economists acknowledge that the fundamental mathematical relationship is that of an identity – which says nothing about causation at all. As a result, they also ignore all the ways in which trade flows can determine savings rates.

It’s anything but realistic to expect the Fund to endorse President Trump’s tariffs or any of the rest of his trade policies. But it also seems to remain anything but realistic to expect the Fund to identify any plausible alternative ways to prevent today’s global imbalances from turning into Financial Crisis 2.0.

Our So-Called Foreign Policy: The Case that Trump is…and is not…a NATO Disrupter

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energy, Europe, George H.W. Bush, Germany, Mainstream Media, Marc Fischer, NATO, North Atlantic treaty Organization, Our So-Called Foreign Policy, Russia, Soviet Union, Trump, Trump Derangement Syndrome, Washington Post

Marc Fisher’s column in today’s Washington Post on the approach taken to the North Atlantic Treaty Organization (NATO) by President Trump and his successors is one of the more schizoid articles on American foreign policy that I’ve ever seen.

On the one hand, Fisher makes the absolutely crucial – and typically overlooked – point that since its founding (back in 1949), the United States has seen the alliance as a means not simply to contain the old Soviet Union (and now the Russian follow-on state). It’s also been seen as a means to contain Germany – specifically, (in Fischer’s words) to “enmesh Germany so thoroughly in Western alliances that it never again became a dominant, destabilizing force.” And P.S. – that’s also why Washington was so enthusiastic about Germany joining the European Union (originally through various predecessor organizations).

Even better, the author discusses how this strategy has had historic benefits (helping build a Western Europe that was free and peaceful for decades) and costs (discouraging Germans, especially after unification, from grappling seriously with the challenge of becoming a “normal” country, complete with robust defense capabilities, without reverting back to dangerous militarism).

But despite the valuable history lesson, Fisher’s article at least flirts with Trump Derangement Syndrome in two important ways. First, he fails to distinguish between German ambivalence about more assertive foreign and defense policies, and current German policies like signing energy supply contracts bound to send billions worth of euros in revenue to a Russian government that Berlin professes to view as a threat to European security and the broader “global liberal order.”

Even seven decades after the end of World War II, the former remains understandable, at least to some extent. There can be no excuse for the latter, and President Trump has been absolutely right to call Germany on the carpet in this respect.

Second, Fisher calls the Trump-ian approach to NATO, and to defense burden-sharing issues a major and troubling departure from longstanding U.S. policy because it’s been (or seemed to be) uniquely ignorant of the Germany issue. Yet he belittles Mr. Trump’s claim to be a long overdue disrupter of hidebound American NATO strategies by noting that, in 1992, former President George H.W. Bush’s administration “bluntly warned” Germany that “the United States would pull its troops out of Europe if the Germans and other Europeans didn’t cough up the money and manpower to take more responsibility for their own defense.”

Unless Bush 41 was simply blowing smoke, I’m hard pressed to see the difference between this position and President Trump’s hard (and harsh) line. Fischer could have made this case – which is entirely conceivable given the long history of similar, indeed transparently hollow, threats from Mr. Trump’s globalist predecessors. But he didn’t. Moreover, the President’s rhetoric hasn’t (yet) gone as far as Bush 41.

The way I see it, major changes in America’s approach to NATO (and to its alliances in East Asia) are urgently needed, and Mr. Trump hasn’t gone nearly far enough down this road. It’s also clear that, in some important respects, the Trump-ian approach of loud bark and modest bite has given his administration the worst of all possible worlds – widely accused by the U.S. and many foreign chattering classes of ostrich-like isolationism, yet failing (to date) to secure for the United States any of the benefits of a genuine America First global strategy. Worse, as I’ve just argued, Mr. Trump actually seems determined to increase some of the threats the United States faces from continuing the alliance status quo.

So I’m not knocking Fisher for criticizing the President’s NATO policy. What a shame, though, that he didn’t limit himself to spotlighting the Germany issue, and proceeded to fall into the kind of Trump-induced incoherence that has rightly cost the mainstream media so much credibility.

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

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

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

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

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

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

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

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

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

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

Making News: Back on CNBC This Afternoon – & More!

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China, CNBC, Germany, Making News, Power Lunch, tariffs, The John Batchelor Show, Trade, Trump

I’m pleased to announce that I’m scheduled to return to CNBC this afternoon at 1 PM EST to help provide an update on President Trump’s trade policies toward China and other major trade competitors.  You can watch the segment on-line – on the network’s “Power Lunch” program – at this link.  As always, if you can’t tune in, I’ll post a link to the streaming video of the segment as soon as one’s available.

The podcast of my interview last Wednesday on John Batchelor’s nationally syndicated radio show is now on-line as well.  Click here to listen to an informative discussion focusing on U.S.-Germany trade tensions — and apologies for posting the link so late!

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

Our So-Called Foreign Policy: Why America’s Alliance Strategy Can’t Have it All

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alliances, allies, burden sharing, China, defense spending, Financial Times, Germany, James Mattis, Japan, NATO, North Atlantic treaty Organization, North Korea, nuclear war, Our So-Called Foreign Policy, Russia, smothering, South Korea, Trump

Decades ago (literally!) I came up with an insight that’s stood the test of time pretty well. When my main professional focus was American foreign policy, I began realizing that the best way to describe the U.S. approach to its major security alliances with East Asian and European countries was to call it a “smothering strategy.” That is, American leaders were trying not only to protect Japan and Western Europe specifically from communist aggression. They were also trying to make sure that those critical regions never exploded into major war again – and principally, that Germany and Japan never resumed their roles as aggressors.

The characteristic U.S. solution? Washington would try to smother these German and Japanese impulses by removing their need to conduct any kind of independent foreign policies of their own in the first place. That’s why the United States pledged to take care of both their national security interests (with dangerous nuclear defense commitments) and their economic interests (by opening its economy much wider to their exports than vice versa). As a result, for decades, Germans (and other Europeans) and Japanese could avoid the expenses of maintaining big military establishments and concentrate tightly on the peacetime pursuits of life, liberty, the pursuit of happiness – not to mention building great wealth.

How good was this insight? To me, the proof of the pudding was America’s determination to preserve these alliances almost unchanged even after the Cold War ended, the Soviet Union disappeared, and China had not yet launched a drive to boost its influence in East Asia. To put it bluntly, U.S. leaders were still terrified that, if they were forced to face the world on their own once more, the Germans and Japanese would go bonkers again.

But this past week came some evidence that the smothering strategy is still firmly in place – despite the election of an American President who has complained loudly as a candidate as well as in office about how these arrangements are inexcusable rip-offs of the American public and especially taxpayers. At a big national security conference held each year in Germany, Trump administration officials expressed alarm at the prospect that some European initiatives to boost military spending that have barely advanced past the talking stage could might result in European forces at least sometime operating independently of their alliance with the United States – the North Atlantic Treaty Organization (NATO) – and even excluding America.

According to a Financial Times account of the meeting, U.S. Defense Secretary James Mattis reacted by insisting that these European Union “defence plans…enhance Nato’s common defence rather than detract from it. And he put down an important marker: there was, he said, a clear understanding that common defence is a Nato mission that belongs to Nato ‘alone’.”

In other words, the Trump administration has now fallen into both of the traps that ensnared U.S. alliance policy during the Cold War. It has assured the allies that its commitment to their defense is absolute – including the risk of fighting a nuclear war on their behalf – thereby gutting any incentives for them to stop “free riding” on the United States militarily and bearing a greater share of the defense burden. And it has made clear that, although it wants the allies to assume more responsibilities for their own defense, it opposes the allies gaining any more control over their own defense. Instead, the United States must remain firmly in charge.

As a foreign policy realist, who believes that national interests are much more important than particular alliances, and can clash with the preservation of these alliances, I don’t blame the Trump-ers for wanting to have their cake and eat it, too on this score – i.e., more allied resources to use as Washington wishes. Nor do I blame the Europeans for wanting as much defense assistance from Americans as they can get while continuing to skimp on their military budgets.

But as an American, I wish the administration would recognize two fatal flaws in this alliance strategy status quo. The first is the un-realism of straining to freeze alliance structures in place when the common enemy that represented their raison d’etre has been gone for nearly thirty years. The second entails the needless dangers created by continuing to provide nuclear guarantees – and the tripwire forces needed to draw it into Armageddon – for these allies when not even the partial revival of Russian and Chinese threats (along with North Korea’s development of ever more advanced nuclear weapons) has fostered consensus in how to handle them.

Of course, dissolving these alliances will entail risks. But the risks of trying to square these circles look far greater. And when considering the nuclear threats they now pose (from those North Korean as well as Chinese forces that are much more capable of credibly threatening the United States with nuclear attack, along with Russia’s Cold War holdover arsenal), they look harder to justify than ever.

Our So-Called Foreign Policy: The Real Message Sent by the Trump Security Strategy Blueprint

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alliances, allies, America First, Asia-Pacific, borders, burden sharing, China, Cold War, deterrence, Eastern Europe, Europe, free-riding, Germany, globalism, international institutions, internationalism, Japan, Middle East, nation-building, National Security Strategy, NATO, North Atlantic treaty Organization, North Korea, nuclear weapons, Our So-Called Foreign Policy, Russia, South Korea, sovereignty, Soviet Union, terrorism

The Blob – a wonderful nickname for the Washington, D.C.-centered complex of establishmentarian foreign policy bureaucrats, former officials, think tanks, lobbyists, and journalists – has actually come up with a useful insight in noting some important contradictions between the Trump administration’s new National Security Strategy (NSS) document, and the president’s speech announcing the document’s release.

It’s hardly new to observe that big differences on crucial issues seem to divide President Trump from his top advisers, though it’s always valuable to note, since this gap can’t possibly make American diplomacy more effective, and could cause real problems. My chief NSS-related concern, however, could be even more important: Mr. Trump’s speech once again demonstrates that he himself remains pretty confused about his foreign policy priorities – and not entirely convinced that priority-setting is particularly important at all.

Not that presidents are often perfectly consistent about America’s approach to international challenges and opportunities. And given the diversity of these challenges and opportunities, consistency itself can be a vastly overrated virtue – at best. But these days, much more clarity is urgently needed – especially since President Trump has touted himself as such a disrupter; especially since the America First-style disruption he touts is badly needed on many fronts, in my opinion; and especially since disruption is badly needed because some genuinely dangerous situations are nearing crisis territory, and some existing crises keep worsening.

With that backdrop in my mind, two of these clashing ideas – maybe described more accurately as sets of impulses? – stand out. The first has to do with America’s major security alliances. Mr. Trump has consistently, and in my view, understandably, complained about defense free-riding by countries in Europe and the Asia-Pacific region in particular that for decades have enjoyed protection by U.S. conventional and nuclear forces. And his December 18 NSS speech continued in this vein, scolding his White House predecessors for failing “to insist that our often very wealthy allies pay their fair share for defense, putting a massive and unfair burden on the U.S. taxpayer and our great U.S. military.”

He’s absolutely right that major economies like like Germany, Japan, and South Korea should pay far more, and not only because they can afford to do so – and free up American resources for major domestic needs in the process. They need to pay more because they face far greater threats from potential aggressors like Russia and China and North Korea than does the United States.

If President Trump would start highlighting the discrepancy – firmly based in geography – between the security challenges faced by the United States and those faced by its allies, he might actually achieve greater defense burden-sharing. But he makes a fatal mistake when boasts that his administration’s “new” strategy “emphasizes strengthening alliances to cope with these threats.  It recognizes that our strength is magnified by allies who share principles — and our principles — and shoulder their fair share of responsibility for our common security.”

For whenever the allies have heard phrases like “common security,” they have concluded that the United States can’t afford to put any meaningful pressure on them to boost defense budgets – because its own vital interests will always persuade it to fill any gaps. History could not teach more clearly the lesson that America’s failure to stress that its alliances are helpful assets, not vital necessities, and that its support for these arrangements is not unconditional, has been the kiss of death for any efforts to eliminate or reduce free-riding. And the Trump administration’s burden-sharing campaign will surely founder on exactly these shoals.

If we were living in another (past) decade, this shortcoming might be No Big Deal. After all, as I’ve previously written, America’s major alliance commitments, including their nuclear dimension, involved either pledges to protect arguably vital or potentially vital regions, or to deter adversaries, like North Korea, that couldn’t retaliate in kind against the American homeland. So it’s anything but entirely surprising that, for decades during the Cold War and after, these alliances achieved their overseas goals and kept the United States itself safe.

But the likeliest alliance-related potential flashpoints nowadays are totally different. Russia, which still has plenty of nuclear weapons, is seriously threatening only Baltic and other East European countries that were recklessly invited to join the North Atlantic Treat Organization (NATO) even though their fates have never been considered vital interests by American leaders. Even during the Cold War, America’s European allies were never entirely convinced that Washington would risk DC, or New York, to save Paris or London. It’s that much less credible to suppose that U.S. leader would risk a major American city to save Riga.

Frighteningly, however, that’s precisely a catastrophe that the United States today could suffer because it remains American strategy to deny a president any real choice but to act. And the means to this perilous end? A growing U.S. military presence in Eastern Europe not remotely strong enough to repel a Russian attack, but large enough to put irresistible political pressure on Washington to go nuclear to save it from annihilation, or to retaliate for its loss.

Such American tripwire forces remain on the Korean peninsula, too, and their tripwire mission also remains exactly the same – even though North Korea can now, or will shortly be able to, respond to American nuclear weapons use by destroying U.S. cities.

In other words, greater alliance burden-sharing – and probably much greater changes – now need to be squarely on President Trump’s table not simply to achieve greater economic equity and to finance domestic policies more responsibly. They’re needed to reduce as dramatically as possible the chances that nuclear weapons will land on American soil. But as Mr. Trump’s speech indicates, there’s no reason to suppose that he’s even considering this type of disruption.

The second set of clashing ideas or impulses has to do with the overall purpose of American foreign policy. I’ve been writing for decades that the main flaw in the internationalist approach dominating the country’s diplomacy for decades has been its insistence that the United States can be no more secure, prosperous, or free than the world at large. Therefore, internationalism (which Mr. Trump and many of his supporters tend to call “globalism”), whether in its conservative or liberal forms, has pursued a worldwide reformist and policing agenda even in areas where the United States had no tangible stakes whatever, or where the benefits never remotely approached the costs and risks.

In his NSS speech, Trump (again) rightly lambasted the archetypical post-Cold War version of this internationalism: “nation-building.” He emphasized that “We do not seek to impose our way of life on anyone” and repeated an important (potentially and constructively) disruptive in marker laid down in previous addresses:

“We will pursue the vision we have carried around the world over this past year — a vision of strong, sovereign, and independent nations that respect their citizens and respect their neighbors; nations that thrive in commerce and cooperation, rooted in their histories and branching out toward their destinies.”

The point about a world of “strong, sovereign, and independent nations” represents long overdue pushback against the globalist objective of a world increasingly governed by ever more powerful international rules and institutions that can only undermine national self-rule – and are likeliest to focus on restraining U.S. freedom of action.

But the business about respecting citizens and neighbors (along with his concern about “vigorous military, economic, and political contests…now playing out all around the world”), and thriving in commerce and cooperation, too strongly resembles the standard internationalist boilerplate that has launched the nation on so many, often disastrously, misguided Americanizing missions.

And although an explicit Trump-ian return to nation-building etc seems wildly improbable, first consider the president’s description of his anti-terrorism goals in the Middle East, and then try to figure out how they can be reached without transforming this dysfunctional region into something light years from where it is now, and that it has never been: “confronting, discrediting, and defeating radical Islamic terrorism and ideology” and preventing “terrorists such as ISIS to gain control of vast parts of territory all across the Middle East.”

Far better for him to focus like the proverbial laser beam on “not letting them into the United States” – a goal that, however difficult, is far more practicable than curing what ails a remote, often hostile part of the world with which the United States has almost nothing in common.

The conventional wisdom about documents like the National Security Strategy is that they’re overwhelmingly for show, have virtually nothing to do with an administration’s day in and day out decisions, and lack any meaningful predictive power. Ditto for sweeping presidential speeches on grandiose subjects. And again, the conventional wisdom isn’t entirely wrong.

But as even cynics tend to concede, just as NSS-like reports result from the work of numerous government agencies and therefore hundreds of junior and senior officials (including political appointees), prepared presidential remarks (even in this administration) usually represent the combined efforts of many White House officials and also incorporate input from a wide range of government agencies. As a result, it’s far-fetched to suppose that they’re completely devoid of meaning. For me, they can reveal two important insights about a chief executive’s foreign policy outlook and potential.

First, as suggested above, they can yoke presidents to ill-considered and even dangerous commitments. Consequently, they can create equally ill-considered and even dangerous public expectations, too. Of course, circumstances force politicians to execute U-turns all the time, but the more obvious they are (because they reverse positions prominently staked out), the more (needlessly) damaging they can be.

Second, and more important, they speak can volumes about how well presidents can handle the challenge of making hard foreign policy choices, their related willingness to acknowledge in the first place that not all good things are possible simultaneously, or even close, and their consequent ability to establish sustainable priorities. In these respects, the president’s remarks about his administration’s first NSS display too many of the shortcomings that produced globalism’s major failures.

(What’s Left of) Our Economy: A Decent Month & a Long Way to Go for US Trade

Tags

Canada, Census Bureau, China, exports, Germany, imports, Made in Washington trade deficit, Mexico, NAFTA, North American Free Trade Agreement, recovery, South Korea, Trade, trade deficit, Trump, {What's Left of) Our Economy

America’s goods and services trade deficit decreased by 5.93 percent in June – a second straight sequential decline that resulted in its lowest level ($43.64 billion) since last October. Highlighting the month’s results was an all-time high services exports figure ($65.37 billion). In addition, total exports hit their highest level ($194.37 billion) since the end of 2014, and June goods exports to Mexico ($21.35 billion) were the second greatest total on record, and the merchandise deficit fell on month at its fastest pace (18.28 percent) since July, 2015.

Yet despite these milestones, the total trade deficit for the first half of the year ($276.60 billion) was the highest six-month total since the first six months of 2012. Further, goods exports to China – which accounts for roughly half of the total American merchandise trade deficit – fell in June at their fastest rate (4.74 percent) since January, 2016 (18.41 percent). And although the China-heavy manufacturing and high tech trade deficits fell on month, they are running ahead of last year’s totals as well. Indeed, the latter’s six-month total ($43.40 billion) represents an all-time high. Year-to-date merchandise shortfalls have risen – including a quadrupling of the Canada shortfall – with many of the foreign economies whose trade policies have been criticized by President Trump. (Germany and South Korea were important exceptions).

The June figures also showed a quarterly uptick in the drag on the current recovery of the Made in Washington portion of the U.S. trade deficit from an already lofty level – cutting 17.47 percent from cumulative growth since the expansion began in mid-2009, or just under $464 billion.

Here are selected highlights of the latest monthly (June) trade balance figures released yesterday morning by the Census Bureau:

>In June, the combined U.S. goods and services trade deficit dropped for its second straight month, from a downwardly revised $46.39 billion to $43.64 billion. The new total brought the shortfall to its lowest level since last October ($43.07 billion).

>Leading this progress were U.S. services exports, which rose on month by 0.94 percent to a a second straight new all-time high: $65.37 billion.

>Total exports hit something of a milestone, too, increasing by 1.23 percent sequentially to their highest level ($194.37 billion) since December, 2014 ($197.18 billion).

>Moreover, on the eve of the renegotiation of the North American Free Trade Agreement, the June data show that U.S. goods exports to NAFTA partner Mexico improved by 7.42 percent over May’s figure, to hit their second highest total ($21.35 billion) on record. (The all-time high of $22.35 billion was set in August, 2014).

>Yet in contrast to this good news, the combined American trade deficit for the first six months of the year ($276.60 billion) was the worst January-June total since 2012’s $281.46 billion – when economic growth was somewhat faster.

>Another June low-light: China, which may face punitive unilateral U.S. tariffs, bought 4.74 percent few goods from the United State than in May – the steepest such drop since January, 2016’s 18.41 percent.

>U.S. merchandise imports from China, however, rose by 1.17 percent, to $42.29 billion, and helped push the June American deficit up 3.08 percent, to $32.58 billion – the highest since last August’s $33.86 billion.

>Year-to-date, the U.S. goods deficit with China is running 6.08 percent ahead of last year’s pace, even though exports have risen nearly twice as fast (up 15.63 percent) than imports (8.39 percent).

>Although it fell on month in June (by 6.83 percent, to $8.82 billion), on a year-to-date basis, the trade deficit for high tech goods for the first half of this year set its own new record for the January-June period – $43.40 billion.

>In fact, this shortfall is up 33.37 percent from the previous January-June period.

>Between the first half of last year and the first half of this year, U.S. High tech exports inched up by only 0.36 percent, but imports have climbed 5.66 percent.

>A similar story unfolded in manufacturing. The trade gap fell 4.93 percent on a monthly basis, from $80.10 billion in May (the second highest total ever) to $76.13 billion.

>Manufacturing exports rose 2.98 percent on month, while imports dipped by 0.70 percent.

>Year-to-date, however, the manufacturing trade deficit is running 6.19 percent ahead of last year’s record pace, which resulted in an $853.07 billion 12-month total.

>Manufacturing exports are up 3.86 percent for the January-June period, but imports have grown by 4.98 percent.

>Mexico represents another example of a country criticized by President Trump whose merchandise trade surplus with the United States shrunk sequentially but has risen on a year-to-date basis.

>Thanks largely to those robust American goods export figures, the U.S. goods deficit with Mexico sank by fully 18.28 percent month-to-month – the fastest rate since July, 2015 (43.12 percent). American goods purchases from Mexico rose by only 0.52 percent over June’s levels.

>Year-to-date, however, the U.S. merchandise shortfall with Mexico is up by 13.26 percent, as goods exports have risen by 5.04 percent, but imports have grown by a faster 6.86 percent.

>An even more extreme example is provided by Canada, with which U.S. goods trade flows have been exceptionally volatile, albeit in the context of a balance that has become notably modest.

>In June, the American merchandise deficit with Canada nosedived by 54.42 percent. The decrease was only from $1.37 billion to $624 million in absolute terms, but that’s still the lowest Canadian goods surplus since June, 2016.

>On a monthly basis, U.S. goods exports to Canada improved by 1.11 percent, and imports fell by 1.77 percent.

>Between the first six months of this last year and this year, however, the U.S. goods deficit with Canada has more than quadrupled, from $2.20 billion to $10.51 billion. American merchandise exports have advanced by 3.94 percent, but imports rose by nearly twice as fast – 9.95 percent.

>Indeed, the American goods shortfall with its partners in NAFTA (the North American Free Trade Agreement), which will soon be renegotiated by the three signatories, dropped by 24 percent month-to-month in June, from $8.66 billion to $6.58 billion, on an export increase of 3.91 percent and an import dip of 0.61 percent.

>Year-to-date, however, this deficit has surged by 36.68 percent, from $34.24 billion to $46.79 billion, as U.S. goods sales to Mexico and Canada combined have improved by 4.44 percent, but purchases from the two grew by 8.36 percent.

>Yet U.S. goods trade with Germany has shown a reversal of this pattern. In June, the American merchandise deficit rose by 10.03 percent, from $4.99 billion to $5.49 billion. U.S. exports increased by a mere 0.18 percent, while imports were up by 5.36 percent.

>The American goods deficit with Germany on a year-to-date basis, however, has decreased by 5.48 percent, as U.S. merchandise sales to Germany have advanced by 7.04 percent, while purchases from Germany have slipped by 0.1 percent.

>U.S. goods trade with South Korea followed this pattern, but with bigger disparities between the on-month and on-year data. Sequentially in June, the American merchandise deficit jumped by 26.23 percent, from $1.46 billion to $1.85 billion. U.S. merchandise sales to South Korea were off 5.96 percent, but American goods imports increased by 1.95 percent.

>Yet between January-June, 2016 and January-June, 2017, this American merchandise deficit cratered by 31.91 percent, from $16.46 billion to $11.20 billion. U.S. goods exports to South Korea surged by 21.82 percent during this period, while imports slid by 2.38 percent.

>At the same time, on a monthly basis, the American merchandise trade deficit with South Korea has more than tripled (from $561.4 billion) since the bilateral trade agreement went into effect in March, 2012.

>The June trade figures make clear that the drag on American growth exerted by the Made in Washington portion of the U.S. trade deficit grew slightly between the first and second quarters of this year – from an already considerable level.

>This deficit consists of U.S. trade flows heavily influenced by trade agreements and other trade policy decisions – thus omitting services and oil trade – that are then adjusted for inflation.

>Between the second quarter of 2009 – when the current recovery officially began – and the first quarter of 2017, the increase in this Made in Washington deficit has cut cumulative U.S. growth by 17.40 percent, or $443.24 billion out of $2.5476 billion in real GDP expansion.

>As of the second quarter of 2017, this drag effect increased to 17.47 percent, or $463.97 billion out of $2.6551 billion in real GDP expansion.

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

Tags

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

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

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

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

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

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

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

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

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