(What’s Left of) Our Economy: RealClearAmateurism on Steel Tariffs

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AK Steel, Armco, autos, foreign direct investment, Japan, Japan Economic Institute, Kawasaki, Michael Cannivet, RealClearMarkets.com, Ronald Reagan, steel, tariffs, The Japan Times, Trade, Trump, {What's Left of) Our Economy

One of my favorite sayings holds that “A little knowledge is a dangerous thing,” and a recent column on the RealClearMarkets.com website on steel tariffs does a splendid job of showing why.

According to author Michael Cannivet, who heads an investment company “serving high net worth private clients,” President Trump’s decision to impose tariffs on steel imports from a wide (but still to be determined precisely) group of U.S. trade partners are “not a real long-term solution” for “cities reliant on American steel and aluminum production” because they’re certain to harm U.S. companies in the sector that are “working hard to reinvent themselves by innovating.” And he chooses as a prime example a steel firm close to his heart – AK Steel, which has a plant in his wife’s hometown of Middletown, Ohio that has employed “generations of her family.”

But in Cannivet’s eyes, AK’s experiences are also important because (quoting another author):

“AK Steel is the result of a 1989 merger between Armco Steel and Kawasaki. The Kawasaki merger represented an inconvenient truth: Manufacturing in America as a tough business since the post-globalization world. If companies like Armco were going to survive, they would have to retool. Kawasaki gave Armco a chance, and Middletown’s flagship company probably would not have survived it.”

This analysis is absolutely right – except it omits one crucial point. Kawasaki – a Japanese steel company – didn’t merge with Armco out of the goodness of its heart, or simply because it viewed the Armco operations in question as unusually promising assets. It also merged with – and transferred state-of-the-art production technologies – to Armco in large measure because Reagan-era trade restrictions severely limited its opportunities to supply the lucrative American market via exporting from Japan. Here’s some evidence from none other than the Japan government-run Japan Economic Institute of America (an often useful source of information and analysis that unfortunately closed its doors in the very early 2000s):

“By the mid-1980s NKK and Japan’s other major steelmakers were beginning to eye onshore U.S. operations. Such a presence would give them a way around the trade restrictions that by then had become a fixture so that they could service the automotive and other Japanese manufacturers that were setting up plants in this country.”

And P.S. – why were so many other Japanese manufacturers (like automotive firms) setting up plants in America? Again, in large measure due to those same Reagan-era trade curbs, as explained by this recent column in The Japan Times:

“The Reagan administration forced the Japanese auto industry into accepting a voluntary restraint on their exports to the U.S., under which the annual shipments from Japan was limited to 1,680,000 vehicles. The Japanese automakers responded by launching production in the U.S. one after another to evade the trade restrictions — Honda was the first by building its long-planned auto plant in Ohio, and was followed by Nissan and Toyota.”

None of this should be surprising to anyone with more than a little knowledge of trade or the globalization in manufacturing in particular. My book, The Race to the Bottom, cited an immense number of examples of national economies much smaller than the United States using tariffs or other trade barriers to lure foreign manufacturing to their shores. As a result, there’s every reason to believe that a U.S. resort to these measures would work spectacularly – and instances of precisely such successes keep emerging. 

And that’s of course the point of this post: Cannivet clearly doesn’t know more than a little about trade or the globalization of manufacturing. What he knows for sure is that he doesn’t like tariffs – possibly because he learned not to like them in a college freshman economics course. But apparently that was all that RealClearMarkets needed to justify showcasing his views. Maybe the site should change its name to RealClearAmateurism.

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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 Establishment Goes Farther Off the Deep End on North Korea

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alliances, allies, China, Cold War, deterrence, James Jeffrey, Japan, North Korea, nuclear war, nuclear weapons, Our So-Called Foreign Policy, Russia, South Korea, Soviet Union, The Atlantic, Trump

James Jeffrey’s new post in The Atlantic on the North Korea nuclear crisis has so much to commend it. (Yes, there’s a “but” coming, and it’s enormous, but let’s give him his due.)

The former U.S. Ambassador to Turkey and Iraq valuably reminds readers of the dangers of assuming – as per the latest conventional wisdom – that North Korea’s motives for developing nuclear forces potent enough to threaten the American homeland are purely defensive. This confidence, he notes, may be convenient for justifying a call for the United States to clear the way for a negotiated solution to the crisis by backing off its longstanding insistence on Pyongyang’s denuclearization. But no one aside from Kim Jong-un himself can have any confidence in assessing what’s inside his head.

As a result, Jeffrey also recognizes that the nuclear deterrence strategy that helped prevent Soviet and Chinese aggression during the Cold War (and so far seems to be helping curb Russian and Chinese expansionism nowadays) is far from guaranteed to work against a leader with a history of erratic and even violent behavior, and who is heir to a regime with a similar history – including absorbing enormous sacrifices to “reunify” the Korean peninsula under its rule. (At the same time, Jeffrey seems to undercut these arguments at the end by calling the denuclearization goal unreasonable, and signaling his support for a compromise that would leave the North with “some nuclear capability” in exchange for “a ‘temporary’ diplomatic solution that stops North Korean development of systems that can strike the U.S.”

In addition, Jeffrey forthrightly explains that both the Cold War deterrence strategies and their latter-day Korean counterpart depended on a gamble that involved putting the U.S. homeland at risk of nuclear attack, and denying an American president any real choice but to push the nuclear button that would surely bring this about.

Finally, the author understands that U.S. security interests could be powerfully served – and deterrence on the Korean peninsula strengthened – by encouraging South Korea and Japan to develop their own nuclear weapons (although he never addresses the objection that neither country would likely go to these lengths as long as they can free-ride on the American defense guarantee).

So Jeffrey deserves great credit for going beyond conventional foreign policy thinking in many important respects. But in the most important respect by far, he’s solidly inside the consensus – which astonishingly, and let’s face it – derangedly – believes that there is any objective that the United States could achieve that’s worth any significant risk of nuclear attack on one or more major American cities.

Specifically, the author believes that North Korea may indeed have aggressive aims, and that the nuclear forces it will soon possess will be powerful enough to keep the United States on the sidelines if he attacks the South for fear that he will strike at the American territory. As a result, he believes that “the possibility of military action against North Korea could be understood not as a ‘good thing,’ but as the ‘least bad.’”

And although he does not call on the Trump administration to launch a “preventive war” to take out the North Korean nukes, he insists that steps that could result in such an attack on the United States, namely “a preemptive strike (or generating a credible threat of one to frighten China to act against Pyongyang), however awful, could be the least risky” way to a avoid several even worse alternatives.

And what are these alternatives? On top of the conquest of the South, and “abandoning 80 years of global collective security,” or watching “China intervene to ‘check’ Pyongyang, thereby pulling South Korea (and Japan) into China’s security orbit and ending the security regime the U.S. has maintained in the Pacific since 1945.”

I agree that these would be important setbacks for American interests. But would they be worse than watching several major U.S. metropolitan areas become burning, glowing wastelands? This is where I get off the boat – and I believe anyone with a lick of sanity should follow.

Do you and the rest of the American people agree? I strongly suspect the answer to both questions is “Yes,” but re the latter, here’s what’s most outrageous, and indeed unacceptable: We have no way of knowing, because all wings of the nation’s foreign policy establishment have pursued a strategy of hiding these risks from the public.

That’s why I keep contending that, given North Korea’s impending ability to hit the United States with nuclear weapons, the only policy capable of eliminating this threat (to the extent possible) is pulling the American forces out, thereby removing any reason for North Korea to launch a nuclear strike on American territory, and allowing the powerful, wealthy countries of the region handle Kim anyway they wish. Alternatively, let’s at least put this question – literally one of life and death – directly to the Americans who have been hoodwinked for so long and who would pay the price of hewing to the status quo, and see what they think.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our So-Called Foreign Policy: A Neglected Reason for Skepticism About Deterring North Korea

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allies, America First, Asia, China, Cold War, deterrence, Eastern Europe, Japan, North Korea, nuclear weapons, Our So-Called Foreign Policy, Russia, South Korea, Trump, Western Europe

With President Trump traveling around Asia and talking North Korea, among other subjects, with the region’s heads of state, it’s a good time to bring up an aspect of the nuclear crisis that hasn’t received enough attention – including from yours truly.

It’s what political science types might call the asymmetry in stakes perceived by the North and by the United States, and it’s a problem that’s greatly complicating American efforts to resist China’s recent expansionism in Asian coastal waters and Russia’s similar activities in its borderlands, as well as North Korea’s designs. It also differentiates these national security challenges from their prime Cold War era counterparts.

In plain English, “asymmetry in stakes etc” means that what the United States on the one hand, and North Korea, China, and Russia on the other, are arguing about means much more to those three American rivals than it does to the United States itself. As a result, especially with all of those rivals either able or on the verge of being able to hit a U.S. cities with nuclear-armed missiles, Washington’s commitment to defend the countries in their cross-hairs is much less believable than the prospect that they will call America’s bluff and risk a military conflict.

After all, the United States would be put in a position of exposing its territory and population to nuclear attack for relatively low priority interests – principally, South Korea, freedom of navigation in the South and East China Seas, and small Eastern European countries that until recently were well inside the Soviet orbit for decades with no apparent effect on U.S. security or prosperity.

North Korea, China, and Russia would also be running nuclear risks if military showdowns develop.  For them, however, the upsides are more highly prized. And since the downside for America involves catastrophes that would equal the September 11 attacks by about a zillion, it’s likely that the United States would not decide, as the saying goes, to sacrifice Washington or New York or (FILL IN CITY OF YOUR CHOICE) to save Seoul or Vilnius (capital of the Baltic state Lithuania) or Asian sea-lanes.

Of course, the United States vowed to use nuclear weapons to defend allies during the Cold War, too, and the threat clearly achieved the desired deterrent effect. But thinking in “asymmetry terms” explains why these circumstances differed fundamentally from today’s. The main allies being defended – Western Europe and Japan – were continually identified as high priorities by Washington, and the reasons were entirely understandable. Both were major potential and then actual concentrations of industrial, technological – and therefore military – power. Their possible shift into the Soviet (or, less likely, Chinese), camp would transfer major assets to U.S. adversaries and weaken the overall strength of the free world.

I’d long had my doubts about whether preventing even losses this great were worth risking a global nuclear cataclysm, but this proposition was at least reasonably debatable, in my opinion. Preventing the losses at risk now? Not even close.

And what’s also surely instructive about the Cold War experience is that the European allies, in particular, never fully believed the American pledge. That’s largely why the United Kingdom and especially France developed their own impressive nuclear arsenals. Fast forward to today, and America’s nuclear pledges, especially in Asia, are more deeply doubted. That’s why South Korea and Japan are discussing creating their own nuclear forces more actively and urgently than ever.

In a previous post, I’d identified other reasons for challenging what may be a growing belief that North Korea can be deterred by America’s nuclear weapons just like the Soviet Union and China were during the Cold War – and that therefore some kind of agreed upon freeze in Pyongyang’s nuclear weapons program is the most realistic way to resolve the crisis peacefully and acceptably. The asymmetry argument is another important reason for skepticism.

It’s entirely possible that I’m wrong. And I’d be perfectly happy to support such an effort. But if a freeze becomes the aim, I want American forces – whose vulnerability to North Korean attack would put heavy pressure on any U.S. president to respond with nuclear weapons and possibly trigger North Korean nuclear retaliation – nowhere near the Korean peninsula. Because the chances that I’m right are much higher than zero. And I view the policy of incurring any risk of a nuclear warhead landing on American soil in order to save South Korea to be completely indefensible.

As argued above, Japan could reasonably be placed into a different, and higher priority, category. So although I’d prefer to see U.S. forces exit the Asia-Pacific region completely, a fallback position could be focusing American deterrence policies on protecting Japan (from whatever plans for global or regional hegemony or predominance or call it what you will China may be seeking), abandoning South Korea militarily (but as previously proposed, supporting its development of nuclear weapons and selling it whatever conventional arms it wants), and pulling back from the South China Sea (because, as also previously argued, any power controlling these waters will need to trade with America if it wants to grow acceptably fast).

It would be an Asian version of the partial pullback I’ve recommended for Europe. It’s also entirely consistent with what’s lately often been called an “America First” foreign policy. Maybe it’s something for President Trump to consider?

(What’s Left of) Our Economy: September Trade Figures Show Continuing Asia and NAFTA Challenges

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

Since it’s not the usual same-day report, here are the highlights of Friday’s Census Bureau September U.S. trade report in a slightly different than usual format.  And there were lots of highlights, especially for those following President Trump’s current trip to Asia and his continuing efforts to renegotiate the North American Free Trade Agreement (NAFTA).   

September’s combined U.S. goods and services trade deficit increased modestly month-to-month, by 1.70 percent from an upwardly revised $42.77 billion to $43.50 billion. Though the total was the year’s second lowest (just behind August’s), it brought the overall shortfall year-to-date 9.30 percent above last year’s nine-month level. Yet arguably its most noteworthy details concern economies identified by the Trump administration as troublesome U.S. trade partners.

In particular, as the president begins his trip to Asia, the new trade figures showed that the chronic American goods shortfall with the region fell 6.71 percent sequentially, from $44.48 billion to $41.49 billion. Merchandise exports to the Census Bureau’s Pacific Rim country grouping (which does not include Western Hemisphere economies) rose 4.90 percent on month, from $32.27 billion to $33.85 billion. Goods imports, however, fell by 1.83 percent, from August’s record $76.76 billion to $73.35 billion (still the third highest total ever).

On a year-to-date basis, the goods trade gap with the Pacific Rim is up by 2.03 percent.

The new trade figures remind that Mr. Trump’s goal of reducing American trade deficits with NAFTA signatories Canada and Mexico will be a tall order.

The combined NAFTA merchandise deficit actually plunged by 14.63 percent month-to-month, from $6.97 billion to $5.95 billion. The total was the second lowest of the year – nosing out July’s $5.99 billion.

U.S. goods exports to its North American neighbors declined by 1.84 percent sequentially, from $45.04 billion to $44.21 billion, while goods imports dropped by 3.56 percent on month, from $52.01 billion to $50.17 billion.

Year-to-date, however, the NAFTA goods deficit is 24.16 percent higher.

Bilateral trade developments within these regional flows also warrant attention.

The massive and chronic U.S. trade deficit with China – which the president hopes will help pressure North Korea to abolish its nuclear weapons program even has he has targeted its predatory trade practices – slipped sequentially in September by 0.73 percent, from $34.89 billion (the highest total of the year) to $34.64 billion (the second highest total).

America’s goods exports to the strongly growing Chinese economy decreased on month by 1.11 percent, from $10.93 billion (the year’s highest total) to $10.80 billion (the second highest total).

U.S. merchandise purchases from China slipped by 0.82 percent on month, from $45.82 billion (the all-time record) to $45.44 billion (the third highest total ever).

Year-to-date, the merchandise deficit with China is up 6.27 percent.

Japan, has expressed special alarm over the dramatic recent improvement of North Korea’s nuclear arsenal, but is also trying to reconstruct the Trans-Pacific Partnership trade deal without the United States. It saw its even longer-standing merchandise surplus with the United States plummet 26.17 percent sequentially in September, from $6.55 billion to $4.84 billion.

U.S. goods exports to Japan grew by 10.41 percent month-to-month in September, from $5.41 billion to just under $5.97 billion – the second highest total of the year after the just over $5.97 billion figure of April.

U.S. goods imports from Japan sank by 9.66 percent sequentially, from $11.96 billion to $10.81 billion.

All the same, on a January-to-September basis, the American merchandise deficit with Japan is 1.32 percent higher than last year’s nine-month total.

South Korea is on the front lines of the Korean peninsula crisis, and President Trump has launched an effort to revamp its 2012 bilateral trade agreement with the United States. Its merchandise trade surplus with the United States fell by 12.25 percent on month in September, from $2.22 billion to $1.95 billion.

U.S. goods sales to South Korea improved sequentially by 2.38 percent, from $3.74 billion to $3.83 billion, while goods imports shrank by 3.06 percent, from $5.96 billion to $5.77 billion.

Year-to-date, the American goods deficit with South Korea is way down: by 24.01 percent. But since the trade deal with the United States went into effect, in March, 2012, it’s up more than 247 percent on a monthly basis.

Within North America, the goods deficit with Mexico was down 7.67 percent on month in September, from $6.18 billion to $5.70 billion.

U.S. goods exports to Mexico – many of which are industrial inputs that return to the United States as final products – fell by 3.75 percent sequentially, from $20.87 billion to $20.09 billion. America’s merchandise imports from Mexico dropped by 4.64 percent, from $27.05 billion to $25.79 billion.

Year-to-date, the U.S. goods deficit with Mexico is up 10.93 percent from the January-to-September period last year.

Trade balances with Canada – which has been a target of several contentious American trade law actions during President Trump’s first year – have been exceptionally volatile lately. The September merchandise deficit with Canada nosedived by 68.77 percent on month – from $794 million to $248 million, the lowest total of the year.

American goods sales to Canada dipped by 0.19 percent sequentially, from $24.17 billion to $24.13 billion, while goods purchases from Canada dropped by 2.38 percent, from $24.97 billion to $24.37 billion.

Year-to-date, though, the merchandise deficit with Canada is up nearly 153 percent.

The September trade figures also reflected the receding impact of this year’s violent hurricane season.

Principally, the U.S. trade deficit in oil, much of whose production and transport infrastructure is located on the Texas and Louisiana Gulf coasts, soared sequentially in August by 61.65 percent in pre-inflation dollars (from $3.02 billion to $4.88 billion), largely because exports fell by 11.54 percent. That monthly export decrease was the biggest since August, 2015’s 12.62 percent.

In September, however, oil exports rebounded on month by 13.59 percent. That was the biggest monthly increase since May, 2016’s 15.47 percent. And the oil deficit shrank by 17.82 percent, to $4.01 billion – the year’s second lowest total after July.

The overall September trade deficit rose even though exports across the board performed well that month.

Total exports hit $196.82 billion – their highest level since December, 2014 ($197.18 billion). The same held for goods exports, whose $130.58 billion was their best total since December, 2014’s $134.19 billion.

Moreover, services exports hit their second straight all-time high ($66.24 billion).

Yet the much larger amount of imports grew fast enough to more than offset these gains.

Total imports hit rose 1.18 percent on month in September – the fastest rate since January’s 2.83 percent. And the $240.31 billion level was the second highest of the year, after January’s $240.47 billion.

Goods imports rose 1.22 percent on month in September – also the fastest rate since January (3.09 percent). And the $195.97 billion total was also the second highest of the year (after January’s $197.07 billion).

The September monthly increase in services imports (0.98 percent) was also the biggest since January (1.05 percent). And the $44.34 billion total was a new all-time high (passing July’s $44.14 billion).

The huge and chronic American manufacturing trade deficit retreated from August’s monthly record of $82.15 billion. But at $79.91 billion, it was more than enough to keep the shortfall running 5.95 percent ahead of last year’s record shortfall.

Similar trends seem to be unfolding in the nation’s high tech goods trade. The volatile monthly deficit in this category jumped by 15 percent on month in September, to $10.34 billion. That was the second highest total of the year (after May’s $9.47 billion).

Year-to-date, the high tech goods shortfall is up 23.64 percent, a rate of increase that would enable it to surpass the full-year record of $98.72 billion, set in 2011.

Nevertheless, the September figures also made clear that trade’s drag on the current U.S. economic recovery – created by the increase in the trade deficit since the end of the last recession – continued decreasing.  As shown in last week’s initial real gross domestic product (real GDP) data, trade’s overall hit to American growth since the recovery began in mid-2009 has fallen from 10.04 percent in the first quarter to 9.24 percent in the second quarter to 8.18 percent in the third quarter (according to the initial read on the latter). That last number translates into $229.2 billion in lost growth after inflation. 

The September trade figures enable the growth hit to be calculated for the increase in the inflation-adjusted Made in Washington trade deficit – i.e., in those trade flows heavily influenced by American trade agreements and related policy decisions. This trade shortfall, which excludes commerce in energy and services, has sliced recovery-era growth by $459.19 billion after inflation, or 16.39 percent. 

As big as that sounds, its smaller proportionately than the cost of the Made in Washington deficit as of the second quarter – 17.30 percent.    

 

Im-Politic: Mainstream Media Again Foster NAFTA Myths and Think Tank Corruption

Tags

Canada, donors, Google, Im-Politic, Japan, Korea, Mainstream Media, media, Mexico, NAFTA, Navistar, New America, North American Free Trade Agreement, offshoring, Peterson Institute for International Economics, Reuters, tariffs, think tanks, Trade, trucks, Trump, Washington Post, Woodrow Wilson Center

Although Donald Trump’s presidency might still turn out to be a watershed for U.S. trade policy, it already seems clear that trade policy coverage from the Mainstream Media will remain uniformly terrible, and unmistakably slanted toward the conventional approach that candidate Trump promised to disrupt. As recent articles from Reuters and the Washington Post remind, the bias takes both subtle and non-subtle forms.

Both pieces deal with the talks to renegotiate the North American Free Trade Agreement (NAFTA), which have resumed in Washington, D.C. this week. Despite its failings, Reuters correspondent Sharay Angulo’s article on the talks’ possible impact on multinational truck manufacturers contained some important information. For instance, she reported that 98 percent of the trucks exported from Mexico are sent to the United States and Canada – which oddly precedes a claim that most of these truck companies “have a similar strategy of building in Mexico to export to countries other than the United States.”

We also learn from her that more than half the “original parts” of U.S. firm Navistar’s Mexico-made trucks come from the United States and Canada (although this information comes from Navistar itself, and like other company-specific information re NAFTA, offshoring, and trade in general, so far can’t be independently verified). In addition, the article (again citing Navistar statistics) states that the firm exports fewer than half its Mexico-made vehicles to the United States – which seems to differentiate it sharply from its competitors.

Where the report veers sharply from the rational is in its unquestioning acceptance of the claim that “Higher tariffs on imports or reduced trade flows would raise the cost of production and of exporting to the United States. That would make trucks more expensive for all Navistar’s customers….”

What’s somehow missed by the author (and all the “experts” consulted by Reuters who allegedly agreed with this contention) is that this result would unfold only if Mexico retaliated against any Trump administration tariffs on its exports to the United States with new levies of its own that would hit manufacturers like Navistar. Given Mexico’s heavy dependence on parts imports to support its export-oriented truck and other industrial production, why on earth would its government take this step? Such retaliation would “raise [its] costs of production and of exporting to the United States” yet higher. Talk about cutting off one’s nose to spite one’s face.

Also missed by Angulo – how higher Mexico production costs could well achieve Mr. Trump’s revamp objectives by shifting truck manufacturing back to the United States. She’s correct in suggesting that low tariffs on Mexico exports to the United States may not suffice. But a logical (and seemingly obvious) implication is simply that higher tariffs will be needed.

The less subtle form of bias came in an October 6 Washington Post article previewing the latest NAFTA talks, and although it’s a more common variety, it was especially flagrant. One big problem is the authors’ (and their editors’) decision, with a single exception, to quote only critics of the Trump administration’s efforts.

Thus, readers are presented with the perspective of a Canadian trade lawyer, a former Mexican trade negotiator who now works for a D.C.-based consulting firm with many offshoring companies as clients, a Mexican business lobbyist who officially advises his country’s NAFTA negotiators, a former Canadian official, a former Obama administration economic aide, and four specialists from two Washington, D.C.-based think tanks.

A second big, and related problem – at a time when the intellectual integrity of such think tanks has come under a positively stygian cloud due to the uproar over New America’s firing of several researchers who ran afoul of big donor Google, the Post piece makes absolutely no mention that both of these organizations depend heavily on contributions from both companies and foreign government organizations with vital stakes in maintaining the NAFTA status quo.

For example, the latest info from the Mexico Institute of the Woodrow Wilson Center (itself a recipient of U.S. taxpayer funding), base for one of the specialists showcased in the piece, reveal that the organization receives contributions from no less than six big Mexican companies, plus Wal-Mart (a big importing business) and the main trade association of the American pharmaceutical industry – which manufactures in Mexico for export to the United States.

The Canada Institute, where the other quoted Wilson Center specialist is based, lists the Canadian government as a donor.

As for the other think tank relied on by the Post for (supposedly objective) expertise, the Peterson Institute for International Economics (PIIE), among its U.S. and foreign multinational funders that produce in Mexico for export to the United States are Toyota, GE, Caterpillar, IBM, Ford, GM, Samsung, John Deere, Procter & Gamble, and Mitsubishi.

PIIE also takes contributions from three foreign government entities that help their countries’ companies engage in export-oriented operations in Mexico: the Korea Institute for International Economic Policy, the Korea Development Institute, and the Japan Bank for International Cooperation.

In addition, in recent years, the Peterson Institute has also cashed big checks from Mexican building materials giant Cemex, and from the U.S. Chamber of Commerce – the organizational spearhead of America’s corporate offshoring lobby.

As I’ve repeatedly emphasized, the point here is neither that these think tanks’ findings and opinions lack merit, or they or their donors have no right to weigh in on important trade and other policy debates. It’s that these ostensible research groups should make clear who’s paying their rent – and that if they continue with what I’ve called deceitful idea laundering on behalf of their sponsors, the press should call them out.

The Mainstream Media, however, keeps failing to fulfill this responsibility – which can only deepen already profound suspicions that it’s abandoning its watchdog role and turning into an establishment lapdog instead.

(What’s Left of) Our Economy: U.S. Trade Deficit Falls Slightly in August as Strong Exports Outweigh Record Manufacturing Shortfall

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Canada, Census Bureau, China, European Union, exports, goods trade, imports, Japan, Made in Washington trade deficit, manufacturing, Mexico, non-oil goods trade deficit, oil, recovery, services, South Korea, Trade, trade deficit, Trump, {What's Left of) Our Economy

In August, the combined U.S. goods and services trade deficit declined by 2.67 percent sequentially to hit $42.40 billion – its lowest monthly level since September, 2016’s $38.47 billion. The improvement came even though several typical major engines of trade deficit growth worsened.

A new record was set for the chronic and huge manufacturing trade deficit, with its $82.15 billion August total topping the previous high (last November’s $80.75 billion) by 1.73 percent. The manufacturing-heavy China goods gap, meanwhile, grew to its highest monthly level ($34.89 billion) since September, 2015 ($36.29 billion). And the pre-inflation oil trade deficit, which has decreased dramatically in recent years, staged its strongest monthly rebound (jumping by 60.59 percent) since June, 2016 (60.84 percent). Pointing to a hurricane effect: the biggest monthly drop in current dollar oil exports (11.53 percent) since August, 2015 (12.62 percent).

Boosting the August trade performance was the new all-time high hit for services exports ($66.11 billion), the best overall monthly exports figure ($195.32 billion) since December, 2014 ($197.18 billion), and the best monthly goods exports reading ($129.21 billion) since April, 2015 ($129.72 billion). America’s goods trade deficits with Mexico and South Korea, both of which have been criticized by President Trump, increased sequentially in August (by 25.49 percent and 15.20 percent). And the longstanding Japan merchandise deficit grew by 13.49 percent on month.

But merchandise trade shortfall with Trump trade target Canada plummeted by 61.43 percent month-to-month, and the goods gap with the European Union fell by 7.92 percent. The latest figures on the growth-slowing impact of the Made in Washington trade deficit show that it’s weakened slightly (from slowing the U.S. economic recovery by 17.40 percent as of the first quarter of this year to cutting inflation-adjusted growth by 17.30 percent in the second quarter). The new August trade figures indicate that it might decline modestly again once third quarter GDP and September trade data are released.

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

>America’s combined goods and services trade deficit declined by 2.67 percent on month in August to its lowest level ($42.40 billion) since September, 2016 ($38.47 billion), as a new monthly record manufacturing trade shortfall and poor China and hurricane-related oil results were more than offset by strong export performances, including a new all-time high for services exports.

>The August manufacturing trade deficit of $82.15 billion was 1.73 percent greater than the previous record total of $80.75 billion, set last November.

>August manufacturing exports grew by a solid 6.82 percent on month, to $93.51 billion. But the far larger amount of imports rose by 5.07 percent, to $175.67 billion.

>Year-to-date, the manufacturing trade deficit is running 5.56 percent ahead of last year’s record pace. Manufacturing exports for the January-August period are up 4.04 percent, and imports have increased nearly as fast – 4.72 percent.

>Fueling these manufacturing trade results in August was a 3.99 percent month-to-month widening of America’s manufacturing-heavy trade deficit with China. The $34.89 billion total was the largest monthly figure since September, 2015’s $36.29 billion.

>U.S. goods exports to China improved sequentially in August by an impressive 8.75 percent, but merchandise imports, which are much greater, increased by 5.08 percent.

>Year-to-date, the merchandise deficit with China is 6.24 percent higher than last year’s total – which was the second largest annual figure ever.

>The pre-inflation U.S. oil trade deficit, which has nosedived in recent years thanks to the energy production revolution, rose in August from $3.02 billion to $4.85 billion. That 60.59 percent monthly increase was the biggest such rise since the 60.84 percent surge registered in June, 2016.

>Pointing to the effects of this year’s violent hurricane season, oil exports in August recorded their biggest monthly decrease (11.53 percent) since August, 2015 (12.62 percent).

>On a year-to-date basis, however despite the longer-term improvement, this oil shortfall is outpacing last year’s by a stunning 36.01 percent.

>The hurricane impact on oil was also suggested by the excellent export data produced by other major sectors of the economy.

>Services set a new overseas sales record in August, and reached their second all-time monthly high in the last three months. August’s $66.11 billion bested June’s $65.90 billion by 0.33 percent.

>Total U.S. exports improved by 0.42 percent, to $195.32 billion, and thereby hit their highest level since December, 2014’s $197.18 billion.

>Goods exports rose even faster sequentially in August, by 0.44 percent to $129.21 billion. The result was their strongest month since April, 2015 ($129.72 billion).

>Having set reform of the North American Free Trade Agreement (NAFTA) as a priority, President Trump no doubt noticed that the U.S. merchandise trade deficit with Mexico surged by 25.49 percent on month in August, to $6.18 billion. U.S. goods exports to Mexico were 5.73 percent higher in August than in July, but import growth was 9.68 percent.

>The year-to-date merchandise deficit with Mexico is so far 11.72 percent higher than in the first eight months of 2016.

>America’s merchandise trade deficit with South Korea, which has just this week agreed to substantive talks on modifying its bilateral trade deal with the United States, increased by 15.20 percent sequentially in August, to $2.22 billion.

>U.S. goods exports to South Korea actually sank by 8.21 percent on month – the biggest such decrease since January’s 21.51 percent. America’s merchandise imports from South Korea fell, too, and for the second straight month – but by only 0.70 percent.

>America’s merchandise trade deficit with South Korea is down so far this year by fully 28.07 percent on a year-to-date basis. But since the bilateral trade deal went into effect, in March, 2012, it’s nearly tripled.

>The U.S. merchandise trade deficit with Japan increased notably (13.49 percent) as well on month in August, to $6.55 billion.

>America’s goods exports to the world’s third biggest single national economy decreased by 5.52 percent month-to-month, while its goods imports rose by 4.02 percent.

>Year-to-date, this merchandise deficit with Japan is running 12.54 percent ahead of last year’s level.

>Better news came in merchandise trade with America’s other NAFTA partner, Canada. The U.S. deficit – which has been volatile recently – plummeted by 61.43 percent in August, to just $410 million.

>American goods exports to Canada improved by 12.50 percent. Imports climbed, too, but by only 9.06 percent.

>Year-to-date, though, the U.S. merchandise trade shortfall with Canada is running nearly three times ahead of last year’s rate.

>Improvement in August was also seen in American merchandise trade with the European Union (EU) – the world’s largest economic unit. On a monthly basis, the U.S. deficit narrowed in August by 7.92 percent, to $12.39 billion.

>U.S. goods exports to the EU advanced by 9.08 percent on month, while imports were up only 2.52 percent.

>Year-to-date, moreover, the American merchandise deficit with the EU is running 0.72 percent behind last year’s rate.

>The latest data for the growth drag on the still weak U.S. economic recovery of rising trade deficits are only from the second quarter. But by both major measures, they show that trade’s bite into the expansion is easing, but remains deep.

>Since the recovery began, in mid-2009, to the end of the second quarter of this year, the increase in the trade deficit has reduced cumulative after-inflation output during the expansion by 9.24 percent, or $247.30 billion. That’s down from the 10.04 percent, and $255.9 billion, as of the first quarter.

>The toll on the expansion attributable to U.S. trade policy is diminishing, too, but has been much higher. This Made in Washington deficit strips out of inflation-adjusted American trade flows energy and services – two sectors where trade policy and related decisions have had only marginal effects so far. The remainder of U.S. trade flows – of goods except oil – are heavily influenced by policy.

>Since the recovery’s onset, the rise of this Made in Washington deficit has cost the recovery $462.8 billion in lost growth in absolute terms – or 17.30 percent of the cumulative total. That’s down from a growth bite of 17.40 percent worth ($443.3 billion in absolute terms) for the first quarter.

Our So-Called Foreign Policy: What to do about North Korea

Tags

China, embargo, Japan, Kim Jong Un, missile defense, missiles, Nikki Haley, North Korea, nuclear weapons, Our So-Called Foreign Policy, sanctions, Shinzo Abe, South Korea, Trade, Trump, United Nations

Tuesday’s post explained my reasons for concluding that, contrary to the emerging conventional wisdom in the U.S. foreign policy establishment that North Korea’s use of its growing and increasingly powerful arsenal of nuclear weapons can be deterred with the same kind of policies that the United States used to keep the nuclear peace during the Cold War.

As I’ve argued, the resulting dangers mean that the best way to serve America’s paramount interest (by a long shot) of preventing a nuclear attack on its own territory is to pull U.S. forces out of the immediate area, and letting Northeast Asia’s powerful, wealthy countries deal with dictator Kim Jong Un as they see fit. This move would both ensure that the governments with the greatest stake in keeping North Korea’s missiles in their silos, and even eliminated, bear the costs and risks of handling the problem, and that the only plausible pretext for Pyongyang attacking the United States itself is eliminated.

Of course, Washington has chosen not to take this route. But America’s response so far to the escalating North Korea threat is turning into a major failure based even on its own criteria for success. After all, the latest North Korean missile overflew Japanese territory. Although the overflight was brief, the combined U.S. and Japanese response could not help but send a message of weakness and egg on Kim further.

According to Japan’s defense minister, Tokyo decided not to shoot down the missile because the government determined it wasn’t intended to land on Japanese territory. I don’t know how to say “Baloney!” in Japanese, but complete contempt is the only justifiable reaction. For despite this stated confidence, as the missile approached, Prime Minister Shinzo Abe’s government sent out regular early morning alerts to the public – including in far off Tokyo – warning it to “seek cover” and describing the situation as “very dangerous.”

Another nonsensical rationale for the inaction from both Japanese and U.S. forces, this from a staunch defender of America’s Asia policy status quo: “If we shoot and miss, it would hand Kim Jong-Un an incalculable propaganda victory.” That’s of course true – because as this former official has noted, anti-missile technology is anything but proven. But of course, keeping the defensive missiles in their launchers also winds up telling North Korea that the United States and its allies have little faith in their systems.

Moreover, the Pentagon and its foreign counterparts can conduct all the tests they want, but adequate confidence in missile defenses won’t be legitimately justified until they’ve shown they can work in real-world situations. And better to try shoot-downs sooner rather than later – both because North Korea’s offensive capabilities will only improve as time passes, and because its better to find out about the real-world shortcomings of allied systems ASAP.

So if I’m Kim Jong Un, I’m looking at the U.S. and Japanese failure even to try a shoot-down and asking myself, “Let’s see what else I can get away with?” And when he develops reasonably reliable intercontinental missiles capable of hitting American territory and destroying American cities, he could easily conclude that the “what else” includes major threats against South Korea that would be entirely credible, and that could move him closer to effective mastery over the entire peninsula.

How, then, can Washington and its regional allies send some credible messages themselves? The following list is meant to start a (long overdue) serious discussion:

>First, the allies can actually try to shoot down North Korean missiles judged on a flight path anywhere near some of their territories. Again, even if they miss, they’ll at least get some truly reliable data on their systems’ capabilities.

>Second, they could urge the United Nations to authorize a total ban on trade and commerce with North Korea. The United States, Japan, and South Korea could also announce that they will enforce the ban with punitive measures against violators. The North’s business partners would then face a clear – and no-brainer – choice: They can continue trading with economically miniscule North Korea or they can continue trading with three of the world’s largest economies, but they can’t do both.

It’s true that North Korea’s biggest trade partner is China, that all three allies have extensive economic ties with the PRC, and that even the United States – a clear loser in China trade – has been reluctant to disrupt these relations significantly. But now the subject is war and peace and the core security of Japan and South Korea. If this reluctance continues even after North Korea has sent missiles over Japanese territory, Kim will inevitably conclude that his main adversaries lack the stomach to resist further provocations.

>The United States, Japan, and South Korea could blockade air and sea trade with North Korea. China’s overland trade would continue – but ever-stronger economic sanctions on China finally could persuade Beijing to halt this commerce once and for all.

>The United States could further pressure China by deciding to sell all of its neighbors – including Taiwan – any conventional weapons they wanted, and to provide whatever training they needed to operate them effectively. (President Trump is thinking along these lines regarding South Korea, but the new policy should go much further.) This step of course would also help deal with China’s aggressiveness in the South China and East China Seas, and boost America’s own production and export of these advanced manufactures. So Beijing would need to decide whether coddling North Korea was worth seeing Asia’s other countries – including many bearing major historic and/or current grudges against China – become much stronger militarily

>Finally – for now – the United States could announce a full-scale review of its nuclear non-proliferation policies in Asia, with a special focus on whether it would continue opposing the acquisition of nuclear weapons by Japan and South Korea. As with the previous proposal, China would need to decide whether coddling North Korea was worth seeing one of its major national security nightmares – nuclear arms possessed by the same Japan that launched devastating attacks against it in 1894 and 1937 – come to life.

Shortly after the latest North Korea launch, American envoy to the United Nations, Nikki Haley, declared, “No country should have missiles flying over them like those 130 million people in Japan. It is unacceptable. They (North Korea) have violated every single UN Security Council Resolution that we’ve had. So I think something serious has to happen.”

She’s absolutely right in implying that neither the United States nor the so-called world community has done anything “serious” yet regarding the threat posed by North Korea. Options like the above would qualify. If Washington genuinely wants to maintain its current North Korea and broader East Asia strategies, they need to be actively, and urgently, considered.