Our So-Called Foreign Policy: Laughable Mainstream Media Ignorance on U.S. China Policy

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Angela Merkel, China, George W. Bush, H.R. McMaster, international order, Mainstream Media, Mark Landler, North Korea, Ooffshoring Lobby, Our So-Called Foreign Policy, responsible stakeholder, Robert Zoellick, The New York Times, Trump, Ukraine

Bad as it was, the worst aspect of Mark Landler’s New York Times piece yesterday about the first year of President Trump’s foreign policy wasn’t his contention that “liberal, rules-based international order” is a reasonable way to describe the international scene in recent memory. I mean, anyone seen much order out there lately? Or any country paying much attention to rules?

Nor was it endorsement of the conviction held by German Chancellor Angela Merkel – and much of the U.S. foreign policy establishment – that Ukraine is “a vital part of the trans-Atlantic relationship.” That’ll come as news to anyone remotely familiar with the history of either the United States or Western Europe from 1924 to 1989 – when the region was a part of the Soviet Union and its admittedly tragic fate had absolutely no discernible impact on any member of the Atlantic alliance whatever.

Instead, the worst aspect of Landler’s thinly disguised paean to the globalist approach to international affairs was his choice of former President George W. Bush’s top trade negotiator, Robert Zoellick as an authority on dealing with China.

Actually, I agree with Zoellick (though for somewhat different reasons) that Mr. Trump has made a major mistake in basing America’s China trade policy on Beijing’s efforts to help resolve the North Korea nuclear weapons crisis peacefully (and on acceptable terms of course). This week, even the president may have acknowledged this, as he’s tweeted criticism of China based on reports that Beijing has been violating UN sanctions by continuing to sell crude oil to the Kim Jong Un regime.

But the choice of Zoellick to make this accusation is laughably ignorant. Of course, it was the entire foreign policy establishment – as well as the offshoring-happy multinational corporations that finance so much of it – that made the historically foolish and dangerous mistake of assuming that indiscriminately expanding the world’s trade and other commercial ties with China would turn the People’s Republic into a country fundamentally easier to deal with on all fronts, and promote economic and political reform of its communist system.

Zoellick, however, took this naivete to a whole ‘nother level. For he was the American leader who, in 2005, declared that the time was ripe to turn China into a “responsible stakeholder” in the “international system.” The then-U.S. Trade Representative acknowledged that China had a long way to go reach this objective.

But this high profile address (to a quintessential Offshoring Lobby organization) unmistakably signaled the U.S. government’s belief that it was eminently attainable (along with the development of a relationship built on “shared interest and shared values”), and specified that its fate depended on the U.S. side on a campaign by that Offshoring Lobby to pacify those Americans who “perceive China solely through the lens of fear.” Is it any surprise that years of coddling China on trade and national security issues followed (including praise for China’s “constructive role” vis-a-vis North Korea)?

And upon considering Beijing’s ongoing refusal to curb its North Korea trade dramatically and its expansionism in the South China Sea, not to mention its intensified crack down on dissent at home and ever more brazen violation of global economic and commercial norms, can anyone reasonably doubt that Zoellick has been spectacularly wrong?

Interestingly, at one point in his article, Landler quotes Trump national security adviser H.R. McMaster as admitting that, on foreign policy, the president “has moved a lot of us out of our comfort zone, me included.” It’s a move that Landler, and most of his Mainstream Media colleagues, would be well advised to make.

(What’s Left of) Our Economy: Why the Latest World Trade Failure Should be Celebrated

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agriculture, Alan Greenspan, bubbles, China, Congress, developed countries, developing countries, Doha Round, Federal Reserve, Financial Crisis, George W. Bush, Global Imbalances, Information Technology Agreement, ITA, Obama, offshoring, poverty, Robert Zoellick, September 11, terrorism, TPP, Trade, trade law, Trans-Pacific Partnership, World Trade Organization, WTO, {What's Left of) Our Economy

Trade policymakers have just uncharacteristically – and perhaps unwittingly – given the world economy an important holiday gift: a virtual decision to kill the so-called Doha Development Round of world trade liberalization talks.

This outcome of the latest meeting of the World Trade Organization (WTO) in Nairobi won’t make an active contribution to solving global economic problems. But it greatly reduces the odds that additional multilateral trade expansion will keep worsening the kinds of international economic imbalances that helped trigger the last financial crisis and keep threatening to set the stage for a new meltdown.

The Doha round (named after the capitol of Qatar, where it was launched) was a product of the September 11 terror attacks, but was whoppingly misconceived both strategically and economically. Though intended to spur the prosperity needed in developing countries ostensibly needed to reduce terrorism’s appeal, its founders – notably President George W. Bush’s administration trade chief Robert Zoellick – seemed unaware that dangerous extremism had never taken hold in most world regions where poverty was most desperate, e.g., rural India and rural China. Moreover, the round’s explicit aim of channeling most of its trade liberalization benefits to developing countries completely violated the core principles of genuinely free trade.

But those mistakes and their impact paled next to the damage likely from a treaty reflecting the Doha goals – ever greater global financial instability stemming from trade flows that fostered the offshoring of production, and therefore income-earning opportunities, to countries that would still long remain too poor to consume adequately, and away from the rich-country populations (especially America’s) whose purchasing power was still crucial for adequate global growth.

By the time the Doha talks were inaugurated, in 2001, years of NAFTA-style, offshoring-centric U.S. trade liberalization decisions capped by China’s admission into the WTO had already recklessly placed the U.S. and world economies on a completely unstable course. The Bush administration and the Federal Reserve under Alan Greenspan further greased the skids for crisis with two decisive moves. The former filled the resulting American income and growth shortfall with renewed, and record, federal budget deficits. The latter even more powerfully fueled consumption with prolonged (then) record low peacetime interest rates. For half a decade, the United States experienced an unprecedented burst of debt-led, bubble-ized growth. And then the entire global economy nearly collapsed.

Success at Doha was always bound to magnify world trade imbalances further and ensure even more badly lopsided growth by requiring the United States and other developed countries to open their markets much wider and faster than low-income countries. Particularly important were measures practically certain to gut the U.S. trade laws that shielded America’s domestic economy from foreign predatory trade practices like export subsidization and dumping. In fact, the inequities were so egregious that even America’s staunchly pro-trade liberalization agricultural sector, which has long wielded outsized influence in Congress, balked; its reservations began the Doha hold-up that eventually brought its demise.

Unfortunately, another recent international trade policy decision is likely to add to dangerously distorted global growth – the new Information Technology Agreement reached under WTO auspices, which eliminates tariffs on many tech products but does nothing about the non-tariff barriers and predatory commercial practices used so heavily by so many U.S. trade rivals. New financial pressures may also be fueled if Congress passes the Trans-Pacific Partnership (TPP) trade deal pursued so avidly by President Obama. As I’ve often explained, this agreement’s text does target non-tariff barriers, but creates no mechanisms even remotely capable of actually curbing their use. Therefore, it’s all but certain to create the trade deficit-boosting, finance destabilizing effects of the previous American trade agreements on which it’s modeled.

All the same, TPP ratification this year looks doubtful, given election-year opposition by major Republicans in Congress. Doha’s death would represent a second “do no harm” decision in a single year – certainly not enough progress on the trade policy front, but considerably better than nothing.

(What’s Left of) Our Economy: Robert Zoellick is the Dan Snyder of U.S. Trade Policy

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fast track, gross domestic product, growth, Jobs, Obama, Robert Zoellick, TPA, TPP, Trade, trade agreements, Trade Deficits, trade policy, {What's Left of) Our Economy

Let’s assume that Wall Street Journal edit page staffers published Robert Zoellick’s new op-ed on U.S. trade policy because they truly consider him an expert on the subject — rather than because they’re reflexively enthusiastic about any call for trade expansion, and lately about endorsements of President Obama’s proposed new trade agreements . Even giving the paper this benefit of the doubt, the Zoellick article – co-authored with a Congressman on the House Ways and Means Trade Subcommittee – still doesn’t deserve to be taken seriously.

Journal editors no doubt impute trade expertise to Zoellick because he served as U.S. Trade Representative from February, 2001 to January, 2005. This does mean that Zoellick was involved in important trade negotiations like those over the World Trade Organization’s Doha Round and the Central America Free Trade Agreement. His position also meant that Zoellick dealt with subjects like trade relations with China that didn’t involve specific new agreements. So what was his record?

During his tenure as USTR, the U.S. trade deficit on an inflation-adjusted basis grew from $508.7 billion annualized in the first quarter of 2001 to $774.1 billion in the first quarter of 2005, according to the Commerce Department’s tables on real gross domestic product and its composition.  That’s an increase of more than 52 percent. And since the trade deficit’s growth subtracts from the economy’s growth, this means that under Zoellick, trade slowed that decade’s expansion – and surely its job creation. As always, moreover, this trade toll was exacted overwhelmingly on the private sector, which is America’s best hope for healthy growth.

Speaking of healthy growth, moreover, the ballooning trade deficit also piled more debt onto the economy. Combined with the jump in federal budget deficits under the Bush administration in which Zoellick served, and the (then) historically loose monetary policies pursued by the Federal Reserve, this new indebtedness helped trigger the financial crisis. Yes, you should hold the applause.

It should also make you wonder what Zoellick and his co-author are talking about when they claim that American trade expansion is needed to encourage a shift, not only in the United States, but around the world, “from extraordinary governmental spending and zero-interest-rate monetary policies to growth led by the private sector.” On his watch, trade expansion produced exactly the opposite result.

But is it fair to blame Zoellick for all the trade-related damage suffered by the economy? After all, lots of the country’s trade is in oil, which has next to nothing to do with agreements or any other aspects of trade policy. Nonetheless, Zoellick’s record looks even worse according to this measure. The share of U.S. trade flows strongly influenced by trade policy is nicely tracked by the data on the non-oil goods balance. Under Zoellick, the inflation-adjusted deficit here rose from $69.83 billion (non-annualized) in the first quarter of 2001 to $132.53 billion in the first quarter of 2005. That’s a much bigger increase of just under 90 percent (i.e., a near doubling). And again, nearly all of the growth-related and broader economic damage was inflicted in the private sector.

Trusting Zoellick’s judgment on trade, then, seems tantamount to trusting Redskins owner Dan Snyder’s judgment on building a football team. Hopefully, Congress is smart enough to see his endorsement of the trade agenda being pursued by President Obama and the Hill’s Republican leaders as a kiss of death.