Im-Politic: Impeachment and the Mind of a Diplomat II

Tags

2016 election, 2020 election, Burisma, election interference, Hunter Biden, Im-Politic, impeachment, Joe Biden, Rudy Giuliani, Trump, Ukraine, William B. Taylor

Monday’s post detailed one reason for viewing skeptically the upcoming public impeachment testimony of supposed prosecution star witness William B. Taylor – evidence of his inability or unwillingness to make the crucial distinction between President Trump differing with him on a policy issue (dealing with Ukraine), and the chief executive committing an offense that warrants a House of Representatives indictment and possible removal from office by the Senate.

Today I’ll air a more serious challenge to his credibility – which I hope is highlighted into the testimony he’s scheduled to give this morning at the first session of open impeachment hearings. For whatever reason (the above failure, his crush on Ukraine), Taylor’s views on the crucial issue of uncovering U.S. campaign interference by Ukraine resulted in his taking an unacceptably one-sided position.

I can’t go so far as to accuse Taylor of deliberate partisanship – because I can’t read his mind. But his closed-door testimony to House investigators October 22 and answers to their questions showed unmistakably that his allegation of a Trump administration Ukraine military aid delay for partisan political reasons results from criteria that were capable only of producing partisan results.

Specifically, in his testimony last month, Taylor continually portrayed himself as a non-partisan career public servant who had single-mindedly pursued American objectives that lay beyond any legitimate controversy, and who was therefore determined to keep domestic politics out of U.S. foreign policy. That’s also how he’s been described by his admirers. But when it came to two such policy imperatives – uncovering election interference from a foreign government (Ukraine’s) and fighting the corruption that has crippled that country’s economy and democracy building efforts, and undermines American aid programs – Taylor’s record unquestionably skewed in favor of the Democratic party.

Despite pretty much universal American public support for preventing future foreign meddling in U.S. politics – which of course requires identifying as many sources of such previous interference as possible – Taylor not only displayed no interest in learning more about clearly documented meddling from Ukraine officials (including those remaining in power). By his own account, he seemed to refrain actively from learning anything about it.

/For example, Taylor acknowledged a deep “emotional” attachment to Ukraine and – in his words – “stayed engaged” with the country while serving in private sector positions for a decade before returning to Kyiv as a Trump administration envoy this past June. Yet he claimed that when he resumed an official role, he knew nothing about that country’s efforts to prevent Mr. Trump’s election even though the country’s ambassador to Washington had published an op-ed in The Hill newspaper in August, 2016 opposing Mr. Trump’s election bid (which was featured prominently on his embassy’s website), and even though these and other similar developments had been reported in August, 2016 by the Financial Times and in January, 2017 by Politico.

In addition, Taylor testified that he was never briefed on these matters when he took charge of the U.S. embassy in the country, and evidently never sought a briefing, either. The only meddling-related subject he had some prior knowledge of, and was briefed on, was the successful effort by a Ukraine political reformer and parliamentarian to expose off-the-books cash payments in 2005 to future Trump campaign chief Paul Manafort when he was advising and lobbying for the pro-Russian political factions.

Even so, Taylor proceeded to justify his ignorance by insisting that these activities were only undertaken by “some Ukrainians, a couple of Ukrainians….none of those were in” the country’s current administration with one exception – the powerful Interior Minister. (Actually, the envoy who published the 2016 anti-Trump article stayed in office through this past summer.) And when asked “isn’t it fair to say that, if you’re aligned with the Trump administration, isn’t it legitimate to have a good-faith belief that Ukrainians were operating against you in the 2016 election?” Taylor replied diffidently, “You could have that opinion, that some were.”

Stranger, and flimsier, still were Taylor’s stated reasons for dismissing as “help with a political campaign” and a bid for “domestic political gain” Trump administration efforts to the probe Democratic presidential candidate Joe Biden’s son’s lucrative dealings with a Ukraine energy firm while the former Vice President served as the Obama administration’s point man for the country.

These included a bizarre claim that rather than focusing on “individual cases” – like Hunter Biden’s service on the board of the Burisma company – America’s longstanding anti-corruption policies in general concentrated on “the importance of honest judges, of the selection process for judges, the selectjon process for prosecutors, the institutions.” And evidently, he saw no reason to make an exception even when the individual case raised the possibility of influence-peddling at the highest levels of an administration only a few years out of power.

They included the even more disturbing contention that the “irregular channel” of Trump administration Ukraine policy headed by former New York City Mayor Rudy Giuliani was illegitimate because it, in his view, it “wanted to focus on one or two specific cases, irrespective of whether it helped solve the corruption problem, fight the corruption problem” – meaning that Taylor ruled out chance that a “specific case” involving the family of the former Vice President of the United States and the government of a country he insists is a vital strategic partner of the United States could warrant any special attention.

They included the confidence that Giuliani’s sole interests were strengthening influencing the upcoming presidential election rather than corruption fighting based largely on a New York Times article reporting “that Giuliani was interested in getting some information on Vice President Biden that would be useful to Mr . Giuliani’s client,” along with Taylor’s refusal to answer the question of whether it’s “possible that the request to investigate interference with the 2015 election was not to influence a future election?”

They included Taylor’s additional statement that the Trump-Giuliani probe was ipso facto inappropriately political “Because as I understood the reason for jnvestigating Burisma was to cast Vice President Biden in a bad light” – which amounts to the unacceptable position that corruption suspects should be immune from official investigations if they decide to run for office.

And they included Taylor’s attempts to avoid opining on whether “A reasonable person could conclude that there ‘is a possible perceived conflict of interest” raised by Hunter Biden’s employment at Burisma. His performance is so comically evasive that it’s worth presenting in full (starting on p. 316 of the hearing transcript and beginning with a question from a Republican committee staff member):

Q: “ You would agree that, if Burisma – if their motivation for engaging Hunter Biden for their

board was not related to his corporate governance expertise but, in fact, was hoping to buy some protection, you would agree that’s worthy of investigating, right?

A: …I don’t know why Burisma got him on the board.

Q: But if Ukrainians were engaged in misdeeds or wrongdoing with regard to putting Hunter Biden on theirboard, that could be something that could be worth investigating, right?

A: I don’t know. I don’t know. I don’t know the relationship that he had with the board. I don’t know.

Q: Okay. And, at the time, the Vice President had a you know, policy supervision of Ukraine on some respects.

A: He was very interested in policy with Ukraine, yes.

Q: Okay. So do you see a perceived conflict of interest there?

A: I’m a fact witness. I ‘m not giving opinions on –

Q: Okay.

A: – this thing, but – so I –

Q: Is it reasonable to see a perceived conflict of interest there, or is that crazy?

A: I’ve said other things are crazy.

Q: A reasonable person could conclude that there is a possible perceived conflict of interest there, right?”

At this point, one of Taylor’s personal lawyers interjected:

“You asked him that question earlier, at the beginning, about 7-1/ 2 hours ago. It was one of the first questions you asked him. He’s already answered it.” 

Again, Taylor has every right to prefer Biden’s views on Ukraine to Mr. Trump’s, and essentially to define that country’s unmistakable interference with the 2016 U.S. elections out of existence.  But holding these positions while professing political neutrality take gall and sanctimony to an entirely new level.  And Americans will have reason enough to be thankful for the impeachment proceedings if they indicate how widespread these views have been lately among the nation’s so-called foreign policy professionals.       

 

Im-Politic: Impeachment and the Mind of a Diplomat I

Tags

Blob, House of Representatives, Im-Politics, impeachment, Trump, Ukraine, Ukraine Scandal, William B. Taylor

When the House of Representatives’ public impeachment hearings open this week, one of the star witnesses for the prosecution – and perhaps the star witness – is expected to be William B. Taylor, former chief U.S. envoy to Ukraine. His appeal to President Trump’s opponents is easy to understand, since he was both deeply involved with Ukraine policy when the alleged actions that ostensibly triggered Mr. Trump’s latest round of troubles took place, and since he’s compiled such an impressive record of service to America, especially as a decorated military veteran.

I haven’t yet made up my mind as to whether Taylor’s remarks at his October 22 closed door appearance before House investigators will seal or significantly strengthen the case for impeachment. (So far I’m leaning “No,” for reasons I’ll detail soon.) What is clear to me is that Taylor’s opening statement, and answers to questions from the Democrats and Republicans involved, put on full display a syndrome long common among America’s diplomatic corps (and broader foreign policy establishment) whose pervasiveness should disturb anyone who believes that the nation’s approach to world affairs should prioritize American interests.

The syndrome is called “Client-itis”. As the name suggests, it’s applied to foreign policy officials who fall in love with the countries they’re focused on, and who act as if their chief responsibility is championing that country’s interests in U.S. corridors of power, not vice versa. And last month, Taylor both came off as a prime example, and strongly suggested that his real beef with the President (and the real beef of the foreign policy Blob in general) concerns Mr. Trump’s doubts about Ukraine as a vital U.S. interest worth antagonizing Russia over, not about any supposed Trump improprieties.

Taylor’s Ukraine-philia emerged right off the bat in his prepared statement before the investigators: “While I have served in many places and in different capacities, I have a particular interest in and respect for the importance of our country’s relationship with Ukraine. Our national security demands that this relationship remain strong.”

But Taylor also eventually made clear that far more than cold strategic calculations underlay this view. As he explained, also at work was an “emotional piece,” that “is based on my time in Ukraine in 2006, 2009, when traveling around the country, I got to know Ukrainians and their frustrations and difficulties and those kind of things. And then coming back and seeing it now where they have the opportunity, they’ve got a young President, a young Prime Minister, a young Parliament, the Prime Minister is 35 years old. This new government has appealed to young people who are so idealistic, pro-West, pro-United States, pro-Europe, that I feel an emotional attachment, bond, connection to this country and these people.”

Is it possible that Taylor nonetheless was able to distinguish American from Ukrainian interests anyway, despite these strong feelings? Sure – but the closing passage of his statement justifies such strong doubts that it’s worth quoting in full:

“There are two Ukraine stories today, Mr. Chairman. The first is the one we are discussing this morning and that you have been hearing for the past 2 weeks. It’s a rancorous story about whistleblowers, Mr. Gjuliani, side channels, quid pro quos, corruption, interference in elections. In this story Ukraine is an object.

“But there’s another Ukraine story, a positive, bipartisan one. In this second story, Ukraine is the subject. This one is about young people in a young nation struggling to break free of its past, hopeful their new government will finally usher in a new Ukraine, proud of its independence from Russia, eager to join Western institutions and enjoy a more secure and prosperous life.

“This story describes a Nation developing an inclusive, democratic nationalism, not unlike what we in America, in our best moments, feel about our diverse country – less concerned about what language we speak; what religion, if any, we practice; where our parents and grandparents came from – more concerned about building a new country.”

Taylor returned to the strategic argument, but not for long, concluding his statement with “This second story, Mr. Chairman, is the one I would like to leave you with today.”

The problem is, however moving this description of the new Ukraine, none of these considerations mitigating for viewing that, or any, country as a “subject” – i.e., worth helping because of its alleged virtues – should be standing at the forefront of U.S. policymakers’ worldview. If such support can contribute to America’s freedom, security, and prosperity at costs and risks deemed acceptable by the American political system (meaning, ultimately, by voters), then their pursuit becomes entirely legitimate. But their intrinsic nature is secondary. That is, an “object” of U.S. interests is precisely what must remain first and foremost for the U.S. government and its officials when dealing with foreign countries and regions.

Taylor is absolutely correct in noting that aiding Ukraine has been a strongly supported bipartisan American policy goal. But as he and his Democratic questioners also made clear, Donald Trump wasn’t sure about Ukraine’s relation to America’s well-being at all. And Mr. Trump is not only the current Constitutionally elected President of the United States. He also ran – and won – on a platform that emphatically opposed a foreign policy made on Taylor-like bases.

That is, an “object” of U.S. interests is precisely how the President views Ukraine. And it’s a decision whose legitimacy Taylor has unquestionably overlooked. Let’s hope that in their impeachment proceedings, the House and Senate don’t.

In my next post:  Taylor’s testimony and the case for clearing Mr. Trump. 

(What’s Left of) Our Economy: Trump-Like China Trade War Advice – from China!

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America First, Asia, China, Clyde V. Prestowitz, free trade, globalism, Japan, Long Tongyu, managed trade, protectionism, South China Morning Post, Trade, trade talks, trade war, Trump, {What's Left of) Our Economy

When I first entered the trade and manufacturing world, I worked for a fellow named Clyde V. Prestowitz, Jr., who was shaking up American attitudes on international economic policy (in a good way) with sharp critiques of the prevailing dogma and often ingenious ideas for reform and even transformation. (The most complete statement of his views – this 1988 book.) 

And one of his most intriguing thoughts held that died-in-the-wool protectionist Asian governments like Japan’s would much rather deal with an openly economic nationalist U.S. President than with a standard preacher of free trade. So imagine my (pleasant) surprise to see this morning that a former senior Chinese economic official who still clearly retains much influence express substantial agreement – and in the process light the way for an American approach toward China’s trade transgressions that moves from what might be called a “Trump Lite” strategy that only partly reflects the President’s sharpest instincts to a much more thoroughly America First-oriented policy.

These views can be found in an interview in Hong Kong’s South China Morning Post describing the views of Long Tongyu. This retired Vice Minister led China’s successful decade-and-a-half effort to join the World Trade Organization (WTO) – a top Beijing priority because membership provided the People’s Republic with valuable insulation from unilateral and other foreign efforts to retaliate against its wide range of predatory practices. And although he’s no longer on active duty, he would never, ever make public statements at odds with the beliefs of current Chinese leaders. In fact, folks in his position often float trial balloons for the regime and serve in other ways as unofficial spokespeople.

According to the Post, Long stated that “We want Trump to be re-elected; we would be glad to see that happen.” And why would Beijing prefer to deal with a President who’s imposed tariffs on hundreds of billions of dollars worth of exports on which China depends to achieve adequate growth rates, rather than with Democratic rivals who oppose such measures?

As Long explained, “Trump talks about material interests, not politics.” Further clarifying, he contended that “He makes the US decision-making process efficient and transparent, because he basically says what it is. The pros of [having Trump] outweigh the cons. We don’t need to spend so much time figuring out what Americans want any more, or search for each other’s real thoughts in the dark, like we used to.”

Even more specifically, according to the Post‘s paraphrase, “Despite his fickleness, Trump is a transparent and realistic negotiator who is concerned only with material interests such as forcing China to import more American products, on which Beijing is able to compromise….”

Although Long didn’t use this phrases, it’s clear that he was lauding a Trump trait denounced by the President’s globalist critics – an approach to foreign policy described as “transactional.” In other words, Mr. Trump is more interested in securing relatively immediate, tangible, specific goals when dealing both with allies and adversaries than with more ambitious objectives valued by globalists for their supposed potential to promote U.S. interests most effectively over the long term, whatever the short-term risks or costs – like preserving American alliances and international institutions, and keeping other relationships (i.e., with China) on an even keel. (See this early post-Cold War article of mine for a more complete analysis of such conceptual differences.)

In the process, it’s clear that Long was also endorsing Prestowitz’ belief (which he based on his own personal experiences as a U.S. trade negotiator during the 1980s) that Washington could not hope to succeed with fundamentally different systems like Japan’s (his interlocutor) or, by extension, China, by demanding that these governments agree to American demands for more openness to imports, or broader structural changes that would lead indirectly to better sales for U.S. products and services.

Instead, Washington was much better advised to seek less grandiose but more concrete commitments – specifically, to increase imports by specific amounts.

This shift to “managed trade” or “results-oriented trade” ostensibly horrified the U.S. policy establishment. But the Prestowitz proposal was adopted by former President Ronald Reagan in 1986 in negotiations with Japan over semiconductors, and achieved its objectives of expanding American companies’ share of Japan’s market.

Further, Prestowitz’ main rationale was also echoed in Long’s remarks. He didn’t justify managed trade mainly for the relatively easy verification challenge it presented – although he did emphasize that Washington would be much better able to monitor promises to boost buys of specific products than foreign promises to convert to free trade principles. Nor did Prestowitz stress that such sweeping U.S. demands were unrealistic, and that protectionist countries would respond by simply stonewalling.

Rather, Prestowitz contended that Asian protectionists were genuinely bewildered and frustrated by standard American positions, primarily because the ideas behind them were so alien to their experiences. Similarly, and in line with Long’s views, they didn’t comprehend how negotiations could resolve or bridge differences that ultimately are philosophical or ideological. They much more clearly understood pragmatic haggling over quantities, and Prestowitz argued quite sensibly that superior U.S. leverage could be counted on to persuade these export-dependent economies to treat American imports more generously.

As a result, the implications for Trump trade policy couldn’t be clearer. The United States should drop its demands that China change its policies fundamentally, whether on the intellectual property front or the technology extortion front or the illegal subsidy front or various other non-tariff barrier fronts. (As I’ve previously written, there’s no chance of verifying even genuine Chinese compliance satisfactorily.)

A much better response would be a combination of (1) severely punitive tariffs to make sure that Chinese products benefiting from these practices don’t enter the American market, and harm American-owned producers; and (2) other threatened or imposed tariffs aimed at obliging Beijing to purchase much greater amounts not only of agricultural products, but the full array of advanced manufactured products.  The first set of tariffs would center on those advanced manufactures, the second on more labor-intensive Chinese products – which Beijing relies on heavily to keep employment high enough to keep China’s masses content economically.  

That first set of tariffs would not only prevent U.S.-owned producers from having to deal with heavily subsidized and/or copycat Chinese competition. It would surely prompt China to send these exports elsewhere – and finally pressure the rest of the world to get its own act together in responding to China’s excess capacity building and dumping, rather than relying on the United States to soak up these surpluses.

The second set of tariffs would need to be accompanied by a resolve not to let Beijing off the hook with claims that its own economy simply can’t absorb greater supplies of American goods across the board. Rather than enable China to use free market-oriented excuses after decades of (continuing) state planning and other interventionism, Washington should tell Beijing that, for all the United States cares, it can stick these products into warehouses if genuine customers can’t be found.

This new approach shouldn’t represent the totality of a smarter new U.S.-China economic policy. In particular, the Trump administration should keep sharply restricting Chinese purchases of American hard assets, whether defense-related or not – because why should a basically free market economy welcome state-controlled and bankrolled entities that can only further distort free market forces? And controls on exports or other transfers of advanced technology to Chinese entities will need to be further tightened.

But a shift to managed trade is nothing less than essential. And assuming that Long Tongyu reflects Beijing’s thinking, with enough American consistency and resolve, China would go along before too long.

Our So-Called Foreign Policy: Time to Test U.S. “Allies” on China

Tags

allies, America First, Asia-Pacific, Barack Obama, China, Emmanuel Macron, EU, European Union, France, globalism, Our So-Called Foreign Policy, RCEP, Regional Comprehensive Economic Partnership, TPP, Trade, Trans-Pacific Parternship, Trump

President Trump’s globalist critics in the foreign policy Blob (the Washington, D.C.-centered complex of former diplomats and military officers, genuine academics, think tank hacks, and their Mainstream Media mouthpieces) think they’ve uncovered major new proof that the administration’s America First-type foreign policies and trade policies are failing catastrophically. Actually, the developments they’ve seized upon make clearer than ever the dangerous folly of their own outdated strategies, and the urgent need for a Trump-ian course change.

What’s gotten the globalists excited: Reports that America’s allies the world over are turning their backs on Washington and either moving into China’s orbit or cultivating better relations with the People’s Republic.

In the Asia-Pacific region, fifteen countries, including American treaty allies Australia, Japan, and South Korea, have decided to join the Regional Comprehensive Economic Partnership (RCEP) – a Chinese spearheaded trade agreement that doesn’t include the United States. Although Washington is apparently free to join, RCEP’s progress is seen as a big defeat for the United States, and for Mr. Trump in particular, because for years Beijing has been pushing it as an alternative to the Asia-Pacific-focused Trans-Pacific Partnership (TPP) deal signed by former President Barack Obama but nixed by President Trump on his first full weekday in office.

TPP was touted as a counter to RCEP that was vastly preferable for the United States because its protections of the environment and labor rights, and its curbs on state-owned enterprises, created standards that China could not hope to meet any time soon. Therefore, the agreement allegedly represented both a means of containing Chinese power and a powerful inducement to the kinds of Chinese reform long sought by Washington (and at least nominally sought by the President).

In other words, it supposedly was a globalist masterstroke that was foolishly trashed by Mr. Trump. And he’s now getting his richly deserve comeuppance via the Chinese-developed RCEP, which, it’s said, doesn’t address the above issues nearly as effectively as TPP, but which has nonetheless attracted many other signatories also spurned by the Trump rejection.

As known by RealityChek regulars, the anti-China case for TPP was bogus from the start, along with its claims to promoting the kinds of reforms throughout the Asia-Pacific region that would benefits American exporters. For the agreement contained a wide open backdoor for numerous products with high levels of Chinese content, which would have enabled Beijing to realize many of TPP’s benefits without incurring any of its obligations. Nearly as bad, for all their lofty ambitions, those obligations would have been impossible for Washington to monitor and enforce adequately, as most signatory governments’ bureaucracies, along with their national industrial bases, were too large (and in the case of the governments, secretive) to track.

Moreover, these glaring TPP weaknesses raise questions that hardly strengthen confidence in globalist views both of the agreement and, just as important of U.S. Allies. Specifically, TPP’s China back door and verification shortcomings weren’t exactly secrets. And they surely reveal that the Australias, Japans, and South Koreas of the world were never very interested in containing China or pressuring it to reform in the first place. The decision of these countries to go along with an RCEP that doesn’t even try seriously to achieve these goals casts even deeper doubt on their reliability for any future American efforts to work multilaterally to cope with China.

And as for the inevitable counter-argument that the Trump TPP pullout gave these Asia-Pacific countries little choice but to accept a second-best deal more advantageous to Beijing, it doesn’t withstand scrutiny. After all, all these countries had years to work with the George W. Bush and Obama administrations to develop regional trade arrangements that could realistically hope to achieve their intertwined China and reform objectives. They all (along with those globalist Presidents) completely blew the opportunity.

On the other side of the world, the Associated Press has just reported on a similar shift by the European Union, that huge economic bloc that also contains many countries allied with the United States through the North Atlantic Treaty Organization. In an article titled “Europeans look to China as global partner, shun Trump’s US,” correspondent Sylvie Corbet wrote that “When France’s president wants to carry European concerns to the world stage to find solutions for climate change, trade tensions or Iran’s nuclear ambitions, he no longer calls Washington. He flies to Beijing.”

She added that on his recent visit to Beijing, Emmanuel Macron “portrayed himself as an envoy for the whole European Union, conveying the message that the bloc has largely given up on Trump, who doesn’t hide his disdain for multilateralism.”

In the process, though, the author made a powerful, if completely unwitting, case for American unilateralism. For according to Corbet, Macron and Chinese dictator Xi Jinping “issued a ‘Beijing call’…for increased global cooperation in fighting climate change and better protecting biodiversity. Both countries have deplored the U.S. withdrawal” from the Paris climate change accord.

Macron apparently stood by as Xi “said the two leaders were sending ‘a strong signal to the world about steadfastly upholding multilateralism and free trade, as well as working together to build open economies.’”

And for good measure, the French president touted China’s record of helping to reduce tensions in the Persian Gulf, and potential contributions to using diplomacy to persuade Iran to return to full compliance with the nuclear proliferation deal rejected by Mr. Trump. In addition, he touted China’s ability to help “develop stable and cooperative trade rules at the international level.”

To which the only serious reply from the American standpoint is, “If Macron and anyone else in Europe really believe this nonsense, and assume that they’re better off aligning with China than with the United States, then America is better off without them.” And this holds not only for trade but for security issues like Iran.

It’s been unconvincing enough for globalists to insist that the United States has no choice but to maintain alliances with countries famous for being defense deadbeats and free-riders, and fence-sitters in the campaign to create a truly open world economy (as opposed to one that winks at all instances of protectionism except America’s). But it’s positively goofy for globalists to claim that these countries would be strong and active supporters of security or economic goals compatible with U.S. and traditional free world interests if only President Trump showed more patience with them.

Of course, it’s possible – and perhaps likely – that these Asian and European moves are ultimately bluffs aimed at curbing Mr. Trump’s perceived worst excesses. But it’s at least as possible that these countries hope to create pressure on the President to accept their longstanding, “Heads we win, tail you lose,” strategy vis-a-vis the United States.

All of which reminds me of episodes when I was little, and blurted out remarks like, “I’m going to run away.” My parents often replied, “Is that a promise or a threat?” That sounds to me like a necessary and indeed long overdue U.S. response to its worrisomely feckless allies.

(What’s Left of) Our Economy: Boeing’s Safety Woes are Hammering U.S. Manufacturing & Overall Trade Flows Under Trump

Tags

Airbus, Boeing, civilian aircraft, exports, imports, manufacturing, non-oil goods trade deficit, safety, services trade, tariffs, Trade, trade deficit, Trump, World Trade Organization, {What's Left of) Our Economy

When last month’s U.S. trade figures (for August) came out, I wrote about how the economic narratives about the woes of domestic manufacturing and America’s trade accounts during the Trump Tariffs Era have been turning into a story about the safety related troubles of Boeing. This morning, the September data were issued, and the Boeing drag on the trade performances of industry and the entire economy look bigger than ever. Especially interesting, the Boeing effect worsened during a data month when total U.S. trade, manufacturing trade, and civilian aircraft trade all took modest turns for the better.

Specifically, the overall U.S. trade deficit in September dropped by 4.70 percent, from an upwardly revised $55.04 billion to $52.45 billion. The total was the lowest since April’s $51.98 billion, and the sequential decrease the biggest since January’s 12.61 percent nosedive.

Partly as a result, the year-to-date trade deficit is up by 5.47 percent – a rate of increase less than half that of the previous year’s 12.68 percent.

Combined goods and services exports rose by 0.88 percent from $207.83 billion to $205.99 billion – their worst monthly performance since April’s $205.76 billion. Total imports, however, sank by nearly twice as much proportionately – 1.68 percent. And September’s $258.44 billion figure was also the lowest since April ($257.74 billion).

Services trade, however, provided an oddly glum counterpoint. It’s long been a trade surplus generator, and remained so in September. But the new monthly surplus of $19.27 billion was the lowest since December, 2012’s $18.55 billion. The main culprit? The fourth straight high for monthly services imports ($49.89 billion).

At the same time, the huge and chronic manufacturing trade deficit fell sequentially in September for the second straight month, from $92.08 billion by 4.53 percent, to $87.91 billion. That total was the best since June’s $83.63 billion. And this progress was mirrored in civilian aircraft. Their exports jumped month-to-month in September by 25 percent. Imports rose even faster – by 41.58 percent. But their amount is much smaller ($1.35 billion vs $3.29 billion). Therefore, the civilian aircraft trade surplus improved from $1.69 billion to $1.95 billion.

What, then, is the problem? It becomes glaringly visible upon examining trade in civilian aircraft during the entire stretch of Boeing’s current woes (which essentially began this past March with many national aviation authorities grounding the plane in their own countries’ airlines, and/or barring it from their national air spaces), and comparing it with the aircraft trade figures for the same periods of previous years, and with the performance of overall manufacturing exports and imports.

Last month, I described how civilian aircraft’s trade performance between this past April (the first full month in which the Boeing effect could be expected to begin showing up) and August had deteriorated markedly from the same period last year. Today’s trade data show that the deterioration has grown far worse.

As made clear in last month’s post, despite its reputation as a major American trade winner, the civilian aircraft sector has experienced ever poorer results since 2017, and the new trade figures confirm this trend.

Between April and September of 2017 and April and September of 2018, civilian aircraft exports fell by 10.32 percent, even though overall U.S. manufacturing exports increased by 6.84 percent. The industry’s record on the import side was better – they dropped during this time by 13.98 percent, while manufacturing imports in total climbed by 11.64 percent.

But the comparison between the following April-to-September periods looks considerably drearier for aircraft. Between April and September of last year and the same period this year, although manufacturing exports were down by 3.82 percent, civilian aircraft foreign sales sank by 26.80 percent. And although manufacturing imports edged up only 0.27 percent between these periods, American purchases of civilian aircraft surged by just over 26 percent.

Further, the impact of aircraft’s slump on manufacturing and overall U.S. trade has been substantial and growing. As of last month’s trade report, the fall in these products’ exports between the April-August 2018 and April-August 2019 periods accounted for 30.72 percent of the decrease in total manufacturing exports during that time, and 16.81 percent of the increase in total manufacturing imports.

As of today’s figures, the civilian aircraft share of manufacturing’s total export decline is up to 31.35 percent of the total, while their share of industry’s total import increase has shot up to more than half manufacturing’s total.

Expanding the focus to all U.S. goods trade except for energy products (which to date haven’t received significant attention in free trade negotiations or any other aspects of American trade diplomacy) also reveals a sizable Boeing effect. Between the April-September 2018 and 2019 periods, civilian aircraft’s export decline accounted for fully 42.39 percent of the total U.S. non-oil goods export decrease recorded then, and 20.61 percent of the non-oil goods import increase.

In addition, to repeat a crucial point, this major Boeing effect on manufacturing and overall trade has absolutely nothing to do with the Trump trade wars, since civilian aircraft so far have not been subjected to foreign tariffs on American exports imposed in retaliation for Mr. Trump’s levies. This situation will change due to recent and upcoming rulings in the long-running World Trade Organization case between Boeing and the European Union’s Airbus. But as of now, any evaluation of the Trump effect on U.S. trade flows ignoring the powerful drag created by Boeing’s troubles deserves a grade of “incomplete” – at best.

(What’s Left of) Our Economy: A New Anti-Trade War Argument Bites the Dust

Tags

BLS, blue-collar workers, Bruce Yandle, Bureau of Labor Statistics, consumers, George Mason University, inflation-adjusted wages, Mercatus Center, private sector, real wages, tariffs, Trade, trade war, Trump, wages, Washington Examiner, work week, workers, {What's Left of) Our Economy

Bruce Yandle of George Mason University’s Mercatus Center has just added a novel claim to the list of catastrophes allegedly triggered by President Trump’s tariff-centric trade policies. In an October 28 Washington (D.C.) Examiner post, He seems to understand that amid rock-bottom rates of U.S. joblessness, it’s getting ever tougher to contend that the trade wars are killing American employment (though the rate of net job gains has certainly slowed in most sectors since the advent of tariffs on steel and aluminum imports in March, 2018).

So Yandle, a former university business school dean, has come up with another reason for the nation’s workers and aspiring workers to hate the curbs on trade: They’re making Americans work too darned hard for the stuff they like to buy. It’s an intriguing idea with just one fatal flaw: It’s not supported by a shred of evidence. P.S.: It takes about 10 minutes of internet surfing and arithmetic-ing to demolish.

Here’s Yandle’s case:

“[T]he occurrence of high employment in the face of a slowing economy can be the result of putting tariff-made rocks in our own harbors to keep out lower-cost foreign goods. When cheaper goods can no longer be imported, we have to work longer and harder to maintain the same level of consumption.

“Low unemployment is something to celebrate but let’s at least note that there are some people who might (quite reasonably) prefer to work a little less with more leisure time and cheaper cars, clothes, and tools, which are some of the goods that have been hit with tariffs.”

I’m unaware of any instances of workers complaining that, “I’d be able to knock off earlier and clean out Walmart if only for those stupid tariffs,” but what I suppose really doesn’t matter. Nor should what anyone supposes matter – because the federal government keeps statistics both on Americans’ hours on the job and their pay.

The results of my research are below. They show hours worked for various major categories of private sector employees, and the change in their hourly inflation-adjusted wages, over two relevant time periods. The first goes from the first full month of the Trump administration (February, 2017) through the latest data month (this September – tomorrow the Bureau of Labor Statistics (BLS) will release the October numbers), and from the first full month of the administration’s first important tariffs (April, 2018, for the steel and aluminum levies) through September. (Government employees’ wages aren’t monitored by BLS because their pay is set largely via politicians’ decisions, and therefore says little about the economy’s fundamental strengths or weaknesses.)

Total private weekly hours since Trump inauguration: 34.3 to 34.4

Total private weekly hours since 1^st (metals) tariffs: 34.5 to 34.4

Total blue-collar weekly hours since Trump inauguration: 33.6 to 33.6

Total blue-collar weekly hours since 1^st (metals) tariffs: 33.8 to 33.6

Total manufacturing weekly hours since Trump inauguration: 40.7 to 40.5

Total manufacturing weekly hours since 1^st (metals) tariffs: 41.0 to 40.5

Total manufacturing blue-collar weekly hours since Trump inauguration: 41.9 to 41.5

Total manufacturing blue-collar weekly hours since 1^st (metals) tariffs: 42.4 to 41.5

Total private real hourly wage since Trump inauguration: +2.53 percent

Total private real hourly wage since 1^st (metals) tariffs: +.1.86 percent

Total blue-collar real hourly wage since Trump inauguration: +3.05 percent

Total blue-collar real hourly wage since 1^st (metals) tariffs: +2.49 percent

Total manufacturing real hourly wage since Trump inauguration: +0.46 percent

Total manufacturing real hourly wage since 1^st (metals) tariffs: +0.83 percent

Total manufacturing blue-collar real hourly wage since Trump inauguration: +2.77 percent

Total manufacturing blue-collar real hourly wage since 1^st (metals) tariffs: +1.25 percent

For every category except two, over both time periods, workers’ weekly hours went down, and their real wages went up. That is, their leisure time and the buying power of their pay both have risen. They’ve been working less and been able to purchase more.

The first exception is overall private sector workers. Since Mr. Trump’s administration began, their work week has edged up – a tenth of an hour. Even so, their pay rose faster. So they don’t have much cause to complain about working too hard and enjoying the fruits of their labor less.

The second exception entails the overall blue-collar workforce (called “production and nonsupervisory employees” in BLS-ese). Its work week has stayed the same since the Trump inauguration. At the same time, however, this group experienced the fastest wage increase during this period. And its pay in constant dollars went up even faster after the metals tariffs were imposed – as its workweek dipped.

Moreover, this points to another problem with Yandle’s case:  All four categories of workers saw their workweek fall faster after the tariffs’ imposition than before. And in three of the four (except for manufacturing blue-collar workers) wages rose faster after the tariffs went on as well.

And in case you’re wondering, to create some context, whether American workers recently have been significantly better off in the absence of tariffs and trade wars, the answer is, “Not consistently during the current economic recovery.”

No one’s saying that these results show that the United States is a workers’ paradise, or is becoming one because of the Trump tariffs. But if anyone has a right to be grumpy about the above trends, it’s trade mavens like Yandle, who are pushing fact-free arguments to take the levies down.

(What’s Left of) Our Economy: New Data but Cloudier Skies on Trump’s Trade Policies and Manufacturing

Tags

Barack Obama, China, Commerce Department, exports, GDP-by-industry, imports, manufacturing, manufacturing output, manufacturing trade deficit, tariff front-running, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

If only the Commerce Department’s data on gross domestic product (GDP) by industry didn’t come out on a basis timelier than once a quarter. For they’ve provided uniquely valuable information on how well the Trump administration is faring in its efforts to (1) reduce the humongous U.S. manufacturing trade deficit, and (2) reduce domestic industry’s reliance on imported parts, components, and materials, and boost total output and employment over the long-term by ensuring that more of the value in these manufactured products are Made in the USA.

More specifically, the data (whose latest edition came out this morning) shed light on the crucial question over whether the best business model for domestic manufacturing is that recommended by traditional trade theory, or whether an America First-type approach is more effective. The former, of course, holds that output of any kind is maximized by capitalizing on the principle of comparative advantage, and encouraging U.S.-based companies to use whatever inputs are made more efficiently abroad. The latter insists that such reliance on foreign inputs deprives the economy of the enormous output gains that are possible by encouraging growth in these very inputs.

Sadly, however, the reasonably clear analytical skies that permitted a reasonably clear verdict to be returned during the first two years of the Trump era in trade are rapidly clouding up, for a variety of reasons. And much of the growing confusion has been created by the President himself. 

During Mr. Trump’s first two (nearly) full years of the Trump administration (keeping in mind that the President didn’t take office until late January, 2017), his America First-style policies were looking pretty impressive. (It’s true that no new tariffs came on during the President’s first year. But he did put the kibosh on a major trade agreement signed by his predecessor, the Trans-Pacific Partnership, and made clear that levies were on the way.)

Since Mr. Trump actually began imposing tariffs in early 2018, however, the results have been harder to interpret for two main and related reasons. First, the administration’s tariff decisions have oscillated pretty dramatically, featuring not only steps to put in place, threaten, suspend, and remove such levies, but actual and threatened tariff rate changes on big chunks of imports (especially from China). Second, these policy swings have produced lots of “tariff front-running” – that is, U.S. importers speeding up their foreign purchases in order to avoid paying higher tariff-ed costs.

And this overall picture is exactly what’s been borne out by today’s figures (which incorporate revisions going back to 2014). The table below shows the new annual totals from 2011 (when the current economic recovery finished its early rapid bounce-back phase and settled into a more durable pattern) to 2018, The (slightly) revised numbers make clear that during the first two Trump years, domestic manufacturing did a much better job of generating healthy growth without ballooning manufacturing trade deficits (which reflect in part growing industry dependence on imported inputs) than during the previous Obama administration years.

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

2011:             +3.93 percent           +8.39 percent            2.13:1

2012:             +3.19 percent           +6.27 percent            1.97:1

2013:             +3.36 percent          +0.77 percent             0.23:1

2014:             +2.93 percent        +11.78 percent            4.02:1

2015:             +3.72 percent       +13.65 percent             3.67:1

2016:              -1.19 percent         +4.66 percent                —

2017:             +3.99 percent         +3.16 percent            0.79:1

2018:             +6.23 percent         +3.96 percent            0.64:1

In other words, whereas during the Obama years, the manufacturing trade deficit nearly always expanded considerably faster than manufacturing output (and 3.67 and 4.02 times faster in 2014 and 2015), the first two Trump years saw both significantly higher output growth per se, and output growth that topped trade deficit growth. During 2018, moreover, numerous tariff were imposed, and not merely threatened.

This year, however, saw a major change. As shown below, the ratio of manufacturing output growth to manufacturing trade deficit growth returned to levels resembling the worst of the Obama years. And overall growth itself was feeble in comparison.

2Q 2017 – 2Q 2018:           +7.00 percent        +7.83 percent         1.12:1

2Q 2018 – 2Q 2019:           +2.03 percent        +7.27 percent         3.58:1

But here’s where the tariff front-running comes in, especially in the huge volume of trade with China – as made clear here. Unfortunately for trend-spotters, however, the administration’s success in fostering strong manufacturing output performance while weaning industry from imports won’t become any easier to identify anytime soon. The President’s China trade policies, after all, are likely to remain mercurial.  Further, the General Motors strike and Boeing’s safety problems are sure to distort the production numbers for at least the next quarter or two. Add a still-sluggish world economy that, along with foreign retaliatory tariffs, will keep weighing on U.S. exports, and you get uncertainty that could even dwarf that supposedly paralyzing American business investment.

(What’s Left of) Our Economy: (Inadequate) Establishment Progress on China Trade

Tags

China, decoupling, dual-use technologies, national security, reciprocity, Trade, Trade Deficits, trade war, Trump, World Trade Organization, WTO, {What's Left of) Our Economy

Normally, it’s bad news for anyone seeking a realistic, sustainable U.S.-China trade policy when a group like private “The U.S.-China Trade Policy Working Group” issues a statement outlining “a new framework for trade negotiations” out of concern that bilateral economic relations “have taken a very concerning turn.”

Such phrases usually signal that the group of supposed experts in question is going to “Blame America First” for the current trade war (albeit with token acknowledgments of problematic Chinese policies) and urge a return to a cosmetically altered pre-Trump status quo. A quintessential example is this July letter to the President and Members of Congress from “members of the scholarly, foreign policy, military and business communities, overwhelmingly from the United States, including many who have focused on Asia throughout our professional careers.” Pessimism seemed especially appropriate given that this latest Working Group is comprised of “economists and legal scholars from China and the United States,” since members from the PRC can be accurately seen only as mouthpieces for the dictators in Beijing.

So I’m as pleased as I am surprised to report that the Group’s October 18 statement reinforces the case for a Trump-ian turn in China policies in two important ways. First, it made clear that, contrary to the economic conventional wisdom, lopsided U.S.-China trade flows (i.e., U.S. trade deficits) are an important, legitimate concern for Americans and their leaders. Second, it echoed increasingly common criticisms that the World Trade Organization (WTO) is a sorely inadequate forum for dealing adequately with these as well as the grave threats to U.S. security created by China’s rapid progress toward superpower status.

Not that the Working Group’s endorsement of a concentration on economic imbalances was emphatic, or even explicit. In fact, it was disappointingly implicit, and justified partly for political, not economic reasons. But nonetheless, endorsement it was, and it came twice, in the following passages:

>”In today’s interdependent global economy, a broad assortment of divergent domestic policies (including policies that have not historically been regulated through WTO rules) can trigger calls to ‘rebalance’ the structure of cross-border market access and trade barriers between countries.”

>”One advantage of [the Group’s proposed new framework for world trade] is that it offers a structure whereby the US and China can, together, make choices about how to rebalance their trading relationship in the future.”

At the same time, some individual Group members have accorded considerably more importance to the bilateral imbalances, both in economic and political terms. For example, University of Cambridge (United Kingdom) economist Meredith A. Crowley wrote in a concurring statement:

“Economic research has documented that the US’s trade policy commitments at the WTO have resulted in a higher level of penetration of the US market by producers based in China than China’s trade policy commitments have generated for producers based in the US. This asymmetry in border policy commitments, in conjunction with changes in technology, domestic and regulatory policies, and the wider economy have resulted in an asymmetry in the real and perceived benefits of the US-China economic relationship between these countries and across groups within the United States.”

And according to Dartmouth College economist Robert W. Staiger:

“US expectations of reciprocal market access expansion into the Chinese market arising from China’s 2001 entry into the WTO have not been met. This requires a rebalancing of the existing WTO market access commitments between the US and China to achieve the degree of reciprocity in these commitments that was intended to arise from their 2001 negotiations.”

Indeed, Staiger both went on to note that the same criticism could be made of the 1994 Uruguay Round global trade agreement that produced some trade barrier cuts along with creating the WTO:

“US expectations of the balance between the internal benefits and costs of its own tariff commitments agreed to at the…Uruguay Round have not materialized. This may require a rethinking and possible renegotiation of some of the Uruguay Round tariff commitments made by the US, subject to the preservation of reciprocity (once achieved) with China and with other US trading partners who would be impacted by this renegotiation.”

His mention of reciprocity as a trade diplomacy goal is noteworthy as well, for although this objective has been sought by the Trump administration and long supported by trade policy critics, it was never a goal enshrined by the WTO (or its predecessor, the General Agreement on Tariffs and Trade) and is roundly rejected by most economists.  (See, e.g., here.)

As for the WTO itself, the Group as a whole made two key observations:

“It has been almost 18 years since China joined the WTO, the system of trade rules and dispute resolution mechanisms that, at that time, defined the state of the art. During the intervening years, the global economy and the technologies that sustain it have changed dramatically, in ways that very few people anticipated at the time”; and

“[T]hese changes have had significant impacts on the international trade ecosystem, and the political leaders of many WTO members have voiced concerns that globalization pursuant to the WTO system is no longer attuned to their countries’ needs.”

As a result, the Group declared its intent to offer an “intellectual framework” that would represent an “alternative” to that which “undergirded the global economy at the time of China’s 2001 Protocol of Accession to the WTO.” (In fairness, the Group has also described its recommendations as an alternative to more recent ideas, emphasizing geopolitical competition, that underlie more recent calls for U.S.-China economic decoupling.)

Most strikingly of all, although Group members clearly would like to preserve as much of the WTO’s multilateral dispute-resolution system as possible (in order to preserve to the great possible extent what they remain confident are the mutual gains resulting from maximum free trade), all are now on record as backing both the United States and China dealing with certain high priority issues “bilaterally outside the WTO framework initially, with subsequent WTO-compliance then achieved through the application of various WTO ‘flexibilities,’ or, in the case of new areas such as digital trade, through the development of new WTO norms.”

And despite the above qualifications to outside-the-WTO bilateralism, the references to “WTO ‘flexibilities’” and to “developing new WTO norms,” can only shrink the trade body’s role and legally accepted authority over the trade policies of both countries.

Unfortunately, the new Working Group report isn’t entirely a good news story for critics of pre-Trump China trade policies – mainly because it says so little about operational details, and what little is said is so unconvincing. For example, it uses a “buckets of policies” methodology to identify practices that the two countries (and the world trade system as a whole) should agree to prohibit or forswear, and practices that all parties concerned should be permitted in the name of sovereignty in general and economic development objectives more specifically.

But even keeping in mind the Group’s recognition that it work is only a start down this road, the suggested standards they propose for classifying practices as permissable and not seem hopelessly subjective. Even regarding rules they consider relatively uncontroversial, what will be the real world difference between “policies [that] cause harm to [another] country…without necessarily taking on a beggar-thy-neighbor character or entailing global economic losses” on the one hand, and on the other, policies that cause harm to another country that do take on a beggar-thy-neighbor character?

Similarly, in terms of the more controversial situations they explore, what’s the real world difference between “cases where Country A’s policies have adverse implications for Country B, but the harm is the incidental consequence of, and not the primary motivation for, those policies” and cases where the harm isn’t incidental and/or the primary motive?

And within these areas, huge definitional questions loom just as large. Like what kinds of compensation for various trade-related offenses will be deemed “adequate” and what kinds of responses considered “well-calibrated”?

The calibration point also brings up another problem never squarely faced by the Group to begin with: What’s the verification mechanism? That’s an especially important omission given China’s long record of violating official commitments. To date, if anyone’s thought of an answer that can adequately safeguard legitimate American interests other than reserving that authority unilaterally to Washington, they’ve very effectively kept it secret.

Moreover, the Group’s approach can be faulted for failing to recognize the systemic nature of China’s assault both on even minimally free market-oriented norms. “Well-calibrated domestic policy adjustments” and “proportionate and well-targeted” remedies sound great until the ease with which China’s vast and secretive bureaucracy can reorganize and rename offending entities is considered.

In fact, the Group seems to try to define the systemic nature of the China threat out of existence, touting the “advantage” created by its framework of “encouraging each country to refrain from aggregating the other’s extraterritorially injurious policies into a single grievance and to refrain from amalgamating extraterritorially injurious policies with other, non-economic concerns.”

Such aggregation is precisely what’s needed to deal with the China challenge satisfactorily from a U.S. standpoint, and avoid being drawn into the mug’s game of responding to offending Chinese behavior episodically.

Moreover, for all the potential benefits of delinking lower from higher hanging fruit, delinking economic concerns and strategic concerns created by Chinese transgressions clashes with the Group’s own recognition of the emergence and multiplication of “dual use” technologies with civilian and crucial military applications.

This U.S.-China Trade Policy Working Group deserves credit for breaking out of some dangerously outdated academic and policy molds. But compared with the growth of the Chinese threat, and the extent to which the economic decoupling it seeks in part to avoid is already proceeding, its work is way behind the times.

(What’s Left of) Our Economy: How Certain Should We be About Trade War-Spurred Business Uncertainty?

Tags

business investment, capex, China, Dallas Federal Reserve, manufacturers, manufacturing, Philadelphia Federal Reserve, tariffs, tax incentives, Trade, trade war, Trump, {What's Left of) Our Economy

Among my most vivid memories of my years trying to make some sense out of the economy is one of a conversation with my late father. Since he was a tax lawyer for many decades, I once asked him if he supported some ideas that keep coming up for strengthening American manufacturing, chiefly making permanent the tax credit for corporate research and development (which Congress approved in 2015), and permitting companies to claim deductions for spending on machinery and equipment sooner rather than later, and even immediately (which the tax bill passed in 2017 allowed in some circumstances).

His answer: They’re small beans. His explanation: Any business-person with The Right Stuff will try and capitalize on new business opportunities whatever the tax laws allow (within reason).

I’ve been thinking of that conversation often as President Trump has waged his trade wars, especially against China (a long-time trade and broader economic predator), particularly in regard to the widespread claims that unanswered questions about his real aim (a bilateral level playing field? Decoupling the two economies?), and the herky-jerky nature of his tariff announcements and postponements have created enough uncertainty to paralyze business investment in new products and processes. Of course, that’s the type of activity that fosters healthy, sustainable, and not bubble-ized, growth.

I’m not unsympathetic to the difficulties of planning in this environment. But my father’s analysis makes me wonder if – assuming the uncertainty narrative is correct – too many American executives have lost their nerve. And this suspicion has just been borne out by a report spotlighting how many companies look to be plowing ahead with upgrades and innovations, trade war or not.

The evidence came from the latest monthly survey of mid-Atlantic state manufacturing published by the Philadelphia branch of the Federal Reserve system. As often the case, the October edition, released a week ago, featured responses to questions posed by “Philly Fed” researchers seeking regional manufacturers’ views on specific economic issues and challenges, and the current queries included:

>”Do you expect the following capital expenditure categories over the next year (2020) to be higher than the same, or lower than in the current year”; and

>”How has trade policy (including tariffs) affected your expected capital spending for 2020 compared with 2019?”

Here are the answers to the first question, by spending category measured in percentage of responses:

                                                            Higher           Same            Lower

Noncomputer equipment:                     41.1              44.6              14.3

Software:                                              28.6              58.9               12.5

Energy-saving investments:                 21.3              68.1               10.6

Computer and related hardware:         26.8              55.4                17.9

Structures:                                           32.1              45.3                22.6

Total:                                                   39.1              41.3                19.6

No overwhelming evidence of uncertainty-induced paralysis here. If anything, mid-Atlantic manufacturers seem pretty determined to take steps they deem necessary to bolster their competitiveness even though the trade wars are far from over. Especially encouraging are the results for noncomputer equipment and structures, since they’ve been capital spending laggards lately.

And here are the answers to the second, more specific, question, about trade policy’s effects on capital spending plan, again measured in percentage of responses:

Significantly increase: 5.3

Modestly increase: 8.8

No change: 54.4

Modestly decrease: 15.7

Significantly decrease: 1.8

All increases: 14.1

No response: 14.0

All decreases: 17.0

These results add slightly to the case that Trump-ian trade policies are depressing capital spending. But only slightly.

Trade war opponents can point out that this year’s business investment has been weaker than the previous year’s, so that some capital spending increase was inevitable barring concerns about a major economic slowdown or recession. But supporters can observe that such spending was rising strongly from spring, 2017 through summer, 2018, and so some cooling off was just as inevitable (and not only for mean-reverting-type reasons, but because it would be natural for companies to try to finish current projects before starting new ones).

It’s also possible that mid-Atlantic manufacturers are simply pluckier than their counterparts elsewhere in America. But similar responses to similar questions were provided by southwestern companies in the Dallas Fed’s June manufacturing sounding. In other words, there’s lots of uncertainty surrounding the trade war-related uncertainty claims.

Our So-Called Foreign Policy: The Globalists’ Dangerous Tantrums over Syria and Ukraine

Tags

America First, Cold War, Eastern Europe, FDR, Franklin D. Roosevelt, globalism, globalists, Harry S Truman, ISIS, jihadis, Middle East, Our So-Called Foreign Policy, Russia, Soviet Union, spheres of influence, Syria, terrorism, Trump, Turkey, Ukraine, Vietnam, World War II, Yalta

If you know more than a little something about contemporary American history, you’ve no doubt been struck (or you should be struck if you haven’t been already) by the close resemblance in one key respect between the firestorms around the two big foreign policy-related uproars of the day these days, and the big foreign policy uproar of the late 1940s and early 1950s: The cries of “Betrayal” and “Backstabbing!” generated by President Trump’s withdrawal of the small American troop deployment in Syria, and his lack of interest in keeping Ukraine fully independent of Russian designs, fully recall similar charges that followed Washington’s early Cold War acquiescence in the Soviet Union’s establishment of control over Eastern Europe.

And there’s a very good reason for the similarities among these over-the-top reactions in all three cases – today’s version of which is all too capable of pushing the nation into repeating catastrophic foreign policy mistakes. In all of them, a combination of immutable geography and irrefutable common sense has established ironclad limits on American power. In all of them, America’s existential security and prosperity rendered these limits entirely acceptable. And in all, crusading globalists have reacted not with gratitude for the nation’s favored circumstances, but with tantrums that have slandered any support for the prudence logically suggested by these circumstances as evidence of treason and/or degeneracy. It’s the policy equivalent of refusing to take “Yes” for an answer.  (See this 2018 article of mine for the fullest statement of these views.) 

The Cold War event mainly responsible for the McCarthyite claims of spies and traitors shot through the U.S. government was Yalta conference of 1945 held by U.S. President Franklin D. Roosevelt and his British and Soviet counterparts Winston S. Churchill and Josef V. Stalin,  At that late-World War II meeting in Crimea, FDR agreed to accept Moscow’s clam to the countries located between German and Soviet territory as a sphere of influence.

Roosevelt’s decision reflected his awareness that the enormous Red Army had planted stakes in Eastern Europe after having fought it way through the region on its way to Berlin, that it had no intention of leaving, and that dislodging these forces militarily at remotely acceptable cost was impossible. Interestingly, his successor Harry S Truman fully agreed, even though by the time he became President, the United States enjoyed a monopoly on nuclear weapons.

“Yalta,” however, became a synonym for treason for many Americans, and the next few years (including under the Democrats) became an time of loyalty oaths, persecution, and show trials, Although many of the charges that the U.S. government had become a nest of spies turned out to be true, “McCarthyism” nonetheless ruined numerous innocent lives as well, and for more than a decade stifled badly needed dissent within the national security bureaucracy.

But guess what? Despite Soviet domination of Eastern Europe, and the mass, multi-generation human tragedy that unfolded behind the Iron Curtain, the United States not only survived but generally prospered. Further, the serious problems it did experience had absolutely nothing to do with the fates of Poland, Czechoslovakia, Hungary, or even the former East Germany etc.

Self-interest and restraint in foreign policy go hand-in-hand just as neatly these days when it comes to Ukraine and Syria. As I’ve written, even more than Eastern Europe, Ukraine’s independence has never been considered a vital American interest because it’s never been a significant determinant of the nation’s safety or well-being; because it’s located even closer to the center of Russian military might than Eastern Europe; because as a result the United States is militarily incapable of mounting a sane challenge with conventional forces; and because on top of these assets, Moscow has long possessed nuclear forces that can obliterate the United States many times over.

As for Syria, Mr. Trump’s critics are caught in one or both intellectual time warps. The first has hurled them back to the era when the United States was thoroughly addicted to Middle East oil. However long it lasted, though, it’s now unmistakably over, thanks to the fossil fuels production revolution of the last decade or so.

It’s true that this oil still matters a great deal to Europe and East Asia, huge chunks of a global economy whose health still matters in turn to the United States (though less lately, since both regions seem chronically incapable of or unwilling to generate acceptable growth other than by amassing enormous – and unsustainable trade surpluses with America). But both regions are eminently capable of fielding the military forces needed to preserve the oil flow. P.S. So do the Middle East’s two biggest powers, Saudi Arabia and Iran. Their deadly struggle for geopolitical supremacy notwithstanding, both would collapse economically without the revenue brought in by their oil exports. Just ask Iran, which is being bankrupted by President Trump’s – unilateral – sanctions.

The second time warp has the foreign policy Never Trump-ers trapped in the early post-September 11 period, when the nation discovered its shocking vulnerability to Middle East-borne terrorism. Yet as I’ve repeatedly written, and experience can not have made clearer, the best way by far to protect the American homeland from this deadly threat is not continuing to chase jihadist groups around an uncontrollable region whose terminal dysfunction will keep them appearing and reconstituting, but securing America’s far more controllable borders.

Additionally, though less important, terrorist organizations like ISIS and Al Qaeda have been blessed with the unique gift of antagonizing every other significant actor in the Middle East, for either ethnic (Arab versus Persian versus Turk) or religious (Sunni versus Shia Muslims) reasons. And the Russians, who are now supposedly the new kingpins in the Middle East, have no interest in seeing a serious jihadist revival on their borders. So an American exit from the region will leave it full of countries with every reason to sit on Islamic lunatics, not to mention rife with their own mutual antagonisms and historic rivalries. A chaotic balance of power to be sure, but an entirely durable one. (These arguments have just been made powerfully here.)

During the Cold War, it took debacle in Vietnam, with all the devastation it brought to America’s economy, society, and domestic and national security institutions (some of which still haven’t fully recovered), to teach globalists and the public they led, that geography and common sense mustn’t be completely ignored. Let’s all hope that their America First-oriented opponents, including a critical mass of the body politic, can keep them away from the levers of power before they produce a similar disaster.