Thursday, December 15, 2016

Business Bets and Naiveté

One of the most fascinating assumptions in the election of Donald Trump, and his selection of corporate/Wall Street big wigs as some of his most senior advisors, is that business moguls  are always much more competent negotiators than governmental bureaucrats or even senior government leaders. “Draining the swamp,” apparently means getting those business big wigs into the mix, firing the experienced government experts, and sending out “tough guy” messages that cut to the quick of things “sacred” to major players “on the other side.” Twitter is now a diplomatic channel, and Trump is all over China like a cheap suit in the rain.
In recent Twitter-rants, he has accused the People’s Republic of currency manipulation, stealing American jobs with one-way trade benefits and taking unlawful military positions in the South China Sea (their artificial island in the Spratly chain). Whether there is truth or not to the charges, playing out negotiations in the press to force China to shudder and then cave is a novel approach to diplomacy.
His most recent rant, aimed at challenging the very basis for Sino-American relations implemented by GOP President Richard Nixon – the “one China policy” that recognizes the PRC’s claim that Taiwan is part and parcel of greater China (the PRC gained its UN Security Council seat from this position recognized now through most of the world) – was not well-received by Beijing, which issued a stern rebuke. Trump simply told the world he just might change the American position on this subject and support Taiwan as a fully separate and independent nation. The PRC us not going down lightly on this subject.
His December 9th telephone call with the Taiwanese president, which seriously irked the PRC, and his subsequent Tweets provoked a particularly strong response from China, a nation that does “strongman” very well, practiced for well over half a century. [China’s] Foreign Ministry warned that any damage to that [one China] principle could rupture diplomatic ties. State media called him ‘as ignorant as a child,’ and Chinese social media users upbraided the future leader for his comments.” Los Angeles Times, December 13th. Oooooh!
China has more than a few bargaining chips it can play in the event of a break in diplomatic relations. Here’s just one: “According to the Treasury, the largest foreign holder of U.S. debt is China, which owns more than $1.24 trillion in bills, notes, and bonds or about 30% of the over $4 trillion in Treasury bills, notes, and bonds held by foreign countries.”, September 5thThink what dumping all that debt could do to the value of the dollar.
The world was comfortable with the ambiguity of an official People’s Republic of China and an unofficial Taiwan (Republic of China), a contradiction that allowed both nations to progress peacefully, even building strong economic ties. Perhaps figuring that such an outrageous change in US policy would get Beijing crawling to the bargaining table, eager to make trade concession in exchange for Trump’s re-acceptance of that “one China” policy, just might be a slap in the fact to President Xi Jinping so strong that he would be forced to stand firm and resist any “give” to Mr. Trump. It just might be an invitation to Mr. Xi to teach The Donald a big lesson from the get-go. To take him down hard, as the Chinese press clearly seems to be threatening could happen (and their press is the government!). You see, Mr. Trump has never really done that well in his relationship with the Chinese, even Western-trained businessmen in Hong Kong.
About a quarter of a century ago, stumbling real estate developer, Donald Trump, was about to default on a sizeable parcel of very desirable Manhattan real estate. So he hit the trail looking for money. “It was Hong Kong Chinese investors who bailed him out when his Riverside South project on Manhattan’s West Side ran into trouble in the early 1990s… Trump came to Hong Kong looking for deep-pocketed investors. He found them, in the form of a group led by Henry Cheng, of the New World group. Ed Gargan profiled Henry Cheng and his family at the time of the deal. Cheng is one of Hong Kong’s leading developers and the second-generation head of one of Hong Kong’s wealthiest families.”, September 11, 2015.
“To strike the deal, Mr. Trump had to attend elaborate dinner parties featuring foreign foods he did not want to eat. He delayed the closing because of Chinese spiritual beliefs and hunted around New York for a ‘feng shui’ master to help with the building décor, instead of indulging his tastes for marble and gold, according to former associates of Mr. Trump who were involved in the deal.
“But when his Hong Kong partners sold the property without his support, Mr. Trump waged a bitter, long-shot legal battle against them. And far from winning his share of the Bank of America building, according to court documents, he had to settle for it after losing in court. In the end, Mr. Trump’s alliance and eventual rivalry with some of Hong Kong’s richest men proved to be a tale of Mr. Trump at the extremes. It showcased his unflagging confidence in his ability to turn a bad financial situation around. But it also underscored his willingness to destroy a fruitful relationship with aggressive litigation.
“Their partnership began in 1994, after the collapse of the real estate market left Mr. Trump deeply in debt. He could not afford to make the bank payments on a 77-acre swath of land near Lincoln Center known as Riverside South, let alone to develop the property…
“Nonetheless, Mr. Trump’s litigation over Riverside South dragged on for at least four years. He forced his partners to produce more than 166,000 pages of documents in court and accused them of various transgressions, including fraud and tax evasion…After the lawsuit, the Hong Kong partners moved swiftly to cut all ties to Mr. Trump. Mr. Lo sold his shares in the partnership to the Cheng family, which sold to Vornado Realty Trust, now the owner of a 70 percent interest in the Bank of America buildings.
“But in the interview, Mr. Trump sounded almost wistful about his former partners, marveling at the money they had made together and at the fact that they no longer spoke. He acknowledged that his former partners might have gotten the best deal possible on Riverside South, after all.” New York Times, May 31st. Seems that The Donald doesn’t do “Chinese” very well, never has.
He doesn’t seem to do international that well either, across the board, even if you ignore his colossal bromance with hacker-funder, Vladimir Putin, that is making even senior members of the Republican delegation to Congress squirm very uncomfortably. Trump’s “swamp-draining” message is severely contradicted by his cabinet appointments, most recently Putin buddy, ExxonMobile CEO, Rex Tillerson, as our Secretary of State. Tillerson even negotiated a major agreement with Russian oil giant, Rosneft, giving that company access to Arctic oil… for which Putin awarded Tillerson Russia's prestigious Order of Friendship in 2013.
And remember, cozying up to Russia, especially against ISIS, means accepting Russia’s ultra-close relationship with Iran and the Syrian Assad regime. But Trump is sending a conflicting message: against the Iran nuclear deal but for better relations with Russia? Pick one, for they are mutually exclusive. As Congress votes to continue sanctions against Iran. Ah… Oh, one more thing about Iran.
Looking at Trump’s campaign pledge to create lots of new manufacturing jobs here in the US, it just might not blend well with his equally vituperative desire to kill the nuclear accord with Iran (which, by the way, was a multiparty UN agreement in which the United States was just one player). Israel’s PM, Benjamin Netanyahu, is drooling at Trump’s willingness to oppose Iran’s military ambitions.
Try this one on for size, global fans, a massive domestic job creation effort that would die fast should the United States unilaterally abrogate its acceptance of the Iran nuclear accord and proceed to amp-up economic sanctions against that nation: “Boeing announced a $16.6 billion deal on Sunday [12/11] to sell [80 passenger jet] planes to Iran, which for decades had been economically blacklisted by the United States. The company instead chose to emphasize how many jobs the sale would support.
“‘Today’s agreement [12/11] will support tens of thousands of U.S. jobs’ associated with the production and delivery of the planes, Boeing said in its news release… The intended recipient of Boeing’s message clearly seemed to be President-elect Donald J. Trump.
“Its carefully worded statement is emblematic of the tightrope that America’s biggest exporters are walking amid his threats to shake up trade policy and undo the Obama administration’s nuclear accord with Iran. That agreement lifted the American sanctions on Iran, making Boeing’s jet deal possible.
“Mr. Trump has talked about imposing tariffs on imports from China and on American companies that move jobs to Mexico and other countries. But he has not said much about how some of America’s major manufacturing companies, like Boeing and General Electric, and their workers could be hurt if other countries retaliated for the tariffs or if existing trade agreements were ripped up.
“Boeing officials, already dismayed by Mr. Trump’s attack last week over the costs of a new Air Force One, acknowledged that the Iran jet deal still faced contingencies — a polite way of saying they were deeply worried about whether Mr. Trump and the Republican-led Congress would support it.
“Beyond that deal, Boeing and other companies that export jet engines, high-tech products or heavy equipment — and supply some of the highest-paying manufacturing jobs — are also concerned that they could become easy targets if Mr. Trump started a trade war.
“‘You slap a 45 percent tariff on Chinese imports, and the Chinese suddenly acquire a fondness for Airbus jets instead of Boeing’s,’ Richard L. Aboulafia, an aerospace analyst, said, referring to Boeing’s European rival.
“Trying to protect some jobs could put others at risk, he said. ‘And whether it’s trade with Iran or China, there’s an emerging pattern of the United States turning its economic back to the rest of the world, and that could be greatly damaging to the major export players like Boeing,’ he added.
“Boeing, based in Chicago, is the nation’s top exporter in terms of the value of the goods it sells, which include midsize and giant airliners that are increasingly shipped to China and other parts of Asia, including the Middle East — areas with the fastest economic growth. Sales of its jets have long been a part of American diplomacy, with foreign buyers having to decide whether to deal with Boeing from America or Airbus from Europe. President Obama has said that he promotes Boeing’s planes on his travels.
“Now, Boeing and other export-driven firms, while fearful of Mr. Trump’s rhetoric, are hoping to make the case that they are exactly the types of companies that Mr. Trump should embrace.
“Boeing, which employs about 150,000 people, makes most of its parts in the United States and exports most of its products, bringing in cash from overseas. It has also increased production at its enormous plants in Washington State and South Carolina.
“But industry analysts say a 12-year boom in airliner sales seems to be peaking, and orders for larger planes are slowing. That means Boeing could use the government’s help more than ever to keep pace with Airbus, its only major competitor.” New York Times, December 11th.
Braggadocio and playing Mister-Big-Man is a dangerous pastime. Not only does the perpetrator of such “King-of-the-Hill” strategies more clearly define our country and himself as a global target, but global sympathies and a willingness to help with our other international agendas tend to vaporize for a bull-in-the-China-shop (I know, I know) actions of a strongman in charge of a state increasingly viewed as going rogue.
Mr. Trump appears clumsy and out of his league with his struggling Twitter-dominated foreign policy campaign. And if he truly intends to put “America first,” he sure has a funny way of showing it.
I’m Peter Dekom, and when Trump tweets such policies, I wish he’d explain what’s really in it for America, how exactly do we benefit from forcing others to dig in their heels and slap back… hard.

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