Saturday, January 21, 2017

Trick or Treaty

Funny thing about government: it isn’t supposed to be a “for profit” enterprise. It runs off taxes, fees, government assessments and penalties. What government is supposed to do is benefit our society as a whole, perhaps helping one segment at a time in a non-discriminatory manner. Simply, when working properly, government should keep its citizens safe and able to maximize their ability to live and make a living. And so, the metrics of a successful government are not susceptible to business-world standards. The “cost-benefit analysis” cannot measure the benefits in simple hard dollar terms.
But since we are or become how we measure ourselves, it becomes critical to look at exactly what benefits we extract from the world beyond our borders through our formalized international agreements. Not getting invaded or blown up is hard to quantify, although we can look at military costs against our military successes to track how well we are doing our jobs. So perhaps attempts to figure out our “internal rate of return” on international commitments might not be the most effective metric.
What exactly is it worth that during the eight years of the Obama administration that there have been zero large-scale attacks on our mainland by terrorists. Lone players (or very small groups) using small-radius bombs, guns and trucks have inflicted casualties for sure, but we have more U.S.-based crazies killing and maiming by far than these random and occasional “terrorist” attacks. We also have an economy – with winners and losers as has always been the case – that is intimately linked to foreign markets, where we buy well-priced goods and services and reciprocate by creating trade advantages for American companies.
But there’s a new sheriff in town, one with a seeming obsession with applying business metrics to governmental functions. Donald Trump has discounted our trade agreements and denigrated too many of our mutual protection treaties and associations, most recently questioning why we even have a North Atlantic Treaty Organization for mutual defense. His rather blatant cozying up to Putin’s Russia and statements that Russia is an appropriate ally in our battle against global terrorism are troublesome. After all, Putin’s forces have invaded Georgia and eastern Ukraine, not to mention his annexation of the Ukrainian territory (in abrogation of a treaty Russia had with Ukraine) of Crimea. Putin’s fondest wishes are to end NATO (or contain its reach) and to place a solid wedge between the United States and its European allies (the bulk of our NATO partners).
We have over 30 major mutual defense and trade treaties around the world. According to the January 16th New York Times, while we have over 210,000 troops stationed around the world, only about 36,000 are in the active combat theater in the Middle East. The balance of our forces is roughly equally divided between Europe and Asia. Our largest trading partner – the European Union – accounts for about $699 billion of economic activity. China is a close second with $599 billion and Canada not too far behind that with $577 billion. Treaties drive all of this.

The New York Times looked at the quid pro quo in all of our major trading/mutual defense relationship to see the plusses and the minuses. I will only reproduce their analysis for three regions where we have strong mutual defense treaties and solid trade agreements:

What the United States puts in
Promise to defend NATO states
Deterrent against Russia
Sixth Fleet based in Naples, Italy
Military training and exercises
What the United States gets back
NATO states promise to defend the United States
$699 billion in trade with the European Union, America’s largest trade partner
Bases near Russia, the Middle East and Africa
Counterterrorism and intelligence sharing
Allies cover 34 percent of the United States’ basing costs, worth $2.5 billion annually

Northeast Asia (Japan and S. Korea)

What the United States puts in
Promise to defend South Korea and Japan
28,500 military personnel in South Korea
45,000 military personnel in Japan
Seventh Fleet based in Yokosuka, Japan
Military training and exercises
What the United States gets back
Bases near China and North Korea, and allies against them
$194 billion in trade with Japan, the fifth-largest American trading partner
$115 billion in trade with South Korea, the sixth-largest American trading partner
Japan covers 75 percent of the United States’ basing costs there, worth $4.4 billion annually
South Korea covers 40 percent of the United States’ basing costs there, worth $843 million annually

Southeast Asia

Thirty percent of global maritime trade runs through the South China Sea. The United States is competing with China to lead in that fast-growing market.
What the United States puts in
→Promise to defend the Philippines and Australia
→Military personnel fluctuate up to a few thousand
→Military exercises in Thailand with several regional states
→Freedom-of-movement exercises in the South China Sea
What the United States gets back
→Basing rights in Singapore
→Region friendlier to the United States and better able to unify against China
→Protect South China Sea trade worth $5.3 trillion, about 30 percent of global maritime trade. Includes $1.2 trillion in trade with the United States
→Philippines and Australia promise to defend the United States

In short, what we get is a lot of stability with those with whom we trade. But for some NATO member states, notably the Baltic nations (Lithuania, Estonia and Latvia), they fear Russian invasion, notwithstanding pledges from Vladimir Putin that he has no intentions of invading anyone (a pretty empty promise given his breach of an actual treaty with Ukraine over Crimea). In his waning days as President, Barack Obama ordered America forces to be deployed closer to the Russian border. “Some 4,000 US soldiers have been deployed [into Poland] as part of troop rotations to Europe that the Pentagon has said are intended to bolster ties with NATO allies and send a clear message to Russia.”, January 14th.

On the trade front, we are about to cede the advantage to China. Experts see the risks rather clearly. In mid-January, “[U.S. Ambassador to China, Max] Baucus took the unusual step, with five other American ambassadors in the Asia-Pacific region, of sending an open letter to Congress asking its members to support the [TPP] pact in an effort to cement a leadership position for the United States in regional trade and not yield that role to China, which has the second-biggest economy in the world.

“In their letter, the ambassadors warn that ‘walking away from TPP may be seen by future generations as the moment America chose to cede leadership to others in this part of the world and accept a diminished role.’” New York Times, January 17th.  

However, as Donald Trump signaled an end to any hope of any US involvement in the Trans-Pacific Partnership, China rapidly stepped in to begin to create its own Asian regional alliance (called Regional Comprehensive Economic Partnership) intended to usurp America’s dominance in Asian trade… an alliance that specifically excludes the United States. China seems downright giddy over Donald Trump’s de-globalization platform, apparently ceding the top spot to China. “In a world troubled by grave uncertainties over the basics governing trade, security and the mission to limit climate change, President Xi Jinping of China on Tuesday [1/17] portrayed his nation as a responsible global citizen dedicated to furthering international integration…
“His message, delivered here in the Swiss Alps at the annual gathering of the World Economic Forum [in Davos], appeared meticulously timed to the tumultuous moment at hand. He was speaking three days before Donald J. Trump was to be inaugurated president of the United States, raising the prospect of a trade war with China, and on the same day that Prime Minister Theresa May of Britain outlined plans to pursue her country’s departure from the European Union.
“The Chinese leader used his moment to make an expansive case for globalization as a source of prosperity. He never mentioned Mr. Trump by name, nor did he even make reference to the fact that the White House is about to gain a new occupant. Yet his speech resonated as a rebuke of the trajectory that the president-elect has promised — not least, his repeated threat of steep tariffs on Chinese goods as a response to what he portrays as predatory trade practices.
“‘Pursuing protectionism is just like locking oneself in a dark room,’ the Chinese president declared. ‘While wind and rain may be kept outside, so are light and air. No one will emerge as a winner in a trade war.’” New York Times, January 17th.
If we don’t move soon, China simply moves up as we move down. There are going to be a lot of American business interests, from farmers to sophisticated business systems suppliers, who are going to lose a lot of money in this redefined anti-globalist world. Progress does not reward those who make big mistakes.

I’m Peter Dekom, and we have benefitted greatly from those trade and military alliances we have built over the years… which Mr. Trump seeks to cancel or force to accommodate us (if he can… a huge if).

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