Tuesday, May 30, 2017
A Battle Lost Before It Has Begun
Picture a cat cornered, the extreme reaction, or the more moderate response of a frustrated group, bored with trying to accommodate a disruptive outsider, eventually realizing that they simply are going to have to isolate and ignore that which they can neither control nor mollify. Donald Trump believes he can bring the rest of the world to heel through bilateral – “me, the Art of the Deal American superstar one-on-one with you, the smaller and less significant world leader – negotiations, where he can pick them off, one-by-one. Unfortunately for the under-prepared Donald Trump, (a) globalization is bigger than that and (b) the world does not seem to be willing to play the Donald’s game.
Take for example on Germany’s “bad, very bad” trade imbalance (Trump’s own words) with the United States. Trump expects to force Germany into one of those bilateral trade agreements under the threat of new tariffs directed at German imports into the United States. Unfortunately for Mr. Trump, Germany cannot negotiate trade agreements on its own. It is legally unable to act on trade except as part of the European Union, and a tariff on Germany evokes a total EU retaliation against the United States. Not to mention Germany’s disgust otherwise with Donald Trump and his new “America First” agenda, a policy they appear deeply committed to oppose to the extent of any impact on them.
“[German Chancellor Angela] Merkel did not mention Trump by name. But in remarks earlier in the weekend, before leaving Sicily, she told reporters that the discussion with him on climate change, in particular, had been ‘extremely difficult, indeed unsatisfying. It’s a situation where there are six countries lined up against one.’… [Merkel,] the leader of Europe’s most powerful nation suggested the U.S. was no longer a reliable ally.
“‘The era in which we could rely completely on others is gone, at least partially,’ Germany’s Chancellor Angela Merkel said during a campaign speech in Munich. ‘I have experienced that over the last several days… ‘It is now time that we really take our own fate into our own hands,’ she added… ‘Naturally, we’ll maintain our friendship with the United States … wherever possible,’ Merkel said. ‘But we have to realize that we Europeans are going to have to fight on our own behalf.’
“Although Trump touted ‘big results’ in a tweet Sunday [5/28] about his European trip, Merkel’s comments were a potentially far-reaching negative assessment of his meetings with European Union officials and NATO heads of state in Brussels and the leaders of major industrialized nations at the Group of 7 summit in Sicily, Italy.” Los Angeles Times, May 29th. This is Angela Merkel being polite in public statements. In private, not so much, and you can pretty clearly see where this is heading.
Indeed, the very cornerstone of Donald Trump’s going-forward worldwide trade policy is to side-step negotiations with groups of treaty-linked nations and force them, one-by-one, into direct treaty negotiations with the U.S. That approach may have borne fruit in his deal with powerful China, but increasingly, Donald Trump is finding few members of major trade groups prepared to break ranks and deal signally with the U.S. Certainly not Germany or any other member of the EU.
“Trump argues that the U.S. has greater leverage bargaining with individual countries, reasoning that America’s large market means it has more to offer and that virtually every country is running a trade surplus with the U.S… But the bilateral path is a nonstarter in Germany’s case. And it won’t be much easier elsewhere.
“Since Trump formally withdrew from the Trans-Pacific Partnership, fulfilling a campaign promise on his first day in office, not one of the other 11 Trans-Pacific countries has come forward to express a desire for an individual deal with the U.S.
“Instead, Japan, Australia and the others are trying to push through the Pacific Rim free-trade agreement without the U.S. Their hope is that they can salvage the hard-fought pact and that America, which would be left out of tariff savings and other benefits, would feel the need to sign back on…
“There’s little chance Trump will reverse course, but the reluctance of nations to negotiate with the U.S. alone points to the difficulties ahead for the president’s economic agenda and his goal to forge better trade deals, which he sees as key to expanding the economy and creating higher-paying jobs.
“The reluctance was evident at last weekend’s gathering [5/20-21] of Asia-Pacific economies in Hanoi, where the U.S. Chamber of Commerce met with trade officials from about half of the 21 economies represented… ‘I didn’t see a lot of countries lining up or raising their hands to volunteer to do bilaterals with the U.S.,’ said Tami Overby, the chamber’s senior vice president for Asia… Overby said other countries will be closely watching how the Trump administration proceeds in renegotiating the North American Free Trade Agreement. Those negotiations could begin as soon as mid-August.
“Trump’s chief trade negotiator, Robert Lighthizer, has said he expects much of the NAFTA talks with Canada and Mexico to be two-sided, and his statement at the Hanoi meeting reaffirmed ‘the president’s strong commitment to promoting bilateral free and fair trade.’… Trump’s preference for bilateral talks repudiates at least part of the post-World War II economic order established under the U.S. leadership. That order includes several multi-nation institutions, including the World Trade Organization, an adjudicating body with more than 160 countries as members.
“The Trump administration has been sharply critical of the WTO as it seeks to advance the president’s America First move away from globalism… Former U.S. trade officials from both parties agree that an exclusive focus on bilateral negotiations would be a mistake. It’s true that America’s market size and scope make it highly attractive to other economies, thereby giving the U.S. some clout in the bargaining room. And multinational negotiations do tend to be more complex and time-consuming.
“But experienced trade negotiators say that there is no inherent advantage in taking a strictly bilateral approach, and that two-way negotiations could create what Kantor calls a ‘spaghetti bowl of agreements,’ a mishmash of trade relationships that don’t align with each other and are difficult to manage.
“Globalization and advances in commerce and shipping have made it easier for businesses to quickly divert trade even as many goods have become fungible. A U.S. deal with any single country, for instance, would not be enough to solve the vexing problem of cheaper foreign steel and steel products, which has troubled American industry. The steel problem involves many countries and reflects a global glut of supply, thanks mostly to China’s heavy production.
“To take another example, a U.S. trade deal with China could include a reduction of shipments of car tires to American shores. But that would probably just prompt U.S. buyers to shift to comparably cheap tires from Thailand and other low-cost producers. That’s exactly what happened when Washington slapped tariffs on Chinese tire imports: Neither the domestic market share nor employment in tire manufacturing went up.” LA Times.
Think we will remain competitive? Picture a United States with continued budget cuts to education, a decrease in the availability to student loans, struggling with healthcare issues, facing massive federal budget cuts to job-creating scientific research… and straining to find even a few countries in the world ready to redefine their U.S. trade agreements by leaving the power of their international trade alliances to go it alone with Donald Trump and his woefully-transparent “America first” agenda.
And Putin is loving every minute of Donald Trump’s slow and consistent efforts to alienate his European “allies,” if not most of the rest of the world under this implementation of “America first.” As Europe turns away from the United States, Russia is leaning in. Take this little excerpt from the May 29th New York Times as a sample of what is to come, even as Russia is meddling in local elections: “All the while, Russia is assiduously courting Italy, a country that once had the largest Communist party outside the Soviet bloc and that many analysts consider the soft underbelly of the European Union… In Rome, Mr. Trump left behind an embassy without an ambassador, and forfeited a geopolitical playing field that Moscow’s ambassador in Rome, Sergey Razov, is exploiting…
“The effects of Russian attempts to influence Italy can already be seen. Long shaky, Italian politicians across the spectrum, ever mindful of business ties and energy deals, are wobbling more than ever on the hard line the European Union has taken toward Moscow since its land grab in Ukraine in 2014.
“The enforcer of that tough-minded approach has been Chancellor Angela Merkel of Germany, who has acted as Europe’s main liaison with Russia. But the erosion of her relationship with Mr. Putin over Russia’s meddling in Ukraine has created a breach that many in Italy hope their country will step into.
“Italy’s many Russia enthusiasts are heartened by the recent visit of [Italian] Prime Minister Gentiloni [to Moscow]. His predecessor, Mr. Renzi, visited Mr. Putin at the St. Petersburg International Economic Forum last year and said he opposed the ‘automatic’ renewal of sanctions on Russia.”
Europeans seem to find Putin less objectionable than Donald Trump, who has to have had the most disastrous trip to Europe of any recent American president. Saying it was a “home run,” Donald, doesn’t actually make it one. Bi-lateral trade negotiations? There may be a few countries stupid or powerful enough to walk that line, but for the most part, this vector is dead on arrival. The biggest loser: the American people.
I’m Peter Dekom, and insert an awkward Donald Trump “international leader” handshake here.