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Donald Trump and the Future of the International Liberal Order

President Donald Trump and German Chancellor Angela Merkel hold a joint press conference in the East Room of the White House, March 17, 2017. (Saul Loeb/Getty Images)

President Donald Trump and German Chancellor Angela Merkel hold a joint press conference in the East Room of the White House, March 17, 2017.
(Saul Loeb/Getty Images)

Since Donald Trump unexpectedly won the presidency in November, his foreign policy pronouncements have received considerable scrutiny from those anxious to elicit from them how potentially detrimental his presidency is liable to be to the so-called liberal international order. By this expression is meant that web of alliances and international arrangements and organizations that the United States has been instrumental in helping to create and support since 1945 to promote global peace and prosperity. Most notable among the elements of this global order are such bodies as the United Nations, NATO and the European Union, as well as that medley of treaties and entities created to foster international trade and commerce such as NAFTA and the WTO.

Among scrutineers of Trump’s pronouncements, the consensus is that his views augur badly for the future of this order. Adding considerable weight to this elite chorus is the survey published just after Trump’s victory by the pair of historians of international relations Charlie Laderman and Brendan Simms of Great Britain.

They conclude that the liberal international order enjoys a very uncertain and insecure future under the current administration. They write:

Mr Trump represents a fundamental departure . . . from the entire bipartisan consensus that has existed in US foreign policy since the end of the Second World War . . . In short, by contrast with every single Democratic and Republican President since the Second World War, including George W. Bush, Trump rejects the liberal international order.

Essentially, what Laderman and Simms seek to establish is that, since as early as 1980 when Donald Trump made his first public comments about America’s foreign policy, he has consistently argued that weak political leadership since the end of World War II has allowed his country to become economically and militarily exploited by supposed allies. America has also suffered, Trump maintains, deindustrialization through the economic malfeasance of such trading partners as China and Mexico. Further military embarrassment and humiliation has been dealt to America by minor hostile powers like Iran, not to mention such rogue elements as Al Qaeda and ISIS.

What America needs to do, Trump claims, is make itself great again by divesting itself of uneconomic and unnecessary obligations and alliances – unnecessary and uneconomic, that is, according to a very narrowly conceived construal of national interest.

Here are some vignettes of Trump’s that Simms and Laderman cite to illustrate for how long and consistently he has been lamenting about what has been going wrong for America under its poor leadership:

“That they [the Iranian Revolutionary Guard] hold our hostages is just absolutely and totally ridiculous. That this country sits back and allows a country such as Iran to hold our hostages, to my way of thinking, is a horror.” (1980)

“For decades, Japan and other nations have been taking advantage of the United States. . . . The world is laughing at America’s politicians as we protect ships we don’t own, carrying oil we don’t need, destined for allies who won’t help . . . Make Japan, Saudi Arabia and others pay for the protection we extend as allies.” (1987)

“There are many other countries . . . taking tremendous advantage [of us] . . . including NATO.” (1987)

“Everything’s a compromise today. We don’t want to anger Japan . . . They’re laughing at us! Look at the way we opened up the Persian Gulf for Japan to get oil for Saudi Arabia and Kuwait to make money. Why aren’t they paying us for this?” (1989)

“The United States has become a whipping post for the rest of the world . . . I have said on numerous occasions that countries like China, like India, like South Korea, Mexico and the OPEC nations view our leaders as weak and ineffective and have reportedly taken advantage to the tune of hundreds of billions of dollars a year… I love open markets, but not when China is manipulating the currency.” (2011)

“You have to take jobs away from other countries, China, India, all of those countries; they’re taking our jobs . . . We’ve made it so good for Mexico; what they’re doing to us is unbelievable.” (2013)

Despite disavowing any attempt to judge the “truth content” of Trump’s campaign statements, in actuality our two authors deliver a swinging indictment of them. Thus, for example, regarding his reiterated contention that China has long been engaged in currency manipulation and sharp practice at America’s expense, they observe: “The charge . . . might have been true ten years ago but there is not much justice to it today.”

Our authors then point out that, were Trump, as he has threatened, to impose a heavy tariff on imports from China, this might prompt “retaliatory measures in the South China Sea” thereby risking military confrontation with China.

Their greatest misgivings about Trump’s likely foreign policy arise from his threat to withdraw support for America’s NATO partners, especially when combined with his longstanding, undisguised admiration for Russia’s President Vladimir Putin. Laderman and Simms argue that Putin might feel emboldened by NATO’s implosion to reclaim as a part of Russia’s sphere of influence those former Warsaw Pact countries that have sought, since the break-up of the Soviet Union, to align themselves with the EU and NATO. They write:

By throwing doubt on America’s commitment to upholding the NATO charter, he risks placing Poland, the Baltic and the Black Sea states in the firing line . . . It is one of the many failings of his foreign policy . . . Europe will effectively be on its own against Russia . . . President Putin may be emboldened to take risks, in Ukraine, in Eastern and Northern Europe and more generally.

The suggestion that a U.S.-underwritten NATO alliance is needed by the Baltic and other former Warsaw Pact states like Poland to protect them from Russian aggression rests on flimsier evidence than our authors realize. What looks like Russian aggression can equally seem no more from Russia’s point of view than justified self-defense against Western expansionism. After all, why should not the stationing of American and other NATO forces on its borders be considered no less unjustifiably provocative and aggressive than was the Soviet Union’s stationing of nuclear missiles in Cuba?

While doubtless there is much about which to be concerned vis-à-vis the Trump presidency, his being overly favorably disposed towards Russia and Putin remains a concern that to date seems without warrant.

President Trump is by no means the first major American policymaker to have vehemently criticized the relevance of NATO in upholding liberal political institutions and states. That distinction must surely go to the man who was arguably the chief architect of the entire postwar liberal international order, including and especially the creation of NATO. That man is George F. Kennan, who first articulated in his famous Long Telegram of 1946 the need for a policy of containment of the Soviet Union. The essay was later anonymously republished as “The Sources of Soviet Conduct” in the journal Foreign Policy in 1947, where it had influence on the creation not only of NATO but what has become the European Union.

While Kennan was persuaded of the need for NATO to contain the Soviet Union, after the collapse of the latter in 1990, he became equally as unpersuaded of the need for NATO to incorporate the former Warsaw Pact countries. He regarded this eastward expansion to the borders of Russia as needlessly provocative and potentially catastrophic to world peace. In an interview with Kennan in 1998, Thomas Friedman of the New York Times quoted the 94-year-old former diplomat on the entrance into NATO of Poland, Hungary and the Czech Republic:

 I think it is the beginning of a new cold war . . . I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. . . . Don’t people understand? Our differences in the Cold War were with the Soviet Communist regime. And now we are turning our backs on the very people who mounted the greatest bloodless revolution in history to remove that Soviet regime . . . Of course, there is going to be a bad reaction from Russia, and then [the NATO expanders] will say that we always told you that is how the Russians are—but this is just wrong.

Kennan concluded the interview with one final note: “’This has been my life, and it pains me to see it so screwed up in the end.”

Reader Discussion

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on April 05, 2017 at 13:51:30 pm

1) "Most notable among the elements of this global order are such bodies as the United Nations, NATO and the European Union, as well as that medley of treaties and entities created to foster international trade and commerce such as NAFTA and the WTO.

Among scrutineers of Trump’s pronouncements, the consensus is that his views augur badly for the future of this order."

Form does not substitute for (proper) function!

If one wishes to understand the demise (past and future) of these Liberal International institutions AND the geopolitical alignments of the post-War era, look only to the last eight years of inept, ideologically driven diplomacy by which all the strategic / political / military gains that accrued to the United States (often at the cost of much bloodshed) were squandered away in pursuit of some utopian internationalist vision heralded, of course, by catchwords of such uncommon profundity as "Lead from Behind", "Responsibility to Protect" and other inanities.

2) One thing The Trumpster is missing in all this talk of lost jobs and deindustrialization (all of which are true and scandalous) is the impact of a decision made by both governmental and business types to "financialize" the American economy..No longer would we seek to dominate via industrial might / prowess / capacity; rather, we would dominate via our "financial acumen / resources." Outsourcing of jobs was simply a subset of this decision.

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gabe
on April 06, 2017 at 09:06:17 am

It should come as no surprise that NATO members would propose that the US do the "heavy lifting" for them. After all, we demonstrated that tendency when we initiated the Marshall Plan after WW 11. The attempt to gain access to the treasury is leigion.

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Phred
on April 06, 2017 at 10:05:42 am
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Phred
on April 06, 2017 at 14:38:11 pm

1. Yes, it’s possible to over-state Trump’s threat to the prevailing international liberal order. But nothing in this essay contradicts the thesis that Trump’s views, if sincere, pose the greatest threat to that order since 1980.

2. Ethics is the practice of upholding rules, even if you might gain some advantage by breaking them, because you know that the rules exist for the maintenance of a system, and that you benefit from the maintenance of the system more than you would benefit from a collapse of the system.

Trump’s comments express the view that the “we” would benefit more from flouting the rules of the international liberal order than “we” benefit from that order.

To some extent, this is an empirical question, albeit one that requires relying on evaluating the existing situation against hypothetical alternatives. How much do “we” benefit from the existing order? What would be “our” circumstances under some different order?

But to another extent, this view rests on the question, who are “we”—as opposed to “they”? The international liberal order rests in theory on an understanding of welfare economics that seeks to maximize social good, whether measured by Pareto or Kaldor–Hicks efficiency. These views seek to reflect all parties’ interests, while acknowledging that trade-offs will arise when choosing among policies. Trump, in contrast, exhibits a concern for “winning” on behalf of his side, and indifference or animus toward welfare of “others.” In Trump’s view, the US does not engage in trade negotiations with partners who arrive at agreements; rather, the US is victimized by others who are “literally raping us.”

3. In fairness, some people (R.R. Reno?) argue that the international liberal order fails in its professed goal of incorporating all concerns. Instead, the order reflects the concerns of all nations--but in practice, this means advancing the concerns of the elites of all nations, at the expense of the poor. And to rebel against this international liberal order, populists argue for their national leaders to become more overtly partisan on behalf of their own nation’s welfare, even at the expense of other nations.

My perspective: It may well be true that the international liberal order fails to adequately reflect the interests of the poor. So the goal should be to find mechanisms to advance those interests. But the populist demand that leaders become more overtly nationalistic cannot ultimately solve the problem for the world’s poor; it can only make a fight for resources more explicit. By definition, this approach cannot create more wealth; it can only reallocate the wealth. Every win much be accompanied by an equal loss by some other side—and, given the loss of international cooperation and trade, will generally be offset by a loss that exceeds the amount gained.

In short, even if Trump’s (or Reno’s) diagnosis is correct, the proffered remedy is poison.

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nobody.really
on April 07, 2017 at 11:28:59 am

" By definition, this approach cannot create more wealth; it can only reallocate the wealth. "

1) The conclusion does not necessarily follow from the premises.

2) As for reallocating wealth: a) all systems do that to some extent and b) the current International order is actually quite efficient at *reallocating* wealth to the elites. Recent reports indicate that this reallocation is on the order of $500 billion of gains to the elites.

3) There appears to be a recurring "anti-nationalist" thread in your argument and an assertion that *winning* by one side necessarily involves "loss" for the other side. First, it is (was) the nation state system that propelled Europe and the West to overcome the stagnation of the late middle ages / early pre-industrial systems; it also provided a certain cohesiveness to the various "tribes" of Europe and actually allowed for more efficient system of international trade. Perfect - Nope! It can be argued that it is the DECLINE of the nation-state system that has allowed for the loss of both identity and economic security for many of the "poor" that populate these nation-states. Second: Trade agreements / other international arrangements must or ought not to disadvantage one side EVEN if, and when, motivated by a desire to improve Pareto statistics. Yes, a case may be made, as after WWII, that it was advantageous to "build up" other economies in order to preserve a healthy nation-state system and / or to ward off an even more economically / politically repressive and unrewarding system such as Communism BUT: there does (and did) come a time when those "allowances" needed to be ended. The Trumpster may simply be arguing that it is time that those favorable allowances, those "wink and a nod" understandings made by our trade negotiators or regulators must come to an end. To my reading, The Trumpster is simply saying: Give us a fair trade agreement AND we will win. This does not require that the other side loses - only that the "virtue" posturing, the "world-welfare" spouting visionaries currently advancing such policies - take equal account of the effects on their own polities. Of course, this may be difficult as the *elites* may be required to give up some of the benefits that accrue to them under the current system of international trade / order. So, yes, there may indeed be a loser - I suspect that it may be someone other than you suppose.

And yep. trade agreements themselves will not erase the damage done over several decades as this nation knowingly and willingly abandoned its manufacturing / industrial base and transformed this into a "financial' economy. If tougher or *fairer* trade agreements eliminating loopholes and lax enforcement is required to rebuild a strong industrial base (i.e. one that sustains our military preparedness / prowess) and provides for greater economic security for the citizens of THIS nation-state, then so be it! If such agreements reduce the wealth accumulation of the elites, then so be it! If, as alleged, it slows the growth of other nations, then so be it! We are, after all, not talking about Smoot-Hawley tariffs but rather a certain reciprocity in trade - a certain fairness.

It is arguable that Fair(er) Trade will result in loss to our trading partners and / or a severe downturn in trade itself. For most of our history, we had fairly high barriers to imports AND we and our trading partners did quite well. The EU currently has some substantial barriers (both tariff and administrative) to trade - they appear to be doing well. Are we to continue to simply accept this as our people bear the brunt of it? Or are we to celebrate the benefits accruing to other nations as a result of this form of economic "affirmative action." Or ought we to secure "equal" trading rights for our own citizens?

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gabe
on April 08, 2017 at 13:12:23 pm

And for anyone interested in another take on the International Order, see this:

https://americanaffairsjournal.org/2017/02/the-new-shape-of-globalization/

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gabe
on April 08, 2017 at 13:15:16 pm

Oops, forgot the *sample* illustrating what "free trade" means to certain persons and against which The Trumpster rails:

"Xi’s approach starts with a state-controlled and censored Internet. It means banning companies that offer freedom of information, like Google and Facebook, from the Chinese market. It means strict controls on foreign investment in China while Chinese corporations go on shopping sprees in the rest of the world. It means that, in order to enter the Chinese market, foreign companies are required to invest in China, to export from China, and to transfer technology to China. It means that the exchange rate of the Chinese yuan is managed by the government, not freely determined by the currency markets like the euro and the U.S. dollar. It means investment subsidies for a broad range of key Chinese manufacturers and exporters. It means warnings of possible problems for Samsung’s business in China if the South Korean government obtains an American anti-missile defense system. In short, it means nationalistic mercantilism. This is what the masters of the universe in Davos were actually embracing.

But it is precisely this kind of mercantilism that the post–World War II founders of the global trading system had sought to avoid. It is the ongoing lack of success in the battle against mercantilism that has created the constant gap between the promises and the results produced by generations of American trade negotiators. And it was to respond to this gap that American voters just elected Donald Trump to the presidency.

Although none of these points were included in any of the pundits’ dispatches from Davos, historians looking back from the future might well identify this moment—when the world elite embraced Chinese-style mercantilism—as the moment when the era of the liberal free trade movement finally ended."

Let us drink to the end of the international Order!!!

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gabe
on April 09, 2017 at 01:00:07 am

Gabe, you understand that the Trans-Pacific Partnership was created to help various nations promote free trade outside of China's sphere of influence, right?

And the Trump nationalists have now squashed this deal, leaving all these Asian Pacific nations to deal with China instead of us, right?

The Foreign Affairs article addresses AT LENGTH what a terrible thing it would be to let China determine the terms for international trade--precisely the result we've now achieved. Thus, even if your arguments made sense, your policies are antithetical to your arguments.

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nobody.really
on April 09, 2017 at 01:04:14 am

The international liberal order rests in theory on an understanding of welfare economics that seeks to maximize social good, whether measured by Pareto or Kaldor–Hicks efficiency….

It may well be true that the international liberal order fails to adequately reflect the interests of the poor. So the goal should be to find mechanisms to advance those interests. But the populist demand that leaders become more overtly nationalistic cannot ultimately solve the problem for the world’s poor; it can only make a fight for resources more explicit. By definition, this approach cannot create more wealth; it can only reallocate the wealth.
The conclusion does not necessarily follow from the premises.

Both Pareto or Kaldor–Hicks efficiency involve adopting policies that optimize the use of resources. Pareto efficiency just focuses of optimizing some measure of welfare—for example, GDP—without regard to who gets what share. Kaldor-Hicks efficiency seeks to optimize welfare, but requires that people who lose get compensated by people who gain.

My point is that if we had cause to believe that promoting greater nationalism would create more wealth, then this strategy would already be incorporated into the Pareto efficient strategy, if not also the Kaldor-Hicks strategy.

3. In fairness, some people (R.R. Reno?) argue that the international liberal order fails in its professed goal of incorporating all concerns. Instead, the order reflects the concerns of all nations–but in practice, this means advancing the concerns of the elites of all nations, at the expense of the poor.

[T]he current International order is actually quite efficient at *reallocating* wealth to the elites. Recent reports indicate that this reallocation is on the order of $500 billion of gains to the elites.

Yeah. I just acknowledged that argument.

There appears to be a recurring “anti-nationalist” thread in your argument and an assertion that *winning* by one side necessarily involves “loss” for the other side.

Well … kinda.

Again, I argue that the international liberal order has been designed with the goal of pursuing Pareto or Kaldor–Hicks efficiency—that is, pursuing all the strategies that would yield net positive outcomes, where Peter and Paul both gain, or Peter’s gain is greater than Paul’s loss. By definition, if we reject this order, we’re pursuing some different strategy which is no longer pursuing all the net positive outcomes. The best we could hope for is a zero-sum outcome, where Peter’s gain equals Paul’s loss. But there’s lots of opportunities for net negative outcomes, where Peter’s gain is exceeded by Paul’s loss.

I don’t condemn nationalism as such. Rather, I praise the goal of Pareto and Kaldor-Hicks efficiency, the objective of the international liberal order. If we define “nationalism” to be a rejection of the international liberal order, then we define it as rejecting the goal of pursuing net positive outcomes. By definition, it’s pursuing some different outcomes.

Trade agreements / other international arrangements must or ought not to disadvantage one side EVEN if, and when, motivated by a desire to improve Pareto statistics.

On agreements: If we’re talking about AGREEMENTS, then we’re talking about circumstances when parties AGREE. Under what circumstances would parties agree to a treaty that they thought would disadvantage themselves? If you’re saying that you disapprove of people being compelled to enter into agreements under wrongful duress, I agree. But if you’re saying that parties should be able to evade their agreements if it turns out afterwards that the agreements did not produce all the benefits they had intended, then I disagree. I think parties should be able to make bets. At the end of every bet, one party wins and one party loses. You think such an arrangement is wrongful?

On arrangements other than agreements: There are advantages to pursuing arrangements whereby all parties win, and there are advantages in pursuing arrangements whereby not all parties win. When Britain ended slavery, it compensated slaveholders for their losses. When the US ended slavery, it did not compensate slaveholders. Some people preferred one approach; some another.

I’d simply observe that if you’re motivated by a desire to pursue Pareto efficiency, you’re not focusing on the welfare of any “side,” only the welfare of the whole. If you want to focus on ensuring that each losing party gets compensated for his losses, you’re talking about Kalder-Hicks efficiency.

trade agreements themselves will not erase the damage done over several decades as this nation knowingly and willingly abandoned its manufacturing / industrial base….

For the umpteenth time, THE US HAS VIRTUALLY NEVER PRODUCED MORE STUFF THAT IT DOES TODAY. The problem people point to is loss of industrial JOBS. But that’s not because the US doesn’t produce stuff; it’s because we’ve learned how to produce stuff with vastly less labor. The enemy you’re looking for is not globalization; it’s automation. Don’t shoot a Mexican, shoot a robot.

….a strong industrial base (i.e. one that sustains our military preparedness / prowess)….

Here are two lists of nations by military expenditure. The US outspends the next eight nations combined.

In short, I’m not following this argument.

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nobody.really
on April 09, 2017 at 10:56:04 am

Cupla thoughts:

1) How much we spend on defense is NOT the point. One must consider WHERE many (most) of the component elements of hardware (S/W?) come from. Do we have the industrial capacity to effectively neutralize aggressors?

2) It is all well and good to point to Pareto - Kalder-Hicks efficiency. A wonderful goal, I am certain. Then again, we have all seen (worse yet, experienced) the benefits of these purported experts and expert theories / measures. They do not appear to deliver as promised.

3) The point of the article is not simply that China will assume (or in fact under the Obama era , HAD) leadership / dominance of trade over the other TPP players BUT also that China continues to use its governmental mechanisms to unfairly tip the balance in its favor. It is, in short, a mercantilist system - and one that appears to be quite successful. It would also appear that the author believes that it is the very unfairness of the actual Chinese practices and the lack of response by the US that has permitted the Chinese to assume such a role. One must question also what are the specifics of TPP. Are there weak enforcement mechanisms? are there specific carveouts? and are there non-trade related matters addressed such as "climate change," workers entitlements, infringements upon national sovereignty etc., as these are issues that were dear to the Obamaites and were often inserted into internationaL agreements. Quite simply: Does TPP eliminate the barriers to entry imposed by the Chinese national authority?

4) As to "why would parties agree" to be taken advantage of: One does wonder about that. The fact remains that while a number of our trading partners, China included and the EU, continue to impose barriers to our trade, we effectively do nothing. The article singles out china for amongst other things currency manipulation, technology transfers, tariffs, etc; the EU also engages in similar practices. If one wishes to understand the scope of this, one need only look at the "outsourcing" of the manufacturing process for the Boeing 787, wherein the national authorities in conjunction with their own industrial giants insisted not only on a "share" of the manufacturing BUT in a number of instances on the transfer of both the technology and the highly advanced tooling (developed at Boeings expense).
So, yes, why would they do this?
Yet, it is not the manufacturers that are tasked with the responsibility of "enforcing' trade agreements; it is government trade negotiators working at the behest and instruction of National Administrations. One can advance the argument that since the globalists who are embedded within our (and other) government, and who have been successful in fostering their own view of a proper world order, are less concerned about the interests of any particular nation-state, much less their own, have both influence and authority over the initial agreement and its enforcement, that they will look favorably upon any transaction(s) that appear to benefit that "global" trade outlook. As i said, "a wink and a nod," a *gentleman's* understanding - hey, "cui bono,"right?
Whatever the cause, the fact remains that this nation has had to endure numerous and ongoing impediments to FAIR trade AND that this nation, or more specifically it's leaders, have failed or refused to take appropriate action to remedy this situation.

5) It is all well and good to desire a world order in which ALL live lives of comfort, if not splendor. I would love to see that, as well. Regrettably, I do not see that happening anytime soon AND, based upon history of both man qua man and nations qua nations, it is a fairly considerable task. Indeed, it may be beyond the intellectual and moral capabilities of men. Men will continue to act as men (or women) and nations will continue to act as nations. The question that remains is this: "Why must our Nation make itself the example for all others to emulate when they have demonstrated that they do not desire to do so." Our own little delusional economic / globalist utopia may quickly turn into a dystopia.
Why deny the fact of "national" sentiment; why fail to recognize that nationalism (properly understood) is a cohesive force essential to a well functioning civil association; AND why, above all else, persist in this "myth" of a community of nations that actually practices FAIR TRADE??? It hasn't been happening; it ain't happening and it is highly doubtful that it ever will happen.

Many of the voices heralding Free Trade appear to be ideologically stuck on some Lockean / Smithian gospel.

They remind me of those folks who placed bumper stickers on their cars that read: "immanentize the Eschaton!"

Well, free trade may be the eschaton - I don't see it as immanent, brudda.

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gabe
on April 09, 2017 at 11:54:30 am

Oops. forgot:

You assume that allowing the current situation (failure to enforce Fair Trade by USA) is what will prevent china from assuming or maintaining the mantle of Davos style trade leadership. On the contrary, I read the opposite - that only by assuming a more active and nationally responsible stance will we maintain our leadership.
Yes, let us have a TPP, and other agreements, PROVIDED that barriers to entry, intellectual property rights are respected and protected OR such barriers are met with countervailing tariffs / practices.

My version of the eschaton presumes "fair play,"; then again, I understand that as in a number of other areas, there are some who would suppose that equality of outcome is preferable to equality of opportunity. As i said, it is time to end this economic affirmative action.

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gabe
on April 09, 2017 at 13:01:46 pm

Oh and just for the chagrins of it, there is this from the same article from which you adduce the conclusion that the author supports the current trade protocols:

"The most important step toward establishing balance must be to establish an exchange rate system that fairly and continually reflects roughly the true value of the range of global currencies. To this end, the U.S. should reverse the Commerce Department’s policy of not applying countervailing duty remedies to currency subsidies. At the moment, the Petersen Institute’s C. Fred Bergsten estimates that a 25% tariff is levied on foreign imports of all American goods and services while a similar amount of subsidy is provided for all exports to America by the chronic overvaluation of the dollar. Not only would adjustment of this overvaluation contribute greatly toward achieving balanced trade, but it would also simplify negotiation of other elements of trade. Rules of origin, tariff rate adjustment, and rules for judging whether dumping is occurring would all be simpler to negotiate and of less importance if exchange rates were properly set and adjusted. Or consider interest rates: the Fed has been reluctant to raise rates, in part, due to fear that doing so could strengthen the dollar, increase the U.S. trade deficit, and thereby cause a slower recovery. The creators of the postwar global economic system understood that before they could even speak of trade, they had to establish a sensible currency system that would tend to keep trade roughly balanced."

Yep, that is what YOU would deem Fair Trade. Nobody really believes this; it is a good thing that The Trumpster does not!

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gabe
on April 10, 2017 at 13:21:01 pm

…the same article from which you adduce the conclusion that the author supports the current trade protocols….

Yup, that is what YOU would deem Fair Trade.

Once again I must ask: Would you be so kind as to quote my remarks that lead you to these conclusions?

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nobody.really
on April 10, 2017 at 16:10:25 pm

Do we have the industrial capacity to effectively neutralize aggressors?

1. If we don’t, then no nation does.

2. And the truth is—we don’t. But that’s not due to any lack of industrial capacity. It’s due to the fact that terrorists attack us with box cutters, knives, and trucks. To neutralize aggressors using such meager tools, we don’t need more industrial capacity; we need a police state.

Alternatively, we could reject the cries of the alarmists. We could recognize that violent crime rates have been falling since the dawn of time, and specifically since the 1980s. We could recognize that anyone who is building expectations that we can eliminate all violent crime—that is, to “immanentize the Eschaton”—is simply trying to manipulate the public into a panic.

Bottom line: There will ALWAYS be some group of disaffected people lashing out. If we can reduce those people to waging war with only box cutters, knives, and trucks, then that’s as good as it gets. We should take these attacks as signs of victory, not threat.

Gabe, you understand that the Trans-Pacific Partnership was created to help various nations promote free trade outside of China’s sphere of influence, right?

And the Trump nationalists have now squashed this deal, leaving all these Asian Pacific nations to deal with China instead of us, right?

The Foreign Affairs article addresses AT LENGTH what a terrible thing it would be to let China determine the terms for international trade–precisely the result we’ve now achieved. Thus, even if your arguments made sense, your policies are antithetical to your arguments.

Quite simply: Does TPP eliminate the barriers to entry imposed by the Chinese national authority?

I grant you, the TPP would do little to reduce Chinese trade barriers—BECAUSE THE TPP DID NOT APPLY TO CHINA. CHINA WAS NOT PART OF THE TPP. THE LIST OF NATIONS JOINING THE TPP DID NOT INCLUDE CHINA. I’m running out of ways to say this.

The collapse of the TPP is only fueling the progress of the RCEP, a trade deal DRIVEN BY CHINA. If your goal was to further open the Chinese market, killing the TPP seems like a pretty boneheaded way to go about it.

4) As to “why would parties agree” to be taken advantage of: One does wonder about that.

Uh … yeah. Because until you can answer that question, the rest of your arguments make no sense.

Your (and Trump’s) argument is basically, “I know better than US trade negotiators because … well, I can imagine a world that would suit me better—a world without any need for compromise. And because I can imagine such a world, I conclude than any compromises made by US trade negotiators were needless. And even though they are experts with years of experience and I’m an ignoramus, I still know more than they do. And I know more than our generals, too.”

(Ok, maybe gabe didn’t adopt that last position.)

Now, there are many possible reasons for why the world does not conform to our preferences.

First, maybe we imagine a world that is impossible—for example, a world without compromises. Trump was very good at whipping up public grievance regarding the need for compromise. (Trump’s bombing of Syria suggests that he is not temperamentally well suited for a world that does not conform to his preferences. This could be a problem….)

Second, maybe trade negotiators arrived at the best possible deal, but the US has not chosen to invest sufficient resources in enforcing it (say, via the World Trade Organization). There are always factions that want to cut parts of government they do not understand or value; you know the types.

Third, maybe the trade negotiators arrived at the best possible deal for maximizing the US’s wealth—and it is up to the US to decide how best to distribute that wealth. The fact that we’ve failed to adopt domestic policies that help distribute this wealth can’t be blamed on trade negotiators.

Fourth, maybe Trump is right. Did trade negotiators act to promote the interests of some factions at the expense of others? Yes, that’s in the nature of negotiation. Did negotiators make compromises in a way that benefited the well-connected at the expense of the poor? Perhaps—but again, that’s not necessarily wrong; it’s up to domestic policy to allocate resources. But maybe the negotiators made sub-optimal trade-offs because they are somehow incentivized to promote the interest of one faction at the expense of another, even if the trade-off costs more than it’s worth from a national perspective.

The fourth option could be true—but I have no evidence of it. Right now, it’s just one more conspiracy theory.

5) It is all well and good to desire a world order in which ALL live lives of comfort, if not splendor. I would love to see that, as well. Regrettably, I do not see that happening anytime soon AND, based upon history of both man qua man and nations qua nations, it is a fairly considerable task. Indeed, it may be beyond the intellectual and moral capabilities of men. Men will continue to act as men (or women) and nations will continue to act as nations. The question that remains is this: “Why must our Nation make itself the example for all others to emulate when they have demonstrated that they do not desire to do so.” Our own little delusional economic / globalist utopia may quickly turn into a dystopia.

Are there any facts we could point to to evaluate this claim? Cuz, just as with your claims about US industrial output, I think that you’re arguing on the basis of Trump talking points that are simply false.

Consider Branko Milanovics “elephant graph” which shows how various segments of the world’s population have fared over the past 20 years. When first revealed, many people interpreted it to show that the Developing World and the rich had done well, but that the developed world’s poor and middle class had suffered. But once you remove the data pertaining to China, Japan, and the former Soviet nations, the graph revealed that virtually every strata in the world experienced a 50% increase over the past 20 years.

Are there groups of working class/middle class people who have not experienced a 50% increase over the past 20 years? Sure; and there are groups of working class/middle class people who have experienced greater gains. But the premise that any segment of the income spectrum has only lost, without any gain, is simply false. Trump was able to cherry-pick people with sad stories, such as coal miners in West Virginia. But there are vastly more West Virginians working in health care than in coal mines—and they’re doing relatively well (in part due to Obamacare).

If you cherry-pick your data, you can find support for anything. But that’s not evidence.

The big picture is that the world has never been richer, education has never been greater, and lifespans have never been longer, within every percentile of the income ladder. The liberal economic order has worked.

That doesn’t mean that American men without college educations haven’t experienced a decline in status as 1) the developed world recovered from WWII, 2) women entered the workforce, 3) more immigrants entered the US workforce, 4) globalization grew, and 5) automation grew. That is a real dynamic. But rejecting the liberal economic order will not solve these problems. That’s just a red herring.

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nobody.really
on April 10, 2017 at 16:17:23 pm

Why deny the fact of “national” sentiment; why fail to recognize that nationalism (properly understood) is a cohesive force essential to a well functioning civil association….

Once again I must ask: Would you be so kind as to quote my remarks that lead you to these conclusions?

To repeat: I favor of the pursuit of Pareto and Kaldor-Hicks efficiency. If we define nationalism as the rejection of these goals, then I disfavor it. But if we define nationalism merely as a kind of affinity promoting social cohesion, then I have no great objection. Indeed, I’ve said (in other threads) that if we must build a society based on something less than universal brotherhood, nationalism may be the second-best option.

As i said, it is time to end this economic affirmative action.

We can have efficient policies, whereby jobs flow to those who can do them cheapest. If Mexicans can do the jobs cheapest, then Mexicans get the jobs.

Or we can have protectionist policies that seek to preserve jobs for people based on their nationality rather than their efficiency. We might call such policies "economic affirmative action."

Remind me again: Which policies do you favor?

You assume that allowing the current situation (failure to enforce Fair Trade by USA) is what will prevent china from assuming or maintaining the mantle of Davos style trade leadership.

Once again I must ask: Would you be so kind as to quote my remarks that lead you to these conclusions?

I reach the opposite conclusion – that only by assuming a more active and nationally responsible stance will we maintain our leadership.

Yes, let us have a TPP, and other agreements, PROVIDED that barriers to entry, intellectual property rights are respected and protected OR such barriers are met with countervailing tariffs / practices.

Ironic: Trade deals, like all deals, involve compromise. One of the populist criticisms of US trade deals is that they pursue the interests of the rich at the expense of the poor. And one of the classic examples is intellectual property: People accuse US negotiators of being agents for Disney/Hollywood, simply trying to get foreign nations to clamp down on movie pirates.

Me? I prefer pursuing the Pareto efficient outcome—and leaving it to nations to pursue equity within their borders. So, given that the US is the world’s leading creator of intellectual property, if we’re concerned about reducing the balance of trade, maybe it makes sense for US negotiators to focus on intellectual property matters. But if the US negotiates to pursue intellectual property and not, say, issues that would create more jobs in the US, then it only makes sense that the US would adopt other public policies that shift some of the wealth of intellectual property over to benefit workers.

[T]here are some who would suppose that equality of outcome is preferable to equality of opportunity.

Yes—everyone who buys insurance believes in this. Everyone has an equal opportunity to avoid a house fire, a car crash, or cancer, so if all you care about is having an equal opportunity, you’d never waste money on insurance. It’s only people who care about outcomes who buy insurance. I’m one of those people.

Don’t get me wrong: I like equality of opportunity, too. But as Harrison Bergeron reminds us, at some point the cost of pursuing equality of opportunity just isn’t worth the benefit. So, like Milton Friedman, Friedrich Hayek, and Robert Nozick, I’m willing to compromise with my pursuit of equality of opportunity by offering social insurance.

Here’s the bottom line: There is no “level playing field” from which to judge others. We adopt policies to achieve the best outcomes we can, but those policies inevitably create winners and losers:

In a lawless world, people who are good at physical violence may have a competitive advantage over people with intelligence. In a world with law and order, people with intelligence may gain a competitive advantage over people who are good at physical violence. In the unsettled West, people who ranched cattle benefitted from the right to drive their herds throughout the land—at the expense of farmers whose land got trampled. As the West got settled, laws changed to make ranchers liable for the damage their herds created, which benefited farmers—at the expense of ranchers. Every change in policy creates winners and losers, relative to the prior state of the world.

Once we recognize that there is no “level playing field” and that everybody’s advantages and disadvantages are at least partially a function of social dynamics, it makes sense to design social policies that moderate the differences in outcomes. Recall my favorite example: The reason Justin Beiber is richer than J.S Bach was not because he was harder working or more talented, but because he was born into a different society—a society he did shit-all to create. So the suggestion that Beiber’s success is simply a function of Beiber’s hard work and talent is nonsense.

And the same is true of the rest of us.

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nobody.really
on April 10, 2017 at 18:47:59 pm

"Uh … yeah. Because until you can answer that question, the rest of your arguments make no sense."

You must have missed it - although I was somewhat opaque.

Why negotiators may be taken advantage of may have much to do with a) their ideological (Pareto, etc) outlook wherein they believe that it is the "moral" thing to do to help others and the mistaken belief that the US is so strong (as you appear to believe) that we can continue to absorb the losses, b) that the negotiators are part of a class of global managers that 1) believes the preceding assertion and 2) coincidentally benefit immensely from the current state of trade and c) that they are simply inept or as was the case with much of the last administrations international negotiations / diplomacy MORE INTERESTED IN THE POSITIVE PRESS derived from a completed negotiation (see Syria chemical weapons and Iran nuclear agreement). The image is all to these "negotiators.

As to military strength: It matters not what you spend but HOW you spend it AND to where those dollars flow. If a significant portion of your arsenal is in part (components and components systems) manufactured offshore, would you concede that there is a potential problem.

Even more importantly, and this ties into the problem with citing our much vaunted productivity and GDP (which is distorted by the huge sums generated by Internet businesses, phone services, legal services, advertising revenues from same, etc), we no longer have the capacity to scale up as we did during WWII. You realize, of course, that WWII was decided by the strength of American industries; not only did we supply our own forces but also the Brits, australians and the Soviets with trucks, engines, ships, aircraft, armaments, etc.

How would that be possible today given that the automotive industry has been decimated (in part due to barriers by Japanese, Chinese, Europeans) over the last 30 years. Does our GDP figure reflect the fact that in many instances only final assembly is performed with American labor; or does the $40K cost of that car count fully toward GDP?
Frankly, I don;t care about the $$ figure for the GDP - I do care about the ability to quickly scale up war production should the need ever arise. Where is the tooling? Where are the test facilities? Where is the steel industry required to support this scale up?

And again, where are the basic components of electronic warfare / guidance, etc systems being made. Shall we ask the Chinese to pleas, oh please, do not sink that ocean freighter as it carries some much needed electronic components for our air- and sea craft?

continue pursuing the eschaton, my friend; but so long as other nations fail to follow the "example" set by our highly "moral" utopian *negotiators*, I will place my trust in some effective home-produced military hardware and the manufacturing capacity to produce those instruments in prodigious amounts.

As for China, perhaps, you should review the policies of the Chinese authorities rather than place blame on The Trumpster. He is simply inheriting the fruits of our misguided utopian sentimentalities.
The Chinese would have attempted to assume the mantle of leadership with or without TPP or The Trumpster. The ineffectiveness of that *geo-political genius" Barrack Hussein Obama and the rest of his smart power team had virtually assured that.

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gabe
on April 11, 2017 at 13:34:00 pm

…our much vaunted productivity and GDP (which is distorted by the huge sums generated by Internet businesses, phone services, legal services, advertising revenues from same, etc.)….

What leads you to conclude that these things don’t count as part of GDP?

Many nations mark national celebrations by parading their military hardware and troops down the street. And Trump had requested to conduct a similar parade as part of his inauguration festivities. But this hasn’t been the US style of parading. Rather, our parades tend to contain floats from civic organizations and businesses. Perhaps Trump regards such parades as “soft,” demonstrating insufficient might. But here’s the point: That stuff that shows up in American parades-- THAT IS OUR MIGHT.

Any nation that might want to go to war with America must not only gaze upon our military hardware and troops. They must also gaze upon our almost bottomless source of revenues, generated by voluntary productive exchange by 300+ million civically-involved citizens in a well-regulated, efficient economy. Gaze upon it--and despair.

During WWII, our military hardware wasn’t so different than European hardware. The difference was our bottomless capacity to generate hardware. It barely mattered what guns the US had on its shelves. No nation on earth is better able to generated new stuff to put on the shelves—and generate BETTER stuff, and generate more shelves. So unless attackers are planning to wipe out the US in one nuclear shot, they’re pretty much signing up for a very long, very painful ordeal—even if they can eventually prevail.

…we no longer have the capacity to scale up as we did during WWII.

True. But that’s because before WWII the US was in a Great Depression, so we had plenty of vacant factories and idle workers to call upon. “Scaling up” from a valley was not a problem.

Today, in contrast, the US has never had more plants in operation, and never had more people employed. It would be harder to "scale up" from this peak. But I'd much rather run a war with a health economy than an anemic one.

Which isn't to say that a healthy economy wouldn't pose some challenges for the war effort. Unlike during the Great Depression, if the government were to begin demanding huge amounts of productive capacity and manpower today, it would have to pull people and resources from other productive uses. This would be inflationary. So Congress or the Fed would have to contract the money supply to offset the increasing demand.

People sometimes argue that war helps the economy, and point to WWII as an example. But as I noted, WWII happened during the context of the Great Recession. If you’re not living in that context, you cannot expect the same results. I don't recall that the Iraq War did much for our economy.

That said, the US has a declining labor force participation rate. War would cause more people to come into the labor market who now are on the sidelines—including retirees, prisoners, institutionalized people, disabled people, etc. That also happened during WWII: We put plenty of unemployed men to work--but also women who had not previously participated in the (paid) labor force. Remember Rosie the Riveter?

You realize, of course, that WWII was decided by the strength of American industries; not only did we supply our own forces but also the Brits, australians and the Soviets with trucks, engines, ships, aircraft, armaments, etc.

How would that be possible today given that the automotive industry has been decimated (in part due to barriers by Japanese, Chinese, Europeans) over the last 30 years.

US motor vehicle production as virtually at an all-time high. I say "virtually" because the table does not include 2016 data on production. However, 2016 did set a new record for auto sales, if that’s any indication.

This is the problem of living in a fact-free world: People become prone to believe whatever story fits their pre-existing biases. Seriously, wherever you are getting your information is misleading you.

Does our GDP figure reflect the fact that in many instances only final assembly is performed with American labor; or does the $40K cost of that car count fully toward GDP?

GDP = private consumption + gross investment + government investment + government spending + (exports - imports). So yes, it counts the $40K retail price of the car—but it deducts the price of the imports included in the car.

More to the point, GDP deducts the value of ALL imports—yet the US still has record GDP. So the idea that trade imbalances have somehow crushed the US economy is simply wrong. Moreover, it’s goofy. The US is the most productive nation in history, and so is rich. And what do rich people do? They buy hot dogs from the poor corner hot dog vendor. Do we expect the hot dog vendor to also buy an equal amount of stuff from the rich guy, in order to maintain a “balance of trade”? No—so why would we expect the US to maintain a balance of trade with other nations? Rich people simply consume more than poor people; that’s the point of being rich.

Frankly, I don’t care about the $$ figure for the GDP….

Yeah, I noticed. And in the absence of caring about facts and data, you’re prone to fall for any argument that appeals to you.

[W]here are the basic components of electronic warfare / guidance, etc systems being made. Shall we ask the Chinese to pleas, oh please, do not sink that ocean freighter as it carries some much needed electronic components for our air- and sea craft?

Fair enough, it matters where certain crucial components (and natural resources) come from during war. So this concern is justified. But the premise of this concern is that the US military, notwithstanding its massive budget, has failed to consider and address these concerns, and so must rely on bloggers to raise them. Now, maybe that premise is justified—but I haven’t heard anything to lead me to this conclusion.

For what it’s worth, the US military has a practice of dual source contracting—that is, entering into contracts with multiple vendors for the same supplies, even if this would result in a loss of economies of scale. The military reasons that it’s important to maintain multiple suppliers for reliability (and market competition?) purposes.

As for China, perhaps, you should review the policies of the Chinese authorities rather than place blame on The Trumpster. He is simply inheriting the fruits of our misguided utopian sentimentalities.

The Chinese would have attempted to assume the mantle of leadership with or without TPP or The Trumpster. The ineffectiveness of that *geo-political genius” Barrack Hussein Obama and the rest of his smart power team had virtually assured that.

I don’t suppose it would do any good to ask you to quote the language to which you are responding? In the words of Pooh: “No, I thought not.”

See, one advantage of having you quote the relevant language is that you might actually read it first. For example, where did I blame Trump for the policies of the Chinese authorities?

Rather, I observed that the Chinese authorities act in certain harmful ways, and to circumvent some of these behavior the US invested years negotiating the TPP. You are correct that Obama did not magically cause China to do our bidding. Instead, he supported the long, slow process of negotiating a trade deal with all of China’s neighbors, thereby hemming in China’s influence to the greatest extent possible short of military confrontation. Trump has chosen to trash these years of effort, and instead to do … what? Yes, China has been attempting to assume the mantel of leadership in the Pacific, with or without the TPP. The TPP was designed as a response to those efforts. Now that we’ve trashed the TPP, China’s efforts are more likely to succeed.

Get out of your dichotomous thinking: It’s possible to acknowledge that China can be a bad actor—and that Trump’s behavior is unhelpful, too. Indeed, this conclusion is not only possible, it’s justified.

That said—as it happens, Trump faces circumstances that Obama didn’t, and this change in circumstances may very well justify a change in policy. Specifically, while China’s economy was booming, China was pretty impervious to outside influence. Now that China’s economy is slowing, China is becoming more vulnerable. The US, as a large market for Chinese goods, has a big lever. If the US imposed large tariffs on Chinese goods, China might retaliate. But the US imports three times as much stuff as it exports, so our stick would be bigger than China’s. And the US’s economy is larger, and currently stronger, so we’d be in a better position to take the blow. Finally, the US is a democracy, so when Americans get pissed, they have an outlet for their rage at the ballot box. Chinese people have no outlet other than civil unrest. And China has never faced unrest from such a large, well-educated, and middle-class population as it has now.

Given these vulnerabilities, Trump may be able to press an advantage. (He’d have an even stronger hand if he hadn’t trashed the TPP….)

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nobody.really

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