Trump in a china shop

President-elect Trump has talked by phone with Taiwanese President Tsai Ing-wen, breaking a tradition of non-communication at the highest level since the US downgraded relations with Taiwan and recognized the People’s Republic of China in 1979. Beijing has protested to Washington but is blaming Taipei in public.

The specifics of how the phone call was arranged remain murky. Did Trump initiate it, or President Tsai? Who else was involved? Did a Washington lobbyist or politician benefit from it? These things don’t just happen, but how and why in this case is still unclear.

So what?

Trump is claiming it’s no big deal: why shouldn’t he talk with the leader of a state that the US has close security and economic ties with? He is still a private citizen, even if president-elect. He has opted not to use the State Department in arranging for his congratulatory phone calls from overseas, presumably so that he is free to do as he likes. He likes to be unpredictable and not to give anything away for free: the phone call is in Trump’s view a signal to Beijing that it will need to give as well as get.

Part of the background to the phone call is apparently a visit to Trump from former US Ambassador to the UN John Bolton, who advocates closer ties with Taiwan. He is also rumored to be a candidate for Secretary of State in the Trump Administration. Bolton shares Trump’s “take no prisoners” negotiating style: put your opponent off balance and keep him there.

While the Logan Act of 1799 prohibits private citizens from negotiating with foreign governments in disputes with the US, only one person has ever been indicted under its provisions. Private citizens doing business with foreign governments without the approval of the US government is far more the rule than the exception. I could be accused of doing it myself quite often, even if I state explicitly in virtually all my dealings that I don’t speak for the US.

The real issue here is the One China policy, not the phone call. Taiwan in the 37 years since US recognition of Beijing (and de-recognition of Taipei) has become increasingly democratic, secure, and prosperous. President Tsai is no fan of One China, claiming instead that Taiwan is already a state but hesitating to claim independence and sovereignty. Should the US continue with the Nixon-era policy of supporting Beijing’s claim to Taiwan, or should it move in the direction of recognizing what many would regard as reality: that a democratic Taiwan will never freely accept reintegration with the mainland?

I don’t know the answer to that question, even if Hong Kong’s travails under Chinese sovereignty raise doubts. But I’m sure a congratulatory phone call is no way to reformulate a policy with gigantic implications for relations between Beijing and Washington, whose economies will remain locked in an inevitable embrace for decades to come and whose militaries will be competing as well as cooperating worldwide. This may be only the first of many Trump diplomatic maneuvers I doubt, but it is a particularly important one if you look past the phone call.

Tags : , ,

Jobs count

Today two big items on the job front:

  1. President-elect Donald Trump has saved 1000 jobs at Carrier in Ohio, at a cost to the state of $7000 per job;
  2. The Obama recovery that started in July 2009 generated 178,000 new jobs last month, at no cost to the Federal or state governments, lowering the unemployment rate to 4.6%.

We are now in the eighth year of Obama’s much-criticized “slow” recovery.

Which news gets the electrons? It’s mainly the first of course: Trump is a master at attracting attention to everything he does. What he has done in this case is unusual: a direct intervention in a single company’s decisions by the president-elect, with the threat of “consequences” if it does not comply.

What’s wrong with that?

Let me count the ways:

  1. This kind of non-market intervention is precisely what most economists (and until recently virtually all Republicans) think is a bad idea, as it causes distortion in the distribution of resources (in this case both capital and labor) that cannot be justified on economic grounds.
  2. A precedent of this sort gives all companies who can pretend to be considering transfer of jobs out of the US an incentive to seek a bribe from the state or Federal governments not to go ahead. Ohio in particular can expect to be flooded with such requests.
  3. Carrier’s labor costs in the US will be higher than in Mexico, otherwise it would not have considered this move. It will need to pass those costs on to consumers, making its products less competitive than they might otherwise have been not only in the US but also abroad, reducing American exports.
  4. A company considering a US investment will now have to take into account the unspecified threat of consequences should it decide to move the jobs it creates here to another country, thus discouraging foreign investment.
  5. Mexicans who might have earned decent wages at a Carrier plant will be poorer, thus limiting their purchasing power and ability to buy US goods.

These downsides are all well-understood and major reasons why American presidents have stopped “jawboning” on price increases, investment decisions and other economic issues. As Ronald Reagan taught us, the proper role of government is to set the parameters for open competition and leave the specifics to private individuals or companies.

So what should a president do about jobs being shipped overseas? The key is to create an improved business environment at home, in particular by streamlining regulations and lowering corporate tax rates. This would make the US more competitive rather than more willing to dole out $7000 checks. There is actually a good deal of agreement between Democrats and Republicans on improving the business environment, even if there are serious disagreements on which regulations should be streamlined.

This carrier deal is an insignificant achievement in the grander scheme of things, though one that points in bad directions. For those who don’t like globalization, wait until you see the consequences of economic nationalism.

Tags : ,

My Goldilocks solution for the Middle East

In the final report of their Middle East Strategy Task Force issued yesterday, Steve Hadley and Madeleine Albright say

…the days of external powers trying to orchestrate and even dictate political reality in the region are finished. So is a regional political order of governments demanding obedience in return for public sector employment and related state subsidies.

They paint instead a future of external powers collaborating to help end civil wars, listening to local voices, and interacting with more responsive and inclusive governments. Their sovereignty restored, if need be by military action, these governments would join in partnerships with each other and compacts with external powers to encourage local initiatives, harness human resources, and incentivize regional cooperation. What’s not to like?

It’s that premise, which looks to me wrong. The US decisions not to or orchestrate or dictate a political outcome in Syria and Libya do not mean that the days of international intervention are over. Russia and Iran are for now doing quite well at it, even if in the end I think they will regret it. Egypt has in fact restored its autocracy and Bashar al Assad clearly intends to do so in Syria. Does anyone imagine that the post-war regime in Yemen will be a more inclusive and responsive one? It isn’t likely in Libya either.

I agree with Madeleine and Steve that failing to implement something like the reforms they point to will likely mean continuation of instability, incubation of extremists, and jihadist resurgence, even if the war against Islamic State is successful in removing it from its control of territory in Iraq and Syria. The instability in the Middle East is clearly the result of governance failures associated with the Arab republics, which had neither the direct control over oil resources required to buy off their citizens nor the wisdom to empower them and enable more decentralized and effective governance.

The question, which Ken Pollack rightly asks, is whether the US has the will and the resources required even to begin to end the civil wars and encourage the required reforms. I think the answer is all too obviously “no.” Ken suggests this means the US would be wiser to flee than to fight with inadequate means.

But the way in which we flee matters. It is the US military presence in the Middle East, which represents upwards of 90% of the costs, that needs to draw down, if only because it is a terrorist target and helps them to recruit. It totals on the order of $80 billion per year, a truly astronomical sum. While I haven’t done a detailed analysis, it is hard to imagine that we couldn’t draw down half the US military in the Middle East once the Islamic State has been chased from the territory it controls without much affecting the things Ken thinks we should still care about: Israel, terrorism, and oil.

Oil is the one so many people find inescapable, including Ken. It is traded in a global market, so a disruption anywhere means a price hike everywhere, damaging the global economy. But there are far better ways to avoid an oil price hike than sending a US warship into the strait of Hormuz, which only makes the price hike worse. For example:

  1. getting India and China to carry 90 days of imports as strategic stocks (as the International Energy Agency members do),
  2. encouraging them to join in multilateral naval efforts to protect oil trade,
  3. getting oil producers to build pipelines that circumvent Hormuz (and the Bab al Mandab), and
  4. encouraging Iran and Saudi Arabia to build a multilateral security system for the Gulf that enables all the riparian states a minimum of protection from their neighbors while encouraging protection as well for their own populations.

I would add that we need to continue to worry about nuclear proliferation, because the Iran deal only provides a 15-year hiatus, and to provide assistance to those in the Middle East who are ready and willing to try to reform their societies in directions that respect human rights.

All of this requires far more diplomatic commitment than we have been prepared to ante up lately, but it is not expensive (for the US) or unimaginable for others. A vigorous diplomatic effort far short of what Madeleine and Steve advocate but far more than Ken’s “flight” is the right formula in my view.

 

Tags : , , , , , , , , , , , , , , ,

Saudi Arabia’s regional challenges

While the United States faces daunting foreign policy decisions in the Middle East, Saudi Arabia is facing big challenges while also positioned firmly inside the fray. To discuss its approach to regional policy the Atlantic Council hosted Faisal bin Farhan Al-Saud, a businessman and investor in the Saudi defense and security sector, and Mohammad Khalid Alyahya, a Saudi political analyst and commentator. They did not speak on behalf of the Saudi government.

The discussion predictably centered around Saudi Arabia’s relationship with Iran. Al Saud disagreed with the premise of President Obama’s comments that the two must learn to “share the neighborhood.” Neither Saudi Arabia nor Iran has the right to seek dominance beyond its own sovereign state. In Al Saud‘s view, The Kingdom has demonstrated a policy of working with other governments to promote stability rather than displaying hegemonic ambitions. The same cannot be said of Iran. Since the 2003 Iraq war, Iran has taken advantage of domestic instability to build the power of proxies in Iraq, Syria and Lebanon. Saudi Arabia has demonstrated restraint in the past but is not going to sit back and let Iran take over consecutive states, many of which are immediate neighbors of the Kingdom.

Regarding the war in Yemen in which more than 7,000 civilians have been killed, Al Saud defended Saudi Arabia’s actions as occurring in the specific context of a decade of Iranian aggression in the region. He believes Iran’s motives in backing Houthi rebels were to distract Saudi Arabia from the Syrian civil war rather than a genuine concern for the Houthi movement. Saudi Arabia was aware of this tactic, but had to respond to prevent Iran from gaining an easy win and installing another proxy on Saudi Arabia’s borders.

Alyahya presented an alternative analysis of the Yemen war. He suggests that Iran never intended the Houthis, who’s total population is only 60-70,000, to pursue political control of the country. Rather they intended to establish a powerful Hezbollah-like paramilitary force running parallel to and prodding the Yemeni state.

In discussing drivers of Saudi regional policy, Al Saud emphasized the role of public opinion. Because of the social contract between the Saudi government and the population, the Kingdom is particularly sensitive to public opinion and must respond as a matter of legitimacy. There is palpable anxiety among the Saudi population. Unlike the US, the Kingdom is not in a position to ignore Iran’s oftentimes absurd rhetoric.

Saudi Arabia has also been adjusting to changing US policy in the region. Al Saud praised the positive relationship the two countries have had for decades, but explained that the Kingdom found itself caught off-guard and having to adjust rapidly following Obama’s disengagement from the Middle East and perceived acquiescence to Iran’s actions. He pointed to support of Maliki in Iraq as a potent example. Saudi Arabia is comfortable with the US taking a leadership role in regional security but will continue to build the ability to act on its own in case US policy continues along the same trajectory. One area where the Kingdom continues to rely heavily on the US, however, is intelligence. He cited mistargeting of civilian facilities in Yemen as an intelligence failure on Saudi Arabia’s part, not a disregard for civilian life, and so hopes the US will assist in building the Kingdom’s capabilities.

Regarding the Justice Against Sponsors of Terrorism Act (JASTA), Al-Saud is not concerned that any legal cases will find sufficient evidence. His fear is around public perception in Saudi Arabia of the US and how JASTA promotes links between the Kingdom and terrorism regardless of actual legal outcomes. He is also concerned by the negative media environment. which has been stirred by Trump’s election campaign and the acceptability of anti-Muslim rhetoric. He believes Saudi Arabia’s history of opacity and neglect of public relations has been harmful and hopes to pursue improved relations with the US and its citizens

Tags : , , , , ,

Russia’s increasing Middle East influence

As Russia becomes increasingly influential in the Middle East, US policymakers question what that might mean for American interests in the region. The Atlantic Council convened a panel Monday to discuss Russian interests in the region, how they might shift in a Trump presidency, and where the Russian relationships with Turkey, Iran, and Syria are heading. The panel featured Anna Borshchevskaya, Ira Weiner Fellow at the Washington Institute for Near East Policy, Thomas Cunningham, the Deputy Director for the Global Energy Center at the Atlantic Council, Alireza Nader, a Senior International Policy Analyst at the RAND Corporation and Aaron Stein, a Senior Fellow at the Rafik Hariri Center for the Middle East at the Atlantic Council.

Borshchevskaya said Putin has had his eye on the Middle East since he first took power in 2000. However, it wasn’t until recently that he has made his interventions more obvious. The most obvious move was Russia’s increasingly friendly relationship with Iran, even though the two countries have been historic rivals. Russia’s and Iran’s mutual resentment towards the US has led them to cooperate in the region. Their cooperation is most obvious in the Syrian crisis, where both are working to legitimize Assad’s rule over Syria. Trump has said he will cooperate with Russia in Syria, but it is still uncertain as to whether he will actually do so.

Stein said that Turkish-Russian cooperation is also a very new phenomenon. There was a sense that the two might have become enemies once Turkey shot down a Russian plane in 2015 when Russians pilots tested the Turkish safe zone on the Syrian-Turkish border. However, at the same time, Turkey had begun to distance itself from the US, partly because the US wasn’t doing enough to combat Kurdish forces in both Turkey and Syria. Thus, Turkey was pushed into Russia’s arms. Since the July coup, Turkey has reoriented itself as a hyper-nationalist, isolationist and anti-Western state that is looking to Russia as a “replacement ally” (for the US).

Cunningham said that since both Russia and some Middle Eastern countries are the world’s major oil producers, they are natural competitors and not cooperators. This is the major reason why Russia wants to maintain influence in the Middle East. Russia is producing tons of oil in response to the depreciation of the ruble and trying aggressively to sell this oil to Turkey. Russia is pushing for the creation of a Russia-Turkey oil pipeline, which many European countries oppose. It would be bad from a European diversification standpoint, since at least some of this oil would be directed west. Additionally, Russia is operating oil refineries in Syria, which will give them a leg up with the Assad regime once the civil war in Syria ends.

Nader echoed what Borshchevskaya said about the Russian-Iranian relationship being one that is mutually beneficial to both parties. However, he said, if Putin and Russia begin to cooperate in the region, it is possible that Russia might abandon Iran, since Iran is a weaker ally for them. If they do that, then Iran would have no powerful allies, which would be a major blow. However, Nader does not expect any US-Russian cooperation to be long term. Their goals in the region are much too different. An Iranian-Russian friendship is much more sustainable, since Iranian and Russian hegemonic ambitions in the Middle East can coexist.

I asked whether Russia’s aggressive support for Shiite groups in the Middle East would have repercussions for Sunni groups. Bolshchevskaya responded that Putin maintains that he is friends with everyone and is not favoring Shiite groups over Sunni groups. Instead, he claims, his ultimate goal in the Middle East is to combat terrorist groups and alliances with Shiite entities like Iran and the Assad regime are the best way to go about doing this. Thus far, Sunnis in the region and even Sunni Russians have accepted this explanation.

The panel was also asked to explain Russia’s relationship with Israel. Bolshchevskaya said that Russia is successfully restoring relations with Israel through economic cooperation, tech cooperation and tourism. However, there are limits to this partnership since Israel is still a Western democracy. The partnership between the two states is fundamentally pragmatic rather than idealistic. But given the chill between Obama and Netanyahu, Israel has found Putin to be a welcome new friend.

When asked whether the US is losing out by allowing Russia to exert their influence in the region, Bolshchevskaya said that that we absolutely are. Prior to Russian intervention in Syria, Assad was weak. Once Russia began intervening, the conflict got much, much worse. Additionally, increased Russian influence degrades US credibility in the region. Stein disagreed, saying that there is a lot of hype about the loss of US credibility in the region. ISIS isn’t as big of threat to the US as many politicians make it out to seem and there is no good reason for the US to make any big commitments to eliminating ISIS. Instead, he thought, the US should focus on strengthening relationships with NATO allies and stay away from the Middle East.

Tags : , , , , ,

Assad reaps the whirlwind

Syria’s almost six-year struggle with itself is coming to an ignominious end for an important contingent of its motley revolutionaries, who are facing defeat and even obliteration in eastern Aleppo. Idlib, where the opposition has generated an elaborate set of governing structures, will presumably be the next target of the Iranian/Russian/Syrian offensive. Provided that coalition continues its support, President Assad will soon control all of Syria’s major western population centers though still face Turkish-backed resistance in the north as well as CIA-backed resistance in the south. The Kurdish cantons along the Turkish border can’t be counted as revolutionary, but they aren’t likely to give up their autonomy any time soon.

The smart money is betting that the regime victory in Aleppo will tilt the playing field in Assad’s direction, lead at least some of the revolution’s external supporters to abandon their surrogates, and cause them to seek a modus vivendi with the Assad coalition. This will mean local surrenders and population transfers, which have become common. There will indeed be a political solution, but not of the kind Washington has sought. Assad will not need to agree to a political transition but instead claim to direct a “transition” himself, perhaps even including trappings like another Potemkin election.

The war against the Islamic State, especially the US-supported offensive investing Raqqa, will presumably continue, though a big question mark hangs over who lead the fight and govern in Raqqa (Kurds? Arabs? backed by Turkey? the US?) once ISIS is removed. The Assad regime has better prospects in Deir Azzour, where it has managed to maintain a presence.

Driven from control of cities, the Islamic State will presumably do in Syria what it has done in Iraq: head for the hinterland, go underground and revert to terrorist attacks on regime-controlled areas. This will help the regime to justify its repression, which relies on a bewildering half dozen security agencies as well as “anti-terrorism” courts that have jailed something like 100,000 Syrians.

Reconstruction faces insurmountable obstacles: Assad’s Russian and Iranian friends have told him they won’t pay. Iran might ante up a bit for resettling Alawites and Shia (Syrian or not) into strategically important areas around Damascus and on the road north, but they can afford little else. The Americans, the Gulf states, and the international financial institutions will refuse all but humanitarian assistance so long as Assad remains in power, unless the Trump Administration surprises all of us and decides to make him America’s latest Great White Hope. Alissa Rubin in today’s New York Times suggests Assad may be able to use the threat of increased refugee flows to blackmail the Europeans into footing some of the bill, but they aren’t likely to write checks in the hundreds of billions of euros required.

Fighting will likely continue even after the fall of Aleppo, Raqqa and Idlib, though likely at far lower levels than for the past year. The Russians and Iranians will be able to remove at least some of their troops and reduce some of their aid to Assad, though the country’s economic catastrophe will render him their ward for a long time to come. Syrian society, which in the leadup to the war was nowhere near as sectarian as Iraq’s, will not revert quickly (or likely ever) to its prior state. Alawites and Shiites, most of whom remained loyal, are going to expect rewards. Sunnis will be sharply divided between those who stuck with the regime and those who joined the revolution, but the latter aren’t likely to forget what Assad, the Russians and Iranians have done.

This is a war whose only winner is Assad, but what he has won is in many places reduced to rubble and unsustainable.

Tags : , , , , ,
Tweet