Tag Archive for: United States

Prelude to a Putin–Trump pas de deux (choreographer: V.V. Putin)

Eager, doubtless, to preserve and burnish the penumbra of ‘deal-maker’ following his foray to Singapore, and even more eager to deflect attention from an increasingly ominous Mueller inquiry, President Donald Trump dispatched his national security adviser to lay the groundwork for the first summit meeting between a Russian and a US leader since Barack Obama went to Moscow in July 2009.

Not only was the timing noteworthy—the place was too. John Bolton went not to neutral territory, but to the mediaeval fortress from which Russia has traditionally been ruled, the Kremlin. That itself was a major concession. In return, perhaps, the emissary didn’t just meet Foreign Minister Sergey Lavrov—he was accorded an audience with Vladimir Putin himself. This allowed Putin to set the terms of debate by a small rewriting of history: Russo-US tensions, he said, have little to do with Russia’s redrawing of borders since its invasion of Georgia in 2008, but everything to do with domestic opposition to Trump. Nor did Putin forgo the chance to define the goal of the summit as the restoration of ‘full-fledged’ US–Russia bilateral relations.

As was wholly predictable, Bolton, the reputed hawk, has confirmed that the convergence of US and Russian interests is sufficient to warrant such a meeting of the presidents. Attention now focuses on the form and content of the forthcoming encounter.

Meetings generate expectations, and summits generate inflated expectations. The largely servile Russian media have been circumspect, referring only to Syria as a possible agenda item. That’s a tactical false trail: in the summit communiqué much may be made of Syria, but it’s now secondary for Putin. Trump has already in effect given him a free hand there, deserting the US’s former allies, including the Kurds, to deal with a phalanx of Putin, Assad and Erdoğan assailants as best they can.

A US acknowledgment that Crimea now belongs to Russia irrevocably is presumably high on Putin’s list of desiderata. Such an acknowledgment would also imply recognising Russian control over South Ossetia and Abkhazia, the parts of Georgia it seized in 2008. All that’s required for that outcome would be Trump’s decision, in the interests of ‘The Deal’, not to raise it.

Second, Putin would like to see a lifting of sanctions. With that in mind, and to highlight the tensions between the US and the EU, he may decide to present himself as a champion of free trade. But he knows that sanctions are a difficult, if not a no-go area for Trump, at least until Mueller and his inquiry have been dealt with. So, Putin may well decide to be patient.

Commentators, including Aleksandr Lukin, a loyal advocate for Putin’s policies, and Aleksei Venediktov, the outspoken editor of the liberal radio station Ekho Moskvy, have said that in the long term Putin wants to secure a new, updated edition of the Yalta Agreement of 1945 between Roosevelt, Stalin and Churchill, which carved Europe up into spheres of influence. Ultimately, too, Putin wants to see NATO abolished (as he has said)—that is, the US departure from the western part of Eurasia. He must be relishing the disarray in NATO, now, with members such as Turkey, Greece, Italy and Hungary dubious allies at best.

Putin will have welcomed too the promising electoral trends in the EU, with the emergence of right-wing pro-Moscow governments in Austria and Italy; and can not unreasonably hope that the EU will collapse under the weight of its contradictions, and the tsunami of refugees and economic migrants that his actions in Syria have helped to swell.

Let us recall: Obama’s attempt to ‘reset’ US–Russian relations in 2009 failed mainly because the Russian position was that all the blame for deteriorating relations lay with ‘the West’—Russian shorthand for ‘the US and its close allies’ (a formulation that Trump is making archaic). That is, no concessions could reasonably be demanded of Russia. But now Putin’s overriding and priority interest is a reset of his own, a long-term strategy that requires that Trump be returned to office in 2020: Trump is an asset who must be protected and strengthened. That is the goal against which all of Putin’s policy options for the summit will be weighed.

For Trump the meeting is mainly about domestic politics: he and his team want to forestall and deflect any damaging findings by the Mueller investigation. They need summit outcomes that support that goal. Putin and his summit-planning cell know this, so their aim will be to reinforce Trump and a changing international balance of power that’s shifting to their advantage. For the Kremlin, avoiding any act that might potentially destabilise this favourable trend will be crucial.

So, what is a Putin–Trump meeting likely to focus on? The overall theme will probably be that ‘getting on with Russia’ is in the interests of all. So how can US–Russia relations gradually be improved?

Obviously, by concentrating on ‘issues of common concern’, and those will likely prominently include ‘cooperation’ in counterterrorism and arms control. Arms control outcomes especially would play well to most audiences, global and domestic. In particular, Putin would probably appreciate negotiations towards an extension of the INF Treaty and updating, amending and extending the New START nuclear arms treaty. The process lends substance to Putin’s claims to superpower status, and any outcomes with his current opposite number may well be favourable to Moscow.

We can also predict with some confidence an exhumation of that staple of Cold War Mark 1 summits, an announcement that Putin and Trump are re-activating the Kremlin–White House hotline. But while some things remain the same, some change: the Tsar of All the (post-Soviet) Russias now spends much of his time at his palace in Sochi, while Trump’s preference is his resort at Mar-a-Lago in Florida.

The big and skilful investment that Russia made in seeking to influence the US presidential election, an outcome which prompted a fusillade of popping champagne corks in the Kremlin, and Putin’s reported response that ‘it doesn’t get better than this’, could soon reap even more handsome dividends. An optically fruitful summit may make it easier for Trump to finally rid himself of the troublesome Mueller, and appoint a better kind of Republican in his place.

Australia and the shifting regional order

The issue of how Australia should position itself between the current primary power in the Asia–Pacific (the US) and the rising contender (China) has returned suddenly and forcefully to Australian policy debates. If anything, the issue has become more hydra-headed—because influence operations are now a regular part of the discussion, alongside the shifting regional strategic order, and Chinese investments in Australian critical infrastructure.

On this blog, both Michael Shoebridge and Hugh White have recently posted their respective views on the topic.

Michael sees in China’s actions in the South China Sea—and in the pace of its military modernisation—developments that undercut Australia’s traditional policy line of ‘not having to choose’ between our major ally and our major trade partner. He argues for a reformulation of Australian policy on China—one that reaffirms mutually beneficial economic links, but that won’t ‘assist [China’s] growing military capabilities’ now that those capabilities are beginning to be used in ways that aren’t in Australia’s or the region’s interests.

Hugh’s approach is refreshingly direct: he believes that the core of the issue is that ‘China wants to replace the United States as the primary power in Asia, and we don’t want that to happen’. Both Australians and Americans, Hugh believes, have been in denial about that challenge for over a decade, with Washington awakening to a sense of its new rivalry with Beijing only recently—and unfortunately under an administration driven by the isolationist nationalism of ‘America First’.

Elsewhere, Hugh has outlined the core of the problem for Australia as follows:

As China’s power in Asia grows, its capacity to impose costs on us will grow, and that will give it greater and greater influence over our choices. That’s the reality of power. So our task, as we learn to live with China’s power, is to learn how to make those choices well, so that we can preserve maximum independence over our most important issues at minimum cost. From now on, that is what our foreign policy will be all about.

With all due respect, that sounds like a monochromatic foreign policy—one based on the tactical management of Chinese heavy-handedness rather than on the strategic pursuit of Australian interests.

So let’s start one step further back, by recasting the problem in terms of Australian grand strategy. When we look at the sort of region that China wants and the one we want, what’s the main difference? One—reductionist—answer would say that China wants a prosperous, stable Asia with Beijing at its core, whereas Australia wants a prosperous, stable, liberal Asia where power is checked and balanced.

Building consensus on the goal of prosperity isn’t difficult in either capital. Most states can usually agree to make money together. But the other adjectives suggest a more contentious relationship. What should regional stability look like? How should power be checked and balanced? True, institutions, rules and norms are certainly one part of it, but another part—especially important if the region’s primary power doesn’t accept limitations on its authority within its own domestic polity—derives from the existence of competing centres of power.

Now, what’s the problem? Well, China’s relative power is surging, and future projections of its wealth and clout are sufficiently daunting as to deter some regional players that would prefer a different future from pursuing their goals. Asia’s continuing preference for bilateralism over multilateralism magnifies China’s ability to dominate its smaller neighbours (by dealing with each individually). Meanwhile, the relative power of the US—the principal guarantor of the existing stable, prosperous, liberal regional order—is in decline.

What’s to be done? Keeping the US engaged in the region is a good strategy, simply because it’s the world’s strongest single power, and the designer of much of the current security architecture. But keeping it engaged might be difficult if strategic retrenchment really is the electoral flavour of the decade in America. On the other hand, we probably can’t do much to slow China’s growth.

So how do we get the Asia we want in the face of growing Chinese power and potential American distraction? A range of strategies were fleshed out in the 2017 Foreign Policy White Paper—defending the existing ‘rules’, encouraging economic interdependence, power balancing, and enhancing national and regional resilience.

Yes, rules temper power. And yes, economic interdependence helps prevent the emergence of separate, competing economic blocs. But we need to admit, too, that strategies of engagement haven’t produced the ‘mellowing’ effects that we initially hoped they would. Illiberal great powers—Russia and China—now chip away at the existing international order ‘demanding a modified order that better accommodates the ambitions and appetites of their illiberal domestic regimes’.

So we need to ask ourselves a hard strategic question: what relationship should we have with a rising authoritarian great power that isn’t mellowing? If we’re unwilling to trade away our preferred vision of a prosperous, stable, liberal region, we’ll need to invest more heavily in the other strategies mentioned in the white paper: balancing and resilience.

Our objective should be to shape a regional balance of power more favourable to our interests. Ideally, that means recruiting new supporters to that coalition of powers that favours a stable, prosperous and liberal Asia. A sense that such a coalition exists—even though formalised patterns of security cooperation between its members will probably fall well short of a proper alliance—might stiffen the sinews of Asian policymakers willing to push back against China.

Moreover, we should be exploring options to increase Australia’s own power assets—because a more powerful Australia is also a more resilient one.

It might turn out that none of those strategies avail us. But they suggest a foreign policy that is both creative and consistent—and more satisfying than a bald choice between which great power to follow.

China truth and consequences

A lot of ‘c’ words were tossed at China during the Shangri-La Dialogue—collaboration and competition, coercion and consequences, challenges and choices. The dangers of combativeness. Dark conclusions about China’s militarisation of the South China Sea.

The US promised to compete strongly, cooperate where it could, and make China see the consequences of its actions. Australia preached against coercion.

In the opening Saturday address—the traditional spot for the US Defense Secretary—James Mattis set up the alliterative trail, promising ‘a constructive results-oriented relationship with China, cooperation whenever possible will be the name of the game, and competing vigorously where we must’.

Mattis told the IISS Singapore security conference that competition among nations is intensifying. The Trump administration took a clear-eyed view of this competition, ‘and cooperation with China is welcome wherever possible’. That ‘wherever possible’ line is a screaming modifier, shifting the weight in America’s cooperation–competition calculus.

The US rhetorical clash with China on the Shangri-La Saturday is also a tradition. Reprising last year’s crunch, Mattis was sharp about China in the South China Sea, charging that China has broken its promise not to militarise its artificial islands:

Our Indo-Pacific strategy informs our relationship with China. We are aware China will face an array of challenges and opportunities in coming years. We are prepared to support China’s choices, if they promote long-term peace and prosperity for all in this dynamic region. Yet China’s policy in the South China Sea stands in stark contrast to the openness of our strategy—it calls into question China’s broader goals. China’s militarisation of artificial features in the South China Sea includes the deployment of anti-ship missiles, surface-to-air missiles, electronic jammers and more recently, the landing of bomber aircraft at Woody Island. Despite China’s claims to the contrary, the placement of these weapons systems is tied directly to military use for the purposes of intimidation and coercion. China’s militarisation of the Spratlys is also in direct contradiction to President Xi’s 2015 public assurances in the White House Rose Garden that they would not do this.

Mattis said that Washington won’t ask the Indo-Pacific to choose between the US and China ‘because a friend does not demand you choose among them’. The point the US Defense Secretary stressed during questions was the idea of consequences, as the Indo-Pacific judges China by its actions:

I think there are consequences to China ignoring the international community. We firmly believe in the non-coercive aspects of how nations should get along with each other, that they should listen to each other. Nothing wrong with competition, nothing wrong with having strong positions, but when it comes down to introducing what they have done in the South China Sea, there are consequences … I believe there are much larger consequences in the future when nations lose the respect of their neighbours, when they believe that piling mountainous debts on their neighbours and somehow removing the freedom of political action is the way to engage with them. Eventually, these things do not pay off, even if on the financial ledger sheet or the power ledger they appear to. It’s a very shaky foundation to believe that militarising features are somehow going to endorse their standing in the world and enhance it. It is not. It’s not going to be endorsed in the world.

The consequences argument can apply, too, to the Trump administration launching a trade war that imposes more tariffs on allies than on China. The first question to Mattis was whether picking fights with US partners is going to serve China’s strategic interest in separating America from its friends.

The Defense Secretary’s answer was part rueful, part philosophical:

Certainly, we have had some unusual approaches—I’ll be candid with you, some unusual approaches to how we deal with these issues. But I’m reminded that so long as nations continue dialogues, so long as they continue to listen to one another and to pay respect to one another, nothing is over, based on one decision, one day.

And in Trump world, today’s decision can always be trumped by tomorrow’s different choice.

Australia’s Defence Minister, Marise Payne, added to the alliterative order, arguing against coercion. Her call for strategic competition to be bound by principles and rules had a touch of Trump-flavoured irony. Yet, as she was discussing the South China Sea, her implied target was Beijing (even without naming China). ‘Disruptive changes in international relations when imposed on others create instability,’ Payne said. ‘Adopting a might-is-right approach is contrary to the interests of all nations.’

Rules could adapt and change, but ‘the guiding principle for any process of change must be that one country can’t author rules for others’, especially for the global commons.

Hinting at the chill in Australia–China relations, Payne said:

Nations must also have the right to be free from coercion or criticism when they lawfully and reasonably communicate concerns about the behaviour of others. This extends to the reasonable expectation that rules, not the exercise of power, govern our actions.

On the Shangri-La sidelines this year, Chinese journalists have broken out of the China-team bubble to interview bystanders. Thus, on Saturday your correspondent had a vigorous chat with a Chinese editor, then pontificated for a Chinese video team. Your scribe brushed aside questions about containment of China as the sort of old, outmoded Cold War thinking that China so often criticises in others.

More relevant, I argued, was the US warning of consequences and the Australian argument against coercion.

As an old Canadian mate in the Shangri-La crowd commented, China needs to see the pushback it’s getting at many different levels from many different countries. The consequences are a-coming.

Australia’s real choice about China

Australia’s problem with China is bigger and simpler than we think, and thus harder to solve. It isn’t that Beijing doesn’t like Julie Bishop, or that it’s offended by our new political interference legislation, or that it’s building impressive new armed forces, or staking claims in the South China Sea. It’s that China wants to replace the United States as the primary power in East Asia, and we don’t want that to happen. We want America to remain the primary power because we don’t want to live under China’s shadow.

And that’s a big problem for Beijing. Its ambition for regional leadership isn’t something the Chinese are willing to compromise. Nothing—not even economic growth—is more important to them. So our opposition is a big fault line running through the relationship.

This shouldn’t come as news. China’s ambition, and the problems it poses for Australia, have been unmistakably obvious for a decade, but most of us have been in denial about it. And we all know why. Opposing China would risk the economic relationship, and we cannot imagine a future for Australia without the opportunities that only China can offer. But equally we cannot imagine a future for Australia in which China takes America’s place as Asia’s dominant power, and America withdraws.

So we’ve tried to pretend that our problem would go away, by assuming that America could handle it for us. We’ve been convinced that ‘we don’t have to choose between America and China’ because we have clung to the hope that China, overawed by US power and resolve, would meekly abandon its challenge and accept American leadership in Asia after all.

Washington has been hoping for the same thing. It has also been in denial, unwilling either to accommodate China or to confront it. Few in Washington could consider stepping back from leadership in Asia, but even fewer were willing to face up to the spiralling costs and risks of opposing China as its power grew. So they convinced themselves that China wasn’t serious.

That’s why their response—President Barack Obama’s ‘pivot to Asia’—was so feeble. Its architects assumed that a low-cost, low-risk response would be enough make China retreat, so there was no need to risk an economic rupture, or a military conflict. They massively underestimated China’s power and resolve.

Now, however, they’re starting to wake up to reality. The Trump administration’s new US National Security Strategy, and the defence and nuclear strategy documents which followed, finally acknowledged that China is a serious strategic rival, and committed America to resist it. But nothing was said then or since about how to do that, or how much America is willing to pay.

And that’s because there’s real doubt about whether America’s fundamental interests in Asia really justify the costs and risks of resisting China’s bid. Of course America wants to remain Asia’s leading power, but does it want it enough to confront China head on?

Whatever answer the policy experts in Washington give to this question, it’s abundantly clear that Donald Trump, and the America that elected him, are likely to say ‘no’. As president, Trump has remained true to the isolationist nationalism of his ‘America First’ campaign, and there’s no reason to expect him to change. So while Trump’s America could well blunder into a confrontation with China, it will not marshal the sustained commitment of statecraft, resources and resolve required to resist China’s challenge and preserve the US‑led order in Asia.

This has filtered through to Canberra. Last year emerged as the year that our leaders really started to worry about China because it was the year they really started to worry about whether America could be trusted to fix our China problem for us.

This produced the change of tone from Canberra that has angered Beijing. Before last year we walked both sides of the street. We told Washington that we fully supported them in resisting China’s challenge, and told Beijing the opposite. For all the tough talk about the South China Sea, we did nothing substantial enough in support of America to worry Beijing, and we were careful never to express direct opposition to China’s wider regional ambitions. That kept Beijing happy.

But in the months after Trump was inaugurated, our government decided that Washington’s resolve in Asia could no longer be taken for granted. Trump must be talked out of ‘America First’, and encouraged to stand up to China. Both Julie Bishop and Malcolm Turnbull made major speeches that acknowledged for the first time that the Chinese were challenging the US‑led status quo in Asia, and committed Australia to resisting them.

Then later in the year the government published its Foreign Policy White Paper, which was all about Australia’s determination to resist China’s assault on the ‘rules-based order’—code for US regional primacy. And finally, at the end of last year, the government announced new laws to prevent covert political interference, clearly aimed at China.

That’s when China decided to exert a little pressure. It didn’t take long for Canberra to get the message. By early this year, Turnbull and Bishop were already backpedalling hard. They tried to deny that the foreign interference laws were aimed at China, talked up China’s positive contribution to the region, and even took the remarkable step of repudiating Washington’s new tough language about China as a rival and a threat.

But Beijing hasn’t been assuaged, and so the pressure is still on. It isn’t much so far—at least compared to what they could do if they wanted to cause us real pain. But it’s enough to remind Canberra—and the rest of us—what national power means. It means the capacity to impose costs on another country at relatively low cost to oneself, and China now has that in abundance. We’re being warned.

This problem isn’t going to go away, so we have to make some choices. Now we know that China is serious, what price are we willing to pay to resist it, and how far are we prepared to go? Those choices must be based on a realistic assessment of China’s power and ambitions, and of the cost we will incur by opposing them.

We haven’t had that kind of realistic assessment until now, in part because it has been so easy to accuse those who recognise the reality of China’s power and ambition as advocating surrender to it. That is, of course, absurd. And now, perhaps, we can put this absurdity behind us and start seriously to discuss how to deal with the biggest foreign policy challenge since at least World War Two.

The gift that keeps on giving—to China

All bad management, a business guru once remarked, is taught by example. Donald Trump is teaching a master class on how not to serve as America’s chief executive. By abandoning the thoughtful policymaking of his predecessors in favour of a presidency modelled on reality TV, Trump has failed to articulate anything resembling a credible national strategy.

Instead, what Trump has delivered during his first 16 months in office is a blow to American influence, most notably in Asia. Trump’s misguided economic nationalism—embodied in new sanctions, tariffs and scuttled trade deals—has weakened the United States in the Pacific Rim, and created fresh opportunities for America’s adversaries. Trump’s threatened trade war with China is a case in point.

To be sure, China’s predatory economic practices must be challenged. In reneging on promises of reform and further market opening, President Xi Jinping is reinforcing the state sector against foreign competition while ignoring intellectual property theft. But confronting China will require allies; Trump’s approach will only leave the US more isolated.

Even a cursory examination of China’s economic ties with America’s Asian allies illustrates just how ineffective Trump’s attacks on free trade will be. China is the economic heart of Southeast Asia, accounting for 21% of the region’s exports in 2015. China is also the region’s largest importer, with much of the trade from neighbouring countries comprising electronics and machinery, underscoring China’s role as Asia’s ‘processing hub’.

Compare these numbers to Southeast Asia’s trade with the US, Europe and Japan: in 2015, imports from these economies accounted for over 25% of the region’s total—only slightly more than China’s share. Elsewhere in the region, 25% of South Korea‘s exports go to China. For Australia, which counts China as its most important trade partner, the share is 28%, compared to just 7% for the US, Australia’s third-largest export market.

The political implication of these figures is obvious: China is now Asia’s playmaker, and the US is taking a seat on the bench. Seven of the 11 countries that signed the Trans-Pacific Partnership—the Obama-era initiative to expand trade with Asia that Trump rejected during his first month in office—are now participating in the Regional Comprehensive Economic Partnership, China’s rival trade pact. All 10 members of the Association of Southeast Asian Nations are at the table, along with Australia, New Zealand, South Korea, Japan and India, which have free-trade agreements with ASEAN.

Australia is a good example of a US ally whose leaders share America’s concerns about China’s rising power but also understand the economic imperative of staying in China’s graces. Exports of natural resources, like iron and coal, account for roughly 20% of Australia’s GDP and dominate its economic relationship with China. Australians rightly worry about becoming collateral damage in Trump’s bilateral trade dispute.

The consequences of Trump’s trade strategy aren’t confined to Asia. In Latin America, Trump is not only harming American competitiveness; he is also helping Chinese players establish themselves. While the US remains the region’s leading trade partner, its rising protectionism is allowing China to leverage its economic clout to expand its presence and influence. China now ranks in the top-five export markets for 12 of Latin America’s 20 countries, and is the region’s biggest customer for raw materials. And Latin America is second only to Asia in terms of Chinese investment. Over the past decade, China has committed $140 billion in loans to the region, and Xi has pledged $250 billion in direct investment by 2019.

Trump seems oblivious to the fact that his protectionism has only made China’s work easier. As Trump threatens to renegotiate NAFTA ‘forever’, slashes foreign aid and plans border walls, his counterpart is emerging as the global champion of free trade and multilateral cooperation. Xi has visited Latin America three times since 2014, and in January, China announced that Latin America will be included in China’s massive Belt and Road Initiative. The message to the region is clear: China is here, and it intends to stay.

Whatever Trump expects from his trade bluster, the effect on American influence around the Pacific Rim—and beyond—should not be underestimated. While China’s authoritarian regime faces major challenges in translating its economic might into soft power, its leaders are clearly benefiting by advocating for open global trade.

Previous US presidents have worked hard to craft an integrated economic and strategic approach to America’s relationship with Asia. In contrast, Trump is pitting the US against its Asian allies. Closing this rift will not be easy. Ironically enough, when the time comes to repair the damage, Trump’s campaign vow—‘America First’—will point to where American leaders need to begin.

The double standard of America’s China trade policy

A high-profile United States trade delegation appears to have returned empty-handed from its mission in China. The result is hardly a surprise, given the scale and one-sided nature of the US demands. The Americans pushed for a wholesale remaking of China’s industrial policies and intellectual property rules, while asking China’s government to refrain from any action against Donald Trump’s proposed unilateral tariffs against Chinese exports.

This is not the first trade spat with China, and it will not be the last. The global trading order of the last generation—since the creation of the World Trade Organization (WTO) in 1995—has been predicated on the assumption that regulatory regimes around the world would converge. China, in particular, would become more ‘Western’ in the way that it manages its economy. Instead, the continued divergence of economic systems has been a fertile source of trade friction.

There are good reasons for China—and other economies—to resist the pressure to conform to a mould imposed on them by US export lobbies. After all, China’s phenomenal globalisation success is due as much to the regime’s unorthodox and creative industrial policies as it is to economic liberalisation. Selective protection, credit subsidies, state-owned enterprises, domestic-content rules and technology-transfer requirements have all played a role in making China the manufacturing powerhouse that it is. China’s current strategy, the ‘Made in China 2025’ initiative, aims to build on these achievements to catapult the country to advanced-economy status.

The fact that many of China’s policies violate WTO rules is plain enough. But those who derisively call China a ‘trade cheat‘ should ponder whether China would have been able to diversify its economy and grow as rapidly if it had become a member of the WTO before 2001, or if it had slavishly applied WTO rules since then. The irony is that many of these same commentators do not hesitate to point to China as the poster boy of globalisation’s upside—conveniently forgetting on those occasions the degree to which China has flouted the global economy’s contemporary rules.

China plays the globalisation game by what we might call Bretton Woods rules, after the much more permissive regime that governed the world economy in the early postwar period. As a Chinese official once explained to me, the strategy is to open the window but place a screen on it. They get the fresh air (foreign investment and technology) while keeping out the harmful elements (volatile capital flows and disruptive imports).

In fact, China’s practices are not much different from what all advanced countries have done historically when they were catching up with others. One of the main US complaints against China is that the Chinese systematically violate intellectual property rights in order to steal technological secrets. But in the nineteenth century, the US was in the same position in relation to the technological leader of the time, Britain, as China is today vis-à-vis the US. And the US had as much regard for British industrialists’ trade secrets as China has today for American intellectual property rights.

The fledgling textile mills of New England were desperate for technology and did their best to steal British designs and smuggle in skilled British craftsmen. The US did have patent laws, but they protected only US citizens. As one historian of US business has put it, the Americans ‘were pirates, too’.

Any sensible international trade regime must start from the recognition that it is neither feasible nor desirable to restrict the policy space countries have to design their own economic and social models. Levels of development, values and historical trajectories differ too much for countries to be shoehorned into a specific model of capitalism. Sometimes domestic policies will backfire and keep foreign investors out and the domestic economy impoverished. At other times, they will propel economic transformation and poverty reduction, as they have done on a massive scale in China, generating gains not just for the home economy but also for consumers worldwide.

International trade rules, which are the result of painstaking negotiations among diverse interests—including, most notably, corporations and their lobbies, cannot be expected to discriminate reliably between these two sets of circumstances. Countries pursuing harmful policies that blunt their development prospects are doing the greatest damage to themselves. When domestic strategies go wrong, other countries may be hurt; but it is the home economy that pays the steepest price—which is incentive enough for governments not to pursue the wrong kind of policies. Governments that worry about the transfer of critical technological know-how to foreigners are, in turn, free to enact rules prohibiting their firms from investing abroad or restricting foreign takeovers at home.

Many liberal commentators in the US think Trump is right to go after China. Their objection is to his aggressive, unilateralist methods. Yet the fact is that Trump’s trade agenda is driven by a narrow mercantilism that privileges the interests of US corporations over other stakeholders. It shows little interest in policies that would improve global trade for all. Such policies should start from the trade regime’s Golden Rule: do not impose on other countries constraints that you would not accept if faced with their circumstances.

Lies, damn lies and Vietnam’s trade statistics

On 17 April, Bloomberg reported that China had overtaken the United States as Vietnam’s largest export market. According to figures cited by the news organisation and tallied by the International Monetary Fund, Vietnam’s exports to China totaled US$50.6 billion in 2017, compared to $46.5 billion in exports to the US.

If these numbers are accurate, they would represent a significant shift in the triangular relationship between Vietnam, China and the US. As Bloomberg succinctly put it, the data underscore how the world’s second-largest economy is ‘growing its influence in the region’ at the expense of the US.

But the trade numbers do not tell the whole story; a closer reading suggests they might even be wrong. Preliminary statistics from the General Department of Vietnam Customs (GDVC), which oversees Vietnam’s trade data, contradict the IMF assessment. According to the GDVC, exports to the US last year totaled $41.6 billion, while exports to China stood at $35.5 billion. In other words, by Vietnam’s count, the US remained its largest export market by a margin of 17%, a gap that held steady during the first three months of 2018. Moreover, the GDVC figures show that historic trends in Vietnam’s trade ties have remained intact; Vietnam continues to run a large trade deficit with China and a surplus with the US.

So, what can account for the discrepancies between the official data and the IMF’s figures?

One possible explanation is methodological: the Fund and the GDVC simply used different formulas to arrive at their estimates. But a gap of $15.1 billion on the China side of the ledger makes this highly unlikely. Another possibility is that the IMF sourced its data exclusively from Chinese authorities. But evidence for that scenario is thin.

A third theory—which, admittedly, is impossible to prove beyond a reasonable doubt—may be the most credible: both sides manipulated annual and monthly trade data to bolster their own narratives.

For Vietnam, data indicating lower exports would support the government’s efforts to extend trade deeper into Chinese markets. Plagued by a large and persistent bilateral trade deficit, Vietnamese officials have long requested that their Chinese counterparts allow more imports from Vietnam. The numbers released by GDVC would advance—or at least not undermine—that goal.

For China, on the other hand, inflating the figures for imports from Vietnam could help neutralise such a request, reminding the Vietnamese authorities of how important trade with China is to their country’s economy. Higher trade figures may persuade Vietnam to maintain friendly bilateral ties, and perhaps even to adopt more accommodating positions on thorny regional security issues, such as the South China Sea dispute.

Of course, the Trump administration’s protectionist trade policies could render all of this speculation meaningless. While Vietnam’s bilateral trade with China is expanding and could exceed $100 billion sometime this year, its trading relationship with the US is being hurt by America’s inward turn. Major Vietnamese exporters of seafood and steel have already been hit with new US tariffs, and additional sectors, such as textiles, could be next. With the US having withdrawn from the Trans-Pacific Partnership, growth in bilateral trade is bound to suffer further.

If these trends continue, the IMF’s analysis—as questionable as it may be now—will eventually become reality. And, if China, which has long been Vietnam’s largest source of imports, does replace the US as Vietnam’s most important export market, Vietnam will find it nearly impossible to continue its current strategy of hedging between two great powers. At that point, no amount of creative accounting will be able to mask the new realities of Vietnam’s economic constraints.

The West’s crisis of confidence

In an age defined by US President Donald Trump’s rage, Russian President Vladimir Putin’s revisionism and Chinese President Xi Jinping’s unbridled ambition, the international order is becoming increasingly disorderly, dysfunctional and even dangerous. How did we arrive at this state of affairs? And how can we leave it behind?

Until recently, the era following World War II was a time of benevolent liberal internationalism. The postwar order had begun to take shape as early as 1941, when US President Franklin D. Roosevelt and British Prime Minister Winston Churchill drafted the Atlantic Charter on a ship anchored in Canada’s Placentia Bay. Though Hitler had been victorious on the battlefields of Europe, Churchill and Roosevelt were determined not only to defeat the Nazi onslaught, but also to lay the groundwork for a future of peace and democracy.

They succeeded beyond what they probably imagined was possible. After the Atlantic Charter came the United Nations, the Bretton Woods institutions, the global trade system, the Universal Declaration of Human Rights and much more. During the postwar decades of decolonisation, many new countries emerged, and former enemies united under new alliances and an overarching structure of integration.

China’s great ‘opening up’ and the Soviet Union’s collapse in 1991 marked the start of a quarter-century of truly remarkable global progress. In fact, judging by standard economic, political and social indicators, it might well have been the best quarter-century in human history. There were no major wars between superpowers, global trade expanded and drove economic growth, poverty was more than halved, and rapid advances in science and technology delivered benefits to every corner of the world.

In recent years, however, the world has entered a new phase. The politics of idealism and hope have been replaced by the politics of identity and fear. This trend took root in one Western country after another, but its most notable manifestations have been in the two Anglo-Saxon countries that made the previous period of miraculous progress possible in the first place.

Today, the confused political debates in the United Kingdom are tragic to behold. Since the June 2016 Brexit referendum, Britain has searched in vain for an illusory concept of sovereignty that might prevent the massive loss of international power and influence that awaits it after its departure from the European Union. The kind of global statesmanship that the UK once offered the world has given way to parochial bickering.

But the confused politics of Trump’s White House are of even greater consequence. For decades, the White House was a font of global leadership; today, it is a source of belligerent rhetoric that does not even pay lip service to the idea of a global order. Indeed, the Trump administration’s official National Security Strategy portrays US efforts to safeguard the global order as counterproductive and self-defeating. The future it envisions will be defined wholly by conflicts between sovereign countries.

Revisions to America’s strategic posture would be a reasonable response to Russian aggression and rule-breaking, particularly in Eastern Europe, and to China’s growing assertiveness on the world stage. But the US president’s first instinct should be to defend the international order against rising threats, while making adjustments to account for new realities. Addressing climate change, increased migration, and the revolution in information and communication technologies will require new, comprehensive international agreements to protect the interests of sovereign countries.

Sadly, the pronouncements from Trump’s White House seem to be aimed at undermining any sense of order, with the hope that the US will come out on top in some future Hobbesian struggle for total global dominance. By this logic, international trade should be regulated not by rules and institutions, but through unilateral protectionist measures and arm-twisting. And institutions like the EU—which aims to ensure order and stability through integration—are treated with indifference, if not disdain.

From China’s perspective, the Trump administration’s Hobbesian vision could prove appealing, provided that its economy continues to grow, and that it avoids serious domestic social or political upheaval. After all, with fewer global rules, China will face even fewer obstacles when asserting its growing influence abroad.

In this scenario, the loser would undoubtedly be the wider West, meaning not just Europe but countries like India, which will remain committed to liberal democracy, economic openness and the values underpinning that miraculous quarter-century after the Cold War.

Even barring worst-case scenarios, the West will be facing a new world with new aspirants making new demands about the future. It would thus be a fateful mistake for Western powers to abandon the ideas and institutions that delivered prosperity and stability in previous decades. Above all, the two countries most responsible for creating the postwar international order must not turn their backs on it now.

Relationships between highly asymmetric nuclear powers

The current tensions between Washington and Pyongyang aren’t just about history. Nor are they simply the result of personal frictions between Donald Trump and Kim Jong-un. At their core, they reflect the difficulties that typically attend adversarial relationships between two highly asymmetric nuclear powers.

Bernard Brodie, one of the doyens of deterrence thinking during the early days of the Cold War, canvassed some of the problems in this sort of relationship in his 1958 essay, The anatomy of deterrence. There he considered how the Soviet Union might be strategically hampered by the emergence of a much inferior adversary which could, however, threaten nuclear damage to a small number of Soviet cities. The following extract is taken from pages 7–9 of his essay:

[D]eterrence effect in itself does not depend on superiority … Let us assume that a menaced small nation could threaten the Soviet Union with only a single thermonuclear bomb, which, however, it could certainly deliver on Moscow if attacked … [This] would be sufficient to give the Soviet government much pause … If we think of five to ten H-bombs delivered on as many … cities, the deterrence would no doubt be significantly greater.

If we attempt to plot a curve denoting “deterrence effect” as a function of the numbers of thermonuclear devices expected to fall on the aggressor’s cities … we can surmise that the curve begins at a rather high level of deterrence for the first such bomb, and that while it moves significantly higher as the number of bombs moves beyond one, it does so at a decreasing rate. At a relatively modest number (probably well short of a hundred) the curve is closely approaching the horizontal.

Let’s bring that logic into the current setting. If Brodie’s right, a North Korea equipped with ‘a relatively modest number’ of thermonuclear-tipped ICBMs can be almost as effective in deterring the much more amply-equipped US as the US is in deterring the much smaller North Korea.

Brodie’s assessment is a painful lesson in the truism that nuclear weapons are great equalisers. Sometimes that’s a good thing, because smaller nuclear powers can be forces for good. Cases in which a smaller status quo power uses nuclear weapons to offset a larger revisionist power—France against the Soviet Union during the Cold War, for example—suggest that some asymmetric relationships can make a positive contribution to international stability.

Still, there the asymmetry wasn’t great. Both France and the Soviet Union were members of the Permanent Five of the UN Security Council, responsible for managing international crises on a regular basis.

But weapons that make much smaller powers with revisionist agendas ‘equal’ to great powers with status quo agendas look inherently problematic. A high percentage of recent analysis on the emerging deterrence relationship between Washington and Pyongyang has fixated upon the question of whether Kim Jong-un is rational and ‘deterrable’—that is, on whether the US can reliably deter North Korea.

But turn that question around. How much deterrence of the US does Kim believe he has now bought for himself? And what new freedom of manoeuvre does he think he now enjoys in Northeast Asia because of his capabilities?

One of the main threats that a smaller nuclear power poses for a larger one concerns those long-term effects that even a relatively limited nuclear exchange between the two might have on other, more important, nuclear balances. That threat was always at the core of French nuclear thinking—France couldn’t hope to defeat the Soviet Union in an all-out nuclear exchange, but it could threaten to ‘rip an arm off’ the Soviet Union and leave it a one-armed superpower against its nuclear peers.

That threat has to be a worry for Washington in the event that push ever comes to shove with a nuclear-armed North Korea. Of course the US could defeat North Korea. But at what cost? A nuclear-damaged America would be relatively disadvantaged vis-à-vis Russia and China, less well placed to protect both itself and its allies.

Well, some might argue, Kim Jong-un doesn’t—yet—have any proven capabilities to target the continental US. True, his ICBM tests were flown on highly lofted trajectories. Still, intelligence estimates suggest such a capability is not far away. That’s what lends both urgency and importance to finding a solution to the North Korean nuclear problem.

A relationship of mutual nuclear vulnerability between one country with almost no equity in the international order and another with deep equity in the same order wouldn’t be stabilising. Diplomacy might yet find a solution to that problem. But if it doesn’t, we shouldn’t assume that a comfortable, long-term nuclear deterrence relationship will miraculously unfold as a simple, benign alternative.

Asia after Trump

When the Trilateral Commission—a group of political and business leaders, journalists and academics—met in Singapore recently, many expressed concern about the decline of American leadership in Asia. Every Asian country now trades more with China than with the United States, often by a margin of two to one. That concern has been exacerbated by President Donald Trump’s recent imposition of tariffs and expressions of contempt for multilateral institutions. A frequently heard question in Singapore: will US leadership in Asia survive the Trump years?

History provides some perspective. In 1972, President Richard Nixon unilaterally imposed tariffs on America’s allies without warning, violated the framework of the International Monetary Fund and pursued an unpopular war in Vietnam. Fear of terrorism was widespread, and experts expressed concern about the future of democracy.

The following year, David Rockefeller and Zbigniew Brzezinski created the Trilateral Commission, which meets once a year to discuss such problems. Contrary to conspiracy theories, the commission has little power; but, like other informal channels of ‘track two’ diplomacy, it allows private citizens to explore ways to manage thorny issues. The results can be found in its publications and on its website.

In Singapore, there was no consensus about Asia after Trump. For example, Indian and Chinese members held different positions about the role of China’s ‘Belt and Road’ infrastructure projects. Some Asians and Americans differed over the prospects for a successful resolution of the Korean nuclear crisis, as well as the larger question of whether a China–US war is inevitable. And some Europeans wondered whether the current global uncertainty reflects the rise of China or the rise of Trump.

My own guess, which I warned the group might be wrong, is that the US can recover its leadership after the Trump years if it relearns the lessons of using power with others as well as over others. In other words, the US will have to use its soft power to create networks and institutions that will allow it to cooperate with China, India, Japan, Europe and others to deal with transnational problems—for example, monetary stability, climate change, terrorism and cybercrime—that no country can solve unilaterally. That will require overcoming the unilateral policies and attitudes associated with the rise of Trump.

As for the rise of China, contrary to current pessimism, the US will retain important power advantages that will last longer than even an eight-year presidency, should Trump be re-elected. The first is demography. According to United Nations data, the US is the only developed country expected to contribute to global population growth by 2050. China, the most populous country now, is projected to lose the top spot to India.

The second advantage is energy. A decade ago, the US seemed hopelessly dependent on imported energy. Now the shale revolution has transformed it from an energy importer to an exporter, and North America may be self-sufficient in the coming decade at the same time that China is becoming more dependent on energy imports.

Technology is a third advantage for the US. Among the technologies that will convey power in this century are biotechnology, nanotechnology and the next generation of information technology, such as artificial intelligence and big data. According to most experts, while China’s capacity is improving, the US remains the world leader in research, development and commercialisation of these technologies.

Moreover, in terms of the research base, America has a fourth advantage in its system of higher education. According to a ranking by Shanghai Jiatong University, of the top 20 universities in the world, 16 are in the US, while none are in China.

A fifth American advantage that is likely to outlast the Trump era is the role of the dollar. Of the foreign reserves held by the world’s governments, just 1.1% are in renminbi, compared with 64% for the dollar. When the International Monetary Fund included the renminbi in the currency basket underpinning its unit of account, Special Drawing Rights, many believed the dollar’s days were numbered. But the renminbi’s share of international payments has slipped since then. A credible reserve currency depends on deep capital markets, honest government and the rule of law. None is likely in China in the near future.

Sixth, the US has geographical advantages that China lacks. The US is surrounded by oceans, and Canada and Mexico remain friendly, despite Trump’s mistaken policy of undercutting the North American Free Trade Agreement. China, on the other hand, has borders with 14 countries and territorial disputes with some of the most important, such as India, Japan and Vietnam. This limits China’s soft power. And while geography gives China land-based power projection over the South China Sea, the US has no territorial claims there and enjoys naval supremacy over the remaining 95% of the world’s oceans.

But, most important, the US and China are not destined for war. Neither poses an existential threat to the other. When World War I began, Germany had surpassed Britain in 1900, and British fear of German intentions contributed to the disaster. By contrast, the US and China have time to manage their many conflicts and need not succumb to hysteria or fear.

The US retains not only the power advantages described above, but also its alliances with Japan and South Korea. In any upcoming talks with North Korea’s leader, Kim Jong-un, Trump will have to take care to prevent the Kim regime from achieving its long-standing objective of weakening those alliances.

In Singapore, I quoted Lee Kuan Yew’s response to a question I once asked him about whether China would surpass the US. He said ‘no’, because while China had the talents of 1.4 billion people to draw upon, the openness of the US allowed it to tap and combine the talents of 7.5 billion people with greater creativity than China could. If that openness survives, American leadership in Asia, and elsewhere, will most likely survive as well.