U.S.-China Trade Deal Already in Doubt

 

Trump Chaos Rattles China Trade Negotiations Before They Even Begin

Just days after President Trump claimed success in trade disputes with China, disagreement over the details have emerged. That rings with a familiar tune.

The Trump-Kim Summit this past June in Singapore raised similar doubts about what, if anything, was actually accomplished. It turns out that even with a loosely worded document we now know that nothing was formalized after that highly touted success.

While North Korea continues to develop missiles and possibly more nuclear weapons, Trump complains he hasn’t been offered the Nobel Peace Prize for his efforts. 

The Saturday Trump-Xi dinner in Buenos Aires didn’t even offer anything in writing and journalists were left guessing why applause erupted from behind closed doors as the dinner ended. There was no press conference or photo op to clear up the issue as Trump & Co. headed for the airport.

After landing, Trump claimed Chinese auto tariffs were being lifted. The White House has now walked that back. Trump claimed China would spend over $1 trillion on U.S. goods. His economic advisor Larry Kudlow said that was more aspirational than specific and would be determined by private entities and economic conditions. Trump said if China doesn’t make bold moves in ninety days, he’s Mr. Tariff, and then suggested the timeline might be extended.

No one knows what success looks like three months from now, and that’s a serious problem.

Now China has expressed its discontent with the White House version of winning it all. Yet again, Trump excels at undiplomatic posturing while others are left to clean up his mess.

The pattern here is clear. Trump’s erratic words cannot be trusted, only managed, even by those closest to him. It’s another episode of “Promises Made, Promises Broken.”

U.S. markets didn’t like that kind of uncertainty, and along with other negative financial news on Tuesday, they shed over 3% in one of the worst days in their history. 

Making matters worse, US Trade Representative Lighthizer replaced Treasury Secretary Mnuchin as lead negotiator. Lighthizer is a known China hawk, and while having someone strong-willed and skeptical at the table is an advantage, if the lead isn’t considered to be negotiating in good faith that will not end well for bilateral relations or the international trading system.

The most likely outcome at the end of February will be China claiming they did everything they said they would do and the U.S. saying whatever they did wasn’t enough.

Chinese state media has already started making the list and announced increased punishments for firms found guilty of IP theft, but will they be implemented?   

If Trump really wants to reduce the trade deficit, protect intellectual property, and remove investment barriers, he and his team are going to have to be far more disciplined than they have been to date, and that seems highly unlikely.

Playing loose and fast with the facts, tweeting exaggerated wins, and painting Chinese negotiators into a corner will not make this relationship work. Both sides have to be able win.

 

G20 – What to Watch

G20 – What to Watch

 

 

11/30/18 – Updates on potential Trump-Putin meeting below.

The city center is bulking up on barricades and armed officers as world leaders being arriving for this year’s G20 meeting. Some 22,000 security personnel are being enlisted to keep the peace as anti-globalization and leftist political protests are expected, though they’ll be confined to a largely emptied part of town. The Argentine economy is under significant stress with 45% inflation and the peso more than doubling over the last two years against the dollar. Major parts of downtown will be completely closed, including cafes and shops. 

Saudi Arabia’s Crown Prince Mohammed Bin-Salman arrived on Wednesday and French President Macron is on the ground today. Trump is expected Friday along with several hundred press in tow. How many are fake news, but real people, will likely be tweeted ad nauseam starting late Saturday as Trump winds up his 48 hour stint in Argentina. 

Here are a few of the potentially most controversial issues to come out of the annual gathering.

 

Will there be a joint statement? 

After the debacle at APEC where the U.S. and China were at loggerheads over the final text and in an unusually thuggish move, the Chinese delegation stormed the offices of the Papua New Guinea Prime Minister’s office demanding changes. In the end there was no agreement over language for a final statement, the first time since APEC’s founding in 2003. 

For context, those final statements are mostly aspirational with very watered down, benign language that all participating countries can sign off on. They aren’t even legally binding. Early drafts are usually negotiated well in advance.

Will the same happen at the G20 with an even more complex set of issues in play including climate change (which Trump doesn’t believe is a scientific fact), migration (U.S. troops still on the border with Mexico), economic growth, health, sustainable development, the international financial architecture, and a host of other issues in addition to an “Action Plan.”

For comparison here’s a link to last year’s statement. 2017 G20 Leader’s Declaration 

 

Lots of Deals, or Not

Part and parcel of G20 gatherings are major business deal announcements and project financing, aka deliverables. Most, if not all of these, have either been in the works for months or already started, but it makes the event look like a venue where things get done. China is funding Argentina’s fourth nuclear power plant and if the proliferation of China’s ICBC bank branches across the capital are any indication, financial ties are strengthening even during Argentina’s economic downturn (Citibank sold its retail operations to Santander in 2016 further shrinking U.S bank presence in the country.)

Teatro Colón (Colón Theatre) in Buenos Aires
Site of cultural event for Leader’s Summit

What, if anything, will the U.S. be announcing in terms of large deals in Latin America? The re-negotiated NAFTA with Mexico and Canada is already old news as is Argentina’s new beef exports to the U.S. China’s financing largesse is likely to overshadow any announcements by Trump unless the numbers are “bigly” and “yuge.” There are no signs of that happening.

Trump-Xi Statement

Rumor has it Trump and Xi are meeting for dinner on Saturday night, with the venue and menu yet to be reported. The outcome of that feast may well determine the near-term future of global trading relations, major stock market movements, and a wave of punditry over the temperature of a new Cold War. Trump’s economic adviser, Larry Kudlow, tried to strike a positive tone this week suggesting a deal could be made over the tit-for-tat tariffs that have roiled markets, while hedging with a statement that China needs to offer more. Trump, with his illimitable bravado, threatened even more tariffs.

Meanwhile China’s President Xi continues to travel the world (most recently Spain) and continues to tout support for free markets and the allure of China’s growing market. So far there’s been no mention of structural reform and there likely won’t be. State-owned enterprises are a fixture of China’s Communist Party rule despite its turn towards capitalism, and no threat from the U.S is going to change that. 

 

Trump-Putin Meeting

Update 11/30/18 12:54 – Russia says a meeting with Trump is still on as with other leaders. WH says nothing has changed. They may be splitting hairs on what “meeting” means. Technically a “pull aside” is not an “official” meeting since it doesn’t involve a formal sit down with advisors, etc. and can take place for a very short time. A pull aside also doesn’t carry the same gravitas as a formal meeting, but leaders still talk to each other, and usually without press or even a briefing afterwards.

Update 11/29/18 11:45 – Trump tweets cancellation of his G20 meeting with Putin citing Russia’s continued seizure of Ukrainian ships and crew. That leaves door open if they’re released in the next two days, but suspicions swirl that this has to do with more Cohen revelations of pursuing a Moscow deal during the campaign.

Official White House Cancellation of Putin Meeting Announced via Tweet

As of 11/29 the meeting has been cancelled via Trump’s tweet and then on 11/30 Russia says they will still meet. Who knows what “meet” means anymore.

No matter how this pans out, the on-again, off-again announcements make the U.S. look weak and confused. If Trump does end up meeting Putin, even in an “unofficial” pull-aside, he appears to be dancing to Russia’s balalaika (stringed Russian musical instrument.) There will be no time for an in depth discussion of Iran, missile treaties, Ukraine, North Korea, Syria, or a handful of other pressing issues. 

It’s amateur hour in Buenos Aires for the U.S. delegation, in part or by design thanks to Trump’s inability to stay on point and engage with the international community in any strategic way. Have no doubt though that WH Comms will spin this as a series of successful events during an intense two days of high stakes diplomacy.  

. . . It will certainly be a whirlwind few days of summitry, though don’t expect any mountain peaks to be topped with major announcements. 

If you like this post please share it widely and often. For Twitter updates join the conversation @brianpklein.  Thanks.

Of Three Minds

The age of mindspeak, communicating brain-to-brain, may arrive sooner than expected if recent networking advances pan out.

Researchers at the University of Washington and Carnegie Mellon have developed a three-person, brain-to-brain, communication system that utilizes EEGs to detect “signals” from one person and sends magnetic stimulation to the brain of another. 

According to the MIT Technology Review, we may be on the cusp of “cooperative problem-solving by humans using a ‘social network’ of connected brains.”

In Ursula LeGuin’s 1969 classic “The Left Hand of Darkness” the main character Gently Ai can mindspeak with fellow Terrans. Since people could literally see what was on another Terran’s mind they had achieved a straight-talking society devoid of deceit (and duplicitous politicians.) Could mind-to-mind communication eliminate lying and create community in a shared mindspace?

However intriguing the idea, the recent experiment doesn’t go as far as some might think towards live-streaming our thoughts.

A “signal” was detected when the senders looked at or avoided looking at a flashing light. That changed a detectable brainwave frequency which in turn became a signal sent to the receiver, who either saw a flash of light from a magnetic pulse to the skull, or not. And ta-da, communication.

Importantly this wasn’t pattern recognition of complex neuronal nets. Simple signals like this won’t do the trick when it comes to communicating thoughts.

True mind-to-mind communication devices need to be able to do more than just pick up brain waves emanating at skull level. Billions of connected neurons fire in three-dimensional space. Detectors would have to be exquisitely sensitive to pick up and differentiate these subtle nets buried within nets of similar looking electrical signals.

Mental images add more complexity. Where within these incredibly dense neural networks does conscious experience emerge? That remains a mystery to neuroscientists and philosophers of mind alike. Are the patterns of neuron firings that generate the mental image of an apple, for example, even the same from person to person? No one knows.

There’s also a lot of verbal garbage floating around in our minds that one wouldn’t want broadcast to another person. Meditators routinely observe this chatter of personal stream-of-consciousness. A mental filter would be crucial to refining intentional messaging. 

Even then, without the physical cues of face-to-face communication it might be impossible to tell the difference between a sarcastic quip or a simple observation that, say, engaging in Twitter political arguments is a tremendous time suck.

Since the internet already does a good job of connecting across distance and time, is there any advantage to mindspeak? Augmented reality glasses may already be the next step in hands-free communication with MagicLeap’s Lightwear, Microsoft’s HoloLens, Google’s Glass, and the Meta 2 all promising high-definition, seamless, digital communication meshed with the physical world.

Still, the research is intriguing for the detection and transmission of crude brainwaves. The field is developing rapidly and head-mounted detectors, along with some that connect directly to the brain, can now enable users to remote-control robotic arms and move cursors around a screen. That’s a significant step up from mouth or eye-movement controllers for paraplegics and those suffering loss of nerve or muscle control. The U.S. military is even experimenting with mind-controlled robotic soldiers

For now, though, we’re still going to have to rely on instinct, experience, and media to help decipher our fellow human beings. Using technology has its limits. Despite the “connectedness” of social media people already feel increasingly isolated, no matter how many Facebook or Instagram friends they have. 

The amazing biology of skin, muscles, eyes, ears, vocal chords, and hand gestures still hold the best promise of understanding each other with an in-person chat and the art of conversation. In this increasingly polarized, tech-obsessed world a coffee-house or couch may be all the tech we need.

Related Reading: 

Trump’s Dangerous China Trade Gambit

Update 9/17/18: The Trump administration has announced a 10% tariff on $200 billion in Chinese imports that will rise to 25% at the end of the year. U.S. consumers will bear the brunt of what is essentially a tax passed on as higher prices.

China has said they will not negotiate if these tariffs are imposed. Expect retaliatory Chinese tariffs and a raft of new restrictions on U.S. businesses as Trump escalates his trade war.

Revised list of U.S. tariffs via USTR website (here).

China has said they will not negotiate if tariffs were imposed. Expect retaliatory Chinese tariffs and a raft of new restrictions on U.S. businesses as Trump escalates his trade war. 

A dangerous new phase in Trump’s trade war is about to begin when the $200 billion in U.S. tariffs on Chinese goods comes into effect soon. Everything from electronic components to auto parts and textiles will be affected, though notably U.S. consumer goods including toys, cell phones, and pharmaceuticals were left off the list. Someone in Trump’s orbit must have realized that the consumer backlash on these items would mean a Republican hit in the midterms.

While this may look like a giant game of chicken, neither Trump nor Xi is likely to swerve anytime soon. Some China policy advisors have come to the conclusion that Trump’s true intention is to weaken China, not negotiate in good faith towards resolving long simmering trade tensions. A segment of hard-liners in Beijing always interpret U.S. policy as a direct threat to Chinese interests. They’re often wrong, but this time they may be on to something.

Leaked, off-the-record comments made by Trump during an interview with Bloomberg, as reported in The Star, suggest that Trump is only interested in win-lose scenarios. He reportedly said that he has no interest in conceding anything to Canada in ongoing NAFTA trade talks and Canadian negotiators seem to agree, noting a complete lack of flexibility on the U.S. side. Talks with Canada have since broken down.

That’s a death blow to constructive negotiations.

Trump’s refusal to offer concessions does not bode well for U.S.-China economic relations. The latest round of trade talks broke down after two days without any plan to renew discussions, and the first tranche of U.S. tariffs kicked in on $16 billion worth of goods.

While Trump thinks “trade wars are easy to win”, he is becoming ever more isolated not only from facts, but from his advisors in general. His own narcissism, on full display in excerpts from Bob Woodward’s new book “Fear: Trump in the White House” suggest nothing and no one can change his penchant for causing chaos if left to his own instincts. There are only so many times an order can be ignored or a paper can “go missing” from his Oval Office desk.

Add to that the misinformation bubble tightening around him and his warped perceptions are likely to lead to even more problems. His chief economic advisor, Larry Kudlow, recently told him that the Chinese economy is looking weak, giving false feedback that either Trump’s actions are already bearing fruit or now is an opportune time to pressure Beijing.

Xi Jinping is not likely to back down in the face of an aggressive U.S. push on trade. Quite the opposite. As China’s military build-up in the South China Sea illustrates, their rhetoric of a “peaceful rise” and “biding one’s time” has come to an end. 

Despite economic difficulties, and there are many, from decades of easy money, loose financial oversight, and rising debt, China’s leaders have been exceptionally adept at managing through difficult periods. The entire financial system is commanded by the Communist Party. The renminbi, despite early signs of increased convertibility, is not freely traded. Exports, as a total percentage of China’s economic activity, remains relatively low and trade with Europe and the rest of Asia are unlikely to be affected by the latest eruption from another of Trump’s late night Pennsylvania Ave. rants. 

China’s economy is still largely insulated from the worst of what a sustained trade war might inflict on its economy. A slowdown in trade with the U.S., at least in the short-term, is unlikely to cause significant pressure. This trade war may actually accelerate China’s transition to a more consumer-oriented economy while other countries/regions, including the EU, Australia, and Japan, gain greater market share.  

The real stakes here are a lasting break-down between two of the world’s largest economies that goes far beyond tariffs. 

Normally foreign policy issues including security and trade, are addressed separately. Trump has consistently blamed China for impeding progress on North Korean denuclearization and then linked that to his tariff policy. With increased CFIUS reviews, a necessary effort to reduce potentially damaging Chinese government interference in the U.S., the hardliners in China are likely to conclude that nothing is to be gained from constructive negotiations across an ever widening number of important bilateral and multilateral issues. 

No one doubts that China has been abusing the international trading system for years at the expense of U.S. companies. Intellectual property theft, market restrictions, counterfeiting of drugs, and a host of important issues need to be addresses, but a trade war is one of the least effective ways to accomplish these goals. Tariffs are simply the wrong tool for the job.

Once negotiating trust is lost, the dangers of misperception rise exponentially. Everything Trump does now may be seen as directed at Xi’s hold on power and China’s system of government. An external threat is an easy cause to rally around and China has no shortage of nationalistic tendencies at the moment. If relations become polarized there’s nothing easy about walking back form the edge towards the negotiating table again. 

Wall Street’s GoldmanSachs, JPMorgan and UBS are all warning that a wide-ranging trade war will lead to a bear market as corporate earnings and investment take hits they cannot easily ignore.

As U.S. consumer prices rise and companies lose export markets, Trump will no doubt think he’s winning. The November mid-terms will show whether the nation agrees with him or not.

Trump’s China Trade War – Attack on Consumers

The next tranche of U.S. tariffs on $200 billion worth of Chinese goods are about to hit. Rather than being largely invisible to the public like the first $50 billion, round two includes seafood, bicycles, suitcases, bags, carpets, air conditioners, and sports gear (an exhaustive list of over 190 pages can be found as a USTR .pdf file here.)

(DoD Photo By Glenn Fawcett – Wikimedia Commons)

Other imports subject to tariffs this time around include auto glass, tires, engines, iron, steel, flooring, and construction tools. A visit to Lowe’s or a home improvement project will cost more, along with new cars that use China-made inputs.

This is the beginning of his attack on consumers, but not the worst yet. Some of the most popular consumer items including toys, cell phones, and pharmaceuticals, were not included. A consumer backlash is the last thing the Trump administration needs right now as polls continue to show Republican candidates struggling in the run-up to the midterms. The widespread business outcry would also be hard to contain.

Still, this latest round of tariffs and the failed recent trade talks suggest more problems ahead for the relationship as both Trump and Xi harden their positions. 

Some China policy advisors have concluded that Trump is hell-bent on weakening China. That view casts the tit-for-tat tariff struggle in a far more damaging political light. Xi Jinping will be easily backed into a corner where he has no choice but to fight and show his people how strong China has become.

Trump’s advisors meanwhile, including Larry Kudlow, are feeding him the false impression that China’s economy is on the ropes and ripe for disruption. With a “winner take all” approach Trump will have to keep ratcheting up the pressure, no matter how much he breaks in the process.

With so much distrust and misinformation flowing freely, expect this dispute to go well into 2019 and affect consumers far more than at present.

The U.S. can include almost $200+ billion more in traded goods. China, out of categories to include by then, can opt for a trade war by other means by restricting U.S. business operations and increasing scrutiny of foreign investment.

To be sure this is no easy win for Trump, no matter how many times he says it. Tariffs are a blunt instrument. Come January the domestic environment, including Congress, may not be so supportive of his “get tough” efforts, which will have done little except to increase consumer prices and the cost of doing business.

Brain Meet Computer- Elon Musk’s NeuralLink

Artificial intelligence – the ultimate tech disruptor some may fear has just gotten another boost. Elon Musk’s new company, NeuralLink, is exploring brain chip implants according to the Wall Street Journal (paywall).

The Verge quotes Musk from a Dubai conference saying, “Over time I think we will probably see a closer merger of biological intelligence and digital intelligence.”

So far, brain-computer interfaces focus mainly on medical applications with embedded, electrical stimulus helping reduce seizures. A prototype neural lace dates back to at least June, 2015 when scientists embedded the device in living mice.

Investors, neuroscientists and futurists see cognitive enhancement as the logical next step.

While this may seem far-fetched at the moment it was only a few years ago when pundits said that an electric vehicle company would never thrive. Tesla’s market cap crossed $45B in March.

Doubters said a rocket couldn’t fly into space, launch a satellite, and then land upright back on Earth. SpaceX has put that notion to rest. HyperLoop, space tourism, human life on Mars — none of these are so far-fetched anymore.

I thought I was writing speculative fiction with Ocular Rift, about a near-future where citizens are divided by version and brain-tech Immersives rank highest among them. Now, I’m not so sure. Shameless plug: New chapters were just added. Read for free here and let me know what you think.

 

Photo: Lieber Research Group, Harvard University

What the China Stock Market Crash Really Tells Us (and What It Doesn’t)

Monday morning headlines were more sobering than a double shot of espresso, adding anxiety to an already tumultuous few weeks in China. The Shanghai index dropped 8.5%, in one day, again. This after a see-saw struggle to regain momentum with similar drops from mid-June’s dizzying peak of over 5,000.

The consequences of such a serious correction, with a Monday close at 3209.91, are neither dire nor surprising and the ensuing panic will likely bring out a host of incorrect linkages.

Here are three misconceptions of what the crash seems to mean, but doesn’t.

1. The China market crash will destroy the U.S. economy

U.S. exports to China totaled a mere 7% of total U.S. exports year to date. Canada and Mexico represent a combined 34%.

Exports in general make up an extremely small percentage of the U.S. $18 trillion economy (about 8%) and exports to China represent an even smaller amount.

Over two-thirds of all U.S. economic activity is driven by consumers. The biggest impact on that activity is whether people feel they have more money to spend today than yesterday, not on whether day traders in Pudong are pulling their money out of Sinopec shares.

2. Shanghai and Shenzhen stock markets represent the broader Chinese economy  

Usually a broad-based stock market sell-off represents a belief that the underlying economy isn’t going to do as well going forward as it has in the past. That’s the rational explanation assuming near perfect knowledge of economic conditions. Even the U.S. market doesn’t work that efficiently (there are sell-offs even without new negative economic information.)

In China, knowledge of the broader economic slowdown has been around for a while. If the markets were rational they should have been dropping when the government announced lower growth targets back in March. They should have dropped as alternate economic measures hinted that the official 7% growth rate might not be reached.

Instead they continued to climb based primarily on two non-economic beliefs. The self-fulfilling prophecy that the market could only go up and that the Chinese government would prop up any market weakness. Win-win.

Since domestic savers have very limited choices of where to put their money, once the real estate two-step dance was over (buy one to live-in, buy one to hold) the stock market became the only game in town attracting a flood of capital. That rush caused prices to rise which attracted even more investment, much of it borrowed on margin. Thus the illusion of a perpetually rising market.

The Shanghai composite has now dropped below the magical 3,500 level where many believed the Chinese government would step in with massive buying to push prices back up. The illusion of invincibility appears to be faltering. Meanwhile online sales in the real economy continue to expand.

In this market there is no irrational exuberance with Chinese characteristics, just irrational exuberance as rationality returns to the market.

3. The China sell-off is similar to previous Asian financial crises   

In 1997 the Thai Baht came under heavy pressure resulting in large scale contagion throughout the region. A heavily reliance on trade with a market-determined exchange rates drove this spread. China has neither.

China’s yuan, despite recent changes, remains a managed currency. The government still decides on its opening daily price. That means speculators cannot significantly alter its value beyond a government imposed trading band of +/- 2 percent per day.

China’s economy is also far less reliant on trade than in the past as government investment in infrastructure as well as real estate development have become main drivers of growth. Of those industries dependent on trade China’s recent devaluation made Chinese exports cheaper (a dollar or euro buys more today than in the recent past).

What does the recent sell-off really tell us?

The Chinese government is going to have an increasingly difficult time trying to stop the carnage. Despite conventional wisdom, it does not have unlimited power. By even trying to manage the sell-off, policymakers have placed themselves in an extremely difficult situation.

If they can’t right the market as people expect the government looks weak. If they impose even more draconian rules to stop sellers from liquidating they may kill interest in the market as a whole. Lose-lose.

Apple’s Tim Cook, for one is not that concerned about purchasing habits in China. Let’s hope that the nascent middle class has more cash stashed at home that they’re willing to spend than most people think.

Meanwhile the China market crash has caused a flash sale on a host of solid U.S. equities.

China Devaluation Latest Sign of Market Weakness

The People’s Bank of China (PBOC) devalued the renminbi yesterday in the latest sign that market forces continue to weaken in the world’s second largest economy.

Exports have fallen. Growth is likely far slower than the official 7% rate. Electricity usage is down. Steel production has declined. Infrastructure investment yields less impact. Even demographics highlight a shrinking workforce (enter the robots). And then there’s the stock market, largely divorced from the underlying economy and gyrating like hips at a hula hoop competition.

Currency devaluation will do little to reverse these trends.

As a short term fix it may help exporters whose goods are now cheaper to buy abroad, slow capital flight (it costs more to convert renminbi into other currencies) and potentially attract more foreign investment into the country (a U.S. dollar today buys more renminbi than a dollar yesterday).

But the underlying economic uncertainty in China’s partial transition to domestic led growth will continue to weigh heavily on the minds of international investors and policymakers alike.

If China truly wants to make the renminbi a global reserve currency the PBOC will have to reverse itself and let the currency float freely like the yen, euro and pound. That requires giving up managing a trading band around a fixed daily rate. Economic conditions would have to improve significantly before moves in that direction resume (almost certainly a gradual step-by-step process).

None of this means a hard landing for China’s go-go economy, but resorting to a currency devaluation highlights the limited policy options left for a government navigating increasingly choppy waters.

Remaining moves (and ones largely ignored to date) include government heavily investing in a social safety net, improving health care coverage and promoting more affordable housing. That will allow households to free up some of their savings to spend and spur new business creation.

Until this happens expect more partial solutions and continued volatility.

Does Anyone Really Know What Time It Is In North Korea?

Update 2018 – Relations between North and South Korea have improved over the past year to the point where North Korea has now re-set its clocks to be in sync with its southern neighbor.

World_Time_Zones_MapIn yet another bizarre move by North Korean dictator Kim Jong Un, official time in Pyongyang will officially roll back 30 minutes on August 15th. While not unheard of in the annals of geopolitics (New Delhi and Islamabad diverge by half an hour as well), the move is a decidedly cold war maneuver that matters little to the rest of the world.

Re-jiggering airport information will be relatively easy with so few flights in and out of the capital. Train schedules need little adjustment considering the extremely limited service with China, its only ally (loosely defined).

Why is Kim asserting his right to bend the space-time continuum above the 38th parallel north to the Yalu and Tumen rivers? After executing high ranking leadership and family members it appears that he still needs a symbolic boost to assert a Kim 3.0 leadership. Harkening back to a World War II propaganda cliché he’s freeing North Koreans from the legacy of Japanese imperialism.  Little else seems to have changed in the isolated and perpetually dark-after-dusk hermit kingdom.

If waking up to best of 1960’s-styled patriotic music on the government-controlled radio station weren’t enough, the capital’s citizens now sacrifice a ceremonial 30 minutes so the country can exist in a time zone of Kim’s own making.

Unfortunately this will do little to counter endemic poverty, international isolation and the ignominious title of being the only country left in the world still fighting a last century war (if the Iran nuclear deal actually goes through).

Arm-chair criticism aside some change is in the air. Reuters has an official Pyongyang bureau and even the North Korean embassy in Beijing, once a mysteriously inaccessible outpost, has opened its doors to journalists (no questions allowed during press briefings, however).

It looks like Kim wants to engage with the outside world, if only on his own terms and largely with the same missile-rattling and provocations marking over half a century of mistrust. Most recently North Korean soldiers planted wood cased landmines on the South Korean side of the demilitarized zone resulting in two serious injuries to ROK soldiers.

And yet the Kaesong Industrial Complex keeps churning out near slave labor-produced goods where workers, despite agreements to the contrary, receive wages only from the North Korean government and not their South Korean employers.

Manic engagement remains the norm. Hard currency continues to flow north while the DPRK attacks one of its only business partners, no matter what time it is.

In homage to the title of this blog post here’s the 1969 hit by Chicago.

U.S. Needs an Asia Re-Pivot

Legacy must be on Obama’s mind these days as his two-term presidency nears an end. It might seem early, but the approaching 2016 election cycle starts in earnest as soon as Hilary Clinton announces her candidacy. That could be only months away. Then the media cycle fills with coverage of every presidential hopeful’s latest utterance and Congressional paralysis settles in.

Little can be done in twenty months that hasn’t been accomplished in six years save for some much needed focus on longer-term policy. This positioning was supposed to include an “Asia Pivot”, loosely defined and broadly conceived. So far it has lived up to its conception.

Enter news of a China-led3-23_aiib_2 Asian Infrastructure Investment Bank (AIIB) featuring participation of major allies the UK, France, Germany, Australia, South Korea and now Japan*. Glaringly absent, the U.S.

What’s stopping U.S. involvement? Partly an inherited pride from post-World War II institution-building that created the IMF and World Bank. Opponents highlight the risk of the bank becoming a potential instrument of Chinese regional soft power, a potential lack of transparency and less stringent lending standards that may erode development criteria created over the past several decades. These include social imperatives, environmental standards and labor protections.

While these remain reasonable concerns, China already lends heavily throughout the region. No amount of outside pressure has influenced how this aid has been disbursed or under what terms.

Only involvement with this new multilateral institution opens the door to engagement with China and the region on development issues.  With little cost, potentially none at first except for some diplomatic formalities, the U.S. could play an influential role in the first round of serious regional economic institution building since the 1966 formation of the Asian Development Bank (ADB).

Foregoing a role, even a limited one, pivots the U.S. further away from Asia signaling that the U.S., while espousing support for regional integration, does little to back-up those ideals.

As regional trading patterns increasingly revolve around China’s economy a new constellation of partners will define the regional development agenda, with or without U.S. involvement. Avoiding the AIIB risks forfeiting hard won gains. Asia will then see the U.S. primarily through a narrow security lens.

Refusing to work with China and the rest of Asia, even when the terms are not ideal, is not a legacy worth leaving.

* Note: After publication Japan changed course and announced it would not be joining the bank at this time.

@brianpklein

For more on the issue see:

Image: Xinhua/Li Xin