Trump’s Diplomatic Reality Show Hits Summer Re-Run Season

Photo: AFP

This op-ed appears originally appeared on the SCMP website 7/5/19.


Last Sunday, US President Donald Trump crossed the guarded border in Panmunjom, a village in the demilitarised zone between North and South Korea. He smiled and shook hands with North Korean leader Kim Jong-un as photographers rushed to capture the history-making moment. This was, after all, the first time a sitting US president had set foot in reclusive North Korea.

What could have been a breakthrough meeting between the last cold war rivals instead devolved into yet another photo op for the White House family album.

Meanwhile, Trump gains little from giving away personal meetings like candy from a cheap dispenser.

A one-hour-plus Trump-Kim meeting followed without any discernible outcome, other than that the negotiators will get back to negotiating. So we end up where we started, sold on an empty victory as the Donald Trump diplomatic reality show goes into its summer rerun phase.

Under an administration that is obsessed with camera-ready events rather than serious strategy, the country’s credibility around the world continues to decline.

Imagine if this effort had gone into concluding a comprehensive treaty with the North, eliminating the missile and nuclear threat and establishing a durable peace on the Korean peninsula. Then this meeting might have been worth something.

Instead, Trump love-bombed Kim. This flattery may be Trump’s attempt to get the reclusive leader out into the world and impress him with the riches that could be his if he would give up his nukes – except that Kim is not that naive. To believe that Kim would succumb to Trump’s charms and miraculously give up weapons he thinks ensures his country’s survival shows a remarkable lack of sophistication on Trump’s part.

While the White House preoccupies itself with staging publicity stunts, North Korea keeps winning, the longer Kim holds out for a deal. Stringing Washington along is cost-free and gives the young leader larger international exposure and some semblance of overseas influence. Also, perhaps more importantly, it buys him time to continue developing his nuclear arsenal.

Meanwhile, Trump gains little from giving away personal meetings like candy from a cheap dispenser.

The administration’s preference for optics over policy is not limited to North Korea. Meeting Chinese President Xi Jinping at the Group of 20 summit in Osaka, Trump eased national-security restrictions on Chinese tech giant Huawei in exchange for a promise of increased Chinese imports of US goods. China was already buying large quantities of US agricultural products before he imposed tariffs – so yet again, we have an apparent development that just pushed the trade talks back to where they started.

However, Trump’s sudden back-pedalling on Huawei – like his flip-flop on ZTE, another Chinese smartphone maker that had been banned from buying US components after breaking US sanctions against Iran – only adds to other countries’ concern. With Trump, everything is a commodity to be traded.

On Iran, the White House has shown a propensity for haphazard thinking. After repeatedly warning Tehran that shooting down a US drone and attacking ships in the Strait of Hormuz would result in decisive action, Trump suddenly reversed course. He said he was concerned about the loss of life. But it wasn’t a convincing excuse because military commanders could have easily offered other targets or options for retaliation if that was the major issue.

Impulsive and consensus-bending actions are now being emulated among US allies. Japan and South Korea have, in the past, worked in concert on economic and security issues. At the G20 summit in Osaka, both countries adopted a declaration to “realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, to keep our markets open”.

Yet, within days, Japan imposed restrictions on hi-tech exports to South Korea. The sudden action appeared to be in retaliation for a top Korean court ruling on Japanese compensation for wartime forced labour, an issue which Japan says it settled under a 1965 treaty.

The world will be worse off if this rot continues. Back in the US, domestic politics is also replacing substance with style and made-for-television flash. According to a Pew survey in June, an overwhelming majority of Americans – 85 per cent – believe that political discourse in the US has become worse, and 55 per cent blame Trump. Huge numbers believe that political debate has become less respectful, fact-based, and substantive.

Leadership has always had an element of stagecraft – grand settings for formal talks, the glare of press corps lights, red carpets. “Politics is show business for ugly people,” as the saying goes. But leaders have to be judged by what they actually accomplish.

So far, global leaders have willingly participated in Washington’s publicity stunts, but as the ties that bind nation to nation slowly unravel, international cooperation will become more difficult. Not only is the world less safe as a result, the preference for symbolic gestures over concrete action also encourages a rise in personality politics.

Even Trump admits in his book Trump: The Art of the Deal: “You can’t con people, at least not for long … if you don’t deliver the goods, people will eventually catch on.” The only question remaining is how much longer this con that has lasted 2½ years can keep going.


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No Deal, No Problem – A Trump-Xi G20 Meeting Is Already a Win

Illustration: Craig Stephens

This op-ed originally appeared in the SCMP on 6/24/19 and has been updated below.

Update: According to news reports (SCMP/Politico) Trump and Xi have tentatively agreed to a trade truce in the run-up to their Sat. 6/29 meeting at the G20 in Osaka, Japan. Preliminary press releases reportedly indicated that the U.S. would not impose new sanctions on an additional $300M in imports from China.

Presidents Donald Trump and Xi Jinping are finally meeting on Saturday at the Osaka G20 Summit. For those hoping that a resolution to trade tensions is near at hand, however, it is best to lower expectations now.

Neither side is itching for a compromise that could be easily interpreted as weak or conciliatory. Quite the opposite. If there was a meter measuring market pain for both countries, it has not yet pinged high enough for either side to change its position. That is what it will take because the tariff feud has turned into a contest of wills over a much broader geopolitical struggle.

Trump is holding fast. He gloated over his tough China stance to an adoring crowd of 20,000 fans during his 2020 Presidential campaign rally in Orlando, Florida. While his understanding of trade complexities can be charitably described as confused, he proudly declared that Americans were not paying for the tariffs, despite all evidence to the contrary.

The best the world can hope for is a pause between the two with neither side looking like they are “giving in.”

This followed not-so-veiled threats that if the meeting didn’t happen Trump would immediately impose additional tariffs on the remaining $300 billion of Chinese imports. He remains convinced that the US has the upper hand and “China will have to make a deal.” These are not the words of a leader convinced he has to compromise, even though he offered conciliatory words about how strong of a leader Xi is and their good personal relationship. 

The Trump administration is already walking back expectations of a major breakthrough. Commerce Secretary Wilbur Ross, speaking to Bloomberg at the Paris Air Show this week said “eventually we will have a deal with China, but I don’t think it will come directly out of the G20. The G20 is 40,000 foot level kind of discussion.” Principles for going forward, he went on to say, would be the best case.

It’s hard to imagine what principled negotiations would look like when there has been so little of it in the past. Sending mixed signals is Trump’s forte, it’s how he keeps everyone guessing, as if that’s some masterstroke of negotiating leverage. It isn’t. An impulsive strategy like this builds mistrust and uncertainty, the opposite conditions for effective negotiations.

Xi also shows no signs of compromise. Economic growth may be slowing, from manufacturing to car sales to exports and foreign direct investment, but the policy pumps are just turning on to push the economy forward again. “Soft” diplomacy has begun to turn hard with academic program cancellations, delayed visa issuances, and anti-US rhetoric on state-controlled media. These are not the signs of a leader ready to compromise either.

More importantly stark differences remain between both sides. The US wants fundamental changes to China’s system of state-owned enterprises. The state sector is one of the few remaining vestiges of party control over the economy and Xi would have to damage his own base to satisfy Trump’s demands. This looks increasingly like a non-negotiable issue.

President Xi, in agreeing to the G20 meeting, said he wants Chinese companies to be treated fairly, an oblique reference to letting the Huawei issue go. Trump has casually suggested the company could be included in a trade deal, but this further muddies the waters of what constitutes a national security threat versus a political punching bag. Congressional backlash to softening his stance would be swift and unforgiving.

Instead, the best the world can hope for is a pause between the two with neither side looking like they are “giving in.” 

The G20 is a perfect venue for these gestures, with its traditionally grand shows of diplomatic pleasantries. If Trump and Xi appear together, shake hands, and smile, consider that a small victory. If a process or roadmap is announced, then at least both sides can go back to their corners while negotiators search for compromises — not a terrible outcome considering the alternatives.

Trade disagreements between the US and China are at risk of becoming symbolic of a great power rivalry, and symbols can easily take on a life of their own if given enough time and energy. A dangerous nationalistic fervor brews in both countries. It doesn’t take much to go from simmer to boil. 

Considering the risks of a breakdown in talks, both sides need to go in clear-minded. At present there is no economic crisis that will pressure Beijing to make concessions. And election-cycle politics in the US will not pressure Trump into a deal. To the contrary, his campaign’s talking-points have already been tested using China as an easy target for political gains. 

That expectations for the Osaka meeting need to sink so low speaks to a broader break down in relations rather than the specific trade issues that need to be addressed.

In diplomacy, sometimes a pause is a prelude to a turn around, sometimes it’s just a break to argue another day. In either case, not escalating the feud is a benefit for everyone, even if it’s just a short-term win that both sides can claim as their own.


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No “New Cold War” Between U.S. and China



Illustration: Craig Stephens

People like stretching historical analogies over present-day problems, even when they don’t quite fit. It’s no wonder that the United States’ competition with China in trade and technology has been widely dubbed the “new cold war”, though it bears only a superficial resemblance to that period of ideological conflict.

What the world faces now is much more complicated than that. We’re entering a chaotic period of shifting, unprincipled relationships. It’s not a competition between the “free world” and “authoritarianism” any more but, rather, a world divided against itself, chasing short-term gains as nationalism rises.

Over the last several years, the values and opportunities that China and the US represent to the world have changed at a pace unique in recent history. Most countries have successfully navigated between China and the US, but if relations between the two sour much further, the pressure on other countries to choose sides might be impossible to ignore.

Countries are caught in the middle of a non-ideological battle between economic powerhouses.The US has changed dramatically under President Donald Trump. He has elevated an anti-immigrant, anti-global, anti-free trade agenda, targeting allies and competitors alike. He wields tariffs like a bludgeon over any country he determines to be working against his interests, ranging from Mexico (in the name of stemming the flow of illegal immigrants) to potentially Australia (on who knows what whim).

And he has trampled on cherished democratic norms and the legitimacy of the constitution, Congress, and courts. Gone are the days of the US as a beacon of human rights and open markets, and as the land of seemingly unending opportunity.

Other countries are noting that the world of strict alliances and the spheres of influence are changing. Consider the historically close ties between the US and the Philippines, which includes the Mutual Defence Treaty of 1951. Manila now seeks to re-evaluate the agreement that requires each side to go to the other’s aid in case of an attack. The Philippines conducts military drills with the US, but also takes part in Chinese-led naval exercises – even though Beijing currently controls territory in the South China Sea that Manila sees as its own.

Clearly, the Philippines feels compelled to sit on the fence, as do many other countries. Singapore drills with both the US and Chinese navies. Japan, a strong military ally of the US, has signed a cross-border investment agreement with China. Germany refuses to rule out the use of Huawei mobile-internet equipment despite Washington’s threat to cut off intelligence sharing with Berlin if it does not drop the Chinese vendor.

China is also changing rapidly. After decades of stellar growth, its economy is slowing and its export growth to countries around the world can’t go on forever. Beyond growth, politics is increasingly influencing business.

Source: CNBC

In the past, as long as countries avoided direct criticism of the Chinese government, they could keep access to the lucrative mainland market. Now, companies are increasingly targeted for purely political purposes and a blacklist is reportedly being created that might include US tech companies and Japanese firms that will no longer work with Huawei. Earlier this year, an unofficial Chinese ban on Australian thermal coal imports looked suspiciously like payback for Canberra’s decision to block Huawei, too.

China’s global campaign to win friends and influence neighbours worked well. Beijing spoke of biding its time and rising peacefully, and most observers didn’t bother to consider what China was biding its time for. However, its aggressive campaign to militarise the entire South China Sea has since shattered illusions of peaceful coexistence under international law.

A military build-up sized more for a global role has also became evident with China’s development of a third aircraft carrier and an army of state-backed hackers targeting foreign countries and companies at an alarming rate. Port agreements around the world have also raised the alarm about China’s naval expansion along with its global economic interests. To even the casual observer, a defensive posture is evolving into an offensive capability.

And here lies the danger of rushing into war rhetoric – trade war, cold war or otherwise. For the lens through which we view the world also limits what we see.

In war, one side wins, the other loses. In the complex world of international relations, however, that’s often not the case. The more that the antagonistic aspects of the US-China relationship get hyped, the less room there is to negotiate. People may then erroneously believe that conflict is inevitable.

At this moment in history, neither the US nor China represents an ideal to the rest of the world. Both want the world to conform to their specific versions of economic success. Both are challenging what it means to be allied with other nations. Tight configurations have loosened.

If the global order fractures along fault lines, there won’t be two sides like in the cold war, but many chaotic fragments that will be hard to make whole again.


This op-ed originally appeared on the SCMP website.

China’s “Maritime Militia” Raising Stakes for South China Sea Clash

This op-ed originally appeared in the SCMP, May 10, 2019

For years China has avoided direct military-to-military clashes in the South China Sea through the use of fishing vessels backed by the Chinese Coast Guard to enforce its territorial claims. This “maritime militia” strategy may have exhausted its effectiveness now that the U.S. considers these irregular forces to be under the command of the People’s Liberation Army and Navy (PLAN). 

Photo:AP

U.S.-China military dialogues need to increase to match this rising risk of small-scale skirmishes leading to broader armed conflict. Prospects for dialogue, however are dimming as tensions across a range of bilateral issues show no signs of easing.

It was no trivial distinction when, as has been recently made public, U.S. Admiral John Richardson told Chinese Vice Admiral Shen Jinlong in January, 2019, that militia and Navy would be treated the same.

A larger-scale conflict almost occurred as recently as December, 2018, when China sent 100 maritime militia ships to contest the Philippine-occupied Thitu reef located between the island of Palawan and Vietnam. By April, 2019 the number had grown to over 200 ships. Under the new calculus if the Philippine military were attacked by any of these vessels, the treaty-bound U.S. would be obligated to strike back. U.S. Secretary of State Mike Pompeo reassured Philippine President Duterte of this commitment.

Though small in size, unarmed fishing boats, and armed Coast Guard vessels routinely approach ships in the region and ignore warnings to keep their distance. Any one of these could pose a serious threat as the 2000 bombing of the USS Cole, which resulted in the death of 17 sailors and the injury of 39, clearly illustrated. 

Without stronger and more regular contact, the threat of even simple harassment activities that have been tolerated in the past may quickly turn to armed conflict.

This change in military operational protocol comes at a time of increasingly tense relations between the U.S. and China as political forces in both countries test the strength of the status quo. U.S. President Trump’s hardline National Security Adviser John Bolton appears ascendant in the administration’s often haphazard foreign policymaking process, often leading public messaging from the White House. He’s taken aggressive stances against Venezuela, Iran, and North Korea with an excessively bellicose approach to international affairs. 

Recent racist comments from State Policy Planning Director Kiron Skinner certainly don’t help bilateral relations either. In a recent Washington speech at a security event sponsored by the centrist New America think tank, she stated that the challenge posed by China is one of a different ethnicity and civilization and a “non-caucasian” great power competitor. 

With this type of xenophobic theorizing posturing as serious policy, more contact and strong lines of communication between the U.S. and China are more important than ever.

Chinese aggression is also on the rise as naval forces have continued to strengthen. A “near miss” occurred as recently as September, 2018 when a Chinese warship deliberately came within 45 yards of the U.S. warship Decatur, forcing the ship to alter course and avoid a serious collision.

Mediating these conflicts used to be the domain of military-to-military contacts at the highest levels of government. Formal dialogues were regularly held under both Republican and Democratic administrations.  The peaceful resolution of a 2001 mid-air collision between a Chinese jet and a U.S. P-3 surveillance plane, which resulted in the death of a Chinese pilot and the emergency landing of the U.S. crew on Hainan, provides ample evidence of the value of continued communication.

Without stronger and more regular contact, the threat of even simple harassment activities that have been tolerated in the past may quickly turn to armed conflict. As history shows, what starts out small and contained can quickly escalate in ways neither country can easily control. 

Facts at sea are not going to change anytime soon. The U.S., as well as other countries, will continue Freedom of Navigation Operations in the South China Sea in areas globally recognized as international waters. 

Image: Central Intelligence Agency – Asia Maps — Perry-Castañeda Map Collection: South China Sea (Islands) 1988

China is strengthening its artificial islands and their naval harbors, airstrips, and radar installations even though Xi Jinping specifically said he would not militarize the South China Sea back in 2015. 

International and regional responses to these provocations have been exceptionally muted.

Despite a 2016 ruling by a UN tribunal, which declared these installations illegitimate, China has continued to build, occupy, and arm its South China Sea outposts. The UN Convention on the Law of the Sea, to which China is a signatory, makes clear that artificially constructed islands cannot be used as justification for territorial claims. 

The ASEAN Regional Forum (ARF), comprised of 27 nations, has been unable to address concerns over China’s conduct in the South China Sea. An ARF member, China routinely blocks attempts to address these issues.

Which leaves bilateral relations as the main driver of discourse. 

As China’s ambitions expand economically and politically around the globe, its military reach will inevitably grow as well. The build-up, including several aircraft carriers and plans for several more, as well as advanced submarines speak to ambitions that go far beyond China’s coast. 

Without an effective and regular mechanism for two of the world’s largest military powers to address their issues in a peaceful manner, the greater the risk of conflict. Neither country should let this situation devolve further. There’s already too much at stake in a relationship that grows more tense with time.

Trump’s Limited Options on Venezuela

A version of this op-ed first appeared in the SCMP on 4/22/19. Since publication an uprising led by opposition leader Guaidó against Maduro’s rule began..

Opposition leader Guaidó rallying against Maduro.
Credit: Carlos Garcia Rawlins/Reuters

The U.S. announced enhanced sanctions against Venezuela in April targeting the Bank of Venezuela, cutting off its access to the U.S. financial system. The move, intended to further isolate Nicolás Maduro’s regime, comes after months of tough talk to end his grip on power. More sanctions are expected in May to further curtail Venezuela’s trade in oil, their main export and foreign currency earner.  

President Trump and his National Security Adviser John Bolton have continued to call for Maduro’s ouster, repeatedly saying that “all options” are on the table. While grandstanding for adoring crowds may be Trump’s specialty, Maduro’s generals and allies have not been moved by the threat of armed conflict, especially Russia and China, who continue to back him despite the increasing risk of defaults on tens of billions of dollars in loans.

Trump has very limited, if any, “hard” military options due to both conditions on the ground and domestic and international political constraints. Invasion, blockade, or arming an alternate military force of defectors are extremely unlikely. If the administration is truly interested in supporting Venezuelan democracy, they are going to have to abandon their go-it-alone strategy and build strong alliances to assist in ending Maduro’s destructive rule. That means toning down the war-like rhetoric.

In a reversal of goodwill shown for decades, perceptions of the U.S. among countries around the world have plummeted during Trump’s tumultuous presidency. According to a February, 2019 Pew Research Center report, forty-five percent of nations surveyed regard U.S. power and influence as a “major threat.” The highest percentages, and largest changes in negative sentiment, came from Germany, France, Mexico, and Brazil. 

Trump also targeted major trading partners and allies with unilateral tariffs including Canada, Mexico, the EU, and Japan. Most recently he’s rescinded aid to Honduras, Guatemala, and El Salvador over illegal immigration concerns. For the past two and a half years the White House has done nothing but excoriate Latin America on immigration issues. That’s done little to endear the region to U.S. concerns about democracy in Venezuela.

Photo credit: Reuters

Any military intervention is complicated by Russia reportedly sending troops and material to help prop up Maduro’s failing government. While their numbers may be small compared to the U.S. Southern Command, their presence hampers potential military options with the threat of direct U.S. – Russian conflict in Latin America.

Trump has very limited, if any, “hard” military options due to both conditions on the ground and domestic and international political constraints.

In addition, there’s been little sign that Maduro’s generals will defect. Hopes rose when Air Force General Francisco Yanez switched his support this past February to Juan Guaidó, the main opposition leader.

Since then there’s been limited signs of military support for the opposition save for rank and file soldiers complaining about harsh economic conditions. Along with Maduro’s political elites, top members of the armed forces remain one of the greatest beneficiaries of government largesse while the rest of the population struggles to survive. Cuba is reportedly assisting Maduro as an additional military wing to keep his troops in line.

Even in the U.S. there’s questionable support for military intervention after decades of conflict in Afghanistan and Iraq. Trump’s “America First” rhetoric is founded on unwinding U.S. involvement overseas, not starting new ones. With the U.S. presidential election cycle about to kick off in earnest, Trump will be preoccupied with campaigning. A controversial military conflict unpopular with his isolationist base would likely drag on his re-election efforts.

While the U.S. has targeted Venezuela’s oil exports, its main source of revenue, the campaign has met with limited success. State-run Venezuelan oil company Petróleos de Venezuela (PDVSA) continues to export almost one million barrels per day, with most going to China, Russia, and via Singapore to other destinations.

China, which lent heavily to Venezuela with oil-backed loans starting in 2007, is still due an estimated $20 billion. If sanctions curtail oil production, those loans are at increasing risk of default.

The next round of sanctions are expected to target companies and financial institutions involved in the oil trade, cutting them off from the U.S. banking system. That’s significant leverage on Venezuela’s sales of oil. Some countries, including Russia, are willing to barter refined fuel for the oil, subverting the global financial system. There’s little to stop that trade from continuing.

Still, a further tightening of Venezuela’s access to hard currency will have some effect on the economy, but will it be enough to turn the political tide? In principle the lack of cash should weaken Maduro’s ability to pay his generals, fomenting unrest and eventually leading to defections. That hasn’t worked so well against North Korea. Largely cut off from the international system, the Kim regime is still able to import luxury goods and supply its expanding missile and nuclear arsenal. 

On the diplomatic front, fifty-four countries now recognize Juan Guaidó as the legitimate President of Venezuela, after an election widely considered illegitimate by western countries. Russia, China, Iran, Syria, and Cuba continue to back him.

While the U.S. has tried to engage UN support for new elections, allies including France, the UK, and Germany objected to including security concerns in the resolution. Russian and Chinese vetoes, as permanent members of the Security Council, killed the proposal.

Despite the limited external political support for Maduro’s ouster he still holds on to power. Riots over food, electrical outages, and shortages of medicine along with an inflation rate of over one million percent that forced millions to flee the country, have not been enough to end his reign. The UN expects 5.3 million Venezuelans displaced by the end of 2019, nearly one-fifth of the population.

Which leaves the Trump administration with few options. 

If the White House wants democracy restored, then threats about military action, which alienate allies, don’t serve that purpose well. Rather, a focus on brightening Venezuela’s future and curbing the plundering of the country’s resources might bring an end to the suffering sooner rather than later.

White House Eagerness for a Deal Gives North Korea the Upper Hand


IN A MINUTE | Trump Loses Edge with North Korea

Agreeing to meet without deal gives Kim the advantage


Trump claimed in last weeks’s State of the Union address that if it weren’t for him, the U.S. would be at war right now with North Korea. His self-praise for merely engaging the North telegraphed an eagerness for a deal that will be hard to justify should talks not deliver full and irreversible North Korean denuclearization.

Many now argue that North Korea will never give up their weapons and the U.S. should just accept that and move on, but the stakes are high for U.S. allies South Korea and Japan, the most susceptible to a North Korean provocation. If North Korea keeps its nuclear capability, Japan, a U.S. treaty ally, will certainly move to counter that threat, triggering a regional arms race.

There’s been precious little indication that Kim is willing to give up anything for another meeting with the U.S. President, a completely predictable outcome when Trump showed so much eagerness to meet in Singapore without a major breakthrough in talks.

A presidential meeting should only come after an agreement has been reached, not the other way around.

During the lapse in diplomacy since last summer’s Singapore summit, North Korea has been expanding its weapons program, not decreasing it. Recent reports and commercial satellite imagery show that the DPRK not only continued to build missiles, but there have far more weapon sites than previously disclosed. 

While North Korea has not overtly tested a missile or engine system since talks began, even the most novice global affairs observer knows delays are not concessions. Kim can fire up a test whenever and wherever he wants. Blowing up wooden sheds and exploding a mountain entrance were, at best, window dressing.

Trump has been far more adept in his trade negotiations with China and refused to meet with Xi Jinping until more details are ironed out. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are headed to China soon.

By refusing to say he’ll meet with Xi until he finds out what happens in the latest round of negotiations he maintains his advantage. A presidential meeting should only come after an agreement has been reached, not the other way around.

Which begs the question, why did Trump commit to meeting Kim before his Special Envoy, Stephen Biegun, finished negotiating any of the numerous and contentious details? After Biegun returned from Pyongyang Trump officially announced his Feb. 27-28 visit to Hanoi, but preparations were already underway for that visit. One can only surmise that Kim understood he had the advantage.

Up for grabs are a litany of economic, political, and military gives including the minimal lifting of some U.S. sanctions, a declaration to formally end the Korea conflict, establishing an interest section or Embassy in Pyongyang, and at the extreme, a reduction in U.S. troops and/or weapons systems on the peninsula.

Additionally Trump has already said he wants a Nobel Peace Prize for his efforts, but his vanity should not drive what may amount to a bad deal.

For any of these U.S. concessions, Trump must insist on full, verifiable denuclearization. Otherwise the bait-and-switch game will just go on while North Korea continues to build its arsenal. Transparency has always been the problem, and so far Kim has shown no more propensity to open his reclusive nation than his father or grandfather before him.

That may change if Kim is more interested in massive personal wealth and global recognition that followed Chinese and Vietnamese reform and opening. If so, Trump must press hard on eliminating the North’s ability to make and weaponize fissile material.

The worst thing that could happen in a real estate deal gone bad is bankruptcy. But an impulsive approach to high-stakes diplomacy with North Korea could mean risking regional and U.S. national security.


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“Brand America” Falls Out of Favor With Foreign Investment

Trump understands that brand matters, and the latest version of brand America is failing badly. At this year’s World Economic Forum in Davos, business executives expressed not only concern, but outright dismay, over the investment climate in the U.S. And they aren’t just sitting on their capital waiting for better days.

Investors are voting with their money and heading for other countries. The statistics for Foreign Direct Investment in the U.S. (FDIUS) show a troubling trend. In the second quarter of last year FDI turned negative, a reversal of fortune not seen in years. That followed a drop of 41% year-on-year to $277 Billon in 2017, after peaking at nearly $472 billion 2016, according to U.S. government data.

Cyclical Decline in Foreign Direct Investment to the U.S.

Companies including Tesla, Unilever, and Foxconn are looking elsewhere to invest due in part to the uncertainty around the U.S.-China trade war. Imports and exports have been hit along with supply chain disruptions. While the upcoming trade talks in Washington were bathed in a positive light from governments on both sides of the Pacific, the outcome has been thrown into serious doubt after the Department of Justice announced criminal charges against Huawei and its CFO Meng Wanzhou. 

She is currently detained in Canada on an extradition request that is now sure to move forward. Trump has said he may intervene in her case if it serves the trade talks and U.S. national security. What he can actually do, politically or legally, remains unclear.

Trump Has Few Options
on Huawei Sanctions Trouble


The souring on brand America isn’t just about China trade disruptions. Trump’s immigration policies, his tacit acceptance of jingoistic and racist dog whistling by his most ardent supporters, and the perception that the U.S. is retreating from global affairs is turning away international students that might otherwise invest in a coveted U.S. education.

Enrollment in undergraduate programs dropped for the second year in a row with a 6.6% fall for 2017-2018. That’s putting new strains on colleges and universities that have grown accustomed to full-tuition paying foreign students.

The longer term cost to the U.S. will show up in worker shortages, primarily in science, technology, engineering, and math disciplines. These professions are already woefully short on trained graduates and unfilled jobs create a drag on economic growth.

While the administration touted $1.5 trillion dollars in corporate tax reductions that began in 2018, a survey by the National Association of Business Economics shows that companies are not in fact spending more. Trickle-down economics didn’t work under Reagan and it certainly isn’t working now even with a new, slick cover promising to make America great again.

A brand is only as good as what it delivers and so far Trump’s promises made continue to be promises broken. The U.S. accumulated a lot of good will over the decades. That hard-earned reputation is now at risk of being destroyed in only a few years.


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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 biggest risk 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

 

 

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.

Losing Iraq

It should come as no surprise that winning the peace in Iraq after winning the war a decade earlier proves harder in practice than in theory.

After years of occupation, an election and billions of dollars in U.S. funding, the all-inclusive society of Shi’ites, Sunnis and Kurds has failed to materialize. A new military built from the ground up as Saddam’s forces were disbanded turned tail at the first signs of organized radical resistance. Add to the transition equation a porous Syrian border in civil war, well-funded radical groups pursuing a mythologized Caliphate and a stream of foreign fighters eager for a new front — Iraq’s unresolved domestic fissures could only expand.

All of the official optimism about a new pluralistic Iraq, under both the Bush and Obama administrations, flew in the face of what political-military planners, historians and diplomats knew as far back as the late 1990’s when Iraq War I was waged.

Democracy is a tough sell.

In a region where centuries of animosity and mistrust continue to fuel a cycle of violence and counter-violence, pluralism, let alone democracy, has never been an ideal. And no amount of U.S. troop presence would change historical momentum fueled by ideological, ethnic and tribal divisions. Not at least without a new identity forged by the Iraqis themselves.

Why would the Kurds, for decades suppressed, gassed and murdered, find comfort in Baghdad under any rule but their own? The borders of modern Iraq, after all, were lines drawn by the British forcing traditional enemies together into a tentative order.

The Sunnis too, had no home in Prime Minister Nouri al-Maliki’s new Iraq. Once an oppressor-class under Saddam Hussein’s dictatorship, they were quickly forgotten by the new Shi’ite-dominated government.

There has never been a South Africa-styled national reconciliation. No new equality in the ebb and flow of power and pain in the Middle East. Only old wounds and new scars.

Perhaps the existential threat posed by the Islamic State of Iraq and Syria (ISIS), the latest in a long line of radicalized groups, and its military rout of Iraq’s major cities, will fuse a fractured nation into a common front. That’s the most the U.S. could hope for (and support) until Iraq’s larger fate can be addressed.

New calls for al-Maliki’s ouster will hardly solve the problem. President Obama has insisted on a “political solution” while ISIS takes Mosul and marches towards the capital. Inclusion certainly helps, but now it must be in the fight for a unified Iraq.

First Iraqis will have to rally under one flag. Then they can decide for themselves whether to create a future of partition or pluralism.