Monday, 15 October 2018

In your brain you know he's sane

Since Donald Trump's UK visit in July I've been pondering what to make of him now we are getting close to half way through his term (first term, maybe?) as U.S. President. That visit passed off with a predictable degree of hullabaloo and also a predictable degree of confusion about what the President actually thinks about Britain, Brexit and Theresa May. What he thinks, not what he said because that's a matter of record and was contradictory. Which matches his pronouncements on most subjects. But hopefully he enjoyed his round of golf at Turnberry, as I did when I played there. (It was the first links course I had played and I've loved them ever since).

Nevertheless, we know he's deranged, don't we? "In your guts, you know he's nuts", said Lyndon Johnson about Barry Goldwater in 1964 but the slogan was also used against Trump in his presidential campaign and I remember saying "we do know they were both nuts", because that's certainly how it seemed to me (post of 21 February 2017). And yet, and yet......

We are now familiar with Trump's lack of diplomatic niceties and the way he goes in hard and early to soften up the situation in advance. And that he is a tasteless mysogenistic boor, at best.

But Trump's grandstanding brought Kim Young Un to the negotiating table, though admittedly at a time that suited Kim as he now has credible nuclear weapons and delivery systems. Nevertheless, there is an opportunity to improve security in a sensitive area of the globe and prevent further spread of weapons from a rogue state. It's far too early to tell whether any real progess has been made, as some reports claim North Korea is ploughing on with its nuclear programme but there is the prospect of an accommodation which is far more than the smooth talking but ineffective Obama achieved on his watch.

Trump's actions to pull out of the deal with Iran and recognise Jerusalem as Israel's capital, the first of which seemed risky and the second bizarrely inflammatory to most of us, has not created greater instability in the Middle East, with Saudi Arabia currently much more concerned about Iran than anything to do with Israel. Finding a solution to the Gordian knot of Palestine is probably beyond anyone, but it seems to me that it can't be done without recognising that the Jewish nation has historically valid claims and rights over Jerusalem, at least as much as anyone else. Unless you are J. Corbyn, of course, in which case it's all very simple. No, simplistic. The recent kerfuffle over the Saudi dissident who disappeared after visiting their embassy in Turkey has clouded the fact that Trump has built a powerful coalition covering Israel and Saudi Arabia to resist Iran, the real threat in the region, which does seem rather clever. And beyond Obama's imagination.

So while most of us thought Obama's reasoned approach to Korea and the Middle East made sense at the time, it actually resulted in aimless drift and a reduction in security.

But what about fears of a trade war? I recognised Trump's tactics at an early stage. I recall going on a company training event focussed on pricing, for which they had hired a facilitator considered a guru. He was indeed sharp and, more importantly, streetwise. One of his pieces of advice concerned increasing prices if you weren't sure the market would take it: pick on a small customer who didn't matter that much to try it out before going into battle with your major customers. Trump did something similar. He picked on Canada (sorry, Trudeau lovers, in this context Justin is the 7 stone weakling) and Mexico. The bigger game for Trump and what he sees as fair trade is the EU and, especially, China. Trump was sending a message to the world.

But does his policy of banging on tariffs make sense? It certainly offends against the long-held principles of free trading. Two of the economics commentators I most respect, Irwin Stelzer and David Smith, are at odds over this. Smith has referred to Trump's tariffs as "knuckleheaded" and has been totally consistent in his comments so far. Stelzer, or at least his subeditors who write the headlines, seems to have oscillated. In June* he noted the big game was China, that Trump had more ammunition than China and that China would not be able to sustain a game of poker over tariffs.  In July** he called it as a "win for Trump on trade" after the EU decided to work with the US to reform the WTO, try to end the theft of intellectual property and work towards zero tariffs and removal of trade barriers. Stelzer greeted this as proof that "Trump is not a mad protectionist but a champion of freer, fairer trade". He noted that America had taken some casualties in the trade war but Trump had been ready for this with support to American farmers and industry hit by retaliation to his tariffs.

However by August*** Stelzer was concerned that some commentators thought Trump's tariffs would bring the US economy to a screeching halt and that the tax cuts induced growth would inevitably run out of steam because employers can't find people in a high employment economy. But only a fortnight later Stelzer got over his wobble and declared that the "Trump war on the world is working"****. This war included:

  •  Turkey, who had upset Trump and US evangelicals over the case of Andrew Brunson, held by Turkey on charges of spying and terrorism. Trump banged on tariffs even though Turkey is a key ally. (The Turkish currency plunged and Brunson was released on 12 October. Trump is now being warmer to Turkey over the Saudi Arabia embassy affair. A simple message: are you with me or against me?)
  • Russia, with sanctions on Putin's circle. Trump has backed the UK strongly over the Salisbury affair despite Trump's chummy (and at the time unsettling) meeting with Putin
  • China: tariffs banged on and retaliation greeted with more. China is the ultimate big trade issue for Trump
  • EU - see above. They blinked
Stelzer noted that the US had taken some serious inbound fire, but support for its president seemed to be holding and the "wars unleashed by America on what we might with some accuracy call the rest of the world are going rather well". Trump offers a firm handshake and state dinner to Macron, then levies tariffs on French products. He wines and dines Xi Jinping at Mar-a-Lago, then loads tariffs on Chinese exports. He chats pleasantly to Erodogan at a NATO meeting, but then cripples his economy. He has a cosy meeting with Putin, but then increases sanctions on Russia. Stelzer compared Trump to a cowboy, with scalps hanging from his belt. I'd say it shows two things: it ain't personal and you'd better believe he means it when he says "America first".

Maybe we need someone who isn't an economist to see through this. Niall Ferguson is not an economist. The Oxbridge historian is a senior fellow at the Hoover Institution, Stanford and a visiting professor at Tsinghua University, Beijing. Ferguson became an American citizen this year and has a good vantage point from which to comment on Trump and China. In a column# titled The China I see is losing this trade war - Trump's tariffs are widely mocked but he has found Xi's weakspot, Ferguson said that 99.9% of economists regard Trump's trade war against China as idiotic. "Doesn't  he realise that a trade deficit is not equivalent to a loss in business?" Ferguson went on to say that, while Trump might have missed some economics classes when he studied at business school, somewhere along the way he picked up an intuitive understanding of power. Ferguson says the Chinese governing elite is scrambling to formulate a strategy to respond and has few good options. Divisions at the top are showing, with strains between the "new new China" technology sector, the "new old China" of banking and telecoms and the "old old China" of  state-owned heavy industry. China reminds Ferguson of the French second empire, in which an autocratic regime brought into being a large middle class. Ferguson sees Xi's China running the same risk as Napoleon III. Xi will be well aware of the risk and will do whatever he can to avoid growth slowing. Which makes Trump's trade war a real problem for him. Ferguson says future historians may be as impressed with Trump's trade shock as today's economists are contemptuous of it.

The story has now moved on, with the US pushing Mexico and Canada (reluctantly) into a revision of the NAFTA. Stelzer@ notes that the proposed new arrangements show what future trade deals will look like post-Trump and that Trump is using the threat of tariffs as a bargaining tactic to gain concessions rather than a prelude to permanently high tariffs. So Justin Trudeau was forced to relax tariffs on American poultry, eggs and dairy products. Adam Smith himself said that the use or threat of high tariffs is "good policy when there is the probability that they will procure the repeal of high duties". I'm not sure David Smith has recognised that.

There is some concern from free marketeers that the new arrangements will not be as effective at maximising trade as they surrender free trade purity for advantages for (some) American workers. But - and it's a big but for me to swallow as a free marketeer - while free trade has produced unparalleled wellbeing it pays little concern to distributive effects and has hollowed out communities, which is a downside of globalisation. But a problem with current world trade is that some nations, notably those with partly Marxist economies (hello China) game the system. OK, they cheat. Deals between countries that cheat, by artificially fixing their currency for example, can't really maximise economic benefit for both parties anyway. So there is a case for Trump's hardball tactics.

Now he's pulled Trudeau down a peg, Trump will continue his battle with the EU and Japan over motor cars and will hope to get China in line as well once, as Stelzer puts it@ "as soon as his good friend Xi Jinping can no longer tolerate the trade war's damage to his economy and sues for peace". Stelzer also notes that the implication of what he calls "Globalisation 2.0" is that the price paid for a system more attentive to the interests of American workers will be reduced efficiency and a consequent increase in costs and prices. The gain is a system that might be seen as fairer (at least to some Americans) and therefore prove more sustainable.

And if Trump can stop Chinese theft of intellectual property that would be an enormous long term benefit for the US and maybe the West in general. Western companies selling to large Chinese enterprises - which are all state backed - find they have to cede their IP rights to get the work. Not the arising IP under the contract which has become normal in the West but all of the know how related to the design of whatever product is concerned. And that's without getting into the security implications of Chinese subcontractors inserting rogue chips into the motherboards of PCs made by American companies for the US Department if Defense, including their navy.  I wasn't the only one to feel queasy about BT's deal with Hauwei as this sort of caper isn't really a surprise. Individual western companies stand no chance of negotiating different terms with what is effectively the Chinese state. I've always felt it needs western governments to intervene if we are to avoid selling our future.

So the end results could be possibly fairer to America, more sustainable and with "yuge" potential long term benefits. Looked at that way Trump's tariffs don't sound so nuts, do they?

In the meantime the US economy continues to do well on what has been called by some a 'sugar high' due to Trump's tax cuts. Whether these will prove beneficial in the long term or will just increase debt remains to be seen. But in the short term it seems to have worked, politically at least.

But, even if his economic and trade policies might not be nuts, doesn't Trump ride fast and loose with the truth I hear you say? Plenty of American Presidents have "misspoken". For example, one of Reagan's press correspondents once clarified matters by saying that the President had been "less than precise". And, risibly, one of Eisenhower's people once misspoke himself by saying "President Eisenhower doesn't necessarily speak for this administration" (eh?). And of course there was sleazy Bill Clinton, who didn't just miss-speak several times but also found himself in a miss-poke (sorry, couldn't resist that one) media frenzy - "I did not have sexual relations with that woman". Er, so you just had it off with her dress then Bill? That's really weird....

So whether you like him or not there is clearly at least some degree of method in Trump's bizarre and at times unsettling behaviour.  And, whether you, I or Joe Soap likes it, he is POTUS and we have to deal with him because has influence over many things that matter a lot to us. So whether or not he's sane, in your brain you surely know we have to work with him as best we can.

If you watched the BBC bulletins during Trump's visit to Britain you'd have thought that half the country was up in arms against him, as the time spent showing the rather embarrassing, indeed pitiful, demonstrations was almost as much as that covering the visit itself. The truth was revealed when the camera zoomed out from the throng at the launch of the Trump baby blimp in London, for we could all see there were a  few hundred there at the most. At least one BBC editor wanted us to see the context.

Note to the BBC: just because some people make a lot of noise doesn't mean that they should have equal coverage. After all, empty vessels and all that.

I found the demonstrations embarrassing to the point of squirm inducing. Yes, I'd have been on that side of the plot when I was a student. But there seemed to be a lot of folk involved who should be more grown up by now. For a start, what they were demostrating about is mostly none of our business. If you doubt that, consider what we would think of southern US rednecks demonstrating against Theresa May because we have allowed gay marriage.

But these folk just don't get how counter-productive their actions could be. How should we be responding to Trump? Lord Powell who, as Charles Powell was private secretary to Margaret Thatcher from 1983 to 1990 and one of her key foreign policy advisers, wrote^ that the special relationship would, for her, have transcended the personality and politics of whoever was US president. She would have found plenty in common but would not have agreed with him on everything and a lot "to oppose fiercely. But top of her mind would have been that her duty and Britsin's interest was to give him the respect that in her eyes any and every American president deserved. Whatever personal distaste she would have felt for aspects of his behaviour - and she was pretty broad-minded - she would have rigorously supressed as beside the point by comparison with our strategic interest".

If you want to know just how deep a hole Jeremy Corbyn could take us into just think how statesmanlike he would be in these situations. And consider the consequences.

Trump ain't nuts. And neither is Corbyn. But there is more sanity in Trump's approaches to international relations and trade than might appear obvious. Corbyn? I think that's pretty obvious too.

*China will fold if it plays poker now, Irwin Stelzer, Sunday Times 24 June 2018

**That's a win for Trump on trade, Sunday Times 29 July 2018

*** Tariffs will wreck Trump's boom, Sunday Times 5 August 2018

**** Trump war on the world is working, Sunday Times 19 August 2018.

# Sunday Times 23 September 2018

@ Globalisation, blue collar style. Irwin Stelzer, Sunday Times 7 October 2018

^ Soulmate, no,  but Maggie would keep Trump close, Sunday Times 8 May 2018

1 comment:

  1. Trudeau - You knew you were rattling my cage Phil but I'll forgive you, as a Trudeau fan, because we Liberals are happy to have our cages being rattled. On the issue you raise though you may be right in that Trump always goes for weakest link and in this case Canada and Mexico are weaker in terms of balance of trade. Although by that standard pity poor old UK! But Trump displays all the traits of a sociopath apart from contradicting himself at almost every turn. Give me a radical Liberal every time:-)