Tag: korea

Takeaways from Trump’s First 100 Days

For foreign policy wonks, Trump’s first hundred days have been a bit like a roller coaster ride. In just over three months, the new administration has veered from one crisis to another, from Syria to North Korea, China to Canada. Sudden Trumpian reversals on various foreign policy issues have been sharp enough to produce whiplash. Meanwhile, a dizzying barrage of strange foreign policy choices and statements makes it difficult to guess what’s coming next.

Nevertheless, amid all the confusion, there are a couple of big takeaways from these first 100 days that may help us better understand where Trump’s foreign policy approach is headed:

1. There really is no such thing as the Trump Doctrine

Trump’s reversals on issues like NATO have been hailed by some as bringing him closer to a “normal” presidency. Indeed, it is not always obvious from a President’s campaign what his broad foreign policy approach will end up being, or the obstacles and inertia that he will face in trying to alter American foreign policy. Yet even by these standards, Trump’s approach to the world remains unclear. A recent attempt by White House Chief of Staff Reince Preibus to outline what he sees as the Trump Doctrine merely adds to this confusion:

Trump is “reshaping our position in the world,” Priebus said, and “really establishing, I think, a Trump Doctrine in setting some certain lines of where we’re not going to allow people like [Syrian President Bashar al-Assad] to go, but at the same time making it clear that we’re not interested in long-term, you know, ground wars in the Middle East, but obviously focusing in on ISIS and what we’re doing in the Middle East to protect us here in the United States, working with China on ongoing issues with North Korea that are very real and are serious issues that takes cooperation within the region to handle appropriately.”

Another official “added that Trump’s status as ‘an incredible negotiator’ is also central to the doctrine.” As these statements suggest, Trump’s foreign policy so far has been highly reactive – responding to crises – but with no indication of an overarching strategy. 

2. Trump is escalating the War on Terror

Though the most visible indicator of this escalation was the use of a MOAB (Massive Ordnance Air Blast bomb), affectionately known as the ‘Mother of all Bombs,’ in Afghanistan, the new administration has chosen to escalate conflicts in a number of countries. More troops are being sent to the greater Middle East, in particular to join the fight against ISIS in Syria and Iraq, and U.S. Special Operations Forces are now engaging in ground actions against Al Qaeda in Yemen.

The administration has also loosened the rules of engagement in Yemen, Afghanistan, Somalia and elsewhere, and has increased the number of bombing raids and drone strikes. According to at least one watchdog group, Trump’s choice to give his generals a free hand in these conflicts has resulted in a massive increase in civilian casualties in these areas.

3. Brinksmanship may be back  

The new president appears to have a gift for raising tensions around the world. Though his administration did certify that Iran is complying with the Obama-era nuclear deal, they also announced a 90-day review of the deal. Various officials are using increasingly tough rhetoric towards Iran. The administration has also indicated that it intends to step up support for the GCC campaign in Yemen against the Houthis, a group often described as an Iranian proxy.

Trump is also taking an increasingly hard line towards North Korea, with Vice President Mike Pence warning the DPRK that “all options are on the table” in the case of further missile or nuclear tests. Tensions around the peninsula are high, with joint U.S.-South Korean drills, and a North Korean live fire exercise taking place this week. Whether the new administration’s statements are accurate indicators of their position, or merely heated rhetoric, such statements can easily raise the potential for conflict.

4. Advisors really matter

Political science research has shown that even experienced advisors cannot substitute for an inexperienced president. Unfortunately, Trump is anything but experienced on foreign policy. And while some of his appointments have been reassuringly experienced (such as James Mattis, now Secretary of Defense), others are either inexperienced (such as Jared Kushner) or have disturbing worldviews (i.e., Steve Bannon).

Infighting between advisors inside the administration has been notable during these first hundred days, and Trump’s policies seem to vary depending on which individuals he is listening to on any given day. If you are interested in the internal dynamics of the Trump administration, you can check out my recent article at War on the Rocks, which explores the civil war in the White House. The Cliffs Notes version? Advisors really matter, and it’s still unclear which faction – if any – will triumph in the struggle for influence between Trump’s teams of rivals.

5. Competence is key

Some of Trump’s foreign policy decisions appear to be trending closer to a traditionally hawkish Republican line, while some of the problems that he faces – such as Turkish-Kurdish tensions in Northern Syria, or the intractable conflict in Afghanistan – have been around for far longer than this administration. Yet it is worth noting that the new administration’s response to various crises has often been less than competent. Some of this is the result of inexperience and a lack of appointed officials in key positions at the Departments of State and Defense, but others are self-inflicted wounds. The administration’s immigration bans and TPP withdrawal are cases in point.

Other foreign policy incidents have been frankly bizarre. Trump’s first National Security Advisor, Mike Flynn, was forced to resign after only 25 days for misleading the administration on his lobbying and ties to Turkey and Russia. In an oval office meeting, Trump refused to shake Angela Merkel’s hand, later claiming that he didn’t hear the request. He phoned Turkish premier Recep Tayyip Erdogun to congratulate him on a questionable referendum victory that consolidated his dictatorial power. Moreover, the administration misplaced an aircraft carrier, announcing that the USS Carl Vinson was heading for the Korean Peninsula as a show of force, when in fact, it was near Australia, moving in the other direction.

Taken alone, these incidents are concerning. But when considered in the broader context of Trump’s tendency to bluster and saber-rattle, his support for escalating the war on terror, and his inability to articulate any coherent strategy for U.S. foreign policy, they raise even bigger questions. If Trump’s first hundred days are truly representative of his foreign policy approach, it’s going to be a bumpy four years.

The Economics of Trade: Wilbur Ross Is Mistaken

Billionaire investor Wilbur Ross, a supporter of Donald Trump, made the following comment in a letter to the Wall Street Journal (Aug 15): “It’s Econ 101 that GDP equals the sum of domestic economic activity plus “net exports,” i.e., exports minus imports.  Therefore, when we run massive and chronic trade deficits, it weakens our economy.”

In reality, the last sentence –beginning with “Therefore”– does not follow from the first.

Mr. Ross is alluding to the demand side of National Income Accounts, wherein Y=C+I+G+ (N-X). That is, National Income (Y) equals spending on Consumption (C) plus Investment (I) plus Government (G) plus Net Exports (Imports N minus Exports X).  

Taking such accounting too literally, a reduction in imports may appear to be mathematically equal to an increase in overall real GDP.  But that is dangerously incorrect, as the 1930s should have taught us.

The accounting is true by definition (a tautology). But economics is about behavior, not accounting identities.

If trade deficits “weaken our economy,” as Mr. Ross asserts, then we should expect to see real GDP slow down when trade deficits get larger and see real GDP speed up when trade deficits get smaller or become surpluses.  What the data show is much different – the exact opposite in fact.  

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North Korea’s Economic Outlook: Cloudy with a Chance of Statistics.

During the past few weeks, North Korea has been the subject of outsized news coverage. The recent peacocking by Supreme Leader Kim Jong Un – from domestic martial law policies to tests of the country’s nuclear weapons capabilities – has successfully distracted the media from North Korea’s continued economic woes. For starters, the country’s plans for agricultural reforms have been deep-sixed, and, to top it off, I estimate that North Korea’s annual inflation rate hit triple digits for 2012: 116%, to be exact.

Unfortunately, the official shroud of secrecy covering North Korea’s official information and statistics remains more or less intact. But, some within North Korea have begun to shed light on this “land of illusions”. For example, a team of “citizen cartographers” helped Google construct its recent Google Maps’ exposition of North Korea’s streets, landmarks, and government facilities.  In addition, our friends at DailyNK have successfully been reporting data on black-market exchange rates and the price of rice in North Korea – data which allowed me to conclude that the country experienced an episode of hyperinflation from December 2009 to mid-January 2011. 

Yes, things may be getting a bit brighter in North Korea. According to recent reportage by Carl Bialik of the Wall Street Journal, statisticians from the U.S. and Europe are bravely making their way into North Korea to teach students basic statistical methods. These lessons may only represent material from an introductory stats course, but they are a step in the right direction, because they force students to at least think about analyzing data. Unfortunately, in North Korea, reliable data continue to be a scarce commodity.

While these developments in North Korea have hardly shaken the dismal economic status quo, one can only hope that they will start to bring about some much needed change . But, don’t hold your breath. If flamboyant basketball hall-of-famer Dennis Rodman’s recent “basketball diplomacy” mission to Pyongyang is evidence of anything, it’s that North Korea is more interested in scoring cheap headlines than it is in turning around its economy. Until North Korea begins to open up its markets and make transparency a priority, its economic prospects will be cloudy, at best.

North Korea’s Hyperinflation Legacy, Part II

Following North Korean supreme leader Kim Jong-il’s death last December, many around the world had high hopes that his successor (and son), Kim Jong-un, would launch much-needed economic and political change. Unfortunately, in the months since the new supreme leader assumed power, little has changed for North Koreans outside of the small, communist upper class. The failed communist state has not delivered on its advertised economic reforms.

One thing it has delivered, however, is weapons, which have flowed through its illegal arms-trafficking pipelines. And, if that’s not enough, North Korea is planning another missile test  in the near future. But, as it turns out, the only thing that is certain to blast off is inflation.

In my recent blog post, I pointed out that one of North Korea’s communist legacies is hyperinflation (in addition to starvation). Indeed, hyperinflation may soon plague North Korea once again.

From what little data are available, it would appear that, in the span of six months, the price of rice has increased by nearly 130%. This is par for the course in North Korea, where the price of rice has increased by roughly 28,500% over the last three years (see the chart below).

 

 While the North Korean government worries about rocket launches and how to supply Syria with weapons, and while its archaeologists “discover” ancient unicorn lairs, its citizens’ food bowls are becoming quite expensive to fill. The supreme leader’s priorities, it would seem, are supremely out of whack.

Why Don’t Koreans Buy More Ford F-150 Trucks?

Ford Motor Company ran a full-age ad this morning in The Washington Post urging Congress and President Obama to reject the pending free-trade agreement with South Korea unless its provisions on automobiles are changed to promote the sale of more U.S.-made vehicles in Korea.

To drive home the point, the ad shows 52 cars with Korean flags in the windshield dominating one car sporting an American flag. The ad claims that, “For every 52 cars Korea ships here, the U.S. can only export one there.”

As my colleague Dan Ikenson blogged earlier, Ford blames the disparity on Korean trade barriers that discourage auto imports. Ford demands that the Obama administration “fix” the agreement before it can be approved by Congress.

In a study we released last month analyzing the agreement, Cato senior fellow Doug Bandow offered a different explanation of why we import so many more cars from Korea than the Koreans import from the United States, and why the agreement would go a long way to addressing legitimate concerns about barriers to U.S. auto exports:

In terms of tariff reduction, the agreement would deliver the “level playing field” many members of Congress demand. Tariffs on imported passenger cars and parts and accessories are currently 8 percent in Korea and 2.5 percent in the United States. Most of those tariffs would be eliminated upon enactment of the agreement, and all by its full implementation.

Although the FTA reduces South Korean tariffs, American automakers complain that the accord does not address non-tariff restrictions. … In fact, social and cultural barriers may be more important than government policies. One problem is auto size, since American cars are larger than those typically preferred by apartment-dwelling South Koreans. Even if all tariff and non-tariff-barriers were removed, the average Korean would still be much less inclined to buy a Ford F-150 pickup truck, a Chevy Suburban, or a Jeep Grand Cherokee than the average American would be inclined to buy a smaller, more fuel-efficient Korean-made vehicle such as a Hyundai Sonata. No free trade agreement can change fundamental consumer preferences.

Instead of complaining about all those Korean cars Americans want to buy, we should be glad for an agreement that opens both markets to greater competition.

Ford Motor’s Curious Policy Priorities

Though it has been relatively successful in the marketplace lately, the Ford Motor Company continues to confound in its public policy commitments.

First, the company remained silent for the better part of two years as its chief domestic rivals General Motors and Chrysler were nursed back to viability by a doting government dispensing $65 billion of taxpayer-funded nourishment. Not once (to my knowledge) did Ford publicly complain that the government bailout of its struggling competitors was an affront to its own prospects or that it would deny the company its rightful increase in sales and market share (the so-called spoils of competition).

But now Ford is trumpeting its opposition to the U.S.-Korea Free Trade Agreement. In a full page ad in today’s Washington Post, Ford implores Americans to reject the agreement as it currently stands, arguing that it would “allow Korea to remain one of the most closed automotive markets in the world.” So all of a sudden Ford is concerned about sales and market share?

Had GM and Chrysler been allowed to contract to a degree commensurate with their reckless decisions over the years, Ford might have hit the mother lode of sales and market share. But Ford didn’t even attempt to make that case. If Ford is so concerned about sales and market share, where is the outrage over the $45.4 billion in unconventional tax deferrals being granted GM as part of the ongoing bailout bonanza? Aren’t those deferrals just subsidies to help GM regain market share … at Ford’s expense?

Instead, Ford has chosen to target a trade agreement that promises enormous benefits to American businesses and consumers, a slew of new domestic employment opportunities, and annual increases in GDP of anywhere from $17 to $43 billion (bailout-type sums!) on the grounds that the agreement contains no guarantees of increased U.S. auto sales in Korea.

There are no guarantees in trade. But that’s what Ford and others in the U.S. auto industry and in Congress want: guaranteed sales figures, bilateral trade balance within the auto sector, managed outcomes. Is that what Ford means in the ad where it claims to support free trade?

Granted, the Korean auto market has been notoriously difficult to penetrate. Behind-the-border taxes levied on engine size and other non-tariff barriers have discouraged purchases of U.S. automobiles in Korea. But without the agreement, none of that will change. With the agreement, Korea reduces its tariff on passenger vehicles from 8% to 0 immediately, while the United States reduces its tariff on passenger vehicles from 2.5% to 0 immediately. So both are good reforms, but there is no question that U.S. auto exporters get a relatively bigger boost from the agreement. And though there are no guarantees of hard sales quotas, one can be pretty well assured that only the most inept producer/exporter would fail to capitalize on an 8 percent cost reduction granted with the stroke of a pen.

Ford should stop politicking and stay focused on the goal of making better automobiles.