Multilateralism Project

Monday, I submitted page proofs for a chapter in the forthcoming 2019 volume of  Canada Among Nations, an annual book about Canadian foreign policy to be published by Palgrave. David Carment of Carleton's NPSIA and Chris Sands of Johns Hopkins SAIS are editing the volume, entitled Canada–US Relations; Sovereignty or Shared Institutions?

My chapter (4) focuses on "'America First' and US-Canadian Relations." Though Canada is a primary concern, the paper discusses the threat "America First" poses to multilateralism and the liberal international order. As I've previously noted, President Trump has labeled Canada (and other allies) a threat to U.S. national security in order to impose steel and aluminum tariffs on these states. He also called Prime Minister Justin Trudeau "weak and dishonest" and repeatedly threatens to end NAFTA and bring "ruination" to Canada's economy.

My chapter discusses whether Trump's approach to international relations could be viewed as an especially intense version of realism that fails to recognize the potential virtues of multilateralism. Most of the institutions Trump threatens were built during the Cold War with the intent of aligning states with the US versus the Soviet bloc. Trump demonizes China, and at least one chapter in the new volume focuses on this strategy, but the President does not seem to recognize the potential  value of having allies working with the US to counter what he calls unfair and illegal Chinese trade practices. Every relationship is a transaction for Trump, a deal to be won or lost, and America can only win in his view if all other states lose -- even if that means demonizing long-time blue chip allies like Canada and Germany. Each relationship is ultimately bilateral and there is advantage to be taken.

I'm now working on a followup paper for a workshop on US-Canadian relations cohosted by last year's Carleton Fulbright scholar, James McCormick, at Iowa State in March. Former Library of Parliament International Affairs analyst Gerald Schmitz is the other host. I've been invited to submit that paper for consideration in a special issue of Canadian Foreign Policy Journal focusing on “America First”? Meeting the Challenges of the New Nationalism for Canada and the World.”  Schmitz is also helping to organize a one-day round-table in Ottawa on January 25th on "America First" and the International Order. I'm scheduled to partake via Skype.

For that paper and round-table, I'm expanding my work on multilateralism and looking at the proposals various western leaders are floating to save multilateralism in the wake of America First (and other threats), particularly in the areas of free trade and security.

Canadian Foreign Minister Chrystia Freeland has since mid-year 2017 called for "finding ways for like-minded democracies to act on our values and fight for the multilateral order." Though Freeland has urged the U.S. to join in the fight to save multilateralism, in October Canada hosted a meeting to fix and reform the WTO. The government invited about a dozen major trading states (including the EU as a single entity in that list). However, notably, the US was not invited to this "like-minded" summit "because it doesn’t share the views of the 13 invited countries, the new Canadian trade minister says."

German Minister for Foreign Affairs Heiko Maas has been calling for "an alliance of multilateralists" linking states like Japan and Canada. He has openly worried about the U.S. threat to the current order, though he too has invited the U.S. to join with its allies in saving multilateralism.

French Foreign Affairs Minister Jean-Yves Le Drian similarly calls for a coalition of goodwill powers to address major international problems (including climate change). In his view, "Europe should align itself with countries like India, Australia, Mexico and other “powerful democracies” that share a commitment to multilateralism." Le Drian says the coalition should work with or without the U.S.

I'll stop with that list for now, but will end by noting that newly reelected Ohio U.S. Senator Sherrod Brown (D), who is sometimes mentioned as a 2020 presidential hopeful, was quoted in the Toronto Globe and Mail on November 3 outlining a potential alternative US strategy that would target China in a trade confrontation, but in a way that might fit with the multilateral aspirations of America's long-time allies:

Mr. Brown is trying to thread the needle: He trumpets his support for tariffs – and blasts Mr. Renacci for supporting free-trade deals under previous presidents – but criticizes Mr. Trump’s handling of the trade war. 

“You don’t play off steel workers against farmers, you don’t play off industry against agriculture, and he’s done that,” Mr. Brown said in an interview during a stop at a campaign office in a strip mall in Brunswick, Ohio, south of Cleveland. “You [should] align with our allies – Canada and Western Europe and Japan, maybe – to stop serial cheaters like China. But instead he attacked Chrystia Freeland for what she was doing and your Prime Minister.”

That approach could signal a Democratic justification for approving the new USMCA and a broader way forward for the party in 2020 -- a majority of the US population supports multilateralism and free trade (perhaps in polarized response to Trump's America First), but middle class blue collar workers in Ohio, Michigan, Wisconsin, and Pennsylvania are likely still vulnerable to protectionist appeals by politicians.



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Trump and Canada

Though news reports suggest a new NAFTA deal is imminent, President Trump was tough on Canada again this week:

“We’re very unhappy with the negotiations and the negotiating style of Canada – we don’t like their representative very much,” Trump told reporters on Wednesday, in an apparent reference to Canada’s foreign minister, Chrystia Freeland.

Trump also claimed that he turned down a meeting [in NY at the UN] with Justin Trudeau to discuss the prospects of a deal “because [Trudeau’s] tariffs are too high and he doesn’t seem to want to move – and I told him: ‘Forget about it.’”

Canadian officials were quick to deny that Trudeau ever requested a meeting.

I'm posting this a little after midnight, so it is possible that there will be a new trade deal by the time you have read this piece.

In any event, living in Canada, there are strong signs that the feeling is mutual. This is a very strong sign: On Friday September 28, the Globe & Mail Washington columnist John Ibbitson published a piece in my morning paper entitled, "NAFTA nightmare is quickly becoming reality."

In that column (online version September 27), Ibbitson explained that "a resolute Prime Minister [Trudeau] and Foreign Affairs Minister [Freeland] refuse to be cowed by this bully of a president, this predator, this Mussolini wannabe."

I read those words over breakfast Friday!!

Saturday, my spouse and I strolled through the Byward Market on a sunny afternoon and came upon this photo in a bakery, where they were selling "Obama cookies" and playing a video of Obama's visit on a constant loop. Thus, the picture provides a parsimonious explanation of Trump's policy toward Canada:

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Political Economy of Relative Gains

Realist IR scholars reject the possibility of meaningful international cooperation on the idea that not all states can benefit from such cooperation. That's wrong, liberal institutionalists retort, because classic trade theory demonstrates that cooperation can promote mutual "absolute" gain.

Realists counter with the point that mutual gains rarely result in equal distribution. Some states will benefit more from cooperation and these relative advantages mitigate against cooperation. Why would a state partake in an agreement that helps competitors more than it helps itself? Essentially, because realists see international politics as a struggle for power, states can prevent a redistribution of power by refusing to partake in meaningful cooperation.

Plus, on many truly difficult issues, there are going to be costs to cooperation -- similar to the dues union members pay for the benefit of membership. States have an incentive to free ride, rather than to pay costs to create gains. Thus, on many global issues that require genuine multilateral cooperation -- Kenneth Waltz mentioned “poverty, population, pollution, and proliferation” (209) -- states won't work together because they lack incentives.

Realists do not think much of existing international cooperation. Believe it or not, a prominent realist view of past trade practices suggests that they reflect typical interstate competition rather than real cooperation. Realists recognize that states form alliances when confronted by potential hegemons, but this is basically because their survival is potentially at stake. In lesser circumstances, a strong state might set up sham institutions to promote forms of cooperation that are in their individual interest and essentially coerce others to participate. This could include institutions that serve multiple purposes, promoting selfish security cooperation with small economic bribes.

Some empirical evidence supports the pessimistic view of international economic cooperation.

This is a quick and simplified account of a complex debate, of course, but I mention it because of this study result I read in The Atlantic last October.** Individual Americans apparently embrace this vision and reject the prospect of mutual benefit if the benefits provides relative gains to "competitors." IOW, people see other people as competitors:

In a survey of faculty, students, and staff at the Harvard School of Public Health, nearly half of the respondents said they’d prefer to live in a world where the average salary was $25,000 and they earned $50,000 than one where they earned $100,000 but the average was $200,000. Similarly, a majority favored relative over absolute advantage when it came to their own intelligence and attractiveness, their child’s intelligence and attractiveness, or praise from a superior. Apparently the survey respondents would rather the planet be filled with stupid, ugly children than have their own child left behind [1].

There are apparent lessons in this about the rise of Donald Trump and the populist/nationalist concerns of his supporters. Trump wants to build a wall along the southern US border, deport millions of undocumented immigrants, and impose new tariffs on major trading partners such as China and Mexico. Many economists predict that his policies would hurt the white working class more than others. However, their analysis is generally framed in terms of utility theory.

What if his voters don't care about utility as much as they do about perceived relative gains -- for them personally as well as for the US? Perhaps they are willing to be additionally impoverished so long as their competitors do worse -- whether that is undocumented Mexican workers or China.

The danger, of course, is that Trump voters are likely very wrong in how his presidency might influence the outcomes they desire. His tax policies, for example, basically continue long-term Republican plans to benefit the richest Americans -- and this link is from The Economist, not some lefty politician or organization. Would the U.S. win a trade war with China?


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** Yes, I'm cleaning out my office and have a stack of clippings.

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Ducks in a row

This has been a quiet week here, but I've posted several pieces at Duck of Minerva recently.

Today, I posted "Wilson's legacy," which compares the neoconservative argument about "democratic realism" to the pragmatic and limited version of liberalism Wilson advocated.

Wednesday, February 24, I posted "More ISA highlights," which constituted my second contribution to the post-conference reminiscing by the Duck bloggers.

Last Saturday, February 20, the first of those posts appeared: "ISA: Renewing my call for comedy." Yes, I presented another paper (or two?) for "the comedy project."

January 24, I posted "Hamiltonian Failure?" The posting explored whether the American state has perhaps gone too far in removing itself from global capitalism.

January 14, I blogged about the aftermath of the earthquake that hit Haiti. The post focuses on Pat Robertson's idiocy.


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Trade with China

You probably already know that China is one of the United States's largest trading partners. Likewise, you probably also know that the US has an enormous trade deficit with China, annually importing hundreds of billions of dollars more worth of goods than it exports.

Do you know what the US imports from China and what it exports?

I ask because the standard answer does not provide the full picture.

Yes, the US imports lots of toys, clothes, and shoes from China. If you don't believe me, just check the labels on these products.

However, by doing business with China, "American" companies are also required to comply with many Chinese political practices that would be unacceptable in the US. Companies like Google, Cisco, and Microsoft essentially help China monitor and censor information. Clyde Prestowitz:

In fact, the global corporation acts as a conveyor belt to carry non-democratic values into democratic societies. This is not to say it can't work the other way around, but the power relationships are such that it's more natural for a Google to yield to China's Internet police than to defy them.

The US exports machine, appliance and airplane parts, seeds, and plastics to China.

However, the US also exports its inequality. Twenty-five years of integration into the global economy has made the distribution of wealth in China increasingly unequal. The World Bank recently reported on this topic, but the fact is obvious to anyone watching the Olympics. Consider all those empty seats in sold out sports venues:

Officials and observers offered several explanations for the empty seats. Some speculated that tickets reserved for sponsors and VIPs might be going unused in preliminary or qualifying rounds as officials with a claim to them wait for the finals.

I face the same problem every time I attend a AAA baseball game in Louisville. The overwhelming majority of box seats are empty -- sold before the season begins to local corporations and elites -- but the outfield area is often packed with fans like me who hold tickets only to that day's game.


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Trade lunch

Today, I attended a lunch meeting of the Louisville Committee on Foreign Relations. The guest speaker was Alan Tonelson, who is a research fellow at the U.S. Business and Industry Council Educational Foundation.

These luncheons are supposed to be off-the-record, so I won't comment directly on his remarks. I will say that they were quite interesting and I broadly agreed with the implications of his argument. However, since Tonelson's views are quite public, I can highlight a bit of political sleight-of-hand in his standard (published) rhetoric.

Essentially, Tonelson is an economic nationalist with protectionist leanings. He writes often about the dangers of the enormous U.S. trade deficit.

As he argues, U.S. trade policy isn't really about opening markets for export purposes. Sure, there is some of that, but especially with large and poor states like China and India, the purpose of trade policy is to allow American-based transnational companies to find low cost workers.

Tonelson correctly stresses the fact that American workers are finding their jobs outsourced as a result of this policy. He also worries a lot about the enormous trade deficits created by this policy, as well as the resulting foreign debt and the declining value of the dollar. Economic catastrophe could be just around the corner.

Transnational companies, many U.S.-based, are of course walking away with a huge part of the surplus value of labor -- from Chinese labor, Indian labor, etc.

A substantial portion of those profits, on the other hand, are spent or saved in the USA. How does that effect foreign debt calculations? I'm not enough of an economist (there's an understatement) to say...but I think Tonelson's failure to grapple with it directly makes his argument seem misleading.

In any event, the manufacturing job losses are real, but Tonelson doesn't stress another enormous problem in the US. The Bush tax and budget policies have re-created enormous deficits, which does create foreign debt when T-bills are sold to Europe and China. Plus, the Bush domestic tax and economic policies have exacerbated the very same adverse distributional consequences of the trade policy.

Tonelson seems opposed to budget deficits, but I cannot find a concern with the distributional consequences of the Bush tax cuts. In fact, he seems to advocate consumption (value added) taxes that are often viewed as regressive because the poor spend so much more of their income, living as they do month-to-month instead of on a trust fund.

Bottom line: US workers lose their jobs, corporate titans profit, and then the latter get big tax cuts. I agree with Tonelson that this is a problem.

We could try to save the jobs, but I'm pretty dubious that can happen. Comparative advantage is a powerful economic force and I'm not sure that the US will expend its political power anytime soon to prevent manufacturing and tech-related jobs from going to Mexico, China or India.

However, we could have a lot of control over domestic economic and tax policy.

If "America" (if we can imagine a national trading state in this globalized economy featuring transnational businesses) found a way to distribute its enormous trade profits in a far more egalitarian fashion, then Americans would have little to worry about.

However, in reality, corporations like Walmart (which Tonelson disparages) pays its workers crappy wages without benefits to sell those cheaply produced goods. The federal government slashed welfare and refused to consider national health care even as it sends huge tax cuts to the most affluent members of society.

Sure, Walmart keeps cutting prices, which does help consumers. The $250 VCR I bought in 1987 can be replaced for well under fifty bucks nowadays. However, at some point, the US has to think seriously about bigger distributional effects of trade and how to address those consequences as a matter of national policy.

Bluntly, if transnational companies are to get the cheap labor they want, then they have to pay some costs. Higher taxes could be funneled into job retraining programs or national health insurance. How about a living wage? Perhaps a guaranteed annual income? How about a shorter work week? All those ideas and many more deserve serious attention.