By Kumar David –
Trump scores own-goal against G7 Allies, Canada, Mexico and China; Kim Jong Un’s game is going to plan
Events are unfolding, spot on as foreseen in this column six weeks ago (Kim Jong Un’s Game-Plan Is Pretty Clear). I attributed to wily Kim short-term, medium and long term strategies; first make an American military strike impossible and secure his regime, second ease sanctions and enhance economic ties with the South (SK) and China, and third reunification of the Peninsula on terms that ensure his and his cronies survival. Here is an extract from that column.
1. (a) Defuse all possibility of a US first-strike and secure the import of fuels and consumer goods. (b) Fish for capital injection, albeit on a limited scale, from the South and China to support a mini-Deng Xiao Ping (mini-DXP) initiatives.
2. Campaign for the lifting of sanctions in exchange for “complete denuclearisation; a complete nuclear free Korean Peninsula” to which Kim and Moon Jae-in committed in the Panmunjom Declaration of 27 April 2018.
3. Secure reunification of the Peninsula on a formula that will guarantee the regime, its principal functionaries and the military, safety for say 50 years – One Country Two Systems but very different from Hong Kong-China or East-West Germany.
The omission in my piece was to overlook Russia. The quintet that will count in the economic game in the Far East in coming years will be China, Japan, two Koreas and Russia. The US will be marginalised in the economic game; it cannot contribute much – it is broke, Trump envisages sucking investment back home not driving it abroad, and high tech is not important for North Korea (NK) yet.
The operative portion of the Kim-Trump declaration reads:-
“Convinced that the establishment of new US-DPRK relations will contribute to the peace and prosperity of the Korean Peninsula and of the world, and recognizing that mutual confidence building can promote the denuclearization of the Korean Peninsula, President Trump and Chairman Kim Jong Un state the following:
- The United States and the DPRK commit to establish new US-DPRK relations in accordance with the desire of the peoples of the two countries for peace and prosperity.
- The United States and DPRK will join their efforts to build a lasting and stable peace regime on the Korean Peninsula.
- Reaffirming the April 27, 2018 Panmunjom Declaration, the DPRK commits to work toward complete denuclearization of the Korean Peninsula
- The United States and the DPRK commit to recovering POW/MIA remains, including the immediate repatriation of those already identified”.
How will the three strategic perspectives I attributed to Kim pan out? He has achieved his crucial objective; preventing military action and open regime-change efforts. Of course both sides will subvert any clause in the declaration that does not align with their real intentions, but that’s different; let’s work with the declaration and official statements. Kim has given away nothing, zilch, zero! He did commit to complete denuclearization of the “Korean Peninsula,” (sic!) but said nothing on what will be done and given no timetable for verification or destruction of the arsenal. Crucially nothing was said about NK’s missile capability. “Fire and Fury” and wiping NK off the face of the earth, all this is passé. All Trump got was bland agreement to “mutual confidence building (which) promotes denuclearisation”; he has reconciled America to a nuclear North Korea for the foreseeable future.
A nuclear North Korea is ok with me; a nuclear US is far more dangerous than a nuclear-any-other-country. America is the only country that has used nuclear weapons in war and killed hundreds of thousands of civilians in so doing. Nevertheless I do agree that Kim and Trump talking to each other and the relaxation of tensions overall is an excellent state of play.
Kim’s next stage
Having scored an innings victory in the First Test, Kim now faces a more daunting Second. He needs a NK-SK-China-Russia-Jap sanctions busting and investment strategy. China, Russia and SK can now legitimately ask the Security Council “Why sanctions any longer when Trump is drooling all over Kim over Singapore like a sugar daddy?” Here are tweets that have got American media (Fox News included) and the GoP establishment flustered. “I trust Kim; the US press is the enemy”; “NK is no longer a nuclear threat”; “Kim loves his people; his people love him”; “I will stop the War Games (military exercises with Japan and SK); they are provocative and expensive”. What a love fest!
I am in USA at the moment and the media (pro and anti-Trump), the establishment and folks in general are perplexed. Everyone knew that Trump was a hare-brained crackpot and no one could say what he would say next or in what direction stagger; but now it has gone surreal. However, one must grant that Trump’s surreal diplomacy, outlandish threats and Security Council sanctions prodded NK to the negotiating table.
Meanwhile ultra-right pro-Trump candidates are pulling ahead in GoP Senate and House primaries but for that very reason are likely to lose in November. Meanwhile, in Sri Lankan Trump cultists claim the summit was: “A massive victory for the President on many fronts. He promised to pull the US military out in exchange for ‘denuking’ and brought NK to a neutral position and possibly a future ally. He is the first US leader to push back powerful military lobbies and despite his cowboy image a statesman who treated Kim as an equal”. This is formidable support from a former leftist.
Trump cannot resolve US trade deficit
I will explain why the US trade deficit imbroglio is unsolvable. The deficit is linked to an overarching financial bubble, high returns to capital, and production costs not matched by high enough productivity. Unfair trade practices is not the deeper cause. The US cannot reverse its escalating trade deficit under free-trade, which it championed for decades when it suited America to do so. Why? The lifestyle of the elite and living standards of the people make US manufactured goods price uncompetitive against global rivals. Hence consumers, mainly American consumers rush to buy Mexican durables, Japanese cars and just about everything made in China.
US trade deficits began in the mid-1970s with the downturn in global capitalism. (See graph of monthly trade deficits; multiply by 12 for annual). The downturn was controlled till the mid-1990s by a vicious neo-liberal attack on welfare and wages. However the 1991 recession, the 1990s dot.com crash and the early 2000s belly-up of global capitalism pushed the trade deficit up again culminating in the 2008 crash. There was a technical rally at the end of the crash which could not be sustained. A picture is worth a thousand words and the graph saves me the thousand words. The deficit is endemic, it is organic and pertains to returns on capital, synthetic financing and higher living standards than can be sustained by higher productivity. America can’t compete; its technology though superior does not confer sufficient advantage.
Trump upended two days of economic diplomacy refusing to sign a joint statement with allies committing to free-trade. This has escalated into a trade war with the G7, Canada and Mexico. He mocked Canada’s prime minister as “very dishonest and weak” and his trade adviser Peter Navarro promised Justin Trudeau a “special place in hell”. Outraged Canadians are calling for a consumer boycott of US goods. Canada is the most important market for US goods, importing US$300 billion worth a year and taking 18% of its exports, ahead of Mexico and China last year – food, entertainment (films and music), iPhones and Nikes. The US is the top destination for Canadian tourists – 42 million trips compared to Canada’s population of 36 million.
In parallel, Trump decided to impose 25% tariffs on $50 billion worth of Chinese goods, accusing it, correctly, of intellectual property theft. Tariffs will first affect $34bn in annual trade; $16 billion will follow. The final list includes 1,100 items focused on its “Made-In-China-2025” plans to become dominant in high-tech. China responded with a list of 550 products, also covering about $34 billion to be subject to an additional 25% tariff. The list includes soybeans, corn, wheat, beef, pork, poultry and vehicles. A second list set to begin later covers coal, crude oil and gasoline. A head-on Pacific trade war that America cannot win is in full swing.
Allegations that China forces unfair transfer of US technology, steals intellectual property and refuses to give US companies fair market access are all true. Reducing technology theft and giving the US greater access to Chinese markets will narrow the $350 to $400 billion annual bilateral trade deficit with China, but not enough to reverse the US annual global trade deficit of $800 billion.
US tariffs have met fierce criticism from domestic companies and US farmers fearful of retaliation. They have had a mixed political reaction, winning praise from Democrats and opposition from Republicans who typically favour free trade. The IMF says Trump’s trade policies will hurt the US economy and undermine the world trade. While the IMF expects the trade dispute to have limited economic effect – slowing global GDP by less than one percent – it is concerned about how the fight would affect sentiment. “What is more critical and more difficult to factor in at the moment is the impact on confidence” declares the IMF. Global stock-markets have not crashed – not yet!