Day: August 26, 2019
Trump caves on Iran
President Trump has apparently agreed in principle to a meeting with Iran’s President Rouhani. Best bet is that this might occur at the United Nations in September or October. The big question is what the conditions are: has Trump offered sanctions relief and has Rouhani agreed to talk about the detailed provisions of the nuclear deal, Iran’s missiles, or Iran’s behavior in the region? The answer to the former is clearly yes; the answer to the latter is that there is no evidence Rouhani has agreed to discuss any of these matters. Trump has caved.
It has been clear for some time that Trump was begging for a meeting with the Iranians, who have resisted unless promised sanctions relief. He now says he wants a discussion of missiles as well as extension of the nuclear deal (aka the sunset clauses). He has made it explicitly clear that Iran can hope for economic relief and that he is not looking for regime in Tehran. Both are major concessions. The latter, a no regime change pledge, was a prelude to President Obama’s negotiations with the Iranians and one that will displease many in the Trump Administration, especially National Security Advisor Bolton.
If the sunset clauses of the Joint Comprehensive Plan of Action (JCPOA) were the major issue, it would have been much wiser to stay in the agreement than to renege on it. Missiles were never part of the JCPOA. There was no reason to withdraw from it on that basis. Trump is essentially retreating from the more extreme positions held in the Administration, which regard the JCPOA as fundamentally flawed (and therefore extension would not be desirable) and the Iranian regime as an illegitimate one that should be replaced before any further negotiations.
Trump did not mention Iran’s regional behavior. This could of course have been an unintentional omission. Surely the Israelis, the regional Sunni powers, and America’s Iran hawks will be unhappy about it. On the merits it is the most important issue right now. Iran is actively involved in arming and training militia forces in Iraq, Syria, Lebanon, and Yemen. This is not an issue that should be ignored, though once again: the US would have been better off had we raised the issue while still a party to the JCPOA.
Only time will tell whether the meeting with Rouhani will actually come off, but President Trump is clearly ready and willing, despite Iran’s regional behavior and Israeli resistance to the JCPOA. He has decided to cut and run. But he is erratic, vulnerable to pressure, and may change his mind.
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Stevenson’s army, August 26
[The Congress class starts next week, so I’ll be giving extra emphasis to news about the legislative branch.]
Congress will be in session only 15 days in September, then recessing for two weeks [Jewish high holidays]. Lawmakers have to fund the government, probably by passing a short term continuing resolution. They dodged a bullet by approving a two year budget topline and suspending the debt limit last month.
Another July accomplishment was a new law making it easier for congressional offices to do constituent casework that requires some kind of approval paperwork.
In an apparent effort to preclude further stock market declines, President Trump said the Chinese had called and wanted to restart trade talks. Bloomberg says the Chinese Foreign Ministry knows of no such calls, and other US officials previously said there would be more talks next week. Anyway, the president has now discovered the International Emergency Economic Powers Act [IEEPA] and thinks it would allow him to forbid US companies from having Chinese customers or subsidiaries. Here’s background on IEEPA from the Congressional Research Service, and another paper on broader national emergencies laws. [Note that both CRS and FAS have CRS papers now.]
The Atlantic has a piece showing China’s effective soft power at work.
My SAIS colleague Charlie Stevenson distributes this almost daily news digest of foreign/defense/national security policy to “Stevenson’s army” via Googlegroups. I plan to republish here. If you want to get it directly, To get Stevenson’s army by email, send a blank email (no subject or text in the body) to stevensons-army+subscribe@googlegroups.com. You’ll get an email confirming your join request. Click “Join This Group” and follow the instructions to join. Once you have joined, you can adjust your email delivery preferences (if you want every email or a digest of the emails).
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The mercantile solution
Maybe trade talks with China are back on, or so says Donald Trump. The Chinese want to talk, he claims. More likely he is the one that needs to find an out: the slowing world and American economies and sharp drops in the stock market are flashing alerts: by November 2020 we could be in recession. His re-election prospects would be dealt a big blow if that materializes. No doubt he got an earful about all this from his G7 colleagues over the weekend.
An early solution to the trade war appears unlikely. The American position in the talks advocates fundamental changes in the way the Chinese manage their economy and treat foreign investors. The American negotiators want no technology transfer requirements, a free-floating Chinese currency, and an end to state subsidies. These are so-called “structural” changes that are difficult for the Chinese to concede. China needs more than 6% growth to accommodate its population’s expectations.
President Trump couldn’t care less about all that. He is interested mainly in the bilateral trade balance. A mercantilist, he regards imports as bad and exports as good. What he wants is not complicated structural change–which takes time and attention to detail–but rather simple Chinese commitments to import more from the US. The Chinese have understood this and are likely willing to give him what he wants: they should not care less whether they get soybeans from the US or from Brazil.
Negotiating with the US is therefore a two-level game. The Chinese have understood this: they will do their best to satisfy Trump on reducing the giant bilateral trade deficit while stiffing his negotiators on the structural changes. They will hope this approach will bend the President towards lifting the tariffs he has imposed while Beijing avoids fundamental reforms.
It may work, but it may not. If Trump is a true mercantilist, he will want to make the tariffs permanent, or at least of indefinite duration. Only then could he hope for American companies to do what he “ordered” last week: return to the US, where he would need to protect them from foreign competition with tariffs. If this is Trump’s real ambition, you can expect any renewed trade talks to fail.
You can also expect a permanent decline in US competitiveness as other countries meet competitive challenges while the US is protected from them. Americans will be less well off, productivity will suffer, foreign investment will shrink, the economy will grow more slowly, and the stock market–hesitant now–will fall to new lows. The mercantile solution is a bad one, but hard to rule out with a President who is a mercantilist.
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