Aug 25th 2017

Can Trump Deal with North Korea and China?

by Jeffrey Frankel

Jeffrey Frankel is Professor of Capital Formation and Growth at Harvard University.

CAMBRIDGE – For years, Americans have misunderstood the nuclear threat from North Korea, misjudging how to address it. They have also misunderstood the bilateral trade deficits with China, overestimating their importance. Today, as President Donald Trump threatens new trade barriers against China, on which the United States must depend to help rein in an increasingly dangerous North Korea, these two issues have become closely connected. Yet US officials seem no closer to figuring them out.

The stakes obviously are much higher regarding North Korea, with US-South Korean joint military exercises this week aggravating already-high tensions. If the US and North Korea do get into a military confrontation, there is a real risk that nuclear weapons will be used. Even a conventional war would likely be catastrophic.

Trade is relevant to the North Korean nuclear challenge, because strict economic sanctions by China – potentially including a halt in oil supplies – are probably the world’s best bet for stopping the North’s nuclear program (in exchange for certain security guarantees from the US). Trump may well understand this. But he apparently believes that he can use US trade with China as a bargaining chip to secure its help in dealing with North Korea. This is the wrong approach.

Trump’s approach to governance – characterized by an unprecedented lack of interest in rules, principles, alliances, and institutions – is sometimes described as transactional. Justifications of that approach typically focus on Trump’s business background, which supposedly makes him the dealmaker the US needs. In fact, Trump’s behavior reflects a lack of regard for some of the most elementary requirements for successful negotiation.

A skillful negotiator knows that one must look at the game from the other player’s viewpoint, in order to determine which outcomes they may view as favorable, and find common ground. Moreover, concluding a deal requires credibility with respect to both inducements and punishments.

Trump’s attempts at bargaining with China reflect a failure on both fronts. From China’s perspective, a nuclear-armed North Korea is undesirable, but still less problematic than the potential breakdown of order in the country, which could produce an influx of refugees into China and bring American troops closer to China’s border. Against this background, erratic US trade threats are not the way to convince China to apply pressure on its troublesome ally.

Instead, the US, along with South Korea, should promise that, if Chinese-backed sanctions did cause the North Korean regime to collapse, China would not be confronted either by US troops north of the 38th parallel or by a unified, nuclear-armed Korean Peninsula. In the shorter term, the US and South Korea should offer to pause the deployment of America’s Terminal High Altitude Area Defense (THAAD) system in South Korea, if China adopts and enforces additional sanctions on the North.

But credibility on the part of the US president is needed to make this – or any – strategy work. Unfortunately, Trump’s statements – whether about the past, the present, or the future – are often out of touch with reality. On the North Korean nuclear issue alone, he has shown a remarkable lack of consistency, credibility, and follow-through.

In January, Trump tweeted that North Korea’s development of a nuclear weapon capable of reaching parts of the US “won’t happen!” By July, the North was testing an intercontinental ballistic missile capable of reaching the US, and it is believed that the country already possesses the capability to produce a miniaturized, ICBM-ready nuclear payload.

Earlier this month, when Trump said that any North Korean threat “will be met with fire and fury like the world has never seen,” North Korean leader Kim Jong-un responded by threatening to attack Guam. Instead of delivering fire and fury, Trump reiterated that if Kim “utters one threat in a form of an overt threat … he will truly regret it. And he will regret it fast.” These statements clearly are neither credible nor accurate.

Trump has displayed similar caprice and lack of follow-through with respect to China. In December, then-President-elect Trump challenged the “One China” policy that his predecessors, Democrats and Republicans alike, had respected. He either didn’t know that China is more willing to go to war over Taiwan than the US is, or was displaying his characteristic shortsightedness. In any case, on February 9, he had to reverse his position, losing face just a couple of weeks after his inauguration and setting a bad precedent for future deal-making with the strategically savvy Chinese.

Likewise, Trump backed down on his oft-repeated promise that he would name China a currency manipulator as soon as he took office. It was a foolish threat all along – not least because, if Chinese authorities had stopped intervening in the foreign-exchange market in 2015-2016, the result would have been a weaker renminbi, not a stronger one.

By now, Chinese President Xi Jinping, like most world leaders, has learned to discount Trump’s warnings. Trump’s statements suggesting a lack of loyalty to America’s allies – he took months to affirm his support for Article 5 of the North Atlantic Treaty, NATO’s bedrock collective-defense clause – have left even close US partners hesitant to make deals with his administration.

The White House is still pursuing aggressive trade-policy measures against China, only some of which have any merit. (While the effort to enforce intellectual property rights has some basis in reality, the attempt to block steel imports using a national-security exemption is farcical.) But these initiatives will not do much, if anything, for America’s trade balance, real income growth, or employment. And they certainly won’t convince China to help mitigate the North Korean nuclear threat.


Jeffrey Frankel is Professor of Capital Formation and Growth at Harvard University.

Copyright: Project Syndicate, 2017.
www.project-syndicate.org



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