Saving Asia’s Long Peace


October 21, 2017

Saving Asia’s Long Peace

by Kevin Rudd@ The Asia Society

http://www.eastasiaforum.org/2017/10/19/can-we-preserve-asias-long-peace/

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Former Prime Minister of Australia and China Scholar Kevin Rudd at The Asia Society

How can we save Asia’s ‘long peace’? Right now, the world is legitimately focused on the emerging North Korean nuclear crisis. This has been a crisis long in the making, beginning with the Soviet training of North Korean nuclear scientists and engineers after the Second World War, the North’s expulsion of International Atomic Energy Agency inspectors in 2002 and the subsequent series of ballistic and nuclear weapons tests.

 

The uncomfortable truth is that for the last quarter of a century, the international community has simply been kicking this can down the road. And now, at one minute to midnight, everyone is scrambling on what to do about it.

There is a further, more substantial question, however, which we must equally consider for the medium- to long-term, and that is Asia’s collective failure to produce a united voice on not just the evolution of the North Korean threat but on the plethora of other threats confronting long-term stability, security and peace. And the equally uncomfortable truth is that there is a bucket-load of them in what has become the great Asian Paradox: high levels of pan-regional economic integration underpinning unprecedented levels of regional prosperity on the one hand; while at the same time a continuation and gradual exacerbation of underlying geopolitical threats to security on the other.

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We seem to have become collectively desensitised to the ‘long peace’ from which the region has benefited since the Korean Armistice of 1953. The Vietnam War remained a sub-regional conflict — albeit one which was devastating for the participants. The Sino-Indian border war of 1962 remained an exclusively bilateral affair, as did the Bangladesh Liberation War of 1971. Led initially by Northeast Asia, after 1975 by Southeast Asia and more recently by the economic advance of India, Asia has by-and-large quietly become not just a region of growing prosperity, but the long-term guarantor of global economic growth.

To a large extent, the ‘Asian economic miracle’ has induced a significant degree of pan-regional, geopolitical complacency. We have become the unwitting victims of the neoliberal orthodoxy that economics ultimately solves both politics and geopolitics — that is, that market liberalisation will ultimately produce Western political democracy at home and peace abroad, because democracies never attack each other. China constitutes the singular exception to this view — but there are others as well.

One of the problems in all this has been the failure of the wider region to generate a pan-regional political security institution capable of entrenching regional norms, practices and cultures for the management of underpinning geopolitical tensions.

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ASEAN is the standout counter-example. It is a testament to its founding vision 50 years ago that for states which originally had hostile relationships with each other (the Singaporean and Malaysian confrontation against Indonesia; and later, the original non-communist ‘South East Asian Five’ versus Communist Indochina), there has been no intra-regional conflict of any magnitude for the last 40 years. When one threatened between Thailand and Cambodia in 2008, it was ASEAN institutional diplomacy which prevailed and resolved the problem.

But despite ASEAN’s success, for half a century we have failed to replicate a parallel political security institution for the whole of East Asia — let alone wider Asia itself. APEC has evolved into a successful regional economic institution, although India is not a member. The ASEAN Regional Forum, which does have a security policy mandate for the wider region, does not meet at head-of-government level and has never really worked. ASEAN+3 (China, South Korea and Japan) evolved into ASEAN+6 (including India, Australia and New Zealand), which evolved into the East Asia Summit (EAS), which now includes both the United States and Russia.

Over the past two years, an independent policy commission of the Asia Society Policy Institute has worked together on how we could strengthen the existing East Asia Summit, created a decade ago, to enhance its effectiveness as a political security institution for the wider region. The commission was made up of former foreign ministers Marty Natalegawa of Indonesia, Yoriko Kawaguchi of Japan, Kim Sung-Hwan of South Korea and Igor Ivanov of Russia; former national security advisors Shivshankar Menon of India and Tom Donilon of the United States; Wang Jisi, a member of the foreign policy advisory group of the Chinese foreign ministry; and myself.

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Manila, the Philippines August 7, 2017: H.E. Senior Minister Prak Sokhonn with Foreign Ministers of the ASEAN member states and eight dialogue partners composed of Australia, China, India, Japan, New Zealand, Republic of Korea, Russian Federation and the United States of America attended the 7th East Asia Summit (EAS) Foreign Ministers’ Meeting (FMM) to review and discuss the future direction of EAS cooperation. They also exchange views on regional and international issues, and discuss preparations and possible outcome documents for the adaptation by EAS Leaders in the 12th East Asia Summit, 14th November 2017.–Courtesy, MFIC, Cambodia

 

The EAS has the mandate to expand its activities in the security domain. The Kuala Lumpur Declaration of 2005 is clear about this. Furthermore, members of the EAS have all signed the Treaty of Amity and Cooperation, which commits partners to peaceful dispute resolution. Moreover, the EAS uniquely has all necessary players around the one table.

To begin with, the EAS needs a permanent secretariat. It should be empowered to create temporary EAS working groups on current and emerging security policy challenges. It could also, over time, consider aligning the existing ASEAN Defence Ministers’ Meeting-Plus with the EAS heads of government process. And its overall objective should be to establish the habits, protocols and procedures for crisis prevention and dispute resolution within the wider region.

In the absence of that, the brittle, usually bilateral nature of existing security policy tensions across the wider region will simply get worse. Indeed, this will be reinforced by the emerging system of competing alliances across the region — with US allies on the one hand and a raid against the expanding network of Chinese semi-alliance structures unfolding through a combination of the Shanghai Cooperation Organisation, the Conference on Interaction and Confidence Building Measures in Asia and perhaps the Belt and Road Initiative on the other.

An expanding East Asia Summit, perhaps one day evolving into a wider East Asian community or an Asia Pacific community, will not exist as a substitute for evolving and existing alliance structures. But it could well help take the sharper edges off what is currently unfolding, as well as slowly evolving concepts of common security, military transparency and common military exercises which could over time help preserve the ‘long peace’ from which we have collectively benefited since the end of the last Korean War.

Kevin Rudd is Australia’s 26th Prime Minister and President of the Asia Society Policy Institute in New York. The Asia Society Policy Institute’s Report, Preserving the Long Peace in Asia, is available for download.

Deja Voodoo–Trump’s Tax Reform


October 20, 2017

Deja Voodoo–Trump’s Tax Reform

by Joseph E. Stiglitz*

http://www.project-syndicate.org

A Trump administration staffed by plutocrats – most of whom gained their wealth from rent-seeking activities, rather than from productive entrepreneurship – could be expected to reward themselves. But the Republicans’ proposed tax reform is a bigger gift to corporations and the ultra-rich than most had anticipated.

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NEW YORK – Having failed to “repeal and replace” the 2010 Affordable Care Act (“Obamacare”), US President Donald Trump’s administration and the Republican congressional majority have now moved on to tax reform. Eight months after assuming office, the administration has been able to offer only an outline of what it has in mind. But what we know is enough to feel a deep sense of alarm.

Tax policy should reflect a country’s values and address its problems. And today, the United States – and much of the world – confronts four central problems: widening income inequality, growing job insecurity, climate change, and anemic productivity growth. America faces, in addition, the need to rebuild its decaying infrastructure and strengthen its underperforming primary and secondary education system.

But what Trump and the Republicans are offering in response to these challenges is a tax plan that provides the overwhelming share of benefits not to the middle class – a large proportion of which may actually pay more taxes – but to America’s millionaires and billionaires. If inequality was a problem before, enacting the Republicans’ proposed tax reform will make it much worse.

Corporations and businesses will be among the big beneficiaries, a bias justified on the grounds that this will stimulate the economy. But Republicans, of all people, should understand that incentives matter: it would be far better to reduce taxes for those companies that invest in America and create jobs, and increase taxes for those that don’t.

 

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After all, it is not as if America’s large corporations were starved for cash; they are sitting on a couple of trillion dollars. And the lack of investment is not because profits, either before or after tax, are too low; after-tax corporate profits as a share of GDP have almost tripled in the last 30 years.

Indeed, with incremental investment largely financed by debt, and interest payments being tax-deductible, the corporate tax lowers the cost of capital and the returns to investment commensurately. Thus, neither theory nor evidence suggests that the Republicans’ proposed corporate tax giveaway will increase investment or employment.

The Republicans also dream of a territorial tax system, whereby American corporations are taxed only on the income they generate in the US. But this would only reduce revenue and further encourage American companies to shift production to low-tax jurisdictions. A race to the bottom on corporate taxation can be prevented only by imposing a minimum rate on any corporation that engages in business in the US.

America’s states and municipalities are responsible for education and large parts of the country’s health and welfare system. And state income taxes are the best way to introduce a modicum of progressivity at the subnational level: states without an income tax typically rely on regressive sales taxes, which impose a heavy burden on the poor and working people. It is thus perhaps no surprise that the Trump administration, staffed by plutocrats who are indifferent to inequality, should want to eliminate the deductibility of state income taxes from federal taxation, encouraging states to shift toward sales taxes.

Addressing the panoply of other problems confronting the US will require more federal revenues, not less. Increases in standards of living, for example, are the result of technological innovation, which in turn depends on basic research. But federal government support of research as a percentage of GDP is now at a level comparable to what it was 60 years ago.

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While Trump the candidate criticized the growth of US national debt, he now proposes tax cuts that would add trillions to the debt in just the next ten years – not the “only” $1.5 trillion that Republicans claim would be added, thanks to some growth miracle that leads to more tax revenues. Yet the key lesson of Ronald Reagan’s “voodoo” supply-side economics has not changed: tax cuts like these do not lead to faster growth, but only to lower revenues.

This is especially so now, when the unemployment rate is just over 4%. Any significant increase to aggregate demand would be met by a corresponding increase in interest rates. The “economic mix” of the economy would thus shift away from investment; and growth, already anemic, would slow.

An alternative framework would increase revenues and boost growth. It would include real corporate-tax reform, eliminating the tricks that allow some of the world’s largest companies to pay miniscule taxes, in some cases far less than 5% of their profits, giving them an unfair advantage over small local businesses. It would establish a minimum tax and eliminate the special treatment of capital gains and dividends, compelling the very rich to pay at least the same percentage of their income in taxes as other citizens. And it would introduce a carbon tax, to help accelerate the transition to a green economy.

Tax policy can also be used to shape the economy. In addition to offering benefits to those who invest, carry out research, and create jobs, higher taxes on land and real-estate speculation would redirect capital toward productivity-enhancing spending – the key to long-term improvement in living standards.

An administration of plutocrats – most of whom gained their wealth from rent-seeking activities, rather than from productive entrepreneurship – could be expected to reward themselves. But the Republicans’ proposed tax reform is a bigger gift to corporations and the ultra-rich than most had anticipated. It avoids necessary reforms and would leave the country with a mountain of debt; the consequences – low investment, stalled productivity growth, and yawning inequality – would take decades to undo.

Trump assumed office promising to “drain the swamp” in Washington, DC. Instead, the swamp has grown wider and deeper. With the Republicans’ proposed tax reform, it threatens to engulf the US economy.

*Joseph E. Stiglitz, recipient of the Nobel Memorial Prize in Economic Sciences in 2001 and the John Bates Clark Medal in 1979, is University Professor at Columbia University, Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief Economist of the Roosevelt Institute. A former senior vice president and chief economist of the World Bank and chair of the US president’s Council of Economic Advisers under Bill Clinton, in 2000 he founded the Initiative for Policy Dialogue, a think tank on international development based at Columbia University.His most recent book is The Euro: How a Common Currency Threatens the Future of Europe.

 

McCain-The Hedgehog–Honor First for America


October 19, 2017

It isn’t hard to guess who John McCain had in mind when, in a speech on Monday at the National Constitution Center in Philadelphia — the finest speech of his storied political career — he denounced the “half-baked, spurious nationalism cooked up by people who would rather find scapegoats than solve problems.”

It’s easy to guess, too, the names of the Senate and House Republicans Stephen Bannon had in mind when, at a Values Voter Summit in Washington over the weekend, he declared “a season of war against the G.O.P. establishment.”

McCain and Bannon are the antipodes of the Republican Party. The institutionalist versus the insurgent. The internationalist versus the America Firster. The maverick versus the ideologue.

Above all, the hedgehog versus the honey badger.

The hedgehog, said the Greek poet Archilochus, knows one big thing. McCain knows honor. He refused early release from prison camp in Hanoi to save his honor. He reproved Republican voters for calling Barack Obama an Arab in 2008 to save his party’s honor. He championed the surge in Iraq when it was least popular, to save the country’s honor.

He paid for all of it and will be remembered as a giant among dwarves because of it.

Right now, McCain, his allies and their ideas appear to be a waning force in the Republican Party. They are RINOs, cucks, and “globalists.” Many of them, like Tennessee’s Bob Corker, will retire rather than face bruising primary challenges from the ever-farther right. On Monday McCain called America “the land of the immigrant’s dream,” and said: “We live in a land made of ideals, not blood and soil.” To a large and growing segment of the G.O.P., which thinks magnanimity is for losers, these statements amount to a form of treason.

The honey badger, by contrast, will do anything to get what it wants. It is wily, nasty and has as much use for honor as a pornographer has for dress. In the 2016 presidential campaign, according to biographer Joshua Green, Bannon treated white supremacists as useful fellow travelers and urged Donald Trump to persist in what seemed to many to be his use of anti-Jewish tropes. Later he waged a smear campaign against H.R. McMaster on the grounds that the national security adviser was anti-Israel.

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Donald Trump and his pet Honey Badger (Steve Bannon)

For the honey badger, it’s whatever works: anti-Semite one day; Israel’s make-believe champion the next. Bannon is the most revolting operator in American political life since Roy Cohn. He is also the most consequential one.

In his speech, Bannon asked of the Senate majority leader, Mitch McConnell: “Who’s going to be Brutus to your Julius Caesar”? Caesar was stabbed 23 times on the floor of the Roman Senate on the 15th of March, 44 B.C. John Wilkes Booth also invoked Brutus from the stage of Ford’s Theatre after he had assassinated Lincoln, the father of the Republican Party. This is what now passes for acceptable speech among the G.O.P.’s “values voters.”

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Bannon thinks he can get away with this because he already has. He did so to spectacular effect last year with Donald Trump, and again last month in Alabama with Judge Roy Moore. He will run this play as often as he can, whether his candidates win or lose. The goal isn’t to win elections but to purge the party and remake it in Bannon’s image. He wasn’t kidding when he told historian Ronald Radosh in 2013 that he’s a “Leninist.”

It also helps Bannon that the Roll-Over Republicans who might oppose him lack the political courage to do so. Winston Churchill said of the neutral countries in World War II, “each one hopes that if he feeds the crocodile enough, the crocodile will eat him last.” Think of Paul Ryan as the moral equivalent of Norway.

What might stop Bannon? Nobody should expect G.O.P. invertebrates to ever gain a spine. But Judge Moore is in a dead heat with Doug Jones, his Democratic opponent, in what should be the easiest Republican cakewalk of the season. Even the stupid party might remember its Senate nominations of Delaware’s Christine “I’m not a witch” O’Donnell and Missouri’s Todd “legitimate rape” Akin.

But parties need more than just the spur of defeat to give voters a sense of moral belonging and political purpose, and in his speech Monday McCain did that:

“We live in a land made of ideals, not blood and soil. We are the custodians of those ideals at home, and their champion abroad. We have done great good in the world. That leadership has had its costs, but we have become incomparably powerful and wealthy as we did. We have a moral obligation to continue in our just cause, and we would bring more than shame on ourselves if we don’t. We will not thrive in a world where our leadership and ideals are absent. We wouldn’t deserve to.”

This is the finest expression of the American cause uttered by any major political figure in a generation. It could yet serve as a rallying point for a Republican Party that can save itself from dishonor, win its share of elections, and stand up to the honey badgers who mean to pillage it.

 

The Demise of Dollar Diplomacy


October 17, 2017

The Demise of Dollar Diplomacy

by Barry Eichengreen*

http://www.project-syndicate.org

Pundits have been saying last rites for the dollar’s global dominance since the 1960s – that is, for more than half a century now. But the pundits may finally be right, because the greenback’s dominance has been sustained by geopolitical alliances that are now fraying badly.

WASHINGTON, DC – Mark Twain never actually said “Reports of my death have been greatly exaggerated.” But the misquote is too delicious to die a natural death of its own. And nowhere is the idea behind it more relevant than in discussions of the dollar’s international role.

Pundits have been saying last rites for the dollar’s global dominance since the 1960s – that is, for more than a half-century now. The point can be shown by occurrences of the phrase “demise of the dollar” in all English-language publications catalogued by Google.

The frequency of such mentions, adjusted for the number of printed pages per year, first jumped in 1969, following the collapse of the London Gold Pool, an arrangement in which eight central banks cooperated to support the dollar’s peg to gold. Use of the phrase soared in the 1970s, following the collapse of the Bretton Woods system, of which the dollar was the linchpin, and in response to the high inflation that accompanied the presidencies of Richard Nixon, Gerald Ford, and Jimmy Carter in the 1970s.

But even that spike was dwarfed by the increase in mentions and corresponding worries about the dollar starting in 2001, reflecting the shock of the terrorist attacks that September, the mushrooming growth of the US trade deficit, and then the global financial crisis of 2008.

Yet through all of this, the dollar’s international role has endured. As my coauthors and I show in a new book, the share of dollars in the foreign-currency reserves held by central banks and governments worldwide hardly budged in the face of these events. The greenback remains the dominant currency traded in foreign-exchange markets. It is still the unit in which petroleum is priced and traded worldwide, Venezuelan leaders’ complaints about the “tyranny of the dollar” notwithstanding.

To the consternation of many currency traders, the value of the dollar fluctuates widely, as its rise, fall, and recovery in the course of the last year have shown. But this does little to erode the attractiveness of the dollar in international markets.

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America First–Then What is Future of the US Dollar in the Trumpian Era?

Central banks still hold US Treasury bonds because the market for them is the single most liquid financial market in the world. And Treasury bonds are secure: the federal government has not fallen into arrears on its debt since the disastrous War of 1812.

In addition, US diplomatic and military links encourage America’s allies to hold dollars. States with their own nuclear weapons hold fewer dollars than countries that depend on the US for their security needs. Being in a military alliance with a reserve-currency-issuing country boosts the share of the partner’s foreign-exchange reserves held in that currency by roughly 30 percentage points. The evidence thus suggests that the share of reserves held in dollars would fall appreciably in the absence of this effect.

This under-appreciated link between geopolitical alliances and international currency choice reflects a combination of factors. Governments have reason to be confident that the reserve-currency country will make servicing debt held by its allies a high priority. In return, those allies, by holding its liabilities, can help to lower the issuer’s borrowing costs.

Here, then, and not in another imbroglio over the federal debt ceiling this coming December, is where the real threat to the dollar’s international dominance lies. As one anonymous US State Department official put it, President Donald Trump “does not seem to care about alliances and therefore does not care about diplomacy.”

South Korea and Japan are thought to hold about 80% of their international reserves in dollars. One can imagine that the financial behavior of these and other countries would change dramatically, with adverse implications for the dollar’s exchange rate and US borrowing costs, were America’s close military alliances with its allies to fray.

Nor is it hard to imagine how this fraying could come about. President Donald Trump has painted himself into a strategic corner: he needs a concession from North Korea on the nuclear-weapons issue in order to save face with his base, not to mention with the global community. And, for all of Trump’s aggressive rhetoric and posturing, the only feasible way to secure such a concession is through negotiation. Ironically, the most plausible outcome of that process is an inspections regime not unlike the one negotiated by Barack Obama’s administration with Iran.

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Visualizing the Size of the U.S. National Debt

How big is the U.S. National Debt?

The best way to understand these large numbers? We believe it is to represent them visually, by plotting the data with comparable numbers that are easier to grasp.

Today’s data visualization plots the U.S. National Debt against everything from the assets managed by the world’s largest money managers, to the annual value of gold production.

1. The U.S. national debt is larger than the 500 largest public companies in America.
The S&P 500 is a stock market index that tracks the value of the 500 largest U.S. companies by market capitalization. It includes giant companies like Apple, Exxon Mobil, Microsoft, Alphabet, Facebook, Johnson & Johnson, and many others. In summer of 2016, the value of all of these 500 companies together added to $19.1 trillion – just short of the debt total.

2. The U.S. national debt is larger than all assets managed by the world’s top seven money managers.
The world’s largest money managers – companies like Blackrock, Vanguard, or Fidelity – manage trillions of investor assets in stocks, bonds, mutual funds, ETFs, and more. However, if we take the top seven of these companies and add all of their assets under management (AUM) together, it adds up to only $18.9 trillion.

3. The U.S. national debt is 25x larger than all global oil exports in 2015.
Yes, countries such as Saudi Arabia, Kuwait, and Russia make a killing off of selling their oil around the world. However, the numbers behind these exports are paltry in comparison to the debt. For example, you’d need the Saudis to donate the next 146 years of revenue from their oil exports to fully pay down the debt.

4. The U.S. national debt is 155x larger than all gold mined globally in a year.
Gold has symbolized money and wealth for a long time – but even the world’s annual production of roughly 3,000 tonnes (96 million oz) of the yellow metal barely puts a dent in the debt total. At market prices today, you’d need to somehow mine 155 years worth of gold at today’s rate to equal the debt.

5. In fact, the national debt is larger than all of the world’s physical currency, gold, silver, and bitcoin combined.

That’s right, if you rounded up every single dollar, euro, yen, pound, yuan, and any other global physical currency note or coin in existence, it only amounts to a measly $5 trillion. Adding the world’s physical gold ($7.7 trillion), silver ($20 billion), and cryptocurrencies ($11 billion) on top of that, you get to a total of $12.73 trillion. That’s equal to about 65% of the U.S. national debt.

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To get there, Trump’s administration will have to offer something in return. The most obvious bargaining chip that could be offered to make the North Korean regime feel more secure is a reduction in US troop levels on the Korean Peninsula and in Asia in general, With that, the US security guarantee for Asia will weaken, in turn providing China an opportunity to step into the geopolitical breach.

And where China leads geopolitically, its currency, the renminbi, is likely to follow.

*Barry Eichengreen is Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is Hall of Mirrors:The Great Depression, the Great Recession, and the Uses – and Misuses – of History.

China’s Xi Jinping–The World’s Most Powerful Man


October 17, 2017

THE ECONOMIST

China’s Xi Jinping–The World’s Most Powerful Man

Xi Jinping has more clout than Donald Trump. The world should be wary

Do not expect Mr Xi to change China, or the world, for the better

Print edition | Leaders

Oct 14th 2017

One-man rule is ultimately a recipe for instability in China, as it has been in the past—think of Mao and his Cultural Revolution. It is also a recipe for arbitrary behaviour abroad, which is especially worrying at a time when Mr Trump’s America is pulling back and creating a power vacuum. The world does not want an isolationist United States or a dictatorship in China. Alas, it may get both.

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Two Giants of Asia–Xi and Modi–Friends or Foes

AMERICAN Presidents have a habit of describing their Chinese counterparts in terms of awe. A fawning Richard Nixon said to Mao Zedong that the chairman’s writings had “changed the world”. To Jimmy Carter, Deng Xiaoping was a string of flattering adjectives: “smart, tough, intelligent, frank, courageous, personable, self-assured, friendly”. Bill Clinton described China’s then president, Jiang Zemin, as a “visionary” and “a man of extraordinary intellect”. Donald Trump is no less wowed. The Washington Post quotes him as saying that China’s current leader, Xi Jinping, is “probably the most powerful” China has had in a century.

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Mr Trump may be right. And were it not political suicide for an American president to say so, he might plausibly have added: “Xi Jinping is the world’s most powerful leader.” To be sure, China’s economy is still second in size to America’s and its army, though rapidly gaining muscle, pales in comparison. But economic heft and military hardware are not everything. The leader of the free world has a narrow, transactional approach to foreigners and seems unable to enact his agenda at home. The United States is still the world’s most powerful country, but its leader is weaker at home and less effective abroad than any of his recent predecessors, not least because he scorns the values and alliances that underpin American influence.

The President of the world’s largest authoritarian state, by contrast, walks with swagger abroad. His grip on China is tighter than any leader’s since Mao. And whereas Mao’s China was chaotic and miserably poor, Mr Xi’s is a dominant engine of global growth. His clout will soon be on full display. On October 18th China’s ruling Communist Party will convene a five-yearly congress in Beijing (see Briefing). It will be the first one presided over by Mr Xi. Its 2,300 delegates will sing his praises to the skies. More sceptical observers might ask whether Mr Xi will use his extraordinary power for good or ill.

World, take note

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On his numerous foreign tours, Mr Xi presents himself as an apostle of peace and friendship, a voice of reason in a confused and troubled world. Mr Trump’s failings have made this much easier. At Davos in January Mr Xi promised the global elite that he would be a champion of globalisation, free trade and the Paris accord on climate change. Members of his audience were delighted and relieved. At least, they thought, one great power was willing to stand up for what was right, even if Mr Trump (then President-Elect) would not.

Mr Xi’s words are heeded partly because he has the world’s largest stockpile of foreign currency to back them up. His “Belt and Road Initiative” may be puzzlingly named, but its message is clear—hundreds of billions of dollars of Chinese money are to be invested abroad in railways, ports, power stations and other infrastructure that will help vast swathes of the world to prosper. That is the kind of leadership America has not shown since the post-war days of the Marshall Plan in western Europe (which was considerably smaller).

Mr Xi is also projecting what for China is unprecedented military power abroad. This year he opened the country’s first foreign military base, in Djibouti. He has sent the Chinese navy on manoeuvres ever farther afield, including in July on NATO’s doorstep in the Baltic Sea alongside Russia’s fleet. China says it would never invade other countries to impose its will (apart from Taiwan, which it does not consider a country). Its base-building efforts are to support peacekeeping, anti-piracy and humanitarian missions, it says. As for the artificial islands with military-grade runways it is building in the South China Sea, these are purely defensive.

Unlike Vladimir Putin, Russia’s President, Mr Xi is not a global troublemaker who seeks to subvert democracy and destabilise the West. Still, he is too tolerant of troublemaking by his nuke-brandishing ally, North Korea (see Schumpeter). And some of China’s military behaviour alarms its neighbours, not only in South-East Asia but also in India and Japan.

At home, Mr Xi’s instincts are at least as illiberal as those of his Russian counterpart. He believes that even a little political permissiveness could prove not only his own undoing, but that of his regime. The fate of the Soviet Union haunts him, and that insecurity has consequences. He mistrusts not only the enemies his purges have created but also China’s fast-growing, smartphone-wielding middle class, and the shoots of civil society that were sprouting when he took over. He seems determined to tighten control over Chinese society, not least by enhancing the state’s powers of surveillance, and to keep the commanding heights of the economy firmly under the party’s thumb. All this will make China less rich than it should be, and a more stifling place to live. Human-rights abuses have grown worse under Mr Xi, with barely a murmur of complaint from other world leaders.

Liberals once mourned the “ten lost years” of reform under Mr Xi’s predecessor, Hu Jintao. Those ten years have become 15, and may exceed 20. Some optimists argue that we have not yet seen the real Mr Xi—that the congress will help him consolidate his power, and after that he will begin social and economic reforms in earnest, building on his relative success in curbing corruption. If he is a closet pluralist, however, he disguises it well. And alarmingly for those who believe that all leaders have a sell-by date, Mr Xi is thought to be reluctant to step down in 2022, when precedent suggests he should.

Reasons to be fearful

Mr Xi may think that concentrating more or less unchecked power over 1.4bn Chinese in the hands of one man is, to borrow one of his favourite terms, the “new normal” of Chinese politics. But it is not normal; it is dangerous. No one should have that much power. One-man rule is ultimately a recipe for instability in China, as it has been in the past—think of Mao and his Cultural Revolution. It is also a recipe for arbitrary behaviour abroad, which is especially worrying at a time when Mr Trump’s America is pulling back and creating a power vacuum. The world does not want an isolationist United States or a dictatorship in China. Alas, it may get both.

This article appeared in the Leaders section of the print edition under the headline “The world’s most powerful man”

Former US Ambassador to Malaysia and State Department’s Joseph Yun on Rocket Man and North Korea


October 16, 2017

Former US Ambassador to Malaysia and State Department’s Joseph Yun on Rocket Man and North Korea

by Editor Rosemary O’Hara at rohara@sun-sentinel.com or on Twitter @RosemaryOhara14

http://www.sun-sentinel.com/opinion/fl-op-north-korea-rocket-man-rosemary-ohara-20171014-story.html

The first thing you notice about America’s key diplomat on North Korea is that he has a nice smile and a quick wit, attributes that help lighten the mood in tense times.

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It’s not that the questions he faced from a group of American news editors this week were tougher than those others are asking about the war of words between President Donald Trump and North Korean leader Kim Jong Un — and the potential for this exchange to escalate into World War III.

Still, it was a delightful surprise that Joseph Yun agreed to an on-the-record interview Wednesday at the State Department’s annual briefing for opinion page editors — and that he opened with a laugh line.

“I understand you’ve been here since 9 o’clock and you’ve just had your lunch, so feel free to take a nap. We completely understand,” said Yun, deputy assistant secretary of the Bureau of East Asia and Pacific Affairs.

No one had sleep on their minds, of course. We were eager to talk to the man who describes his job as “our country’s designated engager for North Korea, the guy whose job it is to talk to North Korea and see what they want and where they want to go.”

Just two weeks ago, Secretary of State Rex Tillerson acknowledged for the first time that we are in direct communication with the North Korean government over its missile and nuclear bomb tests, and a possible way forward.

President Trump tweeted at the time that Tillerson was wasting his time. “Save your energy Rex, we’ll do what has to be done!”

Five hours later, the President tweeted again: “Being nice to Rocket Man hasn’t worked in 25 years, why would it work now?”

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Special Representative for North Korea Policy at The State Department Joseph Yun (left)

And he didn’t stop there. ”Sorry, but only one thing will work!” What does that mean? “You’ll figure that out pretty soon,” Trump said.

It was Trump’s threat to “totally destroy” North Korea that the Koreans took as a “declaration of war.” Foreign Minister Ri Yong Ho said Wednesday that Trump had “lit the wick of a war against us. We need to settle the final score, only with a hail of fire, not words.”

At the center of this maelstrom is Yun, a soft-spoken native of South Korea who’s been with the State Department for 33 years, most recently as ambassador to Malaysia. “It was a nice life. Next to a golf course. Very nice.”

You could feel the punchline coming.

“They thought I was getting very lazy,” he said. “So exactly a year ago, they asked me to come over to take this job … And I feel that what I owed in my 31 years before, I have paid back now.”

Before getting down to the nitty gritty, this instantly likable man offered one more quip. “I took this job in the Obama administration,” he said. “I am one of the few, I would say, ‘holdovers’ left. I think mostly because they don’t know I’m here. That’s off the record!”

Humility aside, Yun is undoubtedly well known to President Trump and Secretary Tillerson because as State Department Spokeswoman Heather Nauert also made clear that day, North Korea is the President’s top foreign policy issue. “That is the number one issue the President has asked Secretary Tillerson to engage in.”

Yun described how it’s going.

When he began his assignment, the North Koreans wouldn’t talk to him. They wanted nothing to do with anyone from the Obama administration. “They said they believed that the Obama administration was interested in a policy goal of regime change … ‘Why would we want to talk to anyone that represents an administration that believes in regime change?’”

Things changed after President Trump’s inauguration. “After January. 20, I would say things improved and really, we got underway with what we call ‘North Korea policy review.’ And in the review, we came up very clearly that we’re going to increase pressure on North Korea to denuclearize. But at the same time, we would leave room for engagement.”

To be clear, when Yun says “denuclearize,” he means North Korea must rid itself of all nuclear capabilities. Personally, I hadn’t realized that was the starting point for talks.

The policy, called “maximum pressure and engagement,” grew from North Korea’s failure to stop testing its missiles and nuclear devices. “In fact, in six years under the current leader, Kim Jong Un, they tested 80 times — over 80 times. Compare that with the previous six years, under his father, (Kim Jong Il,) who tested less than 20 times. So this was getting very much accelerated.”

To begin a dialogue, Yun invited his North Korean counterparts to New York in late February. But in early February, the North Koreans killed Kim Jong Nam, their leader’s half-brother, in Kuala Lumpur, Malaysia’s capital.

“Not only did they kill him, they killed him using VX nerve agent, which is classified as WMD by the United Nations. There was such an outcry that it was not possible for me to see them and of course we had to say, ‘Now is not the time for talks.’

“At the same time, we had three American prisoners in North Korea. So both President Trump and Secretary Tillerson, it’s their very high priority to get American prisoners out. So I told (the North Koreans,) ‘Can we discuss getting the prisoners out and maybe from there we can build a dialogue?’ So that’s when I went to Pyongyang.”

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The late Otto Warmbier and US Ambassador to the United Nations Nikki Haley

Among the prisoners was Otto Warmbier, an Ohio college student held for more than a year for allegedly trying to steal a propaganda poster from a North Korean hotel. Yun saw that Warmbier was not well. His parents later told Fox & Friends that when their unconscious son arrived home, he was blind and deaf, had a nasal feeding tube, was jerking violently and howling involuntarily, and that it looked like someone had taken a pair of pliers and rearranged his bottom teeth.

“So what could have been a very positive story turned out quite negative because not only was he unconscious, he came back home and he died in less than a week. As you can see, the public opinion in the U.S. was very much against that. And then, of course, North Koreans, as they rightly should, got the blame. And as a result, we have now restricted travel of all Americans to North Korea.”

 

Meanwhile, North Korea continued to violate world norms and test its missiles and nuclear bombs. In early September, it tested a device that “was probably 150 kilotons, which is, I think, about ten times bigger than the bomb that went off in Nagasaki. And of course they also tested intercontinental ballistic missiles that are capable of hitting Hawaii, hitting Guam and possibly the West Coast.

“So this is why you’re seeing the tensions heightened. There is a realization among the American public that there is a genuine homeland security threat. … And this is why you’re seeing open debate on: do we pressure them, do we seek a diplomatic path or do we seek a pressure path? And that, I think, is the really big issue of the day.

“I’m a diplomat. I work in the State Department. We have always said we should pursue pressure as well as a diplomatic path. And that is not an easy thing to suggest — to pressure someone at the same time to coax them to dialogue and diplomatic path. That is the challenge we face.”

On diplomacy, Yun highlights the Trump administration’s recent success at the United Nations Security Council in securing unanimous resolutions to strengthen global sanctions that limit North Korea’s coal exports, oil imports and overseas workers forced to send “loyalty payments” home.

“These guest workers are essentially slave labor,” spokeswoman Nauert later added. “They don’t get to keep their own money. That money goes back to the Kim Jong Un regime … That doesn’t go to feed his own people, to provide medical care to his own people. He uses it to fund extremely expensive weapons programs. We believe that with the sanctions, we could remove money going to those programs.”

It’s impressive to see the growing list of nations severing ties with North Korea and expelling its ambassadors. Since mid-September, they include Peru, Mexico, Italy, Spain, Kuwait, Egypt, the Philippines and on Thursday, the United Arab Emirates.

China remains the biggest holdout. And since China accounts for over 90 percent of trade with North Korea, “it’s crucial that China does its part in sanctions,” Yun says.

On the other end of the spectrum, South Korea and Japan, our close allies, “have been very solid in being with us in all aspects of sanction policy as well as diplomatic policy,” he added.

“So that’s where we are. And obviously this thing hasn’t yet run its course. I would pose to you that this is a difficult problem that’s been with us for many decades. Their nuclear program probably started in the ‘60s. The first nuclear agreement we reached with them was in ’94. …The second nuclear agreement we reached with them was in six-party talks that went from about 2003 to 2008. So we’ve seen many generations of this and this is a serious problem that’s become even more serious because of the homeland threat.”

With that, Yun took questions.

What about former President Jimmy Carter’s call to send a high-level delegation to Pyongyang for peace talks or to convene an international conference that includes North and South Korea, the United States and China?

“Clearly we’re open to any approach, but let me be frank with you. … The North Koreans have made it clear to me, as well as to the world, that they want to talk to the U.S. They’re not that interested in talking to anyone else, that this is a problem between North Korea and the United States. So I’m not sure internationalizing it, that they would accept that. … North Korea has said they don’t want six-party talks. What they want to do is talk to us.”

Do we want to talk to them?

“I think we are very much open to talking to them. You’ve seen Secretary Tillerson say that. We want to talk to them. But we also do believe at the same time, they have got to come to talks with some degree of credibility and seriousness. They have agreed many times in the past that denuclearization is also their goal. But they have recently removed that. They said they would not denuclearize. And so that’s a problem for us. If you come to talks and say you’re not going to denuclearize, I’m not sure really what the future of those talks are.”

Steve Bannon, former White House chief strategist, recently said that as long as North Korea has thousands of rockets trained on Seoul, there’s no credible military option that doesn’t result in the deaths of millions of South Koreans as well as thousands of U.S. troops stationed there. Is he correct?

“You’ll have to ask my colleagues in (Department of Defense.) My main job is diplomacy. It’s not to pull triggers. This is outside, really, my lane.”

Why do we expect sanctions to change North Korea’s behavior when they haven’t for decades? And if North Korea doesn’t commit to denuclearization, are we saying we won’t go to the table to talk?

“I would say sanctions can be effective if implemented fully and properly. As I have alluded, China has about 90 percent of trade, so the burden does fall on China. It’s very different, by the way, than Iran, where there were many trading partners. In this case, it is China. So really, when you say sanctions have not worked, I think it is because sanctions have not been fully implemented by China. Why? That is a question we’re always trying to come to grips with.

“I think the common view among the analysts is that China fears the collapse of North Korea more than it fears a nuclear North Korea. They fear if North Korea were to collapse, then U.S. troops might move in along with South Koreans … And if you remember from the Korean War, that is also when the Chinese got into it, when it looked like (Gen. Douglas) MacArthur was driving U.S. troops and South Korea troops up there. So that’s their principle concern.

“This is why we’ve said to them, to reassure them, Secretary Tillerson has said our policy has four no’s. Number one, it is not about regime change. Number two, it is not about bringing on regime collapse. Number three, it is not about forcing reunification of the Korean Peninsula. And number four, it’s not about stationing American troops north of the DMZ. That was to reassure not just the North Koreans, but the Chinese that this is not about us pushing up beyond DMZ, but rather, it’s about denuclearization in the Korean Peninsula.

“Denuclearization is the end goal of U.S. government policy, and it has been for the past three decades. You can ask questions about why it failed, but you’d have to give me another two hours.”

There it was. A small chuckle, in a conversation that had grown tense.

North Korea has looked at what happened in a denuclearized Libya, and America’s doubtful adherence to the Iran nuclear agreement. Is it realistic to expect Kim to follow a similar path? If he doesn’t, are we looking at South Korea and Japan getting nuclear weapons, or is that threat simply a way to get China’s attention?

 

“This is, of course, what China fears. But if this situation continues, I can predict to you that South Korea and Japan will want stronger and stronger weapons, defensive weapons, or even offensive weapons to counter North Korea’s nuclear weapons … So you are staring at what looks like an arms race. And what is the logical conclusion to that?

“Already, we are seeing South Koreans, conservative South Koreans, wanting indigenous nuclear weapons. And if we have that, if we have South Korea go nuclear, and Japan go nuclear, that will be practically the end of NPT (the landmark 1970 Non-Proliferation Treaty on nuclear weapons.)

“And NPT, in my view, certainly has been one of the most successful, post-Second World War treaties we’ve had, limiting the number of countries with nuclear weapons. The P-5 — Russia, U.S., United Kingdom, France and China — and there’s only a handful of others, Pakistan, Israel and India. So really, if you imagined in the ‘60s that nuclear weapons would be limited to these few countries, people would have thought you were dreaming. South Korea actually gave up nuclear weapons in the ‘70s because we asked them. So you can imagine if this goes down the path, the logical conclusion. … It will be a nuclear Northeast Asia.”

Why do you think South Korea is less concerned by recent events? And what do you think when you hear the trash talking — the “Rocket Man.” Does that make your job more difficult?

That’s also outside my lane. (Crowd chuckles.) What was that first question?

Are we facing World War III tomorrow or more years of diplomacy?

South Koreans in general have become inured to threats from North Korea. Remember, they are facing all these thousands of artillery just across the DMZ, which is about 35 to 40 miles away from Seoul, the center of population. So they have become fairly inured to threats from Pyongyang. In my view, I think for Americans, this is a threat that was somewhat unexpected, even though those who have followed North Korea issues have been predicting it for a while.

“I do think this is a serious issue. I do welcome the public joining the debate on how to deal with this. What is the right strategy? What does it mean to sanction a country and why are we doing it? Why do we have such a difficult partner or are we being difficult? These are all questions that are worth asking.

“In the end, I am again from diplomacy school and I would like to think there is a path out there. I would like to think there’s a path that could deliver: number one, lower tensions; number two, try to meet minimum requirements of each other; and number three, build some kind of relationship, build a little bit more trust in each other. I would like to think that is possible, but again it remains to be seen.

“Meanwhile, since this poses such a threat, we also have to believe we have to put all options on the table and that would have to include a military option. This is not an empty threat. If your homeland is under such a scrutiny and threat, I do believe you have to put all options on the table.”

What about those other American prisoners? What can you tell us about your conversations with them?

“We raise this at every opportunity. Protection of our prisoners overseas is an incredibly important mission for the State Department, so that really takes priority over anything else. I don’t want to go into too much detail about what kind of conversation we had. They were rather restricted because we were not just the two of us. We had a representative from their government there as well.”

“There are actually three remaining detainees in North Korea. I did see them when I was there in June, but nobody has seen them since then. I assume they are still alive. We have an arrangement with the Swedish Embassy, where the Swedes look after our consular cases. And the Swedes have not seen them, either, since June.”

After spending about 40 minutes with our nation’s key diplomat on North Korea, I came away thinking we were lucky to have him. But I grapple with our policy of not holding talks unless the North Koreans first agree to give up their nuclear capabilities.

Why would Kim do that, I asked my colleagues. He would lose face. It could spell his end. And if you back someone into a corner, there’s only one way out — straight at you.

My colleagues countered: We’re asking Iran to forego nuclear weapons. Besides, his people remain incredibly repressed. They wouldn’t rise up like the Arab Spring.

As to the policy of making North Korea give up its nuclear capabilities altogether, spokeswoman Nauert said there’s no other choice.

“If North Korea were to become a fully nuclear-capable country with weapons that are able to hit folks around the world, we know that North Korea would not contain itself,” she said. “We know that North Korea would sell those weapons and sell its technology. So the idea of containment may sound nice and rosy, but in reality, there’s no one out there who believes that North Korea could be contained.”

The best way to force Kim to give up his nuclear arsenal — as Trump, Tillerson and Yun have all made clear — is for China to end trade and oil shipments if he doesn’t. Without these, Kim’s nation cannot survive.

On reflection, I began to see some value in Trump’s tweets. Not because they are helping to de-escalate tensions with North Korea, which they’re not, but because they are putting new pressure on China.

Another high-placed diplomatic friend, speaking off-the-record, offered me that perspective.

“China hates to be humiliated. China despises the fact that they’re going to be bullied. But they’re looking at Washington and going, ‘This guy is pretty crazy, right? Actually, he could be a real threat.’ And China cannot afford under any circumstance to have conflict on the Korean Peninsula. The last battle on the Korean Peninsula put China back 50 years in developing the One-China policy to their satisfaction.

“So now, it is quite clear that China wants to help — for the first time — in North Korea. All of a sudden, everyone understands the stakes and for the first time, China is reacting. Not at the suggestion of bullying by the U.S., but because Trump has been able, to some degree, to pull back with his public belligerence against China. But privately, (our diplomats) believe that China believes it has to try to get a solution here. And that is a positive development that President Obama and his predecessors couldn’t deliver.

“Conventional wisdom hasn’t worked. And the unconventional activity is making a difference.”

It’s not that “Rocket Man” is working. Bullying words distract.

But there’s a reason President Trump has maximized pressure on North Korea and gotten China to agree to a “complete, verifiable and irreversible” denuclearization on the peninsula.

 

North Korea is close, very close, to being able to rain nuclear hell on its neighbors and our homeland.

And while China might not have once cared if North Korea had nuclear weapons, recent provocations have changed the equation.

More than anything, China doesn’t want South Korea and Japan to acquire nuclear weapons, something Trump once suggested as a way to cut America’s defense costs in the region.

Neither does the world want to see more countries acquire nuclear bombs capable of killing hundreds of thousands of people in horrific ways.

As Yun says, “It’s crucial that China does its part in sanctions.”

And that’s no joke.

Reach Sun Sentinel Editorial Page Editor Rosemary O’Hara at rohara@sun-sentinel.com or on Twitter @RosemaryOhara14.

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