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Trump Plays the Trade Card for Help on North Korea

Walter Russell Mead

According to his new interview with The Wall Street Journal, President Trump is offering up an unconventional deal to China: concessions on trade in exchange for cooperation on North Korea.

Mr. Trump, in a wide-ranging interview with The Wall Street Journal, said he told Mr. Xi when they met for the first time last week that his administration wouldn’t accept a continued large trade deficit with China. He added that he told Mr. Xi: “‘But you want to make a great deal? Solve the problem in North Korea.’ That’s worth having deficits. And that’s worth having not as good a trade deal as I would normally be able to make.”

Mr. Trump also said his administration won’t label China a currency manipulator in a report due this week, despite a promise he made on the campaign trail to do so. He said that China has stopped manipulating its currency, and that it was more important to focus on cooperation with Beijing on North Korea.

Trump’s willingness to use trade as a bargaining chip with China for help with North Korea is a good window into his overall approach to foreign policy, and helps explain his frequent remarks that his predecessors have been getting “bad deals” on trade.

Trump primarily sees trade as a political instrument; he thinks about it like a politician rather than an academic economist. He thinks that the huge American market, the largest single-country consumer market in the world, should be used to advance key American interests—both economic and political. Trump believes that his predecessors, especially since the end of the Cold War, haven’t grasped the value of access to the American market, and so have thrown away one of the nation’s most important negotiating tools.

Since World War II, American trade policy has essentially reflected the belief that America’s key goal is the creation of a liberal global order. Promoting a global trading system would help the American economy in three ways: cheap imports raise American consumer living standards while reducing operating costs for American businesses; global competitive pressure helps sharpen the performance of American companies, making the U.S. economy more dynamic at home even as more efficient American companies get better results in global markets; open foreign markets give American companies larger opportunities to grow, and more opportunities to invest their capital for the best returns. All this redounds to the benefit of American consumers, corporations, and investors.

Politically, there are other advantages. By integrating the world’s economies, war becomes less likely. Thus the Marshall Plan, in addition to supporting Europe’s growth through financial aid, also required European countries to begin to integrate their economies in ways that would make another major European war very difficult. Since World War II, the United States has pushed free trade in agriculture not only because this is in the interest of American farmers, among the most productive in the world, but also because ensuring that other countries depended on global sources for their food also made it much less likely that countries like Germany, Japan, or China would risk wars that cut off their peoples’ food supply.

To move toward these goals, American negotiators and Presidents since the 1940s have been willing to accept trade treaties that are not strictly reciprocal. Developing countries, for example, could benefit from lower American tariffs on their exports even as they kept their own tariffs and barriers against U.S. goods high. Moreover, by agreeing to negotiate in multilateral forums and to set up a rules-based global system, American negotiators reduced the benefits that the unique size of the American market might offer in bilateral negotiations.

In Trump’s view, that may have been good policy in the 1940s and 1950s, but beginning with the recovery of Europe and Japan, to say nothing of the rise of developing countries on the basis of export-led growth worldwide, America should have changed strategies, looking to bilateral negotiations.

For Trump, this strategy has several advantages. First, because the U.S. market is so huge and so attractive, other countries are likely to pay a high price to gain access to it. Second, the multilateral rules-based system, as opposed to a bilateral approach, makes it harder for the United States to mix trade and political negotiations. To be able to say to China, “Help us on North Korea and we will give you a better trade deal,” can help the United States avoid wars and gain other important objectives. Throwing that advantage away, Trump believes, is the equivalent of going into a fight with one hand tied behind your back.

For those who believe that the creation of a liberal global order is America’s best and indeed only hope of remaining prosperous and safe, Trump’s approach is madness—like burning down your house to drive out a mouse. Trumpian nationalists respond by saying that the security of any world order rests largely if not entirely on the economic and therefore the military supremacy of the United States. If your visionary program of order-building weakens the ability and erodes the will of the United States to remain the strongest superpower out there, it will fall to the ground.

Can Trump make his new strategy work? We’ll see. The North Korea crisis is the single most dangerous flashpoint in the world today. As for China, preserving its ability to trade freely with the United States is its single most important economic interest. America has played every other card in its hand to try to get more cooperation from China against this dangerous threat; Trump is now going to see what the trade card will do.

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