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Not All 'Bad' Deals Are Bad for US

Not All 'Bad' Deals Are Bad for US

Wednesday, 8 November, 2017 - 09:45

President Donald Trump visits Asia this week focused on the supposedly bad deals his predecessors struck with America's partners in the region -- whether job-killing trade pacts or costly defense pledges. In Tokyo, he raised his hosts' "not fair" trade advantages. In South Korea, where he arrives on Tuesday, he'll both tour one of those costly US military bases and, in all likelihood, criticize the “horrible” USKorea free-trade pact, from which he has talked of withdrawing.

Contrary to Trump's narrative, however, previous US presidents didn’t enter these deals blindly. In a very real sense, America’s relationships in Asia were designed to be "bad" -- to sacrifice some US interests in the service of other, higher ones. If he were to scrap those arrangements, Trump would render his nation -- for decades considered indispensable to the stability and security of Asia -- very dispensable indeed.

Recall what East Asia looked like in the years immediately following World War II. Much of the region was desperately poor and in dire need of reconstruction. Communism, which had already claimed victories in China and North Korea, seemed poised to gobble up even more countries. Responding with military force was an option and worked in Korea in the early 1950s to beat back a North Korean invasion. But clearly, a less bloody and more sustainable strategy was needed to stem the Communist tide and defend US allies, values and interests in the region.

What emerged was a system of diplomatic, military and economic relationships that created a stable order in East Asia and enshrined the US as the region’s premier power. Defense treaties, backed by a series of military bases, with allies such as Japan and South Korea kept the peace. Economically, the US opened its markets to exports from Asia, which turned out to be the key driver of the region’s rapid development.

Even Communist China eventually got drawn into the US order. Deng Xiaoping, China’s paramount leader, saw American cooperation as so vital to his country’s economy that he undertook a charm offensive in the US in early 1979, just as his pro-market reform program was getting underway. That led to President Jimmy Carter’s decision to grant China most-favored-nation status, without which Deng’s export-oriented growth strategy would have been almost impossible.

Asia got rich, and the US acted as a kind of guarantor of its success -- as the glue that held otherwise contentious allies together and, in effect, as the consumer of last resort, buying what became the region's vast industrial output, from the Walkman to the Samsung Galaxy.

Of course, when Washington opened its markets to Asian exports, trade deficits were almost inevitable. Japan, Korea and later China were initially too destitute to buy very much from the U.S. in return. All three nations also found ways to protect their nascent industrial programs, often unfairly, while their lower labor costs shifted jobs away from the US to Asia.

For the most part, the US tolerated such costs, just as it picked up the heavy burden of ensuring its allies' defense, paying billions to operate its bases in Japan and South Korea. Does that make presidents from Truman to Obama a bunch of chumps? Not really. The US has gained tremendously from these relationships. Communism was defeated. Endless new opportunities have been created in Asia for US companies, from Starbucks to Apple to Boeing. American shoppers have benefited from lower prices on Asian-made clothing, electronics and other consumer goods. Most of all, the “bad deals” Washington cut in Asia underpinned America's superpower status in the region.

It may be time for more balance in the relationship. The Japanese and South Koreans are no longer poor and could take more responsibility for their own defense (though they do already contribute significantly to the cost of US military bases in their countries). China, Japan and South Korea are all still notching trade surpluses with the U.S. and could do more to open markets to US business, especially China.

This would require mere tweaks to the existing US-led system, however, something Trump and his team could quietly negotiate without upsetting the overall order. Instead Trump has been threatening the order itself. By withdrawing from the Trans-Pacific Partnership, a regional free-trade pact, Trump tossed away a critical tool for strengthening the US position in Asia. Publicly nickel-and-diming Tokyo and Seoul over military expenses raises doubts about whether Washington can be trusted to stand firm when the bombs start falling.


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