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Steve Forbes once joked that if you ever find yourself in a middle seat on a plane and want to create some elbow room, try starting a conversation about U.S. monetary policy. It is a subject whose power to bore the pants off fellow passengers may diminish in coming years.

Of dozens of potentially explosive problems the new Washington administration faces, not the least is monetary policy. A key dilemma is how to keep interest rates low while pursuing a tough trade policy. As we will see, the two objectives seem mutually incompatible.

Of course, all this presupposes that Trump will get a chance to reshape the economy in the first place. That is far from certain. He runs the gauntlet of open hostility not only from almost every rival centre of power in Washington, but from many of his own nominal allies and supporters in the Republican Party.

Thus although the Republicans enjoy majorities in both House and Senate, this will count for little in pursuing his more controversial policies. Indeed, as the author and policy analyst Pat Choate points out, Trump has little sense of how treacherous the Washington waters truly are.

One big concern is a possible impeachment. “Any issue will do for his opponents, so long as it can be sold to a solid majority of the populace,” Choate says. “Most Republicans in Washington would prefer Pence. Thus, there will not be a hard defence of Trump by the party.”
Choate, who ran for Vice President on Ross Perot’s ticket in 1996, adds: “Obama had solid control of the government when he took office in 2009. But within two years, he had lost the House and had only a thin majority in the Senate. He lost both in the 2012 elections. The Republicans know the same can happen to them with Trump at the helm. So they would be willing to allow Democrats to take the point of spear in the battle and then, if the public is willing, they would ‘reluctantly’ replace Trump with Pence. Trump has no idea what hardball politics is like at this level, but will soon learn.”

In common with many observers, Choate believes Trump’s greatest vulnerability is the so-called emoluments provision of the U.S. Constitution. This prohibits Presidents from taking anything whatever from foreign sources. The Brookings Institute did a study in December and provided what is considered a definitive case that Trump’s overseas businesses have put him on the wrong side of the Constitution from Day One.

What we know for sure is that bookmakers are already horning in on the emerging crisis. The Irish gambling chain Paddy Power, for instance, is offering odds of six to one against an impeachment in Trump’s first six months.

Even if Trump manages to duck the impeachment bullet, he seems extraordinarily tightly boxed in on economic policy. A fundamental concern is a Gordian Knot involving major exporting nations. For more than forty years it had been precisely these nations that Washington has relied on to buy vast tranches of U.S. Treasury bonds. Their purchases have not only financed both the fiscal and trade deficits but maintained both interest rates and the dollar’s foreign exchange value on an even keel.

Japan and China now rank broadly equal as the world’s largest foreign holders, and Germany is not far behind. Trump’s problem is that to deliver on his promise to rein in America’s huge trade deficits, he must prevail on these nations massively to increase their purchases of America’s manufactured exports. By a variety of stratagems they have successfully resisted doing so for decades. If Trump now tries to paint them into a corner, he will discover they don’t lack for ways to fight back. By selling just a fraction of its Treasury bond holdings, any one of these nations can cause a painful blip in U.S. interest rates. The knock-on effect on American stock markets could be disproportionate (it doesn’t help the Trump White House that U.S. price/earnings ratios are at an all-time high). The American tendency to think short term and a collective inability to bear pain should clinch the matter. Suddenly both the Wall Street and Washington establishments would be on Trump’s case like never before.

Although a cheap dollar would in the long run pay dividends by helping restore U.S. industrial competitiveness (and this seems understood not only by Trump himself but by some of his key people), the most visible immediate effect would be to raise U.S. consumer prices. Thus any dollar setback could greatly exacerbate a sudden sense of malaise caused by falling stocks.

For now let’s note a few numbers. The Standard & Poor’s 500 index (the benchmark for all serious discussions of American stock market trends) closed at 2,294.69 on Friday (January 27). That was a sliver below an all-time high reached the previous day and means U.S. stocks now stand more than 60 percent higher than their already seemingly overvalued level of late 2013.

As for the dollar, it reached more than 96 Euro cents in the last week of 2016. That was its highest showing since before the invasion of Iraq in 2003. Although it has dropped back a little since, it seems remarkably overvalued given that the U.S. current account deficit at last count totalled $469 billion (and Germany’s current account surplus hit $301 billion).

That said, both U.S. stocks and the U.S. dollar could well continue to edge higher in the short term. It is the longer term that matters. Assuming the Trump administration possesses the intestinal fortitude to stand by its vitally needed tough stance on trade in the years ahead, we should brace ourselves for a big setback in stock prices, a much lower dollar and a big hike in interest rates.

Eamonn Fingleton is the proud owner of a saluki named Cassandra.

• Category: Economics • Tags: Donald Trump, Free Trade 
European commentators get their understanding of Donald Trump from the American media. That is a big mistake.

Battlefield communications in World War I sometimes left something to be desired. Hence a famous British anecdote of a garbled word-of-mouth message. As transmitted, the message ran, “Send reinforcements, we are going to advance.” Superior officers at the other end, however, were puzzled to be told: “Send three and four-pence [three shillings and four-pence], we are going to a dance!”

Similar miscommunication probably helps explain the European media’s unreflective scorn for Donald Trump. Most European commentators have little or no access to the story. They have allowed their views to be shaped largely by the American press.

That’s a big mistake. Contrary to their carefully burnished self-image of impartiality and reliability, American journalists are not averse to consciously peddling outright lies. This applies even in the case of the biggest issues of the day, as witness, for instance, the American press’s almost unanimous validation of George Bush’s transparently mendacious case for the Iraq war in 2003.

Most of the more damning charges against Trump are either without foundation or at least are viciously unfair distortions. Take, for instance, suggestions in the run-up to the election that he is anti-Semitic. In some accounts it was even suggested he was a closet neo-Nazi. Yet for anyone remotely familiar with the Trump story, this always rang false. After all he had thrived for decades in New York’s overwhelmingly Jewish real estate industry. Then there was the fact that his daughter Ivanka, to whom he is evidently devoted, had converted to Judaism.

Now as Trump embarks on office, his true attitudes are becoming obvious – and they hardly lean towards neo-Nazism.

In appointing Jared Kushner his chief adviser, he has chosen an orthodox Jew (Kushner is Ivanka’s husband). Then there is David Friedman, Trump’s choice for ambassador to Israel. Friedman is an outspoken partisan of the Israeli right and he is among other things an apologist for the Netanyahu administration’s highly controversial settlement of the West Bank. Trump even wants to move the American embassy in Israel from Tel Aviv to Jerusalem. This position is a favourite of the most ardently pro-Israel section of the American Jewish community but is otherwise disavowed as insensitive to Palestinians by most American policy analysts.

Many other examples could be cited of how the press has distorted the truth. It is interesting to revisit in particular the allegation that Trump mocked a disabled man’s disability. It is an allegation which has received particular prominence in the press in Europe. But is Trump really such a heartless ogre? Hardly.

As is often the case with Trumpian controversies, the facts are a lot more complicated than the press makes out. The disabled-man episode began when, in defending an erstwhile widely ridiculed contention that Arabs in New Jersey had publicly celebrated the Twin Towers attacks, Trump unearthed a 2001 newspaper account broadly backed him up. But the report’s author, Serge Kovaleski, demurred. Trump’s talk of “thousands” of Arabs, he wrote, was an exaggeration.

Trump fired back. Flailing his arms wildly in an impersonation of an embarrassed, backtracking reporter, he implied that Kovaleski had succumbed to political correctness.

So far, so normal for the 2016 election campaign. But it turned out that Kovaleski was no ordinary Trump-hating journalist. He suffers from arthrogryposis, a malady in which the joints are malformed. For Trump’s critics, this was manna from heaven. Instead of merely accusing the New York real estate magnate of exaggerating a minor, if troubling, sideshow in U.S.-Arab relations, they could now arraign him on the vastly more damaging charge of mocking someone’s disability.

Trump’s plea that he hadn’t known that Kovaleski was handicapped was undermined when it emerged that in the 1980s the two had not only met but Kovaleski had even interviewed Trump in Trump Tower. That is an experience I know something about. I, like Kovaleski, once interviewed Trump in Trump Tower. The occasion was an article I wrote for Forbes magazine in 1982. If Trump saw my by-line today, would he remember that occasion 35 years ago? Probably not. The truth is that Trump, who has been a celebrity since his early twenties, has been interviewed by thousands of journalists over the years. A journalist would have to be seriously conceited – or be driven by a hidden agenda – to assume that a VIP as busy as Trump would remember an occasion half a lifetime ago.

In any case in responding directly to the charge of mocking Kovaleski’s disability, Trump offered a convincing denial. “I would never do that,” he said. “Number one, I have a good heart; number two, I’m a smart person.” Setting aside point one (although to the press’s chagrin, many of Trump’s acquaintances have testified that a streak of considerable private generosity underlies his tough-guy exterior), it is hard to see how anyone can question point two. In effect Trump is saying he had a strong self-interest in not offending the disabled lobby let alone their millions of sympathisers.

After all it was not as if there were votes in dissing the disabled. This stands in marked contrast to other much discussed Trumpian controversies such as his disparaging remarks about Mexicans and Muslims. In the case of both Mexican and Muslims, an effort to cut back immigration is a central pillar of Trump’s program and his remarks, though offensive, were clearly intended to garner votes from fed-up middle Americans.

In reality, as the Catholics 4 Trump website has documented, the media have suppressed vital evidence in the Kovaleski affair.


For a start Trump’s frenetic performance bore no resemblance to arthrogryposis. Far from frantically flailing their arms, arthrogryposis victims are uncommonly motionlessness. This is because relevant bones are fused together. As Catholics 4 Trump pointed out, the media should have been expected to have been chomping at the bit to interview Kovaleski and thus clinch the point about how ruthlessly Trump had ridiculed a disabled man’s disability.
The website added: “If the media had a legitimate story, that is exactly what they would have done and we all know it. But the media couldn’t put Kovaleski in front of a camera or they’d have no story.”

Catholics 4 Trump added that, in the same speech in which Trump did his Kovaleski impression, he offered an almost identical performance to illustrate the embarrassment of a U.S. general with whom he had clashed. In particular Trump had the general wildly flailing his arms. It goes without saying that this general does not suffer from arthogryposis or any other disability. The common thread in each case was merely an embarrassed, backtracking person. To say the least, commentators in Europe who have portrayed Trump as having mocked Kovaleski’s disability stand accused of superficial, slanted reporting.

All this is not to suggest that Trump does not come to the presidency unencumbered with baggage. He is exceptionally crude – at least he is in his latter-day reality TV manifestation (the Trump I remember from my interview in 1982 was a model of restraint by comparison and in particular never used any expletives). Moreover the latter-day Trump habit of picking Twitter fights with those who criticize him tends merely to confirm a widespread belief that he is petty and thin-skinned.

Many of his pronouncements moreover have been disturbing and his abrasive manner will clearly prove on balance a liability in the White House. That said, the press has never worked harder or more dishonestly to destroy a modern American leader.

Let’s give him the benefit of the doubt, therefore, as he sets out to make America great again. The truth is that American decline has gone much further than almost anyone outside American industry understands. Trump’s task is a daunting one.

Eamonn Fingleton is an expert on America’s trade problems and is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Houghton Mifflin, Boston). A version of this article appeared in the Dublin Ireland Sunday Business Post .

• Category: Ideology • Tags: American Media, Donald Trump 

Trust mainstream media commentators to get their priorities right! While they dished out hell to Donald Trump the other day over his 10-minute conversation with the president of Taiwan, they could hardly have been more accommodative all these years of a rather more consequential American affront to mainland China: Barack Obama’s so-called “pivot” to Asia.

As the London-based journalist John Pilger points out, the absurdly named pivot, which has been a central feature of U.S. foreign policy since 2012, is clearly intended to tighten America’s military containment of the Middle Kingdom. In Pilger’s words, Washington’s nuclear bases amount to a hangman’s noose around China’s neck.

Pilger makes the point in a searing new documentary, The Coming War on China. Little known in the United States, Pilger has been a marquee name in British journalism since the 1960s. First as a roving reporter for the Daily Mirror and later as a television documentary maker, he has spent more than fifty years exposing the underside of American foreign policy – and very often, given London’s predilection to play Tonto to Washington’s Lone Ranger, that has meant exposing the underside of British foreign policy also.

Pilger built his early reputation on opposition to the Vietnam war; more recently he emerged as a scathing critic of the Bush-Blair rush to invade Iraq after 9/11.

In his latest movie, Pilger, a 77-year-old Australian, argues that the “pivot” sets the world up for nuclear Armageddon. The Obama White House probably disagrees; but, not for the first time, Pilger is asking the right questions.

This is not to suggest that Washington doesn’t have legitimate issues. But its China strategy is upside down. While it rarely misses an opportunity to lord it over Beijing militarily, its economic policy in the face of increasingly outrageous Chinese provocation could hardly be more spineless. Instead of insisting that China honor its WTO obligations, U.S. policymakers have looked the other way as Beijing has not only maintained high trade barriers against American exports but, far worse, has contrived to force the transfer of much of what is left of America’s once awe-inspiring reservoir of world-beating manufacturing technologies.

In the case of the auto industry, for instance, Beijing’s proposition goes like this: “We’d love to buy American cars. But those cars must be made in China – and the Detroit companies must bring their best manufacturing technologies.” Such technologies then have a habit of migrating rapidly to rising Chinese rivals.

By indulging China economically and provoking it militarily, the Obama administration would appear to be schizoid. But this is to judge things from a commonsensical outsider’s perspective – always a mistake in a place as inbred and smug as Washington. Seen from inside the Beltway, everything looks perfectly rational. Whether Washington is giving away the U.S. industrial base, on the one hand or arming to the teeth against a putative Chinese bogeyman on the other, the dynamic is the same: lobbying money.

As the U.S. industrial base has been shipped machine-by-machine, and job-by-job, to China, America’s ability to pay its way in the world has correspondingly imploded. Although rarely mentioned in the press (does the American press even understand such elementary and obvious economic consequences?), this means America has become ever more dependent on other nations to fund its trade deficits. The funding comes mainly in the form of purchases of U.S. Treasury bonds. And guess who is the biggest buyer? The Communist regime in Beijing, of course. In effect, the bemused Chinese are paying for the privilege of having nukes pointed at them!

That is not a sustainable situation. Beijing no doubt has a plan. Washington, tone-deaf as always in foreign affairs, has not yet discovered there is a problem. We have been fated to live in interesting times.

Pilger’s documentary will air in the United States on RT on December 9, 10, and 11. For details click here.

Eamonn Fingleton is the author of In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony (New York: St. Martin’s Press, 2008).

• Category: Foreign Policy • Tags: American Military, China 
Despite a bloody history, Japan and China are now cooperating in ways that shut out the United States

China is now widely seen as the coming superpower. But few even among the west’s China-watchers understand quite how fast this geopolitical freight train is approaching. Moreover, most western observers assume that China’s ambitions are being opposed by its East Asian rival, Japan. In the words of the Economist, Japan is “standing in the way” of China’s superpower ambitions. As the Japanese economy is still one of the world’s largest, Japan’s supposed hostility has tended to tranquilize western concerns about the dragon’s rise.

All conventional wisdom to the contrary, however, Japan and China are not enemies. The two East Asian great powers quietly buried the hatchet more than 35 years ago and, at least as far as top policymakers are concerned, their relations have long been remarkably close and even warm. It was in December 1979 that the Japanese prime minister, Masayoshi Ohira, paid a historic visit to Beijing to set the seal on wide-ranging plans for Sino-Japanese co-operation. What started out as a simple economic partnership has now blossomed into a full-scale alliance, with an increasingly obvious anti-western – and particularly anti-U.S. agenda.

The cynicism with which Japan habitually treats the United States is apparent not only in its hard-as-nails economic behavior (which contrasts dramatically with Japan’s much more beneficent economic relations with China) but in various diplomatic gambits. One such gambit was Japan’s decision to participate in the “coalition of the willing” that invaded Iraq in 2003. What was so cynical about this? The fact is that no one in Tokyo thought that the invasion had a prayer. They knew in particular that the invasion would not play out anything like the American occupation of Japan in the late 1940s. This occupation was held up by the pro-war party in Washington as a blueprint for how things would pan out in post-defeat Iraq. I should know because I was in Tokyo in 2003 and my own prediction of America’s Iraq debacle, based on my knowledge of the fatuousness of the post-defeat Japan analogy, appeared in an editorial page commentary in the International Herald Tribune in March 2003. Tokyo moreover insisted that its participation be entirely ceremonial, and that Japanese troops at all times be kept far from the action. This tokenist nature of Japan’s participation was kept quiet ahead of time, thus allowing the neoconservatives to crow about the fact that Japan was for the first time breaking with its Peace Constitution of 1947. In all probability this propaganda coup helped Tony Blair win Cabinet approval for the U.K. ’s participation (although Japan’s participation was announced late in the day, it had been telegraphed to London and, of course, to Washington many months previously).

So why did Japan participate? Its only interest evidently in a quid pro quo on trade. By offering the merest of token gestures on Iraq, Tokyo bought off all American pressure to open Japan’s closed markets for the duration of the George W. Bush presidency.

As for the Sino-Japanese alliance, Japanese policymakers entered this because they recognized earlier than their western counterparts how radically the map of world power was likely to be redrawn in the 21st century. They realized that, thanks to reforms initiated in the 1970s, the Chinese economy was launched on a path of sustainable growth. It required little prescience to see that a rise in China’s military power would follow. As China’s growth has continued to meet and even surpass Japanese expectations, the Japanese have become convinced that the U.S. will come off second best in rivalry with China for global leadership.

Faced with this realization, Japanese leaders had a choice. They could obstruct China, sabotaging any hope of reconciliation with their neighbor, or they could mend fences. All the evidence is that they chose the latter, and that since 1979 they have been accommodating, and indeed encouraging, China’s superpower ambitions.

Of course, all this must remain strictly sub rosa. Japanese leaders understand that any acknowledgment of how close Sino-Japanese relations have become would risk a backlash from America. After all, Japan has long presented itself as one of America’s most loyal and devoted allies – and has enjoyed uniquely generous economic privileges as a result.

Yet the fact that Tokyo and Beijing enjoy a special understanding is becoming ever harder to conceal. A marked pro-China bias has long been apparent in key areas of Japanese policy, including trade, technology transfer, foreign aid, and diplomatic co-operation.

On the Chinese side too, there is plenty of evidence that relations have undergone a sea change. Reciprocating Japan’s preferential trade policy, China now buys more than twice as much from Japan as from the US. The number of Chinese students studying in Japan in 2002 was nearly 60,000, a fourfold increase on the late 1980s. And manifestations of Japanese popular culture – from manga comics to karaoke – are now all the rage among young Chinese.

The origins of the Sino-Japanese rapprochement date to the early 1970s. In the wake of President Richard Nixon’s historic visit to Beijing in 1972, Japanese officials rushed to build closer trade ties with China. Then in 1978, in a move almost unnoticed in the west, Japan and China signed a treaty of friendship. This opened the door to extensive economic negotiations that culminated in Ohira’s Beijing visit in 1979.

The most obvious change in Japan’s China policy was in official aid. Up to 1978, Japan’s aid to China had been negligible. Then the numbers suddenly soared. China was the top destination for Japanese aid throughout the 1980s and in every year but one of the 1990s. The sums involved were not insignificant. Indeed Japan’s worldwide aid budget has exceeded America’s in most of the period since 1989. In 2000, for instance, it totalled $13.1 billion, nearly 36 per cent more than that of the US.


Seen from the Chinese side, Japan has long dwarfed all other donor nations. In the 20 years to 1999, Japanese aid to China totaled nearly $25 billion, about two thirds of all China’s bilateral aid in the period. By contrast, for all the Clinton era talk of a US-China “strategic partnership,” the U.S. has provided no significant aid to China in more than 50 years.

Perhaps even more important than the scale of Japanese aid is how it has been applied. In a pattern that will surprise many in the west who have perceived Japan’s China aid policy as a humanitarian gesture to atone for past wrongs, little money is intended for humanitarian purposes. Japan has never done much to alleviate immediate poverty in China. Instead, it has mostly worked with the Beijing government to fund “muscle-building” projects that are clearly intended to speed China’s emergence as an economic superpower.

In particular, as much as 60 per cent of Japan’s total aid has at times been devoted to improving China’s transport infrastructure. Despite talk of China as an economic threat, Japan is clearly intent on providing China’s export industries with the modern roads, railways, and ports needed to serve world markets. Not only that, in a reversal of its traditionally protectionist trade policy, Japan has been providing a major market for China’s exports; so much so that China, almost alone among manufacturing nations, enjoys large and growing surpluses on its trade with Japan.

China can run surpluses on such a scale only because Tokyo has offered Chinese goods highly preferential access to the Japanese market. By contrast U.S. goods have never enjoyed similarly preferential treatment in Japan. The result is that as far back as 2002, China passed the U.S. to become Japan’s largest source of imports. Given that the Chinese economy was merely an eighth the size of America’s, this was remarkable.

Japan has also favored China in its tourism policy. The long-term trend shows that China is one of the fastest growing Japanese tourist destinations. This in turn reflects the Japanese bureaucracy’s manipulation of airline landing rights and airport slots (in regulator-ridden Japan, artificially tight limits on airport capacity substantially shape holiday destinations).
China has also benefited from preferential Japanese technology policies. Although Japan is notorious for jealously guarding its technological knowhow, a survey by the Japanese management specialist, Tomoyuki Kojima, found that Japan had provided 28 per cent of all China’s receipts of foreign technology – the largest share of any nation.

The pattern was set in the early days of the Sino-Japanese rapprochement when officials agreed a deal to build the vast Baoshan steel mill near Shanghai. The plant was designed as a replica of Nippon Steel’s Kimitsu mill, then the world’s most advanced. Other early transfers of important Japanese technology included two petrochemical complexes in Heilongjiang and Shandong provinces. By the late 1980s, these plants and others using the latest Japanese technologies provided 80 per cent of China’s ethylene needs. In 1997, NEC agreed to build a $1.2 billion semiconductor plant in Shanghai. This plant, which enabled China to make computer chips for the first time, was so advanced that there were fears that it breached U.S. national security guidelines. Another striking case of technology transfer was Matsushita’s decision in 2002 to establish a plant to make state-of-the-art plasma screens, a high-technology growth area in the television industry.

Japan’s most surprising expression of favoritism towards China has been in diplomacy. Over the years it has extricated China from several diplomatic jams. In particular, in the wake of the 1989 Tiananmen Square massacre, the Japanese foreign ministry pulled out all the stops in its damage control efforts in western capitals.

In the immediate aftermath of the massacre, the ministry rushed out statements that Japan’s policy towards China remained “unchanged” and that Japan would not follow the U.S. in imposing economic sanctions on Beijing. Officials described the massacre as “a Chinese domestic affair.” A similar attitude was apparent at the Asian Development Bank (effectively an offshoot of the Tokyo ministry of finance).

Pressured by world opinion, Japanese leaders made a few token gestures of censure – some aid payments, for instance, were delayed. But as soon as the political climate seemed opportune, Japan not only restarted its funding operations but expanded them. According to Greg Austin and Stuart Harris’s Japan and Greater China, Japan’s aid to China in the three years after 1989 totaled $2.37 billion, an increase of nearly 38 per cent over the total in the three years to 1988.

In 1991, the Japanese prime minister, Toshiki Kaifu, paid an official visit to China – the first post-Tiananmen visit by any leader of an advanced nation. It was important not only in itself but also for its ice-breaking function in facilitating a visit a little later by John Major, then British prime minister.

Japan’s helpful attitude did not go unrewarded. The CIA recorded that China imported more Japanese goods as a reward for Japan’s post-Tiananmen diplomatic help. Figures quoted by the noted China-watcher James Mann in his book About Face showed that Japanese companies increased their share of many key Chinese markets at the expense of U.S. and European rivals in the early 1990s.

In contrast, because of acute trade tensions at that time, Japan’s relations with the U.S. and Europe had hit rock bottom. Why was Japan willing to expend so much of its scarce political capital “coddling tyrants”? It is hard to escape the conclusion that building up China was a higher priority for Tokyo than maintaining equable relations with the west.

This was not the first time that Japan had risked its diplomatic capital in support of the new China. In the first shaky years of the Deng Xiaoping regime in the late 1970s, Japan used its aid money to prop it up. Japanese officials justified this to Americans and Europeans by portraying Deng as a pro-western reformist. As subsequent events made clear, notably Tiananmen Square, this should have been taken with a pinch of salt. For Japanese officials, Deng’s attitude to the west was beside the point. What they saw in him was a leader who would embrace the East Asian – in other words, Japanese – economic model.

Japan’s pattern of diplomatic helpfulness was established during the earliest years of Japan’s rapprochement with China. Henry Kissinger records that Mao Zedong advised the U.S. to maintain good relations with Japan. Tokyo reciprocated by downgrading diplomatic relations with Taiwan before Washington did, paving the way for China to take Taiwan’s permanent seat on the UN Security Council in 1971.

More recently, Japan’s favorable attitude to China’s bid to join the WTO helped to quell the concerns of U.S. policymakers. After all, they reasoned, if Japan, which they took to have the most to lose from China’s rise, saw no reason to press China harder on the terms of membership, why should the US?

Robert Novick, a senior U.S. trade negotiator, reported that the Japanese sat back and left the Americans to play the tough cops. Novick confessed to having been surprised at Japan’s attitude, given its history of bad blood with China. “I can’t remember the Japanese being visible in the talks,” he said.

Perhaps Japan’s biggest favor was its conspicuous promptness in granting final approval to China’s WTO entry in July 1999 – four months before the U.S. and nearly a year before the EU. By setting such a “good example,” Japan seems to have been intent on pressuring the Americans and Europeans to acquiesce to a distinctly inadequate deal.

Japan’s diplomatic support for China’s economic expansionism is obliquely apparent in countless other ways. A case in point is the behavior of pro-Japanese opinion leaders in the U.S. establishment, loosely known as the “chrysanthemum club.” Virtually without exception, they have taken a strongly pro-China position on trade and diplomatic issues. A key figure here is the Clinton administration’s last ambassador to Tokyo, Thomas Foley, long considered one of the most committed proponents of Japan’s interests in the U.S. As leader of the House of Representatives, he also played an important role in persuading Clinton to grant China “most favored nation” status, and to renounce the former policy of making its access to the U.S. market conditional on meeting minimum human rights standards.

Given the wealth of evidence that Japan is supporting China’s superpower ambitions, a question remains: if the two nations are so friendly, why is this not reflected in their rhetoric? Part of the answer is that rhetoric has much less meaning in East Asia than it does in the west. East Asians say what they think is expected of them – and in the case of East Asian leaders that means paying lip service to positions established by their predecessors decades ago. Such rhetoric placates important domestic interest groups. Moreover, perpetuating the impression of sullen hostility between the two nations also has the crucial advantage of disguising from the U.S. the depth of their co-operation.

But there is more than a hint of humbug in the extravagant denunciations of Japanese military aggression that sometimes emanate from Beijing. When it counts, Chinese leaders stand on Japan’s side – even against the interests of their own people. Specifically, they continue to debar Chinese citizens from pursuing claims against Japan for compensation in respect of wartime atrocities that are believed to have claimed at least 10m victims in China. Japan’s compensation to victims of all nationalities represents less than 5 per cent of the sum Germany has paid to Jews and other victims of the Nazis.

One of the more contrived manifestations of Sino-Japanese hostility concerns Japan’s remembrance of its war dead. The principal form this remembrance takes is visits by Japanese politicians to the Yasukuni shrine in Tokyo. The shrine is notorious for the fact that among the 2.5m people it commemorates are war criminals who visited terrible atrocities on millions of Chinese citizens in the 1930s and 1940s.

The Chinese press is regularly outraged by the Yasukuni visits. But it is also possible to see the visits as part of an elaborate smokescreen to deflect attention from the true closeness of Tokyo’s relations with Beijing. The visits first became a flashpoint at a crucial time in Sino-Japanese relations in April 1979. Just a few weeks previously, Deng Xiaoping had paid a historic visit to Tokyo. He had evidently been warmly received – so much so that it was probably felt on both sides that some contrivance was needed to hide the true closeness of Sino-Japanese relations. The Japanese authorities found the solution in a leak to the press: the previously unexceptionable Yasukuni shrine was now officially said to commemorate 14 top Japanese war criminals. Prime Minister Ohira then announced that he planned to visit the shrine regardless. In contrast to Deng’s epochal visit to Tokyo, which received little attention in the western press, Ohira’s Yasukuni outing made the front pages worldwide. The story served the interests of Deng and other Chinese leaders by allowing them to sound suitably ferocious in condemning Tokyo – while at the same time blocking American lawyers from helping Chinese citizens pursue war claims against Japan.

Empty posturing is also apparent in other much publicized Sino-Japanese spats, such as the cluster of bilateral Japan-China agricultural disputes that broke out in 2001. The goods concerned – long-stem onions, shiitake mushrooms, and tatami rushes – accounted for less than 0.2 per cent of bilateral trade. And while Chinese officials were talking up the prospects of a trade war, trade between the two nations was growing by more than 20 per cent a year.

Another scandal that allegedly damaged Sino-Japanese relations centred on a three-day orgy by Japanese executives in a southern Chinese hotel in September 2003. A party of employees of a Japanese construction company bought the services of 500 Chinese prostitutes who, at various times, would congregate in the public spaces of the hotel in full view of other guests.

A spokesman for the Chinese foreign ministry described the episode as “an extremely odious criminal case.” Reflecting the official stance, government-controlled newspapers aired extravagant charges that the Japanese had planned the orgy to humiliate the Chinese people, since it coincided with the anniversary of Japan’s 1931 attack on Chinese Manchuria.


But were Chinese officials really outraged? Foreigners’ hotels in China are notorious for the brazenness with which prostitutes are permitted to proposition guests. This is not only officially tolerated; it is considered a useful contribution to foreign exchange receipts. The episode was reported in the media of both nations in a highly artificial way. In Chinese press reports – and even in denunciations in China’s internet chatrooms – the company’s identity was carefully withheld. Indeed, as far as Chinese reports were concerned, the men were simply “Japanese tourists.” The fact that they were on a company jaunt came out in subsequent Japanese reports – but the Japanese press too withheld the company’s name.

Had the Chinese been so minded they could have gravely punished the company by releasing its name. If, as seems certain, the company is a major one with global operations, it would probably have stood to suffer significant losses of business in the west, particularly in the United States.

None of this is to suggest that the Chinese do not remember the past. They do. But history is full of cases where former enemies find it within themselves to reconcile. A long pre-1945 history of military conflict has not prevented France and Germany from co-operating closely. Then there is America’s own experience with Japan. In the space of a couple of years in the 1940s, Americans switched from demonizing the Japanese to treating them as close allies.

The Japanese and the Chinese are pragmatic people who rarely let history get in the way of good business. And there is no question that, for both sides, the alliance is good business. The two economies are highly complementary: Japan’s ultra capital-intensive manufacturers supply the sophisticated components and complex equipment needed by China’s labour-intensive factories. As the resulting consumer goods are exported mainly to the west, the relationship is a win-win in trade terms for both nations. For Japan in particular, the benefits are far larger than is generally understood: it has an enormous interest in China’s exporting success. Thus although China’s exports to the U.S. now exceed even Japan’s, the widely voiced conclusion that China’s success has come at Japan’s expense is misguided. The truth is that a large proportion of the high-tech components and materials used in China’s exports originates in Japan. In effect, much of what Japan exports to the U.S. these days goes through China. This helps explain a crucial fact: Japan’s aggregate current account surpluses with the world as a whole are three to four times greater than China’s.

Short-term economic considerations are not the decisive factor in Japan’s changing diplomatic priorities. Japan’s preference for a world led by China rather than by the U.S. is based on culture. Though many westerners imagine otherwise, Japan is deeply uncomfortable with many aspects of western culture. Although Japan presents a thoroughly westernized face to the world, this reflects no sincere acceptance of Judeo-Christian values.

Japan and China share Confucian and Buddhist traditions. Both are ruled by a traditional East Asian ethos of father knows best. Citizens are saddled with a heavy burden of duties while being denied many rights taken for granted in the west.

Because of their common cultural heritage, the Japanese and Chinese think alike in economic matters, too. Officials in both nations have huge powers to direct savings flows, build export industries, and generally shape economic outcomes. This means the two nations find themselves making common cause in opposing American efforts to reshape other nations’ economies along U.S. lines.

Human rights is another area in which a common cultural heritage has helped align the two nations’ diplomatic interests. Japanese and Chinese leaders are at one in viewing a nation’s human rights policies as a purely internal affair. Thus Japan does not try to dictate China’s human rights policies, any more than China tries to dictate Japan’s.

All this should be understood in the context of the well-known xenophobia common to Japan and China. Both nations believe that good fences make good neighbors. Since the second world war this has inclined them to a keen respect for national sovereignty. By the same token, they resent the universalist nature of America’s agenda on political, economic and social issues. This resentment explains why Japan and China are now quietly looking forward to a day when the US-led world order will no longer dominate.

Eamonn Fingleton is the author of In the Jaws of the Dragon . A version of this article was first published in the May 2004 issue of London-based Prospect magazine.

• Category: Foreign Policy • Tags: China, Japan 

Few aspirants to the American presidency have ever deployed a more effective slogan than Donald Trump’s “Make America Great Again.” Although Hillary Clinton professed to believe that America has never stopped being great, in the end countless voters sided with Trump – and in many cases did so passionately, oblivious to all the Trumpian scandals and gaffes that marred his campaign.

I happen to be one of the few commentators who were early to spot his electoral potential. At, I began a series entitled “Why Trump Is Winning” in December, and explicitly called the general election for him as far back as February. I need no persuasion therefore that the issue of American decline is real and powerful. The irony is, however, that I am skeptical about how much even he, with his nationalistic fervor, tough-guy tactics, and vaunted negotiating skills, can do to improve the prospects for his beleaguered core constituency in the American Rust Belt. The problems are just too large and the rot has gone too far.

The most obvious evidence is in infrastructure. Much American infrastructure has become embarrassingly outdated. The problem, in a nation that has long run huge fiscal deficits, is finding the money for the necessary massive upgrades. (More about financing in a moment.)

The expressways are crumbling; the railways slow and antiquated. The United States even lags in internet speeds. Then there is water purity and the quality of mains electricity (this latter is a key consideration for companies locating advanced manufacturing operations).

Meanwhile as Trump has repeatedly pointed out, many American airports are so dysfunctional and badly served by ground transport that they would not be out of place in the Third World. According to the latest annual survey by the Skytrax company of the world’s best airports, Denver placed highest among American airports – but ranked a mediocre 28 in the world. By comparison five East Asian airports, including two in Japan alone, made it into the top 10.

Infrastructure apart, far bigger problems lurk just below the surface. They are summed up in one statistic, albeit a statistic that a perennially out-to-lunch American press rarely mentions: the trade deficit. Measured on a current account basis (which is the widest and most meaningful measure), the trade deficit last year was $463 billion. This represented a stunning 4.7 percent of gross domestic product (GDP). By comparison the worst figure in the 1970s – a decade when the United States was already seen, both at home and abroad, as losing out badly in global competition – was a mere 0.5 percent. The truth is that the United States has not run a trade surplus consistently since the 1960s, and in the last two decades the deficits have rarely fallen below 3 percent of GDP.

Why does trade matter matter? For many reasons, not least because deficits have to be financed. In practice most of the financing has come from major sovereign investors, particularly the governments of China and Japan and to a lesser extent other East Asian nations. Typically it comes in the form of massive purchases of U.S. Treasury bonds. So far, the money has kept flowing but there is evidently an implicit understanding: in return for doing their bit to keep both the U.S. dollar and U.S. financial markets on an even keel, the East Asians will brook no lectures from Washington on opening their markets to foreign trade. Hence a conspicuous silence in Washington in recent years on East Asian trade barriers. Washington has entered a Faustian bargain and it is hard to see how even Trump, with all his undoubted energy and determination, can break out of it.

He has talked about reopening shuttered factories. That is easier said than done. Once a nation loses its position in any advanced manufacturing specialty, it finds it almost impossible to get back in.

Take electronics. Trump seems to believe that by the simple expedient of imposing stiff tariffs on Chinese imports he can encourage Apple to make iPhones in America. In reality, this badly misdiagnoses the problem. Where the manufacture of sophisticated electronic consumer products is concerned, China is a much less significant player than meets the eye. The product may bear a “Made in China” label but this refers merely to the place of final assembly. Admittedly China does possess the knowhow to make some components but generally only the simpler ones such as the plastic housing for a smartphone. The serious components are made typically in high-wage nations like Japan and to a lesser extent Korea, Taiwan, and Germany. Meanwhile Japan reigns supreme as the source of many of the most important materials and production machinery used in the industry. Little noticed outside East Asia, such materials and machinery are the ultimate driver of the electronic revolution.

All this means that, as a practical matter, China’s contribution to a smartphone’s total added-value may amount to little more than a few percentage points. Thus tariffs on China alone will, with the best will in the world, create remarkably few American jobs. Moreover such jobs would be labor-intensive and therefore fundamentally unsuitable for a high-wage economy. In any case it is highly debatable whether such jobs would be created in the first instance: the point is that even if Trump succeeded in imposing massive tariffs on Chinese goods, Apple would presumably retain the right to move the work to other cheap-labor nations such as Vietnam, India, Mexico, and Brazil.


The real challenge for the United States is to create jobs in advanced manufacturing. In the electronics industry that means focusing on components, materials, production machinery, and other so-called producers’ goods. Such goods typically entail production systems that are both highly capital-intensive and knowhow-intensive. The knowhow, moreover, is of a special, quite rarefied kind in that it resides not in the minds of ordinary production workers but rather consists typically of machine settings known only to a few top engineers. Getting high-tech production machinery to achieve high yields of saleable products is a bit like tuning a piano, only much more daunting. Knowhow is acquired through years if not decades of trial-and-error and learning-by-doing, and is closely held by any company that has acquired it.

Precisely for these reasons, the entry barriers in the sort of industries that Trump might want the United States to stage a comeback in are supremely high. By the same token incumbent companies are well shielded from new competition. Deploying capital-intensive production techniques, they can well afford to pay high wages and still dominate world markets.

Japan provides many impressive examples. Take, for instance, such an important material as semiconductor-grade silicon. Each new generation of microchip requires a quantum leap in the purity of silicon wafers. Otherwise, given the degree to which circuitry has to be miniaturized, even just one atom out of place can short-circuit a chip. In the old days Monsanto provided the United States with an ample supply of home-grown silicon. But Monsanto could not keep up and dropped out as far back as the 1980s. The only other non-Japanese supplier, Wacker Chemie of Germany, soon followed. The result is that today just two Japanese companies, Shinetsu and Sumco, enjoy a quiet but crucial global duopoly in this most important of all high-tech materials.

Of course, if the Japanese – or for that matter the Germans – can establish unassailable positions in leading edge producers’ goods, there is no law of the universe that says the Americans can’t. The problem is that, given how denuded America now is of advanced industries, free markets alone will not do the trick. You can’t get blood out of a stone.

To get back into the game Trump needs to win broad support for a muscular industrial policy, in which government would lead the nation in reaching agreed industrial objectives. In this he would have to emulate the sort of tactics the Japanese and, before them, the Germans, used to propel themselves to the top of the manufacturing hierarchy in the twentieth century.

The United States has actually had considerable success in the past with various industrial policies. The most recent example was the Apollo program which put Neil Armstrong on the moon in 1969. That achievement was only possible because government and industry worked closely together to overcome countless technical challenges. The result was a huge boost to American competitiveness in a host of advanced industries, from new materials to semiconductors.

The problem for Trump ultimately is that, since the Reagan era, his own Republican party has consistently opposed any attempts at industrial policy. Can Trump change the party’s mind? Although he has repeatedly defied the odds in his electoral career so far, the Republican party is unlikely to provide him with the rock-solid support he needs to revive the American manufacturing base.

(Reprinted from Business Post (Dublin) by permission of author or representative)
• Category: Economics • Tags: Donald Trump, Free Trade, Manufacturing 

It is not hard to think of reasons why Hillary Clinton should not be President. Yesterday Wikileaks founder Julian Assange cited one of the best: Libya.

In an interview with John Pilger, a noted Australian-born documentary maker and veteran critic of American military adventurism, he commented: “Libya more that anyone else’s war was Hillary Clinton’s war. Barack Obama initially opposed it. Who was the person who was championing it? Hillary Clinton. That’s documented throughout her emails. There’s more than 1,700 emails out of the 33,000 of Hillary Clinton’s emails we published just about Libya.

“She perceived the removal of Gaddafi and the overthrow of the Libyan state as something that she would use to run in the general election for president. So late 2011, there’s an internal document called the ‘Libya Tick Tock’ that is produced for Hillary Clinton, and… it’s a chronological description of how Hillary Clinton was the central figure in the destruction of the Libyan state.”

Things did not quite follow the script, however. For a start, U.S. ambassador Christopher Stevens and several other U.S. citizens were massacred when U.S. facilities in Benghazi were ransacked. The attacks were facilitated by security lapses for which Clinton was forced to take responsibility.

Observing that Libya remains to this day ravaged by civil war, Assange added: “As a result, there [have been] around 40,000 deaths within Libya. Jihadists moved in, ISIS moved in. That led to the European refugee and migrant crisis, because not only did you have people fleeing Libya, people then fleeing Syria, destabilization of other African countries as a result of arms flows.”

The interview, which was made in association with London-based Dartmouth Films and broadcast by RT, ranged widely over Clinton’s vulnerabilities. It can be viewed here.

• Category: Ideology • Tags: 2016 Election, Hillary Clinton, Libya 

According to the London Sunday Express, Prime Minister Theresa May’s delegation to the G20 summit in Hangzhou was offered some ripe sartorial advice. Said one British participant: “We have been told that if you feel uncomfortable about people seeing you naked, you should change under your bedclothes.”

Surveillance is everywhere in the sort of top hotels favored by foreign dignitaries in China. Indeed Chinese spooks now deploy some of the world’s most microscopically miniaturized cameras and bugs. They are also, as the British delegation has been warned, particularly aggressive and effective in the use of such traditional spy-craft techniques as honey traps. Significantly several British reports recently have described the unhappy experience of a British official who accompanied Prime Minister Gordon Brown to China in 2008. He was waylaid by a particularly beautiful young woman and slipped a Mickey Finn. Eventually waking with a world-class hangover, he discovered he was missing his Blackberry and much of the contents of his briefcase.

The Sunday Express account – headlined “The spies in Theresa May’s bedroom: Prime Minister warned over Chinese snoopers at G20” – can be read here. For another good account , click here.

For those of us who know East Asia (I covered the region from a base in Tokyo for 27 years), the interesting thing is not so much that, in their blackmail efforts, Chinese spooks now deploy no-holds-barred stratagems. Rather it is that Western intelligence agencies haven’t long ago raise the alarm.

After all, blackmail has always been a routine lever of power throughout the region. Sexual blackmail generally works on Westerners.

Other forms of blackmail are also possible. As I have recounted in several books, the standard form used by East Asian governments on their own people is a technique best described as selective enforcement. Regulations are written strictly but — in most cases — are enforced laxly. Officials, however, reserve the right to tighten up enforcement on anyone who displeases them. The classic manifestation of selective enforcement is in tax policy. For a rising businessman, it is understood that certain forms of tax evasion are fair game and are rarely if ever challenged. Indeed if a businessman wants to keep up with the competition, it is imperative to take full advantage of evasion opportunities. But if, having grown wealthy, he decided to use his money to promote a cause considered undesirable by top officials — say, the promotion of genuine Western-style democracy — retribution would be fast and effective. All the authorities need do is take a closer look at his tax books. A stiff jail term would soon follow.

There is no way of knowing the full extent to which Western influence in East Asia has been frustrated by blackmail and similar dirty tricks. What we do know is that both Western corporations and Western governmental institutions have a long and ostensibly mysterious history of spinelessness in the region.

Perhaps the most interesting aspect of this story is its London provenance. Why haven’t we had similarly frank warnings from Washington? At a guess, several factors are involved, but one surely is American-style political correctness. British officials have far fewer inhibitions about criticizing the less salubrious aspects of Chinese political culture.

From reading between the lines, it would appear that the decision to plant this story may have come from Theresa May herself. If so, it is another indication that she is demonstrating a new streak of pluck in facing down East Asian pressures. What we do know is that she has already slammed the brakes on a proposed nuclear power deal with China that seemed likely to compromise British national security.

All in all, May seems to be a considerable improvement on her too-clever-by-half predecessor David Cameron. In fact it may not be overstating it to suggest that she may be a new Iron Lady in the making – and, in contrast with the late-phase Margaret Thatcher, an Iron Lady whose feet seem likely to remain planted firmly on the ground.

• Category: Foreign Policy • Tags: China 
Here’s the Smoking Gun

Is Donald Trump really as stupid as the press seems to think? And if not, how do we explain the press’s version of countless Trumpian controversies lately?

Take, for instance, the Kovaleski affair. According to a recent Bloomberg survey, no controversy has proven more costly to Trump.

The episode began when, in substantiating his erstwhile widely ridiculed allegation that Arabs in New Jersey had publicly celebrated the Twin Towers attacks, Trump unearthed a 2001 newspaper account in which law enforcement authorities were stated to have detained “a number of people who were allegedly seen celebrating the attacks and holding tailgate-style parties on rooftops while they watched the devastation on the other side of the river.” This seemed to settle the matter. But the report’s author, Serge Kovaleski, demurred. Trump’s talk of “thousands” of Arabs, he alleged, was an exaggeration.

Trump fired back. Flailing his arms wildly in an impersonation of an embarrassed, backtracking reporter, he implied that Kovaleski had bowed to political correctness.

So far, so normal for this election cycle. But it turned out that Kovaleski is no ordinary Trump-dissing media liberal. He suffers from arthrogryposis, a malady in which the joints are malformed.

For Trump’s critics, this was manna from heaven. Instead of merely accusing the New York real estate magnate of exaggerating a minor, if disturbing, sideshow in U.S.-Arab relations, they could now arraign him on the vastly more damaging charge of mocking a disabled person.

Trump pleaded that he hadn’t known Kovaleski was handicapped. This was undermined, however, when it emerged that in the 1980s the two had not only met but Kovaleski had even interviewed Trump in Trump Tower. Trump was reduced to pleading a fading memory, something that those of us of a certain age can sympathize with, but, of course, it didn’t wash with Trump’s accusers.

In responding directly to the charge of mocking a disabled person, Trump commented: “I would never do that. Number one, I have a good heart; number two, I’m a smart person.” Setting aside point one (although to the press’s chagrin, many of Trump’s acquaintances have testified that a streak of considerable private generosity underlies his tough-guy public image), it is hard to see how anyone can question point two. Even if he really is the sort of unspeakable buffoon who might mock someone’s disability, he surely has enough political smarts to know that there is no profit in doing so in a public forum.

There has to be something else here, and, as we will see, there is. Key details have been swept under the rug. We will get to them in a moment but first let’s review the wider context. Candidate Trump’s weaknesses are well-known. He is unusually thin-skinned and can readily be lured into tilting at windmills. His reality-television persona is sometimes remarkably abrasive. His penchant for speaking off-the-cuff has resulted in a series of exaggerations and outright gaffes.

All that said, if he ends up losing in November, it will probably be less because of his own shortcomings than the amazing lengths to which the press has gone in misrepresenting him – painting him by turns weird, erratic, and downright sinister.

What is not in doubt is that if the election were to revolve around fundamental policy proposals (what an innovation!), it would be Trump’s to lose. As Patrick Buchanan has observed, “on the mega-issue, America’s desire for change, and on specific issues, Trump holds something close to a full house.”

On out-of-control immigration and gratuitously counterproductive foreign military adventures, he has seriously wrong-footed Hillary Clinton. He has moreover made remarkable progress in focusing attention on America’s trade disaster. Thanks in large measure to his plain talk, the Clintons have finally been forced into ignominious retreat on their previous commitment to blue-sky globalism. For more on Hillary Clinton’s trade woes, click here.

Trump’s hawkish stance not only packs wide popular appeal but, as I know from more than two decades covering the global economy from a vantage point in Tokyo, it addresses disastrous American policy-making misconceptions going back generations.

The standard Adam Smith/David Ricardo case for free trade, long considered holy writ in Washington, has in the last half century become ludicrously anachronistic.

Smith based his intellectual edifice on the rather pedestrian observation that rainy England was good at raising sheep, while sunny Portugal excelled in growing grapes. What could be more reasonable than for England to trade its wool for Portugal’s wine? But, while Smith’s case is a charming insight into eighteenth century simplicities, the fact is that climate-based agricultural endowments have long since ceased to play a decisive role in First World trade. Today the key factor is advanced manufacturing. By comparison, not only is agriculture a negligible force but, as I documented in a book some years ago, even such advanced service industries as computer software are disappointing exporters.

For nations intent on improving their manufacturing prowess (and, by extension, their standing in the world incomes league table), a key gambit is to manipulate the global trading system. Japan and Germany were the early leaders in intelligent mercantilism but in recent years the most consequential exemplar has been China.


In theory China should be a great market for, for instance, the U.S. auto industry – and it is, sort of. The Detroit companies have been told that while their American-made products are not welcome, they can still make money in China provided only they manufacture there AND bring their most advanced production know-how.

While such an arrangement may promise good short-term profits (nicely fattening up those notorious executive stock options), the trade-deficit-plagued American economy is immediately deprived of badly needed exports. Meanwhile the long-term implications are devastating. In industry after industry, leading American corporations have been induced not only to move jobs to China but to transfer their most advanced production technology. In many cases moreover, almost as soon as a U.S. company has transferred its production secrets to a Chinese subsidiary, these “migrate” to rising Chinese competitors. Precisely the sort of competitively crucial technology that in an earlier era ensured that American workers were not only by far the world’s most productive but the world’s best paid have been served up on a silver salver to America’s most formidable power rival.

Corporate America’s Chinese subsidiaries moreover are expected almost from the get-go to export. In the early days they sell mainly to Africa and Southern Asia but then, as they approach state-of-the-art quality control, they come under increasing pressure to export even to the United States – with all that that implies for the job security of the very American workers and engineers who developed the advanced production know-how in the first place.

Almost alone in corporate America, the Detroit companies have hitherto baulked at shipping their Chinese-made products back to the United States but their resolve is weakening. Already General Motors has announced that later this year it will begin selling Chinese-made Buicks in the American, European, and Canadian markets. It is the thin end of what may prove to be a very large wedge.

Naturally all this has gone unnoticed in such reflexively anti-Trump media as the Washington Post. (A good account, however, is available at the pro-Trump website,

For the mainstream press, the big nation-defining issues count as nothing compared to Trump’s personal peccadillos, real or, far too often, imagined.

This brings us back to Kovaleski. Did Trump really mean to mock a handicapped person’s disability? On any fair assessment, the answer is clearly No. As the Catholics 4 Trump website has documented, the media have suppressed vital exonerating evidence.

The truth is that Trump’s frenetic performance bore no resemblance to the rigid look of arthrogryposis victims. Pointing out that Kovaleski conducted no on-camera interviews in the immediate wake of the Trump performance, Catholics 4 Trump has commented:

Shouldn’t the media have been chomping at the bit to get Kovaleski in front of their cameras to embarrass Trump and prove to the world Trump was clearly mocking his disability? If the media had a legitimate story, that is exactly what they would have done and we all know it. But the media couldn’t put Kovaleski in front of a camera or they’d have no story…..But, if they showed video of Trump labeled “Trump Mocks Disabled Reporter,” then put up a still shot of Kovaleski, they knew you, the viewer, would assume Kovaleski’s disability must make his arms move without control.

According to Catholics 4 Trump, in the same speech in which he presented his Kovaleski cameo, Trump acted out similar histrionics to portray a flustered U.S. general. Meanwhile, on another occasion, he used the same wildly flapping hand motions to lampoon Ted Cruz’s rationalizations on waterboarding. Thus as neither the flustered general nor Ted Cruz are known to be physically handicapped, we have little reason to assume that Trump’s Kovaleski routine represented anything other than an admittedly eccentric portrayal of someone prevaricating under political pressure.

Perhaps the ultimate smoking gun in all this is the behavior of the Washington Post. On August 10, it published a particularly one-sided account by Callum Borchers. When someone used the reader comments section to reference the alternative Catholics 4 Trump explanation, the links were deleted almost immediately. As Catholics 4 Trump pointed out, the Post’s hidden agenda suddenly stood revealed for all to see:

This demonstrates that the Washington Post is aware of evidence existing that contradicts their conclusions, and that they are willfully attempting to conceal it from their readers. If Borchers and WaPo were honest and truly wanted to report ALL of the evidence for and against and let the readers decide, they would have to include the video of Kovaleski and the video of Trump impersonating a flustered General and a flustered Cruz. Any objective report would include both evidence for and against a certain interpretation of the Trump video.

What are we to make of the various other press controversies that have increasingly dogged the Trumpmobile? For the most part, not much.

One recurring controversy concerns how rich Trump really is. The suggestion is that his net worth is way short of the $10 billion he claims.

He has come in for particular flak from the author Timothy O’Brien, who a decade ago pronounced him worth “$250 million tops.” Although O’Brien continues to pop up regularly in places like the Washington Post and Bloomberg, his methodology has been faulted by Forbes magazine, which, of course, has long been the ultimate authority in such matters.

What can be said for sure is that even the best informed and most impartial calculation can only be tentative. The fact is that the Trump business is private and thus not subject to daily stock market assessment.

There is moreover a special complication almost unique to the Trump business — the value of his brand. In Trump’s own mind, he seems to think of himself as a latter-day Cesar Ritz – albeit he projects less an image of five-star discretion as high-rolling hedonism. That the brand is a considerable asset, however, is obvious from the fact that he franchises it to, among others, independent real-estate developers. That said, it is an intangible whose value moves up and down in the same elevator as The Donald’s personal standing in global esteem.

All that said, in a major assessment last year, Forbes editor Randall Lane put Trump’s net worth at $4.5 billion. Although that is way short of Trump’s own estimate, it still bespeaks world class business acumen.

Another controversy concerns the country of origin of Trump campaign paraphernalia. After he disclosed that his ties were made in China, his criticism of America’s huge bilateral trade deficit with China was denounced as hypocrisy.

Again there is less here than meets the eye. It is surely not unprincipled for someone to argue for laws to be changed even while in the meantime he or she continues to benefit from the status quo.

Warren Buffett, for instance, has often suggested that tax rates should be raised for plutocrats like himself. In the meantime, however, he continues to pay lower rates than many of his junior staff and nobody calls him a hypocrite. By the same token, many Ivy League-educated journalists privately criticize the legacy system under which their children and the children of other graduates of top universities enjoy preferential treatment in admissions. Few if any such parents, however, would stand in the way of their own children cashing in on the system. Should they?

Perhaps Trump’s most egregious experience of press misrepresentation was sparked when he archly urged Russia to hack into Clinton’s personal server to discover her missing emails. “Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” he said. “I think you will probably be rewarded mightily by our press!”

This was sarcasm laid on with a trowel but the press, of course, wasn’t buying it. Yet it is not as if sarcasm is new to American politics. No less a figure than Abraham Lincoln had a famously sarcastic tongue and the press laughed along with him. When someone complained of Ulysses Grant’s drinking, for instance, Lincoln rushed to the defense of the Union’s most successful general. “Can you tell me where he gets his whiskey,” Lincoln asked. “Because, if I can only find out, I will send a barrel of this wonderful whiskey to every general in the army.”

Then there was Harry Truman, the man who declared himself in search of a one-handed economist. When he was not making fun of dismal scientists, he found plenty of other opportunities for caustic wit. After he was presented with the Chicago Tribune’s front page saying “Dewey Defeats Truman,” for instance, he commented: “I knew I should have campaigned harder!”

As for Trump, his wit is clearly a major draw with the ordinary voters who flock to his meetings. Yet little of it is ever recycled in the press. In the case of the Russia hacking joke indeed, many commentators were so humorless as to mutter darkly about a threat to national security. At Slate, Osita Nwanevu interviewed a lawyer to see what could be done to arraign Trump on treason charges. (The answer was nothing.) Meanwhile at Politico, Nahal Toosi and Seung Min Kim reported that Trump’s crack had “shocked, flabbergasted, and appalled lawmakers and national security experts across the political spectrum.” They quoted Philip Reiner, a former national security official in the Obama administration, describing Trump as a “scumbag animal.” Reiner went on to comment: “Hacking email is a criminal activity. And he’s asked a foreign government – a murderous, repressive regime – to attack not just one of our citizens but the Democratic presidential candidate? Of course it’s a national security threat.”

Countless other examples could be cited of how the press has piled on in ways that clearly make a mockery of claims to fairness. All this is not to suggest that Trump hasn’t made many unforced errors. His handling of the Khizr Khan affair in particular played right into the press’s agenda. As Khan had lost a son in Iraq, his taunts should have been ignored. By challenging Khan, Trump was charging the cape, not the matador. The matador, of course, was Hillary, and she was actually highly exposed. Trump, after all, could have simply confined his riposte to the fact that but for her vote, and the votes of other Senators, the United States would never have entered Iraq, and Khan’s unfortunate son would still be alive.

Where does Trump go from here? Although it is probably too late to get the press to fall into line in observing traditional standards of fairness, Trump can make it harder for the press to deliver cheap shots.

He needs to stake out the high ground and get a serious policy discussion going. The debates should help but the first one is still more than a month away. In the meantime one strategy would be to compile detailed, authoritative reports on trade, immigration, and other key issues. While such reports would not reach everyone, in these days of the internet they would find a useful readership among an influential, if no doubt relatively small, cadre of thoughtful constituents. They could thus work indirectly but powerfully to change the tone of the campaign. Certainly such an initiative would be hard for the mainstream press simply to ignore – and even harder completely to misrepresent.

Eamonn Fingleton is the author of In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony . He interviewed Trump for Forbes magazine in 1982.

• Category: Ideology • Tags: 2016 Election, American Media, Donald Trump 

Financial markets are notorious for irrational mood swings. But even by past standards, the recent wild gyrations in both stocks and currencies seem to have set a new record for ludicrousness.

The source of the panic has, of course, been the United Kingdom’s referendum vote last week to pull out of the European Union.

The first thing to note is that markets should have been prepared for the outcome. After all, in the last weeks of the campaign, opinion polls indicated that the two sides were running neck and neck. It was a fair bet moreover that prospective Leave voters were being systematically undercounted. After all, as they had long been portrayed as ignoramuses, xenophobes, and even outright racists by the London establishment, many of them undoubtedly felt cowed into keeping their true opinions from the pollsters. In the circumstances, financial traders would have been prudent to maintain balanced books going into the vote. Judging by the post-vote gyrations, which extended even to oil and other commodities, most traders seem to have been badly blindsided.

Yet not only was a Leave vote foreseeable but some of us foresaw it. Even as early as 2013, it was pretty obvious that in offering a referendum the UK’s pro-EU Prime Minister David Cameron was tempting fate. In a commentary at Forbes in February of that year, I wrote:

British exasperation with the EU has the potential to shake the latter-day world order. A symptom of the strains is that the UK’s pro-EU Prime Minister, David Cameron, has felt obliged to promise the British electorate a straight in-out referendum on British membership of the EU. Cameron probably doesn’t realize it yet but he may just have touched off a geopolitical avalanche. Certainly his referendum is a destabilizing – if in my view highly welcome – move at a time when the world economic order has rarely seemed more precarious. That order is founded on an overtly anti-democratic commitment to globalism on the part of the foreign policy elites of the UK and United States. Yet globalism is not working and the evidence of its failure mounts daily.

I returned to the subject several times, not least in a commentary in May 2014 whose heading – Suddenly The EU’s Break-Up Has Moved From A Long Shot To A Probability – said it all. Analyzing local election results that testified to a strong anti-EU undertow, I wrote:

Although British voters have for decades wanted out of the European Union, that possibility has hitherto been expertly forestalled by a less-than-democratic left-right alliance of London-based elites. Now suddenly all bets are off. In local council elections yesterday, England’s long-suffering grass-roots voters finally rose up. They snubbed both main parties, the Conservatives and Labor, to support the United Kingdom Independence Party (UKIP)….. Yesterday’s vote…. seems likely to trigger a chain-reaction in which it becomes impossible for the London elites any longer to hold out Canute-like against the democratic will.

It is now abundantly clear to even his most committed supporters that Cameron proved too clever by half. His agenda in offering the referendum was merely the parochial one of buying short-term peace among feuding factions in his Conservative party. Although the party’s right wing had long wanted out of the EU, he evidently calculated that with the help of the opposition Labor party he could pull off an easy victory for the Remain camp.

What he did not understand was that he was living in a bubble. He is a globalist in a London where almost all “respectable” opinion is globalist. The globalist fashion has been long been propagated by the City, as the London financial district is known. As City types tend to pay themselves well (despite the fact that their money management services are often of mediocre or even questionable quality), they elicit considerable misplaced obeisance from the more naïve of their neighbors in London’s better residential districts.

So much so that even the higher reaches of the Labor party have long been globalist. In the circumstances therefore it was probably easy for Cameron to forget that countless ordinary Labor voters not only have never shared this mindset but had long ago come to the view that the UK’s entry into the EU in 1973 was the first step towards a globalist future that has proved disastrous for the UK’s once world-leading manufacturing industries. His relative youth (he is not yet 50) moreover may have blinded him to the fact that older voters remember a time when, in many categories, British manufacturers led the world. In shipbuilding, for instance, British yards accounted for around half of all the world’s output in the first fifteen years after World War II. Even more to the point, older Britons remember when it was the UK, not Germany, still less Japan, that built the best small cars. In fact in the 1950s, the UK was the world’s largest auto exporter.

In such once-booming, but now long depressed, industrial cities as Manchester, Newcastle, Sheffield, Birmingham, and Swansea, the sense of alienation has been palpable since as far back as the 1980s. While in general elections disaffected Labor voters may have had nowhere to go but the party they have always supported, the referendum finally gave them a chance to second-guess the Labor leadership – and they took it.

At the end of the day, few in the British establishment have emerged unscathed from the last week. Cameron has already, with a commendable sense of honor, fallen on his sword. His finance minister George Osborne, who up to the referendum had been seen as Cameron’s most likely successor, has not resigned but will probably face a long spell in the political wilderness once Cameron’s successor is chosen.


A related question is what will happen to the Bank of England’s governor Mark Carney. As I pointed out last week, he crossed a line in coming out so vigorously in support of the Remain camp. His efforts to calm markets in the wake of the vote, however, have met with general media approval and seem to have proved of real value. The betting is he will survive to fight another day.

Eamonn Fingleton is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, is the Key to Future Prosperity (Boston: Houghton Mifflin, 1999).

• Category: Economics • Tags: Brexit, Britain 

Mark Carney is a globalist’s globalist. To say the least, this seems never to have held him back in the past. His luck may be changing.

Born in Canada and educated at Harvard and Oxford, he worked for Goldman Sachs in London, Tokyo, New York, and Toronto, before going into public service. His wife is British and his children have both Canadian and British passports. Reflecting his Irish ancestry, he himself holds Irish as well as Canadian citizenship. After a brief spell as governor of the Bank of Canada, he was appointed governor of the Bank of England in 2013 – the first non-Briton to hold the post in the bank’s more than 300-year history.

In the UK’s bitter so-called Brexit debate (about whether to exit the European Union), Carney has been doing Trojan work terrifying any voter who might vote Leave in Thursday’s referendum.He has warned, among things, that Brexit could tip the UK into recession, send the pound reeling, reawaken inflation, and throw countless workers on the dole. In so doing, he has provided invaluable “independent” support for an increasingly outrageous scaremongering campaign by Prime Minister David Cameron as well as finance minister George Osborne and other leaders of the so-called Remain camp (those who want to stay in the EU).Carney has even appeared on one of the big British Sunday current affairs programs to bring his Brexit warnings into every living room. This teed things up nicely for Osborne, who a few days later announced that, in the wake of a Leave vote, a punishing emergency budget would have to be enacted in a supposedly desperate attempt to shore up foreign confidence.

In pandering to the Remain camp, Carney has come in for a particularly bluntly worded – by British establishment standards – reprimand from four elders of Cameron’s own Conservative party. In a letter to the London Telegraph, former finance ministers Nigel Lawson and Norman Lamont and former Conservative party leaders Iain Duncan Smith and Michael Howard wrote: “There has been startling dishonesty in the economic debate, with a woeful failure on the part of the Bank of England, the Treasury, and other official sources to present a fair and balanced analysis. They have been peddling phony forecasts and scare stories to back up the attempts of David Cameron and George Osborne to frighten the electorate into voting Remain.”

Irrespective of which way the vote goes, Carney looks dangerously exposed. Although he claims that the Bank of England has a duty to make itself clear on the alleged consequences of Brexit, the fact is that the bank has a long tradition of staying out of political debates. In particular in the run-up to general elections, it has scrupulously avoided offering any hint of its views on the merits – and sometimes alarming demerits – of the competing parties’ economic programs. In any case, as the prominent Brexit campaigner Bernard Jenkin has pointed out, Carney’s Sunday program appearance clearly crossed a line.

If the British do vote to leave, would this prove, on balance, as bad for the British economy as Carney seems to think? Any honest answer should be prefaced by a mention of the dangers of making forecasts – particularly about the future. Carney might also mention that the Bank of England’s own forecasting record has been spotty at best.

A reasonable guess is that the many economic pluses and minuses of a Brexit decision would broadly balance out. The fact is that a post-Brexit UK would enjoy enormous bargaining power to negotiate an even more favorable free-trade deal with Brussels than that already enjoyed by such super-prosperous non-EU nations as Switzerland and Norway. Thus the Brexit option is less a matter of economic consequences than political ones, and in particular the issue of national sovereignty (and such related matters as immigration from Eastern Europe, which is a hot topic for many Britons).

The irony is that some of Carney’s predictions may prove right – but just not in the baleful way he has suggested. Carney and his colleagues have warned, for instance, that a Brexit vote could precipitate a fall in house prices. There is less here than meets the eye. House prices in the London region are already grossly inflated and are evidently in the later stages of a giant bubble. Irrespective of which way the Brexit vote goes, they are likely to take a tumble in the years ahead – and such a development would be far from unwelcome for millions of ordinary would-be home buyers who have long been priced out of the market. An additional irony is that the main reason house prices have become so inflated is that the Bank of England has been remarkably lax in controlling home loan debt.

Carney has also forecast that the pound, which has already weakened considerably in recent weeks,could take a major hit in the event of Brexit decision. Again this may be proved right – but a drastically lower pound would, on balance, prove a blessing in disguise. After all it would provide a badly needed boost to exporters and help severely challenged domestic producers compete with imports.

The pound has had a long history of overvaluation and, as is obvious to anyone who has taken a look at the UK’s now disastrous trade trend, the problem has become particularly acute in recent years. The UK’s pattern of consistent deficits dates to as far back as the early 1980s and has long run even higher as a percentage of national income even than America’s.


According to economics commentator Liam Halligan, the current account deficit had already reached a shocking 3.5 percent of national income in 2012. It rose to 4.7 percent in 2013 and to no less than 5.9 percent in 2014. As Halligan points, this latter figure was the worst performance in the UK’s history. And with the exception of the desperate circumstances of war and the immediate aftermath of war, it was probably the worst of any major nation ever. Last year’s figure, at 4.7 percent, was a slight relief but in the larger context was still disastrous.

All the evidence is that the UK has become structurally dependent on an unsustainable level of imports. Not only has this exacerbated its chronically severe unemployment problem but a further alarming consequence is that more and more of the commanding heights of the British economy are coming under foreign ownership. The implications for British sovereignty are bleak. For a telling article on the extent to which the British economy had already come under foreign ownership by 2012, click here.

What has the Bank of England been doing to raise the alarm? And, even more to the point, what has it been doing to counter the trend? The answer in both cases is next to nothing. Whereas Carney and his institution have chosen to play a central role in the Brexit debate, they have been virtually invisible on the balance of payments problem and, if anything, they have helped enable the trend. Last summer Carney pronounced the current account deficits “not an immediate cause for alarm.” A month later, Ben Broadbent, the Bank’s deputy governor for monetary policy, further fed public complacency by suggesting the UK had been savvy in borrowing abroad to fund investments.

One interpretation of Carney’s approach is that he is a doctrinaire globalist – the sort of person who cares not a whit about national interests, not even the interests of the nation that now pays him more than $900,000 a year to oversee its central bank.

One thing is clear: various vested interests that have figured in his past – and may figure again in his future – can be well pleased with his performance. Certainly he has been singing their song.

Take Goldman Sachs. Carney’s notorious former employer has been in the forefront of the scaremongers, predicting that a Leave vote would not only trigger a 20 percent devaluation of sterling but threaten banks and house-builders. It may not be a coincidence that, as the Wall Street Journal has pointed out, Goldman Sachs has a lot of skin in the game, not least because it is currently building a vast new $500 millionLondon headquarters for its European operations.

Then there is the Japanese establishment. Given that Carney’s early success dates in no small measure to a spell in Goldman’s Tokyo office, it is interesting to ask how his Japanese friends see the vote. The answer comes as no surprise to anyone with significant Japan watching experience (I worked in Tokyo for 27 years). The Japanese establishment is strongly pro-Remain. Though Japanese corporations couch their case in terms of what is supposed to be best for the UK, it is probably not a coincidence that Japanese mercantilists have found that the fractured and polyglot European Commission is a breeze to deal with. By contrast, a solidly led UK that was free to pursue its own independent trade diplomacy might not prove such a pushover. The fact is that though protectionism is integral to the Japanese economic system, Brussels never seems to have noticed. When did you last hear it protest even such an obvious scandal as Tokyo’s virtual total embargo on imports of foreign cars?

This is not, of course, to suggest that Carney has been consciously dancing to Tokyo’s tune. It is worth noting, however, that nothing is more revelatory of the depth of Japan’s commitment to mercantilism than a few years’ residence in the country. For a foreign investment banker to survive there, let alone to take his career to the next stage, it is necessary to hold tight to the mantra that “trade does not matter.” Even better, one should go around proclaiming that nations that protect their markets “hurt only themselves.” The fact that the success of the whole of the East Asian region – not only that of Japan, but of South Korea, Taiwan, and now China – stands in silent contradiction of this view must be studiously swept under the rug.

A further consideration is what the Germans think. Like Japan, Germany sees the virtues of one-way globalism: it insists that other nations open their markets to its exports while maintaining a tissue of unobtrusive barriers to imports. Although the EU was supposed to provide a level playing field, that playing field has long been quietly tipped in Germany’s favor. Thus while the UK has scrupulously opened its markets to other nations (not least to Germany), Brussels has turned a blind eye to German protectionism. Even as the UK has incurred ever greater trade deficits, Germany has racked up ever greater surpluses. So much so that Germany last year enjoyed a current account surplus equal to 8.5 percent of national income. This was one of the best performances of any major nation in history – actually little short of astounding (Germany’s surplus was nearly as high in money terms as that of China, a mercantilist nation with more than fifteen times Germany’s population).

Of course, this is not to suggest that Carney has been any more conscious of facilitating Germany’s agenda than Japan’s. But the Germans, like the Japanese, have an interest in promoting the rise to ultimate leadership of true globalists in other nations. In that regard, it is worth recalling that Carney attended the annual meetings of the pro-German Bilderberg Group in 2011 and 2012. A reasonable guess is that he would not have been invited had his views been considered problematical for German trade policy. (The Bilderberg Group was founded in the 1950s by, among others, Prince Bernhard of the Netherlands, a German-born former executive of IG Farben who displayed notable Nazi sympathies in the 1930s.)

What we are left with is a remarkable dichotomy. On the one hand, there is Carney’s almost total silence on the concrete reality of a UK balance of payments problem that is unprecedented in the history of any major First World nation. By comparison the economic management of the Ottoman empire in its dissolute last decades seems a model of economic rectitude.

On the other hand, there is Carney’s straining at the leash to forestall a Brexit vote that, while it may engender some uncertainty in the short term, will come with major long term opportunities (in allowing the UK to negotiate its own made-to-measure trade deals with, for instance, China, India, and the United States).

What explains this dichotomy? For now, almost no one seems to be asking. It is, however, a question that may bulk large in Carney’s future.

Eamonn Fingleton is a commentator on global trade. He is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Boston: Houghton Mifflin, 1999).

• Category: Economics, Foreign Policy • Tags: Brexit, Britain, EU, Mark Carney 
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