Donald Trump’s likely legacy? China.

(Reposted from December 2019)

It is unlikely that Donald Trump’s legacy will receive plaudits for much of his domestic or foreign policy. He is an incompetent and solipsistic liar, who continuously pours fuel on fire with his impulsive and erratic decision-making. But unlike any president before him, he has stood up to China and has finally woken up Washington to the reality of the authoritarian state’s ambitions.

Democrat front-runner Joe Biden recently mocked Trump’s tariff policy, suggesting that China were ‘not bad folks’ and ‘not competition for us’. It is exactly this mentality held by the US establishment for years that has allowed China to thrive without accountability.

Trump has a clear rationale to aggressively target China with tariffs. Since China’s inclusion in the WTO in 2001, they have failed to honour their commitments to open up its economy to foreign investment and adhere to the WTO’s rules-based system. They have merely slid backwards while reaping WTO benefits of low tariffs, access to the WTO dispute resolution mechanism, influence on future global trade rules, and freedom for its state-owned companies to operate globally.

Meanwhile, China has committed systemic intellectual property theft, for years striving to obtain trade secrets and valuable information in important industries to gain an edge over western firms. Chinese companies have achieved this through hacking and bribing and China’s government have turned a blind eye. China has also dumped and unfairly subsidised goods such as steel and aluminium, violating WTO rules and damaging US companies. Promises in 2001 to open up its markets were also left to dry as any foreign company in China must adhere to foreign ownership restrictions that force them to form joint ventures with Chinese companies and share their technology. China’s unfair practices have allowed them to facilitate the development of their own tech strategies, substantially benefitting their own companies (often state-owned) at the expense of the rest of the global market.

It has also contributed to its economic growth, to an extent where the economic concern is now intertwined with national security concerns. Xi Jinping has translated China’s wealth into military strength, imposing into the South-China Sea. Their technological prominence and state involvement in the leading Chinese tech companies has sparked allegations of hacking, global surveillance and improper use of AI. China’s Belt-and-Road initiative is a neo-colonial project, which gives developing nations overly-generous loans for infrastructure projects. Ports and airports are at risk to Chinese ownership when the inevitability of defaulting occurs.

Despite the obvious evidence of Chinese malpractice, successive presidents have been weak in countering malpractices, instead of believing that China would eventually liberalise, or that they would not be an issue. While Trump was wrong to neglect it, Obama’s Trans-Pacific Partnership with Asian states would have not addressed China directly but only would have circumvented the issue. Obama also placed his own tariffs and won several WTO cases, but during his tenure, China only continued to steal IP and violate trade rules. Conventional means of trade disputes and dovish diplomacy has long been insufficient. Trump, for all his flaws and desire to simply please his base, grasps this reality.

Tariffs are globally frowned upon. It is unsurprising that Trump’s policy is attacked by economists. But putting on an economist’s hat blinds us from understanding the harsh geopolitical nature of the conflict. The free market is great when everybody follows the rules, but China’s size and hegemonic status makes encouraging compliance and fair trade practice an impossible goal.

The unilateral force of a tariff programme is a viable political strategy as China, not the US, has more to lose in a trade war. China cannot match Trump’s tariffs on a dollar-for-dollar basis, as it imports far less than it exports to the US. Moreover, the trade war is already resulting in a restructuring of China’s compact supply-chain, as foreign companies have relocated their production lines to competitors such as Vietnam, Malaysia and Indonesia. With slow economic growth, China will find it difficult to withstand the effects of a trade war, especially if it is compounded by the pressure of a growing middle class and issues of democracy.

 The trade war does not hurt the US nearly as much. China’s primary retaliatory target has been US farmers, by placing tariffs on soybeans and other agricultural imports. This may have harmed their profits, but farmers still support Trump. They are frustrated with China’s inconsistent purchasing, as well as frequently cancelling or refusing shipments of corn or grains. They also view Trump’s policy as short-term pain for long term gain, perhaps a message that Trump has failed to communicate to the broader populace.

When looking at the trade war in a broader context, usual criticisms of effects to US exporters and consumers are not relevant to the macro question of whether these tariffs can change the behaviour of China. Therefore, it is reasonable to devise a policy that may require the US to withstand some pain, especially when more liberal and open policies towards China have failed. Trump must explain that there is a larger long-term interest in the trade war and that with strong economic growth and low inflation, the US will be stronger in resisting the effects of tariffs than its adversary.

It certainly does not help that Trump makes his trade war difficult to defend. He knows nothing about trade. He makes multiple errors, and lies about the US not feeling any effect. He also has tariffed allies, such as Canada and the EU on more meagre concerns, and in some cases, such as Mexico, he has used tariffs as a political tool. His cosying up to authoritarians such as Vladimir Putin and Kim Jong-un has made his allies unwilling to take him seriously and he has aggravated diplomatic relationships with aggressive and unreasonable demands from Asian partners. He has ordered Japan and South Korea, arguably the states most concerned about China, to pay 400% more for US military presence within both states with limited justification. Trump’s treatment of foreign policy like a business fails to grasp the importance of alliances and the impossibility of tackling China alone.

For his policy to be genuinely effective in the long-term, he must, therefore, muster broad coalitions with allies rather than frustrate them. Many nations are concerned with the way China is acting – India only recently pulled out of a multilateral trade deal including China in fear of inadequate safeguards against Chinese dumping. If Trump can enforce a clear tariff strategy while simultaneously working positively with western counterparts and collaborating with Asian allies to mitigate the global threat, China will be increasingly pressured to abide by the rules. His neglect of TPP that has left the remaining parties to edge closer to China demonstrates his failure to do so.

It can be reasonably argued that the damage has been done by Trump’s arrogance and wretched diplomacy. If that is the case and if Trump cannot survive 2020, then possibly a new face can apply an aggressive China policy while working with allied nations to build pressure on the Chinese leadership. Nonetheless, Trump has at least brought the issue to consensus in Washington and increasingly to Europe, now recognised as the primary threat to the global order. Perhaps his personality and impotence have rendered his tariff strategy more defective than it really is.

 

Investor-State Dispute Settlements – the anti-globalist’s scapegoat

ISDS has become a dirty acronym in trade. Frequently perceived as a tool for corporations to exploit states at the expense of the public interest, it is a prime target for anti-globalists and anti-capitalists. Elizabeth Warren has long lambasted it for providing a ‘huge handout to global corporations while undermining American sovereignty’ and has committed to ensuring it never sees the light of day in future trade deals. Additionally, 150,000 Europeans signed a petition demanding its removal from the now dead TTIP. Yet, despite being the means of dispute settlement within trade agreements for decades, exaggerated rhetoric – that ISDS simply serves corporate interests and harms the state’s ability to govern, is misleading and unproductive.

Investor-state dispute settlements provide a vital function in the international legal order, providing a mechanism for investors to sue states for alleged discrimination and breach of trade agreements. Many nations, notably developing nations, lack the basic protections to ensure foreign corporations can confidently invest in them. ISDS aimed to fill this vacuum, offering an external legal system to comfort investor fears of corruption and discrimination, simultaneously facilitating greater foreign investment for poorer states. The system also removes pressure off domestic courts, providing a substantial benefit for more developed states. Yet, while ISDS improves the enforceability of international law, its provision for claims for investors have created the perception that it is a fundamentally unfair and exploitative system.

Such a demeaning reputation is epitomised by ISDS’s effect on issues of public concern –obstructing the regulation of the environment, public health and labour standards, providing an easy platform for critics to incite widespread support. Prominent cases such as Phillip Morris’ lawsuits against Australia and Ecuador for inaugurating plain-packaging and successful claims by Italian bondholders against Argentina for defaulting on its sovereign debt have been frequently used to form the basis of backlash towards ISDS. In reality, many of these cases, like Phillip Morris, fail, or are rare.

This does not suggest that ISDS is a perfect dispute mechanism system. Often vague definitions in treaties have allowed corporations to stretch the meaning of terms such as ‘investment’ and ‘fair and equitable treatment’. While these have contributed to the backlash towards ISDS, a complete overhaul of the system is disproportionate when existing treaties can be altered and future ones can clarify the definitions of these terms.

Another common attack of ISDS is focused on the allegedly biased judges that arbitrate disputes. As panels partially consist of arbitrators appointed by the investors themselves, the allegation follows that investors will only appoint arbitrators who have been favourable to them in the past. Arbitrators are also seen to be biased as a result of their previous roles as counsel in similar cases they would arbitrate, and the interchanging of these roles is seen as facilitating procedurally illegitimate decisions. Despite the mere appearance of bias, these criticisms are based on assumptions of how the courts operate and minimal empirical evidence exists to suggest the procedure has created biased courts.

Misleading criticism based on the substantive and procedural flaws of ISDS has generally originated from NGOs and academia, who have successfully swayed public opinion on TTIP and TPP. While President Trump has answered their prayers, albeit for his own protectionist justifications, the outrage over ISDS was a disproportionate one.

Yet, such ISDS ‘backlash’ is a more complex phenomenon that has manifested as a result of broader concerns about globalisation. As globalisation has become a more diffuse target, anti-globalists need something more tangible to blame. Despite arguably more damaging effects of TTIP and TPP such as job losses and lowering of wages, ISDS forms a more convenient focal point to express fears of infringement of sovereignty and increasing power of multinational corporations. Therefore, citing rare but consequentially damaging ISDS judgments such as the Italian bondholders case, or unsuccessful but shocking claims such as the Phillip Morris cases, along with biased arbitrators, forms a clearer and more persuasive narrative.

Complete abolition of the system will deprive investors with genuine claims from seeking recourse and discourage foreign investment, notably in developing countries. There is a greater case for reform, as some scholars have advocated for a ‘World Investment Court’ – a centralised court to ameliorate procedural and substantive issues that have plagued ISDS’s reputation. Rather than investor-chosen arbitrators, the court would employ judges, selected through the WTO by states, to avoid perceived bias, and the court would also have a lower and appellate body to develop precedent and consistent decision-making.

Ultimately, prospects of a world court will be determined by the willingness of a collection of states to adhere to the system. To be embraced broadly, the mechanism must meet the interests of states and claimants, or disputes may avoid the system. The proposal also risks politicising the state-based appointment process, especially within the shadow of the trade war. Whether the court can even supersede these hurdles first depends on the expansion of the WTO which is required for the court’s creation.  However, to suggest expansion while the institution is in decline, at risk of not having a quorum of judges and even an US exit, is an optimistic and almost laughable goal.

Reforms may have to be conducted at a bilateral, or regional level. There are greater prospects for the creation of regional or agreement-specific courts, shown by the EU’s court proposal and the EU-Vietnam treaty. However, many states have already alleviated their own concerns of ISDS by guaranteeing protection within agreements to limit investor exploitation. For example, new agreements are increasingly adopting ‘enterprise-based’ definitions of investment, which only include investments within the host state, rather than previous all-encompassing asset-based definitions. More narrowly drafted ‘fair and equitable’ clauses, to prevent broad interpretations, are now more common. States have also included ‘carve-outs’ to prevent investors from suing on public policy issues, including tax and tobacco-based claims, as seen in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPATPP).

We must be wary of groups and politicians such as Elizabeth Warren, who are adamant that ISDS is manipulative tool for corporations, even though the US have not experienced ISDS claims against them. Suggesting complete abolition of ISDS, simply because it is ‘pro-investor’ is not a sustainable approach to trade disputes. Piecemeal changes are arguably more practical and direct solutions, to ensure investors have protection that does not go beyond what is reasonable.  As states are increasingly aware of ISDS provisions, these drafting changes may be incorporated into large-scale agreements, already demonstrated by CPATPP. This way, anti-globalists will struggle to have a strong claim against future trade deals that involve ISDS.

Repost: Solidifying the Conservative Court

Brett Kavanaugh’s course to becoming the 102nd Justice of the Supreme Court was by no means a simple feat. Arguably one of the dirtiest, most arduous, and contentious confirmations in US history, the result was a huge boost for Donald Trump and the Republican party, who will be reassured to see a more conservative court promoting their positions on social and political issues.

With the ability to strike down or uphold laws, the make-up of the Supreme Court is imperative for both political parties. Democrats favour ‘loose-constructionist’ judges, who view the US constitution as an evolving document, whereas Republicans prefer ‘originalists’ or ‘strict-constructionists’, who view the constitution formalistically, not subject to judicial activism. So far, Trump has replaced two judges with strong conservatives – Neil Gorsuch, and Brett Kavanaugh. However, whilst Gorsuch replaced a strong conservative, Kavanaugh replaced Anthony Kennedy, a softer conservative who was often the swing vote on contentious issues, voting with liberals on gay marriage and abortion. With Kavanaugh in his place, the court has shifted to a clearer 5-4 conservative-leaning court, concerning progressives who believe he will erode established social rights.

Democrats fear that Kavanaugh’s inauguration threatens the legalisation of abortion established in Roe v Wade as Kennedy has voted for abortion rights on a number of occasions. While Kavanaugh, a devout Catholic, has not encountered abortion case law during his judicial career, Trump was determined to appoint a pro-life judge and thus would have questioned Kavanaugh on his stance. However, earlier this year, Kavanaugh sided with liberal judges in refusing to review lower court decisions that banned certain states from denying Planned Parenthood Medicaid funding, possibly signalling sympathy towards abortion rights. Progressives have cautioned that the decision was based on procedural matters and that Kavanaugh may instead be trying to keep a low profile early on in his tenure following his contentious confirmation fight.

Although Kennedy wrote the majority opinion to legalise same-sex marriage in Obergefell v Hodges in 2015,  it is unlikely that the replacement of Kavanaugh’s will threaten court recent precedent after three years. Instead, the court is more likely to focus on religious liberty, which Kavanaugh has defended on numerous occasions, such as voting against the federal government’s mandate for religious employers to cover contraception for employees. This, alongside Kavanaugh’s Catholic beliefs, may suggest that in ‘religious refusal’ cases the court will lean towards religious freedom, continuing what progressives label as ‘the right to discriminate’. Kennedy, despite voting for religious freedom in the recent ‘gay cake’ case, reaffirmed protection for gay rights, stating that religious liberty cannot always prevail in every case. With the Kavanaugh’s inauguration, the court may go further in future similar cases, explicitly stating that religious freedom is protected by the first amendment.

Trump’s motive for nominating Kavanaugh however, may be one of personal protection. Under investigation by Robert Mueller for coordinating with Russia during the 2016 campaign, Trump could potentially be subpoenaed to testify regarding his role. Whether Mueller is able to do this will most likely depend on the Supreme Court, and it comes as no surprise that Kavanaugh dislikes criminal investigations into sitting presidents. As a former Staff Secretary to George Bush, Kavanaugh is a fervent believer in executive power, once arguing that the court’s ruling to release the Watergate tapes may have been “wrongly decided”. It is likely therefore that Kavanaugh will prove to be a lifeline for Trump in his determination to prevent further investigation into his activities.

Yet, Kavanaugh may not be the Democrats’ greatest concern. With two liberal justices, Ruth Bader-Ginsburg (85) and Stephen Breyer (80) nearing the end of their careers, a Trump re-election and retention of the Senate in 2020 could give the president the opportunity to entrench the conservative nature of the court for decades, thanks to judicial life tenure. As the majority of Senate seats up for re-election are Republican, Trump will need to carry his party to success if he wishes to further solidify the bench.

In the meantime, while Kavanaugh’s legacy is yet to be known, Republicans will be relieved that “Reagan’s worst mistake” in nominating Anthony Kennedy has been rectified, and that conservative interests remain dominant in the highest court of the land.

This article was written in December 2018 and originally published in The 2019 Dicta Magazine.

Welcome to Absolute Scenes

Hello and welcome to Absolute Scenes. This is a blog done by myself, Fletch, and my good friend Deniz. This is just a short introduction to the blog, we hope to get proper posts up soon. We’ll be posting about sport, and anything that really catches our interest. Thanks for reading, and we hope you’ll stick around.

-Fletch