tag:theconversation.com,2011:/us/topics/g7-summit-quebec-54900/articlesG7 Summit Quebec – The Conversation2018-06-17T14:47:09Ztag:theconversation.com,2011:article/982722018-06-17T14:47:09Z2018-06-17T14:47:09ZTrump-Trudeau tiff is the latest in a history of President-PM disputes<figure><img src="https://images.theconversation.com/files/223456/original/file-20180616-85830-1pa46va.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canada's Prime Minister Justin Trudeau meets with U.S. President Donald Trump at the G7 leaders summit on June 8, 2018. Trump sent angry tweets about his Canadian host shortly after the summit ended. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span></figcaption></figure><p>Canadians were puzzled by Donald Trump’s suggestion that national security concerns required tariffs on Canadian steel and aluminum — and then stunned even more by the U.S. president’s <a href="https://www.cnn.com/2018/06/09/politics/trump-justin-trudeau-g7-communique/index.html">personal attacks on Prime Minister Justin Trudeau</a> in the aftermath of the G7 summit.</p>
<p>What perhaps was more bewildering was Trump’s threat <a href="https://www.thestar.com/news/world/2018/06/12/we-just-shook-hands-trump-confused-by-trudeaus-pushed-around-comment-after-g7-summit.html">to punish Canada</a> for Trudeau’s rather mild rebuke about the tariffs. Even some Americans were so shocked that they <a href="https://www.vox.com/policy-and-politics/2018/6/11/17448682/mccain-trump-tariff-g7-trudeau">leapt to the defence of Canada.</a></p>
<p>The short-term effect of this one-sided confrontation is causing <a href="https://www.theglobeandmail.com/investing/markets/currencies/CADUSD/">a drop in value of the Canadian dollar</a>, and calling into question the success of NAFTA talks with a belligerent U.S. administration. </p>
<p>While this very public spat is perhaps the most publicized disagreement between an American president and a Canadian prime minister, there have been notable confrontations in the past.</p>
<h2>JFK and Dief disliked each other</h2>
<p>In the modern era, perhaps the spat that came closest in tone to the current one was between John F. Kennedy and John Diefenbaker, only in that case both sides were confrontational.</p>
<p>The reasons for the animosity were numerous. Diefenbaker, from an earlier generation, came from a modest background. He saw Kennedy as a spoiled rich kid. Kennedy felt that Diefenbaker, who spoke in language suited to the 19th century and tended to lecture, boring and pedantic.</p>
<p>The Canadian was an anglophile who regarded the United States as a brash upstart which was a danger to the Canadian economy. The late 1950s saw a surge in American investment in Canadian natural resources. The Kennedy administration wanted Canada to cut ties with post-revolutionary Cuba, which it had refused to do, and to accept nuclear weapons under American control, stationed on Canadian soil.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/OiGFn1VSh2w?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Archive video from the Canadian Broadcast Corp. on U.S. President John Kennedy’s visit to Ottawa in 1961.</span></figcaption>
</figure>
<p><a href="http://www.presidency.ucsb.edu/ws/?pid=8136">Kennedy visited Ottawa in 1961</a>, hoping to pressure Ottawa on these and other issues. He pronounced Diefenbaker’s name incorrectly, which offended the thin-skinned prime minister, and accidentally left behind a memo listing ways the Canadians could be “pushed” to accept the American position.</p>
<p>When the memo was found, this only confirmed Diefenbaker’s worst ideas about the Americans. Reportedly, Kennedy had scrawled “SOB” in the margin, no doubt in frustration. Kennedy’s description of Diefenbaker to his confidants was, as they say, not suitable for a family newspaper.</p>
<p>Another irritant for Diefenbaker was Kennedy’s friendly relationship with Diefenbaker’s opponent, the Liberal leader Lester Pearson. The Liberals had changed their position to one of accepting nuclear weapons. They got along so well that the Kennedy administration assisted the Liberals to defeat Diefenbaker in 1963 by sending Kennedy’s personal pollster, an early expert in the field, to assess what the public wanted.</p>
<h2>Did LJB grab Pearson by the lapels?</h2>
<p>However, Pearson had a falling out with Kennedy’s successor, Lyndon Johnson. Though Pearson’s government sold war materials to the United States, its position was that the United States should withdraw from Vietnam.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/223455/original/file-20180616-85819-17tnu2q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/223455/original/file-20180616-85819-17tnu2q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=495&fit=crop&dpr=1 600w, https://images.theconversation.com/files/223455/original/file-20180616-85819-17tnu2q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=495&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/223455/original/file-20180616-85819-17tnu2q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=495&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/223455/original/file-20180616-85819-17tnu2q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=622&fit=crop&dpr=1 754w, https://images.theconversation.com/files/223455/original/file-20180616-85819-17tnu2q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=622&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/223455/original/file-20180616-85819-17tnu2q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=622&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Prime Minister Lester B. Pearson and President Lyndon B. Johnson talk with the media at Camp David in 1965. The day before this picture was taken, Pearson had delivered a speech that questioned the U.S. role in Vietnam.</span>
<span class="attribution"><span class="source">The Associated Press</span></span>
</figcaption>
</figure>
<p>The Canadian government did not heavily emphasize this position, because it didn’t want to create a rift with its ally, but in 1965 <a href="https://www.tandfonline.com/doi/abs/10.1080/02722011.2017.1399281?src=recsys&journalCode=rarc20">Pearson gave a speech at Temple University </a>in Pennsylvania in which he suggested it would be best if the United States withdrew. Johnson requested that Pearson come to see him and then tore into Pearson.</p>
<p>Accounts of the meeting vary, in terms of whether Johnson grabbed Pearson by the lapels or not, but he definitely said something like, “don’t come into my room and piss on my rug.”</p>
<h2>Pierre Trudeau angered Nixon, Reagan</h2>
<p>Pierre Trudeau was the prime minister who incurred the anger of two presidents.</p>
<p>In his youth, Trudeau had visited China in the 1950s, when it was unusual for foreigners to go to the newly communist country, and as prime minister he had a friendly relationship with Cuban leader Fidel Castro, arch-nemesis of American conservatives. Trudeau was regarded by these conservatives — and even some who were not conservative — as a leader who was, at best, soft on communism and, at worst, a fellow traveller.</p>
<p>Richard Nixon, who had been a supporter of U.S. Senator Joseph McCarthy during the latter’s anti-communist crusade of the 1940s and ‘50s, looked on the flashy and long-haired Trudeau with suspicion. It didn’t help that Trudeau gave a speech in the early months of the Nixon administration, claiming the anti-ballistic missile system the United States was developing would threaten world peace.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/223454/original/file-20180616-85863-z8x5iz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/223454/original/file-20180616-85863-z8x5iz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=468&fit=crop&dpr=1 600w, https://images.theconversation.com/files/223454/original/file-20180616-85863-z8x5iz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=468&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/223454/original/file-20180616-85863-z8x5iz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=468&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/223454/original/file-20180616-85863-z8x5iz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=588&fit=crop&dpr=1 754w, https://images.theconversation.com/files/223454/original/file-20180616-85863-z8x5iz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=588&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/223454/original/file-20180616-85863-z8x5iz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=588&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Prime Minister Pierre Trudeau introduces President Richard Nixon to members of the welcoming line at Ottawa airport on the U.S. president’s 1972 trip to the Canadian capital.</span>
<span class="attribution"><span class="source">(CP PHOTO/Peter Bregg)</span></span>
</figcaption>
</figure>
<p>While generally not paying a lot of attention to Canadian-American relations, Nixon was angered when the Trudeau government introduced a motion in Parliament condemning the 1972 renewed bombing of North Vietnam. Nixon continued to have a personal dislike for Trudeau (<a href="https://www.thestar.com/news/world/2008/12/08/nixon_tapes_include_testy_trudeau_chat.html">whom he privately referred to as “that asshole”</a>), but subsequent economic threats by the United States were worked out amicably.</p>
<p>After good relations during the Gerald Ford and Jimmy Carter years, another strong anti-communist, Ronald Reagan, took office. Ever the gentleman, Reagan did not engage in public criticism of Trudeau.</p>
<h2>Reagan opposed Canada’s NEP</h2>
<p>This situation was helped by the fact that Reagan generally did not engage in the development of policy, which could lead to conflicts. However, he listened to those who did and this led to a confrontation over Canada’s National Energy Policy (NEP), introduced shortly before Reagan took office.</p>
<p>Designed to decrease the revenue of (largely American) oil firms and to subsidize exploration by Canadian firms, leading to the Canadianization of the oil industry, the NEP caused an immediate backlash from American firms, which began to withdraw exploration equipment from Canada.</p>
<p>Reagan showed little frustration in public, but confided his feelings to his diary. Combined with the Foreign Investment Review Agency, which screened major purchases of Canadian firms by foreign buyers, the NEP represented to the Reagan administration an anti-American shift in Canadian policy. Relations remained strained until Trudeau left office in 1984.</p>
<p>What distinguishes all of these hostile disagreements from the current one is the very public nature of the disagreement, and the public threat to punish Canada for its prime minister’s rebuke of the American president.</p>
<p>The question is, will this rift prove as transitory as previous ones or will it lead to a prolonged period of political or economic instability in Canadian-American relations?</p><img src="https://counter.theconversation.com/content/98272/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ron Stagg does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Canadians were shocked by Donald Trump’s outburst about Justin Trudeau. Canada and the United States have been allies for more than a century, but there have been disputes between presidents and PMs.Ron Stagg, Professor of History, Toronto Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/981322018-06-15T07:53:59Z2018-06-15T07:53:59ZTrade war with the United States: a positive outcome for Europe?<p>Since the beginning of this month, European, Canadian and Mexican steel and aluminium are now also subject to import tariffs in the US of 25% and 10% respectively due to so-called <a href="http://www.politifact.com/truth-o-meter/statements/2018/mar/09/donald-trump/how-vital-our-national-security-are-steel-aluminum/">“national security” concerns</a>. It is not as yet a trade war but if the unilateral measures of the United States are not lifted in the coming weeks, a series of countermeasures from the EU, Canada and Mexico are likely to be introduced. And after the <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html">G7 fiasco in Canada</a>, it has become rather clear: a trade war is in the making.</p>
<p>In the case of Europe, the proposed counter measures are relatively minor: in the words of Cecilia Malmström, the EC Commissioner for trade: <a href="https://www.theguardian.com/business/2018/mar/07/eu-we-will-retaliate-to-protection-with-tariffs-on-us-imports">“rebalancing” measures</a> whereby, on a limited number of typical American products: Harley-Davidson engines, jeans, Bourbon Whiskey and peanut butter additional import tariffs will be levied that will generate more or less the same amount of the import duties the United States is now collecting.</p>
<p>By contrast and probably also more out of frustration, Canada and Mexico plan to strike back in a stronger way because the new US import tariffs totally undermine the principles of the North American Free Trade Treaty (NAFTA) whose renewal is currently the subject of debate. For both countries, the grapes are sour: the US measures make rather clear what the American president, Donald Trump means by “America first”. No more multilateral trade agreements but bilateral trade agreements in which the US can now put its full economic and political power in the balance.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/223319/original/file-20180615-85834-1aivmc9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/223319/original/file-20180615-85834-1aivmc9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=394&fit=crop&dpr=1 600w, https://images.theconversation.com/files/223319/original/file-20180615-85834-1aivmc9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=394&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/223319/original/file-20180615-85834-1aivmc9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=394&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/223319/original/file-20180615-85834-1aivmc9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=495&fit=crop&dpr=1 754w, https://images.theconversation.com/files/223319/original/file-20180615-85834-1aivmc9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=495&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/223319/original/file-20180615-85834-1aivmc9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=495&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">US president Donald Trump signs the proclamations on steel and aluminium imports on March 9, 2018.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/whitehouse/40709997961">Joyce N. Boghosian, White House/Flickr</a></span>
</figcaption>
</figure>
<p>Europe given its size in international trade is in a stronger position than Canada and Mexico. The European Commissioner can afford to be relatively more relaxed, but is rather more concerned about the US response. The next “America first” measure from Donald Trump could indeed be the imposition of high import tariffs on European and especially German cars. At present, import tariffs of a mere 2,5% are levied in the United States on European cars, whereas Europe levies a 10% tariff duty on American cars. And whereas Europe exports $6 billion of steel and aluminium to the US, it exports around $50 billion worth of cars to the United States.</p>
<p>Protectionist trade policy is typically dominated by “tit for tat” retaliation where the intention is to choose the products on which additional import duties are being levied so as to cause as much damage as possible to the foreign producers and as little as possible to domestic producers and consumers. That is why there is a preference for end products and not so much for raw materials and intermediate goods, the taxing of which does typically more harm than good to one’s own economy. Trump’s choice for steel and aluminium does not seem to be motivated by much economic logic. His possible reaction to European countermeasures with additional import duties on European cars all the more.</p>
<h2>What should Europe do?</h2>
<p>One logical line for European countries would be to invoke just like the US administration did, national security concerns for imposing countermeasures. Think of additional tariffs on the import of the more polluting US goods that jeopardise the reduction of CO<sub>2</sub> emissions in Europe as agreed in the Paris climate agreement. For example: coal, <a href="https://www.nytimes.com/2017/08/23/climate/what-clean-coal-is-and-isnt.html">“clean coal”</a> in Trump’s words.</p>
<p>In 2017, the US exported some 40 million short tons of coal to Europe, 13 million more than in 2016. Europe now even accounts for 40% of total American coal exports. At the same time, US industry is consuming less and less coal. In short, the US is increasingly exporting CO<sub>2</sub> to Europe by means of coal exports while it is seeing its own CO<sub>2</sub> emissions reduce as a result of reduced coal use.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222873/original/file-20180612-112631-1qar6lw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222873/original/file-20180612-112631-1qar6lw.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=342&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222873/original/file-20180612-112631-1qar6lw.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=342&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222873/original/file-20180612-112631-1qar6lw.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=342&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222873/original/file-20180612-112631-1qar6lw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=429&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222873/original/file-20180612-112631-1qar6lw.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=429&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222873/original/file-20180612-112631-1qar6lw.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=429&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Donald Trump rally in Harrisburg, Penn., 2017.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Donald_Trump_rally_in_Huntington_(a)_(cropped)_.png">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Sufficient reasons, it seems for Brussels to start reflect on raising a similar heavy import tariff duty on American coal in the next retaliation phase; politically also a rather attractive countermeasure given Trump’s strong support of the US coal industry. Europe will of course also pay a high price, given the fact that import duties will now be levied on an energy raw material. As one of the most important European transit ports, Rotterdam e.g. imported nearly 10 million short tons coal from the US in 2017. A substantial part of that coal went to the five coal-fired power stations in the Netherlands. With a hefty import levy, the energy price will as a result further increase in both The Netherlands as well as the rest of Europe.</p>
<p>But insofar as electricity produced from coal emits about 1,000 grams of carbon per kilowatt hour, oil 900 grams, natural gas 580 grams, solar power 19 grams and hydropower 15 grams, a higher coal price would actually be good news for getting a more rapid transition toward the often more expensive alternative energy sources. It is effectively something we have all been waiting for.</p>
<p>Thanks to Trump, Europe has now a unique opportunity to start levying heavy import duties on American coal as WTO retaliation measure.</p>
<p>Trade wars can have positive outcomes.</p><img src="https://counter.theconversation.com/content/98132/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luc Soete ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>After the G7 fiasco, it’s clear that a trade war is in the making. US justifications of “national security concerns” for its tariffs suggest a legitimate target for EU countermeasures: coal.Luc Soete, Professorial Fellow, United Nations UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/978962018-06-10T13:28:50Z2018-06-10T13:28:50ZRules-based trade made the world rich. Trump’s policies may make it poorer<figure><img src="https://images.theconversation.com/files/222462/original/file-20180610-191943-14f0w0e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump against the world?</span> <span class="attribution"><span class="source">Jesco Denzel/German Federal Government via AP</span></span></figcaption></figure><p>Nations sell goods and services to each other because this exchange is generally mutually beneficial.</p>
<p>It’s easy to understand that Iceland should not be growing its own oranges, given its climate. Instead, Iceland should buy oranges from <a href="http://www.idealspain.com/pages/information/oranges-spain.html">Spain</a>, which can grow them more cheaply, and sell Spaniards fish, which <a href="https://www.icelandaircargo.com/products-and-services/fresh-fish-and-seafood/">are abundant</a> in its waters. </p>
<p>That’s why the explosion in <a href="https://theconversation.com/us/topics/free-trade-1698">free trade</a> since the first bilateral deal was penned between Britain and France in the mid-1800s has <a href="https://www.cesifo-group.de/DocDL/forum-4-14-intro3.pdf">generated unprecedented</a> wealth and prosperity for the vast majority of the world’s population. Hundreds of trade agreements later, the U.S. and several other countries established an international rules-based trading system after World War II.</p>
<p>But now the U.S., which has played an integral role in bolstering this system, is actively trying to subvert it. At the <a href="https://theconversation.com/us/topics/g7-17736">recent G-7 summit</a> in Quebec, for example, the Trump administration <a href="https://www.nytimes.com/2018/06/08/world/americas/trump-g7-trade-russia.html">objected</a> to even referring to a “rules-based international order” in the <a href="https://www.reuters.com/article/us-g7-summit-communique-text/the-charlevoix-g7-summit-communique-idUSKCN1J5107">official communique</a> – and the president ultimately <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=span-ab-top-region&region=top-news&WT.nav=top-news">refused to sign it</a>. </p>
<p><a href="https://scholar.google.com/citations?user=x5dB33oAAAAJ&hl=en&oi=ao">My research</a> in <a href="https://www.crcpress.com/The-Economics-of-International-Trade-and-the-Environment/Batabyal-Beladi/p/book/9781566705301">international economics</a> tells me that trade policy – because it is inherently forward-looking and global – requires three interrelated attributes to be successful: It needs to reduce uncertainty, ease long-term decision-making, and be legal and credible. </p>
<p>President Donald Trump’s <a href="https://theconversation.com/g7-summit-trump-could-be-using-advanced-game-theory-negotiating-techniques-or-hes-hopelessly-adrift-97836">recent trade policy</a> fails all three tests. </p>
<h2>Birth of modern free trade</h2>
<p>Britain and France signed the first post-Industrial Revolution trade agreement, dubbed the Cobden-Chevalier treaty, on Jan. 23, 1860. </p>
<p>In it, both countries <a href="http://www.nber.org/papers/w22070.pdf">agreed</a> to either reduce or eliminate import barriers and grant the other most favored nation status, which means any trade concessions offered to another nation would automatically apply to them as well. </p>
<p>Within just 15 years, various countries inked <a href="https://trove.nla.gov.au/work/1482271">56 more bilateral treaties</a>. Thus began the first wave of globalization, which lasted from 1870 until 1914, the beginning of two destructive world wars. </p>
<p>From those ruins emerged a rules-based international trading system, known as the <a href="https://www.wto.org/english/thewto_e/minist_e/min96_e/chrono.htm">General Agreement on Tariffs and Trade</a>, or GATT, which came into force in 1948. <a href="https://www.thebalance.com/gatt-purpose-history-pros-cons-3305578">Its goal</a> was to eliminate the kind of harmful trade protectionism that had <a href="https://www.dartmouth.edu/%7Edirwin/Eichengreen-IrwinJEH.pdf">sharply reduced</a> global trade during the Great Depression with the aim of quickly restoring the global economy’s health after so much devastation.</p>
<p>Almost a half century of negotiations to improve the agreement culminated in the creation of the World Trade Organization in 1995. The lynchpin of the modern rules-based international trading system, the WTO now <a href="https://www.wto.org/english/thewto_e/thewto_e.htm">includes 164 nations</a> that together <a href="http://www.nber.org/papers/w22070.pdf">conduct more than 96 percent</a> of the world’s trade.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=384&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=384&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=384&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=483&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=483&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222463/original/file-20180610-191954-65m8yv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=483&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Until very recently, the U.S. was a leader in free trade, such as in 1996, when G-7 leaders including former President Bill Clinton met a little more than year after establishing the World Trade Organization.</span>
<span class="attribution"><span class="source">AP Photo/Jerome Delay</span></span>
</figcaption>
</figure>
<h2>Three key attributes</h2>
<p>This system has worked so well for so long because the WTO and its biggest champions, such as the U.S., made three interrelated attributes integral to their trade policies. That is, its members: </p>
<ol>
<li><p>reduced uncertainty by creating predictable trade policies </p></li>
<li><p>created an environment that facilitates decision-making – particularly in the long term – by consumers and producers and </p></li>
<li><p>placed credible and legal directives that are clearly understood by allies and by those who are not. </p></li>
</ol>
<p>Even though the U.S. played a salient role in the creation of both the GATT and the WTO, Trump’s trade policy has not followed these guidelines. To me he seems more interested in wreaking havoc with the current global trading system than with ensuring its continued viability. And he’s frequently – and <a href="https://www.chathamhouse.org/expert/comment/trump-s-tariffs-presage-world-no-rules">very recently</a> – intimated that he might even withdraw the U.S. from the WTO.</p>
<p>Trump seems to think that by issuing tariff threats, being unpredictable, and viewing foreign countries – even allies – as rival businesses he can extract concessions from trading partners. Instead, such tactics <a href="https://www.bloomberg.com/news/articles/2018-05-31/trump-s-art-of-unpredictability-starts-to-backfire-overseas">are proving</a> to be counterproductive.</p>
<h2>Sowing uncertainty</h2>
<p>Perhaps more than anything else, Trump’s policies have created a lot of uncertainty among U.S. trade partners. </p>
<p>His steel and aluminum tariffs are a case in point. In March, the administration announced across-the-board tariffs on imports of the metals of up to 25 percent to punish nations – particularly China – for subsidizing their own industries and dumping their production on U.S. shores. </p>
<p>After key allies including Canada, the European Union and Mexico complained, the administration granted some countries temporary exemptions to the tariffs. But just a few months later, on May 31, it <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">reversed course</a> and began to impose the tariffs on those countries as well, leaving heads spinning. Only a week later, at the <a href="https://theconversation.com/what-each-of-the-g7-countries-wants-and-what-they-need-97828">G-7</a>, Trump <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news">was threatening</a> to cut off all trade with his counterparts one minute, suggesting that everyone eliminate all tariffs the next.</p>
<p>Another <a href="https://www.vox.com/policy-and-politics/2018/5/15/17355202/trump-zte-indonesia-lido-city">recent example</a> of fostering uncertainty is the curious case of the Chinese phone manufacturer ZTE. In March 2017, Trump’s Commerce Department <a href="https://www.pcmag.com/news/352232/zte-will-pay-record-fine-for-sales-to-iran-north-korea">fined ZTE</a> US$1.19 billion for violating U.S. sanctions law by selling technology containing U.S. components to Iran and North Korea. This past April, the agency said ZTE was still violating U.S. law and barred American companies – most importantly chip-maker Qualcomm – from selling anything to ZTE, which led to an <a href="https://arstechnica.com/tech-policy/2018/05/the-trump-administration-just-forced-smartphone-maker-zte-to-shut-down/">announcement</a> that it was shutting down less than a month later. </p>
<p>Within days, however, Trump appeared to have an abrupt change of heart and <a href="https://twitter.com/realDonaldTrump/status/995680316458262533">tweeted</a> that he and Chinese President Xi Jinping were working getting ZTE “back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”</p>
<p>Flip-flops like these make it hard for trade partners to predict what the U.S. government is going to do, breeding enormous uncertainty.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222465/original/file-20180610-191954-1f3oe2a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trump turned heads when he said he wanted to save Chinese tech giant ZTE, shortly after his administration helped bring it to its knees.</span>
<span class="attribution"><span class="source">AP Photo/Ng Han Guan</span></span>
</figcaption>
</figure>
<h2>Decision-making</h2>
<p>Consider the situation faced by an American businessman who produces high-level industrial equipment that is exported to many countries around the world. </p>
<p>His company’s equipment is made using aluminum and steel and, as a result of Trump’s new tariffs, this businessman <a href="https://www.nytimes.com/2018/05/31/upshot/-us-tariffs-real-economic-risk-is-unpredictability.html">will have difficulty predicting</a> what the cost of the metals will be in the future. This will have clear implications for the pricing of his products. In addition, if the U.S. gets into a trade war, this businessman will also not know whether some or all foreign buyers might look elsewhere for similar but cheaper alternatives.</p>
<p>Such thinking affects not just individual business people but <a href="https://www.dallasnews.com/opinion/editorials/2018/06/06/trumps-trade-policies-make-harder-companies-invest-creates-jobs-americans">also companies</a>. </p>
<p>Far from hypothetical, <a href="https://www.dallasnews.com/opinion/editorials/2018/06/06/trumps-trade-policies-make-harder-companies-invest-creates-jobs-americans">companies</a> are already warning about this. Ford and Toyota North America <a href="http://www.businessinsider.com/trump-steel-aluminum-tariffs-means-expensive-cars-trucks-2018-3/">have both complained</a> about the negative impacts of Trump’s metals tariffs on costs and on the ability to make sound investment decisions.</p>
<h2>Act credibly and legally</h2>
<p>Trump’s steel and aluminum tariffs have also raised questions about their legality and credibility. </p>
<p>German Chancellor Angela Merkel and French President Emmanuel Macron <a href="https://www.washingtonpost.com/world/eu-plots-counterstrike-to-american-tariffs/2018/06/01/aa07dfa8-6521-11e8-81ca-bb14593acaa6_story.html?utm_term=.9b95cf0cb455">have both asserted</a> that these tariffs are illegal. As such, the European Union <a href="https://www.theguardian.com/business/2018/jun/01/eu-starts-retaliation-against-donald-trumps-steel-and-aluminium-tariffs">has filed a suit</a> against the U.S. at the WTO. It’s unclear whether the American national security justification will sway the WTO judges.</p>
<p>Prime Minister Justin Trudeau, who <a href="https://www.nytimes.com/2018/06/09/world/americas/donald-trump-g7-nafta.html">was the target</a> of a post-G-7 Trump tweetstorm, <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">has wondered</a> how Canada could possibly be a national security threat to the U.S. Even Defense Secretary James Mattis <a href="https://www.forbes.com/sites/johnbrinkley/2018/03/12/trumps-national-security-tariffs-have-nothing-to-do-with-national-security/#285badc0706c">is reported</a> to have pointed out the implausibility of the national security argument for the tariffs.</p>
<p>This gloomy state of affairs shows that even some of our long-standing friends believe that the Trump administration’s recent actions are illegal and, more generally, that these same allies cannot make head nor tail of the administration’s trade initiatives.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222466/original/file-20180610-191965-153znc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trump’s policies are irking two of the U.S.’s most important allies, France’s Emmanuel Macron and Canada’s Justin Trudeau.</span>
<span class="attribution"><span class="source">AP Photo/Evan Vucci</span></span>
</figcaption>
</figure>
<h2>A key lesson</h2>
<p>The U.S. is the world’s richest and <a href="https://www.usnews.com/news/best-countries/power-rankings">most powerful nation</a>, in part <a href="https://www.economist.com/briefing/2016/11/12/the-piecemaker">because of its embrace</a> of a rules-based international order that includes the present treaty-based global trading system.</p>
<p>Rather than build on that success, President Trump’s trade actions thus far have <a href="https://www.nytimes.com/2018/03/01/us/politics/trump-chaos-oval-office.html">created chaos</a>, which has not led to any noteworthy success either in terms of extracting concessions from trade partners or creating the “great” agreements he touts in his book “<a href="https://www.thestreet.com/story/13289498/1/10-things-you-learn-reading-donald-trump-s-best-seller-the-art-of-the-deal.html">The Art of the Deal</a>.” </p>
<p>In negotiating deals, trade or otherwise, Trump <a href="https://www.bostonglobe.com/opinion/2018/03/12/trump-breaking-all-rules-and-that-could-great-for-america/xlotc2ETtBEBCLA5Zxpp8O/story.html">seems to like to break</a> all the rules. He needs to learn: That’s not what made America great.</p><img src="https://counter.theconversation.com/content/97896/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitrajeet A. Batabyal has received research funding from the Giannini Foundation for Agricultural Economics, the United States Department of Agriculture, and the Charles Koch Foundation.</span></em></p>International trade policy requires three traits to be successful and lead to mutual prosperity. Trump’s is missing all three, as he showed at the G-7 summit.Amitrajeet A. Batabyal, Arthur J. Gosnell Professor of Economics, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/978362018-06-08T15:53:03Z2018-06-08T15:53:03ZTrump could be using advanced game theory negotiating techniques – or he’s hopelessly adrift<p>The latest G-7 summit, held June 8 to 9 in Quebec, was one of the <a href="https://www.bbc.com/news/world-us-canada-44409775">most contentious</a> in years. </p>
<p>That’s because Donald Trump and his counterparts from six other industrialized countries have been at loggerheads over the president’s aggressive but unstable trade policy. Trump’s renunciation of the <a href="https://www.cnbc.com/2018/05/24/washington-and-europe-playing-game-of-chicken-over-iran-nuclear-deal.html">Iran nuclear deal</a>, his efforts to <a href="https://www.nytimes.com/2018/06/06/us/politics/trump-nafta-businesses-frustrated.html">renegotiate NAFTA</a> and his intransigent stance on <a href="https://www.nationalobserver.com/2018/06/07/news/trump-leave-g7-early-miss-session-climate-change-and-clean-energy">climate change</a> are not helping matters. Nor is his proposal to <a href="https://www.nytimes.com/2018/06/08/world/americas/trump-g7-trade-russia.html">readmit Russia</a> to the G-7 gathering. </p>
<p>But the ink on the G-7 communique wasn’t dry before Trump <a href="http://time.com/5305550/donald-trump-north-korea-kim-jong-un-singapore-summit-what-to-know/">darted to Singapore</a> to meet with North Korean leader Kim Jong Un for nuclear talks, another example of his unpredictable decision-making style. One moment he’s threatening war with the dictator, and the next he’s buttering him up for a summit. </p>
<p>One way to understand Trump’s foreign policy decisions is to focus on their inconsistency rather than their content. Let’s take trade policy as an example.</p>
<p>I <a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">have written</a> a <a href="https://theconversation.com/why-its-too-soon-for-davos-billionaires-to-toast-trumps-pro-business-policies-90803">number of times</a> about the economic dangers of the Trump administration’s tilt toward protectionism. And I <a href="https://theconversation.com/trumps-go-it-alone-approach-to-china-trade-ignores-wtos-better-way-to-win-93918">have pointed to</a> the risk that Trump’s use of trade policy as a unilateral weapon <a href="https://cpianalysis.org/2018/05/09/u-s-china-trade-jockeying-for-influence/">could undermine</a> the rule-based international order.</p>
<p><a href="https://scholar.google.com/citations?user=Y58-EhUAAAAJ&hl=en&oi=ao">I remain worried</a> about these issues, but what has struck me much more deeply in recent days is the seeming inconsistency, indeed instability, of Trump’s behavior on trade. It is worth considering its causes and consequences – which extend far beyond trade to his nuclear game of chess with North Korea and Iran.</p>
<h2>Trouble in Trump trade land</h2>
<p>First let’s review just a few of Trump’s recent trade decisions. </p>
<p>At the G7, Trump’s belligerent and unpredictable trade policy was the main reason the other leaders – which also include Germany’s Angela Merkel, the U.K.’s Theresa May and France’s Emmanuel Macron – are so perturbed. Some commentators are even beginning to term the meeting a “<a href="https://talkingpointsmemo.com/news/a-g6-plus-one-us-singled-out-by-g7-allies-over-steel-tariffs">G6 plus one</a>” to signify Trump’s estrangement from his allies. </p>
<p>Recent events have inflamed tensions significantly. The White House said on May 31 <a href="https://www.nytimes.com/2018/05/31/us/politics/trump-aluminum-steel-tariffs.html">that it would impose</a> steel and aluminum tariffs on the European Union, Canada and Mexico. The three had previously <a href="http://money.cnn.com/2018/03/22/news/economy/steel-aluminum-tariff-exemptions/index.html">received exemptions</a> from the new tariffs, first imposed in March and justified with a little-used <a href="https://theconversation.com/economic-history-shows-why-trumps-america-first-tariff-policy-is-so-dangerous-92715">national security provision</a>.</p>
<p>All are now planning <a href="https://www.wsj.com/articles/u-s-slaps-steel-aluminum-tariffs-on-canada-mexico-european-union-1527774283">retaliatory tariffs</a> against the United States, along with <a href="https://www.theguardian.com/business/2018/jun/01/eu-starts-retaliation-against-donald-trumps-steel-and-aluminium-tariffs">legal action</a> at the World Trade Organization.
Friends indeed. </p>
<p>It’s the same story with China, which Trump has not only made subject to the same metals tariffs but has also threatened with <a href="http://nymag.com/daily/intelligencer/2018/05/trump-moves-ahead-with-trade-sanctions-against-china.html">US$50 billion of other sanctions</a> if it doesn’t meet a series of demands. </p>
<p>Commerce Secretary Wilbur Ross recently traveled to Beijing hoping to negotiate increased Chinese purchases of American goods and a reduction of its trade deficit with the U.S. He was forced to return empty-handed after the Chinese government <a href="https://www.politico.com/story/2018/06/04/china-trade-talks-indicate-impasse-1334995">declared itself unwilling</a> to act without an American promise to drop its tariff threats. An earlier leak that China would purchase an additional <a href="https://www.nytimes.com/2018/05/18/us/politics/trump-china-trade-talks.html">$200 million</a> of U.S. exports turned out to be wildly optimistic.</p>
<p>The United States now finds itself isolated, not only from China but from its strongest allies as well. Is this a temporary step in negotiations, or is it the new normal? </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222395/original/file-20180608-191947-1ac0q90.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">U.S. Commerce Secretary Wilbur Ross returned from China with little to show for it.</span>
<span class="attribution"><span class="source">AP Photo/Andy Wong</span></span>
</figcaption>
</figure>
<h2>Shifting trade winds</h2>
<p>Of course, Trump’s proclivity for changing his mind is <a href="https://www.washingtonpost.com/opinions/trumps-one-consistent-policy-chaos/2016/12/06/f1a5a5ae-bbf7-11e6-91ee-1adddfe36cbe_story.html?utm_term=.650a63acba8a">well-known</a>, but all the same there is an understandable tendency among commentators to focus on the content of his policy choices. </p>
<p>This is especially true on trade, where Trump’s <a href="https://www.forbes.com/sites/rogeraitken/2018/03/05/u-s-president-trump-ratchets-up-protectionist-stance-but-trade-wars-have-no-winners/#391cde384292">protectionist rhetoric</a> has been exuberant, to say the least.</p>
<p>And it is true that Trump’s actions have been more anti-trade than those of his predecessors, beginning with <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/january/US-Withdraws-From-TPP">his withdrawal</a> from the Trans-Pacific Partnership during the first week of his presidency.</p>
<p>Nevertheless, over the last few months, Trump’s trade policy has seemed increasingly erratic. He publicly discussed <a href="https://theconversation.com/what-is-the-tpp-and-can-the-us-get-back-in-95028">reentering the Pacific trade deal</a> and just as quickly dismissed the idea. He imposed metal tariffs, immediately granted exemptions to most of America’s major exporters and then withdrew those exemptions three months later. He threatened China with new tariffs on $150 billion worth of exports, then <a href="https://www.usatoday.com/story/news/politics/2018/05/21/trump-sends-mixed-messages-tariffs-china/628507002/">suspended them</a> and risked political capital <a href="https://www.nytimes.com/2018/05/25/us/politics/trump-trade-zte.html">to save</a> the Chinese corporation ZTE. And after pushing for extraordinary trade concessions from China, he had to take a U-turn after it <a href="http://money.cnn.com/2018/05/17/news/economy/china-us-trade-talks/index.html">denied</a> that it had agreed to the most important of those demands.</p>
<h2>Two schools of thought</h2>
<p>There are two schools of thought about what is driving this policy instability.</p>
<p>Supporters of the president tend to see it as a <a href="https://www.foxbusiness.com/politics/trump-tariffs-on-us-allies-a-negotiating-tactic-for-free-trade-larry-kudlow">negotiating tactic</a>, the “<a href="https://www.thestreet.com/story/13289498/1/10-things-you-learn-reading-donald-trump-s-best-seller-the-art-of-the-deal.html">Art of the Deal</a>” on a grander scale. Trump, they believe, is trying to throw world leaders off-balance so that he can <a href="https://www.nytimes.com/2018/03/08/upshot/trumps-latest-tariff-strategy-less-trade-war-and-more-lets-make-a-deal.html">extract more trade concessions</a> from them.</p>
<p>Trump’s detractors, by contrast, see the president as hopelessly adrift, swayed this way and that by the <a href="https://www.nytimes.com/2018/06/02/business/trump-trade-china-europe-whiplash.html">varying opinions</a> of his advisers. When globalists such as Steve Mnuchin and Wilbur Ross, secretaries of the treasury and commerce, respectively, have his ear, the president <a href="https://www.nytimes.com/2018/06/03/us/politics/mnuchin-trump-trade.html">softens his stance</a> on trade. But when U.S. Trade Representative Robert Lighthizer and White House adviser Peter Navarro, economic nationalists both, are in the room, Trump <a href="https://www.wsj.com/articles/mnuchin-says-tariffs-on-hold-while-u-s-negotiates-trade-deal-with-china-1526833109">doubles down on protection</a>.</p>
<h2>Master negotiator?</h2>
<p>If U.S. observers accept that Trump’s shifting policy is part of a broader negotiating strategy, Americans can perhaps hope for a better outcome than what they see now.</p>
<p>Indeed, there is some basis in game theory for “irrational” behavior as a negotiating technique. Nobel laureate Thomas Schelling, in his 1960 classic <a href="https://www.amazon.com/Strategy-Conflict-New-Preface-Author/dp/0674840313">“The Strategy of Conflict</a>,” pointed out that negotiators with a reputation for overreacting when their demands aren’t met can be in a <a href="https://medium.com/@GabeNicholas/trump-and-the-strategy-of-irrationality-4344d7f7e37d">stronger position</a> to extract concessions.</p>
<p>If a country can convince its opponent of its willingness to follow through on threats even when they are self-destructive, the country can more effectively compel changes in behavior. Moreover, if an opponent doubts the ability of a country’s leaders to understand or carefully consider the consequences of the opponent’s threats, the country is, ironically, in a <a href="http://slantchev.ucsd.edu/courses/ps142j/lectures/credible-commitments.pdf">stronger negotiating position</a>. This “irrationality” approach was famously termed the <a href="https://historynewsnetwork.org/article/17183">“madman strategy”</a> by Richard Nixon and played a role in <a href="https://www.nytimes.com/2011/08/06/opinion/the-madman-theory.html">motivating his escalation</a> of the Vietnam War during the Paris negotiations.</p>
<p>Perhaps, then, Americans are witnessing the early stages of a negotiating strategy that will ultimately bear fruit.</p>
<h2>Or malleable amateur?</h2>
<p>Even in this optimistic scenario, however, the president’s approach seems too myopic. </p>
<p>After all, international trade negotiations do not play by the same rules as military diplomacy, where much of this theory was developed. Such techniques might have a greater chance of working with Iran and North Korea, but of course the risks of escalation here are even more severe.</p>
<p>Trade is different because it is mutually beneficial and also because it requires cooperation that is <a href="http://www.ir.rochelleterman.com/sites/default/files/Oye%201985.pdf">sustained over time</a>. A country’s <a href="https://press.princeton.edu/titles/1322.html">reputation for stable compliance</a> with its agreements is thus put at a premium; otherwise the country risks being shunned by potential partners. To wrest trade concessions from America’s partners may be satisfying, but if it is accomplished at the cost of weakening the world trading system, it is hardly worth the price.</p>
<h2>The costs of instability</h2>
<p>If, on the other hand, Trump’s unstable policy is a symptom of indecision in the face of the competing agendas of his aides, the world economy may be in for a bumpy ride. Irrational behavior can be used selectively as a negotiating technique but <a href="http://foreignpolicy.com/2017/04/18/trumps-madman-theory-isnt-strategic-unpredictability-its-just-crazy/">has a high cost</a> if not applied carefully and strategically. If a country’s negotiating partners doubt its willingness or ability to follow through on its promises, cooperation becomes impossible.</p>
<p>In the final analysis, a <a href="https://www.bostonglobe.com/news/nation/2016/12/20/donald-trump-and-madman-theory/V2a8etfjkTfFzf1S4G7IbO/story.html">stable and rule-based</a> trading system is in the United States’ long-term interest. Inconsistent and aggressive trade policies, whether produced by a master negotiator or a malleable amateur, risk poisoning the mutual trust necessary to make such a system function.</p>
<p>Some are <a href="https://twitter.com/byHeatherLong/status/1004426052150624257">now saying</a> that President Trump is in the early stages of reconsidering America’s membership in the WTO. Hopefully the president will come to understand what is at stake soon, before it is too late.</p><img src="https://counter.theconversation.com/content/97836/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A political scientist and economist explores the causes and consequences of Trump’s scattershot trade policy.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.