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The Federal Reserve: Ignoring the Global Economy?

The Buzz

The Federal Reserve has been accused, among many other things, of ignoring the global economy. Vice Chairman Stanley Fischer would beg to differ. In a speech in early October he delivered to the International Monetary Fund, Fischer was straightforward in his claim the Fed does incorporate global economic outcomes into its analysis. And this is a good thing—more than that, in a world where the US dollar dominates the financial landscape—it is a must.

Recent days have seen the Bank of Japan surprise everyone with a large quantitative easing package, the European Central Bank attempting to spur economic growth and inflation in the Eurozone (the ECB has begun buying asset backed securities), and China cutting rates to stem their economic slowdown. Even so, few are discussing how the Fed should react.

The Fed, when it ended Quantitative Easing (QE), handed the direction of the global economy to other central banks. If the world’s central banks become increasingly loose with their monetary policy, the discussion shifts from the unintended consequences of Fed policy to the possible outcomes based on the decisions of the rest of the central banks. The Fed’s policy of QE may inspire other central banks to undertake similar actions. But their intentions tend less toward domestic economic health and more toward global currency competitiveness.

Some countries may argue that this is not unlike what the US did for the past decade or so. To deconstruct Fischer’s statement in this context: 1) the Fed is concerned about the potential spill-over effects of its policy (both during and after its implementation) in the currency and bond markets, 2) The Fed should step in to do something if it is necessary for global financial stability and therefore the US economy, 3) which is part of the Fed’s mandate.

How does the Fed plan to fulfill its mandate in light of the previously mentioned unanticipated moves by other central banks? It’s tricky. While the Fed may have lost control of the dollar’s short-term destiny—it may strengthen regardless of what actions they take, there is hope that the Fed can “forward guide” the dollar over time. The Fed is obviously aware and ready to counteract the effects of its choices on the rest of the world. But is it ready to counteract the effects of the rest of the world on the US?

The rest of the world’s decisions—especially those of the larger central banks—directly affects economic outcomes in the US. And the Fed is paying attention. Fischer said as much, “In determining the pace at which our monetary accommodation is removed, we will, as always, be paying close attention to the path of the rest of the global economy and its significant consequences for U.S. economic prospects.”

But the Fed is unlikely to base policy on such considerations—at least until things get out of control and begin to influence economic outcomes. This shifts the Fed from a proactive US data and potential outcomes stance to a reactive stance based on foreign central bank moves.

The problem is that it will be difficult to stem to the shift once it begins. If the Fed reacts weakly—or not at all—the markets will take it as a sign that the dollar is being allowed to strengthen. A strong dollar jeopardizes many of the positive US growth stories. It makes the US less competitive globally in manufacturing. Lower transport costs (due to low oil prices) further weakens it. As cheaper goods begin to flow into the country from abroad, prices are held down—and thus the US imports deflation. What the rest of the world does—especially the three central banks currently taking action—has real, tangible effects on the US. The consequences, which will affect US competitiveness and global commodity prices, threaten to dislodge market participants’ faith in the Fed’s ability to stem deflation. These are unlikely to remain theoretical concepts.

So, in the post-QE era, the Fed must shift its focus from internal forces to external ones. With particular attention to the big three central banks, and the spillover effects their policies have here. According to Fischer, this should not worry onlookers. He was more concerned with the US effect on economies abroad, not their effect here. But this might be wishful thinking. And he left the door open to taking the global economy into account when determining policy—even stating that global financial stability was consistent with the Fed’s mandate.

With Fischer looking abroad at spillover effects and Yellen looking internally at inequality, the Fed’s mandate is evolving into a far more encompassing goal. Much of the time the goals intertwine. The times when they do not are when policy becomes increasingly difficult to manage. The Fed has relinquished the lead in global easing for the moment. The US may not be able to afford a stronger dollar and the loss of competitiveness for long without suffering some loss of credibility. In his speech Fischer cited the economist Charles Kindleberger’s theory that the global economy would benefit from a hegemonic central bank. Fischer retreated from this idea, insisting the Fed did not view itself this way. But maybe it should. The dollar is the world currency, and the Fed cannot afford to lose control of it.

Samuel Rines is an economist with Chilton Capital Management in Houston, TX. Follow him on Twitter @samuelrines.

Image: Flickr/Creative Commons. 

TopicsEconomics RegionsUnited States

Breaking Down Korea’s Iron Curtain: Lessons from Germany

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As Germany celebrated the 25th anniversary of the fall of the Berlin Wall, the Western press reexamined the process that culminated in this momentous event on Nov. 9, 1989.  Lessons from this German experience have policy implications for the other Iron Curtain that still stands, dividing the Korean Peninsula. Although many factors contributed to the collapse of the Wall, the following seem to be particularly instructive for the present Korean standoff:

First, the fall of the Wall could not have taken place without far-reaching changes in the Soviet Union, the main sponsor of the East German regime and its security guarantor.  A key aspect of Mikhail Gorbachev's reforms was the Soviet leader's policy of eschewing the use of force and respecting the popular will in the Soviet satellite countries. This respect for the fundamental human rights and free will of the people had pivotal consequences when thousands of East Germans sought to reach West Germany via Hungary, Czechoslovakia, and Poland in the months leading up to Nov. 9, 1989. Not only did Gorbachev refuse to aid the East German regime in trying to stop this outflow of people, but he actually facilitated their transit into West Germany. This exodus undermined the credibility of the East German regime in the eyes of its people and emboldened East Germans to challenge their regime, leading to the dramatic mass breaching of the Wall.

This is a stark contrast to the present situation in China and Beijing's policy toward North Korea. Beijing's leaders seem most concerned with preserving their grip on power in China and preventing a sudden collapse of the North Korean regime. As a consequence, Beijing has aided Pyongyang's efforts to stem the outflow of North Koreans who seek to reach South Korea via China by capturing them and sending them back to North Korea. Beijing's leaders must abandon this flagrant disregard for the basic human right of the North Korean people to determine their own destiny.

This is not only a moral imperative but also serves China's own national interests as Pyongyang progresses in its nuclear and missile program. North Korea now apparently possesses the ability to miniaturize nuclear warheads so as to mount them on ballistic missiles and is working on installing submarine-launched-ballistic missiles (SLBMs) on reverse-engineered submarines imported from Russia. Once Pyongyang possesses the ability to attack the United States with SLBMs while orbiting a missile or a satellite that can reach the US mainland or destroy the US electric grid in an EMP attack, Kim Jong-un will have effectively developed a nuclear counterstrike capability and nullified the US extended nuclear deterrent that shields South Korea and Japan. Armed with a credible nuclear deterrent, Kim will be in a position to blackmail the US and reduce his dependence on China to the extent where he could extract concessions from Beijing on key issues. Rather than being dictated by a nuclear-armed Pyongyang under an unpredictable tyrant, Beijing has more to gain from a reunified nuclear-free Korea under a stable democratic regime that is prosperous and can benefit China's own economy, especially in the northeast provinces bordering Korea. Aiding those North Koreans in their escapes to South Korea is thus in Beijing's interests, as this will help undermine the North Korean regime and hasten its demise.

Second, the fall of the Berlin Wall was possible, in part, because of relatively extensive inter-German contacts in the years before 1989 and thanks to the peculiar situation in Berlin, where millions of Berliners lived within walking distance of each other divided only by a concrete wall. For years prior to 1989, for example, West Germans could visit relatives in East Germany in their homes, and East Germans could access West German media broadcasts, which meant that East Germans on the whole were informed about conditions in the West. Thus, when dramatic changes in Eastern bloc nations took place in the late 1980s, East Germans knew about these changes and were galvanized for action. In Berlin, where East Berliners could literally walk to West Berlin if the East German border guards would let them, East Germans found the weakest link in the iron curtain. On the night of Nov. 9, 1989, East Berliners took matters into their own hands after watching news coverage of a press conference at which a spokesman for the East German Communist Party announced a new law permitting East Germans more freedom to travel and added, mistakenly, that this law would take effect immediately. When the East Berliners decided that this announcement allowed them to pass through the Berlin Wall that very night, they marched to the Wall, and the East German border guards gave in rather than awaiting clear instructions from higher authorities. Developments unfolded spontaneously rather than by a scripted plan.

In contrast, contacts between the two Koreas have been very limited, and there is no place like Berlin along the demilitarized zone (DMZ) separating the Koreas. The sporadic inter-Korean family reunions that have taken place have always been in strictly controlled settings, and South Koreans have never been allowed to visit North Korean relatives in their homes. Although a significant number of North Koreans now have access to South Korean mass media via smuggled DVDs and the like, most are cut off from Internet access and from regular South Korean media broadcasts. Furthermore, the entire length of the DMZ, which is about 4 km wide, is heavily mined and fortified on both sides, and there is no large population center like Berlin which the DMZ bisects, which means there is no point where masses of North Koreans can readily walk across the DMZ in minutes if North Korean guards would let them.

All this points to the dire need for expanding North Koreans' access to the outside world and for promoting more natural inter-Korean exchanges to better inform North Koreans about conditions in the outside world. And this bespeaks of the need for projects along the DMZ that would decrease tension and provide places for easier border crossing. The proposals by South Korea's President Park Geun-hye to build international peace parks along the DMZ are a step in the right direction, as would creating more border crossing points and expanding the scope of the Kaesong Industrial Park to include an international zone along the DMZ where peaceful inter-Korean interactions can take place.

Only after border tensions have been lowered and more extensive inter-Korean human contacts have been established, will conditions become ripe for "accidents" such as those on the night of Nov. 9, 1989, in Germany, which would enable spontaneous actions by peoples of the two Koreas to peacefully overcome the Iron Curtain separating them.

Jongsoo Lee is Senior Managing Director, Brock Securities LLC, and Center Associate at Davis Center for Russian and Eurasian Studies, Harvard University. Lee is the author of The Partition of Korea after World War II: A Global History (Palgrave Macmillan, 2006) and has served as Senior Research Fellow at Asan Institute for Policy Studies. He can be followed on Twitter: @jameslee004.

This piece first appeared in CSIS: PACNET newsletter here

TopicsSecurity RegionsNorth Korea

Chuck Hagel Leaves No Legacy

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The announcement that Secretary of Defense Chuck Hagel had resigned on Monday came as no big surprise to many observers. The questions now are: How did the departure of Obama’s third Defense Secretary come about? What will Chuck Hagel be remembered for, and who will replace him?

First, Hagel will be remembered as one of the least qualified Pentagon heads ever to serve. He had no particular executive level leadership experience. His biggest “qualification” was that he had been a young “20 something” buck sergeant in Vietnam, and was wounded in action. Hagel deserves the nation’s thanks for his excellent service and sacrifice. But thousands of us have served in combat, and there are very few that should therefore be Secretary of Defense. Frankly, Hagel was not one of them.

Hagel was hired to oversee the budget slashing and force reductions in the Department of Defense. He oversaw the publication of a QDR that was completely budget–driven, devoid of any strategy at all. He was doing exactly what the president wanted him to do. Unfortunately for Hagel and for the nation, world events didn’t cooperate.

The withdrawal from Afghanistan has slowed, based on difficulties on the ground. Iraq flared up dramatically with the pivot by ISIS from Syria back toward Baghdad. Putin’s Russia is busily annexing large parts of other sovereign nations, and China has turned into a major regional bully. Meanwhile the administration is so anxious for a deal with Iran that they are practically ready to pay them to be our friend.

In the face of all this, Chairman of Joint Chiefs of Staff Gen. Martin Dempsey and Hagel have finally found a little bit of spine, and had the temerity to say that the Obama policy in Iraq might not work without “some” American boots being on the ground. This apparently was too much. Someone had to go. Firing a uniformed leader short of gross insubordination is a very tough sell from a public relations standpoint, and Dempsey has been careful to never go that far. That left Hagel.

Frankly, the National Security Agenda (foreign and defense polices) belong to the president, not to his Cabinet Secretaries. They execute policy, and give advice, but the president owns it. The failures of this administration are not based on Chuck Hagel’s lack of skill and experience (although he has precious little of either). The failures are due to the poor policies themselves.

Failing to fund DoD to maintain readiness, failing to lead in situations where our interests are at risk, and diving into situation where we have no interests to speak of have led to simply bad policy. And that policy came straight from the White House, not from the Pentagon.

Hagel leaves no legacy. He was unfortunately the proverbial empty suit. His replacement could be anyone, but will likely be as inoffensive a Democratic Party functionary as they can find. If the chair remains empty, no one would notice. American was poorly served by Chuck Hagel, and even less well served by the president’s policies which he had to execute.

Steven P. Bucci, who served America for three decades as an Army Special Forces officer and top Pentagon official, is director of the Allison Center for Foreign Policy Studies at The Heritage Foundation.

Image: Creative Commons 2.0 License. 

TopicsDefense RegionsUnited States

The Sum of all China's Fears: Genetically Modified Food

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Among the worries that keep Chinese leaders awake at night surely is food security. Li Keqiang's first priority upon taking the premiership in 2013 was agricultural modernization. Civil rebellions and wars throughout China's history were fueled by the Malthusian need to keep people fed. As the nation now urbanizes, the demands of keeping Chinese healthily nourished grow more acute. A spat over genetically modified (GM) food encapsulates the dilemma. 

Self-sufficiency has long been totemic and officially China meets an impressive 95% of directly edible grain demand, almost 600 million tones annually. But with Chinese demand for meat already averaging 50kg per capita and approaching European levels for urban residents, China will need to import grains (mainly soybeans and corn) for animal feed, 120 million tonnes by 2020.

Yet with subsidies boosting rural incomes at US$75 billion or 11% of total output, domestic price support has perversely created high consumer prices and, surprisingly, a temporary “grain glut.”

In seeking self-sufficiency, China has hit an ecological ceiling. Crop yields still lag, and only with unprecedented fertilizer application rates. Now the productivity crunch is being sharpened by shortages in three key areas: land, water, and labor.

Chinese often say that “22% of the world is fed with 7% of its arable land.” Urban sprawl has in a dozen years gobbled 8.3 million arable hectares (twice Japan's total arable land) and threatens China's “red line” of 120 million hectares. Official statistics deny this threshold has been breached but cities have been ordered to stop paving over surrounding countryside. 40% of China's arable land has already suffered some degree of degradation. Water is becoming a constraint to food supply even as bureaucrats, incredibly, prioritize thirsty coal production. It might also seem odd that China faces a farm labor constraint, but migrants prefer life in the city. Chinese farming is a rotten business.

The reason is simple: farmers can't own and can't sell their land, so their plots are tiny. The average dairy farm has seven cows. China doesn't do agriculture, as someone has wittily observed, it does
“gardening.” Fragmented farms and supply chains result in pork production costs twice America's. There are huge ideological and social barriers to outright rural land privatisation, but Beijing is gingerly experimenting with industrial farms. Factory farming is contentious, however, and some worry about China following the American model. In China itself, food safety scandals have alarmed the public.

Enter the GM controversy. “Frankenfood” is furiously debated in many countries, but the squabble in China is unusually heated in a society where the state typically commands the agenda. In fact, in their pro-GM campaign, government scientists are visibly frustrated by the opposition, led by hawkish major general Peng Guangqian who detects “a monumental, supremely devious plot to annihilate the Chinese people.” Xenophobic conspiracy themes are perpetuated by nationalistic officials. Chu Xuping, a senior figure in the agency overseeing China's state-owned enterprises, rejects foreign investment in grain, pharmaceutical and water treatment SOEs. The dog-whistle message to the public is unmistakable: no Western fingers contaminating China's supply chain. (Incidentally a Chinese company owns Northumbrian Water in the UK).

China's GM rejection is rippling across world trade, visible recently in an ugly dispute over unapproved US GM corn. Beijing's stance may be geopolitically motivated; to allow a shift to friendlier Latin American sources. But there is also genuine concern about the sanctity of Chinese crop strains as GM seeds overrun the planet.

A close examination of president Xi Jinping's supportive pronouncements on the topic reveals what this is really about: “We must boldly innovate the heights of GMO techniques, and we cannot let foreign companies dominate the GMO market.” An industry analyst is more blunt: “The main reason for China's slow adoption of biotech grain crops isn't so much that the government is swayed by public opinion. It's that China doesn't have leading, marketable biotechnologies and is afraid of having the market controlled by foreign companies once commercialization is granted.”

Here is the nexus where land and water scarcity and concerns over food safety, social stability, industrial competitiveness and foreign dependence all meet. GM food is the sum of all China's fears.

This piece was first posted on The Interpreter, which is published by the Lowy Institute for International Policy.

Image: Flickr. 

TopicsSecurity RegionsChina

A U.S.-China War in Asia: Could America Win by Blockade?

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Is it viable for the United States to impose a naval blockade against China in a potential conflict? That’s a critical question in the study of China’s maritime and energy strategies.

China’s crude oil dependence is obviously the key variable determining the success and failure of a blockade. Although China can produce many of its vital goods, such as grain and coal, in 2013 China imported 64.5% of its crude oil consumption. Oil-based liquid fuels, such as gasoline and diesel, are vital for vehicles. And an overwhelming proportion of China’s crude oil imports—with the exception of imports from Russia and Kazakhstan—rely on seaborne transportation.

But China’s reliance on seaborne oil imports isn’t matched by its naval capability. It doesn’t have overseas bases to support regular operations in distant regions. By contrast, the US Navy not only possesses formidable ocean-going capabilities, but also quantitative and technological advantages. That asymmetry between China’s high level of reliance on seaborne oil imports and its low level of naval capability to protect those imports means the US Navy could successfully interdict China’s seaborne oil trade.

Although China’s concern about a US blockade is often mentioned, few studies have attempted to provide a quantitative estimate of the consequence of a blockade. Using the inverse formula of energy intensity, drawing on statistics published by British Petroleum and the US Energy Information Administration, I produced a preliminary estimate that an energy blockade cutting off all 87% of oil imports that came by sea (that is, rather than overland or by river) would cause a direct reduction of 6.6% to the Chinese GDP (as measured by purchasing power parities), a figure equivalent to the size of the Australian economy. The indirect damage of a blockade in terms of reducing commercial/industrial efficiency would likely be even more serious. Therefore, I found a naval blockade could produce economic devastation and consequently a viable strategy for the US in a conflict with China.

Having concluded that the potential threat of oil blockade is serious, I then investigated the effectiveness of China’s counterstrategies to such hypothetical threat. I classify China’s counterstrategies to a US oil blockade into two categories: vulnerability-reduction strategies aiming at the protection of oil supply; and conflict-prevention strategies aiming at the avoidance of US blockade via the prevention of conflict with the US.

The two most discussed vulnerability-reduction strategies are the development of the PLA Navy to safeguard the seaborne oil imports and the construction of overland oil pipelines. But because of the large volume of China’s oil imports, and the distance between China and the oil producers in the Middle East, naval convoys would hardly be practical as a means for ensuring secure supply. A hundred-ship oil convoy, either during its 35-day trip, or during its fuelling and refueling, is an easy target for air/missile/submarine attack. Likewise, thousand-mile pipelines connecting China with Russia and Kazakhstan could be cut off by a single air strike. The protection of pipelines is virtually impossible. And complex oil refineries—difficult to rebuild—could also be targeted. Thus, I conclude that vulnerability-reduction approaches are costly and largely ineffective.

Nevertheless, it‘s more realistic for China to seek conflict-prevention strategies to counter a possible US blockade. There are many ways to prevent conflict with the US. For example, there can be ‘soft’ conflict-prevention strategies, such as diplomatic reassurance, and inter-military exchange programs. The key dilemma is that the pursuit of conflict prevention mustn’t hamper Beijing’s core security interests. In this sense, “hard” conflict-prevention approaches—especially more robust nuclear deterrence—might be an essential part of conflict prevention.

Because most contemporary US “war-winning” strategies, including Air-Sea Battle and naval blockade, aim at capitalizing on US conventional advantage, they downplay the “unwinnable” nuclear war. The US can conceptualize a conventional war with China because China, with a much smaller nuclear force can’t initiate nuclear exchange in a war with the US. China needs to transform its strategic nuclear force from one of minimal sole-purpose deterrence to a more robust multi-purpose deterrence. A robust Chinese nuclear deterrence could contribute to war prevention by replacing the option of “winnable conventional war” with “unwinnable nuclear war.” But, in order to construct a nuclear deterrence sufficiently robust to deter the US from engaging in a conflict with China, Beijing must make two major changes: it must renounce its No-First-Use declaration, and build up a strategic nuclear force more comparable to that of the US.

Xunchao Zhang is a student from the PRC who studies at the ANU. Earlier this year he was an intern at the Sea Power Centre-Australia. This article first appeared in ASPI’s Strategist here.

Image: U.S. Navy Flickr. 

TopicsSecurity RegionsChina

Obama’s Rebalance to Asia in His Own Words: Where Does it Stand?

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President Obama had a better than expected visit to Asia for annual Asia-Pacific Economic Cooperation (APEC), East Asia Summit (EAS), and G-20 gatherings, due largely to a productive summit with Xi Jinping. At the end of his trip in Brisbane, Obama gave his second major speech on the US rebalancing policy to Asia, coming almost three years to the day following an address to the Australian parliament on his previous visit to Australia. A side-by-side reading of President Obama's two major Australian speeches on the subject (he has yet to give a major policy speech on the rebalance in the United States) provides a useful benchmark for assessing the administration's progress in implementing the policy. I found the following takeaways from my reading of the two speeches:

-The fundamental goals of the rebalance to Asia have remained consistent, focusing around the goals of shared security, shared prosperity, and commitments to advancing universal human rights in Asia. The Obama administration can justifiably point to progress in deepening alliances with Japan, Australia, South Korea, and the Philippines and strengthened partnerships with Singapore, Vietnam, Malaysia, and India, but fallout from a coup d'état has taken Thailand out of the mix (and out of Obama's Brisbane speech). Modernization of U.S. military forces in Asia has made slow and steady progress.

-The Obama administration's rhetorical commitment to energizing institutions such as the East Asia Summit as vehicles for applying international norms to regulate regional behavior remains constant. The United States has reiterated the importance of maritime security, freedom of navigation, and peaceful resolution of territorial disputes, but the Obama administration's words are at risk of being hollow if China takes actions to change the facts on the ground. As a vehicle for upholding mutual restraint among its members, the capacity of the East Asia Summit remains limited. There is clearly more work to be done on this front.

-On the goal of sustainable and shared economic growth, evidence of progress remains slim. Obama's claim that "the United States has put more people back to work than all other advanced economies combined" rings hollow in Asia, which features growth rates that rival the United States. China's slowing growth rate at 7.5 percent still doubles that of the United States. Moreover, the economic pillar of the rebalance depends wholly on the Trans Pacific Partnership (TPP). This is especially the case now that China appears to have overtaken the United States rhetorically in its support for the Free Trade Area of the Asia-Pacific (FTAAP) concept that US officials in the Clinton administration had championed. Without TPP, there will in effect be no rebalance.

-The Obama administration turned allegations of distraction into a virtue by bringing the global agenda to Asia, arguing that the rebalance is "not only about the United States doing more in Asia, it's about the Asia Pacific region doing more with us around the world." In fact, the Obama administration's major successes in Beijing involved catalyzing China to show greater responsibility on global issues such as climate change, the Ebola crisis, and cooperation on countering violent extremism.

-Some Australian commentators have taken offense at Obama's touting of climate change policies in his Brisbane speech that are at odds with the Abbott administration. But a comparison of Obama's Brisbane speech with the one he gave three years ago in Canberra shows that it is not Obama's policies that have changed but those of the Abbott administration compared with its predecessor. Despite policy differences on this issue, security cooperation between the US and Australia has grown closer.

-While pursuing a "constructive relationship with China" and welcoming "the continuing rise of a China that is peaceful and prosperous and stable and that plays a responsible role in world affairs," President Obama insisted that "China adhere to the same rules as other nations," drawing a sharp line against Chinese exceptionalism or efforts to bend international rules to China's favor. In practical terms, the US response to new Chinese initiatives such as the BRICS bank and the Asian Infrastructure Investment Bank (AIIB) is simultaneously testing both the Obama administration's ability to accept China's rise and whether new Chinese initiatives will abide by or challenge international practices and standards of good governance.

-Despite expanded functional cooperation with China on global issues, the rebalance to Asia continues to draw stark lines between the United States and China on universal human rights and rule of law. The Canberra speech in 2011 highlighted those values by pointing to the failure of forms of nondemocratic "rule by one man or rule by committee" that "ignore the ultimate source of power and legitimacy - the will of the people." This time around, in Brisbane, Obama argued for independent judiciaries and open government "because the rule of force must give way to the rule of law." The universality of human rights has not generally been perceived (or advertised by Obama administration officials) as a centerpiece of the US rebalance to Asia, but it may offer the strongest justification for the policy, even if it is also the most starkly divisive issue with which the region must grapple, as well as the most sensitive issue in the US-China relationship.

So where does the rebalance to Asia stand? The consistency of Obama's two speeches in Australia makes the case that the rebalance is real and credible. But whether or not it is sustainable or sufficient will not depend only on the Obama administration's continued commitment to the policy. It will also depend on the ability of the next American president to carry forward the rebalance in an Asian and global environment that will undoubtedly pose new and even more difficult challenges to US leadership.

Scott Snyder is Senior Fellow for Korea Studies at the Council on Foreign Relations and co-author with Brad Glosserman of The Japan-Korea Identity Clash (Columbia University Press forthcoming, 2015). This piece first appeared in CSIS:PACNET newsletter here.

Image: White House Flickr. 

TopicsSecurity RegionsChina

Speaking Honestly about China's Rising Military Could Get You in Hot Water

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Did China pressure the White House to fire U.S. Navy Captain James Fanell as the top intelligence officer in the Navy’s Pacific Fleet? Or did a self-censoring Pentagon simply do the deed on its own, based on trumped up charges of “revealing classified information.” Methinks Congress—and this nation—needs to get to the very bottom of a shortsighted decision that has profound, long-term implications for the Obama administration’s much-ballyhooed Asia “pivot.”

In fact, Fanell was one of the few top-ranking officers willing to blow the whistle on China’s own ongoing “Crimea moment” in the East and South China Seas. His sin was to go public last February in San Diego at one of the largest annual conferences attended by military personnel and scholars.

Ironically, this WEST 2014 meeting of the minds was sponsored by the U.S. Naval Research Institute. Its stated mission is “to provide an independent forum for those who dare to … speak… to advance …understanding of … issues critical to national defense.”

As to exactly what the good captain “dared to say” that got him fired, he quite accurately pointed out China is aggressively seeking to expand its territory and maritime rights in the East and South China Sea at the expense of virtually all its neighbors—and the U.S. military. In addition, based on his analysis of a Chinese amphibious exercise involving some 40,000 troops—one widely reported in the press—Fanell also stated China was preparing for “a short, sharp war” against Japan.

There is no question about the veracity of Fanell’s statements. Nor is anything he said “classified information,” as anyone can come to exactly the same conclusions from reports in this publication and in many others.

Indeed, the only thing Captain Fanell appears guilty of is telling a hard truth in an administration that apparently believes taking a soft line on Chinese expansionism is a better strategy. While that is debatable, firing an officer for speaking the truth at an academic conference is not just plain stupid; it also runs directly against the grain of the kind of free and open democracy the United States is supposed to be.

Here are two chillingly practical implications based on the Fanell situation. First, no military officer is ever going to tell uncomfortable truths to the American public while in uniform if he or she wants to keep adding stripes to the sleeve.

Second, no future conference putatively pledged to daring to speak the truth will ever have any credibility. Instead, such conferences will be seen, and rightly, as forums for the propaganda and spin of whoever is sitting in the White House or running the Department of Defense.

That said, here’s the far bigger implication: In firing Fanell, the Pentagon—already under the siege of sequestration—has shot itself in the budgetary head. Indeed, if American taxpayers are going to be counted on to foot the defense-budget bill, they certainly must be kept in the national-security loop. Absent candor on the growing China challenge, it will be impossible for the U.S. Navy to ever get the kind of budget support it is will need to truly pivot to Asia.

To this point, the putatively pivoting White House is doing a dandy version of “Honey, I shrunk the navy.” The U.S. fleet is down from a peak of 600 ships during the Reagan years to well below 300; and could be on its way to breaking the 200-ship barrier—unless you pad the count with hospital ships as the Pentagon has started to do.

To understand the looming problem, just work through this “pivot math”: President Obama has pledged to shift 60 percent of the fleet to Asia from an original 50 percent. However, 60 percent of a shrinking fleet will mean that by 2020 the United States will have fewer ships in the Pacific than it does now. That sounds more like a retreat than a pivot.

So how about we get to the bottom of a seemingly small story that might otherwise quickly die? There is indeed far more at stake here than one man’s career. Let the Congressional hearings begin.

Peter Navarro is a business professor at the University of California-Irvine and director of the Netflix documentary Death By China.

Image: Flickr/Official U.S. Navy/CC by 2.0

TopicsDomestic PoliticsDefense RegionsChinaUnited States

Post 9/11 Stat You Should Know: America has now Conducted 500 Targeted Killings

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The most consistent and era-defining tactic of America’s post-9/11 counterterrorism strategies has been the targeted killing of suspected terrorists and militants outside of defined battlefields. As one senior Bush administration official explained in October 2001, “The president has given the [CIA] the green light to do whatever is necessary. Lethal operations that were unthinkable pre-September 11 are now underway.” Shortly thereafter, a former CIA official told the New Yorker, “There are five hundred guys out there you have to kill.” It is quaint to recall that such a position was considered extremist and even morally unthinkable. Today, these strikes are broadly popular with the public and totally uncontroversial in Washington, both within the executive branch and on Capitol Hill. Therefore, it is easy to forget that this tactic, envisioned to be rare and used exclusively for senior al-Qaeda leaders thirteen years ago, has become a completely accepted and routine foreign policy activity.

Thus, just as you probably missed the tenth anniversary—November 3, 2012—of what I labeled the Third War, it’s unlikely you will hear or read that the United States just launched its 500th non-battlefield targeted killing.

As of today, the United States has now conducted 500 targeted killings (approximately 98 percent of them with drones), which have killed an estimated 3,674 people, including 473 civilians. Fifty of these were authorized by President George W. Bush, 450 and counting by President Obama. Noticeably, these targeted killings have not diminished the size of the targeted groups according to the State Department’s own numbers.

This piece comes courtesy of CFR's blog Politics, Power, and Preventive Action

Image: Wikicommons. 

TopicsSecurity RegionsUnited States

America's Immigration Nightmare Continues

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I disagree with the president’s use of executive power to protect illegal immigrants who have openly defied our laws for years. But he’s right to say that our immigration policy is “broken” and we have “de facto amnesty.” Neither party wants to deport them. Illegal immigrants eventually become Democratic voters. If they do not attain citizenship, their children get it automatically by birth and will likely vote Democratic when they are eighteen and throughout their lives. What’s more, a number of Republicans, ignoring these long-term political effects, like immigration because it depresses wages, thereby helping businesses.

Republicans have given us de facto amnesty by executive inertia for decades. President Reagan signed the first amnesty law (the Immigration Reform and Control Act) in 1986. The other part of that law was supposed to crack down on employers who knowingly hired illegal workers. This was never enforced. The law is a farce. When Republicans controlled the White House, they did nothing to beef up enforcement. The only difference between that and what President Obama has done is a formal announcement. And if I had to choose between an announced amnesty and a stealth one, I’d rather have it announced. At least the public knows who to blame when they suffer the unintended consequences—lower wages for high-school graduates, more people on entitlement programs and so on.

Every Republican member of Congress knows we don’t enforce the Immigration Reform and Control Act (IRCA). They also know that millions of illegals work every day in agriculture, food processing, construction and other low-wage jobs. They could have held hearings, subpoenaed the owners of the major ag and poultry processors to testify, humiliated them on national television, enlarged the budget for workplace enforcement of IRCA and all the other tools that make for high Washington drama. When Congress gets its blood up, things change.

But the opposite occurred. When the Department of Homeland Security (DHS) raided a major Georgia onion farm and arrested hundreds of illegal workers, Sen. Saxby Chambliss (R-GA), a conservative who says he is against illegal immigration, demanded the DHS stop raids in his state. They stopped. The same thing happened in Nebraska when meat processors were raided, and in Texas when chicken processors were briefly put on the spot. Republicans came to the rescue of business.

Is President Obama’s executive “action”—more aptly, inaction—any worse? I think not. He is essentially doing two things: exercising discretion in who gets deported and issuing work permits to millions of illegal immigrants. He has the authority to do the first. Congress has not appropriated enough money to deport all the illegals in the country. So someone has to prioritize who gets removed. That someone is the federal agency in charge—the DHS.

So the president can effectively promise the illegals in the country who have not committed a subsequent crime that they won’t be deported. They can’t all be deported, unless the Republicans in control of Congress seriously want to purge the nation of illegals, and as I’ve said, they plainly don’t want that. President Obama was correct to point out in his speech that Ronald Reagan and George H.W. Bush had issued executive orders to protect groups of illegals from deportation. Republicans at the time did not oppose it. He made his actions sound like they were being reasonable and humane, rather than usurping of congressional prerogatives.

Speaker Boehner’s speech deplored Obama’s executive actions. But listen closely and you will not hear a single Republican advocate deporting the millions of illegals the president will protect. They apparently agree with the president that deporting long-term illegal is is “not who we are.” They are merely angry that the president is acting “unilaterally,” just as they have done for decades when they held the presidency.

Republicans also say they will deny funding for the executive action. I fail to see how deferring deportations costs anything. Rather, it saves money. And as for the issuance of work permits, I read in the New York Times that Immigration and Customs Enforcement, the part of the DHS that issues them, is self-funding—that is, it generates money from fees it charges for documents, rather than by appropriations. If so, then the talk of a cutoff is simply bluster. The president ended his speech by saying immigrants are a “net plus.” Many economists disagree, pointing out that the effects of the last two decade’s historic levels of immigration are lower wages for American workers with high-school educations. And almost all of the new jobs created by immigrants went to the immigrants themselves. So it’s a net minus. The only political figure to make this point is Sen. Sessions (R-AL). I hope that those Republicans who say they deplore the president’s actions will soon outline an alternative immigration point of view.

Howard W. Foster is a lawyer specializing in civil RICO cases involving the employment of illegal immigrants.

TopicsImmigrationDomestic Politics RegionsUnited States

Understanding Georgia's Evolution

The Buzz

The ongoing conflict in Ukraine has kept reignited Western attention focused on the former Soviet republics, a varied group of countries often misunderstood by outsiders. Last week Georgia returned to the news due to perceived tumult within the government. On November 5, Prime Minister Irakli Garibashvili dismissed the Defense Minister, Irakli Alasania, following the latter’s comments regarding the arrest of employees of his ministry. Two other ministers then resigned in solidarity. Commentators were quick to emphasize Mr. Alasania’s pro-Western credentials, and to cast into doubt the commitment of the ruling Georgian Dream coalition to its Euro-Atlantic trajectory. A domestic political dispute was contrived to suggest that Georgian Dream is not Western in orientation and is using the judicial process to punish its political rivals.

These suggestions are unfounded. The recent dismissal and resignations are domestic political issues and have no connection to the course of foreign policy.  It is not surprising that this dispute allowed some opponents to accuse Georgian Dream of being secretly controlled by anti-Western forces, as this is a frequent albeit unfortunate feature of our politics. Political disagreements erupt for many reasons and are a natural part of democracy, and in parliamentary democracies like Georgia’s—as is true of most European countries—political movement at these times often seems excessive.  For Georgia, a more experienced democracy might have explained the events of last week more coherently, but even so the explanation would not have focused on judicial overreach or the judiciary’s meddling in politics.  Parliament and the government have in fact worked to improve judicial independence and to ensure the proper tools are in place to prevent the judicial process from being politicized, preventing the law enforcement system, specifically the Prosecutor’s Office, from becoming pulled into the epicenter of the political process, to introduce certain legal tools to protect the Prosecutor General and his/her deputies from having to take a position on political issues. The law enforcement system, including the Prosecutor’s Office, must be kept out of the political epicenter. This is one of the most important lessons we have learnt from recent events. We must consider this and improve our work.

Georgia’s ambitions to join NATO and the EU are as strong as ever. No political party would seek to change this course, not least because of the inevitable backlash from voters, who overwhelmingly favor integration with NATO and membership in the EU. Only this summer Georgians celebrated the ratification of an association agreement with the EU, and in September they welcomed the package for enhanced cooperation that was offered at the NATO summit. Overwhelmingly, Georgians support their country’s European and Euro-Atlantic integration. This is a firmly-grounded conviction, which is impossible to change or reverse overnight.

Despite Georgia’s commitment to its Euro-Atlantic trajectory, it also needs relations with Russia, its largest neighbor and an important trade partner. NATO and the EU support the improvement of Georgia’s relations with Russia, as does the American government. Vilifying the current government’s difficult work to improve certain aspects of that relationship is not only unhelpful for Georgia, but damaging to the stability of the wider region. Furthermore, as many commentators seem to have forgotten, there are strict and inescapable domestic limits on any Georgian government regarding rapprochement with Russia: relations cannot be normalized until Russia ceases to recognize the independence of the breakaway regions of Abkhazia and South Ossetia, and withdraws its forces from Georgian territory.

The current government has worked to lessen tensions, to reduce the danger of conflict, and to improve less-politicized areas such as trade and visas. Neither NATO nor the EU is prepared to bankroll Georgia or defend it militarily if another conflict erupts with Russia. This was made eminently clear in 2008 and more recently when conflict broke out in Ukraine. It is illogical to suggest that Georgia’s government is anti-Western simply because it understands this reality.

A Euro-Western trajectory has been pursued by Georgian policy makers for over twenty years; it was neither the discovery of former president Mikheil Saakashvili, nor is its continuation dependent upon individual politicians like Irakli Alasania. Many generations of Georgians since 1990s have contributed to Georgia’s Western trajectory, I need to admit that President Saakashvili and Irakli Alasania did their best in that regard. In spite of the exact balance of power in Parliament and the government, the country’s direction remains unchanged.  A stronger political opposition may emerge in our parliament as a result of last week’s events, but this is a positive development. An opposition willing to work constructively with the majority, and ready to hold it  accountable, will foster a political landscape in which parties compete for the mandate to build a strong, secure, democratic Georgia, able to stand independently as an ally and member of NATO, the EU, and the transatlantic partnership.

Tedo Japaridze is the former Georgian foreign minister and current chairman of the Foreign Affairs Committee of the Georgian parliament.  

Image: Wikicommons/Creative Commons 2.0.