Donald Trump seems to be embarking on the most drastic realignment of U.S. foreign policy since President Richard Nixon and Henry Kissinger’s opening to China in 1971. Much of the U.S. foreign policy establishment seems baffled by what Trump intends to do, but if we take him at his word, an already-visible pivot to Russia fits into a bigger picture. It is, in a sense, a reversal of Nixon’s 1971 pivot to China. Since Trump started his campaign, he has consistently linked U.S. job losses to China’s alleged currency manipulation and other unfair trade practices. Another consistent theme is rejecting President Barack Obama’s nuclear treaty with Iran. Part of the quid quo pro for ending Russia’s isolation may be Russian support or at least neutrality as Trump turns up the heat on Iran and China.
Nixon’s historic switch in the midst of the Cold War decisively realigned U.S. policy. He allowed the National Chinese government on Taiwan to be ousted from the United Nations, replaced by the Beijing government. He started the process of normalization of relations that was concluded by President Jimmy Carter in 1979. Nixon’s motives were threefold: 1) to exploit the Sino-Soviet split to gain Chinese support against the Soviet Union; 2) to enlist Beijing’s help in pressuring its ally, North Vietnam, to agree to a temporary cease-fire in the Vietnam War to facilitate the withdrawal of U.S. troops; and 3) to help Nixon win reelection in 1972.
At the time, the economic benefits of U.S.-China commerce were not a major consideration, but since China’s extensive opening of its economy to international trade began in the 1980s, trade and investment between these two superpowers has become the paramount incentive for mutual cooperation. China’s current success as a trading and manufacturing powerhouse is the real legacy of Nixon’s bold reversal. The last of Nixon’s original concerns lapsed with the demise of the Soviet Union and the end of the Cold War.
Trump’s phone call with Taiwan’s president and his recent tweet questioning the “One China” policy, whereby the U.S. concedes Beijing’s legal claim to rightfully rule Taiwan, might not be mere “errors” of a foreign policy neophyte, but calculated opening shots of a major effort to pressure China to raise the value of the RMB and by other means reduce the competitiveness of its exports to the U.S. This would be difficult because it flies in the face of recent trends for the RMB to weaken and powerful resistance from many U.S. corporations that operate there or source inputs from Chinese manufacturers.
Among the powerful corporations that have profited mightily from commerce with China are Apple, Boeing, Walmart, Microsoft, John Deere, Caterpillar, Proctor & Gamble, Yum! Brands, Coca Cola, AIG, and most giant “Wall Street” banks and financial interests. With such corporate enthusiasm for the status quo, it is might be hard to imagine Trump overturning decades of U.S. China policy, but there are always winners and losers in any policy direction. Capitalism is not monolithic.
If we take Trump at face value, he is a business nationalist, whereas the companies favoring the current U.S. China policy are business internationalists. The struggle between these two groups is a major theme of my book, International Political Economy: The Business of War and Peace. The political establishments of both the Republican and Democratic parties have been dominated by business internationalists for most of the post-World War II era. Consequently the foreign policy establishment has internalized a set of internationalist values that take for granted that the interests of global U.S. corporations are American interests. Trump, by contrast, seems to identify American interests with the national territory and its citizens rather than with U.S. multinational corporations. That is why he baffles the establishment.
If retaining manufacturing jobs in the U.S. is truly a concern of Trump’s, then the pivot to Russia makes sense because Russia is not much of a competitor to U.S. manufacturing, whereas China is the greatest one. Russia is a huge exporter of oil and gas, which you might think would lead to a clash with the powerful U.S. oil companies, yet the largest of these, Exxon Mobil, has already made its own peace with Russia, involving an unprecedented half-trillion-dollar deal to develop and market Russian oil and gas. The fact that Exxon Mobil CEO Rex Tillerson, author of the Russia deal, is Trump’s nominee for secretary of state is further evidence for the pivot to Russia.
Another staple of Trump’s foreign policy has been his antipathy toward Iran and Obama’s Iran nuclear deal. A pivot to Russia could be part of his plan to isolate Iran. He might intend make a trade: Remove sanctions from Russia in return for renewed Russian cooperation with sanctions on Iran (and perhaps North Korea, too). A clue that Trump is serious about squeezing Iran is the enthusiasm that Israeli Prime Minister Benjamin Netanyahu—a harsh critic of the Iran nuclear deal—feels toward Trump, evident in his Sixty Minutes interview this past Sunday.
However, I expect that the threat of renewed U.S. sanctions against Iran, even with Russia on board, would be insufficient to negotiate a better deal with Iran than the one Obama obtained with the cooperation of not only Russia, but also Europe and China. Perhaps we should not read too much into Netanyahu’s expressions on Sixty Minutes, but when asked about the likelihood that renewed sanctions could be effective, he seemed aware of other options. I anticipate these might include use of force.
I have long believed that when President George W. Bush invaded Iraq to overthrow Saddam Hussein, he was assuming that this would provide a platform for a more important second step: overthrowing the Iranian regime, a far bigger prize for the oil industry. This plan failed because the Iraqi exiles the U.S. had tapped to run the new national government turned out to have little internal support. Instead, Iranian-backed militias and political parties came to dominate the politics of that Shiite-majority country. Iran even gained greater access to Iraqi oil by building a new pipeline from the southern Iraqi oil fields around Basra to the giant Iranian oil refinery complex at Abadan. So rather than using Iraq to subvert Iran, the U.S. invasion opened Iraq to Iranian influence. Trump understandably condemns this result.
Many of the Arab governments, once implacably hostile to Israel, are now more afraid of the twin threats of Iran’s Shiite militants and radical Sunni terrorists, such as the so-called Islamic State and its allies. American companies like Exxon Mobil that market Russian oil will further weaken the Arabs’ oil influence, so it is no surprise that Netanyahu is confident. Trump may be poised to eliminate Iran, the last major state sponsor of effective opposition to Israel. If Trump is determined—given support from Russia, Israel, and most Arab states—Iran is vulnerable.
China, however, has more options to counter U.S. pressure. In fact, strong pressure against Chinese exports might just steer China’s transition toward internally-driven consumer-led growth, rather than externally-driven investment- and export-led growth. This is a direction that many experts, Chinese and foreign, have advocated. Trump’s pressure may just quicken the pace, particularly if he induces China to raise the value of its currency (RMB), which is the intent behind his frequent blaming of China for “currency manipulation.” Trump also promises to pressure China on the South China Sea, where the major prize is . . . oil. Perhaps the compromise in that case is that the U.S. does not care who owns the oil of the South China Sea as long as Exxon Mobil or another U.S. company develops and markets it.
Next week I will return to the debt issue and consider how this potential foreign policy may exacerbate debt problems.
Originally posted on World Policy Institute blog December 15, 2016 – Trump’s Pivot to Russia Against China.