All Politics Is Local

In Poli 150 -- Intro to International Politics -- we are transitioning from studying the politics of the global security apparatus to studying the politics of the global economy. So I was pleased to see a current case with some local flavor described on the front page of the NYT's web site:

There are still a few textile mills in the Carolina piedmont, making futuristic fabrics that cover soldiers’ helmets and the roofs of commercial buildings. 

There is also a new threat on the horizon. A proposed free trade agreement with South Korea, which the House and Senate are scheduled to consider this week, would open the American market to a manufacturing powerhouse that has its own high-technology textile industry. ... 

“We are very much in favor of global trade, but we’re just not about having agreements that are unfair to the U.S. textile industry,” said Allen E. Gant Jr., chief executive of Glen Raven, a family-owned company that employs 1,500 people in the United States. “The U.S. needs every single job that we can get.” ... 

Economists generally argue that free trade agreements benefit all participating countries by creating a larger market for goods and services. But that benefit derives in part from the movement of some activities to the lower-cost countries. In other words, even if the deal is good for the United States as a whole, it is likely to create clear losers.

The North Carolina textile industry was hit pretty hard by NAFTA, and the new FTAs will likely batter the sector further. I like the article -- written by the excellent Binyamin Appelbaum -- because it neatly lays out the politics of the deal: the country as a whole will benefit, but smaller groups will suffer. Those groups have a strong incentive to lobby the government for protection. Sometimes they will be successful, sometimes they won't. The Obama administration renegotiated parts of the pact it inherited from the Bush administration under pressure from autoworkers' unions and other powerful groups. Textile workers evidently don't have the same sway.

The article also goes a long way towards describing preference formation and aggregation. Allen Gant reveals more than he realizes in that short statement. What he's saying is that he supports market exchange except when his firm is the one facing new competition. And he's saying that in this case trade would hurt both capital and labor in the textile industry. This statement illustrates materialist conceptions of trade politics, and supports the view that attitudes over trade fall along sectoral, rather than factoral, lines. It's a nice little article, and I'll be giving it to my students.

Korea

When I went to bed last night the news sites were all saying that a resumption of the conflict on the Korean peninsula was possible -- even "imminent" according to one source -- if the South proceeded with its plans to hold a military exercise in disputed territory. I went to bed thinking that I'd wake up to no news, which would certainly be good news. That turns out to have been right, so here's some thoughts on the situation.

1. The security dilemma is still the most important concept in international relations. Obviously the South is spooked by the North's nukes and occasional belligerence, and felt the need to demonstrate its defensive capabilities. The North is obviously spooked by the fact that a huge, well-funded military backed by (still) the only global superpower is right below it, and it can't necessarily count on its only ally (China) for much support.

2. Schelling is still boss. He first identified the "cliff-dancing" strategy in his 1960 book, and it is still relevant. The South just danced a bit closer to the brink, and it worked.

3. North Korea is very weak, but it is not crazy. Neither impression is the one Kim Jong Il wishes to leave, but that conclusion is inescapable at this point. The North threatened retaliation if the South conducted this exercise, but immediately back-tracked since those threats were clearly not credible. In fact, it appears that once its bluff was called it was willing to do quite a lot to walk back its earlier threats. It offered possibly-meaningful concessions in negotiations with Bill Richardson, including resumption of the six party talks, access to its nuclear facilities by outside inspectors, and the return of the remains of U.S. soldiers that died during the Korean War. I'm not at all suggesting that the South should continue to posture in this way, but in this case it appears to have worked.

4. Nukes only get you so much deterrence capability. Namely, they can (perhaps) act as a repellent, but cannot compel others to

5. For all of the talk about shifting power structures in Asia, the U.S. and its ally still won the day. Not just by holding the exercise without retaliation, which was sort of a "remind them who's boss" maneuver, but also by the response of the other regional powers. China and Russia implored the South to stand down, to no avail, indicating a clear lack of power and influence in the region. This follows the U.S.'s decision to conduct joint exercises with South Korea last month, a move China opposed because it occurred in China's "exclusive economic zone" but did nothing to prevent.

6. This incident is really the first time the Obama administration has been willing to stare down some of the U.S.'s antagonists, and he won: the other side blinked (DPRK) or sat down (China). Not only the military exercises, which not only involved moving the USS George Washington strike group to the Yellow Sea, but also passed the ROK-US trade agreement. I'm not sure whether this will encourage more risk-taking by the administration or even whether it should, but it is notable.

7. Keep all of this in mind when you hear that Iran is crazy, undeterrable, will be able to marshall nuclear capabilities to blackmail the Middle East, etc. All of those ideas have been tested over the past month in Korea, and all of them have been found wanting.

UPDATE: Drezner also posted thoughts. I like his #4, but I don't buy it. I think #3 is more likely, and if true is a positive sign for the future of Asia.

Korea

A former student e-mailed me and asked for advice on a paper he was writing about the Korea situation. Up until last week he had been focusing on China's role as facilitator of negotiations. He wanted my take on last's week attack, and the responses from the South, China, and the US since then. A few days late, but this was my off-the-cuff response:

I'm not sure how to read China right now. On the one hand, there is a long history of N Korea doing belligerent things to get attention, and then negotiating some agreement that gets them some aid or something in exchange for them not being stupid anymore. My first reaction is to consider their more recent actions in the same vein, given that history. In that case, you could maybe interpret China's nonplussed reaction as buying into that strategy to get all sides back to the negotiating table.

On the other hand, this recent action is more serious than past actions, and occurs in a different context: succession of power from Kim Jong Il to his son. I don't think this is going to lead to war necessarily, but I do think that it signals that the current status quo is likely untenable. The likelihood of a resumption of fighting has certainly gone way up, and S Korea appears to be losing patience. China also said (I think yesterday) that joint US-S Korean military exercises in the Pacific violated China's economic sovereignty (b/c China uses that water for shipping), which is a sign that China is not interested in marginalizing N Korea to get closer to the US and S Korea right now. Again... this could be a negotiating ploy, but then you'd have to think that both N Korea and China are bluffing. That could be correct, but I'm not very confident that it is.

Certainly the security dilemma is present, and there is some risk of spiraling. You can also think about how deterrence can have negative side effects... the US' security guarantee for S Korea could make S Korea *more* likely to retaliate and escalate the conflict. They know they have a powerful ally, so that will give them much more confidence than they'd have otherwise.

The US obviously does not guarantee N Korea's security, but China might. If so, then you might have a situation in which neither side (US or China) wants to escalate and both sides know it. In that case, N Korea might think that it can act with impunity. Think of it this way: N Korea knows that neither the US nor China want war, and will do whatever it takes to prevent it. The N Korean leadership is also going through a power shift, and the new leaders will want to demonstrate to their citizens that they are strong leaders, and worthy of support. What better way to do it than to attack S Korea in a limited fashion, and not suffer any repercussions? It's true that the only reason there won't be repercussions is because of China and the US, but the N Korean citizens don't know that. (There's a domestic politics information asymmetry too.)

Anyway, that's how I'm reading the situation right now.

Stranger Than Fiction

A rare nervous moment for Obama:

This week, President Obama hosted South Korean President Lee Myung-Bak at the White House. The meeting was cordial, of course, and the countries vowed their mutual allegiance, of course. But everyone had to tiptoe around the elephant in the room: the Korea-U.S. Free Trade Agreement. ...

The Koreans did their part: The government opened its market to some U.S. beef exports, a politically difficult and highly divisive move that brought over a million protesters into the streets of Seoul and threatened to bring down the Korean cabinet. The United States did... nothing. We left the Koreans standing at the altar. Democrats in Congress, including then-Senator Obama, opposed the agreement. Perhaps the most significant reason given for opposition was that the Korean government meddled too much in its auto sector.

Seriously.

Actually, Korea had agreed to cut its tariffs on autos and to take some measures to address its non-tariff auto trade barriers; however, opponents contended that those measures would not go far enough. This criticism, of course, predated the Obama administration's decision to take over much of the U.S. auto sector and erect its own non-tariff trade barriers.

IPE@UNC covered the proposed U.S./S. Korea free trade deal in a series of posts.

It's really too bad Obama and Myung-Bak tiptoed around the controversy. Yawn. Things would have been different if the meeting had taken place in Seoul rather than Washington. The South Korean parliament deals with such matters much differently:

Who Says IPE Is Boring?

Brawls broke out in the South Korean legislature over a proposed U.S./S. Korea trade pact:

Scuffles broke out as dozens of opposition members and their aides attempted to push their way into the office. TV footage showed people from both sides shoving, pushing and shouting in a crowded hall at the National Assembly building amid a barrage of flashing cameras.

Opponents later used a sledgehammer and other construction tools to tear open the room's wooden doors, only to find barricades of furniture set up inside as a second line of defense.

Opponents counter that it will cause pain to key sectors in both nations — agriculture in South Korea and automobiles in the United States.

Note that this "free trade" deal is causing a lot of controversy primarily because tariffs aren't the only trade-distorting regulations in the two countries. The opposition party in S. Korea is (justifiably) worried that U.S. subsidies to American farmers will make S. Korean farmers unable to compete if their protections are discarded. They may be right: U.S. agricultural policy is a tragicomedy of perverse incentives, corporate welfare, and inefficiencies. American and European agricultural policies are also killing the agricultural sectors of developing countries, and this has lead to the near-abandonment of the Doha round of WTO negotiations.

America is poised to lose much of its automobile industry anyway; the only question seems to be whether we let it happen now or in a few years when the pill may be easier to swallow. So, without having studied it in depth, this deal looks great for Americans; less good for S. Koreans. Still, I tend to believe than in normal circumstances any reduction in trade barriers will bring a net gain to society, so I'd like to see this pact pass. But it's another reminder that not all "free trade" is truly free.

My hope? Deals like this will eventually force the U.S. and E.U. to abandon their own agricultural subsidies and open their markets to exports from the developing world. This would be helpful on so many levels: it could provide good jobs and strong industries to the countries that need them the most (esp. in Africa and S. America), it could eliminate a great source of waste and inefficiency in American and Europe, it could further the passage of Doha, and give the West more credibility when it talks about markets and liberty to the rest of the world.

Will that happen? I doubt it. But that's what I'd like to see.

UPDATE: Dr. Oatley posted a short video in October that highlights some of relevant points about the politics of farm subsidies. It is here

US-South Korea Free Trade Agreement

I am kind of surprised by the lack of chatter about the US-South Korea Free Trade Agreement. Without question this is the most important FTA the U.S. has signed since NAFTA. As the International Herald Tribune summarizes, "The United States has reached its biggest free trade agreement since NAFTA, clinching a last-minute deal with close security ally South Korea that it hopes will bolster bilateral ties and provide added spark to global trade talks.

"The free trade agreement...is a historic accomplishment," Deputy U.S. Trade Representative Karan Bhatia told reporters on Monday after eight days of talks. "It is an agreement for the 21st century."

Prominent American legislators are already criticizing the agreement; Max Baucus, D-Mont. is unhappy about Korea's treatment of American beef (do you think Montana is a large beef producer?) while Sander Levin, D-Mich. is unhappy about Korea's apparent reluctance to buy American cars (do they still produce cars in Michigan?). The big auto companies are none too pleased either.

"Levin, who chairs the House Ways and Means Trade Subcommittee, said the deal faces certain defeat in Congress. "The U.S. did not get what was needed - an agreement that assures that the U.S. automotive industry will no longer face the barriers to their products, that trade will be truly a two-way street," Levin said, noting that South Korean companies export 700,000 vehicles to the U.S. annually while the U.S. sells less than 5,000 in South Korea. Earlier this month, Levin had proposed that USTR offer South Korea a tariff-rate quota that would grant a zero tariff for a number of autos that would grow only as U.S. auto exports to South Korea increased in the future. "

Seeing how a lot of Americans prefer Hyundais to Hummers these days, I am not sure why our ability to buy small, reliable, and fuel-efficient cars should be dependent upon Koreans' willingness to buy gas guzzling SUVs. But that's just me--I drive an import.

The agreement seems to go a long way toward accommodating American auto producers' concerns. According to the USTR, the agreement "will eliminate discrimination in engine displacement-based taxes, long a significant impediment to market access in Korea. The agreement contains strong commitments to addresses the specific standards-related concerns raised by U.S. auto manufacturers and to create a working group to review auto-related regulations being developed as an early warning mechanism to prevent new problems from arising and to promote good regulatory practice in Korea. The agreement also contains a special enhanced dispute settlement mechanism for auto-related measures, with strong remedies to deter actions on autos that are inconsistent with the agreement."

The vote should give an early indication of the prospects for getting a WTO agreement through Congress. Initial signs are not encouraging...