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Trump’s Next Move - A Peace Treaty for Korea Peninsula Is Necessary for Real Peace

9/29/2018

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Dr. Wordman

“Nearly five hours of unprecedented and surreal talks between US President Donald Trump and North Korea's Kim Jong Un culminated on Tuesday (June 12th in Singapore) with fulsome declarations of a new friendship but just vague pledge of nuclear disarmament.”, reported by Kevin Liptak on CNN website in an article entitled, ‘Trump's North Korean gamble ends with 'special bond' with Kim’.  Despite of being a historical event where the two leaders extended their handshake giving the world-wide news reporters an opportunity to capture an image of openly friendly gesture, the real accomplishment of the meeting did not go beyond what Kim had said in April nor added any substance over Trump’s praise of Kim being a talented young man. Now the Korea Peninsula issue is in the shadow; the world is preoccupied by the trade wars, President Trump has just put it in high-gear.

But the peace in Korea Peninsula is a very serious matter; it is not only a concern of the Korean people but also on the minds of Chinese and Japanese, neighbors of Koreans, for decades. The essence of the problem is not limited to denuclearization by North Korea (NK) or to stopping military exercises and pulling out troops by the U.S. The core issue is whether or not there will be a real peace treaty signed by the two Koreas (NK & SK) and the U.S. witnessed by their neighboring nations, China, Japan and Russia. For the Korea Peninsula region, the ultimate goal is to have a genuine peace treaty. Of course, the essence of a peace treaty will require denuclearization, removal of foreign troops and final reunification of two Koreas or at least a friendly coexistence of two Koreas under a peace treaty. The history of West and East Germany and the present day united Germany surely serves as a good lesson and model for the Korea Peninsula problem.

Why isn’t a peace treaty signed in 1954 when the Korean War was halted by the leaders then, Kim Il Sung, NK, Syngman Rhee, SK and Dwight Eisenhower, the U.S.? At that time, there was no nuclear threat issue. The military strength of the U.S. was overwhelming. It was almost certain that the U.S. could get a peace treaty between the two Koreas if she wanted to. For over six decades, NK has consistently proposed peace agreement to replace the armistice agreement wishing to end the abnormal situation - military tension - to a normal relation - Peace. D. shin, an academician, in his article, North Korea’s Perspectives in Its Argument for A Peace Treaty, published in Asian Affairs, 48:3, 510-528, online on September 14, 2017 (https://doi.org/10.1080/03068374.2017.1361244), argued to support the above NK position by “making a detailed examination of North Korean texts to fully understand its perspective, rather than a reliance on conjecture about its intentions and policy objectives”. 

Many experts argue that the NK proposal for a peace treaty has always been a strategic deception. Shin’s study on the NK’s proposed languages on peace treaty and various statements over the years was to find what the definition of peace in NK’s perspective is and to justify putting peace treaty on the negotiation table to resolve the Korea Peninsula issue. In the past, I have discussed that it is necessary to accept the idea of reunification of the two Koreas and to achieve a true peace treaty in order to resolve the Korea Peninsula problem. I am glad to see that Shin’s findings are consistent with my thought. 

It is worthwhile to summarize Shin’s conclusions below in a few concise statements to appreciate NK’s perspective on the peace issue, perhaps helpful in solving the NK dilemma:
1. Peace means ending of the armistice status - the current situation of military tension in Korea Peninsula and isolation of NK from the world -, both are abnormal.
2. The Armistice Agreement does (did) not define the ‘final peace’. Reunification is the ultimate goal.
3. Armistice is the anti-thesis of peace. The current armistice did not reflect or honor the agreement. (“For example, the commander in chief of the United Nations Command (UNC) was a signatory of the Armistice Agreement and the UNC was dissolved by the 30th Session of the UN General Assembly held in 1975 but the Armistice Agreement did not reflect this changed reality. In addition, NK claimed that the US violated the Armistice Agreement by appointing a SK general as a senior member of the Military Armistice Commission (MAC) in 1991and by withdrawing the Neutral Nations Supervisory Commission (NNSC).”)
4. The assignment of the U.S. military and shipments of large quantity of military equipment to SK by the U.S. are obstacles to peace. (NK realizes the nuclear weapon she developed is a major obstacle to peace.)

NK essentially wants to have a peace guarantee and certain peace mechanisms leading to peace. Peace treaty is the necessary step to reach a genuine peace with reunification or a friendly coexistence of two Koreas as the final goal. Though the NK and SK governments have not focused on the term ‘reunification’ frequently due to political consideration but the people of Korea do equate that to the ultimate peace. International problems are often solved by intelligent world leaders; skidding back to the 1954 Geneva conference on Korea may elucidate this point.

Recently, I had the fortune to have met a giant journalist, Mr. Seymour Topping, former NY Times Managing Editor and Administrator of Pulitzer Prizes, and had begun to read his books. In one of his books published in 1971, coauthored with Tillman Durdin and James Reston, The New York Times Report from Red China, I came across many interesting chapters reporting about China, political observations, China’s transformation, Nixon’s historical China visit, as well as interview with Premier Chou En-Lai. One particular chapter contributed by Audrey Ronning (Mrs. Seymour Topping, a photojournalist and Prose Award Winner, whom I had the honor to be acquainted with), entitled, Premier Reminisces with an ‘Old Friend’, had a passage very relevant to our discussion here. Premier Chou En-Lai met with Chester Ronning, Audrey’s father, Charge’ d’affairs of the Canadian Embassy and their conversation turned to the 1954 Geneva Conference on Korea, where Mr. Chou headed the Chinese delegation and Mr. Ronning was the acting head of the Canadian delegation. 

Chou was known to push for the peace treaty for the Korean Peninsula. In Audrey Ronning’s chapter, she wrote: “It was recalled how Mr. Chou had opposed the permanent closing of the conference when it became deadlocked. Instead, he proposed that it be adjourned sine die, to be recalled when the time seemed more appropriate to replace the Korean armistice of July, 1953, with a peace treaty.” “”if we had accepted your proposal at the Korean conference,” Mr. Ronning said, “we could have had a peace treaty.”” This passage strokes me hard, indeed, Mr. Chou was a great statesman and he could see clear and far. In 1954, Gen. Walter Bedell Smith, head of the U.S. delegate at the Geneva conference and President Dwight Eisenhower were too much influenced by the US military to see the political value of a peace treaty versus an armistice. If a proper peace treaty was established in 1954, history would have been rewritten, no nuclear threat from Korea today. 

Sixty four years later, the Korea Peninsula problem falls on the lap of President Trump, a self-claimed non-politician and expert on negotiation. Having a summit meeting with NK leader Kim Jung-En was Trump’s bold move but following through to achieve a genuine peace in Korea Peninsula benefitting the world requires Mr. Trump to think and act like a great statesman. We Americans hope that President Trump will reflect on the history and absorb the wisdom of many great leaders before him and make a genuine peace deal for Korea Peninsula in their second summit.

Ifay Chang. Ph.D. Author and columnist, www.us-chinaforum.org and .com, Producer/Host, ScrammblewordGames (on Youtube) Weekly TV Show, Trustee, Somers Central School District.
 


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​Outlook of US-China Trade Relations under WTO

9/22/2018

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Dr. Wordman
 
World Trade Organization (WTO) is an international institution. Although it is not an agency of the U.N., it has a strong relation with the U.N. WTO is an intergovernmental organization concerned with international trade regulation. It was established on January 1, 1995 under the GATT Marrakesh Agreement, signed by 123 nations on April 15, 1994.  GATT (General Agreement on Tariffs and Trade) was established after WW II in 1948 after economists recommended the establishment of three international institutions to manage, promote and regulate world economy, namely the International Money Fund (IMF, concerning with fiscal and monetary issues), the World Bank (WB, concerning with financial and structural issues) and the International Trade Organization (ITO, for international trade and economic cooperation).  The three organizations were proposed to be part of the United Nations system.  The ITO was to be a UN specialized agency to address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. However, the ITO treaty was not approved by the U.S. and a few other nation members thus never became a reality. Hence, GATT had to transform into an international organization to deal with international trade. Reviewing GATT’s history, one can see its complex growth just from the statistics of its ‘meeting rounds’ - starting year, number of members and length of meeting in months: (4/47, 23, 7; 4/49, 34, 5; 9/50, 34, 8; 1/56, 22, 5; 5/60. 45, 11; 5/64, 48, 37; 9/73, 102, 74; 9/86, 123, 87; 11/2001, 159, still going on). Membership grew to 159 with meeting became continuous nearly every month.
 
It was at the end of Uruguay round (1986-1994), the Marrakesh Agreement was signed to establish WTO (commenced on 1-1-1995). The standards of GATT on trade in goods were updated and additional 60 agreements added into the WTO agreement, falling under six categories: 1. General WTO member agreement, 2. Goods and investments, 3. Services, 4. Intellectual properties, 5. Dispute settlements and 6. Review of government trade policies (TPRM). In fact, WTO just published its TPRM on China on July 13, 2018. The report contains 38 summary points mostly with positive comments, meaning making improvements and adhering to WTO regulations. China is moving more to consumption based economy, reducing merchandise trade in percentage of GDP with growing services, improving in processing imports, one third of imports through one window taking 16.7 hours in 2017 down from 22 hours in 2016 and only 1.1 hour for processing exports in 2017, amazing efficiency. China has opened more free trade zones and allowed more foreign investment especially encouraging oil exploration. China’s State involvement in economy remains (which contributed to China’s success but also drew criticism from the U.S.) and China still maintains a price control list on commodities and services (that impact national economy and people’s livelihood) which was updated with items such as explosive materials, tobacco, drugs and construction projects removed. Over all, the WTO has a positive effect on China in managing her economic development and contribution to the world economy.
 
The last WTO review on the U.S. was in 2016, the 2018 report has not been produced yet. The 2016 report pointed out the deteriorating infrastructure and rising income gap as the challenges for the U.S. as well as her concern of anti-dumping, having 269 AD orders as of 6/2016 against China, EU, India, Japan, S. Korea and Taiwan concentrated in the steel industry. The anti-dumping issue is an odd topic in economics. When nations selling goods to another nation at low price (subsidized), the Importer has the freedom to accept or reject the sales. It is hardly a devastating problem, say, compared to a nation monopolizing a certain technology or material or goods and selling at a very high price. One well known example is medicine which many poor countries cannot afford to buy. It will be interesting to see how the WTO 2018 TPRM report will say about the trade war launched by President Trump and what impact it may have on WTO members.  The WTO deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements. Most of the issues that the WTO focuses on were derived from previous trade negotiations, from the Uruguay Round (1986–1994) to Doha Round (2001 to present). For example, the average tariff levels for GATT participants was 22 percent in 1947, reduced to 15% in 1960’s and further reduced to below 5% after the Uruguay Round. The economic historian Douglas Irwin at Dartmouth attributed the prosperity of the world economy, the growth of world trade, over the past half century to the creation of GATT and WTO. Now the U.S. is threatening to pull out of WTO, unilaterally imposing tariffs (25% on steel, 10% on Aluminum imports and 10% on Chinese imports and threatening to apply new tariffs on 500 billion Chinese goods), rejecting existing trade agreements and seeking unilateral preference negotiation. Granted, President Trump might have a point that the US economy and her trade relations with the world were the result of previous US Administrations, however, any change of policy must be well thought out and debated. The current US action seems to be random and impulsive, certainly disturbing to the world economy and the stability WTO was created to maintain.   
 
China first gained observer status in GATT in1986, working towards joining that organization. China hoped to be a WTO founding member but her attempt was thwarted by the U.S., European countries, and Japan. When China later joined the WTO, she had to agree to considerably harsher conditions than other developing countries. She was required to reform various tariff policies, including tariff reductions, open markets and industrial policies. China also had to deal with transparency and intellectual property issues. These changes were difficult steps for China as they were conflicting with her prior economic strategy. Accession required China to engage in global competition according to rules that she did not make. China's admission was a collective decision symbolizing a clear commitment towards multilateralism. After China joined WTO, her service sector was considerably liberalized and foreign investment in previously prohibited areas was allowed; restrictions on retail, wholesale and distribution ended. Banking, financial services, insurance and telecommunications were also opened up gradually to foreign investment. China’s economic growth is definitely helped by her membership in WTO, but it was her decades of hard work contributed to her success and benefitted herself as well as other WTO  members.
 
The issue of deteriorating US-China trade relations is not the problem of WTO nor caused by it. The US-China trade imbalance can be summarized in one phrase, ‘mismatch of economic development policy’, no one especially WTO should be blamed for it. The U.S. has been favoring service sector, particularly the financial service sector, over manufacturing. Her technological lead is also heavily applied to the financial sector. Thus, domestically, the U.S. suffered job loss in manufacturing which could not be made up numerically by the thriving financial industry. This economic trend also contributed to widened income gap and less goods export. On the other hand, China has been focused on manufacturing thriving in an export oriented economy. China is slow perhaps planned so purposely in pumping her service sector growth, particularly in financial services.  Therefore China was not a ripe environment to receive financial services from the U.S. This mismatch of economic development policies between the two great nations created a trade imbalance solvable only by policy adjustment. As China is moving more into consumption based economy and a more service demanding country, she will import more services including the financial services. China’s strategy to upgrade her manufacturing (China Manufacture 2025) will need more technology imports from the advanced nations like the U.S. The above two areas are both strong suits of the U.S. Looking forward, the mismatch will be disappearing. The US-China trade relations will ensure a more balanced trade. This can be achieved under the sound WTO umbrella.     
 

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Does Trump have a Strategy to Run the U.S.? Yes, But…

9/15/2018

1 Comment

 
Dr. Wordman
 
Donald Trump was an unusual Presidential candidate. His campaign style was unusual, combative, rude, impromptu and rash in presentation. His tweets were also unusual but he was successful in getting millions of followers and creating a new political fad, now adopted and imitated by many politicians. He was not eloquent in speeches with his limited vocabulary, but he was persistent in his claims, attacks and promises even without backup data or being challenged by the media. His ability to occupy the media limelight by attacking media was another unusual political phenomenon never occurred before. He was able to cast almost all his opposing and negative media reports into one disposal - ‘fake news’- amazingly, it worked.
 
Donald Trump surprised the media and the nation by winning the 45th US Presidency. He surrounded him with new faces in cabinet and White House appointments leaning towards right wing, hawkish and supportive to his ‘America First’ political slogan. Not everyone adjusted well in his new Administration. Trump was not shy in blaming his subordinates for blunders or crises whether they were created by them or him. One thing has become clear is that Trump is determined to deliver his campaign promises as his way of proving his worth to the people who elected him. On the issues raised during his presidential campaign, such as immigration, military revamping, job creation, trade imbalance, infrastructure as well as general economy, he has been focused on fulfilling his promises in his term.
 
Taking the immigration, he was serious about building a wall along the US-Mexico border. He was also harsh in dealing with illegal immigrants demanding deportation even mercilessly causing separation of children from their parents. He is pressuring Mexico to pay for the wall by saying “one way or the other Mexico will pay for the wall”. Trump’s immigration policy is stopping the illegal from consuming the US social welfare dollars and building a wall to stop inflow of illegal immigrants and drug smuggling into the U.S. draining the US economy - conceptually nothing wrong. President Trump’s desire to expand the military was a core promise during his presidential campaign. However, his proposed $54B increase in military budget raised concerns on federal budget cuts on non-military spending. He encouraged updating US Navy and Air Force military power but demanded more frugal budgets on weapon development from military suppliers - a balance sheet approach. Under Trump Administration, the U.S. sold more military gadgets than his predecessors enriching the military industry complex, good for winning more campaign donations and votes but little to do with long term national defense or world security.
 
President Trump had proposed gigantic tax cuts to induce American corporations to move their manufacturing facilities back to home to create jobs, but no coherent policy is announced to make that happen. Trump’s solution on job creation is also bottom line thinking. He hopes to induce corporations to bring headquarters and factories back to the U.S. simply by cutting taxes but not tackling the skill obsolescence problem - a fundamental education issue. He decided to initiate a trade war to reduce trade imbalances with US trading partners without a clear road map to hit homerun. Thus we see Harley Davison announcing moving part of its manufacturing to Europe citing the impact of 25% tariff on steel imports. Tesla, valuing potential China market for electric cars, is making plans to establish a huge manufacturing factory capable of making 500,000 electric cars per year in Shanghai free trade zone. Trump wants to levy tariff on imports, a simple balance sheet approach, to balance trade with no careful analysis of the impact to the entire national and global economy.
 
Trump claims; “for too long, US lawmakers have invested in infrastructure inefficiently”, ignoring critical needs, and resulting in deterioration. Therefore, the United States has fallen behind other countries. Trump wants to give Americans the working, modern infrastructure they deserve, but his plan of creating a $1.5 Trillion program for infrastructure repair and upgrade hinges on leveraging $200B federal dollars for five to one State and local government funding – simply a transfer of burden. The infrastructure burden has been shifting to the State and local governments for decades, however, most local governments on deficit budgets are unable to upgrade the infrastructure. So shifting the burden off the federal balance sheet is too simplistic a wish for solving the deteriorating national infrastructure. Without understanding what resources are needed, what magnitude of the budget is required, what priorities must be set up in a coordinated national plan executed in a timely fashion, can local governments fix the infrastructure problem – It seems impossible.
 
After the recovery from the housing-loan bubble in 2008, the U.S. general economy has slowly recovered and been stable with stock market showing a healthy pulse showing the second longest bull market cycle. However, all these can burst like a balloon again, if Trump’s trade war would bring down the US GDP by half or one percent point like some economists warned. In the main stream media, the anti-Trump sentiment is running feverishly high, although Trump seems to be able to hold his core supporters together sustaining his approval rating. What troubles the public including his supporters is that he has not laid out a clear blue print to make America Great other than repeating his ‘America First’ campaign slogan and ‘money-driven agenda’.
 
The trillion dollar question is whether Trump has a strategy and a secret plan for governing the U.S. domestic issues and directing the foreign affairs. The media does not believe he does thus constantly bashing him in a bad light. But in all fairness, based on his track record in office for the past nineteen months, I will say that President Trump had been very active in taking actions and initiatives. Analyzing what he has done so far, I am willing to say that Trump does have a strategy. His strategy is a ‘money-driven agenda’ to bring money to the U.S. treasury. He wants others to pay for the US spending, demanding NATO and other US allies (Japan, South Korea, etc.) to increase their defense budget, selling more arms worldwide and squeezing defense contractors, all based on a businessman’s simple balance sheet mentality with little security analysis. In Trump’s business mind, a positive cash flow and bottom line on the balance sheet represents success. More money and better fiscal state means better can the U.S. manage her national and international affairs – nothing wrong with that concept.
 
However, this kind of money-driven balance sheet approach to deal with the U.S. domestic and international issues is very much like using an abacus to solve a complex economic problem which can hardly be characterized by a differential equation. We expect that the Trump ‘money’ strategy will run into more problems than providing solutions in the long run. Take the trade policy or tariff war alone, many analysts have questioned its wisdom; some call it a poker player’s bluff that the U.S. can’t afford the consequence. The U.S. cannot solve the trade issue by bluffing. God has dealt the U.S. very rich resources. The heart of US economic problem is productivity, work ethics, and effective education and economic development policies. The trade imbalance was a result of trades made between willing partners. Trump’s tariff threat may get trading partners to negotiate faster, but the Trump Administration must have a deal in mind with every trade partner and must be prepared with a viable alternative if a deal goes sour.
 
Trump’s deal with EU President Jean-Claude Juncker made on 7-25-2018 is a reasonable tactic to calm US soybean farmers’ protest. But asking China to give up her ‘made in China 2025 plan’ and deny her market value to attract capital and technology investment seems to be a no deal and unfair proposal. Based on the tariffs already enacted by Trump Administration (and the total impact by escalated retaliation), the consequence may be a reduction of long-run US GDP by 0.06% (0.47%), wages 0.04% (0.33%) and full-time jobs 48,585 (364,786). (Erica York and Kyle Pomerleau, Tracking the Economic Impact of U.S. Tariffs and Retaliation Actions, Tax Foundation 6-22-2018 updated 7-20-2018) A Wharton Budget Model even predicted a reduction of GDP 0.9% and wages 1.1% by 2027. Trump must realize a ‘money-driven’ strategy is not adequate, more in-depth analysis with fair assumptions must be made to support a government policy.

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