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Archive for October, 2013

Beijing Tokyo BrusselsTufts University political science professor and long-time policy blogger Daniel Drezner pooh-poohs China’s recent, mild efforts to influence US domestic politics over the debt ceiling. Drezner highlights a senior Chinese Treasury official’s fairly anodyne statement, “the Chinese side feels the US needs to take realistic and resolute steps to ensure against default on the national debt”. Drezner finds the attempt “at best futile and at worst counterproductive.” Overall Drezner concludes there isn’t foreign pressure that could help resolve the conflict, given that some GOP members believe a default wouldn’t be a catastrophic crisis. (Drezner adds China probably isn’t the best country to deliver the message as it has been a bogeyman in recent American politics.)

There are two points I’d make in response. First, a point that I suspect Drezner wouldn’t disagree with: foreign leaders have reason to be highly interested in a prospective default. China holding in excess of $1 trillion in US treasuries certainly gives them an interest in expressing concerns about potential default. Beyond China, no one relishes the knock-on consequences for the global economy of a US default.

My second point challenges Drezner’s answer to the question “Is there any kind of foreign pressure [from friends or rivals] that would help [break the deadlock]?”

There is a policy option available to foreign leaders that will focus the minds of Tea Party members of Congress and their sympathizers.

China, Japan, and the European Union should ever so gently leak a draft, of a draft, of a green paper, on a communiqué on US debt default. After stating the obvious, wrecking the global economy by way of default is unwise, the draft Beijing-Tokyo-Brussels Communiqué would say: in the event of a US default we would impose tariffs targeted at those states (and districts) of the GOP’s Suicide Tea Party Caucus. Trade sanctions targeting the key products from states like Montana, Wyoming, Utah, Texas, and Kentucky. Ryan Lizza has already provided a handy map. Three of America’s largest trading partners could cover quite a few industries those states, their businesses, and thus their representatives care deeply about. Pressure from abroad to exert pressure from below on the Tea Party Caucus.

Tariffs targeting key American states is not an unheard of political tool. In its trade dispute with the US over steel tariffs, the EU threatened tariffs aimed at products from specific states due to steel links as well as those states’ electoral significance in the then-upcoming 2004 presidential elections (Guardian). Altogether, it becomes a lot more difficult to say, “Crisis, what crisis?” when confronted with the prospect of home district businesses and jobs being put at risk.

As for drawbacks, there’s the usual reticence on getting involved in the domestic politics of other countries. To quote LBJ, “Never tell a man to go to hell unless you’re sure you can send him there.” There is an ocean of things China, Japan, and the EU want from the US Congress – looser trade restrictions for China, increased US-Japan defense cooperation, and the prospective US-EU trade agreement immediately come to mind. It is ill-advised to reach short-term goals if putting long-term goals in serious jeopardy. Lastly, stabilizing the global economic system by threatening a trade war is pretty counterintuitive. Tariffs and the resultant retaliatory measures likely hurt everyone involved (see, Smoot-Hawley).

My reply to the counterarguments is therein lay the reason for “a draft, of a draft, of a potential green paper”, loads of distance between possibilities and actions. And yet reason for the business communities in these states to sit up and take notice. Since solid Tea Party Caucus members dismiss the prospects of a global-US default crisis as hyperbole, raising the prospects of an alternative default-linked trade crisis aimed squarely at their constituencies would be well worth the effort. Interviewed by the French press on targeting tariffs at specific states, then-EU Trade Commissioner Pascal Lamy remarked “At the end of the day the US president takes a political decision, and you have to be able to play the same game.” (CS Monitor). In this instance, Obama has limited leverage over members of Congress in safe seats with stridently conservative voters. Foreign leaders do have both a significant interest at stake as well as a policy option available beyond standing idly by or (ineffectually) voicing concern. If Tea Party intransigence continues unabated, yes, mess with Texas (among other states). Not least for shaving valuable tenths of a percentage point off US and global growth (Guardian), as well as for inflicting Ted Cruz and his ilk on us all.

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