This article was written by two Fall 2011 Fellows in PSA’s Congressional Fellowship Program. All CFP articles are produced by bipartisan groups of Democrat and Republican Fellows who were challenged to develop opinion pieces that reach consensus on critical national security and foreign affairs issues.
KORUS Free Trade Agreement: An Agent of Stability
Almost sixty years ago at the end of the Korean War, the relationship between the United States and South Korea took on a new meaning. The relationship was built on a cooperative framework between allied forces in order to promote stability on the peninsula through a strengthened commitment to the mutual goals of protecting democratic values, peace and economic security.
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Gary Hart is a member of the PSA Advisory Board, president of Hart International, Ltd. and chairman of the American Security Project. He served in the U.S. Senate from 1975 until 1987. This article originally appeared in The Hill on January 18th, 2012 and can be found here.
As an American with more than average interest and experience in Russia, it is a mystery to me why, unlike virtually every other country on earth, U.S. policy has tended to be so dependent on the personal relationship between the respective leaders.
This was especially true of Presidents Clinton, with the late Boris Yeltsin, and George W. Bush, with then-President Vladimir Putin (“I looked the man in the eye.”). This mystery of Russian relations is not totally confined to U.S. leaders: Remember Prime Minister Margaret Thatcher’s famous report to President George H.W. Bush on Mikhail Gorbachev as “a man we can do business with.” A humorist might call it the vodka syndrome, except Clinton was never known as a drinker and, of course, the second President Bush had sworn off alcohol.
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Bud McFarlane, former national security advisor and PSA Board Member, along with James Woolsey, former director of central intelligence, authored this Op-ed in The New York Times about their new bi-partisan effort, the United States Energy Security Council, encouraging the introduction of flex-fuel cars into the US market to foster better competition and put America on the path to energy independence. The article can also be read here.
OUR country has just gone through a sober national retrospective on the 9/11 attacks. Apart from the heartfelt honoring of those lost — on that day and since — what seemed most striking is our seeming passivity and indifference toward the well from which our enemies draw their political strength and financial power: the strategic importance of oil, which provides the wherewithal for a generational war against us, as we mutter diplomatic niceties.
Oil’s strategic importance stems from its virtual monopoly as a transportation fuel. Today, 97 percent of all air, sea and land transportation systems in the United States have only one option: petroleum-based products. For more than 35 years we have engaged in self-delusion, saying either that we have reserves here at home large enough to meet our needs, or that the OPEC cartel will keep prices affordable out of self-interest. Neither assumption has proved valid. While the Western Hemisphere’s reserves are substantial and growing, they pale in the face of OPEC’s, which are substantial enough to effectively determine global supply and thus the global price.
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Praseodymium, Gadolinium, Erbium: you may not have heard of them before, but chances are you’ve used them recently. All three are examples of rare earths, the 17 elements occupying the middle of the Periodic Table. Rare earth elements- which, in actuality, are as globally ubiquitous as many other metals- are a critical component of both current and future technologies, helping to create products from cell phones to fiber-optic cables to electric cars.
These elemental tongue-twisters, once only the provenance of scientists and technology manufacturers, have become the object of much attention and speculation from policymakers in the past few weeks, courtesy of China. Although the PRC only has 35% of the world’s rare earth reserves, it has cleverly maneuvered its way into controlling 95% of global supply for the elements, thanks to heavy investment in the industry and a willingness to incur massive levels of environmental pollution while mining them. In the past few months, China has strategically wielded its monopoly as a diplomatic weapon, halting shipments to Japan during the two countries’ nasty territorial dispute over the Senkaku/Diaoyu islands. Now reports say that China is using the same strategy against the U.S. in retaliation for the United States Trade Representative (USTR) accepting a petition alleging that China is subsidizing green energy investment in violation of WTO practices. All in all, it appears that China is beginning to engage in tit-for-tat diplomacy that raises serious questions about its intentions and its ability to behave like the superpower it strives to be. (more…)
Russia has many interesting New Year traditions, but the most famous one, at least in the Western media, is its annual bickering over energy prices with neighboring states. It was Minsk’s turn to join Moscow in upholding the tradition this year.
No sooner had Belarus finished toasting the New Year than Russia halted oil supplies to Belarusian refineries through the Druzhba, or Friendship, pipeline. Although the Kremlin quickly restored the oil flow to pacify its European customers, the dispute over pricing is far from settled. Russia and Belarus are still arguing over terms of a new agreement on export tariffs to replace the deal that expired on Dec. 31.
Having subsidized Belarus for years on end, Russia is now asking it to pay full import duties for the oil resold abroad. While Russia agreed to Belarus’ continuing to buy crude for domestic market duty-free, the Belarusian government argues that the customs union between the two states obviates the need for duty on all oil imports from Russia, including the 14.4 million tons of oil that Belarus refines and re-exports.
The oil dispute has already driven oil prices to a 15-month high and elicited strong criticism from the Europe Union, which imports thirty percent of its oil from Russia, half of it traveling through Belarus. Were the oil supplies disrupted, Germany and Poland would be hit hardest because Russian oil comprises 15 and 75 percent of their total oil consumption, respectively. (more…)
We’re now 9 months into the Obama administration and, on a number of fronts, I think our country is more secure. Most of all, Obama has set a new tone in our relations with the world. But I continue to see our greatest source of our insecurity — our economy — as suffering from a failure of governmental leadership.
By now, everyone knows the story that got us into the current economic crisis. Primed by cheap capital and lax regulation, Wall Street took out huge sums of debt and gambled on everything from stocks to subprime mortgages. This bubble economy proved incredibly profitable for Wall Street and its executives took home tens of billions of dollars in bonuses. Then, the bubble burst. But instead of having Wall Street bear the brunt of this cost, a decision was made that its banks were “too big too fail” and so the government bailed them out.
As I wrote back in March of 2008, I’m not necessarily against the original bailout, but it should have been accompanied by a “new contract with Wall Street” where banks were regulated so they could never again be “to big too fail.” My point was that if the government’s thesis was right, that some banks were too big to fail, then we had a terrible set of market incentives. Banks would come to realize that they were immune from bankruptcy because the government would be there to bail them out. This would lead to a dangerous market system where banks got all the profits from gambling and society absorbed all the losses.
I hoped that the Obama administration would clean up this growing moral hazard on Wall Street, but we are unfortunately seeing more of the same. Obama’s central plan has been to make capital incredibly cheap for large banks so that they get credit flowing again. While the credit markets have admittedly improved, this cheap capital has also added to the risk-taking and the bigness of these banks. In other words, we’ve made the moral hazard worse. The recent profits by Goldman show that it has returned to its high-risk business. No one can fault Goldman for taking risk and making money–that’s capitalism. The problem is that they’re taking this risk with the government’s highly subsidized capital and implicit guarantee in the case of failure.
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I would like to thank Mr. Eckel for the very cordial debate as well as the PSA for offering me this opportunity. Mr. Eckel was a challenging opponent, and I salute him for his effort. Rather than providing a lengthy discussion rewriting what has already been said, I will make an attempt to find some common ground between our two arguments while outlining where we differ.
It appears that Mr. Eckel agrees with affording America some military superiority around the world. However, how the military is used, and the economic limits of its superiority is where we differ. While I support working with our allies to preserve security around the world, we differ with how much faith should be placed in foreign governments. While Mr. Eckel and I both support free market capitalism as the best path to prosperity for poor nations, Mr. Eckel still concerns himself with tired leftist dogmas of overpopulation, global warming, and resource depletion. Of course in order to solve these mythical problems, the solution is always more and more government control.
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I’ve very much enjoyed these past few posts and the debate in which Devil’s Advocate (DA) and I have had the opportunity to engage. We clearly have different views of the strategic posture that the United States ought to take in the twenty-first century, as well as the international problems that merit the focus of its attention. Thus, in my ‘closing arguments,’ I’d like to come back to some of the principle themes we have explored, and try
to outline what I feel are the main analytical and philosophical differences between our views, as well as point out some areas where our ideas aren’t so far apart.
The first major bone of contention between DA and I concerns the relationship between markets, the environment, development and politics. Contrary to how it may have appeared to some readers, I share Devil’s Advocate’s strong appreciation of the power of free markets to efficiently allocate resources, punish needless waste, and create a prosperous national and global economy. Devil’s Advocate, though, too often falls into the trap of what David Goldstein calls “economic fundamentalism,” which treats the theories of classical economics as immutable laws, rather than as powerful but imperfect descriptors of economic behavior. I respect the precision of markets, but where they fail – for instance, in adequately incentivizing energy conservation, or in capturing the costs associated with global warming – it is up to governments, sigularly and collectively, to provide regulations that guide market behavior toward national and international goals. I think it is exceedingly important that regimes of global governance be constructed to encourage sustainable management of primary resources, impose costs on carbon emissions, and begin to move the global economy away from fossil fuels. I don’t say this because I’m worried about the fate of polar bears – though, as a peripheral issue, I am – but because I feel that the political and economic stability of this planet depends on it.
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What a wonderful world it would be if we could only wish our troubles away as Michael Landweber thinks we can. He wants the United States to declare victory over Cuba’s Castro regime while at the same time making concessions to it and bestowing the legitimacy that the dictatorship has craved for the better part of fifty years.
Mr. Landweber mistakenly characterizes U.S government’s policy toward Cuba as one based on animus toward a single person, Fidel Castro, rather than on a thorough understanding of the system that he has forced upon his countrymen. Though it’s now Raul Castro and not Fidel at the helm, the dictatorship remains unchanged. Just ask Cuban dissident punk rocker Gorki Aguila who was arrested on Monday for “precriminal dangerousness.” The repression continues despite the fact that Cuba is free to trade with every other country in the world. Apparently Landwber thinks that American trade has some mystical power to do what trade from other countries hasn’t been able to, bring down an intransigent totalitarian dictatorship, but he doesn’t explain exactly how that would happen. He can’t.
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Taking into account some of the arguments made by Devil’s Advocate in response to my previous post, I’d like to expand on some of my original points as well as clear up a few inconsistencies and misunderstandings that seem to have emerged in this exchange. I’ll return to the question of defense spending and America’s geostrategic position in a moment, but I’d like first to clear the debate of some straw arguments that Devil’s Advocate makes, likely due to my incomplete exposition of some of my original ideas.
In disputing my diagnosis of likely causes of twenty-first century instability, Devil’s Advocate makes the following argument:
Mr. Eckel attributes 21st century instability to “poor resource management, unresolved tensions between political institutions and political identity, [and] governments that are unresponsive to the needs of their people.” The exact opposite in fact is true: The instability in the world is directly caused by governments that attempt to manage their resources and economies (Pre-1995 India, Soviet Union, Zimbabwe, North Korea, Cambodia, Indonesia, Maoist China, Vietnam, etc.) Planned economies create much more instability than ones that rely on the free market and capitalism.
Just to be clear, I’m not advocating the reintroduction of central planning as the guiding principle of global economic management. I’m certainly not advocating for, nor defending, the kinds of klepto-socialism practiced by the leadership of Zimbabwe, Vietnam, Maoist China or the now-defunct U.S.S.R. When I talk about “managing” the global economy, I’m talking about using market-based institutions to guide global development. This isn’t a new idea, nor is it a particularly leftist one. The I.M.F. manages the global economy by ensuring that individual government insolvencies don’t lead to the systemic collapse of global finance. The W.T.O. manages global trade. The World Bank attempts to manage economic development. None of these institutions are particularly socialistic, and they certainly aren’t back doors to central planning. (more…)
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All blog posts are independently produced by their authors and do not necessarily reflect the policies or positions of PSA. Across the Aisle serves as a bipartisan forum for productive discussion of national security and foreign affairs topics.
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