American Evolutions, Part 1 of 3: From Sears to Google

See Part 2: From Order to Disorder… in America and Part 3: Beyond Democrats and Republicans.

Today’s story begins with the once-behemoth that is the American retail firm, Sears. In the last week of September Sears’ stock dipped below $1 a share, reducing the company’s market value below $100 million. Sears may still linger on a bit, but when a big firm falls into penny-stock territory, its outright liquidation is a foregone conclusion.

Sears (originally Sears, Roebuck and Company) is the iconic store of the American modernization experience. As a relative latecomer to the world stage, Americans got in on the industrial revolution significantly after most Western European nations. The vast majority of Americans lived on farms until late in the 19th century. Urban Americans had access to manufactured goods, but in rural regions most people made their own clothes and tools – or tapped the expertise of craftsmen in local towns. Most of these in-town purchases were managed via general stores where managers, knowing farmers had no alternatives, gouged on pricing, credit terms and selection.

Enter Sears.

Sears sourced manufactured goods from American cities (and abroad) and built a distribution network deep into every nook and cranny of the American territories. Starting with luxury goods in 1886 and rapidly moving into everyday products, by turn-of-the-century Sears’ 500+ page mail order catalogues had become ubiquitous not just in cities, but in farmhouses. It was Walmart and Amazon all in one. Sears completely overhauled what Americans considered to be centuries-old economic norms and pushed cheap, high quality manufactured goods into every single home. Sears quickly became America’s largest firm and largest employer. Quite unwittingly, Sears started the United States on the long path to urbanization, the industrial age, and the destruction of the local retail store.

(Incidentally, when the British Empire brought its manufactures to German lands, the economic dislocation helped start a German civil war. So anytime you think Americans can’t handle transformative economic stress, please try to keep it in perspective.)

Sears’ near-death today is part of a similar economic transformation. Just as Sears was a physical manifestation of the Industrial Revolution, Sears’ end is part of the Digital Revolution. Gathering, processing and distributing information has been the bugaboo of corporate systems as long as there have been firms with a reach further than they could see. The steamship and telegraph obviously helped, but managing anything big first and foremost requires an information system.

The Digital Revolution thus far has reduced the cost of storing information to nearly zero. In the early 1980s storing a gigabyte of data cost roughly $500,000 and I think that’s without accounting for inflation (economists and techies don’t always have the best relationships when it comes to data comparisons). Today storing that same volume of data costs roughly three cents. Information transfer costs follow a similar path (part of why all publicly available email clients are available at no-cost).

With information now being in effect free, the biggest restraint on industrial expansion became… humans. Someone still needs to analyze and distribute the data, and then check up on the results. Humans in the data chain have become the general store managers of our time, gatekeepers to the consumer that escalate prices. Enter algorithms, designed from day1 to remove humans from the data management equation. With the elimination of those pesky human barriers, the Digital Revolution reached out into the real world of sales and distribution and killed the job-destroying monster that preceded it. That’s remade how we design, order, manufacture, transport and warehouse goods. It allows us to instantly transmit architectural plans, military orders, payroll, and cat videos as well as get two-day (or less) deliveries for free.

The problem with algorithms is twofold. First, we have yet to figure out how to program in value judgements and ethics. Second, anything that introduces a hiccup into the information flow – say, fact-checking – increases the cost to something above zero. Just as Sears’ systematically cut out costs, algorithms and the human decision-makers who design and manage them see the human element as a block on progress. Something to be ruthlessly excised.

That has set up Silicon Valley for the mother of all government smack-downs.

Let’s divide the American political spectrum into four rough blocks: the center-left, center-right, populist-right, and populist-left – and then look at how their view of Silicon Valley has radically shifted during the past three years.

America’s center-left originally adored Silicon Valley because they were corporate titans with social agendas that matched the center-left’s general political views – particularly when it came to social policies on issues such as education, gay rights, and multiculturalism. The center-left – epitomized by politicians such as Chuck Schumer and Diane Feinstein – saw Silicon Valley as remaking corporate America from within.

But as information transmission became free, this happy marriage collapsed. Silicon Valley resisted anything that might infringe upon information flow, including flows that harmed issues the center-left valued. For example, Russian attempts to spawn race riots or shift the direction of a presidential campaign, or the ISIS live-streaming of executions, or disinformation campaigns blaming train derailments on Hilary Clinton after she lost the election. Consequently, the center-left hasn’t simply dropped its support for the Valley, it now sees the valley as a threat to democracy itself. The Valley’s chronic misogyny in the age of MeToo doesn’t help the Valley’s case with the center-left either.

America’s center-right – represented in Washington by folks such as Paul Ryan and Mitch McConnel – similarly were wedded to Silicon Valley’s aura. In the Valley the center-right saw a heavenly manifestation of what could be achieved with American know-how and new technology and a spirit of entrepreneurship in a low-regulatory environment.

This happy marriage has also ended. At first it was about politics: Valley CEOs started to get a bit too public with their enthusiasm for left-leaning issues, and charges erupted that some in the Valley were censoring right-leaning political viewpoints on platforms they controlled. But the center-right’s concerns soon deepened to something much more fundamental: much of the Valley committed to never working for the American government – most notably the intelligence community and the Defense Department. But Valley services remained fully available for sale so their work could benefit other government’s programs.

The idea that the political liberalism of Silicon Valley is better served by allying with Xi Jinping’s dissident eradication systems or Vladimir Putin’s systematic repression than the U.S. military requires mental contortions the center-right considers unfathomable. The center-right now doesn’t merely question the Valley’s ideology or even its patriotism, but its sanity. The most pro-business part of the American political spectrum is now firmly anti­-Silicon Valley. Concerns about cybersecurity and the regulations those concerns will likely spawn is only the icing on the cake.

But as much credence as there is to the points of America’s centrist politicians, the concerns of the American populists are actually more valid.

The populist right started out furious with Silicon Valley. Whether the politician is Ted Cruz or Donald Trump, the Main Street verses Wall Street discourse is not only a powerful one, it is broadly accurate. The current manifestation of Silicon Valley is fundamentally designed to remove as much human labor from the economy as possible. It – statistically – is the greatest job-destroying machine in American history.

The populist left is, if anything, even more angry at the Valley. Algorithms and robots don’t pay taxes, but their profitable outputs still accrue. This concentrates the income of what used to benefit human laborers to the operators and designers back in San Jose. Politicians like Bernie Sanders and Elizabeth Warren are fundamentally correct when they assert this is a leading reason for America’s deepening economic inequality.

All four factions are correct. All four factions are edging towards policies that would revoke the Valley’s unlimited license via some sort of constraining regulation.

Tesla is probably in the greatest danger. Technically, Tesla is a car firm, but its valuation and finance-raising systems mirror Silicon Valley rather than Detroit. That gives it access to ridonkulous amounts of cash – something necessary to pioneer fundamentally new technologies – but lands it with the metrics of a conventional automotive firm. Therein lies the rub.

When it comes to evolving ethics in a dynamic regulatory environment, most investors go with what they know. They know Tesla is a badly-run company that has yet to figure out how to move metal around its own factory floor. They know Tesla has almost never met a production goal. They know Tesla cannot break into the mass market (the cheapest available Model3 is at fifty grand, with the subsidy). They know Tesla’s technology and materials science is insufficient to its goals. They know Tesla faces stiff, rising competition from more experienced market players.

They know Tesla is led by a CEO whose social media strategies mirror a broadly-disliked president. They know Tesla’s CEO has bet the firm’s future on a political ideology that provides subsidies that will not last. They know Tesla’s CEO sees no problem cross-subsidizing the firms of family members. And they know Tesla’s CEO has settled with the SEC on charges of stock manipulation which cost the firm that has never made a profit $20 million. There is no shortage of preexisting business norms and regulations that could bring Tesla down. Should the investment community ever believe Washington is coming for Silicon Valley, they will ditch the weak players first. It doesn’t get weaker than Tesla – ergo why the short-selling of Tesla is already so intense.

Facebook comes in second, and not simply for the role they’ve played in Russiagate. The firms’ unfettered and enthusiastic raping and selling of customer data has not simply shown no ethical constraints, but we now know Facebook actively markets its user data to scammers. Not via the web – dark or otherwise – but by sending sales reps to scammers’ convention and closing deals in person. The public trust has been lost. The question in my mind isn’t will Facebook be eclipsed and displaced by a rival, but will there be prison time for some of its executives?

Twitter may have a brighter future. Unlike Facebook, TeamTwitter admitted the role it played in Russiagate fairly early on and has taken steps to roll back the damage. Such public admissions combined with a sense of genuine regret – or at least a reasonable digital facsimile of regret – stand in stark contrast to Facebook whose grudging, plodding steps have the feel of a six-year-old who thinks moving a single pair of underwear to the hamper has cleaned up his room and thus should be allowed to go back outside to play. Are Twitter’s actions and contrition deep and fast enough? That’s a political question, but I give points for effort.

One likely path forward in regulation is the modification of Section 230 of the Communications Decency Act. To make a very long and technical legal explanation short, Section 230 stipulates information technology platforms are not publishers, and so are not responsible for any content they pass along. Without 230 we’d not have an Internet economy since all our infotech platforms would be liable for the accuracy of everything in every webpage, blog post, pop-up ad and email.

To date, there have only been three carveouts: copyright infringement, child pornography and sex trafficking. Silicon Valley fought those carveouts tooth and nail, asserting first-amendment rights issues, but mostly being concerned about costs. The hilarity of deliberate inaccuracies currently punctuating American political information systems – Russiagate being the prime example – are pushing many political factions to consider a fourth carveout for foreign election interference. And while with some very skilled coding an algorithm can be taught to look for prostitutes, I’m guessing that determining whether an ad that slams or celebrates Hillary Clinton or Donald Trump is accurate will require the sort of judgement call only a human can make. And humans don’t work for free.

Amazon probably faces less pressure, and probably has more time. Yes, AmazonPrime and related subsidiaries are a very visible part and parcel of the whole job-destroying ethos that motivates Silicon Valley. But three issues pop up:

First, the damage to American retail is largely done. A stiff roll-back at this point would probably be counterproductive. And this is hardly the first American retail revolution: general stores to Sears to Walmart to Amazon. At each step the process is more capital intensive but less labor intensive with slimmer margins. Where do you draw the line? Do you draw a line? (A change to how Amazon is taxed, however, is an excellent idea).

Second, Amazon would operate in the red if not for a single unit that has nothing to do with getting a hairdryer to you: Amazon Web Services. AWS is the data management portion of Amazon which is wrapped up in nearly every dataflow for every business in the country. It is well-run, faces competition, and has next to nothing to do with the retail arm. Splitting the two so that the wildly-profitable AWS cannot cross-subsidize the barely profitable (and until recently, unprofitable) Amazon Retail makes a wildly great deal of sense for all players. It would certainly preserve the value-added portion of Amazon that generates lots of new sources of economic activity rather than gutting old sources.

Third, Amazon is everywhere. I don’t say this to imply U.S. government entities cannot bring it down, but instead that Amazon’s retail activities are in every American county, complete with dozens of distribution centers and tax relationships. Should the regulatory floodgates open the result will be a thick, self-ambulatory tangle of regulations at the city, country, state and national level. It will be a rancid mess that Amazon leadership will be able to exploit to buy time and – most importantly – to shape in a way to mitigate end-impacts upon the firm.

Of the big boy digital firms, that leaves Google, whose recent actions put it into a category all its own:

Recent defections from Google’s development teams have exposed the firm’s work on a project they call Dragonfly, a search engine product for the Chinese market. Allegedly, Dragonfly tags certain search terms the Chinese government chooses that it thinks might indicate dissident behavior such as “how do I get a Canadian visa?” or “what happened in Tiananmen Square in 1989?” or “what is Falun Gong?” It then packages the request with other search data on the person in question, complete with IP and physical addresses and phone numbers and forwards the information on to the Chinese state. It’s a degree of privacy violation and government monitoring of civilians that would have disgusted Orwell.

If – and I emphasize the word “if” because I do not have a Dragonfly-style program covering Google HQ – Dragonfly is real, Google is in serious trouble. Collaborating with a dictatorship that is sliding into a cult of personality so complete Hitler would have salivated over the program violates every ethical and political norm of every political faction in the United States. Anything that puts Elizabeth Warren and Ted Cruz on the same side during Senate hearings should get everyone’s attention. And Google’s executives’ refusals to confirm or deny Dragonfly’s existence while under oath before Congress tends to shift my thinking that this is less bureaucratic bungling and more greed so all-consuming it constitutes treasonous behavior. It is exactly the sort of massive corporate miscalculation that has triggered catastrophic government crackdowns on major American firms in the past. The breakups of Standard Oil and Bell come to mind.

And it would happen under President Donald Trump. Make no mistake. Trump is no longer part of the party of the businessperson. Things in America have changed in politics too…

Trade Talk, Part 2 of 2: For Whom the Trump Toll

On Oct 1 the American, Canadian and Mexican governments announced their mutual agreement to a revised treaty text for the North American Free Trade Agreement. As it was at formation, NAFTA remains the most valuable trade block in the world. Donald Trump insists the new deal will be called “the United States – Mexico – Canada Agreement” or USMCA. As something very close to that acronym has already been taken by an organization that excels in high-kinetic situations and getting American citizens abroad out of trouble, I’m still going to call the trade deal “NAFTA.”

Trump got a rough start. He came in with zero experience and a cabinet that was, in a word, messy. Organizationally he spent his first two years dealing with (causing?) personality and organizational conflicts, and during the past year he has fired nearly everyone in his cabinet with expertise.

But in the background this entire time, Trump’s trade team has continued hacking away at rewriting the United States’ entire trade position. During the decades of the global Order, the United States was all about granting the world deference on economic and trade issues so the Americans could gain the allegiance of most of the world on security issues. That’s how the Americans built and maintained their alliance against the Soviets. That Order is now collapsing, and that necessitates a different approach to both security and trade.

Meaningful adjustments to how the Americans treat the world are, generally, broad-scale disasters for most countries. The ability to trade security deference for economic dynamism in a world of global security was a great exchange for most. Under Trump the two issues are now divorced. You want a security deal with the Americans? You need to offer them something security-related. You want a trade deal with the Americans? You need to offer them something trade-related. No more cross-swaps unless you are willing to be embarrassingly deferential. At first everyone resisted. In part because they had a great deal going in – with the Cold War long gone they hadn’t needed to give the Americans much – in part because no one wanted worse terms.

But since the Americans control global finance and the global currency and global trade flows and the global ocean and global energy and the world’s largest market, the White House holds all the cards. Once it became clear Trump’s position wasn’t rhetoric, everyone knew they’d have to find a way to make a deal.

South Korea – fearing the need to stand alone against North Korea and China and Japan – went first, largely giving in to Trump on economic issues in the hope that when the time comes the Americans will be there on security issues. It is unclear if that will work for Seoul, but it was very clear the Koreans didn’t have a choice.

Next came Mexico, a country whose entire meaningful trade portfolio – and its recent rise from mass poverty – is wrapped up in NAFTA. A country whose seen its position in the U.S. market slashed by China. A country who knows it cannot attach itself to any other market.

Trump’s trade team used its agreement with Mexico to force Canada’s hand. And just like that, America’s economic position in the world is guaranteed. NAFTA alone accounts for roughly one-third of America’s entire global trade position. With that secure, the Americans can now get down to some serious bullying with everyone else.

Next up is Japan. Now sandwiched between a South Korea who already has a deal and a slightly redesigned NAFTA, the only markets that really matter to Tokyo are already locked into Trump’s new system. Trump wants a bilateral or nothing at all. And so this week Japan relented and opened negotiations. I doubt they’ll take long to conclude.

Even easier to negotiate will be a pending bilateral with the United Kingdom. In 2019 the Brits will be leaving the European Union without a deal. The pending hard Brexit will trigger a depression in the United Kingdom, forcing London to accept whatever trade terms the Trump administration sets.

Of America’s largest trading partners that only leaves two on the outside.

The first is Germany. There will be no deal here. There are two obstacles. First, Germany is within the European Union, and EU trade deals are negotiated and administered by bureaucrats in Brussels the Germans do not fully control. Those eurocrats tend to be pretty huffy about how special the EU is and – by design – do not factor in geopolitical issues. Even easy deals typically take a decade to negotiate and it is my opinion the EU doesn’t have that much runway left.

Second is the issue of France. If Paris and Berlin were to combine forces to pressure the EU secretariat to cut a quick deal with Trump, it might happen. But the French and German economies are structured differently and interact with the Americans differently. In absolute terms the French export less than one-third as much to the United States as Germany, to say nothing for the thin French industrial position within the United States itself. That leaves the eurocrats to do what they do best – and that doesn’t include a quick deal.

Hong Kong, China

That just leaves China, a country that is loosely tied for first place in the American trade volumes pecking order with the Canadians and Mexicans. With every country that gives in to Donald Trump, the maneuvering room of those on the outside shrinks. With Korea and Mexico and Canada and Japan and the United Kingdom locked in, already representing 40% of all US trade, China has everything moving against it. We’re now beyond the simple issues of the Americans controlling the global system but not needing it, or the Chinese needing the global system but being unable to maintain it, or the Chinese needing the American market far more than the reverse is true. We’ve even moved past the unavoidable fact that the two people most responsible for Trump’s foreign economic and security policies – Trade Representative Robert Lighthizer and National Security Advisor John Bolton, respectively – have taking China down a few dozen pegs as their top goal.

The new bit of info is that America’s entire trade policy is now designed to break China. The Americans wrote into the new NAFTA treaty that if a signatory signs a trade deal with any non-market-based economy (read: China) then the Americans will up and leave. Expect such language to be appended to every deal the Trump administration writes. For all the talk of China stepping into America’s free-trade shoes (which I always found rather silly) everyone now knows exactly the cost of picking what the Americans feel to be the wrong side.

We might even know the date. As part of their efforts to box in Iran, the Americans are prepping secondary sanctions against any entity that continues importing Iranian crude after November 4. Nearly all international trade is not settled directly, but indirectly via the dollar. For example, if Vietnam sells shoes to South Africa, South Africa pays rand to an intermediary which converts them to dollars, and then converts the dollars into dong which are paid to Vietnam (because no one in Vietnam has or wants rand, and no one in South Africa has or wants dong).

Since the U.S. dollar is the intermediary that makes it all work, Washington holds the option of saying “no,” especially if those transactions are routed either through U.S. banks or banks that value their business with U.S. institutions… like the Federal Reserve. Apply that to all transactions of a given entity and the effect is a complete shut-out from not just the American market, but all global trade.

As present, China is the only country that hasn’t at least hinted at cooperation with the United States’ anti-Iranian efforts. That raises the tantalizing, terrifying possibility of a trade-cum-security-cum-finance throwdown between the Chinese and Americans as soon as November 5 that is less the Chinese bringing a knife to a gun fight and more the Chinese bringing a knife to an artillery exchange.

For those thinking that Trump is a spent force because he’s about to face a mid-term wipe out, think again. Even in the event of a Democratic wave that turns the Congress blue, nothing changes. The U.S. Constitution clearly grants the presidency preeminence and autonomy in foreign affairs. When domestic politics hobbled Bill Clinton, George W Bush and Barack Obama, all three put more of their hours into international politics. At its fundamentals, trade policy is part and parcel of such foreign affairs issues. Congress might be required to stamp approval on new deals, but Congress plays no role if the executive wants to scrap old deals. Trump can even choose to cease executive workings for preexisting deals he might legally need Congressional approval to scrap. (You can thank George W Bush and Barack Obama for setting that particular precedent – they are the ones who decided to not enforce laws they disagreed with.)

The fact is that the United States has leverage to spare in every sphere of global significance, and Trump is racking up some significant successes in converting that leverage into real – if fairly minor thus far – changes. Whether or not you care for the Cold War Order or trade deals like NAFTA or more direct action against traditional trouble states, change is less in the wind than barreling down the tracks towards us all. And with each of the old-style allies that finds itself lined up in the new Trump-style system, the speed of onrushing change will only increase.

Now if we only knew something about the destination.

Trade Talk, Part I of II: Oh Canada, What the Hell is Going On?

In the late hours of September 30 a small bevy of leaks indicated Canada and the United States agreed to terms that will allow Canada to remain in the newest iteration of both countries’ premier trade relationship: the North American Free Trade Agreement. In the wee hours of October 1, said rumors were confirmed and fleshed out by both governments.

It has been a long road. Ronald Reagan initiated the process, George HW Bush finished the negotiations, Bill Clinton got the deal ratified, and George W Bush bridged the NAFTA relationship to North American security issues. Donald Trump has railed against NAFTA since the very beginning, and three decades later he made the abandonment and/or forcible renegotiation of every trade deal on the books a key piece of his presidential campaign.

The part of the American business community that depends upon international manufactures trade is hugely relieved – Canada and Mexico comprise about one-third of the total American trade portfolio. Simply walking away from NAFTA, as Trump often threatened, would have at a minimum triggered a Texas-centric American recession. Now businesses can look forward to revised rules-of-origin, agricultural access and dispute-resolution systems expressly modified to benefit American entities.

Overall changes to the trade pact are on the minor side: tweaks to dispute resolution mechanisms, increased requirements for local content in automobiles, improved access for digital firms both in the cloud and on the ground, minimum wage levels for some manufactured goods, greater access for U.S. agricultural products, and improved protection for intellectual property – particularly for pharmaceuticals. Overall, it’s a change in less than 5% of the original deal with most of the changes simply being updates to reflect the fact that it isn’t the 1980’s anymore.

Of course, this is not over. Completing the negotiations is a required step of critical importance, but now we get to deal with the fun and games of a trinational political ratification. In the United States, Trump will need to get the new NAFTA through the post-midterms Senate. In Mexico, outgoing President Enrique Peña Nieto will sign the deal on his last day in office, but it will be up to populist greenhorn Andres Manuel Lopez Obradorto get the text ratified and operationalized. Any number of things in either in-flux country and with either moody leader could still go horribly, terribly typical and wreck the whole thing.

But the most interesting developments might well be up in the Great White North.

First, the backstory of how Canada fits in to American-led trade deals.

The core of the American grand strategy during the Cold war was very butter-for-guns. The Americans would create a global Order to indirectly subsidize everyone’s economies, and in exchange the allies would grant the Americans broad control of their security policies so the Americans could fight the Cold War without having to refer everything to committee. That’s the core tenant of the American relationship with everyone from London to Paris to Berlin to Rome to Tokyo to Seoul to Canberra (and even Beijing).

But not for Ottawa.

That’s because the Canadian educational system is sufficiently strong that Canadians can read a map. They know that no matter what the Americans do to defend themselves, there is no version of American security so limp that it does not also require the defense of Canada. Add in a cultural, economic and political understanding of Americans matched by no one else on Earth, and throughout the Cold War and post-Cold War periods Ottawa has always been able to turn an inch into a yard when dealing with Washington. Perhaps the most obvious example of this is Chapter 19 of the NAFTA accords which established tribunals for arbitrating trade disputes between American and Canadian firms. This chapter was negotiated by Reagan – hardly a president noted for the willy-nilly waiving away of American sovereignty or autonomy.

Québec City, Québec, Canada

Ok, with that set up, let’s now dive into the Game-of-Thrones-with-a-Smile-eh world of internal Canadian politics. Folks, stick with me here. Canada is a bit bizarre.

There are three types of democratic political systems. The first is unitary where the capital city is large and in charge: France, the Netherlands, Argentina, Japan, Korea, New Zealand, Sweden. The second is federal. The powers of governance are balanced among local, regional and national authorities: the United States, Germany, Australia, Mexico, India.

The third is confederal: where the provinces have far more power than the national authorities on most issues. Confederal systems are of sort messed up because on most issues the individual provinces hold veto power over most issues. In confederal systems, change comes veeeeeeeeeeeeeeeeeeeery slooooooooooooooowly: Switzerland (which only granted women the vote at the national level in 1991) and Canada (which only signed a comprehensive internal free trade agreement in 2017).

That’s strange even before you mate it to the Canadian ethnic divide.

Way back when, both Canada and the United States used to be British colonial possessions. But other European powers held North American colonies as well, and in 1754 British-French tensions boiled up into a decade long conflict we know as the French and Indian War. In that conflict the French were roundly defeated by a combined force of British Redcoats, Canadian colonists, the Iroquois Confederation and Yankee Doodles led by one George Washington.

The terms of the post-war settlement handed control over several French possessions – what we know today as Quebec – to the British. Because the British decided they didn’t want to kill the French who were already there or fight a war of occupation, they granted the French colonials broad economic, cultural and linguistic autonomy: the Quebecois were born. About a century later when the British started incrementally granting their Canadian colonies independence, Quebec was tossed in with the Anglo provinces – British-granted autonomy and all.

Bam! Canada is a bi-lingual, bi-national confederation.

One of many outcomes of this is the Quebecois have the ability to veto all kinds of things at the national level. It also means that what seem to be irrelevant, even petty, topics at the provincial level tend to shape Canada’s national and even international policies. Policies like trade. For example, Quebec maintains one of the most inefficient, coddled, expensive, low-quality dairy industries in the world – and Quebec’s ability to shape national policy has enabled it to shape trade policy with the United States to protect Quebecois dairy.

The new NAFTA text takes direct aim at that industry, hardwiring in a tripling of U.S. dairy access to the Canadian market as well as changing protein standards for dairy products, a technical tweak highly likely to increase American access even further. Quebecois farmers are, unshockingly, apoplectic and are threatening political consequences.

It isn’t an empty threat.

Canada’s Liberal Party thinks of itself as the “natural” ruling party of Canada. It is in some serious trouble. Let’s start with its leader.

Prime Minister Justin Trudeau still may be a cool-sock-wearing liberal heartthrob on the global stage, but the shine has most certainly come off back at home. No one ever thought Trudeau was very bright. A cadre of liberal technocrats maneuvered him into power largely to ride the name recognition. I don’t mean this as a condemnation. The technocrats are doing a better job than their equivalents in most other Western countries, and if in a confederal system all you need a prime minister for is to kiss some babies, flash some smiles and cut some ribbons, the younger Trudeau is a fine choice. But his lack of foresight, political skills and leadership has costs, and technocratic cabinets aren’t that great in times of extreme change.

Consider a person for whom I hold immense respect: Chrystia Freeland. She took over Canada’s foreign ministry ten days before Donald Trump became the U.S. president. She inherited the old Canadian foreign policy rulebook that detailed how to best exploit Canada’s position as a free-rider in the American-led global Order. She quickly discovered Donald Trump was not only serious about ending the Order and re-negotiating NAFTA, but that the American president thinks of Canada as a normal country that warrants no exceptions whatsoever on economic and security policy.

Freeland has spent most of the past two years trying to protect the old arrangements, to no avail. Because Canada is confederal, her hands were tied. She couldn’t offer concessions. And because Trudeau is a (fantastically well-coiffed) bobble-head, there was no leadership from the top as to how to deal with such radically changed circumstances. When Trump initialed a bilateral deal back in September with Mexico to proceed with NAFTA2 withoutCanada, Freeland realized she had to take drastic action for the good of the country. The result? Last week Freeland dropped her hardline stance, caved a bit, and got the best deal she thought she could.

So now we have several things moving at the same time.

First, the Liberal party is getting gutted politically. Earlier this year the Liberals were ejected from power in Ontario, Canada’s most populous province. On October 2 the Liberals of Quebec – the second-largest province – weren’t simply defeated, but gutted by Coalition Avenir Québec (Coalition for the Future of Quebec), a center-right party so new as to be wet behind the ears. In May 2019 Trudeau’s semi-ideological allies in Alberta, Canada’s richest province, are likely to be eradicated by a conservative/separatist alliance. It would be challenging for a strong leader to turn these sorts of defeats around for national elections in 2020. Justin Trudeau is not such a leader.

Second, Trudeau faces a more personal challenge. He is Quebecois ethnically, but he was raised in Ottawa. English is his first language. His French is comme ci comme ça. The Quebecois like having one of “their own” in charge, but only if he can deliver. The new NAFTA’s dairy rule combined with the fresh winds in provincial rulership have just denied him what gravitas he held in his “home” province.

Third, the Americans will not let up. Trump’s negotiating team – lead by one very wiley Robert Lighthizer – refused to lift America’s aluminum and steel tariffs in the rubric of the NAFTA re-negotiation. And they won’t until such time as the Canadians ratify the new treaty text.

Fourth, don’t forget Foreign Minister Freeland. Her personality is the work of the same character artisans which brought us Hillary Clinton and John Bolton. Professional, direct, competent, a bit schemy, and if you cross her she will cut you. But she’s still Canadian so most people think of her as mostly nice most of the time.

Freeland has just been forced by circumstance to take a strong leadership role and execute some seriously decisive actions – something her boss is broadly incapable of. If she wasn’t already thinking that perhaps her party needs a new leader and her country a new prime minister, she probably is now. And since she clawed her way from opposition backbencher to foreign minister in less than fifteen months, I’m going to go out on a limb and guess she has an idea of who might be right for the job.

Treason Talk

Donald Trump’s past week has been eventful, travelling to Brussels for a NATO summit, London for a meeting with the Queen and the UK prime minister, and Helsinki for a much-ballyhooed summit with his Russian counterpart, Vladimir Putin.

Trump was his usual self, denigrating allies and organizations that the United States itself created and runs. A friend of mine in the foreign policy community referred to Trump’s actions at the NATO summit and in the United Kingdom as the equivalent of taking a huge, steaming s**t on the entire Western world. And then in Finland, Trump indicated he believed Putin’s word over the American intelligence community and the Justice Department when it came to accusations of Russian meddling in the 2016 presidential election. Trump has since clarified that’s not quite what he meant, but it was clear from his tone and caveats that his “clarification” was written by someone else. Best guess on the author: White House Chief of Staff John Kelly (who reportedly went all Marine General on his boss upon his return from Helsinki.)

Back in the States, pushback to Trump’s statements – particularly to the Helsinki summit were… thorough. I have yet to see anyone in the world of American media that was not at least partially pissed off. Even Fox and Friends, by far the U.S. president’s favorite news show, was less than complementary.

I was particularly taken aback by the sudden explosion in the use of a word that doesn’t often crop up in American political discussions: treason. First used by former CIA Director John Brennon, the word’s use quickly spread across the internet to permeate the American political conversation.

It is not, in my opinion, very useful.

Treason is the crime of betraying one’s country, in particular by attempting to overthrow the government, attempting to kill the sovereign, providing assistance to a foreign power against the United States in war time, or providing aid and comfort to a foreign government. Considering that Trump is the head of the American government and the United States and Russia are not at war, making a legal case for the first three of these conditions is impossible. That just leaves “aid and comfort” – and if the full power of the United States government cannot manage a treason conviction against someone like Walker Lindh, it is difficult to envision someone making charges stick against the dude in charge of the U.S. government.

The people using the “t” word cover a disturbingly wide spectrum. The first are those who believed they could and should impeach Trump before he even got into office. These are the people who do not analyze, but instead – much like Trump – react by instinct. Trump’s particular… style… amplifies this visceral reaction. No matter what happens, their scripts are written until the day Trump is no longer president. I don’t pay too much attention to this crowd.

The second are the more reasoned critics, on both the Left and Right, reacting to Trump’s statements and actions. Some of these critics have been vocal from the beginning – like the Never Trump crowd – while others have tried to avoid the fray. Their ranks are growing – and getting louder.

These two groups combined cover a growing swath of the American public and policy establishment. The primary implication of the growth of these groups is that their size and volume make it more difficult for the American president to manage domestic affairs. That by default forces the president into the realm of presidential power over which Congress and the public play little role: foreign affairs. That’s right folks. Trump is going to do morestuff like this recent Europe trip because it may soon be all he can do.

It’s the third group openly discussing treason that really gets my attention: those who have made it their lives to serve and defend the United States during the Cold War and beyond, for whom the Russians have always been public enemy number one. The idea that an American of any stripe – especially the Commander and Chief – would actively seek a friendly relationship with a foreign leader and country who has proven so consistently, pathologically, and above all recently hostile to American interests to them is a world turned upside down.

But therein lies the problem. We are in a world turned upside down. This groups’ reaction is more a reaction to that altered reality than it is to Trump.

The global Order is out of date to the point that it was going to break apart no matter who won the 2016 elections. We can argue back and forth over the details of how a President Clinton would have been different – and there are many – but the core issue is the American people have lost interest in managing the global system. Without ongoing American involvement, that system was doomed.

The real problem here is that the generally calm, reasoned national security community – the soldiers, diplomats, and intelligence teams that keep us all safe, the people who represent the vast bulk of American expertise on all issues foreign policy – are working from a playbook that dates back four presidential administrations. Trump is hardly the only American president guilty of abdicating America’s global vision – it was a failing of the Clinton, W Bush and Obama administrations as well. What is different about Trump is that he is not even giving the old playbook lip service. Instead he is leading by instinct, and demonstrating that instinct can still reveal truths… truths that have been apparent for 29 years.

As regards Russia, I’m not a fan. Never have been. I tend to not like countries that have pointed nuclear weapons at me my entire life. But Russia is no longer the United States’ primary enemy and hasn’t been since 1989. That’s not because Moscow has started acting like Minnesota, but because the Soviet collapse and Russia’s relative weakness means that containing Moscow with a globe-spanning alliance is no longer the lens through which the Americans view everything. America needs to update its strategic policy, and pick and choose friends and foes as guided by that updated policy. And with that update, who knows, Russia may well be something other than a foe. You don’t have to delve too deeply into history to find examples of the Americans partnering with unsavory elements in order to defeat more unsavory elements: Mao against Stalin, Stalin against Hitler.

Putin against al Qaeda.

That doesn’t mean Trump’s actions are wise or productive. That doesn’t mean Trump has a plan. Of course there are better ways to do this. There are aspects of the NATO alliance – in particular members of the NATO alliance – that are worth maintaining. Even cutting NATO into bait would be more productive than the path Trump has chosen. But the bottom line is the Order is gone, and so far the only person who seems willing to admit it, however frustratingly, is the man at the top.

I get why the American foreign policy class feels overwhelmed, offended. Betrayed. After a quarter-century of American leadership largely ignoring them or sending them on wild goose chases through the Middle Eastern Sandbox, they now have a leader who has torn up the script they’ve been following their entire adult lives. It isn’t that they are wrong about the risk to the international order, per se, but instead that they are late to the party. What comes next for the world is scary, particularly after decades of relative stability and prosperity. The American policy establishment (much less the public) is panicking and stampeding for the door. It hasn’t yet realized that there is no going out the way we came in. Until that sinks in (and probably well beyond), Trump will be blamed as the cause. There is plenty of criticism for the quick, ugly, instinct-driven way Trump is severing America’s ties to the world, but there are far greater forces at work than a real estate mogul from Queens.

Instead of panicking through the saddest party of the century, the Americans need to find a new way forward. That’s impossible without a national conversation on what America wants out of the world, and it is certainly impossible without a president who actually engages with his own people. Until the United States figures out that new strategic policy, we will be living in a world in which the Americans are not a force for Order, but instead the greatest wild card in history.

I Think They Get It Now, Part I

Jump to other parts of this series: France, Germany, UK, Italy, Japan, and Canada.

U.S. President Donald Trump made a… let’s call it a splash, at the G7 summit in Canada June 9. The G7 comprises the seven largest industrialized democracies – the United States, Canada, Japan, Germany, the United Kingdom, France and Italy – who also form the core of the entire American alliance network. Their leaders and finance ministers meet regularly to discuss challenges to the global order. Normally, the G7 is a bit of a lovefest with leaders agreeing to push this bit of financial stability or that bit of poverty reduction.

This time was different. The Trump administration is busy belittling and/or wrecking parts of the international order, and a mere week before the summit the United States levied steel and aluminum tariffs on nearly all the G7 members themselves. As such the summit was preceded and followed by quite aggressive statements out of most of the G7 members, most notably from Canada and France, about how American tariffs would not be allowed to stand in specific and a general dissatisfaction with the position of the White House on global affairs in general.

In essence, ahead of the summit the G7 leaders were showing concern that Trump’s rhetoric wasn’t simply rhetoric. And in the summit’s aftermath the emotion could best be summed up as defiant despair that Trump really, truly, means what he says.

I can see why they’re all pretty bummed.

The Americans created, supported, subsidized, and maintained the global order since the end of World War II. Under that order the industrialized world in general and the other G7 countries in specific have done very well for themselves, rebuilding after the war’s devastation in an environment of absolute physical security.

Maintaining a global order is far from “normal” when viewed from the long stretch of American history. In fact, it has only been the dominant strain since the end of World War II. Before that the United States had other foreign policy themes that competed for top billing.

  • In the post-revolutionary era it was all about standing up to the established European empires, with former imperial master Britain in general triggering a near-dehabilitating mix of obsessive paranoia and narcissistic fear.
  • The competing ideology back then was that the United States should be one of those imperial powers.

Theme1 nudged the Americans into the War of 1812, and led the Americans to encourage the independence of the European’s imperial colonies throughout the Western Hemisphere. Theme2 birthed the Monroe Doctrine and set the Americans on their own pseudo-colonial drives.

But as the world – and America – changed, American foreign policy changed with it. The American Civil War and Reconstruction removed all appetite and bandwidth for meaningful foreign policy, triggering a shift to hard isolationism. Once the Americans finally had their (second) coming out party with the Spanish-American War in the 1890s, isolation gave way to a mercantile-driven dollar diplomacy where the Americans would fence off swathes of the world in a corporate-driven foreign policy designed to maximize American economic penetration. The Depression and World War I convinced Americans the world was no fun at all; isolationism came back into vogue.

The great upheavals of the World Wars left the US the pre-eminent power in every respect that matters. Over the course of fifty years, the Americans had gone from almost no navy, stealing Britain’s IP, and being a major global debtor to having the only navy, the technological edge, and to being an economic power on an unprecedented scale. The US had a choice: seek isolation once again and watch its only real competitor – the Soviets – slowly eat away at the periphery until they could challenge the US or find a way to take a ragtag group with long lists of mutual historical grievances a mile long and get them to work together. A real life Magnificent Seven.

The new idea was as straightforward as it was revolutionary: use America’s newfound and historically unprecedented economic power to pay all the previous competing powers of eras gone by to be on the same side. Any country that had any meaningful imperial presence could only do so if it also had a significant naval force. These empires’ clashes — over resources, populations and trade routes — were the root causes of nearly every significant military conflict of the entire industrial period, and they culminated into the First and Second World Wars.

In response, the Americans launched a broad system of what was collectively known as Bretton Woods, named after the location where the deals were first hammered out.

Bretton Woods provided global security for all the maritime and industrial powers, enabling all of them to access any resource anywhere at anytime safely, and then export finished goods to the American market. Bretton Woods puts all the world’s competing naval / maritime / trading powers on the same side by providing them with everything they had ever fought to attain. In exchange the Americans only demanded one thing: alliance against the Soviets.

All those purchased allies are all still powers of significance today, and it should come as no surprise that the most powerful of them now comprise the G7. All were represented at the G7 summit in Canada this past weekend.

Ship traffic around Singapore

The Bretton Woods strategy is notable in American diplomatic history in that it had no counterpoint. No other policy oscillated with it. Bretton Woods was both bipartisan and served as the norm for seven decades. But longevity and broad support are not the same thing as sustainability or permanence. The world is changed since the Cold War’s end, and now – belatedly and until now piecemeal – the Americans are finally changing with it. Trump’s foreign-policy beliefs are not a bug in the American system, they are a feature. Under Trump the Americans are firmly – finally – abandoning Bretton Woods, and in doing so flirting with all four of their pre-Bretton Woods foreign policies.

  • Trump’s hardball on NAFTA is most definitely neo-imperial. He is attempting nothing less than the forcible change of the economic structure of America’s neighbors to meet specific American structural needs. Also fitting the mold is Trump’s suggestion that Russia be re-admitted to the G7. In a post-Bretton Woods world Russia is less a foe to be contained as it is a potential partner to leverage against other competitors.
  • Trump’s position on Syria is flat out isolationist. As are many of his inklings on U.S. basing and strategic stances in Western Europe and East Asia. It isn’t as crazy as it sounds. Something that no one has ever been able to explain to me about American involvement in Syria is what-does-the-winner-get? And the idea that the Americans should defend the Europeans from Russia so that they can use Russian energy en masse has always been an awkward sale.
  • Trump’s pending trade war with China has overtones of the anti-British policies of America’s early decades. And there are more than mere echoes of the general anti-British paranoia in Trump’s overall feelings about foreigners whether they be Chinese, Mexican, Iranian or Arab.
  • Trump’s willingness to flirt with North Korea most certainly has a dollar diplomacy feel to it, and Trump has directed Commerce Secretary Wilbur Ross on a never-ending road-show for American goods… and linking potential sales to ongoing trade negotiations with, well, everyone.

Viewed through the prism of Bretton Woods all these goals and methods are inane. But viewed through the lens of anything other than the strategic environment for which Bretton Woods was designed, Bretton Woods itself is ridiculous.

It isn’t that these goals – or even methods – are good or bad. It is that they are different. It is that they better reflect America’s current situation than the Bretton Woods situation does. The Americans are done paying for alliance.

Courtesy of the G7 show this past Saturday, I think they get it now. I think America’s closest allies realize the shift in the White House is, indeed, real. I think they understand Trump is not bluffing. I think they’ve internalized that Trump’s rhetoric is the American position. I think they finally believe Bretton Woods will not magically regenerate when Trump is gone.

And that means it is high time for the allies to figure out where they fit into the scared new world that is tumbling open right in front of them.

In this series we will go through the other six members of the Group of Seven. These are the powers that the Americans co-opted to make the Bretton Woods system work. They are the countries with the greatest long-term potential to shape and re-shape their worlds. Many may be out of practice, but that is far from saying they are done with history.

This Is How the World Ends, Part V

by Peter Zeihan, Melissa Taylor, and Michael N. Nayebi-Oskoui

See Part I, Part II, Part III, and Part IV.

Event 5: Trump Unleashed (in progress)

The United States has never made foreign policy by committee.

The Constitution grants the executive broad authority and autonomy to collect information, come to conclusions, chart out strategies and implement foreign and military policy. Congress technically has oversight, but the legislative branch lost interest in and surrendered meaningful control over foreign policy over a decade ago. Within the executive branch there are no meaningful checks on the president’s powers, with all senior executive staff serving at the President’s pleasure (or, if you prefer, whim).

Trump has been pruning his executive staff quite rigorously in recent months, and the foreign affairs team is no exception.

Think back to the 2016 campaign. In the early months there were 18 people vying for the Republican nomination. Everyone assumed Trump’s campaign was a marketing scheme, so Trump got 18th pick for advisors. This landed him with disasters-in-waiting such as Michael Flynn.

Upon actually becoming president, a number of individuals from more established interests either saw an opportunity to shape a man who was obviously a neophyte and/or felt it was their duty to the country to try and advise the freshman president. This gave rise to what I’ve called the “Axis of Adults.” These are the men who wanted to make sure the country didn’t go off the rails.

The chair of the National Republican Committee – Rince Priebus – became Chief of Staff in an attempt to inject some Republican orthodoxy. Army General HR McMaster became National Security Advisor with the intent of speaking truth to power. ExxonMobil CEO Rex Tillerson took over the State Department to share the insights of corporate America. Gary Cohn climbed aboard to explain the ins-and-outs of Wall Street.

All sought to actively shape President Trump’s views. All are now gone.

Washington, D.C.

Another pair already have one foot out the door. Priebus’ replacement as Chief of Staff – General John Kelly – felt the best thing he could do to help the president was ensure accurate information delivery. That meant, among other things, taking away the president’s phone so he wouldn’t ingest bad information… and so Trump now plans his life without much consulting his chief of staff. General James Mattis – the Defense Secretary – now seems to be the only person allowed in the room with an interest in accuracy, context and consequences. It makes him a bit of a downer in adrenaline-fueled TrumpWorld, and I’d be shocked if he wasn’t excused by year’s end as well.

Bottom line: All the chaos and disruption of the past 15 months has been the result of a Donald Trump who has been actively held back. Now the world gets to see what a Trump unleashed – an America unleashed – can do.

The pace of… everything is about to pick up considerably. Between the end of the WTO and the dawning exploitation of secondary sanctions, the US is getting the free use of its other hand – its natural economic power. The Trump administration is testing America’s strength just as other major powers are hitting structural barriers, not least of which are demographic. The Americans are now only one of the few peoples that are repopulating, within a generation the average American will be younger than the average Brazilian (the Americans are already younger than the average German or Chinese). At the same time the collection of people who have repeatedly talked the president out of some of his more disruptive policies are now either gone or sufficiently discredited in the president’s eyes that they might as well be.

It isn’t so much that any individual actions taken by the Trump administration will or won’t work. It isn’t so much that there is or isn’t a grand, multi-faceted plan in the White House. It isn’t even that the president does or doesn’t understand the context or consequences of his policies. And it certainly isn’t that this is not what I would do if I were king for a day.

It is that global population patterns are dependent upon global manufactures trade to generate income, and global agricultural trade to pay for food from abroad. It is that the global transport that enables such sectors to work requires a global order.

It is that since World War II the United States has sustained the only true global order that our world has ever known.

It is that not only is the United States no longer holding the global order together, it is actively breaking it down and there is no power or coalition of powers that can even theoretically take its place. It is that a world without America is a world in which other countries – whether out of desperation or opportunity – feel forced to protect their own interests. And most are wildly out of practice, wildly vulnerable, or – in most cases – both. It’s that America’s only significant geopolitical competitors – Europe and China – have become irrevocably addicted to that order just in time for it to end.

And perhaps most worryingly, it is that the Americans’ abdicating global leadership isn’t the same thing as the Americans’ abdicating global power, or global reach.

It is that the party is over.

This Is How the World Ends, Part I

by Peter Zeihan, Melissa Taylor, and Michael N. Nayebi-Oskoui

I like to say that I sell context. It’s all about how seemingly disparate things like age structures and trade patterns and political evolutions and technological advances interact. In any such dynamic system there are winners and losers. My concern is that the global system itself now faces a moment of truth in which the countries of the world, first and foremost the United States, will fail to rise to the occasion. Which is a nice way of saying that what I’m really seeing – what I’m really selling – is the end of the world.

This world system was put into place 70 years ago. The core of the international system during the Cold War was the Americans’ support of the global trade and security order. The Americans agreed to provide global and regional security to their allies in exchange for deference on security matters. When issues of economic import rose to prominence, the Americans tended to give way. When issues of strategic import rose to prominence, the Americans tended to get their way because that was the deal.

This arrangement froze geopolitics as previously independent countries were pulled into a massive, interconnected system because of not only America’s overwhelming economic and military power, but also the power of the alliance structure it controlled. This was sucha powerful force that it even pulled in America’s enemies one-by-one and allowed them to rise, fueled on exports. In the process, the US made the global economy dependent on the relatively free flow of goods, people, and money while also alleviating the need for the large militaries that defined the first half of the 20th Century. In other words, the US and its alliance shifted every global system that mattered for literally every country in the world.

Everyone except the US, which managed throughout this to remain isolated economically. It maintains its own military, largely produces what it needs (though it imports a lot of what it wants) and remains the largest economy in the world. With the fall of the Soviet Union and the end of the Cold War, just as the world began to truly bet their economies on the American plan, the American’s need for this incredibly expensive system faded. It’s taken the US awhile, but it finally noticed.

There is no replacement for US power, economic or military. “Europe” as a concept, China, and Russia are all in existential struggles and each of them is likely to lose. There is no alternate reserve currency. There is no one who can react to any event anywhere in the world like the US can. The Americans are leaving a power vacuum and we know what happens in power vacuums.

I’ve been speaking and writing about this approaching “end” for the better part of the past decade. One of the fun things – and incidentally, one of the things that helps keep me sane – is that it is all very abstract. I can blithely note that wars will happen, that supply chains will break down, that the lights will go out, that famine is an inevitability, but so long as the timeframes are fuzzy and the locations are over the horizon it is easy to speak and write with a degree of detachment. This doesn’t affect me, and certainly not right now.

I think/fear that I’m about to lose that insulation. The end is pretty god-damn nigh. Exactly how this plays out is still very much up in the air. The blow by blow will matter immensely in the short and even medium term. So I’m going to lay out the most recent big events that seem to be giving shape to the Disorder over the course of several newsletters.

Event 1: The United States withdraws from the Iran nuclear deal (May 8)

The Obama administration did not sign the U.S. up to the nuclear deal because it thought Iran would suddenly become an upstanding member of the international community. After decades of being the region’s arbiter, the American security apparatus in specific and the American public in general wanted to get out of the region. That meant the White House needed to make a choice.

Option one was to appoint a “winner.” This “winner” would patrol the region, keep the local powers in line, and in general do what the Americans had done: keep the region as stable and static as possible.

The Obama team didn’t like the candidates. Iran was out as a matter of principle. Saudi Arabia didn’t field a meaningful army, much less a navy. Israel was potent, but small, and the religious angle meant it could never lead the region. Turkey may have been capable, but it had unrelated interests in Europe and the Caucasus and the Mediterranean, and so could never concentrate its efforts on such a gangly region like the Middle East.

Even then, there was no guarantee that any “winner” would look out for American interests unless a large American military presence remained… which would defeat the point of a sustained withdrawal. And the last thing Washington wanted was to cause the emergence of a new regional hegemon that was not consistently pro-American.

That left option two: establish a regional balance of power so the region would self-regulate. This balance, ultimately, is what the nuclear deal sought to achieve: partially rehabilitate Iran, partially reintroduce it into the international system so that Iran could counter – and be countered by – the other regional players. In doing so – or so the theory goes – the region’s wars will be many, but limited.

The key selling point of the balance-of-power option was that the Middle East has so many competing centers of power that no single country would ever be able to gain a significant, long-term advantage. That would keep any of the (many) expected battles bottled up within the region. It sounds a bit cruel, but the ongoing civil wars in Syria and Yemen are good examples of the balance-of-power strategy working because those conflicts keep the region’s powers at one another’s throats.

Trump’s withdrawal from the nuclear deal does two things. First, it wrecks the balance-of-power strategy by gutting the possibilities of the region’s most active player: Iran. The resurrection of global financial sanctions on Iran will – at a minimum – halve the country’s export earnings by year’s end. This means the Americans will need a new strategy for the region. At present, the Trump administration hasn’t offered anything as to what that might be. But that is an issue for another day.

From my point of view, the second outcome of the withdrawal is far more important. The old/new sanctions on Iran uncaps what has traditionally been the Americans’ most potent economic weapon: secondary sanctions.

Secondary sanctions are not something the Americans have ever used often or liberally. They present would-be sanctions busters with a choice: do business with the sanctioned country (in this case, Iran) or do business with the United States. Since the Iranian market is roughly 1% the size of the American market, there may be a bit of whining but for most firms that’s not all that difficult a decision. And that’s before you consider the long-term demographics of the world’s major economies.

What is truly different this time around is the presence of some institutional infrastructure the Obama administration set up a few years back to force the Iranians to negotiate the nuclear deal in the first place. Via an exhausting series of bilateral negotiations, the Obama team got a good hard grip on something called SWIFT, a system for managing financial transfers between various players in the international space. They used this newfound power to apply secondary sanctions to anything that touched the U.S. dollar. Since the U.S. dollar is the only global currency of exchange (the euro position has been shrinking for years, and even the Chinese yuan has been backpedaling of late) the end result was to cut any sanctions-busters out of pretty much all international trade, even if those sanctions-busters have no direct exposure to the American market.

I think the Trump administration fully understands just how powerful of a tool it just picked up, and that tool is perfect for the job of pretty much everything else on the administration’s international agenda.

Up next: Europe Guts Itself.

The Syrian War, 2.0

The Israeli Air Force announced April 21 that it would scale back participation in the Red Flag exercises in Alaska. The joint Red Flag drills are regular events hosted by the United States, with the upcoming April 26-May 11 exercises allowing the Israelis to train in an environment they rarely experience (non-coincidentally, Alaskan terrain is somewhat similar to the Persian highlands). IDF spokespersons attributed the decision to keep Israeli F-15s at home due to the changing situation assessment of tensions along its northern border that have left everyone holding their breath.

We weren’t kept waiting long. In the early morning hours of April 30, the Israelis launched a series of significant strikes throughout western Syria, targeting infrastructure that supports weapons development and distribution. A rocket factory made for some particularly impressive fireballs.

The Israelis normally hold their cards much closer to their chest than this – particularly when it involves possible actions in their close-in neighborhood. But these are not normal times. The open secret is that the United States sees almost no role for itself in Syria going forward (at least, compared to what American engagement in the Middle East typically looks like). The Americans’ primary goal in Syria has been the eradication of ISIS. With the terror group’s holdings nearly obliterated, so too goes a compelling case for extending American involvement in Syria. This is compounded by the fact that a country as broken as Syria needs the kind of costly, involved, long-term occupation and rebuilding efforts the Americans pursued in Germany and Japan after World War II – a cost the Americans were unwilling to pay in either Iraq or Afghanistan.

The pending American withdrawal evolves the Syrian War in a much fiercer direction. Initially, the primary players in the fight were domestic: the Assad government, ISIS, the Syrian Kurds, and the various collections of anti-regime elements who seemed to occupy every spot on the spectrum from wonky democrats to those who felt ISIS would have been more successful if it had just been a bit more brutal. Foreign powers used these factions as proxies to meet their tactical and strategic needs in the country without committing significant troops. It also created plausible deniability in a very volatile situation with many major actors. In exchange, these factions received intelligence, money, weapons and on-site support far superior to anything they could hope for otherwise, not to mention promises for their role in the future in Syria that may or may not be fulfilled. While those foreign players could certainly make their presence felt, using proxies inherently means the foreigners were rarely present in sufficient strength to dictate events on the ground. (The sole exception might be Iran’s proxy militant group in Lebanon, Hezbollah, which has apparently redirected nearly all its fighters into the Syrian theater to assist the Assad government. More on that exception in a moment.)

The presence of U.S. forces in Syria has limited what all the outside players could do, as well as the sorts of risks they were willing to take. The Americans may have never had more than a couple thousand troops in-country, but their vast array of naval firepower combined with the base at Incirlik, Turkey meant they could at a moment’s notice squeeze off missile and bomb barrages at any target they desired. There was no point in baiting the eagle (as Moscow discovered Feb 7 when the Americans obliterated a Russian probe attempt).

But take the Americans out of the equation, and the lid comes off the pot. And since everyone has different goals, Syria is about to get consistently lively:

Russia was an early participant in the Syrian conflict for a mix of reasons:

  • Syria is one of the few of Russia’s Cold War-era proxies that is still of some use, so propping up Assad holds some slight strategic value all its own.
  • Politically, being involved where the Americans were not helped burnish Russia’s credentials as a player, guaranteed it a seat at any table that discussed Syrian issues, and was an easy propaganda win back home.
  • Being in Syria annoyed the crap out of the Turks, forcing Ankara to rivet its gaze to its south rather than to the north where more core Russian interests were in play.
  • Being able to twist the Syrian fighting this or that way enabled the Russians to generate scads of refugees on demand. A mix of geographic, climatic and infrastructure patterns meant that most of those refugees could only go north to Turkey and Europe, enabling Moscow to scramble European politics with nothing more than a few dozen bombs.
  • More recently, the Russians have turned Syria into a vast testing and training range for its forces. Russia’s military may be huge, but it hasn’t seen 1% of the sort of expeditionary combat American forces have seen since 1992. Syria let’s the Russians play catch up.

What do all these reasons have in common? Russia has a vested interest in seeing the Syrian War never end.

Moscow, Russia

Iran is the closest to a strategic ally that the Assad regime has, and Syria has quite surprisingly – to Iran – become the lynchpin in Iran’s entire regional strategy. The most important tool Iran has is the militant group Hezbollah, which Iran uses not simply as a foothold in the Levant, but to threaten Israel and pressure the United States. When Saddam ran Iraq, the Iranians were able to shuttle support to Hezbollah via Iraq and Syria into Lebanon. Well, the Americans overthrew Saddam and now civil war threatens Syria. The Iranians didn’t just have no choice but to go all-in in Syria, but they are now the power seeking to maintain governments in the region rather than seeking overthrow them. That requires a degree of political, strategic, military and economic commitment that is downright… American.

Assad may have won the civil war, but now Iran has to hold the place together, and as the Americans learned in Vietnam, Afghanistan and Iraq, the second phase is far more difficult. But unlike the Americans, the Iranians can’t just go home. An ongoing Assad victory is absolutely critical to maintaining Iran’s current sphere of influence from Mesopotamia to the eastern Mediterranean. In short, the Iranians can never go home.

Directly opposite the Iranians are a series of powers that seem to be somewhat confused about what’s going on in their neighborhood: the Gulf Arab states – Saudi Arabia, the United Arab Emirates, and Qatar. Their efforts in Syria are, in a word, messy.

  • Part of this is due to geography: large swathes of desert terrain separate the Gulf Arabs and Syria.
  • Partly it’s a lack of experience: the Gulfies are among the most dependent countries on earth when it comes to relying on the American security blanket.
  • Partly it’s ineptitude: Saudi and Emirati and Qatari-backed groups spend as much time fighting each other in Syria as they do Assad or anyone else.
  • Partly it’s an issue of distraction: these same powers are also fighting a war in Yemen.

It all adds up to a lot of ammunition backed by a lot of money that’s causing a lot of deaths. And that just might be the point. For decades the Americans’ took on the mantle of preserving countries in their current form; If your job is to maintain the global system, then you want stability. But with the Americans leaving, the only power that really wants a stable Syria is… Iran. And if there is one thing the Saudis do not want, it is an Iranian-dominated anything. Better to burn the whole place down than allow the dust to settle in an arrangement that doesn’t suit Saudi preferences.

Which puts Israel and Saudi Arabia more or less on the same side, with Israel in the perfect strategic and political position. The regional powers with which the Israelis have passably good relations – Turkey, Saudi Arabia, the UAE, Qatar and Egypt – are fighting against Assad and Iranian influence, which means Israel is free to strike targets according to its own national security prerogatives with little risk of even angry tweets from regional stakeholders.

The Syrian War has quietly ushered in a new era of Israeli security relations with its neighbors: rather than relying on the Americans, Israel is aggressively, proactively and decisively pursuing its national security interests and intervening in Muslim conflicts… and no one except Syria and Iran has anything to say about it. The Israeli Air Force has attacked over 100 targets within Syrian territory since 2012, from suspected missile and arms deliveries en route to southern Lebanon to high value Hezbollah and Iranian targets. With the Iranians now the force for order in the country, the Israelis will gleefully expand their target list to anything that will cost the Iranians lives, equipment or money.

It’ll be a long list.

Tehran, Iran

The role of Turkey in Syria has been… unmoored for a reinforcing pair of reasons.

  • First, Turkey’s World War One defeat was so total and humiliating that Turkey in essence took a vacation from the world that lasted a century. The Turks are out of practice using the political, diplomatic, economic and military tools that are standard for pretty much everyone else. The learning curve is fairly steep, but it is still there and the Turks are starting from almost zero.
  • Second is that the political situation within Turkey is flattening that learning curve. President Recep Tayyip Erdogan has largely completed the process of purging the country of, well, everyone who opposes him. That has left this very Trumpian personality with zero competent allies, which means he is running Turkey’s $900 billion economy, 80-million citizens, and 900,000-strong military all by himself. Such concentration of power makes for erratic decision-making, with Erdogan highly vulnerable to bad intelligence, fake news, Russian manipulations, personal mental blocks, and a host of other issues that would routinely be filtered out in a more decentralized system.

At the end of the day the Turks’ primary concern in Syria is the military capacity and de facto independence of the Syrian Kurds. Ankara/Erdogan fear – with significant reason – that a Syrian Kurdish statelet will provide a template that could be reproduced within Turkey’s own Kurdish regions. To that end and despite Erdogan’s best efforts, the Turkish military/intelligence apparatus is steadily constructing effective networks of military groups throughout northern Syria. When the Turks do decide to move in force, they’ll be able to.

And let’s not kid ourselves. Unlike the United States, Russia, Iran or Israel, Turkey can put troops on the ground in Syria in the hundreds of thousands if it wants to and the Turks have the motivation and staying power to see their strategy through in what will be a complex and bloody new stage in the war. It is ultimately Turkey that will decide what Syria will look like, and years from now we’ll all be looking back at the 2018 American withdrawal as the event that unleashed Turkish power in the region.

I’d like to end with one particularly dark thought. The primary reason the Americans were in Syria at all was because a militant group called ISIS was stupid enough to post the beheadings of a few American co-eds on social media. Expunging ISIS is pretty much done and so the Americans are now leaving. But look at what enabled ISIS to exist in the first place: local sectarian divisions, multiple competing power centers, an arid geography that complicates regional consolidation, meddling outside powers, and a metric butt-ton of easily attainable military-grade weapons. None of these factors have gone or are going to go away. Every power playing in the Syrian sandbox is creating, sponsoring and supporting their own constellations of mutually-antagonistic militias. It isn’t so much a petri dish from which will emerge the next ISIS as it is an ISIS factory.

Happy Monday.

Of Walls and Soldiers

I’m going to do something today that I normally try to avoid: commenting on a political statement that may well not turn into policy. It’s a big, busy world with a lot going on on even a slow day, and American President Donald Trump likes to talk and tweet a lot. If I philosophically waxed on the potential geopolitical implications of everything Trump ever said (or was said about him or near him), I’d never have time to shower.

Yet of late Trump has been connecting more of his rhetoric to actual policy (for example, on trade), and his ongoing cabinet overhaul is installing personalities with reputations for boldness and effectiveness (for example, the incoming National Security Adviser John Bolton). Me noting such improvements in delivery is not the same thing as me personally endorsing those policies or persons, but I’m in the job of calling it as I see it and I avoid lobbying for any particular policy.

Which means I’m about to do something else I normally try to avoid: calling a mistake a mistake.

At a gathering of Baltic presidents earlier this week the American president indicated he planned to deploy the U.S. military to the border until such time as Congress appropriates the required funding for a large, meaningful border barrier. On April 4, the Homeland Security Secretary indicated that the Trump White House was already coordinating with several states to send National Guard troops to the border, perhaps immediately.

I’ll leave it to more military-minded folks to parse the differences in significance between a regular military deployment and the Guard, but regardless, from my point of view it would be a colossal mistake on at least two levels.

First, far from reducing illegal migration, any meaningful wall effort will drastically increasethe ability of illegal migrants to cross the border while also criminalizing the entire border region. The Sonoran and Chihuahuan Deserts that form the bulk of the American-Mexican border regions are among the most dangerous, desolate regions of the planet. That makes it a good border – it is hard to cross. Would-be migrants have to make crossings in the deep desert. Dangerous, desolate areas with no towns also have another defining characteristic: no roads. Anyone who crosses the deep desert largely has to do so on foot, and a great many die trying.

Areas with no roads cannot support other signs of civilization: post offices, schools, hospitals, gas stations…or walls. The first thing that would need to be done to facilitate the construction of a meaningful border wall would be to build service roads across the desert at at least 40 points in order to enable heavy construction vehicles to reach the border in the first place. At least one road would then need to parallel the wall across the entire 2000 miles of would-be border wall. Put simply, the preparatory effort of building a barrier to stop illegal migrants would eliminate the biggest current barriers that hinder illegal migrants: the region’s natural hostility, remoteness and lack of infrastructure.

(Incidentally, narcotics also flow more heavily along routes with good infrastructure, so the wall would likely double down on one of America’s most pressing social/law & order issues in addition to exacerbating the migration question.)

Even that assumes the wall actually stops migrants. It wouldn’t. A great comparison is the world’s second-most hermetically sealed border barrier: the Gaza Wall that keeps the Palestinians bottled up in the Gaza Strip. (The Korean DMZ, with its miles-thick fields of landmines, comes in first.) The Gaza Wall is over 30 feet high, made of solid concrete, and the Israeli Army has standing shoot-on-sight orders for anyone brave enough to try overtopping it. Yet the Gaza Wall is so riddled with tunnels that the Gazans regularly get everything from construction materials to consumer electronics to foodstuffs to live animals to missiles to wedding parties to fast food deliveries on a daily basis.

The point isn’t just that the Gaza Wall is porous, but that Gaza’s under-wall traffic is fairly regular –  items and people go back and forth often. A U.S.-Mexico border wall would need to block irregular traffic because the illegal migrants only need to cross once. That requires a much more intense security regimen than exists in Gaza, which now means so expanding the border infrastructure that the United States has a moderate number of border agents every few miles. Having only 30 people on station every four miles (a woefully inadequate number considering the task’s scale) at any given time adds up to roughly 60,000 security staff – not counting support personnel or the sort of expanded infrastructure required to support such a large number of people along such a long logistical chain in such a remote area.

It’s worse than it sounds by far. Any border defined by an ineffective barrier and large, determined population movements is one in which various elements will conspire to provide clandestine crossing capacity that expressly avoids law enforcement. That not only generates a culture of criminality, but a whole industry based upon circumventing the barrier. Considering the Mexican cartels already have deep pockets courtesy of their narcotics smuggling, and already hold respectable market share in the smuggling of people, adding a wall would provide the cartels with the perfect environment to use cash and guns to criminalize America’s border towns and the border force itself.

My second major objection is that border patrol is the last thing the U.S. military should be involved in. Militaries exist to fight wars, and while the nature of conflict is certainly evolving in an era of irregular conflicts, drones and cyberspace, hunting down illegal migrants remains completely alien to the military’s training and culture. America’s military is awesomely powerful because its Abrams tanks and Nimitz carriers and Longbow helicopters are terrifyingly effective at blowing shit up. In a high labor cost country like the United States, a military’s business is all about using very expensive equipment to blow up other folks’ expensive equipment, preferably from over-the-horizon so that retaliation is never an option.

Interdicting illegal migrants requires not just getting up close and personal, but capturingthe would-be migrants, shipping them somewhere for processing, and then somehow dumping them back across the border… and likely doing it all over again the next day. I have the utmost respect for the American military’s ability to adapt and evolve, but border duty means taking a high-dollar, high-skill asset and using it for low-dollar, low-skill tasks.

Even that assumes the military could do the job well. It could not. If there is something the military has learned after 15 years of wars in Afghanistan and Iraq, it is that it hates interfacing with civilians. The military is trained to, in a nutshell, kill people – not build things. But even during the Iraqi occupation lethality was a useful tool because there was an insurgency afoot, packed with imported radicals. That would not happen on the border. Lethality isn’t useful unless American society takes a hideously dark path and simply shoots everyone in the border region with a tan. Or if you prefer, the Army could separate the illegals from the citizens first and, what? Execute the illegals by firing squad? Any military that does either of those things becomes a force that American citizens would (and should) be afraid of.

Even that assumes meaningful patrols are possible. Were the U.S. Army assigned to this task it would be taking on the greatest geographic reach of any American Army effort everin the most hostile natural environment the Army has ever been deployed in on a mission for which “victory” would never be possible because the border isn’t a war.

There are other reasons barricades and troops are not the right solutions. A meaningful wall’s impact on trade would easily trigger a U.S. recession across the United States with Texas getting hit the hardest. It would cause a multi-year depression in Mexico that would so destabilize the country economically as to guarantee sustained increases of illegal migrants to the United States. Current thoughts of militarizing and attempting to secure Mexico’s northern border would actually cause the problems they purport to address.

It would also cheese off the government that is most critical to actually stemming migrant levels in the first place: Mexico. Keep in mind that net migration from Mexico to the United States has been negative for nearly a decade. Most of the illegals that enter the United States from the south are not from Mexico, but instead from the half dozen Central American countries. If interdiction is the goal, the best place to do so is at Mexico’s southern border which is both far shorter and easier to fortify than its northern border.

That sort of interdiction requires a relationship between Washington and Mexico City characterized by communication, cooperation and a degree of trust – not sending the Army to the border. Instead, the bilateral political relationship is now so poisoned that it will very likely lead to the election of the Mexican equivalent  of Bernie Sanders – one Andres Manuel López Obrador – who has campaigned on a promise to cease all cooperation with the Americans.

America Sells Its Seoul

The United States and South Korea have agreed on an overhaul of their bilateral trade agreement this past week. In it, the Koreans caved on pretty much every issue of contention, most notably agreeing to improve American firms’ access to Korea’s automotive and pharmaceutical markets while restricting their own exports of steel to the United States by nearly one-third. In exchange, the Koreans received the first permanent waiver to the Trump administration’s until-now unrelated issue of steel and aluminum tariffs.

In addition, Trump has personally made it clear he has little intention of formally signing off on the deal until after the North Korean situation is resolved, insuring South Korea must follow the American preferences on any subsequent arrangements with Kim Jung Un, rather than the other way around.

It’s the first formalized, publicly-declared instance of American foreign policy coming full circle. During the Soviet standoff the Americans made the global oceans safe for all and kept the American market open to the alliance, in essence trading some of its economic power in order to purchase a security alliance. But the Cold War is nearly three decades gone now, and until recently the Americans had yet to update their strategic policy. As such, the post-Cold War global economic boom was largely a result of the Americans continuing to pay for a global system without getting anything in return. That disconnect was in part responsible for America’s recoiling from the world and the rise of Bernie Sanders and Donald Trump.

We now have the beginning of a formal re-engineering of the old Cold War system. Linkage between economic and security issues is back – but without the Cold War rubric to shape it, American policy is taking on a somewhat à la carte characteristic.

South Korea was a great spot for the first of a new series of arrangements. Next to the three tiny Baltic states that have no hope of defending themselves against their monster neighbor Russia, there is no country in the world that has a greater defense dependency upon the United States. And since South Korea has a smallish, rapidly aging population (aka low local consumption and so export-dependent) and few domestic resources (aka import-dependent), trade is its lifeblood. No country in the world would be forced to come to terms with the Americans more, and Korea’s position as the world’s fifth-largest exporter means everyone must take notice.

Whether starting with the Koreans was the goal all along, or the well-worn contours of geography and economics guided the administration a bit like a luge course to this destination is really not relevant. (Donald Trump’s general lack of discipline and revulsion in the face of context suggests the latter. U.S. Trade Representative Robert Lighthizer’s laser attention to detail and dogged persistence suggests the former. National Security Advisor John Bolton hasn’t been on Team Trump long enough to participate in the Korea trade talks, but this sort of thing certainly fits with his style, too).

The biggest question in my mind is, who’s next?

China seems like an interesting bet, but I’m guessing the Trump administration wants to get far more out of the Chinese than merely new understandings on steel, aluminum, intellectual property rights, and North Korea. The White House appears set to link a host of until-now unlinked issues. Issues like agriculture and freedom of navigation, manufacturing and the South China Sea, finance and hacking, market access and policies on Iran, reciprocity and Russian sanctions. It is a heavy list and even if the Chinese were to simply roll over on it all (which is not very likely) it would take quite a bit of time to work out the details.

In my opinion, folks convinced of the Chinese rise aren’t very good at math or reading maps. The Chinese financial system is the most overextended in history and every country that has followed its investment-led model has eventually crashed hard. The one-child policy has destroyed China’s future – it is now the world’s third-fastest aging demography. China’s strategic position is horrid – a line of islands parallels its coast, preventing it from projecting power into the sea lanes upon which its economy depends. It is utterly reliant on global energy imports and global merchandise exports – imports and exports which are under the thumb of the U.S. Navy.

The linkage the Americans are about to impose is the opposite of what the Chinese have become used to the Americans doing. It is precisely what the Chinese do to everyone else whenever the issue of Hong Kong or Taiwan or Tibet comes up. The Chinese are going to hate/fear this sort of strategic thinking in the United States because it cuts to the heart of the Chinese political system and strategic policy. And there’s far more to this than Beijing knowing they lack the leverage on the Americans to win. The Americans are in effect putting a dollar amount on their Korean alliance, and the same thing can now be done to any other aspect of American policy – including the China relationship.

The same general issue holds true for the European Union. Most of the European states are in terminal demographic decline, meaning that not only are they deeply dependent upon exports for their economic well-being, there is absolutely no hope their economic situation can be sustained, much less improved, without either the kindness of outsiders or a fundamental reshaping of how Europe defines the terms “economy” and “government.” Considering the European experimentation with those two terms in generations past, that last sentence should make everyone a bit twitchy.

And of course those are just some of Europe’s problems. There are also ongoing and deepening debt, banking, refugee, and political legitimacy crises. With neighboring powers – primarily Turkey and Russia – becoming more aggressive, the European choice is between once-again submitting themselves to American strategic goals, aggressively rearming in an era of terminal economic decline, or going through a regional…re-invention.

It’s an ugly choice, and one made far worse by a host of until-now unrelated issues.

  • Brexit not only reduces the EU’s overall heft and thus its stature in the world and at the negotiating table, but the UK acting as a free agent can and will provide the Americans with a host of wedge issues to hurt the Europeans where they are most vulnerable.
  • Of the EU’s 28 current members, five – Ireland, Cyprus, Austria, Finland and Sweden – are not in NATO, and so have little history in making formal economics-for-security swaps with the Americans.
  • Full competence for negotiating trade deals is held collectively with the European Commission, the EU’s executive/administrative/bureaucratic authority. But full competence for negotiating defense deals is held individually with the member states.
  • On major issues – for example, economics-for-security swap deals – every EU member has full veto rights. Even a deal that makes sense for France and Germany and Italy and Poland and Spain and the Netherlands and Sweden could be undone by a local election in Belgium (nearly derailed a free trade deal with the Canadians), or a spiteful politician in Greece (did derail Europe’s Russia policy).

That means that either a) the major EU powers find ways outside of EU norms to crush the dissenters, b) the EU gets cut out of American and global markets which throws Europe into a long-lasting depression, or c) the Trump administration breaks the entire EU in order to get its deal with the members that matter. No matter the path, the strategic alignments that have made the EU the vehicle that have made Europe united, at peace, wealthy and free are over.

Zocalo, Mexico City, Mexico

If anything, the NAFTA renegotiation will be even tougher, but here the issues are different. Canada and Mexico are not dependent upon the Americans for strategic overwatch (or, more accurately, the United States has no option but to protect its continental neighbors from extra-continental threats if it is to protect itself). Neither of them trade very much with the rest of the world, with both in essence functioning as de facto extensions of the American economic space.

The Americans can, will and are playing hardball in the talks, but the Canadians and Mexicans are doing the same. They know the tactics the Trump administration is employing to bring the rest of the world to heel just don’t apply in North America. Both Canada and Mexico have been (repeatedly) successful in courting American corporate giants and American state governors to make their cases in Washington for them. Remember that NAFTA is the only trade deal the Americans have signed in the post-WWII era that was not about security. That gives both Canada and Mexico something that neither the Chinese nor Europeans have: leverage.

It also means that the Canadians are playing very dirty, following what has more-or-less become a scorched earth policy. As part of Canada’s NAFTA strategy the Canadians have launched a case at the WTO that would actually hurt them if they won, because if they did win, the case would impose such pain on the Americans it would likely induce the Trump administration to abandon the WTO completely. Additionally, Canada’s hardball tactics might be aiming to wreck NAFTA. If that were to happen, Canada has a separate bilateral trade deal with the United States…but Mexico does not. In a world without the WTO and NAFTA, Canada would become the only country to maintain preferential access to the American economy. Harsh. Brilliant, but harsh.

But all these talks will take time. For the Chinese and Europeans, these are all very messy, complex, interwoven issues that cut to the core of issues of national identity and even national existence. For the Canadians and Mexicans the negotiations will continue to be difficult because with those countries the Americans are actually dealing with a more-or-less level field. The Americans with their stereotypical boorish, freight-train style will plow through it all as quickly as they can – and Lighthizer and Bolton will revel in every minute of it – but unweaving and reweaving the strands of China and Europe will take time, as will hammering out a more sustainable understanding within North America.

Trump isn’t that patient.

My bet is the next two deals will be bilateral and done more or less simultaneously.

Japan will be far easier than most of the other negotiations in front of the Americans because it will be a one-on-one talk as compared the multilateral complications of NAFTA and the EU. Japan – like South Korea – is deeply enmeshed into American defense networks and fully admits and realizes just how important U.S. strategic policy is to its own strategic needs (while most of the Chinese and Europeans remain in deep denial). Contrary to the conventional wisdom, Japan is no longer a massive trading nation. Rather than engage in broad-based economic and financial reform in the 1990s and 2000s to fix their broken economic model, they instead walled themselves off from the world. Consequently, Japan’s share of the international export market has shrunk by four-fifths since the 1980s.

Most importantly, the horror show that is Japan’s aging demography long ago induced the Japanese to forward-position much of their manufacturing capacity in their end-markets both to minimize currency risk and curry political and strategic favors. In essence, Japan has already swallowed some of this economics-for-security medicine in the post-Cold War era. It won’t crush their sense of national identity or their national economy to do it again, so long as the Americans continue to hem in places like North Korea and China.

The other big about-to-be deal is the United Kingdom, and this deal will practically fall into the Trump administration’s lap. Because of Brexit, the Brits are already casting out for alternative systems. The search has not been going particularly well. Political bungling at home, unrealistic expectations from the Leavers, a united EU front, and a resurgent and increasingly economically suicidal Labor opposition have tangled up the UK’s negotiating positions on pretty much everything.

The government of Prime Minister Theresa May now fully realizes that there is going to be no Brexit deal. It took considerable concessions to the EU simply to extend the negotiation period for another year. The new arrangement is that the UK will remain subject to all relevant EU laws and regulations, but will gain no input or votes on them during the “transition.” The one concession London teased out is the one most relevant to this discussion: the EU will allow the UK to negotiate trade deals outside of the EU’s authority. So the Brits now need to and are free to fully recalibrate their national, regional and global security and economic norms just as the Americans are reforging national, regional and global security and economic norms.

If the Trump-Lighthizer-Bolton team can induce (browbeat?) the world’s third- and fifth-largest economies which control the world’s second- and third-largest navies into joining the United States in a refashioned economics-for-security arrangement, then not only will the Trump administration have gotten a couple “big wins,” but the global stage will be set for whatever strategic alignments come next.

This is the bit that worries me, but it is also the bit that I ultimately expected.

The established American foreign policy community, both in the government bureaucracy and distributed throughout Washington, is still living in the past and seems out of ideas. For its part, the Trump administration has no strategic vision; MAGA is a slogan, not a policy. The normal means of debating a new national grand strategy – discussion and debate between the major parties – is not possible because both parties are currently broken.

Trump may be stumbling/groping/learning his way into a common approach, but he is doing so without any guiding principles or goals. The Cold War structure was stable because the Americans paid everyone the same (by creating a global structure) and expected the same behavior in return (membership in the anti-Soviet alliance).

This time around the Americans are customizing the membership fee to match the need. For South Korea the cost is deference on North Korea. For China it will likely be deference on global policy. For Europe it will likely include a demand to follow American regulatory norms. And as the Americans are strategically unmoored, I see no reason why the goal posts won’t move as America’s perceived self-needs evolve. It is less the stuff of a global leader and more the behavior of a mafioso.

There’s a reason I call the next couple of decades the “Coming Disorder.”

Read more about it in my book, The Accidental Superpower.