US Government Shutdown International Implications

When the U.S. shut down, the world’s economy felt the effects

Globe and Mail Wednesday, Oct. 23 2013

The ability of United States to project influence in the world rests on its economy. This past month, with congressional gridlock turning into government shutdown, has hurt the economy and undermined belief in the American way.

The self-inflicted damage to the USA – Standard and Poor’s reckons this latest episode cost the U.S. economy $24-billion – will stunt growth for this year with the inevitable trickle-down effect on global trade and finances.

Then there is the international effect.

Where normally President Barack Obama is front and centre of the family portraits at international gatherings, this time around, spotting Secretary John Kerry, who stood in for the President at the Asia-Pacific Economic Co-operation summit, is a ‘Where’s Waldo’ moment. Center stage at the summit in Indonesia went to the Chinese and Russian presidents: XI Jingping and Vladimir Putin. Mr. Kerry was barely visible in a rear corner.

Mr. Obama’s absence from the APEC summit is a lost opportunity to push forward the Trans-Pacific Partnership. Trade Representative Michael Froman hoped, optimistically, to conclude the negotiations by Christmas. Like everything else, it gets pushed back.

In the Sino-American competition for influence in Asia, bilateral relationships are also affected. One Indonesian business leader joked that the U.S. is “playing checkers while the Chinese play chess.”

Previous generations of Chinese leaders believed the United States could right itself from bouts of irrationality and that common sense would prevail. But will it?

With an estimated $1.3-trillion in U.S. treasury bonds (the Japanese hold $1.1-billion), the Chinese have reason for consternation. An American financial crisis will hurt China economically, bringing with it the risk of social disruption. Chinese leadership puts a premium on domestic stability.

Some Chinese are calling for a “de-Americanized” world, arguing that while the United States claims the high moral ground it is covertly “torturing prisoners of war, slaying civilians in drone attacks, and spying on world leaders.”

Those in China who implicitly favour greater pluralism and active participation in global institutions designed by the West are also put at a disadvantage by Capitol Hill misbehaviour.

For the West there is a bigger problem.

Since the creation of the western alliance in the wake of the Second World War, the Allies have put their faith in the United States. In recent years successive secretaries of defence have warned the Alliance that the United States could no longer carry the load and that they had to shoulder more of the burden. The “dim future” that then-Defence Secretary Robert Gates warned about may be closer than expected.

Let us hope not.

A power vacuum would be disorderly. The world would look more like that of the 1930s – what the poet W. H. Auden called a “low, dishonest decade.”

If the United States pulls back, who will step forward?

The Chinese? What is their vision of the world? Their ability to project global leadership is doubtful. China doesn’t have allies. Its nationalistic system is not exportable.

Having the United States bear the burden of global primacy has served global peace and financial security. With some notable and costly aberrations – Vietnam and Iraq – American military might has preserved the peace and U.S. naval power has guaranteed the maritime order that makes globalization possible.

There have been complaints about the U.S. Federal Reserve since the birth of the Bretton Woods system in 1944, but its central bankers have done a good job in managing the dollar. Neither the euro, the yen, or the yuan are yet ready for prime time as an alternate reserve currency.

In recent years the U.S. Chamber of Commerce has had a ‘JOBS’ banner hanging from its facade. It should replace it with one reading “Unity.”

When the U.S. Congress behaves recklessly the ramifications are serious. Former treasury secretary Tim Geithner was right when he said that the U.S. problem was not economics but politics and the requirement for it to get beyond the “paralysis” in the U.S. political system.

To repeatedly bring your country to the brink of default is new. It deeply damages a nation that takes pride in the claim that the business of America is business.

Politics aside, the American economy is today in better shape and more stable than Europe, Japan or the BRICS (Brazil, Russia, India, China and South Africa).

The United States remains the land of innovation – outclassing all others in Nobel prizes in the sciences, medicine and economics. It is also the place to which the Chinese elite send their children for higher education.

Now if only the United Sstates would get its political act together.

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Video: No winners in budget showdown, Obama says

Visitors are led on an official tour, which had been suspended during the 16-day government shutdown, at the U.S. Capitol in Washington, October 17, 2013. The U.S. Congress on Wednesday approved an 11th-hour deal to end a partial government shutdown and pull the world's biggest economy back from the brink of a historic debt default that could have threatened financial calamity.

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Video: As shutdown ends; repercussions begin

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North Korea, China, Canada and BMD

While we weren’t looking, North Korea got a lot more dangerous

The Globe and Mail Monday, Oct. 21 2013

While we focus on Iran and Syria, pay attention to North Korea. It possesses the full arsenal of weapons of mass destruction: chemical, biological and nuclear as well as cyberwarriors.

The Kim dynasty – grandfather Kim Il-sung , father Kim Jong-il vKim Jong-un – is dangerously unpredictable. Tales from the Hermit Kingdom evoke Game of Thrones.

In the purge following Kim Jong-un’s taking power, the former Army Minister was dispatched by a mortar round. The family of Kim’s former girlfriend was forced to watch her execution then trucked off to the gulags.

The regime is also a regional menace.

North Korea was behind the assassination of the mother of current Korean President Park Geun-hye, the bombing in Rangoon that killed many in the South Korean cabinet, the abduction of Japanese citizens, and the sinking, by submarine, of a South Korean frigate .

Systematic human rights violations in North Korea remain “widespread”, reports Amnesty International. The annual report of the UN High Commissioner for Human Rights observed that the “use of political prison camps, frequent public executions and severe food shortages, coupled with the extreme difficulty of gaining access, make DPRK [North Korea] singularly problematic.”

Unanimous votes of concern in the UN General Assembly and by the Human Rights Council have had no effect. The UN Special Rapporteur has never been allowed to investigate.

Having withdrawn from the Nuclear Proliferation Treaty, North Korea developed a nuclear weapon in tandem with a ballistic missile capacity. It recently reactivated a plutonium-producing nuclear reactor in Yongbyon.

North Korean missiles threaten North East Asia and they could potentially reach the west coast of North America. After a third North Korean nuclear test in February, the U.S. will spend a billion dollars to place additional interceptors in Alaska.

North Korea has been an exporter over several decades of conventional arms, nuclear reactor technology and ballistic missiles. Its client list has included Syria, Iraq, Iran, Libya, Pakistan, and Yemen.

All of this activity violates UN Security Council resolutions. The decade-long Six Party talks that involving the two Koreas, Russia, Japan, USA and China and was aimed at curbing North Korea stalled out in 2008.

Recently, the Chinese have made efforts to both revitalize the talks and rein in North Korea. The Chinese, who chair the Six Party talks, hosted an informal session last month in Beijing. Importantly, the Chinese have now imposed export controls on materials that could contribute to North Korean weaponry.

China bears a lot of responsibility for the problem but it also has the leverage to effect change. Leading the effort to denuclearize North Korea would demonstrate that China’s new leadership is becoming more than a passive international participant.

China is far more averse to instability on its border than in the more distant Middle East. It would be more motivated to act (even militarily) on matters relating to a potential conflict with the client state on its front door.

But China will not act by a timetable dictated by the West.

Different from the West, China takes longer to re-assess what is in its best interests and to adjust policy accordingly. We need to remember this and to persist with patient diplomacy.

China is now the sixth largest financial contributor to peacekeeping operations and is currently fielding 1769 peacekeepers ( in contrast to Canada’s 157). Active Chinese involvement in sustaining and reforming international architecture is an essential guarantor of global peace and security.

For Canada, the North Korean threat has a couple of implications.

First, our growing commercial aspirations in Asia underline the need for secure sea lanes to ship our goods. This means getting on with our new warships. It also underlines the value of our submarines as key assets in sustaining maritime order in the Pacific.

Second, changing circumstances mean that we now need comprehensive ballistic missile defence (BMD) insurance.

We are effectively integrated into BMD through NORAD’s Integrated Tactical Warning and Attack Assessment mission. We also benefit from US policy to defend a two hundred mile band beyond the U.S. border in order to protect U.S. cities against fall-out.

But we would not be in the room when the decisions to launch are made. Nor do the current algorithms contain protection for Canadian cities like Calgary or Edmonton. Full participation in BMD would fix this.

We live in a world of changing perils and shifting poles of influence. This puts the premium on diplomacy that encourages all parties’ active participation. It also obliges us to look to our own security with the necessary hard power to back it up.

A former diplomat, Colin Robertson is vice president of the Canadian Defence and Foreign Affairs Institute and a senior advisor to McKenna, Long and Aldridge LLP.

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Moving North American integration forward

Should Canada join the U.S. and Mexico? On these key projects, yes

Globe and Mail Wednesday, Oct. 02 2013

North American integration has a new champion in U.S. Vice-President Joe Biden.

Looking at the United States, Canada and Mexico during his recent visit to Mexico he wondered aloud why there is not more co-operation? “It’s just so natural, geographically, politically, economically.”

The trilateral idea has been on life support for more than a decade. The economic gains of the North American free-trade agreement were realized by 2000. In the wake of Sept. 11, 2001, the requirements of U.S. security curbed the further development of North American integration.

George W. Bush made an effort at revival through the Security and Prosperity Initiative. A Christmas tree of multiple wishes and bureaucratic bafflegab, it was quietly put into the ‘out’ basket by the Obama administration.

The trilateral leaders meetings, once annual standalone events, are now occasional and tacked onto other events. They have become a photo op. In substantive terms, they mask dual bilaterals: one between the U.S. and Mexican presidents and the other between the U.S. and Canadian leaders. Each has their own agenda.

For Canada, it is about preserving and improving access to the U.S. market. For Mexico it is regularizing immigration and keeping out the guns that arm its drug gangs. For the U.S., it is about security: keeping potential terrorists from slipping through Canada into the U.S.; keeping out illegal migrants and drugs from Mexico.

Now Mr. Biden promises to shift the U.S. emphasis back to economics.

His visit to Mexico, with four cabinet secretaries, launched the U.S.-Mexico High Level Economic Dialogue.

Border infrastructure is to be modernized using new technologies to extend hours of operation. It commits to doubling by 2020 of the number of Mexican students studying in the U.S. and Americans studying in Mexico.

Mr. Biden should now turn his attention to the northern border.

Of late, the tone at the top has become less than constructive. The Keystone XL pipeline, as important as it is to North American energy security, is crowding out the agenda to the exclusion of progress on other issues.

Both leaders share some responsibility for the pipeline impasse.

President Barack Obama disses its economic advantages and has failed to recognize private sector progress in addressing climate change.

Prime Minister Stephen Harper has not helped with his assertion that he won’t take no for an answer and implied that he’ll look to the next administration for redress. Our energies would be better spent bringing forward long-promised oil and gas regulations on greenhouse gas emissions.

We need to focus on what we can constructively do together rather than on our divisions. This is where Mr. Biden can be helpful.

As he observes, the dynamic of the North American trading relationship has evolved. The current system is designed for the old world of imports and exports, of tariffs and customs officials.

Today it is more about making things together.

The bits and pieces, and the people that service them, now come from a thousand points across the continent, irrespective of country of origin. When borders become chokepoints, we lose North American competitiveness.

Recognition of this fact should be the starting point in what should be a permanent process where the emphasis is on continental regulatory alignment and expediting the cross-border passage of people, services and investment.

The Canada-U.S. beyond-the-border and regulatory co-operation initiatives are quietly making progress but they could do with high-level boosting.

Our security ministers have done their work and created a perimeter, arguably with belt, suspenders and life jacket.

Now we need to see commensurate attention by our economic ministers to improve access for goods, people and services.

Get on with the promised new bridge between Detroit and Windsor. More trade crosses that gateway than that between Japan and the United States. It is vital to manufacturing, especially to the automotive industry that depends on its supply chains.

Canada is putting up a half billion dollars to help fund the Michigan portion. Now we need assurance of U.S. financing of its customs plaza.

Mr. Biden should come to Canada and begin a high-level economic dialogue that complements the one being undertaken with Mexico. Let the two dialogues proceed in tandem with the goal of eventually bringing them together.

With an eye to the future, Canada should join the U.S. and Mexico in doubling the student exchanges between our countries.

Once we get beyond the border, our shared agenda should address issues including skills and training, labour mobility and mutual recognition of credentials. This is how we will realize the promise of North America.

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