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May The Trump-Kim Summit Produce A Better Outcome Than The G7

When President Trump was elected his posture on global trade and the international system were quite clear. The campaign slogan “Make America Great Again,” rooted in economic nationalism, says it all, and it should be no surprise that the U.S. has opted for unilateralism when it comes to key issues from trade to international security. The disarray left in President Trump’s wake at the G7 meeting of rich nations signals just how seriously the White House is taking its economic and foreign policy strategy. Embers of a growing trade war now loom large over the global economy. From the U.S. vantage point, trade tensions now include the northern border with Canada’s affable Prime Minister Trudeau drawing the ire of Trump’s Twitter account and the disdain of his officials, all while the “bromance” between France’s president Macron and Trump coming to an end. Trump drew an abrupt conclusion to his G7 presence and parted for an historic tête-à-tête with North Korea’s Kim Jong-un, which is taking place in Singapore. While the G7 summit was arguably a disaster, the world should hope for a much better outcome between the U.S. and North Korean leaders.

The Korean Peninsula has been a global flash point since the end of the Korean War in 1953. Home to one of the most heavily militarized borders in the world with the ironically named demilitarized zone on the 38th parallel, any steps to deescalate this conflict should be applauded. By this measure, President Trump’s unconventional tactics and diplomatic norms, which have left long-standing allies scratching their heads, has managed to bring erstwhile enemies to the table—cautious optimism is in order. The trouble, however, lies in the diplomatic double standards that are emerging, which are probably not lost on North and South Korean as well as Chinese negotiators. While the U.S. is making assurances that if North Korea gives up its nuclear ambitions, which it appears to have done with the recently televised destruction and decommissioning of its nuclear test sites, it can gain a seat at the table in the community of nations. The double standard, however, lies with Iran’s short-lived nuclear détente with the West, for which all but the U.S. are in favor of maintaining Obama-era policies of rapprochement and valuable investment and trade deals with Iran.

Both countries, Iran and North Korea, represent significant flash points in the world and significant sources of regional and global instability. It appears the world favors equilibrium when it comes to conflict and stability. For every country that comes in from the cold another backslides, and North Korea seems poised to advance provided the summit is successful. As the U.S. contemplates trading Iran’s place with North Korea, we should be mindful of the critical legacy diplomacy and political assurances create – even (and especially) – if they cross into one political party and presidency after another. It is the sum of these assurances, those that were left in disarray at the G7 meeting, that make up the global order.

Calibrating trade imbalances, which is one of the central aims of the looming trade war between the U.S. and key trading partners, from China, Europe and NAFTA, is a typically delicate process. Doing so at the edge of a knife and with increasingly acrimonious posturing and name calling from heads of state will invariably produce few winners. Consumers, employees and companies will end up paying the highest price in this trade war, which negates the operating reality that the vast majority of international trade is in fact intra-company. This will result in increasing the landed costs of goods and services U.S. consumers rely on from international sources. With the era of cheap, credit-fueled financing also coming to an end due to rising interest rates, it is very likely U.S. consumers will be hit with a double whammy in terms of increased purchase prices, as well as more expensive financing. Meanwhile, wage inflation, ever the victim of economic gravity, is not rising in step with other prices, notwithstanding encouraging employment rates.

As G7 leaders and the world dust off from the short-lived and tumultuous U.S. presence at the important summit, we should all wish godspeed to President Trump and his North Korean counterpart. Their meeting will either be short-lived or long-lasting provided level heads and Twitter-temperament prevails. While all summits tend to end with positive pronouncements, with the exception of late being meetings among hitherto close allies, the measure of success with North Korea will only register over the long term. Will the U.S. be able to draw dawn forces on the 38th parallel, which have been a pax guarantor for more than 65 years? Will North and South Korea continue their paths to peace, which was on full display during the Winter Olympics? Will the prospects of economic integration into the global economy begin to lift the people of North Korea out of abject poverty? Is any of this possible with Kim Jong-un and his military junta clinging to power? If President Trump can genuinely orchestrate a lasting peace with North Korea this could very well be his greatest international legacy. Doing so at the expense of long standing allies and trading partners seems to be excessive collateral damage, as the world will need a united front for Korean peace to truly take root.

Already with fractures on the Western front with Iran, it is very likely European countries will not follow the U.S. about face with Tehran. Does similar dissension await the hoped-for peace accord with North Korea? Will China, a key U.S. trading partner and the greatest source of U.S. trade imbalances, support global peace prospects with North Korea while the U.S. commercial and economic policies are on a trade war footing? In the same way we cannot decouple the fortunes of companies from countries, we cannot decouple the fortunes of economic policies and geostrategic ones. Coming out of a hot-tempered and short-lived G7 meeting, it is essential level heads prevail and that knee-jerk urges at tit-for-tat economic protectionism are replaced by consensus, especially when it comes to gaining peace on the Korean Peninsula. For this and for quelling the growing trade rebellions among allies, the U.S. would be wise to end its trade war footing and resume its posture of leadership in the world.

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