Sanjaya Baru | Geopolitical Reverse Nixon; Geo-Economic Nixonism

Observers of international relations have coined the phrase “Reverse Nixon” to capture US President Donald Trump’s presumed attempt to drive a wedge between Russia and China. Fifty-five years ago President Richard Nixon befriended Communist China to be able to take on the then Soviet Union.

Any attempt to separate the “Eurasian Alliance” today is a long shot.

In his essay on “The 18th Brumaire of Napoleon Bonaparte”, Karl Marx recalls Hegel’s famous remark that all great personages in history appear twice and adds his spin, saying: “The first time as tragedy, the second time as farce”. It’s one way of viewing Donald Trump’s attempt to combine a geopolitical “Reverse Nixon” with a “geo-economic Nixonism”. For Richard Nixon too launched a trade war, aimed then at Europe and Japan.

Nixon was a tragic figure. He made history with his foreign policies, renewing American self- confidence after the ignominious exit from Vietnam. He reinvigorated the dollar and brought rising Germany and Japan in line, and yet he had to quit office, paying for his misdemeanours.

Mr Trump, on the other hand, has been re-elected despite his misdemeanours and is on a roll. But the world has moved on. Today the US is not in a position to break Russia and China’s “Eurasian alliance”, nor is it able to browbeat its neighbours and European allies on trade. On the geopolitical front, Trumpism will not work as Reverse Nixon. It is unlikely to work even on the geo-economic front.

Mr Trump’s views on trade policy are borrowed from the Nixon era. The concept of “fair trade”, as against “free trade” is, of course, as old as the first textbooks on international trade. The US was a fervent advocate of protectionism during the inter-war period, in the 1930s, and of “fair trade” and “reciprocity” once again in the early 1970s and again in the late 1980s. The US Trade Act of 1930, popularly known as the Smoot-Hawley (or Hawley-Smoot) Act, raised US duties on over 20,000 products.

Economists attributed the Great Depression of the 1930s to the impact of such protectionism. While the US pursued a more liberal trade policy after the Second World War, by the late 1960s it returned to advocating fair trade and tariff reciprocity, worrying about the growing competition from Germany and Japan.

Responding to European and Japanese competition, the Nixon administration sought to legislate the Trade Act of 1971 that would have raised tariffs steeply. This attempt was, however, foiled fearing a backlash from trade partners. Senator Abraham Ribicoff, chair of the Senate Finance Committee, undertook a tour of Europe and returned home to warn the US Congress that if enacted the Trade Act 1971 would have sparked off a “trade war”. In his report on “Trade Policies in the 1970s”, Sen.

Ribicoff stated that: “Strong threats of retaliation against the United States were made by Common Market spokesmen and by a number of other countries. Fundamental relationships between ourselves and our closest allies were at stake -- but these consequences seemed to have been ignored by our policy makers.”

Despite this warning the Nixon administration persisted, perhaps buoyed up by the successful outreach to China that summer. A Congressional Commission that enquired into the subject of “National Security Considerations Affecting Trade Policy” (1971), took the view that “trade policy is national security policy” and advocated a policy shift from the ideology of “free trade”. After dismantling of the Bretton Woods system of exchange rates determination in 1973, sharply devaluing the US dollar, Nixon shifted focus to trade policy. The Trade Act of 1974 gave enormous powers to the President in the realm of trade and tariff policy. It was in response to the economic challenge posed by the rapid rise of the post-war economies of Germany and Japan that the United States Congress enacted the Trade Act of 1974.

The policy instruments made available by the 1974 Trade Act, like Special and Super 301, were deployed by the US against Japan in the 1980s. Walking in the footsteps of Nixon, another Republican President, Ronald Reagan, weaponised trade policy to force Japan to reduce its export surplus vis-à-vis the US. President Donald Trump has walked in the footsteps of both Nixon and Reagan. To understand the logic of Mr Trump's policies it is useful to renew our acquaintance with the thinking of American strategists on the importance of geo-economic dominance and on dealing with economic challenges posed by other countries.

In his 1971 report, Sen. Ribicoff had observed: “Today the traditional methods and old slogans of international trade and investment are simply not relevant when dealing with the increased power of the EEC and Japan. The pre-eminent trading position of the US in the world has faded, and we have run into difficult economic times… The issue in 1971 for the United States is no longer trade expansion through free trade, but through fair trade.” If it was EU and Japan then, today it is EU, Japan, China, India and the rest of the world.

The central strategic challenge for US economic policy today is for it to recover and secure its geo- economic dominance in the global system. After vanquishing the Soviet Union, the US had emerged as the dominant global political and military power. The competition with the Soviets was, albeit, in ideological and geopolitical terms. The Soviet Union imploded due to its economic weaknesses.

What we see today is that while the US remains the primary global military power, its economic and technological status is being challenged by China.

US policy towards a rising China, and indeed other emerging economies, should be based on answers to three questions, wrote Robert Blackwill and Jennifer Harris, in their book War By Other Means: Geoeconomics and Statecraft (2016): “How does it affect America’s economic position in the world? How can we use geo-economic tools to advance our strategic interests? And, how can we shape emerging economic trends to produce geopolitical results beneficial to the United States, to our allies and friends, and to a rules-based global order.”

Mr Trump has cut out “allies and friends” and he’s not bothered about a “rules-based order”, but he has chosen to deploy geo-economic tools to assert US dominance. It remains to be seen if he will succeed, for he has opened far too many fronts, at home and overseas.

The writer is an author, a former newspaper editor and adviser to Prime Minister Manmohan Singh