Trump’s trade victory over S. Korea will end in defeat

By Hal Brands / BLOOMBERG

US PRESIDENT Donald Trump said he got a “great deal” in renegotiating America’s bilateral trade agreement with South Korea.

This is the first trade pact Trump has successfully revised, and it reflects the intellectual core of his America First approach to trade: The US can use its great economic and geopolitical leverage to drive harder bargains with weaker powers.

That approach appears to have worked in the South Korea case, at least in a modest way. But limitations and dangers lurk should the president try to apply it more broadly.

At first glance, the US-South Korea deal would appear to be a textbook victory for coercive economic diplomacy.

The Trump administration scored two concessions that it has portrayed as victories for American manufacturing and exporters: South Korean commitment to limit its steel exports to the US; and a deal to double, to 50,000, the number of cars that US automakers can export to South Korea without meeting its safety standards.

Admittedly, there remain questions about how much the agreement will benefit Detroit, given that South Korean demand for American cars has so far been quite limited.

But the administration can nonetheless claim, not entirely without justification, that it got a deal in which most of the concessions came from the other side.

It did so by using an array of pressure tactics. Trump had repeatedly threatened to simply tear up the existing bilateral trade agreement unless it was renegotiated.

South Korea was also facing the looming imposition of steep tariffs on steel exports unless it gave ground.

Finally, the administration was able to invoke — largely implicitly — the geopolitical leverage it possesses as the guarantor of South Korean security at a time of intense tension on the peninsula.

In short, the US held most of the cards, and Trump played them for all they were worth.

As is often the case with Trump’s foreign policy, there is half an insight — but only half — underlying this approach.

Trump correctly understands that the US wields significant negotiating power because of both the economic allure of exporting to America and the fact that Washington is the primary security provider for many of its leading trade partners.

If the US is really willing to play hard-ball — to hold its relationships with key allies and trading partners at risk — then it probably can squeeze a few more concessions out of most of them.

Yet, if this approach worked tolerably well for Trump vis-à-vis South Korea, he is nonetheless risking both disappointment and damage if he makes it his go-to strategy for global trade.

The disappointment will come from the fact that, for all of America’s undeniable power and influence, in relatively few cases will it possess as much leverage as it did with South Korea.

Few countries depend on the US as heavily as it does for its security right now, simply because few US allies face security challenges as acute, immediate and terrifying as the one posed by Kim Jong-un.

As a major exporter of steel to the US, South Korea was also highly vulnerable to the threat of tariffs.

Where Washington lacks this potent combination of advantages, Trump’s practices may prove less availing.

China, for instance, has already responded to American trade penalties by announcing it will impose countervailing tariffs of its own; the European Union has threatened to go in the same direction.

“We talk about everything, in principle, with a friendly country that respects the rules of the World Trade Organisation,” French President Emmanuel Macron said. “We talk about nothing, in principle, when it is with a gun to our head.”

Trump will still be tempted to throw America’s weight around in many of its trade relationships, no doubt, but here’s where the damage comes in.

The US may be the mightiest country in the world, but the international order it leads is based on a tacit bargain that it will not always exploit that power to the hilt.

After all, so many countries align with Washington because they believe that American hegemony is exercised in more benevolent and less coercive ways than the hegemony of other great powers might be exercised.

This means that the US must sometimes settle for less than it might get in negotiations with even its closest allies as the price of reassuring them that it will use its power wisely and responsibly.

This doesn’t require being played for a patsy, contrary to what Trump has argued. It simply requires recognising that the long con is smarter than the short con — that the US benefits so enormously from its position of broadly consensual world leadership that showing restraint is sometimes the better part of wisdom.

Trump may win some short-term gains by bullying and berating US allies and other partners, but the longterm losses will be far greater.

Especially, if Trump insists on doing this in his trademark style. It is one thing to engage in hard-edged trade negotiations with allies: American officials have been doing that for generations. It is another thing to conduct those negotiations in ways that seem almost calculated to embarrass proud countries and leaders by depicting them as parasitic bloodsuckers.

And it is yet another thing to do all this and then threaten to put an otherwise-sealed deal on hold to extract still further concessions, as Trump implied he would do to South Korea just days after the agreement was concluded.

An American president is rapidly gaining a reputation for forcing US allies and trade partners to accept maximum political humiliation as the price of appeasing him. This is tremendously shortsighted.

The ability of democratic allies to cooperate with the US is ultimately a function of what those allied governments can sell to their publics.

Should Trump persist in his approach, he will increasingly put foreign leaders in positions where the path of least political resistance is to confront rather than conciliate Washington.

Every country, every leader, has its politics. To succeed in trade negotiations, or any other aspect of global affairs, even a superpower has to keep that in mind.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.