Published daily by the Lowy Institute

Weekend catch-up: Rudd down, Iran sanctions out, protectionism up

Weekend catch-up: Rudd down, Iran sanctions out, protectionism up
Published 8 Oct 2016   Follow @SamRoggeveen

The Interpreter took a day off on Monday but last Saturday we published a piece by new Shadow Foreign Minister Penny Wong, her first public comments about the US alliance:

It is in the US's best interests for Australia's voice to be an independent one, and for our perspective on the region to be unique. The US is better served in this region by an independent and confident Australia. This is why, for modern Labor, the US alliance is one of the three pillars of our foreign policy, along with strong relationships in our region and multilateral engagement with the world. However, being in an alliance does not mean Australia must agree reflexively with every aspect of American policy or make its foreign policy subservient to that of our partner.

Brendan Thomas-Noone wrote on the worrying trajectory of tactical nuclear weapons development:

The proliferation of these systems and their potential impact on strategic stability has not been fully considered. One way these capabilities could upset stability is by blurring the distinction between conventional and nuclear use. Another is the prospect that 'decapitation strikes', a source of Soviet anxiety during the Cold War, could become more feasible. Indeed, there are some indications that nuclear-capable, submarine-borne cruise missiles are playing a role in nuclear dynamics between Russia and the US in a similar way.

The ANU's Ian Parmeter wrote on deteriorating US-Russia relations over the war in Syria:

...the reality is that Russia has the US in a bind over Syria. President Obama’s refusal to become militarily involved in the civil war had left a vacuum that Russia filled with its intervention in September last year. Russia, not the US, now sets the rules for negotiations on Syria. The Catch 22 for the US is that having ruled out the military option, it has no choice but to continue with diplomacy. To abandon diplomacy would subject the US to withering international criticism for doing nothing over the humanitarian crisis in Aleppo.

Stephen Grenville said American anti-globalisation sentiment is misplaced: [fold]

If Trump’s main appeal is to blue-collar workers, let’s look more closely at the experience in their core industry: manufacturing. Adaptation and change have been the norm in manufacturing. Contrary to general perceptions, manufacturing output continued to grow strongly following what another one-time presidential candidate,  Ross Perot, described as the ‘great sucking sound’ of NAFTA in 1994.  Even when China’s entry into the World Trade Organisation in 2001 opened up the US market, US manufacturing output continued to expand.

The shock of intense competition from China, however, bought a change in manufacturing employment.  After plateauing between 1980 and 2000, employment fell sharply.  China was not the only reason: the ‘tech-wreck’ recession of 2001 and the Great Recession of 2008 also brought sharp cut-backs in manufacturing employment. But the competition from China provoked a burst of innovation which transformed manufacturing, shifting labour-intensive processes offshore, splitting production through the use of offshore supply chains, and computerising the processes that remained onshore. Output has now reached record levels, but it is produced by far fewer people.

Could Joe Stiglitz be part of another Clinton Administration? Emma Connors:

Former UK Prime Minister Tony Blair thinks Joseph Stiglitz, the outspoken economist, Nobel Laureate, and one-time chairman of President Bill Clinton's Council of Advisors, has the ear of Hillary Clinton, as discussed in this fascinating interview with Politico's Glenn Thrush, (you can listen to the podcast or read the transcript).  Blair says: 'Hillary Clinton has become very close to Joseph Stiglitz, who is one of the individuals, kind of an avatar of that movement, and she has clearly been moved to the left by Bernie Sanders.'

Rodger Shanahan this week had twin posts on the Syria morass. The first ('Syria: What are we going to do now?') focused on those who want the US to 'do something', and why their arguments don't stack up. The companion piece was all about calls to (a) punish Assad for Aleppo and (2) save the civilians of Aleppo. Shanahan said the US cannot do both:

The Assad regime and its supporters have encircled Aleppo with little prospect of the siege being broken. They seek to attrit the armed elements which are fighting among the civilian population. Even if the regime and Russian forces took all care to minimise civilian casualties (which they don't), innocents would still die. Assad is likely to take Aleppo and it is simply a matter of how many civilians will die before it is done.

Rather than call for military intervention to attempt the rather quixotic task of stopping Russian, Iranian and Syrian forces attacking Aleppo, a more likely path to limiting civilian deaths would be to pressure armed groups to leave Aleppo and to provide a UN presence on the ground to ensure that fighters are given safe passage out of the city.

There's a lot to learn from Vietnam's experience of living with a powerful China, says Euan Graham:

Beyond the deterrent value of raising costs for China in a military sense, Vietnam understands the complex interplay between diplomacy and military power. This includes psychological aspects, above all the capacity for independent action that is embodied in a national defence capability maintained at high readiness. Vietnam's defence inventory includes Israeli-made radars, Russian S-300 surface-to-air missiles, Su-27 and Su-30MK2 strike aircraft and Kilo submarines equipped with land-attack cruise missiles. This resembles a thrifty but still potent version of China's own 'anti-access' and sea denial dispositions vis-à-vis the US.

Hanoi further avoids the flip-flop mentality by maintaining depth to its international relations, averting dependence on a single ally, and ensuring that alternatives are available when a comprehensive strategic partner like Russia proves unreliable.

Kevin Rudd's bid to lead the UN ended this week, an occasion marked by pieces from Sarah Frankel ('Rudd's latest manoeuvre in the race to lead the UN') and Peter Nadin:

Kevin Rudd will certainly be in the mix for a 'cabinet' post after his work as chair of the Independent Commission on Multilateralism. The question is what position? Would Rudd, a former head of government, be satisfied with a minor role? Traditionally, the prominent posts are divided among the big powers: France has peacekeeping (DPKO); the UK has humanitarian affairs (OHCA); and the US has political affairs (DPA).

Voter turnout will be vital for Trump, wrote Christine Gallagher:

People are optimistic that Trump will deliver on jobs and the economy. A man from upstate New York told me workplace issues are key for people he knows who have taken financial blows in the past decade and who are either out of work or unable to retire. An increase in white, working class voters has the potential to swing the election Trump’s way, particularly in contested Rust Belt states such as Ohio.

While Trump may increase the white, working class Republican vote, Clinton may struggle to retain Obama’s youth and non-white votes. The election of the first female president of the United States would clearly be an historic landmark, yet this barely featured in my discussions, which suggests age and race are more important than gender in this election.

Greg Earl's regular round-up of economic diplomacy included this anecdote: one of the key advocates for a rewrite and the powerful US Senate finance committee chairman Orrin Hatch has a solution with a sting in the tail for Australia. He says there is a simple way to get the 12-year intellectual property protection for biologic drugs in the TPP that the US pharmaceutical industry wants, but which Australia has limited to eight years. 'There are countries that would renegotiate the deal if the Administration were to get on the ball and work on it,' Hatch told Politico. 'Australia may not be one of them, but I said: 'Tell Australia we'll deal with them later. They don't have to be part of TPP.'

Zubaidah Nazeer on the battle for the Jakarta governorship:

The contest illustrates that Indonesia's democracy is, to a large extent, a fight between emerging leaders with strong public support such as Widodo and Purnama and old war horses trying to maintain their influence.

Protectionism is the spectre over this weekend's IMF-World Bank meetings in Washington:

But there is a 'new' aspect to this year's annual meetings, and that is the increased emphasis on avoiding policies that will impair growth. The IMF normally focuses on what needs to be done to lift growth rather than on what needs to be avoided. Yet in her warm-up speech for this year's meetings, the first point Lagarde made was that ministers should follow the advice given to first-year medical students and above all 'do no harm'. As to what would do harm, Lagarde said that the rise of protectionism was a 'clear case of economic malpractice' that would destroy a clear driver of growth.

These concerns reflect Brexit and the rise of Donald Trump, who has pledged to impose punitive tariffs on imports from Mexico and China. The implications of a Trump presidency will no doubt be a key talking point in Washington, even if this is not explicitly acknowledged in the formal communiques. But there are rising protectionist pressures in many countries. Ministers attending the IMF/World Bank meetings may not be able to influence the views of Trump and his supporters, but they could share a common resolve to avoid the spread of 'economic malpractice'. If this was achieved, something significant would come from this year's meetings.

Now that Iran is free of many sanctions, how is its international trading position faring? Dina Esfandiary:

On implementation day of the landmark 2015 Joint Comprehensive Plan of Action (JCPOA), a number of multilateral and unilateral sanctions on Iran were lifted, including all EU measures in a number of sectors like banking and finance, insurance and shipping. Suddenly Iran became a potential gold-mine: an untapped and diversified market, the second largest economy in the Middle East, a young and educated population, and a country with the fourth-biggest oil reserves and the second-biggest gas reserves in the world.

With these changes came great foreign interest. Sixteen trade delegations visited Iran in the first three months after implementation day last year and the number of visiting trade delegations increased by 237% over one year. Between January and mid-March 2016, Iran struck an estimated $50 billion in deals with firms from Italy, Japan, South Korea, Russia, and Germany.

But turning them into deliverable contracts has been difficult.

You may also be interested in