Media  Global Economy  2019.04.15

The breakdown of the Hanoi summit has put Japan-US trade talks higher on the agenda - Initiating such talks may be the most promising shot at recovery from the last-minute scuttling of a US-North Korea deal by Michael Cohen's testimony -

The article was originally posted on Webronza on March 3, 2019
The Hanoi summit was eclipsed by Michael Cohen's testimony

The summit talks between the United States and North Korea in Hanoi broke down over the denuclearization of the latter.

US President Donald Trump explained that he walked away from the summit because North Korea called for the lifting of all sanctions in exchange for dismantling part of its nuclear facilities (the nuclear facility in Yongbyon). Few observers however predicted that North Korea would agree to a total abandonment of its nuclear capabilities. In fact, working-level negotiations up to the summit had often been stymied by this fact.

In a desperate move to recover his popularity in the US, President Trump arranged this summit with North Korean leader Kim Jong-un in hopes of achieving some positive outcomes. Trump was optimistic that bilateral talks would be brought to a successful conclusion or compromise at the highest level, but to no avail. By his explanation, he seemed to blame the North Korean leader for not being ready for a deal.

It seems that Kim Jong-un made the above proposal with the recognition that, in the context of domestic politics in the US, Trump would be ready for a deal that may be short on substance but appealing in appearance to US citizens. This recognition was probably relevant in view of the precautionary remark Trump made before the summit that the denuclearization process would take time.

In short, both leaders did not expect a big deal.

In all likelihood, a monkey wrench was thrown into the equation when Michael Cohen, a former lawyer for Trump, testified at a hearing before the US House of Representatives on February 27, the very first day of the summit.

Cohen had accepted a plea bargain from the Federal Bureau of Investigation (FBI) on charges of tax evasion and campaign finance violations, as well as another bargain from Special Counsel Robert Mueller on charges of perjury before the US Congress. Trump denounced Cohen on Twitter, saying that he lied in order to receive a more lenient punishment.

For Trump, Cohen is a betrayer, who had benefited from working for him. Trump would not have had the faintest idea that his "betrayer" would castigate him as a racist, a con man, and a cheat at the House of Representatives hearing.

Legally speaking, Cohen's testimony was nothing new; what he said had been already repeated in the media. For US citizens who had not followed media reports closely, however, Cohen's testimony was a revelation of acts and facts unworthy of a president. His confession that he intimidated individuals and organizations on some five hundred occasions attracted huge public attention.

In a 30-mimute news program, the Public Broadcasting Service (PBS), an American public broadcaster, spent most of its time covering Cohen's testimony and only a minute or two on the US-North Korea summit. The testimony eclipsed the Hanoi summit, so to speak.

No deal was excellent for damage control

In a sense, it was perfect timing. When it is nighttime in Hanoi, it is daytime in Washington, D.C. Talks over dinner in the Vietnamese capital was followed in time by Cohen's testimony at the US capital. The testimony came just between talks on the first and second days.

At the social dinner, Trump was highly optimistic, saying "We're going to have a very busy day will lead to, really, a wonderful situation long term. And our relationship is a very special relationship." He also said, "We had a very successful first summit and I hope the second summit will be equal or greater than the first."

Kim Jong-un concurred, saying "It's been a time period that took me more agony, effort, and patience than ever. I am confident a great result will be produced this time to be welcomed by everyone, and I will do my best toward that goal." He also said, "If I'm not willing to do that [denuclearize], I wouldn't be here right now."

But Cohen's testimony was a game changer. Seeing this and its repercussions in the US, Trump had to produce outcomes that would offset the damage caused by this testimony with regard to the denuclearization of North Korea.

Trump must have thought that the passable outcomes that had been originally conceived would expose him to strong criticism. This idea must have been the reason why he upped the ante on the second day (February 28) even if it would scuttle the negotiations.

This was an unexpected move for Kim Jong-un. His carefully crafted scenario fell apart.

Some diplomatic experts argue that Cohen's testimony had nothing to do with the Hanoi summit. But they cannot explain why the second day of talks was so different from the first day.

We may tend to think of the denuclearization of North Korea, Russia-gate, the US-China trade war, and wall building on the Mexican border as discrete issues. This tendency is especially strong for experts in each issue.

For Trump, however, all of these issues are intertwined in that they all concern how his administration is evaluated and, ultimately, whether or not he can win in the presidential election next year.

As long as he is president, he will not be subject to criminal prosecution by the Department of Justice, although he may be impeached by Congress. When he is no longer president, however, he could be open to prosecution on charges that he violated the campaign finance act by paying hush money to a former pornographic film actress. Cohen testified that the prosecutors are considering prosecuting him on some other charges.

Reelection is a matter of life or death for Trump.

Trump shut down part of the federal government over the issue of building a wall along the Mexican border. This however invited significant public backlash. Congress refused to provide funding to build a border wall. In response, Trump declared a state of national emergency to repurpose funds from other parts of the government to build his wall, resulting in 16 states suing his administration. The failure to deliver on his campaign pledge to build a border wall may estrange many of his supporters.

His attempted shot at recovery from this predicament, arranging the US-North Korea summit, went awry due to Cohen's testimony. A lukewarm deal at the Hanoi summit would have earned a stern rebuke from experts and lawmakers well versed in the issue of denuclearizing North Korea.

Walking away from the talks to reject North Korea's request was excellent as a damage control move. House of Representatives Speaker Nancy Pelosi, a Democrat, praised Trump for not making an easy compromise.

Trade talks will be the next shot at recovery for Trump

Trade negotiations will be the next shot at recovery available to Trump.

Trade talks will allow Trump to earn Brownie points domestically. For one thing, such talks will not be subject to criticism from the opposition Democratic Party. For another, they will not invite much of a backlash from the Republican Party, which has undergone a major shift from its original orientation toward protectionism. Let me elaborate on this.

As I have repeatedly said, Trump's stance on trade talks capitalize on the Democrats' traditional orientation toward protectionism, as highlighted by his withdrawal from the TPP. It represents a departure from the traditional position of the Republican Party. Surprisingly, as far as trade policy is concerned, Trump's position supports trade protectionism just as the position of Senator Bernie Sanders from Vermont, a leftist Democrat who advocates the cause of social democracy.

The mainstream politicians of the Republican Party despised Trump and his positions until he became US president, as illustrated by their attempt to select another person as the presidential candidate despite Trump's victory in the primaries.

In the midterm elections last November, Senator Ted Cruz from Texas, who denounced Trump in a neck-and-neck battle for the Republican presidential nominee during the presidential primary in 2016, fawned over Trump and fully threw his support behind him in a bid to win his support for his election campaign as if he forgot what had happened before. Thanks to Trump's support, Cruz won by a narrow margin.

Cruz was not alone. Republican mainstream politicians have given up their original causes and positions and now support Trump's policies on the border wall or on trade. Most Republican supporters also support Trump though he is mired in a number of scandals, including Russia-gate and a cover-up of extramarital affairs with pornographic actresses, even though it seems to conflict with their long-professed sense of Christian morality.

As far as trade policy is concerned, the Trump administration is effectively no different from the Democratic Party. Moreover, the Republican Party no longer voices opposition to the protectionist policy of the Trump administration. There seems to be little partisan rivalry over trade policy despite the antagonism between the Trump administration and the Democratic Party over immigration policy, as highlighted by the former's insistence on building a border wall, which resulted in the longest government shutdown in U.S. history.

Why is this? I asked this simple question to some of my American friends.

Most of them cited the upcoming Republican primaries as the major reason that Republican politicians support Trump. To run for Congress, it is necessary to win a Republican primary and receive the party's nomination to officially run as its candidate. You cannot announce your candidacy at will. Winning the support of Trump, who is overwhelmingly endorsed by Republican supporters, secures the chance of being nominated.

Conversely, making an enemy of Trump will minimize that chance. If Trump puts up a rival candidate in a primary, defeat will be inevitable. Political analysts say that it is for this reason that Senator Jeff Flake, a Republican from Arizona who confronted Trump even after he became president, gave up the idea of running in the midterm elections. The more Flake challenged Trump's policies, the more his approval rating dwindled. In July, it fell to as low as 18 percent, while his disapproval rating rose to 51 percent.

The denuclearization of North Korea and Japan-US trade talks are all aimed at reelection

What about the approval rating of Trump among Republican supporters?

Some 90 percent of Republican supporters and about 35 percent of American voters in general support Trump, constituting a rock-solid base of support.

An American friend of mine explained that the paramount issues for Republican supporters are lower taxes and deregulation, in a nutshell, a small government, and that free trade is not a big issue for them. What my friend must have been suggesting is that they will continue to support the Trump administration as long as it seeks a small government, even if it leans toward trade protectionism. This is noteworthy because there used to be a rough partisan divide over trade policy, where Republicans championed free trade while Democrats advocated trade protectionism.

Modern politics faces many different issues. People will support a political party simply because they support its stances on certain major issues. Their support for that party will remain unchanged even if they disapprove of its stances on other comparatively minor issues.

American society today is now roughly divided into two groups: women, minorities, youth, and liberals who support the Democratic Party on one hand, and white men and conservatives who support the Republican Party on the other. White men, whether they are blue-collar workers in the Rust Belt or farmers in the Corn Belt, tend to support Trump and the Republican Party even though Trump's trade policy causes them some economic damage.

A similar tendency is also seen in Japan, where agricultural cooperatives and farmers at large continue to support the ruling Liberal Democratic Party even though the Abe administration is pushing ahead with its TPP policy. But farmers will not remain silent if the TPP end up having a major impact on them. Influential Japanese lawmakers backed by stock farmers and mandarin orange producers such as Sadanori Yamanaka, Takami Eto, and Tokutaro Higaki were defeated in an election following the Japan-US trade agreement on beef and citrus in the late 1980s.

Before the Hanoi summit, Trump postponed the self-set deadline of March 1 for raising tariffs on Chinese imports, citing progress in US-China trade talks. A final agreement has now been left to a summit meeting between Trump and Xi Jinping.

After the US-China trade dispute is settled, Washington will likely focus on trade talks with Japan rather than with the EU. Farmers in the Midwest have already been greatly affected by China's higher tariffs on American soybeans tariffs. American agricultural produce has been affected by the TPP 11 and the Japan-EU free trade agreement. To regain the ground lost in the Japanese market, Washington needs to initiate negotiations with Tokyo as soon as possible.

Unless Washington does so, the Republican Party will lose the votes of farmers in the Midwest, a traditional Republican constituency. This will diminish the chance of Trump being reelected. For Trump, both the denuclearization of North Korea and Japan-US trade talks have important implications for his chances of remaining in the presidency.

(This article was translated from the Japanese transcript of Dr. Yamashita's column in "Webronza" on March 3, 2019.)