The Trade of a Lifetime
"Shipping containers" by ZapTheDingbat is licensed under CC BY 2.0.
The true art of the deal is to give a little to get a little. And it’s not always easy.
Last week, news broke of the release of American basketball star Brittney Griner by the Russians after a lengthy negotiation. The deal was essentially a one-for-one prisoner swap for the notorious Viktor Bout, known as the Merchant of Death, who was serving a 25-year prison sentence in the United States after his conviction for illegal arms dealing.
Not included in the deal was Paul Whelan of Michigan, a former Marine and corporate security executive who is currently in a Russian prison on a 16-year sentence for espionage, which he began serving in 2020. It’s the second time this year Whelan was left out of a prisoner swap; back in May, the Biden Administration sent former Russian pilot Konstantin Yaroshenko back home in exchange for Trevor Reed, another Marine veteran in Russian custody, in a deal which also was initially supposed to include Whelan.
Predictably, social media and the air waves lit up as right wingers, conservative pundits and Republican politicians lambasted Biden and his administration for leaving Whelan behind. Of course, Griner too had been left behind, along with Whelan, just a little over six months ago in the deal for Reed; a fact which seems to have been either widely forgotten, or simply overlooked. Or ignored.
In any event, one thing missing from all the breathless criticism is an analysis of the alternatives. The obvious one is the United States rejecting any deal which didn’t include both Griner and Whelan, leaving both of them in Russian custody even though it would have been possible to bring at least one of them home. Whelan’s own family understood that would not have been the way to go:
"It is so important to me that it is clear that we do not begrudge Ms. Griner her freedom," David Whelan said. "As I have often remarked, Brittney's and Paul's cases were never really intertwined. It has always been a strong possibility that one might be freed without the other."
Such is the way of these things. There are two parties to every negotiation, and in the case of the Russians, the counterparty is not only a stubborn one, but an actual adversary on a number of levels and fronts. There are few incentives for Putin’s gang to release the Americans they’re holding and quite a few incentives to hang on to them.
Yet there are many who seem to think we should have been able to simply get our people back for the asking -- or, more accurately, for the demanding. It’s one of the strains permeating the populist movement, especially: a persistent belief in the ability of America to simply impose its will in its international relations. If we just twist enough arms hard enough, the thinking goes, we’ll have it our way.
It’s an odd and somewhat juvenile way of looking at the world, kind of a schoolyard ethos writ large which, when applied to policy at the adult level, leads to some odd and somewhat juvenile results. And nowhere is that more clear than in the subject of trade.
Let’s Make a Deal
No one in their right mind would accuse Donald Trump of having any general understanding of policy, let alone mastery of the finer points. He’s a deeply ignorant and militantly uninformed man. But as the old saying goes, even a broken clock is right twice a day, and when it comes to international trade Trump did have at least one thing right: we’d been coming out on the short end too much for too long.
The problem was his solution. He thought, perhaps even quite sincerely, the main issue was our trade deficit with China, and the best way to correct it was to impose tariffs on Chinese goods in order to force concessions on their part. Leaving aside the fact he didn’t actually know how tariffs work (to this day he still believes the Chinese pay them as the exporter rather than American consumers paying as the importer) he was quite blunt about the underlying philosophy: create pain as a means to compel and coerce.
And in a way, it kind of sort of worked, if not really. China did eventually come to the table and agree to some pretty mild concessions, although of course they imposed retaliatory tariffs of their own -- something which Trump trade adviser Peter Navarro repeatedly, and bizarrely, insisted wouldn’t happen -- and never fully followed through on any of their commitments (oddly enough, people who are getting their arms twisted seem to resent it).
As things turned out, the trade deficit with China was a little smaller at the end of Trump’s single term than it was at the beginning, although the overall trade deficit grew substantially as American companies switched to importing from countries not subject to the tariffs. And, of course, the Covid-19 pandemic had an enormous impact on Chinese production and exports, which skews the numbers a bit.
Along the way, American farmers needed massive support (to the tune of $25 billion in direct subsidies) to make up for the lost business with their biggest export market. American technology companies fared no better in terms of intellectual property protection or the conditions imposed by China for doing business in their country. There was no dramatic boost to American manufacturing. The most charitable reading is, Trump’s trade policy, at best, accomplished nothing.
Unfortunately, reality demands leaving charity aside. There are a lot of negatives to the Trump Administration trade policy, but none is more consequential than the abandonment of the Trans-Pacific Partnership. Pulling out of the TPP put us in a much weaker geopolitical situation throughout the Indo-Pacific Region, and at a time when China is becoming increasingly assertive.
If that seems a bit like operating at cross-purposes, it is. Not only that, but a similar comprehensive agreement in the works with Europe likely died with it, with all that implies for a NATO alliance grappling with a shooting war on its borders and an increasingly adventurous and belligerent Moscow.
We needed, and need, both of them.
For their part, the Biden Administration hasn’t completely jettisoned the Trump approach, and for good reason. While from a tactical perspective the use of tariffs and other punitive measures to force a positive outcome has proven to be massively ineffective (and that’s being kind), from a strategic perspective the emphasis on the primacy of American domestic interests in trade policy is the right one. We want the best deal for ourselves.
But to get it, we don’t have to engage in all-or-nothing, zero-sum gamesmanship. There is such a thing as a win-win situation. It’s something we’ve produced many times in the past, in many treaties and agreements. Individual corporations and businesses do it all the time, too. Getting there is a matter of having a mature outlook, an understanding of how life really works, a feel for where to compromise and a willingness to take the long view.
And there may be no time more important for a comprehensive economic approach than now.
It’s All Baked In
For many of our erstwhile allies and economic partners, the idea of America actually adopting a comprehensive industrial policy is a frightening one. To them, it means deglobalization (which is not really an accurate term), which in turn means a world where free trade has fallen apart and we’ve descended into some kind of international Hobbesian war of all against all.
Perhaps their fears would have been justified had Trump won a second term, although judging by the minor tweaks to NAFTA his administration implemented, in the event those fears may have turned out to be overblown. As it is, the Biden Administration’s policy is clearly not intended to spark a trade war, nor completely undercut the economies of our longstanding partners. Instead, it’s meant to do what any policy is meant to do: get things organized.
That means, at least in part, doing a lot of the work the TPP was supposed to do, although through different methods and structures than a single agreement. It’s a more laborious process, but the end goal is the same -- not so much free trade as rules-based trade, by agreement, for mutual benefit. And it’s a goal which can be pursued everywhere, and should be.
Had the World Trade Organization proven to be a more effective institution, it’s entirely possible we wouldn’t be at this point. It’s also clear many in the European Union fear the potential of an American industrial policy and decry supposedly new wrinkles, like subsidies for American industries, because they would result in more robust competition from this side of the Atlantic. But subsidies are nothing new, and EU members themselves have been using them regularly all along. Public-private partnerships are a common business model throughout the developed world.
Laissez-faire capitalism is a myth.
The EU also seems willing to at least consider taking an “if you can’t beat ‘em, join ‘em” approach. Which only stands to reason given the innovative economic flexibility Europeans have often displayed. Arguably, the most important and successful economy on the Continent is in Germany, which serves as the linchpin of the EU. Since the end of World War II, the Germans have been using the social market economy model, which is often colloquially referred to as Rhine capitalism. It is, beyond question, a mixed economy.
It’s also a shining example of how the best aspects of capitalism can be incorporated into a system where the market isn’t worshiped as a god and the government’s role is both active and restrained. Such a blended system has proven to be effective on the national level; something like it may be possible on the international level, where entire national economies play the role of corporations and international agreements serve the same function as institutional regulators currently perform within countries.
It would mean each country trying to maximize its economic potential, much as corporations try and maximize their profits and shareholder returns, while simultaneously playing by the rules and honoring their contracts (which would be treaty obligations for countries). In other words, we would replicate the Rhenish model of regulated competition and social support, but on a global scale.
Which is really not all that far from where we are today. A lot of the features we need are already baked in. What we lack is organization.
Get It Together, Kids
Which brings us back to international agreements.
If we’re to have any realistic hope of tackling some of the looming challenges our world is facing -- not least of which is human-caused climate change -- the United States is going to have to lead the way. No other country on Earth has our combination of a rules-based democratic order, a powerful capitalist economy, a highly developed technology sector and a military capable of providing security for all of it, and more.
Done right, the end result of all our efforts can be a cleaner, more peaceful, more prosperous world than maybe we can even imagine at the moment. It seems so far off in a lot of ways. Yet everything does, until someone strikes out for it with everyone else following behind.
But leadership requires us to be, to borrow a cliche, the grownups in the room. And all grownups know the tradeoffs adult life requires between what we want, what we need, what we want to do and what we have to do. Only children, and little ones at that, get the opportunity to grab at everything and say “mine.” Past a certain point it gets a bit more complex.
Everyone knows it, too. The inherent compromises of any fair deal are what makes a deal fair in the first place. And the only agreements which truly stick are the ones willingly and voluntarily entered into by all the parties. There is no guarantee everyone will keep their word all the time, but there most certainly is a guarantee someone won’t keep their word if they were coerced into giving it in the first place. They’re not morally bound to keep their word if coerced, either.
So, we can’t be, and shouldn’t be, bullies.
Of course, in trade the mutual benefits are usually fairly easy to identify and the key is in working out the details. In diplomacy, especially between rivals at a fraught juncture in their relationship, it can be extraordinarily difficult to even get started. The first problem is motive, and when dealing with Russia the purpose of any act can be, to paraphrase Churchill, a riddle wrapped in a mystery inside an enigma.
We don’t know exactly why they seized Brittney Griner, although the timing (just a week or so before their invasion of Ukraine) is highly suspicious. We can be sure the Russians knew both Trevor Reed and Paul Whelan were former Marines, but we don’t know exactly why they grabbed them, either. It’s at least possible the game was to get Viktor Bout back all along. It’s also possible Putin and his henchmen just wanted to keep some leverage in their back pocket.
Whatever the ultimate truth, once the Russians have American citizens in custody, getting them freed isn’t a simple matter of making demands. That kind of approach doesn’t even work with our friends. There is almost certainly not going to be an ideal solution, either. Inevitably, trading a Bad Guy for a Good Guy is probably the only way it’s going to work out, so we have one more trade to make.
The trade of a lifetime.
Odds and Ends
Big Oil has been increasingly intent on getting into the green energy game, and by all appearances at least some of the companies are beginning to get really serious. BP is one of them: BP doubles down on hydrogen as fuel of the future | Reuters
We’ve been arguing for a while, maybe we haven’t looked at alternative fuels like hydrogen quite hard enough, especially when it comes to transportation. Hopefully, it’s the start of something big.
Meanwhile, a recent study showed once again (surprise, surprise) Americans may agree a lot more than one would think given the endless partisanship of the news. Check out this report, and take the quiz yourself while you’re at it: History Wars (historyperceptiongap.us)
While we’re on the subject of education, this essay on the great Leo Strauss is long but worth the time. There’s much to think about, not least of which is the idea we need to be freed not from the past, but from the present: Leo Strauss and the Closed Society by Matthew Rose | Articles | First Things
Last week, we talked a lot about artificial intelligence, technology and our own place in the world. In a lot of ways, John von Neumann not only saw it coming, but laid the foundation for it all: The World John von Neumann Built | The Nation
And finally, you may have had no idea there was a Guiness World Record for Mr. Potato Head. Don’t worry. Probably neither did anyone else: Watch: Malaysian puzzle solver breaks Mr. Potato Head world record - UPI.com
See you next week.
Kevin J. Rogers is the executive director of the Modern Whig Institute. He can be reached at director@modernwhig.org. When not engaged with the Institute he publishes independently to Commentatio on Substack.
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The Modern Whig Institute is a 501(c)(3) civic research and education foundation dedicated to the fundamental American principles of representative government, ordered liberty, capitalism, due process and the rule of law.
