Who is afraid of Donald Trump?

(Michael Candelori, CC BY)

Almost everybody was wrong about the chances of Donald Trump winning the presidential elections, in particular the so-called big-data prognosticators.

 

The predicting model of the New York Times calculated the chances of Hilary Clinton to win at 84 per cent, the Huffington Post at 98 per cent and the Princeton Election Consortium even at 99 per cent. All for the drain. Against the expectations Trump was able to mobilize the underprivileged white population of “Anytown, USA” whose anger and the feeling of disempowerment have been ignored by the Washington elites for two decades of increasing inequality, the too big to fail banks and globalization, leaving many people behind. Both the Republicans and the Democrats have been complicit in this development.

Whereas the George W. Bush administration accelerated the deregulation of the finance sector, it was the Bill Clinton administration who started disintegrating the Glass-Steagall Act, in particular its legal constraints on finance, thus cutting lose Wall Street and boosting the “financialization” of the US economy. On November 9th, 2016, both the Democrats and the Republicans did not even know what hit them.

No big deal?

After the election, the mood in the US American academic and liberal circles is largely negative. There is a real sense that Trump’s moving to the White House will be a serious threat to democracy in the US, as the highly polarizing and brutal election campaign might have been just a foretaste of what Trump is capable of. Some careful optimists point to the system of checks and balances that should prevent Trump’s demolition derby, but with the new appointments to the Supreme Court coming up and the Republican majority in the Congress, the Democrats might be left with very few political instruments (e.g. the filibuster in the Senate) to counter the concentrated power.

With Trump, the unlikely defender of the ordinary people, there will certainly be some changes, mainly because they will be in tune with the Republican majority in the Congress. Some of Obama’s main initiatives, including the Affordable Care Act (Obamacare) and the Paris Agreement on Climate Change might be rolled back or weakened but this would be also the case with any common Republican president working with a unified Republican Congress. It is very probable that Trump will be able to get approved new infrastructure spending and a tax cut for high-income families, unless he conflicts himself with the GOP leadership. The Republicans have already tried to get such a bill through the Congress in January 2016, only to be stopped by Obama’s veto.

On the one hand, both the tax cut and the infrastructure spending are likely to boost the US economic growth, at least in the short term. On the Election Day the stock index and US treasury bonds shot up, as investors estimated that the new government is not only going to increase spending on the ailing infrastructure but also cause inflation to grow. The Tax Policy Center—an independent think tank— calculated that the Trump’s tax reduction program alone (which is quite similar to the tax reform plan devised by the Republicans in Congress) might add around 1,7 per cent to the GDP in 2017.

The infrastructure investment program of USD1 trillion in the next 10 years is believed to boost the GDP growth even further. Trump’s economic adviser Stephen Moore expects that USD150bn can be extracted from taxing the foreign revenues of US corporations and invested in new roads, bridges and airports. Interestingly, still in August 2016 Moore heavily criticized Obama for his spending on infrastructure. “Over Obama’s presidency, Washington has spent nearly USD1 trillion on infrastructure. […] this was more money than any other president in history has spent.” In a sense, Trump’s infrastructure program might not be as revolutionary as some Republicans like to present it.

On the other hand, there is the issue of international trade which Donald Trump—according to his many statements in the campaign— is not a big fan of. Should he decide to stick to his promises and destroy NAFTA or introduce more protectionism into the US-Chinese trade relations, it will massively hurt growth and lead to a huge rise in the cost of living for poor and lower-middle income families in the US.

Imagine what will happen to Apple Inc. producing its devices in China, after the US unilaterally imposes high tariffs. The Apple factories in China will rapidly find out that they are in violation of Chinese environment, health and safety regulations. There is no one-sided protectionism, as protectionist spirals tend to damage all parties involved. Increased protectionism will send emerging markets into recession, also damaging Europe’s economy which is more exposed to international trade than the US economy is. In particular, Germany due it its export-orientated economy will be immensely hurt, with dire consequences for Central and Eastern Europe.

How foreign is foreign policy?

It is no secret that Donald Trump is largely unexperienced in the field of foreign policy and frames international relations in terms of “cutting deals” and “making businesses”. But he will not be the first president that has little understanding of the complexities of international relations. Therefore, the White House advisors and top administration members (not necessarily only those in charge of foreign policy) will play the key role in determining the parameters of the new administration’s foreign policy. Both top advisers in the new administration—Stephen Bannon (Chief Strategist and Senior Counsellor) and Reince Priebus (The White House Chief of Staff) have no foreign policy experience and competences.

While Donald Trump expressed his admiration for Vladimir Putin and showed interest in a “reset” with Russia, the future vice-president Mike Pence said on several occasions that the US will engage Russia in Syria (by establishing a safe zone) and Eastern Europe (by deploying a missile defense shield), as well as made allusions to Reagan era hawkish politics vis-à-vis Russia. Also, Rudy Guliani, who has been discussed as one of possible front-runners for the position of Secretary of State, espouses more confrontational positions with regards to Moscow. The other contender for the job is John Bolton, a belligerent former US ambassador to the UN who called for the US to bomb Iran last year.

Given this variety of positions, low degree of coherence and high degree of inexperience of Trump and his future aides an erratic foreign policy of the new administration is to be expected, resulting in the so-called flip-flopping, just as Obama’s foreign policy on Syria but on a larger scale. There might be dominance of rhetoric over decision, also in the view of strong position of Stephen Bannon in the White House and his proclivity for provocation, conflict and rejection of political correctness (close to openly racist and white supremacist positions). The first more serious test will be in the first week of March 2017, when the decision on sanctions against Russia will have to be made, as the presidential Executive Order 1366 establishing the sanctions will expire. Thus, Trump will have around six weeks to make up his mind on the new opening in the relations with Russia after he starts his term.

Despite Trump’s rhetoric on better relations with Russia, some experts are deeply skeptical whether a new reset will be possible at all. Taras Kuzio, expert in Russian and Ukrainian politics from the University of Alberta, argues that any US reset with Russia under Putin is bound to fail. “Two resets by Presidents George W. Bush and Barack Obama with Russia failed because Moscow believed only the US – not itself – should reset. Both resets were undertaken in better international conditions, one after the 9/11 terrorist attacks on US cities and the other during ‘liberal’ Dmitri Medvedev’s presidency.

Today’s conditions, when Putin and Russia have very low international standing and Western leaders are calling its actions in Syria’s war crimes, are far less conducive to a successful reset.” As a consequence, any attempt to end sanctions against Russia is likely to meet resistance from the GOP in the Congress who is largely critical of Putin. There might occur a similar President-Congress tension on Russia policy as during Obama presidency, when Barack Obama vetoed the US Congress over sending arms to Ukraine.

Central and Eastern Europe: Where is it on the map?

Trump, as many other American Presidents, does not have much knowledge of the region and is likely to be influenced by personal sympathies and antipathies. That is why Viktor Orban was very quick to congratulate Trump on his victory and Milos Zeman did not get tired of expressing his support.

Poland is a country that Trump knows best due to the role of the Polish diaspora in the US politics. This is why Poland’s President Andrzej Duda was the first CE leader, after Russian and Ukrainian presidents, with whom Trump talked. According to the Polish Ambassador to the US, Piotr Wilczek, this was Trump’s gesture towards Poland and its leading role in the region.  

On top of that Poland’s defense spending of 2 per cent of its GDP (which is the NATO guideline) turns it to a member of a rather exclusive club of five countries within NATO (next to the US, UK, Greece and Estonia) and the only one in CEE (Slovakia spends 1.16 per cent while Czech Republic 1.04 per cent and Hungary 1.01 per cent).

Other CEE countries which are much smaller than Poland, both in terms of population and economy, are likely to be put under pressure by the US due to their rather modest investments into defense. Trump is expected to cut American contribution to NATO from 45 per cent to 37 per cent and insist that Europeans raise their contributions to compensate for the difference. This will likely cause increased defense spending in several European countries and bolster ambitions by some EU member states, mainly France and Germany, to expand the EU’s strategic autonomy through more permanently structured defense cooperation.

When it comes to the EU policy toward Moscow, the key troublemaker will probably remain Hungary, as Viktor Orban welcomed Trump’s promises of renewed U.S. engagement with Russia, and rejects the EU sanctions regime. Since Orban enjoys playing the EU against Russia, this might undermine the fragile cohesion within the Visegrad Group which rests mainly on the anti-migration resistance against Germany with divisions than commonalities regarding other issues. A more general concern is that Trump’s victory could give a further boost to anti-EU populists in the region, both these in government and those that are not strong enough to form a government but on the wave of the new popularity induced by Trump’s presidency can blackmail their governments into more anti-EU positions.

This problem could occur, for instance, in the Czech Republic facing elections in 2017. There are several Eurosceptic parties in the Czech parliament (the Civic Democratic Party-ODS, Dawn- National Coalition, which have split into new hard Eurosceptic Freedom and Direct Democracy in 2015). A new boost to populist tendencies in CEE might generate pressure on the governments to follow through with more renationalization, also by claiming that the EU is powerless and irrelevant.

Bilateralization

Three more specific aspects are likely to become relevant in the US relations with the region: bilateralization, NATO funding and environment policies. Since Trump views international relations as a series of “deals”, a bilateralization of US foreign policy can be expected. As a consequence, multilateral institutions regulating international trade, environment and disarmament will suffer, and multilateral organizations like the WTO might be weakened. The US will decrease the role of multilateral agreements and favor bilateral deals and summits of the most powerful countries, mainly through G-7 and G-20.

Most of the CEE countries will be excluded from the very start, given their rather limited economic and geopolitical relevance. Poland is the only CEE country that might come close to a hypothetical reach of G-20. But currently Warsaw does not have any chances to become a full member, as Poland is unable to increase its economic potential soon enough. Nevertheless, Poland could lobby for the status of a permanent guest at the G-20 summits, similar to the status Spain currently enjoys within G-20.

Trump also expressed the will to pull the United States out of the Paris Agreement on climate change. He is likely to announce that the US will not comply with the intended nationally determined contributions (in the case of the US: 26-28 per cent reduction below 2005 emission levels by 2025), as pulling out of the agreement is not simple, given that it has come into force now. Domestically, Trump wants to “bring back the coal industry,” and to support fracking. And this is in tune with Poland’s position on coal industry and might revitalize the interest in fracking in Poland.

Berlusconi in the White House

The major question remains whether Donald Trump will become more presidential, once in the White House. The answer is: probably no. He is not a generic Republican who is well-connected in the party but an outsider who has hijacked the Republican Party against the preference of the GOP leadership who supported him only half-heartedly, while many senior Republicans, such as John McCain, turned against him. As in the August 2016 letter of 50 GOP national security experts who denounced Trump as the most reckless presidential candidate in the American history. Trump was more than happy to go on a rant against the GOP leaders, such as Paul Ryan, which suggests that as a president he will not necessarily avoid conflict with the GOP majority. In addition, Trump’s advanced age might indicate higher aggressiveness, as in comparison to Barack Obama or even Bill Clinton he is unlikely to plan his career after the presidency.

Against this backdrop, Donald Trump is likely to be the next Berlusconi who has difficulties of separating public policy and his own businesses, views international security from a mercantile point of view and follows the adviser whom he listened as the last one. One of the major concerns are ties between Trump’s private businesses and the government policies.

On November 11th Trump put three of his children, as well as his son-in-law, on his transition team, a decision that gives an impression of creating a clan-like decision-making system. Since Trump’s offspring will manage his businesses and also have impact on the composition of the new administration, the issue of conflict of interest might rise on regular basis. One of the recent examples hereof is Trump’s debts with foreign banks. For instance, Deutsche Bank has allegedly given USD2.5bn in loans to Donald Trump since 1998. Currently, he is believed to still have USD350m outstanding debts with the bank. Now, Deutsche Bank is negotiating with the Obama administration about the amount of damages it will need to pay for the sale of trashy subprime mortgage securities to clueless US clients, so the bank is thinking about stretching the talks until January 2017 when Trump becomes officially president.

A further problem will be the personnel recruitment. Given the small rebellion of the GOP against Trump, he is reluctant to recruit people from the Republican party, universities or Washington think tanks, which would be the natural source of personnel for any other new administration, both Republican and Democratic. Around 4,000 jobs are to be filled with every new administration but this time they are likely to go to lobbyists from the private sector and corporate consultants. People like Michael Cotanzaro (lobbyist for Devon Energy) will recruit for jobs at the Energy Department, while Michael Torrey (lobbyist for the food industry) will help finding new employees for the Department of Agriculture. Also, the names discussed for the top financial positions in the Trump administration such as Steven Mnuchin (former Goldman-Sachs-Banker) or Wilbur Ross (Rothschild Investments) suggest that the interests of private sector will have great impact on future decisions of Trump administration. Apparently, Trumps is aware of the negative impression of having too many lobbyists on his team, since he proposed to introduce a five-year lobbying ban for the former government employees—a quite incredible promise, given the lacking legal instruments of implementing the ban.

This suggests two things. Firstly, we can expect further deregulation of the US economy, from which not necessarily Wall Street will profit (as the major US banks—Citigroup, Morgan Stanley and Goldman Sachs— turned their backs on Trump in the past due to his litigious behavior and failed businesses). The most profitable may be big corporations and investment firms in energy, agriculture, telecommunication and construction. This raises the question in how far the middle class will actually benefit from the envisaged changes.

Secondly, as Trump wants to renegotiate multilateral free trade agreements such as NAFTA, this could mean that after a possible annulment of NAFTA, bilateral trade agreements will be negotiated separately with Canada and Mexico, with the US pushing for more asymmetrical conditions favoring American companies. In exchange, more imports of Canadian energy could be offered by the US, in particular a more decisive backing for the Keystone XL pipeline (from Canadian Alberta to Texas) that Barack Obama initially supported but eventually turned against. The Canadian Prime Minister Justin Trudeau has already said that he would be willing to renegotiate NAFTA. Still, the renegotiation of NAFTA might not be as profitable as Trump thinks. For instance, Mexico is in a better economic shape now than in 1992 when the agreement was negotiated and signed. With any opening of negotiations, the Mexican government would require that the United States accepts Mexican trucks on its roads, which was provided for in the first NAFTA agreement but withdrawn by Congress.

Ireneusz Pawel Karolewski is an Associate Professor of Political Science, Willy Brandt Centre for German and European Studies, University of Wroclaw in Poland. He was Kosciuszko foundation fellow at Center for European Studies, Harvard University in 2014 and Visiting professor at the John F. Kennedy School of Government, Harvard University in 2015. His research interests are social and political theory, European Union governance and EU foreign policy.

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