A declaration of ignorance and policy insanity

Jun 9th, 2018 | By
Category: Notes and Comment Blog
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Paul Krugman on the summit frolics.

[T]here has never been a disaster like the G7 meeting that just took place. It could herald the beginning of a trade war, maybe even the collapse of the Western alliance. At the very least it will damage America’s reputation as a reliable ally for decades to come; even if Trump eventually departs the scene in disgrace, the fact that someone like him could come to power in the first place will always be in the back of everyone’s mind.

That’s why I keep saying we’ll never live this down. He got selected, he got elected, and he trashed the joint. Not a sign of health.

He didn’t put America first; Russia first would be a better description. And he didn’t demand drastic policy changes from our allies; he demanded that they stop doing bad things they aren’t doing. This wasn’t a tough stance on behalf of American interests, it was a declaration of ignorance and policy insanity.

Trump started with a call for readmitting Russia to the group, which makes no sense at all. The truth is that Russia, whose GDP is about the same size as Spain’s and quite a bit smaller than Brazil’s, was always a ringer in what was meant to be a group of major economies. It was brought in for strategic reasons, and kicked out when it invaded Ukraine. There is no possible justification for bringing it back, other than whatever hold Putin has on Trump personally.

Nukes? Great power? It’s really big?

Then Trump demanded that the other G7 members remove their “ridiculous and unacceptable” tariffs on U.S. goods – which would be hard for them to do, because their actual tariff rates are very low. The European Union, for example, levies an average tariff of only three percent on US goods. Who says so? The U.S. government’s own guide to exporters.

…

So what on earth was Trump even talking about? His trade advisers have repeatedly claimed that value-added taxes, which play an important role in many countries, are a form of unfair trade protection. But this is sheer ignorance: VATs don’t convey any competitive advantage – they’re just a way of implementing a sales tax — which is why they’re legal under the WTO. And the rest of the world isn’t going to change its whole fiscal system because the U.S. president chooses to listen to advisers who don’t understand anything.

Actually, though, Trump might not even have been thinking about VATs. He may just have been ranting. After all, he goes on and on about other vast evils that don’t exist, like a huge wave of violent crime committed by illegal immigrants (who then voted in the millions for Hillary Clinton.)

So what’s the goal?

Well, it was pretty much exactly what he would have done if he really is Putin’s puppet: yelling at friendly nations about sins they aren’t committing won’t bring back American jobs, but it’s exactly what someone who does want to break up the Western alliance would like to see.

Alternatively, maybe he was just acting out because he couldn’t stand having to spend hours with powerful people who will neither flatter him nor bribe him by throwing money at his family businesses – people who, in fact, didn’t try very hard to hide the contempt they feel for the man leading what is still, for the moment, a great power.

Whatever really happened, this was an utter, humiliating debacle. And we all know how Trump responds to humiliation. You really have to wonder what comes next. One thing’s for sure: it won’t be good.

Well what comes next is the meeting with Kim so…

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