Syrian chaos as US and China make nice

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This is what chaos in government looks like. From Thursday:

Foreign Minister Julie Bishop has refused to back regime change in Syria even if it turns out that President Bashar Assad is to blame for a chemical weapons attack that killed scores of children.

Instead Ms Bishop said it was up to Russia and Iran to put pressure on their ally Assad who would likely remain in power for the time being. “Our view has always been that Assad must be part of the solution. He must be transitioned out rather than it be a precondition that he must go.”

Then Do-nothing Malcolm over the weekend:

Prime Minister Malcolm Turnbull says the continued role of Assad “must be under enormous question”.

“I have grave doubts as to whether he can have any continuing role,” the Prime Minister said during a press conference in Papua New Guinea.

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Whether Assad should go is a grave if moot question. But when you have government that wholeheartedly endorses him staying and going on consecutive days then how can anyone have faith that the right decision will be made?

Then again, we’re not exactly getting clear leadership from Washington, via the FT:

With his first major military action, President Donald Trump has, once again, confounded experts struggling to interpret his approach to the world.

…During the presidential campaign, Mr Trump pledged to pursue an “America First” foreign policy that would be less interventionist than George W Bush’s. He also hinted that he would be more willing than Barack Obama to countenance strongmen, such as Syrian President Bashar al-Assad and President Vladimir Putin in Russia, if it was in the US interest.

Once installed in the White House, Mr Trump had telegraphed that he would put less emphasis on human rights — inviting Egyptian President Abdel Fattah al-Sisi to the White House the week after the outgoing Obama administration had refused to grant the same privilege.

Yet, only days after Rex Tillerson, secretary of state, said the fate of Mr Assad would be “decided by the Syrian people”, Mr Trump switched course, apparently moved by the images of Syrian children killed in a gas attack.

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This after Trump slammed Obama for mulling any similar move in 2013 following another gas attack:

At this point, it is quite unclear what the US goals are. I would suggest that the Australian government be equally unclear rather than pulling wild 180 degree turns daily. From Reuters:

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Russia warned on Friday that U.S. cruise missile strikes on a Syrian air base could have “extremely serious” consequences, as President Donald Trump’s first major foray into a foreign conflict opened up a rift between Moscow and Washington.

…”We strongly condemn the illegitimate actions by the U.S. The consequences of this for regional and international stability could be extremely serious,” Russia’s deputy U.N. envoy, Vladimir Safronkov, told a meeting of the U.N. Security Council on Friday.

Russian Prime Minister Dmitry Medvedev charged that the U.S. strikes were one step away from clashing with Russia’s military.

U.S. officials informed Russian forces ahead of the missile strikes and avoided hitting Russian personnel.

Satellite imagery suggests the base houses Russian special forces and helicopters, part of the Kremlin’s effort to help Assad fight Islamic State and other militant groups.

…Treasury Secretary Steve Mnuchin, in Florida with Trump, said on Friday the United States would announce additional sanctions on Syria in the near future but offered no specifics.

Russia’s Defense Ministry responded to the attack by calling in the U.S. military attache in Moscow to say that at midnight Moscow time (5 p.m. EDT) it would close down a communications line used to avoid accidental clashes between Russian and U.S. forces in Syria, Interfax new agency said. U.S. warplanes frequently attack Islamic State militants in Syria and come close to Russian forces.

U.S. ambassador to the United Nations Nikki Haley said on Friday the Trump administration was ready to take further steps if needed.

“We are prepared to do more, but we hope that will not be necessary,” she told the U.N. Security Council. “The United States will not stand by when chemical weapons are used. It is in our vital national security interest to prevent the spread and use of chemical weapons.”

…U.S. officials called the intervention a “one-off” intended to deter future chemical weapons attacks and not an expansion of the U.S. role in the Syrian war.

From the perspective of any “realist” foreign policy response that would be sensible. The US getting drawn into a deeper conflict with another Great Power over a strategically marginal and far flung country would be a large mistake.

And indeed, if one looks through the missile strike, we find that the US’s other Great Power relationship went about as well as can be expected over the weekend. From the Globe and Mail:

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After two days of meetings, which included chief strategist Steve Bannon and Commerce Secretary Wilbur Ross in front positions, what have we learned? What came of this clash?

…The announced U.S.-China clash has somewhat receded, providing more leeway for Canada with China and with the United States. The U.S attitude showed a degree of pragmatism, which may carry through to North American free-trade agreement re-negotiations. So far, Mr. Trump pushes to the limit but avoids crossing it.

Four key surprises stand out. First, the two days included a high level of positive decorum and positive signalling. The many smiling photos gave face to Xi Jinping in front of his home audience. The scene of Arabella Kushner, Mr. Trump’s granddaughter singing the traditional Jasmine song and reciting a Tang dynasty poem to Mr. Xi went viral in China. The post-summit briefing emphasized good chemistry, friendship, and the promise of many meetings ahead.

Second, the unexpected Syrian crisis brought the leaders together. At the end of dinner, President Trump candidly briefed President Xi over the U.S. cruise missile attack over Syria. It is well known that China has stood with Russia in vetoing United Nations Security Council sanctions against Syria and has supported Russia and the Syrian regime. Yet, what Secretary of State Rex Tillerson reported about the Xi-Trump conversation is truly remarkable:

In the same vein, the Chinese Foreign Ministry spokesperson, Hua Chunying bluntly said: “We are shocked at the latest chemical weapons attack in Syria and strongly condemn it.” While also calling for “non-interference” and “restraint,” she pointedly refused to condemn the U.S. strike. This stands in great contrast with the strident Russian condemnation and denial of facts on the chemical attack itself.

Third, on the thorny trade issue, the U.S. and China made unexpected progress, agreeing on a “hundred-day plan,” that is focused on increasing U.S. exports rapidly and having an impact on the trade deficit. Implicit in Mr. Ross’s remarks is the likely freeze of any unilateral actions against China during this 100-day period.

Secretary Ross appeared convinced that the Chinese shared the desire to reduce their trade surplus, because of the “impact it is having on money supply and inflation.”

Fourth, the U.S. and China agreed to expand the Strategic Security and Economic Dialogue (the pillar of their relations under former U.S. president Barack Obama) from two to four pillars, adding a pillar on law enforcement and cybersecurity, and a fourth unexpected pillar on social and cultural issues.

With regards to North Korea, the two sides had long discussions and found no breakthrough. What filters from the briefings is that Mr. Trump took a measure of the complexity of the issues involved and constraints faced by China. The two sides resolved to share information and to co-operate in their next moves. China may have committed to increase its pressures on North Korea.

There’s plenty of politics here with both leaders offering each other domestic political benefits but it’s still not a bad result. There is always a wide gulf between declared and actual foreign policy but the signals for progress are strong. The question remains, what exactly can China offer to close the trade deficit? If it keeps liberalising the yuan then it’ll keep falling making matters worse.

Perhaps it can redirect some strategic trade flows, such as oil, coal and tourism (via visas) so perhaps we’ll see China swing to greater US purchases in such. From the FT:

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China will offer the Trump administration better market access for financial sector investments and US beef exports to help avert a trade war, according to Chinese and US officials involved in talks between the two governments.

US President Donald Trump and Xi Jinping, his Chinese counterpart, decided at their first meeting in Florida last week that they needed rushed trade negotiations to produce results within 100 days. The two concessions on finance and beef are relatively easy for Beijing to make. At present, foreign investors cannot hold a majority stake in securities and insurance companies in China. The country’s largest companies in these sectors, such as Citic Securities and China Life Insurance, have achieved enormous scale in the 15 years since the world’s second-biggest economy joined the World Trade Organisation, making them formidable competitors for new entrants to the market.

The concession to allow majority foreign ownership was discussed during Barack Obama’s administration, when Chinese and US negotiators held several rounds of talks about a bilateral investment treaty, or BIT.

More will be needed.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.