Trump’s War on the WTO

Economic nationalism is a threat to world-wide—and American—prosperity.

by Greg Rushford

July 4, 2018, in The Wall Street Journal

President Harry S. Truman and Secretary of State George Marshall successfully pressed America’s war allies to create the General Agreement on Tariffs and Trade more than 70 years ago. Leaders across the globe, mindful of how economic nationalism in the 1930s had contributed to the devastation of World War II, wanted to open the world up again. The agreement focused on slashing of tariffs and other barriers to trade—bringing unprecedented prosperity to hundreds of millions of people. The GATT, which evolved into the World Trade Organization in 1995, became the world’s most successful international economic experiment.

But now economic nationalism and tariff wars are back. President Trump regards the WTO with disdain and would like to withdraw. He has ordered aides to come up with ways to inflict punitive tariffs on U.S. trading partners anytime he wishes—in clear violation of the system the WTO administers. And it’s not only talk. Mr. Trump and U.S. Trade Representative Robert Lighthizer have taken a wrecking ball to the legal machinery sustaining the global trade regime.

The White House is slowly killing the WTO’s seven-member appellate body, which is the institution’s court of final appeal in trade litigation. The ploy is a simple war of attrition: The U.S. has whittled the court down to four members by withholding the consensus to replace jurists when their four-year terms expire. Another vacancy in September will leave three—barely a quorum but not enough to handle the caseload. By the end of next year, only Hong Zhao, a veteran Chinese trade official, will be left.

Mr. Lighthizer, who declined to comment for this article, has left WTO diplomats in the dark as to what he wants. But that’s not difficult to figure: higher tariffs. Mr. Lighthizer has been a longtime advocate for the protectionist domestic steel lobby, which has often lost at the WTO.

Mr. Lighthizer argued in 1995 that it had been “a mistake” when the appellate body’s decisions were made binding on member countries. American presidents since Ronald Reagan had championed that reform. It meant that losing parties would have to bring trade policies into compliance with their WTO legal obligations or pay compensation. To economic nationalists like Mr. Lighthizer, this infringed on sovereign rights.

In a 2001 speech, Mr. Lighthizer raised eyebrows in the normally genteel trade bar by saying that he believed some WTO jurists “may be crooked, although I have no evidence of that.” Perhaps due to such intemperance, his 2003 campaign to become a WTO jurist was rebuffed. Now he can exact revenge.

Mr. Lighthizer’s gripes about judicial overreach could find some support—if it weren’t for his bullying. The WTO’s negotiated trade agreements, subjected to rounds of compromise, include imprecise legal obligations. Stuck analyzing diplomatically fudged language, the appellate body has been forced to fill the gaps by applying enlightened international legal theories.

“There are issues that governments have chosen not to raise in negotiations in the hope that they could obtain their goals through litigation at the WTO, even though they knew what they sought had never been agreed to by the other members,” Washington trade lawyer Terrence Stewart wrote last year. It’s a legitimate concern, but judicial overreach still is in the eye of the beholder.

Despite Mr. Trump’s assertion that the WTO has been “a disaster” for the U.S., Washington has won 85% of the 117 WTO cases it has brought against foreign trading partners. Japan complained in 2003 that WTO jurists had stretched the law by determining that Japanese health officials used phony science to ban American apples.

The real U.S. gripe is that foreign governments have won most of the 145 cases that they have brought against American protectionist policies. Mr. Lighthizer’s steel clients have screamed the loudest whenever jurists in Geneva have found legal hanky-panky in the way U.S. antidumping officials hit foreign competitors with tariffs. This is fodder for Mr. Trump’s base.

The Democratic Party has its share of protectionists too. In 2011 President Obama’s trade office, cloaked in secrecy, blocked the appointment of Washington trade lawyer Jennifer Hillman to a second term on the appellate body. Ms. Hillman was subjected to a whisper campaign suggesting her vote was not considered “reliable.” Translation: She was too intellectually honest to tilt her legal determinations in the White House’s favor. This pleased the steel lobby.

In 2016 Mr. Obama’s trade advisers blocked Seung Wha Chang, a South Korean legal scholar, for a second term on the appellate body. Mr. Chang had ruled against the U.S. too often, especially in cases involving steel and aluminum. The Koreans complained bitterly.

Tim Reif, the Obama trade lawyer whose fingerprints were all over the moves against Ms. Hillman and Mr. Chang, is currently advising Mr. Lighthizer. On June 7 he was nominated by President Trump to fill a vacancy on the U.S. Court of International Trade. As a federal judge, Mr. Reif will enjoy lifetime tenure. He declined to comment.

The debate over the WTO isn’t going to be resolved by lawyerly tinkering. The real problem rests in the return of economic nationalism. Both political parties would be well-advised to consider the wisdom of Truman and Marshall. They understood that true national-security imperatives meant resisting protectionism.

Mr. Rushford edits the Rushford Report, an online journal that tracks trade politics.

From Central Europe: An Intelligence Lesson for Americans

By Greg Rushford

I visited Prague last month, looking for insights into Russian and Chinese intelligence strategies in this important capital city in central Europe. As it turned out, the Czech Republic’s principal counterintelligence agency — the Security Information Service, better known by its acronym BIS — made it easy. On December 3, 2018, the BIS released its latest annual public report on secret foreign influence operations that had targeted the Czech Republic. 

Unsurprisingly, the BIS spooks pointed their fingers in a familiar direction: various Russian “active measures” aimed at advancing Vladimir Putin’s foreign agenda of disruption; and espionage operations emanating from Xi Jinping’s Beijing. Well-informed observers were quick to commend the BIS for its professionalism in releasing such an apolitical, fact-based report. “Compared to most of the security institutions in Central Europe,” noted the respected Prague-based European Values Think Tank, the BIS “managed to describe Russian and Chinese intelligence activities in the Czech Republic in a remarkable detail.” 

But that certainly would be news to the overwhelming majority of Americans. As usual, the major cable television channels where a majority of Americans get their news, very little of which is foreign — Fox, MSNBC, CNN — had nothing. Even the New York Times, which prides itself as the gold standard for foreign news reporting, ran only a skimpy Associated Press filler that consisted of just seven sparse sentences. That wire service said that the BIS had uncovered a Russian cyber-espionage operation that had targeted the Czech foreign ministry. There was no mention that BIS had also identified Chinese important espionage operations in the Czech Republic. There was scant mention of why the story was an important one — a core journalistic principle that is taught at the high-school level. 

This is not surprising. Even the best American editors are prone to downplay any story that wouldn’t immediately be perceived by readers in the heartland as relevant to their daily lives.  Why should people in Peoria care about what happens in Prague? 

As it happens, there are ample reasons. Those reasons begin with an appreciation of history — and the consequences of being ill-informed about disturbing trends in global politics. Furthermore, reading current political news from Prague helps provide valuable context that offers opportunities for further reflection on the chaotic current political environment in the United States. 

But that’s getting ahead of the story, which begins with a brief overview of ongoing security threats at the behest of the Russians and Chinese that the Czech intelligence service has exposed.

Familiar Russian and Chinese Mischief

Moscow-directed influence and disinformation operations against the Czech Republic, the BIS reported, “were a part of the general Russian” strategy of weakening the vital NATO alliance and the European Union internally. Perhaps the most disturbing detail in the report: The Czech ministry of foreign affairs was targeted by a brazen Russian cyber-espionage campaign that began in 2016 and was detected the next year. By then, the Russian intelligence operatives had hacked into more than 150 diplomatic electronic mailboxes, including those of the Czech foreign minister. To experienced observers, such operations have a familiar, if brazen, ring. Moscow’s traditional subversive “active measures” of covert dirty tricks have long been aimed at weakening the institutions that sustain and protect liberal democracies. 

By contrast, the BIS reported that the Chinese have been focusing on the classic espionage business of stealing secrets. The Czech counterintelligence officials said they had “identified a worrying development in the area of Chinese activities…that as a whole pose a threat to the Czech Republic in the field of economic, scientific and technical espionage.” Toward that end, the BIS noted that China “has almost unlimited funds at its disposal and is able to offer these funds to foreign companies in exchange for access to intellectual property or entry to foreign markets.” 

It doesn’t take much reflection to see why American readers should find the BIS findings relevant. As the Czech Republic is an important member of the NATO alliance, any attempts to weaken that country are also of national security concern to the United States. More specifically, even the most casual consumers of news would recognize that the Russians have also been running similar cyber-espionage operations in the United States. And the reports of the Chinese spying aimed at stealing valuable intellectual property mirror news of Beijing’s economic espionage activities that also target the United States. 

Two Presidents: One Mentality

But while the BIS report was important for its insights into foreign intelligence operations, reading it offers a stark reminder of the (disturbing) similarities between current political trends in both the Czech Republic and the United States.  Specifically, Americans who read about Czech President Milos Zeman cannot help but reflect upon U.S. President Donald Trump and his America First agenda.

Zeman is called the European Trump, and for good reason. And his reaction to the BIS disclosures about his friends in Moscow and Beijing was, well, Trumplike, which I’ll explain shortly. But for context, consider how much alike the two presidents are.

For context, consider this recent report about Zeman in Politico: “He’s a septuagenarian who dislikes Muslims, the media and migrants and loves Vladimir Putin,” reporter Siegfried Mortkowitz noted. “He’s detested by urban dwellers and liberal elites who see him as a national embarrassment and a menace to values they hold dear.” 

Other European analysts have noted how Zeman’s supporters outside the major cities are hardly bothered by his tendency to speak crudely, as they also tend to speak the same language of resentment. Zeman, who was elected to a second term in January 2018, is also loathe to apologize for anything, preferring instead to double down in the face of protests from the detested elites. 

Surely, every American — no matter his or her political persuasion — who has read this far would have already been reminded of Donald Trump. 

The parallels between the two presidents are simply impossible to ignore, beginning with their attitude toward a free press.

Chafing at a free press

Trump has invested considerable political energy in trying to discredit the so-called purveyors of “fake news.” He has famously branding the media as the “enemy of the people” — with no apologies for the fact that using such language puts him in some very distasteful historical company indeed.

Zeman also chafes at his country’s free press, once joking about “liquidating” journalists with Vladimir Putin, a man with expertise on that subject. And in October last year, Zeman reacted to the murder of journalist Jamal Khashoggi in Saudi Arabia’s consulate in Istanbul this way: “I love journalists, that’s why I may organize a special banquet for them this evening at the Saudi embassy.” 

[Anyone who doubts that the Czech Republic has a free press would profit from visiting Czech Press Photo 2018, which is now on display in Prague’s Old Town Hall. Sponsored by the minister of culture and the mayor of Prague, the exhibition treats visitors to an impressive display of the best news photographs and documentaries produced by the country’s journalists in the past year. One of the most compelling: a spot news photo of a bare-breasted Ukrainian activist who shamed Zeman during his January 2018 presidential campaign. She was shouting: “Zeman is Putin’s slut.”]

Shared covert political support from Moscow

Zeman, who was the only European head of state who openly supported Trump’s 2016 presidential candidacy, has never hid his pro-Moscow sentiments. And like Trump, Zeman has been dogged by convincing evidence that the Russians covertly supported his political campaigns.   

Zeman has close associates who are suspected of dubious dealings with Russians who have connections in the Kremlin. So does Trump, although his personal involvement remains a matter of ongoing investigations. 

When Trump was reminded by Fox News host Bill O’Reilly in February 2017 that “Putin’s a killer,” he shot back: “There are a lot of killers. We have a lot of killers. Well, you think our country’s so innocent?”

Zeman has accepted Russia’s 2015 seizing of Crimea. Donald Trump has just said — incredibly — that the Soviet Union did the right thing when it invaded Afghanistan in 1979. And just the other day, Trump even said that he trusted the leaders of communist China more than he did his Democratic opponents in the U.S. Congress. 

And while each president is loathe to utter any words that might cause offense to Putin, they certainly are not shy when it comes to scorn directed toward the European Union and NATO. It is difficult to give either president the benefit of the doubt for having good intentions, when their statements dovetail with Moscow’s propaganda machine. 

A mutual distrust of their country’s professional intelligence services

Perhaps nowhere are the parallels more striking than when it comes to the attitude displayed by the two presidents toward their country’s professional intelligence services. The cadre of intelligence officers at the BIS, as do their non-partisan counterparts in America’s CIA, are steeped in the importance of speaking truth to power. But of course, this is not always appreciated in the highest corridors of political power. 

It is a matter of record that when U.S. intelligence agencies reported they had found disturbing evidence of Russian interference in 2016 aimed at promoting his presidential candidacy, Trump repeatedly denigrated the findings. Trump at one point even called the heads of the CIA and FBI “political hacks.”

Zeman reacted in similar fashion to last month’s BIS report that detailed Russian- and Chinese covert strategies aimed at undermining Czech national security. The BIS had given him “wrong” data, he said. The Czech president also insisted that the quality of BIS’s intelligence analyses had been “deteriorating,” reported RadioFreeEurope/Radio Liberty. Czech intelligence officers were “bozos,” Zeman ranted.

Last May, Zeman even blocked the promotion of BIS chief Michal Koudelka to the rank of general. Koudelka is a professional intelligence officer who has developed an expertise on Russian influence operations. 

The importance of understanding history

Beyond the current political similarities, Americans have important historical reasons to be more interested in what goes on in Prague. In the late 1930s the America Firsters of that era were infamously slow to recognize the growing threat posed to the western democracies by fascism. In 1938, historians recall that perhaps only three percent of an ill-informed American public believed that America should fight to defend our democratic allies, France and the United Kingdom, from Adolf Hitler’s conquest. That changed suddenly, of course, when America was later drawn into World War II after the December 7, 1941, Japanese sneak attack on Pearl Harbor.

But the global conflict had become inevitable in February 1939 when Hitler seized the German-speaking Sudetenland, in the western part of was then called Czechoslovakia. The Nazis took Prague the following month — but people in America’s heartland mostly slept. They still didn’t understand why what had happened in Prague, mattered to them.

This isn’t just ancient history from the Czech point of view, either. Last month in Prague, I was reminded of how people in Prague still cringe at the memory of Neville Chamberlain’s September 1938 appeasement in Munich. The Czechs were shocked when the British leader agreed to let Hitler take the Sudetenland. 

Chamberlain had hoped that Hitler’s thirst for conquest would be satisfied by feeding it. As the renowned intelligence scholar Christopher Andrew relates in his newest book, The Secret World, Chamberlain had been warned by his own counterintelligence service, MI5, that the appeasement would produce the opposite effect. The British prime minister disregarded the secret intelligence — more politely than Milos Zeman’s current intemperate rejection of the BIS reports, but just as unwise. 

Today, the Czechs still remember what they call the Munich Betrayal. And every time that Donald Trump speaks respectfully of Putin — and disrespectfully of the NATO alliance — the Czechs have a familiar feeling. They have good reason to worry whether, if push comes to shove with the Russian Bear, America will still have their backs. 

Message to American news editors: Step up your game. 

Putin Plays the Philippines: Part II

By Greg Rushford

Late last year I began researching President Vladimir Putin’s use of secret intelligence to support Russia’s foreign policy goals. A substantial percentage of what the Soviets used to call “active measures” involves influence operations aimed at supporting foreign leaders who have pro-Moscow inclinations. Most of the digging involved piecing together the available public record from numerous locations worldwide: press clips, court records, academic course materials, official government documents, historical studies that provide valuable context, and such. But it wasn’t long before an experienced Putin-watcher who knew that I pay attention to Philippine politics, rather casually tipped me off to something new.

Putin, the source said with a knowing smile, was running “influence operations” in the Philippines aimed at helping his admirer President Rodrigo Duterte learn “how to do it.” The “it” referred to information-warfare methods aimed at discrediting Duterte’s many human-rights critics, both domestic and in Europe and the United States. That was the full extent of the tip: tantalizing, but clearly not enough to publish an article that would meet acceptable journalistic standards.

Months of digging have not turned up proof of such a Russian-directed influence operation in the Philippines. But still, enough bits and pieces have surfaced on the public record that, added together, raise disturbing questions.

As I reported in Part I of this article, Martin Andanar, Duterte’s communications director, has struck cooperative arrangement with TASS, Russia’s propaganda agency that includes “media training” for the official Philippine News Agency. Andanar insists this is merely standard cooperation with a friendly government, not part of a joint disinformation effort. “The Presidential Communications Operations Office does not engage in fake news,” Andanar has declared previously when other reporters have raised similar questions. And Duterte’s national security adviser, Hermogenes Esperon, maintains that any inferences of an ongoing agent-of-influence operation are going too far beyond the facts.

This report attempts to explain bits and pieces of the available public record in a context that will better enable readers to draw their own inferences.

Mutual anti-American feelings

For openers, it is not difficult to understand why, from Vladimir Putin’s point of view, Duterte would be an obvious candidate for an agent-of-influence operation.

Before he was sworn-in as president on June 30, 2016, the rough-edged Philippine politician had been a provincial mayor in Davao, a bustling city in Mindanao, the Philippines’ southern island. Little-travelled, he did not claim to be experienced in foreign affairs, much less a player in the world of international intrigue.

 But Duterte was hardly shy about proclaiming his two core beliefs in clear, personal language. One centers on his longstanding deep dislike for Americans, an animosity that apparently had festered since an unhappy childhood experience (never fully explained) with an American priest. The other was that Duterte considered Vladimir Putin “my favorite hero” (along with China’s Xi Jinping.)

It is difficult to imagine that Putin, a former KGB officer who is running clandestine operations in many countries aimed at cultivating prominent politicians, wouldn’t have immediately spotted a ripe opportunity. After all, one of the Russian president’s top priorities is to foster distrust between America and its allies.

The game begins

In this case, the game seems to have begun in November 2016, when Putin and Duterte first met, on the sidelines of the Asia-Pacific Economic Cooperation Summit in Lima, Peru. The Russian strongman and his Philippine admirer clicked. Duterte told his Russian counterpart that he no longer wanted to be identified “with the Western world.” He told Putin that he considered the Philippines’ longstanding treaty ally, the United States, untrustworthy, Reuters reported. The Filipino railed against American “hypocrisy” and “bullying,” which are also two of Putin’s favorite subjects.

Three months later, Putin dispatched Nikolai Patrushev, one of his closest and most trusted advisers, to meet with Duterte in Davao. Patrushev heads Russia’s security council. After their meeting on February 15, 2017, Duterte and Patrushev announced that Russia and the Philippines had struck an intelligence-sharing relationship. As one news report put it, Patrushev had “offered the Philippines access to an intelligence database to help it fight crime and militancy, and training for the elite forces assigned to protect President Rodrigo Duterte.”

The Patrushev factor

If that were all, this story could stop here. But to seasoned Russia watchers, nothing Nikolai Patrushev is involved in is ever likely to be straightforward. Like Putin, Patrushev is a former KGB officer. And when Putin stepped down as head of the FSB — the Federal Security Service, which is the main intelligence agency that was spun off from the old Soviet KGB — Patrushev replaced him.

As Mikhail Zygar put it in his authoritative “All the Kremlin’s Men,” Patrushev “has been the nerve center of most of Putin’s special operations — the annexation of Crimea, for instance.” He’s virulently anti-American, and once told the state-owned newspaper Rossiyskaya Gazeta that he believed that the Soviet Union had “collapsed as a result of a plot hatched by Zbigniew Brzezinski and the CIA to weaken the Soviet economy.” The Russian spymaster also believes that Western intelligence operatives have sponsored violence in Chechnya. (We don’t know if Patrushev and Duterte talked about it, but the CIA happens to be another favorite Duterte target. If my plane ever goes down, “ask the CIA,” he has recently said — offering no reason for the fantasy.)

While such opinions suggest that objective intelligence analysis is not Patrushev’s strong suit, he’s considered more talented in so-called “wet” operations. A British official inquiry fingered both Putin and Patrushev as the most probable suspects in the 2006 murder-by-poison of former KGB officer Alexander Litvinenko. Earlier this year, Patrushev was one of 24 Russians close to Putin who were subjected to sanctions by the United States for a variety of “malign” deeds.

At least for a man who has always been a civil servant, Patrushev seems to have the resources to ride out such sanctions, if reports that he owns a mansion outside Moscow worth upwards of $17 million are to be believed. Like Putin, Patrushev has also managed to avoid prosecution for suspected economic crimes, including the smuggling of rare Russian birch trees.

While the Patrushev-Duterte February 2017 meeting in Davao raised eyebrows, the “active measures” trail pretty much went cold again.  

An admission of a foreign intelligence operation

But a year later, Duterte — whose famously loose lips have often landed him in controversies — seemed to blow the whistle on himself.

On February 12, 2018, Duterte made headlines in Manila by boasting that “another country” had given him a transcript of a telephone conversation involving Loida Nicolas Lewis. Lewis is a well-regarded (and wealthy) Philippine-American lawyer and businesswoman who lives in New York City.  And she sure has gotten under Duterte’s skin.

First, Lewis supported the ultimately unsuccessful candidacy of Manual “Mar” Roxas, the Philippine politician who was beaten by Duterte in the 2016 presidential race. Since then, Lewis has become a prominent critic of Duterte’s controversial human-rights record. There is no evidence that Lewis — who is also on the board of the respected U.S.-Philippines Society, which promotes closer ties between the two traditional allies — has done anything beyond exercising her rights to engage in normal political discourse. She is also widely known for her charitable work.

That hasn’t prevented Duterte from fuming that Lewis has been part of a conspiracy to destabilize his government.

A few days before Duterte announced that he had been listening into Lewis’s telephone conversations, the International Criminal Court had announced it would open a preliminary inquiry into thousands of extra-judicial killings on his watch. Human rights advocates have estimated that some 12,000 Filipinos who somehow got caught up in Duterte’s war against illegal narcotics have been killed. The ICC, which is headquartered in The Hague, is charged with prosecuting crimes against humanity.

In his February 12 remarks, Duterte said that he had not been surprised by the announcement from The Hague, because he had been listening in on Lewis’s calls. “I knew in advance,” the Philippine president said. “I was already listening to the tapes of their conversation.” He added: “It was provided by me by another country but the conversation was somewhere between Philippines and New York.”

Presidential spokesman Harry Roque told reporters in February that he could not “annotate” Duterte’s remarks, adding: “Let’s take the President’s statement on its face value.” When I inquired again late last month, Duterte’s national security adviser, Hermogenes Esperon, informed me that he had “no comment on telephone transcript.” The secretary added: “But we all know Lewis supported another presidential candidate. She is one who wants the democratic way of electing presidents — if her candidate wins.”

Lewis says that she has no idea what Duterte was talking about, and that she is not in the business of plotting coups. She says that she only learned about the ICC’s inquiry when it was officially announced. “They can watch me as much as they want,” she told me. “Truth is the best defense.”

Clearly, the Russians aren’t the only ones who eavesdrop. The Philippines has its own telephone surveillance equipment (some of which has been purchased in the United Kingdom on Duterte’s watch, according to news reports). The Chinese, of course, have sophisticated surveillance capabilities — and Lewis has also upset Beijing with her public stance calling upon Duterte to take action against Chinese illegal seizures of reefs in the South China Sea that international law reserves exclusively for the Philippines.

Still, to anyone familiar with Russian spycraft, the wiretapping of an American citizen in the Big Apple has a distinctly familiar smell. But once again, there is no concrete proof — other than the “if it talks like a duck, walks like a duck…” version.

Russian propaganda hits the Philippines

In recent months, the Philippine press has been full of numerous reports of so-called “fake news” and various online disinformation campaigns that have targeted several of Duterte’s political opponents and human-rights critics: in the Philippine senate, the Supreme Court, and the ICC in The Hague. Proving where these campaigns originated, though, has been elusive.

The closest any journalist has come to documenting the suspicions of a Russian influence operation directed at the Philippines was published on February 26 in the Manila-based Rappler, an online publication that has earned a worldwide reputation for its quality investigative journalism.

The report, by Natashya Gutierrez, noted that a Spanish-based Russian Twitter account, @Ivan226622, had been exposed by authorities in Madrid as part of a Russian trolling operation. Ivan and other denizens of the bot-twitter universe had aimed at destabilizing Spain by supporting independence in Spain’s Catalonia region. “But it seems that” the Russian propaganda account “has since changed gears: it is now tweeting exclusively about the Philippines,” Gutierrez wrote.

While most of Ivan’s tweets were retweets of Philippine newspaper articles, the troll also circulated a “YouTube video on how trust in the press has dropped over time,” another staple of Russian propaganda. Shortly after the Rappler report, Twitter suspended Ivan’s account.

The headline to Gutierrez’ article asked the right question: “Has Russian propaganda infiltrated the Philippines?”

So far, there are more such questions than conclusive answers. Stay tuned.