Putin Plays the Philippines

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Kremlin spymasters have their eyes on Rodrigo Duterte. To understand why, first consider the long list of other foreign leaders the Russians have targeted.

(Part One of a Two-Part Series)

 By Greg Rushford

Russian President Vladimir Putin has been wooing Philippine President Rodrigo Duterte, in what appears to be a Kremlin-directed agent-of-influence operation. It is a matter of public record that Russia and the Philippines have established an intelligence-sharing arrangement. The publicly announced deal appears to be the standard fare: sharing intelligence on the threat the Philippines faces from Islamic terrorists in Southeast Asia, a gift of 5,000 Kalashnikov rifles and ammo, training of Duterte’s presidential guards. But whenever the Russians are involved, there are always, well, curiosities.

Curiosity number one: Duterte has boasted that a “foreign” power has given him telephone transcripts of one of the critics of his human-rights record, an American citizen of Philippine origin who lives in New York City. To anyone familiar with the tradecraft, that sounds straight out of the Putin playbook.

Curiosity number two: Duterte’s presidential communications office has sought “media training” for the official Philippine News Agency (PNA) from TASS, Moscow’s mouthpiece.  Why would the Philippines, a democracy with a free press, seek any journalistic assistance from one of the world’s most disreputable propaganda operations?

Curiosity number three: In February, a solidly-researched article by Natashya Gutierrez, a leading Philippine investigative reporter, revealed that “a Russian-linked Twitter account used to interfere in polls in Spain is now tweeting exclusively about the Philippines.” Gutierrez’s article, published in the online investigative news outlet, Rappler, also disclosed that this was “one of several disturbing developments that may suggest Kremlin influence.”

Add up the curiosities, and it appears that Putin and Duterte have been hiding in the open, which often comes with the territory in Moscow’s influence operations. But Philippine officials deny that, even as they acknowledge it is a matter of public record that their country has struck an intelligence-sharing relationship with Putin’s Russia.

Manila’s side of the story

Duterte’s national security adviser, Sec. Hermogenes Esperon, says he has “no comment on [the] telephone transcript.” And he brushed off a query about the Russian propaganda directed from Spain. But to insinuate that an agent-of-influence operation is going on “is really insinuating too much,” Esperon added. It’s in “our national interest” to deal with Russia, as well as neighboring China, the secretary noted. “It is always good to have friendly relations or, at the least, open lines of communications with neighboring Asian countries.”

Esperon also stressed that “retaining standing alliances is also beneficial,” referring to the close security ties the Philippines has enjoyed since the 1950s with the United States.

Martin Andanar, the head of the Philippines’s presidential communications operations office, insists there is nothing untoward about the Philippine News Agency’s relationship with Russia’s TASS. The PNA also has “a standing partnership with Kyodo News of Japan and Press Trust of India,” and other “media/information counterparts in South Korea, Japan, and Cambodia,” he adds.

Tradecraft can strengthen a weak hand

Before taking a closer look at the emerging Moscow-Manila intelligence ties, some essential background history illustrates the nuances of how Russia has long used secret intelligence in its dealings with many other foreign leaders.

Putin’s main goal in cultivating the Philippines’ Duterte is a familiar one: to exploit Duterte’s well-known visceral dislike of Americans, looking for opportunities to weaken the Philippines deep-rooted security ties with Uncle Sam. No wonder: Beyond their expertise in influence operations, the Russians don’t have much else to offer foreign leaders.

The anemic Russian economy (GDP of $1.3 trillion, and going nowhere fast) is puny compared to big players like China ($12 trillion GDP) and America ($19.3 trillion). In their dealings with foreign leaders anywhere in the world, the Russians — who were humiliated by the collapse of the Soviet Union — look to leverage their foreign policy aspirations to be taken seriously.  So they reach into their historically proven bag of dirty tricks to buy influence, and respect.

Vladimir Putin is only the latest Russian leader to play this game.

Indeed, there is a rich historical context associated with how the Kremlin’s spymasters have long practiced the art of cultivating the secret affections of foreign leaders.

Active Measures, Past…

Aktivnyye meropryiyatiya— Russian for active measures —isanold Soviet KGB term for an array of clandestine intelligence operations aimed at furthering the Kremlin’s foreign policy goals. The covert-operations toolkit includes a variety of dirty tricks. Classic subversion. Kompromat, Russian for blackmail operations. Under-the-table cash. An array of deceptions including propaganda, mis- and disinformation campaigns. Plus, thinly-disguised “little green men” like those who showed up in plain green uniforms to destabilize eastern Ukraine and Crimea in 2014.

Intelligence experts generally agree that a high percentage of the Kremlin’s active measures have traditionally involved information warfare and covert assistance aimed at supporting sympathetic foreign politicians who will toe the Moscow line.

The best-documented illustration of how Soviets operate stems from the Kremlin’s manipulations in India during the Cold War.

A now-declassified secret 1985 CIA assessment noted that “the Soviets enjoy nearly unfettered access to the pages of Indian newspapers,” planting more than 160,000 articles in the Indian press.” The American intelligence report added that “access to the Press Trust of India, New Delhi’s largest English language news agency, “has become so automatic that some Soviet officials have come to call it Press TASS of India.”

And renowned Cambridge University intelligence historian Christopher Andrew has written of the “suitcases” of cash that were routinely delivered to Prime Minister Indira Gandhi, who dominated Indian politics from 1967 until her assassination in 1984. Seems that Mrs. Gandhi even kept the suitcases.

Due to the inherent secrecy associated with clandestine operations, it took decades for such facts from Cold War intelligence battlegrounds to dribble out.

…and Present

But in recent years, Russian active measures have become the stuff of daily headlines. With varying degrees of success, Vladimir Putin has directed influence operations aimed at an array of politicians of both left and right.

The politicians who have been targeted share one thing in common: their anti-American, or anti-European Union, proclivities. True, the details of how these operations have played out will likely remain the stuff of history that will take years to be fully documented. But meanwhile, thanks to various press reports, academic studies, and official announcements, it doesn’t require access to secret intelligence information to perceive what the Russians have been up to.

On the left, those targeted have included British Labour Party leader Jeremy Corbyn (election help); South Africa’s former President Jacob Zuma (whispers of those proverbial suitcases of cash); and Latin American strongmen like Hugo Chavez and Nicolas Maduro of Venezuela (too many dirty tricks to summarize briefly).

And of course the Castro brothers, going way back. Just this week, a headline in Cuba’s communist mouthpiece, Prensa Latina, demonstrated that old-fashioned Russian propaganda is very much alive in the region: “Russia Condemns U.S. Interference in Latin American Affairs.”

In 2012, then-Ecuadorian President Rafel Correa gave Julian Assange, the Wikileaks founder whose name always seems to come up when the subject is Russian influence operations, refuge in Ecuador’s embassy in London. And two other anti-American populists, Evo Morales of Bolivia, and Nicaragua’s President Daniel Ortega have paid their Moscow benefactors back shamelessly, expressing support for Russia’s 2014 seizure of Crimea, to cite just one example.  (As we will see in the second part of this series, the Philippines’ Rodrigo Duterte, an unashamed Putin admirer, is not known to have gone so far.)

Former German chancellor Gerhard Schröder, another leftie who has termed American global influence as “monstrous,” while calling Putin a “flawless democrat,” went on the Russian payroll shortly after he left office in 2005. Schröder had championed the still-controversial Nord Stream natural gas pipeline that connects Germany to Russia. Today he chairs the board of the government-controlled Rosneft, Russia’s largest oil company, which has close personal ties to Putin.

And on the right…

Putin works hard-right foreign leaders also. There’s the pro-Moscow Czech president, Milos Zeman. France’s National Front leader Marine Le Pen (who has enjoyed Russian bank loans). Hungary’s anti-immigrant Viktor Orban. Turkish autocrat Recep Tayyip Erdogan. Several other right-wing parties from Italy and Germany to Scandinavia have also received Moscow’s support.

Of course, the world of secret intelligence being, umm, secret, the Kremlin’s successes in each of these individual cases remain speculative. Authoritarian-minded rightists like Erdogan and Orban, while their Eurosceptism would be pleasing to Moscow, also come from countries that are traditionally sensitive to any hints of untoward Russian influence. Plus, wily leaders like Erdogan and Orban have their own agendas. So it’s sometimes difficult for outside observers to determine exactly who is playing whom.

Putin’s most famous current success story is well-known to anyone who follows developing headlines. The U.S. intelligence community has identified the main goal of Putin’s several influence operations during America’s 2016 presidential elections: helping Donald Trump defeat rival Hillary Clinton. Clearly, the Russians had a hand in Trump’s victory (although there were other reasons for Clinton’s defeat, arguably the most important of which was her unattractiveness as a candidate).

But Putin didn’t fare so well last year during the United Kingdom’s general election, when his operatives energetically worked various social media outlets to promote the fortunes of Jeremy Corbyn’s Labour Party. Labor lost the 2017 election.  As has America’s Trump, Corbyn has a history of denigrating British intelligence reports on the Kremlin’s political influence operations directed his way. And to complicate matters further, a lot of murky Russian money is also believed to have been directed towards supporting various British Conservative Party politicians.

Given such a history of active measures aimed at so many prominent world leaders, as we turn to Southeast Asia it is not surprising that Putin has also had his eyes on Rodrigo Duterte.

To be continued in Part Two…

Don’t Believe China’s Trade Hype

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Don’t Believe China’s Trade Hype

Beijing runs with the G-33—poorer, protectionist-minded WTO laggards.

By Greg Rushford

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Don’t expect much progress in dismantling global trade barriers from the World Trade Organization’s meeting in Buenos Aires this week. The Trump administration will take most of the blame. American trade negotiators have even said they will refuse to sign the customary ministerial declaration expressing support for the “centrality of the multilateral trading system.” The U.S., as WTO Deputy Director Alan Wolff noted, is “sitting this one out.”

In the absence of American leadership, all eyes are on Chinese President Xi Jinping. Mr. Xi has missed no opportunity to declare his support for the WTO’s mission of advancing free trade. He acknowledges that China has benefited greatly since becoming a WTO member in 2001.

“We should uphold multilateralism and pursue shared growth,” Mr. Xi declared last month in a speech to Asia-Pacific business leaders in Vietnam. His remarks were well-received—in clear contrast to Mr. Trump’s insular America First exhortations at the same forum. Global economic leadership is a key part of Mr. Xi’s “Chinese Dream.”

 But going by China’s actual record in the WTO, Mr. Xi will have to dream on. Despite the glowing free-trade rhetoric from Beijing, inside WTO negotiating rooms China is hardly a champion of free trade. Instead, the Chinese run with the G-33, a group of poorer, protectionist-minded WTO laggards—the likes of South Africa, Venezuela, Zimbabwe and India.

These countries tailor their negotiating positions to longstanding grudges against their former European colonial masters, as well as rich Americans. They support China’s assertion that it remains a developing nation deserving of “special and differential treatment” when it comes to dismantling trade barriers.

In the WTO’s thorny agriculture negotiations, for example, China and India stand together in demanding that rich Europeans and Americans dismantle trade-distorting subsidies. Yet they demand that “developing” countries be allowed to continue propping up tens of millions of subsistence farmers indefinitely.

Beijing insists that it made enough concessions on lowering agriculture tariffs and subsidies when it joined the WTO in 2001. When the WTO held its ministerial meetings in Bali in 2013, the Chinese and Indians won the “temporary” right to circumvent their existing legal restrictions on exceeding their (wasteful) domestic support programs. In Buenos Aires, they will push for the permanent right to prop up their globally uncompetitive farmers.

Beijing is also resisting an initiative to curb governmental subsidies that contribute to overfishing. In 2002 a group of WTO members led by Australia, New Zealand, Iceland and Chile established the so-called Friends of Fish to try to reach consensus. But China wants a carve-out to protect its subsidies and insists that countries be allowed to police violations themselves—an approach that threatens the collapse of already depleted global fishing stocks.

China has also failed to join the WTO’s Government Procurement Agreement. Forty-seven advanced economies have opened bidding on more than $1.7 trillion of their governmental contracts to foreign competition. China entered negotiations to join the GPA in 2002. The big news from the WTO’s 2011 ministerial meetings in Geneva was that Beijing would sign on. But that deal has never materialized, while talks drag on and on.

While Chinese rhetoric doesn’t square with the country’s record in the WTO, Beijing’s performance is not all negative. After arduous negotiations, Beijing joined the Information Technology Agreement, where 82 WTO members have agreed to slash tariffs on trade in high-tech goods.

 China also slashed average tariffs on industrial products to less than 9%, and has promised early action to slash its 25% auto tariffs. Chinese officials from President Xi on down vow that China will continue to play a “constructive” role inside the WTO.

Just how constructive depends on whether Beijing continues to seek special treatment at the expense of its partners. This week’s meeting might begin to shed light on an important question: Is Mr. Xi’s free-trade talk worth more than scoring political points against Donald Trump ?

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

Imports Are Good for American Workers

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by Greg Rushford (Milken Institute Review, April 21, 2017)

Recent polling by the Wall Street Journal suggests that Americans have become skeptics about international trade, with less than half believing that cross-border commerce is, on balance, beneficial. A vociferous third go further, agreeing with their new protectionist-in-chief that “our free trade has led to a lot of bad things happening.” And while President Trump’s trade agenda is yet to be fully shaped, the outline of what he wants is becoming clear: high tariff walls to curb competition from imports and more stringent Buy American laws for U.S. manufacturers — all in the name of protecting domestic jobs.

So what should Americans who reflexively cringe at the economic nationalism currently in vogue say to the skeptics? One option is to point to history: countries in the post-war era that have relied upon high protectionist tariffs and “buy domestic” import-substitution schemes — think India, Brazil and Argentina — lost their economic mojo and only began to recover their places in the sun when they opened their borders.

But there’s also an argument that doesn’t require historical perspective. Just look around at the most successful American manufacturers, and observe how access to global markets sustains their American workforces. Of course, it isn’t quite that simple. As David Autor of MIT reminds, trade produces losers as well as winners. But this reality can’t be allowed to block the American economy’s only plausible path toward ongoing prosperity.

Hogs and Drugs

Take Harley-Davidson, the motorcycle maker headquartered in Wisconsin that sells its iconic “hogs” in a zillion countries. The jobs of the men and women who make those Fat Boys growl depend upon imported components — transmissions from Japan, wheels from Australia, tires from Spain and Thailand. While Harley declines to reveal specifics, it’s a safe bet that, all told, about one-third of the value comes from outside the United States.

It’s a similar story for Merck, the New Jersey-based pharmaceutical giant that makes some of its lifesaving potions in Elkton, Va. (pop. 2,042). Because it operates there in a free-trade zone authorized by the federal government, Merck can save serious amounts by importing chemicals. But nobody has told Merck’s Elkton workers that free trade puts food on their tables.

Likewise for the venerable diesel-maker Cummins, which is based in Indianapolis. Cummins’s American workers could not make those engines as well or as cheaply without key imports including gaskets, bearings and cylinder heads.

Half of the goods the United States imports are inputs and raw materials that are necessary for U.S. companies to operate their domestic production. Those imports are absolutely essential to the health of American manufacturing.

“Half of the goods the United States imports are inputs and raw materials that are necessary for U.S. companies to operate their domestic production,” explains Scott Miller, a former Procter & Gamble executive who now edits TradeVistas, an economic research website for the Center for International and Strategic Studies in Washington. Those imports, Miller stresses, are “absolutely essential to the health of American manufacturing.”

True, Miller adds, the U.S. government could adopt the Indian-Brazilian-Argentine import-substitution model to force domestic manufacturers to bring their global supply chains back to American shores. But there would be consequences in the form of higher consumer prices, problematic quality resulting from undermining competition — and ultimately fewer American jobs.

Ironically, though, you aren’t likely to hear the CEOs of American export-oriented companies celebrating the role of imports in sustaining the jobs of their workforces. When I first started writing about the importance of imported components to domestic jobs in the 1990s, Harley-Davidson’s supply-chain managers freely acknowledged that they bought the best parts wherever they could be found. But these days the company is lying low, loath to offend customers who apparently assume their hogs were born and raised exclusively in Menomonee Falls and Kansas City. Cummins and Merck are hardly more communicative about their dependence on international trade, both for imported components and markets.

Ignorance Is Not Bliss

The explanation for the low profile of American corporations whose employees as well as profits depend on open trade is that few companies are prepared to stick their proverbial necks out when political leaders find it more convenient to pretend they never took Econ 101. Echoing Republican presidents Ronald Reagan and the two Bushes, Bill Clinton said he was for “free and fair trade” without specifying what the qualifier “fair” meant. Barack Obama was hardly better: his three favorite words, he often told audiences, were “Made in America.” Meanwhile, the populist from Mar-a-Lago — who does everything bigger — says that his four favorite words are “Made in the USA.”

Over the years, America’s corporate leaders have gotten the message: limit the anti-protectionist talk to only friends and family. There’s no good reason to spend goodwill on the topic, especially when corporate America has bigger fish to fry in the form of corporate tax reform and deregulation.

This see-no-evil approach has often translated into economic buffoonery when presidents and CEOs talk about trade to the American people. Obama, for instance, perfectly illustrated the point in a February 2012 speech to Boeing’s workforce in Everett, Washington. That’s where Boeing makes its newest commercial aircraft, the dazzling 787 Dreamliner. “Boeing has suppliers in all 50 states, providing goods and services like the airplane’s ground-breaking carbon fiber composite aircraft structure from Kansas, advanced jet engines from Ohio, wing components from Oklahoma, and revolutionary electrochromic windows from Alabama,” Obama boasted. American workers, he said, are the best in the world.

Boeing executives on that stage beamed enigmatically — perhaps because they were aware that some 70 percent of the Dreamliner’s parts come from an atlas’ worth of countries. “The wings are produced in Japan, the engines in the United Kingdom and the United States, the flaps and ailerons in Canada and Australia, the fuselage in Japan, Italy and the United States, the horizontal stabilizers in Italy, the landing gear in France, and the doors in Sweden and France,” a study by the Swedish National Board of Trade concluded. “All in all, a Boeing airplane is not particularly American.”

Perhaps irony is less surprising in the case of Donald Trump — but it is still striking. The president’s private Boeing 757, famous for its silk-lined master bedroom and solid gold bathroom fixtures, is kept airborne by Rolls Royce 211 fanjets, the UK-made workhorse of an entire generation of Boeing aircraft. Somehow, as Trump campaigned in front of the plane railing against nefarious foreigners stealing our manufacturing jobs, nobody seemed to take note of the “RR” logo prominently displayed on the portside engine.

As for the new American president’s passion for slapping high tariffs on imports from Mexico, perhaps Trump might consider some awkward facts. The Dreamliner’s wiring comes from Mexico. And, in return, the Mexicans are among Boeing’s most enthusiastic customers for the big plane — Mexico’s president Enrique Pena Nieto proudly flies one. Boeing’s CEO, Dennis Muilenburg, who seems no more enthusiastic about throwing his weight behind open trade than the CEOs of Merck, Cummins and Harley-Davidson, did not respond to an invitation to say whether he thought that was a pretty good deal for his company and its nearly 150,000 U.S.-based workers.

Somebody (other than college professors and think-tank nerds) needs to get back in the game of explaining the benefits of trade to American audiences. The Geneva-based World Trade Organization is giving it a shot. In a recent speech, WTO Director-General Roberto Azevedo appealed to a younger audience: “A jar of Nutella can contain hazelnuts from Turkey, palm oil from Malaysia, cocoa from Nigeria, sugar from Brazil and flavoring from China,” he noted. Meanwhile the company, which is headquartered in Italy, has a plant in Canada that brews up the chocolatey goodness sold by retailers across America.

* * *

It’s easy to dismiss the awkward silence of American corporate executives who know American jobs (and profits) depend on global supply chains simply as pragmatism-as-usual. But one indirect consequence, the sheer ignorance of American workers and politicians as to how their bread is buttered, is dangerously exposing the global economy to uncertainty. Is it too much to ask corporate America to explain that economic nationalism is a recipe for stagnation and joblessness?