Friday, November 17, 2017

The Art of the Pro-Communist Deal 
  President Trump enlists the United States in
  Xi Jinping's 21st Century World Vision as U.S.
  Pacific allies reject him, and by necessity us

Forty-five years ago, in 1972, President Richard Nixon made a historic trip to open a diplomatic relationship between the United States and the People's Republic of China (PRC).

Over the past two weeks, President Donald Trump also made a historic visit to Asia to:
  1. Bestow the U.S. government's endorsement upon Chinese President and General Secretary of the Communist Party of China Xi Jinping's Silk Road Economic Belt and the 21st-century Maritime Silk Road Initiative by encouraging American companies to make billions of dollars in investments in the economy of the People's Republic of China, some directly funding the Initiative, some not so transparent.
  2. Grant the U.S. government's approval of People's Republic of China government-affiliated companies and banks making
    1. investments in a natural gas project in Alaska;
    2. investments in shale gas development and chemical manufacturing projects in West Virginia; and
    3. investments to be managed by Goldman Sachs in American companies across the manufacturing, industrial, consumer and healthcare industries.
  3. Incite the remaining 11 Trans-Pacific Partnership (TPP) nations in Asia and the Americas to achieve agreement on the “core elements” of what is to be known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an agreement that prior to Trump's insulting speeches was thought impossible after the U.S. withdrawal from the original TPP.
  4. Abide a polite but firm statement from Vietnam President Tran Dai Quang and a blunt statement from Philippine President Rodrigo Duterte telling the U.S. to stay out of their dispute with China over the South China Sea as they wanted to avoid any chance of war, a position affirmed by President Xi.
These results, which are as surprising as was Nixon's 1972 trip, represent major reversals in American trade policy, foreign policy, and foreign investment policy. These "achievements" are considered below under the headings:
  • Trump's Surprising Endorsement of China's Belt and Road Initiative
  • How Trump Incited the TPP Deal's Anti-American Pacific Trade Wall
  • The Choice: War or The Pacific Americas Prosperity Neighborhood
  • Remembering The Nixon China Surprise

Trump's Surprising Endorsement of China's Belt and Road Initiative

As reported in the Chinese press this week, Trump and Chinese President and General Secretary of the Communist Party of China Xi Jinping "witnessed the signing of deals worth US$253 billion on Thursday, making the US head of state’s visit to China one of the most fruitful for Chinese and US businesses in terms of the value of agreements struck."

Perhaps we need to back up here and make clear what really happened during this China visit. Sure, Secretary of State Rex W. Tillerson, National Security Adviser Lt. Gen. H. R. McMaster, Commerce Secretary Wilbur Ross, United States trade representative Robert E. Lighthizer and Jared Kushner were there. And sure the American media did not provide boring in-depth economic explanations focusing instead on the personalities, in this case Trump and Xi, and in Vietnam Putin.

But the important policy fact about the China visit was that 29 other persons were specifically included to accompany Trump in China in order to further what appears to be the Trump Deplorable Trade Policy (TDTP) including in order of their business or organization name:
  1.  Mr. Seifollah Ghasemi, Chairman, President & CEO, Air Products of Allentown, Pennsylvania
  2.  Mr. Keith Meyer, President, Alaska Gasline Development Corporation (AGDC) of Anchorage, Alaska
  3.  Governor Bill Walker, State of Alaska
  4.  Mr. Donald Chen, President, Asia-Pacific, Archer Daniels Midland Company of Chicago
  5.  Mr. Daniel Revers, Managing Partner, Arclight Capital Partners, LLC, of Boston
  6.  Mr. Mitch Snyder, President & CEO, Bell Helicopter of Fort Worth
  7.  Mr. Kevin McAllister, President and Chief Executive Officer, Boeing Commercial Airplanes, Renton, Washington
  8.  Mr. Jack Fusco, President and Chief Executive Officer, Cheniere Energy, Inc., of Houston
  9.  Mr. Timothy Tangredi, President & CEO, Dais Analytic Corporation of Odessa, Florida
  10.  Mr. Frederick Jones, Chairman and Chief Executive Officer, Delfin Midstream, LLC, of Houston
  11.  Mr. Andrew Liveris, Executive Chairman, DowDuPont of Midland, Michigan
  12.  Mr. Luka Erceg, President & CEO, Drylet, LLC, of Houston
  13.  Mr. David Messer, CEO, Freepoint Commodities LLC, of Stamford, Connecticut
  14.  Mr. John Rice, President & CEO, GE Global Growth Organization, General Electric, of Boston
  15.  Mr. Shane Tedjarati, President, High Global Growth, Honeywell of Morris Plains, New Jersey
  16.   Mr. Lloyd Blankfein, Chief Executive Officer, Goldman Sachs of New York City
  17.  Mr. Vance Hum, President and Chief Executive Officer, I.M. Systems Group, Inc., of Rockville, Maryland
  18.  Mr. Theodore Walker, CEO, Worldwide Property & Casualty, Partner Reinsurance Company of the United States of Greenwich, Connecticut
  19.  Mr. Steve Mollenkopf, CEO, Qualcomm, Inc. of San Diego
  20.  Mr. Nick Lisi, Executive Vice President , SAS of Cary, North Carolina
  21.  Mr. Kevin Smith, CEO, SolarReserve of Santa Monica, California
  22.  Ms. Li Zhao, Country Representative, Stine Seed Company of Adel, Iowa
  23.  Mr. John Garrison, President & CEO, Terex Corporation of Westport, Connecticut
  24.  Mr. Langtry Meyer, Founder & Chief Operating Officer, Texas LNG Brownsville, LLC, of Brownsville, Texas
  25.  Mr. Paul Doherty, President and CEO, The Digit Group, Inc., of Memphis, Tennessee
  26.  Mr. Gianluca Pettiti, President, Thermo Fisher Scientific of Waltham, Massachusetts
  27.  Mr. Jim Miller, Chairman, U.S. Soybean Export Council of Chesterfield, Missouri
  28.  Mr. Paul Koenig, CEO, Viroment of Minneapolis, Minnesota
  29.  Mr. Jose Emeterio Gutierrez Elso, President & CEO, Westinghouse Electric Company, LLC, of Cranberry Township, Pennsylvania
Speaking alongside Trump in Beijing as the deals were announced, General Secretary of the Communist Party of China Xi reportedly welcomed U.S. companies to participate in his ambitious “Belt and Road” infrastructure-led initiative. In one deal reported, China’s Silk Road Fund and General Electric signed an agreement specifically to cooperate in investments under China’s “Belt and Road Initiative” as it was defined prior to Trump's visit.

But other "deals" appear to be an expansion of the “Belt and Road Initiative” into the United States. Perhaps we need to back up again and provide a description of the Initiative from the Wikipedia entry:
    The Silk Road Economic Belt and the 21st-century Maritime Silk Road, better known as the One Belt and One Road Initiative (OBOR), The Belt and Road (B&R) and The Belt and Road Initiative (BRI) is a development strategy proposed by China's paramount leader Xi Jinping that focuses on connectivity and cooperation between Eurasian countries, primarily the People's Republic of China (PRC), the land-based Silk Road Economic Belt (SREB) and the oceangoing Maritime Silk Road (MSR). The strategy underlines China's push to take a larger role in global affairs with a China-centered trading network.

   The Belt and Road initiative is geographically structured along 6 corridors, and the maritime silk road.
  • New Eurasian Land Bridge, running from Western China to Western Russia through Kazakhstan.
  • China–Mongolia–Russia Corridor, running from Northern China to Eastern Russia
  • China–Central Asia–West Asia Corridor, running from Western China to Turkey
  • China–Indochina Peninsula Corridor, running from Southern China to Singapore
  • China–Myanmar–Bangladesh–India Corridor, running from Southern China to Myanmar
  • China–Pakistan Corridor, running from South-Western China to Pakistan
  • Maritime Silk Road, running from the Chinese Coast through Singapore to the Mediterranean
    The area of the initiative is primarily Asia and Europe, encompassing around 60 countries. Oceania and East Africa are also included. Anticipated cumulative investment over an indefinite timescale is variously put at US$4 trillion or US$8 trillion. The initiative has been contrasted with the two US-centric trading arrangements, the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.

    The Belt and Road Initiative is expected to bridge the 'infrastructure gap' and thus accelerate economic growth across the Asia Pacific area and Central and Eastern Europe: World Pensions Council (WPC) experts estimate that Asia excluding China will need up to $900 billion of infrastructure investments per year during the next 10 years, mostly in debt instruments. They conclude that current infrastructure spending on the continent is insufficient by 50%. "The gaping need for long term capital explains why many Asian and Eastern European heads of state "gladly expressed their interest to join this new international ļ¬nancial institution focusing solely on ‘real assets’ and infrastructure-driven economic growth".

    The Global Times hosts a news desk dedicated to the Belt and Road Initiative.
The GE deal is the only one transparently constituting an investment in the Eurasian-Africa elements of the Initiative. As explained by Chinese State Administration of Foreign Exchange (SAFE),  the Silk Road Fund and GE established a joint energy infrastructure investment platform. The Silk Road Fund was founded in December 2014 and is jointly backed by China's foreign exchange reserves, China Investment Corp, the Export-Import Bank of China and China Development Bank.

The SAFE statement said: "The two sides will make joint investment in infrastructure projects in the fields of power grid, new energy, and oil and gas, in countries and regions along the Belt and Road. The cooperation between the Silk Road Fund and GE will not only boost cooperation between high-end manufacturing companies from China and the US, but also promote economic development of the regions where their investment goes."

What is surprising about three of the other "deals" is that they constitute PRC capital investments in the United States when the Eurasian-Africa elements need substantial capital as described above. Let's look at those three "deals."

Perhaps the deal stirring the most interest in America's Rust Belt is the world’s largest power company by asset value, China Energy Investment Corp. owned by the PRC, signed a memorandum of understanding (MOU) with the West Virginia Dept. of Commerce on an $83.7 billion plan to invest in shale gas development and chemical manufacturing projects in West Virginia, with some possible benefit to Ohio and Kentucky

"This investment by China Energy is the culmination of years of relationship building, both by West Virginia University and the state,” WVU President Gordon Gee said. “It is also an excellent example of the possibilities that we have been discussing within the West Virginia Forward initiative with our partners at the state Department of Commerce and Marshall University.

“As I have traveled the state talking about West Virginia Forward, I have frequently said we need a ‘quick win.’ In the economic development world, this is a nearly unprecedented big win. The agreement, and the ramifications from it, will help move West Virginia forward for years to come.”

In another "deal", China’s top state-owned oil company Sinopec, Bank Of China,  and China Investment Corp (which reports to the State Council of the People's Republic of China) agreed to help the State of Alaska develop a $43-billion natural gas project in Alaska.

Alaska Governor Bill Walker and others participate in a an agreement signing ceremony while Presidents Trump and General Secretary Xi observe

In a news release issued by the state-owned Alaska Gasline Development Corporation created by the Alaska Legislature in 2010, Alaska Governor Bill Walker states: “This is an agreement that will provide Alaska with an economic boom comparable to the development of the Trans-Alaska Pipeline System in the 1970s.”

From the news release we learn:
    Alaska Gasline Development Corporation (AGDC), the State of Alaska, China Petrochemical Corporation (Sinopec), CIC Capital Corporation (CIC Capital), and Bank of China (BOC), today announced a joint development agreement to advance Alaska LNG, Alaska’s strategic gas infrastructure project.
    The agreement was signed in the presence of United States President Donald Trump and China President Xi Jinping, and expresses the common interests in the preparatory work of Alaska LNG.
    Alaska LNG is designed as a 20 million tonnes per annum (MTPA) integrated LNG system comprised of a three train liquefaction plant in Southcentral Alaska at Nikiski; an approximately 800 mile, 1.1 meter diameter gas pipeline; a gas treatment plant on the North Slope of Alaska; and various interconnecting facilities to connect the Prudhoe Bay gas complex to the gas treatment plant.
    Under the agreement, the parties have agreed to work cooperatively on LNG marketing, financing, investment model and China content in Alaska LNG, and get a periodic result by 2018.
    “Today’s agreement brings the potential customer, lender, equity investor, and developer together with a common objective of crafting mutually beneficial agreements leading to increased LNG trade between Alaska and China,” said Keith Meyer, president, AGDC.
    “Sinopec is interested in the possibility of LNG purchase on a stable basis from Alaska LNG,” said Sinopec.
    “CIC Capital is an experienced financial investor in the energy and infrastructure sectors and has long been interested in investing in American LNG infrastructure. CIC Capital is pleased to work with fellow industry and financial partners on this project,” said CIC Capital.
    “As the most internationalized bank in China, Bank of China is willing to facilitate the China-U.S. energy cooperation and provide financial solutions for this transaction by taking advantage of its vast experiences and expertise in international mega-project financing,” said Bank of China.
    Sinopec is a huge, state-owned, fully integrated energy and chemical company. Based in Beijing, Sinopec is the largest oil and gas company in the world by revenue with annual revenue of USD 455.49 billion.
    CIC Capital is China’s direct investment arm, which is mandated to make direct investments and manage bilateral and multilateral fund investments in order to pursue long-term financial returns and promote international investment cooperation. CIC Capital is a market-oriented commercial entity with a specialized mandate and global reach. As a long-term financial investor, CIC invests on a commercial basis.
    Bank of China is a state-owned commercial bank. Bank of China ranks top 10 largest banks in the world by market capitalization value and provides a comprehensive range of financial services to clients in 52 countries and regions around the world.
    The Alaska Gasline Development Corporation (AGDC) is an independent, public corporation of the State of Alaska, empowered to maximize the benefit of Alaska’s vast North Slope natural gas resources through the development of infrastructure necessary to move the gas into local and international markets. Visit for up to date information.
The purpose of the agreement is to develop natural resources located in the National Petroleum Reserve in Alaska (NPRA), an area of land owned by the federal government and managed by the Bureau of Land Management (BLM) which is located to the west of the Arctic National Wildlife Refuge.

The State of Alaska entered into an agreement with Sinopec - a PRC-owned "energy and chemical company," CIC Capital - a sovereign wealth fund responsible for managing part of the People's Republic of China's foreign exchange reserves, "China's direct investment arm," and the Bank of China - a PRC "state-owned commercial bank."

At a minimum it is curious that the Republican President of the United States Donald Trump oversaw the signing of the agreement while sitting with the General Secretary of the Communist Party of China Xi Jinping.

The third "deal" which for all intents and purposes looks like the expansion of the Initiative into the United States occurred despite earlier opposition to Chinese investment in U.S. companies by the Trump Administration, Congress, and the Pentagon.

Goldman Sachs and China Investment Corp (CIC) signed a strategic agreement to establish a China and United States industrial cooperation fund. The Cooperation Fund will target $5 billion in commitments with a broad mandate to invest in American companies in the manufacturing, industrial, consumer and healthcare industries, among others, that have or can develop a material business connection to China. The Cooperation Fund is designed to enhance commercial linkages and promote market access for US firms in China and will seek to improve the balance of the US-China trade relationship.

“The China-United States relationship is one of the most important in the world and strengthening economic and trade cooperation is vital to the economies of both countries,” said Lloyd Blankfein, Chairman and CEO of Goldman Sachs. “The Cooperation Fund will increase Chinese investment in the United States, creating more opportunities for American workers and contributing to China’s economic transition and growth.”

“CIC has invested in the US for ten years and is committed to be both an investor and facilitator to develop a stronger China-US investment relationship,” said Tu Guangshao, Vice Chairman and President of CIC. “The partnership will help promote China’s supply-side structural reform and economic transition, and by investing in the US, it will act as a multiplier for business growth throughout the country.”

The deals endorsed by Trump and Xi could be valued as much as $250 billion. Sure Boeing won orders and commitments worth $37 billion at list prices for 300 jets, including 260 narrow-body Boeing 737s and a total of 40 wide-body 787s and 777s from state purchasing agency China Aviation Supplies Holding Co. Other "deal" signings overseen by Trump and Xi include:
  • Delfin Midstream has reached a preliminary 15-year sales deal to supply 3 million tonnes a year of liquefied natural gas (LNG) to city gas distributor China Gas Holdings (0384.HK) from 2021.
  • Air Products and Chemicals (APD.N)  signed an agreement with Yankuang Group for a $3.5-bln coal-to-syngas production facility in China and signed an agreement to form a $1.3 billion joint venture (JV) with Lu’An Clean Energy Company, which will significantly expand Air Products’ scope of supply serving Lu’An Mining (Group) Co., Ltd.’s syngas-to-liquids production in Changzhi City, Shanxi Province, China..
  • Cheniere Energy Inc (LNG.A) signed a memorandum of understanding (MOU) with China National Petroleum Corp [CNPET.UL] for long-term LNG sales and purchase cooperation.
  • Westinghouse Electric Co. signed contracts with China’s State Nuclear Power Technology Co. to build six AP1000 nuclear power plants in China.
  • Bell Helicopter, part of Textron Inc (TXT.N), reached a deal to sell 50 additional Bell 505 helicopters to Reignwood International, with Reignwood also being named the craft’s exclusive reseller in China.
  • Terex Utilities Inc. and Xuzhou Handler Special Vehicle (300201.SZ) signed a strategic letter of intent for Xuzhou Handler to buy 5,000 insulated aerial devices from Terex over five years worth $250 million.
  • Qualcomm (QCOM.O) signed three non-binding agreements to sell $12 billion of semiconductors to Xiaomi, Oppo and Vivo over the next three years.
  • Ford Motor (F.N) and China’s Anhui Zotye Automobile (000980.SZ) have agreed to invest a combined $756 million to set up a 50-50 joint venture in China to build electric passenger vehicles. 
  • The United States soybean industry including Archer Daniels Midland Company has signed letters of intent worth more than $5 billion – a $1 billion bump from similar contracts signed a year ago - with Chinese importers covering the purchase of an additional 12 million tonnes of soybeans in the 2017/18 marketing year.
  • JD.Com Inc (JD.O) said it would purchase more than $2 billion of U.S. agriculture and food products over the next three years, including at least $1.2 billion of beef from Montana Stock Growers Association and pork from Smithfield Foods Inc. [SFII.UL].
  • Drylet LLC agreed to form a joint venture with Nanjing Hoyo Municipal Utilities Investment and Administration for wastewater treatment in China. Hoyo Municipal Utilities Investment and Administration will also become an equity investor in Drylet.
  • Software company SAS signed a cooperation agreement with Shenzhen Zhenghong Technology to establish the Big Data Innovation Center for Smart Manufacturing in Shenzhen. 
  • Caterpillar, Inc. (CAT.N) and China Energy Investment Corporation signed a five-year strategic cooperative framework agreement covering future agreements for mining equipment sales and rentals, technology applications and product support.
And looking at a cross-section of other industries represented at the signing is interesting.

For instance, Minneapolis waste water treatment company Viroment signed an agreement with Hangzhou Iron and Steel worth $800 million addressing textile and sewage sludges for over 800 plants. Viroment also signed a $100-million agreement with Guangye Guangdong Environmental Protection Group to address sewage sludge solids disposal requirements in South China.

The agreements will allow more than 800 textile companies in eastern China’s Zhejiang province and 80 waste water treatment plants in southern Guangdong province to install Viroment technology to help them comply with China’s environmental regulations.

“Right now we have no footprint in China, so this is our kick-off,” Viroment’s chief executive Paul Koenig said. “If Trump wasn’t coming, I don’t think we would have pushed to have [such] large deals in writing.”

“Everyone’s excited and everyone’s motivated … you can pretty much always add one or more zeroes when you’re dealing with China,” Koenig said.

Koenig will attend three more trade missions to China later this year, with ongoing plans to work with companies in Hebei province and major port city Tianjin, and eventually “tackle all of China”.

Smart city developer The Digit Group of Memphis, already having a presence in China, signed three contracts worth a combined $1.9 billion, including one to build a 200-hectare virtual reality theme part in the eastern city of Qingdao.

DowDuPont signed a tire contract with bicycle-sharing startup Beijing Mobike Technology Co. to develop lighter, more durable materials for tires and saddles, as well as coatings, adhesives and synthetic rubber. The U.S. company said the agreement creates incentives for U.S. exports of polyurethane and other products. DowDuPont began working with Mobike last year, and about 2 million bicycles already use their tires.

Honeywell International Inc. inked a memorandum of understanding with China’s Oriental Energy to cooperate on an ethane dehydrogenation project of 600,000 tons a year. Like DowDuPont, its deal also involves an existing Chinese partner. Honeywell announced in May that two Oriental Energy subsidiaries had licensed its technology to begin producing propylene. Honeywell also signed a service contract with Spring Airlines Co., China’s biggest budget carrier that flies over 130 routes with a fleet of Airbus A320 planes. The deal would further develop Honeywell’s ties to China’s aviation industry. The U.S. company is a supplier for the C919, a new single-aisle plane being produced by state-owned Commercial Aircraft Corp. of China Ltd.

Sure, this seems like good economic opportunities for American companies. Still, creating a positive focus on trade with the People's Republic of China and having open public discussion of PRC Communist Party General Secretary Xi Jinping's 21st Century Silk Economic Belt and Road during Trump's visit is bit of a surprise. China's "Belt and Road" initiative is its economic centerpiece for the future of international trade.

From a policy standpoint, a U.S. President endorsing
  • a U.S. private company's involvement in the "Belt and Road" and 
  • Communist-PRC-owned companies investing in U.S. natural resources and businesses 
represents a significant pro-China turn-around from the Trans-Pacific Partnership goal of resisting China's effort to dominate world trade in the future.

Not that the Trump Administration has backed down from U.S. imports trade issues. Disputes over such imports such as hardwood plywood continue where it has been determined that the Communist government is subsidizing product production costs.

But in light of that, it seems like a questionable move to have Communist-PRC-owned companies directly involved in the U.S. economy, obtaining ownership interests in U.S. corporations.

As noted in the prior post With thoughtful Chinese characteristics a President tends his plan for 1.4 billion  people for 2020 ...and 2035 ...and 2049 President Xi heads a 7000-year-old autocratic nation and clearly with regard to economics and business thinks in time frames far longer than the next quarterly report.

In his three hour and 23 minutes speech at the 19th Congress of the Communist Party of China (CPC) Party General Secretary Xi Jinping under the title Thought on Socialism with Chinese Characteristics for a New Era laid out his vision for the Chinese people. “The Chinese nation … has stood up, grown rich, and become strong – and it now embraces the brilliant prospects of rejuvenation … It will be an era that sees China moving closer to center stage and making greater contributions to mankind.”

How Trump Incited the TPP Deal's Anti-American Pacific Trade Wall

In contrast to how Trump helped the "deals" in China, Trump's first stop on his trip was in Japan where he went on the attack.

For the U.S., the Japanese trade deficit is second only to that with China and to Trump that means the other side is somehow breaking the rules.  He said the U.S. has "suffered massive trade deficits at the hands of Japan for many, many years".

"We want free and reciprocal trade but right now our trade with Japan is not free and it's not reciprocal and I know it will be and we've started the process," Mr Trump told the group of US and Japanese executives. He took aim at Japanese carmakers in Tokyo.

"Try building your cars in the United States instead of shipping them over. That's not too much to ask," the US president said at the briefing, adding, "is that rude to ask"?

Rude? Yes. But also downright ignorant of some troublesome facts - you know, facts that Trump's Deplorables won't accept - about Japanese automakers, the ignorance of which allows him to create the Trump Deplorable Trade Policy.

Data shows that in 2016, three-quarters of Japanese branded cars sold in the US were manufactured in North America. Last year, those carmakers built nearly 4 million vehicles and 4.7 million engines in the US and contributed $45.6bn in total investment through 24 manufacturing plants, and 43 research and development and design centers in the U.S.

The problem isn't the Japanese. The problem is Americans who are still buying cars from Japan, along with agricultural goods, electronic components and pharmaceutical products.

American-made cars can be sold in Japan. But in a country where people cram onto mass-transit, there is no demand for American cars. Only a delusional person or an ignorant President would think otherwise.

While listening to Trump's misinformation and insults, Japanese Prime Minister Shinzo Abe hadn’t forgotten that it was Trump who pulled out of the 12-nation Trans-Pacific Partnership trade pact, a move the U.S. president once again defended Monday.

Abe spent significant political capital to back the deal, particularly among farmers who don’t want to see tariffs on agriculture lowered. Japanese officials also say the TPP would’ve helped narrow the trade gap.

So Prime Minister Abe and other Japanese officials spent most of their energy during Trump's China visit on a process known as “TPP 11” -- an attempt to keep the Trans-Pacific Partnership framework intact with 11 nations and definitely without the U.S.

Trump left Japan with no changes in trade policy, went to China and seemingly embraced China's trade leadership, then moved on from China to Vietnam.

In Vietnam, the Asia-Pacific Economic Cooperation (APEC) forum was meeting, a forum for 21 Pacific Rim member economies that promotes free trade throughout the Asia-Pacific region. The annual APEC Economic Leaders' Meeting is attended by the heads of government of all APEC members.

In 2014 Xi was pushing APEC members to create a Free Trade Area of the Asia-Pacific (FTAAP) saying that it is a "strategic initiative critical for the long-term prosperity of the Asia-Pacific". He touts it as as "an institutional mechanism for ensuring an open economy in the Asia-Pacific." It has been China's offer of an alternative to what was the American-led  TPP until Trump rejected it.

This year the APEC meeting was held in Danang, Vietnam. In contrast to endorsing the "Belt and Road", according to the New York Times:
    President Trump on Friday vowed to protect American interests against foreign exploitation, preaching a starkly unilateralist approach to a group of leaders who once pinned their economic hopes on a regional trade pact led by the United States.
    “We are not going to let the United States be taken advantage of anymore,” Mr. Trump told business leaders at the Asia-Pacific Economic Cooperation forum in Danang, Vietnam. “I am always going to put America first, the same way that I expect all of you in this room to put your countries first.”
    But taking the stage at the same meeting immediately after Mr. Trump, President Xi Jinping of China delivered a sharply contrasting message, championing more robust engagement with the world. Mr. Xi used his own speech to make a spirited defense of globalization, saying relations among countries should be “more open, more inclusive, more balanced, more equitable and more beneficial to all.”
    Mr. Trump’s remarks were strikingly hostile for an audience that included leaders who had supported the Trans-Pacific Partnership, a sweeping 12-nation accord that was to be led by the United States, from which Mr. Trump withdrew immediately after taking office.
Trump's logical fallacy is clear to Vietnam. Vietnam is the source of smart phones (Samsung), clothing and shoes (such as Walmart, Zara, and North Face brands) for Americans as well as the rest of the world. Like those Japanese cars, ordinary Americans are buying Vietnamese imports, mostly because alternatives are unaffordable.

Before and after Trump's speech, TPP-11 members continued negotiations. Key decisions were made by the TPP-11 countries indicated in green on the map below including Japan fuming over the new insults, plus Canada and Mexico recently insulted regarding the NAFTA talks.

As we learned from the Financial Times article TPP deal ignites criticism of US isolation on trade the United States will likely be isolated in terms of Pacific trade, ironically except for China:
    A weekend move by Japan and 10 other Pacific nations to press ahead with a vast regional trade agreement without the US has prompted fresh criticism that Donald Trump’s “America First” trade policy is leaving Washington increasingly isolated.
    The 11 remaining members of the Trans-Pacific Partnership, which the Obama administration spent years negotiating and Mr Trump pulled out of on his third day in office, announced on Saturday that they had reached agreement on the “core elements” of a deal to proceed without the US.
    The group still has work to do, as Canada, Malaysia and Vietnam seek changes to an agreement they have rebadged — at Canada’s request — as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
    But officials said the plan was to sign a final agreement early next year, in a deal that would eliminate the tariffs on 95 per cent of goods traded in a bloc covering some 500m people and more than $10tn in economic output.
    “This will send out a very strong message to the US and to other Asia-Pacific countries,” said Toshimitsu Motegi, the Japanese economy minister.
It is not a coincidence that the Japanese economy minister spoke for the group, but that wouldn't be noticed by those embracing the Trump Deplorable Trade Policy as they would never believe how much damage is being done to their grandchildren's economic future.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership is different from that achieved at the end of Barack Obama’s presidency.

About 20 provisions that were once part of the TPP talks have been "suspended," according to a joint statement by the agreement’s member countries. And there are still four sticking points — including a commitment on coal that affects Brunei — to solve, but experts say a final deal could be announced as early as next year.

But of real interest because it would preclude future American participation, most of the provisions in the chapter on intellectual property have been “suspended,” meaning they likely will be excluded from future negotiations. This includes the proposed 20 year increase in copyright term and the introduction of criminal penalties for circumventing technological protection measures.

The effect will be to put differing trade walls between the United States and every one of those countries on the map above between now and 2020. What Trump is putting at risk with his nationalistic "America First" speeches are the exports from the Pacific States as explained in the Progressive Pacific Message website which includes this information:

Note that all but one of the largest markets listed for exports from these states are countries on that map above and none are in Europe or a country on the Atlantic Ocean.

Based upon Trump's tacit endorsement of "Belt and Road" funding by American companies, it seems the Trump Deplorable Trade Policy (TDTP) has a great big gap in the direction of China. In the tables above, China is the largest export market for Washington and Oregon, and second behind Mexico if you combine China and Hong Kong for California.

But based on Trump's attacks in Japan and Vietnam, plus his prior attacks on NAFTA countries Canada and Mexico, the  Trump Deplorable Trade Policy (TDTP) is a threat to the economic well-being of the Pacific States, China notwithstanding.

In 2015 the LA Times ran an Infographic piece West Coast ports: What comes in, what goes out and what it's worth providing look at the volume and variety of both imports and exports at the 28 ports along the West Coast totaling over $630 billion in 2014 including smaller ones like the Port of Kalama, Washington (total 2014 trade $3.0 billion, top export Soybeans, top import Rolled iron and steel).

Consider this from The Daily News Local ports worry over Trump’s possible steel tariffs:
    At Steelscape and its subsidiaries, steel imports support about 800 jobs in the U.S., including 270 jobs at the Port of Kalama. The company imports hot rolled steel coils, which are processed into cold-rolled, flat steel for building materials such as siding and roofing.
    Although the company gets a small amount of steel from domestic sources, imports are the bedrock of its business model. Steelscape says it can save about $60 to $100 per a ton of steel by importing it through the Columbia River docks rather than shipping it in over the Rocky Mountain.
It might be tempting to say that this discussion represents a typical West Coast State versus the rest of America dispute and that Steelscape should bite the bullet and buy American steel or get out of business. But actually, should lernin' be a goal, as one could learn from Pittsburg: Steelmaker USS-POSCO in international trade dispute bind the assumption that somehow buying "American-made" steel will improve net employment in the Rust Belt is a foolish fallacious thought process.

The Choice: War or The Pacific Americas Prosperity Neighborhood

Trump left Vietnam for a visit to the Philippines. Both the Philippines and Vietnam have recently seen China disrupt oil and gas exploration in disputed areas of the South China Sea. While the U.S. ordinarily doesn’t take a position on territorial disputes, it has aggressively challenged China for moves to assert control over areas also claimed in part by Southeast Asian countries.

In early September the headline was US Navy to conduct regular naval patrols in South China Sea. In early October the headline was US Navy destroyer sails near disputed islands in South China Sea. Now the headline is Trump Offers to Broker Peace in South China Sea as Trip Wraps Up.

Trump's association with the Alt-Right spokesman Steve Bannon creates fear in the Asia-Pacific region. It is likely that on his trip Trump doesn't remember this statement Bannon made on his radio show in a March 2016 discussion with Neoliberal Lee Edwards of the Heritage Foundation:
    We’re going to war in the South China Sea. I was a sailor there. We’re going to war in the South China Sea in five to 10 years. There’s no doubt about that. They’re taking their sandbars and making basically stationary aircraft carriers and putting missiles on those. They come here to the United States in front of our face – and you understand how important face is – and say it’s an ancient territorial sea. That's a throwdown, is it not sir.
Yes, Bannon is no longer a part of the Trump Administration. But China, Vietnam, and Philippine officials aren't foolish and ignorant - they study everything said about the South China Sea associated with the Trump Administration. They know there is considerable evidence that Bannon is respected by Trump. One can imagine how eyes might glaze over when Trump offers to mediate the dispute at least partly because of Trump's ignorance about what's actually going on.

Vietnam President Tran Dai Quang at a joint press briefing in Hanoi in response to questions about Trump's offer to mediate said “I have shared my thoughts with President Donald Trump on the recent developments in this area,” adding that Vietnam wanted to settle disputes through “peaceful negotiations” in accordance with international law.

The Philippines' overlapping claims with Chinese claims which expand beyond the Philippines to Vietnam, Malaysia, Brunei and Taiwan, was not part of the 40-minute discussions in the South China Sea when Trump sat down with Philippine President Rodrigo Duterte for their first formal bilateral talks in Manila.

Regarding Trump's offer to mediate, Duterte said: “The South China Sea is better left untouched. Nobody can afford to go to war.” Duterte, who turned towards China since taking office last year,  noted that Chinese President Xi Jinping told him on Saturday that he also didn’t want to “waste the lives of my countrymen for a useless war that cannot be won by anyone.”

Robespierre Bolivar, spokesman of the Philippines Department of Foreign Affairs, announced Monday that the Association of Southeast Asian Nations (Thailand, Vietnam, Indonesia, Malaysia, Philippines, Singapore, Myanmar, Cambodia, Laos, Brunei) will "commence the negotiations on a substantive and effective code of conduct" based on a framework established with China last August.

A draft copy of the announcement released previously to the media said, "While the situation is calmer now, we cannot take the current progress for granted." The statement said it is "important that we cooperate to maintain peace, stability, freedom of navigation in and over-flight above the SCS [South China Sea], in accordance with international law. It is in our collective interest to avoid miscalculations that could lead to escalation of tensions."

China claims most of the South China Sea, one of the busiest shipping routes in the world. ASEAN member nations Malaysia, Vietnam, the Philippines, and Brunei, as well as Taiwan also claim overlapping parts of the area.

A code of conduct would serve as a guideline for the competing claimants on how their sea vessels and aircraft can pass through the territory without any dispute.

In other words, as Trump runs around the world announcing the Trump Deplorable Trade Policy (TDTP) of forcing negotiated bilateral arrangements - a laborious one-by-one process with other nations - the other nations are continuing to move forward with multilateral agreements.

The TDTP is popular in parts of the United States where book lernin' is detested.But the rest of the world realizes that bilateral ultimately equates with war because factually in the 20th Century bilateral resulted in the killing 160± million people in wars.

The leadership of the rest of the world understands that the Trump Deplorable Trade Policy cannot even achieve the goal of more jobs sought by the Deplorables because it has no teeth. The only way to significantly alter the trade deficit is to get Americans to quit buying stuff made elsewhere or to put up tariff walls both of which would disrupt the ability of the poor and middle-class to afford things they purchase, most significantly things like clothing, toys, appliances, electronics, even food.

The question Americans have to ask is the Trump Administration aggressively pursuing Bannon's war or a Pacific Americas Prosperity Neighborhood. An Asia Times headline recently asked Are US naval assertions in the South China Sea necessary? noting "US freedom of navigation operations in the Spratly Islands are pre-emptive challenges to China's potential claims and thus are beyond normal international practice." The article clearly explains why the awareness of  Bannon's "let's get into a war with China over the South China Sea" policy makes Asian's nervous.

It should be making all Americans nervous also. The multilateral free trade movement which could create a Pacific Americas Prosperity Neighborhood is an alternative to bilateral aggression and war. Smart trade economics is an alternative to war. The Trump Deplorable Trade Policy (TDTP) is not only not smart trade economics, it is a previously-abandoned-20th-Century-formula-for-causing-wars.

Remembering The Nixon China Surprise

As mentioned at the beginning of this post, forty-five years ago, in 1972, President Richard Nixon made a historic trip to China.

For 23 years, Americans had been isolated from China by the U.S. government. As explained in the Wikipedia entry on Nixon's trip: "The American ruling class was concerned that communists might dominate schools or labor unions."

At the time, Nixon's trip seemed almost shocking because as the 1952 vice-presidential candidate on the Eisenhower ticket his strong anti-communist stance was important in garnering votes.

As noted in another Wikipedia entry on the trip: "Because Nixon had an undisputed reputation of being a staunch anti-Communist, he was largely immune to any criticism of being 'soft on Communism' by figures on the right of American politics."

Per Wikipedia: "'Nixon going to China' has since become a metaphor for an unexpected or uncharacteristic action by a politician."

When one considers Trump's campaign bluster against trade with China, the actual details of his trip to China seem almost as surprising as Nixon's, except the surprise is the level of Trump's failure to protect the interest of Americans other than corporation executives like those who went on to China with him.

What was troubling during the 2016 campaign was Trump's opposition to the Trans-Pacific Partnership (TPP) trade agreement which resulted in what was to be its defeat.

The TPP was intended to counter China's growing dominance in trade among Pacific nations. Trump further bolstered that Chinese dominance on his trip and is isolating the United States from some of its most important allies in the Pacific.

Of course, in 1972 Nixon had Henry Kissinger as his National Security Adviser organizing his China trip. Prior to becoming National Security Advisor Kissinger was director of the Harvard Defense Studies Program and the Harvard International Seminar starting in 1951.

As reported in September, Trump had Rex Tillerson as his Secretary of State organizing his China trip. Prior to becoming Secretary of State Tillerson was Exxon/Mobil chairman and CEO. Tillerson joined Exxon Company USA in 1975 as a production engineer.