Terror, Trump, Trade, and NATO

Just prior to the Brussels terror attack, Donald Trump questioned the value of the NATO alliance and the cost of U.S. participation.

He clarified his remarks, saying he didn’t want to withdraw from the alliance but was troubled by the cost of U.S. involvement—especially considering our burgeoning national debt of $19 trillion. The debt has roughly doubled since the beginning of the Obama administration, and is completely unsustainable at its current rate of growth.

Trump’s position was immediately attacked by Ted “carpet bomb ‘em” Cruz and condemned by foreign and security policy experts, some of whom brought us the debacles of the Iraq/Afghanistan War, Libya, etc. — the modern “make-the-world-safe-for-democracy,” nation-building, permanent-war, expert-for-hire crowd. These folks earn a living as national security sherpas, inhabiting the nation’s think tanks, defense contractors, and consultancies.

In fact, NATO has foundered since the end of the Cold War, looking for a clear mission.

After all, it was established in the immediate post-WWII period precisely to prevent a Soviet invasion of Europe. Once the threat disappeared with the demise of the Soviet Union, NATO lost its original raison d’etre. Additionally, at the time of NATO’s founding, the U.S. military and economy, via our vast industrial base, reigned unchallenged. It turns out that NATO’s main mission — not without controversy in the U.S., Europe, and Russia — has been to expand greatly its member countries in Eastern Europe up to the Russian border, and engage in attacks on Serbia and Libya, countries that did not threaten or attack it.

Yes, things have changed — as Trump points out. No longer the economic powerhouse of yore, the U.S. now runs trade deficits of $500 billion a year, instead of the post-war surpluses. These deficits stunt our economic growth and diminish our industrial base, and we borrow from China and others to finance them. Most of Trump’s security policy critics pay little attention to the details of paying for a large, globally intervening military.

Many of them are also zealous adherents of free-trade orthodoxy, which means that they “believe” — counter to the empirical evidence — that free trade deals are good for the American economy and its working men and women (whose sons and daughters fight their endless wars). The fact that we have stagnant wages for two generations, millions absent from the workforce, 60,000 shuttered manufacturing establishments, and 5 million lost manufacturing jobs since the late 1990s is of little interest to them.

In any case, all problems with free trade can be explained away by economists whose models assume an ideal world of full employment and fixed exchange rates, or by pundits citing misleading corporate/Wall Street talking points. In this unreal world, cyber hacking, forced technology transfer, IP theft, and trade cheating, such as currency manipulation and massive foreign industrial subsidies, are small issues that do not affect the bigger picture. Or, they are to be tolerated by the American middle and working classes for the sake of keeping alliances and putative national security priorities intact — while the country slowly implodes economically.

Trump, at large political risk, has invaded this closed, self-reinforcing circle and is doing the country a huge service in questioning the basic national security, economic, and trade assumptions that undergird the conventional wisdom and current world order, such as it is, founded in the late 1940s by a victorious America. With a businessman’s sharp eye for balance sheets and assets, Trump sees a nation with a much diminished industrial base, crumbling infrastructure, 40 plus million on food stamps, stagnant wages, millions not participating in the workforce, massive trade deficits, and unsustainable budget deficits and debt.

What of NATO itself, which the talking heads say we must rush to embrace more closely in the wake of the Brussels terror attacks? What shape is the alliance in? What is there to work with?

Only six out of NATO’s 28 members maintain defense budgets at the required 2 percent of GDP, with U.S. defense spending (3.6 percent of GDP) topping the list. Belgium is near the bottom of the list at 0.9 percent. (Is it too indelicate at this time to ask if this is part of the problem?) And the other five large NATO economies? Powerhouse Germany — 1.2 percent of GDP. The UK — 2.1 percent. France — 1.8 percent. Italy — 1.0 percent. Canada — 1.0 percent.

It is instructive to note that the combined GDP of other NATO countries is roughly $16.8 trillion, 97 percent of the U.S. GDP of $17.3 trillion. We are not talking about impoverished countries here. With a projected defense budget of $578 billion in 2016, the U.S. taxpayer in fact carries roughly two-thirds of total NATO defense spending, or a little less than twice the combined total of all other alliance members combined.

And how about our trade with NATO countries? Do we run a surplus sufficient to allow us to take on the defense spending burden? No. We ran an overall $121 billion goods trade deficit with the NATO countries in 2015, running surpluses with only five of the 27 members. Our goods trade deficits: Germany $74 billion; Italy $27.7 billion; France $17.5 billion; Canada $14.8 billion; Denmark $5.5 billion, Hungary $3.9 billion; Spain $3.8 billion; Portugal $2.3 billion; Poland $1.8 billion; Slovakia $1.8 billion; Romania $1.4 billion; UK $1.4 billion; Norway $1.1 billion; and so on.

So is Donald Trump really naive, as Ted Cruz called him, in suggesting that the U.S. examine its relationships with NATO and other treaty allies? (Japan, Korea, and Taiwan come immediately to mind when considering expensive security commitments and trade deficits.) Is it fundamentally misguided to reorder 70-year-old defense, trade, and economic priorities?

The political/pundit/consultant class thinks that they are going to run the world just because they have since 1945. But they handed out military commitments that we couldn’t afford and ran a trade policy that allowed our treaty partners to suck the U.S. dry. Sorry, allies, you can’t have it both ways. You got our money, now you have to pay for your own defense. Or maybe it is wiser to ‘stay the course’ and collapse under the weight of our security commitments and a global trading system that our trading partners use to target and decimate our economy.

Kevin Kearns is president of the U.S. Business & Industry Council, a national business organization advocating for domestic U.S. manufacturers since 1933.