U.S. 2016 Divides Advanced and Emerging Economies

 

Since 2008, Europe has been swept by Brussels’s misguided fiscal austerity and the European Central Bank’s (ECB) monetary ‘Japanization,’ a huge immigration crisis, the impending Brexit, and anxiety about Italy’s impending constitutional referendum – to mention a few.

 

Amid its malaise, Brussels sees former Secretary of State Hillary Clinton as America’s only viable president. Conversely, a Trump White House would boost the Euro-skeptic oppositions in the EU core economies, which the Euro federalists see as the last nail in the coffin for the EU.

 

Despite his failure to end wars in the Middle East and South Asia, eager cooperation with Pentagon, and penchant for drone strikes in multiple nations, President Obama remains popular in Brussels. After the Bush years, a weak but pro-EU U.S. president is preferable to an assertive but anti-EU president. Nevertheless, Obama’s Transatlantic Trade and Investment Partnership (TTIP) is struggling with even greater challenges than its counterpart, the Trans-Pacific Partnership (TPP) in Asia.

 

According to Pew Research, Clinton’s ratings remain solid but lower than Obama’s in Europe, as she inspires confidence but little enthusiasm. Her hawkish stances are more popular in Eastern Europe. In turn, nine out of ten Europeans have no confidence in Trump, who unlike Clinton, would take a tougher stance on U.S.-EU trade and investment, cooperate with Putin, and possibly renegotiate Washington’s North Atlantic Treaty Organization (NATO).

 

Due to monetary divergence between the U.S. and the EU, the former will hike rates by the year-end but the latter only in the late 2010s. As a result, the next U.S. president must cope with increasing transatlantic pressures as part of Europe is likely to take another look at China and emerging Asia.

 

 

Until the early 2010s, most Europeans believed that China was the world’s leading economic power, while the U.S. was on decline. But as Beijing initiated its economic rebalancing, which meant deceleration of growth in the short-term, most Europeans today see the U.S. slightly ahead of China.

 

That view is very different in Japan. Among major advanced economies, Tokyo no longer sees U.S. world leadership as important as it was a decade ago. More than six out of ten Japanese believe that America’s importance has declined. As other advanced economies continue to move closer to monetary exhaustion, Japanese views will become more common outside of Asia.

 

If the TPP were to fail, which is Trump’s explicit objective and Clinton’s nominal goal, Prime Minister Abe’s structural reforms would crumble. That, in turn, would pave way to Japan’s monetary exhaustion sooner rather than later. Worse, Trump’s goal to re-negotiate defense pacts in Asia would undermine the Abe administration’s controversial defense reforms and America’s security hub in Asia.

 

In Abe’s view, Clinton must both win and flip-flop her current view on the TPP, whereas Trump must lose. These are the outcomes he needs to survive politically.

 

 

In China, President Obama’s ratings declined from 2009 to 2013 – in parallel with the U.S. pivot to Asia and the consequent rearmament in the region. But since the pivot has proven economically and strategically weaker than anticipated, Chinese views of Obama have slightly shifted.

 

Nevertheless, Clinton remains less liked in Beijing and among the Chinese. After all, she created Obama’s policy framework for the U.S. pivot. She has also pushed for greater economic, political, and defense rapprochement with Southeast Asia. Finally, from Tibet and Xinjiang to Hong Kong and Taiwan, she has supported liberal interventionism.

 

In India however, Clinton is perceived as an opportunity rather than a threat. In New Delhi, unlike in Europe or in Asia, the Bush era is a matter of nostalgia. Economically, Bush sought greater cooperation with India than the Obama administration. Strategically, the tough stance against “Islamic extremism” was supported by most Indians, particularly Prime Minister Narendra Modi’s conservative Bharatiya Janata Party (BJP). The BJP’s right-wing might actually welcome a Trump presidency.

 

Unlike the Europeans and most Asians, Indians continue to see the U.S. as the most powerful nation in the world. Yet, barely half – fewer than the Chinese – see Obama’s America in favorable terms.  They want greater U.S. assertion and cooperation.

 

Whether the next president is Democratic or Republican, he or she is likely to court New Delhi into a containment alliance, even at the risk of increasing regional tension. While Modi might ideally prefer to hedge his bets between U.S. geopolitics, Russian defense contractors, and Chinese economic cooperation, he prefers an assertive White House.

 

 

Recently, Brazil has been shaken by the worst recession in a century, President Dilma Rousseff’s impeachment, and former President Lula’s ‘corruption’ trial. Yet, key members of the judiciary and prosecutors have a cooperative history with U.S. intelligence and security agencies.

 

Amid the U.S. 2016 campaigns, only Bernie Sanders condemned the Brazilian coup. Obama stayed quiet and Secretary of State Kerry showered support for the corruption-tainted interim President Michael Temer, who according to polls inspires confidence among only 2% of Brazilians, and House Speaker Eduardo Cunha, who spearheaded impeachment proceedings while shuffling away millions of dollars in bribes into Swiss banks. The center-right leader Senator Aoysio Nunes met with the Senate Foreign Relations Committee and attended a luncheon hosted by Albright Stonebridge Group, headed by Clinton’s close confidant Marlene Albright.

 

In Brazil, critics see these moves as typical of Washington’s historical quest for regime changes in Latin America. While Trump’s muscular militarism has little support, Clinton’s liberal interventionism appeals to Brazil’s economic oligarchs, the highly concentrated conservative media (Globo, Abril, Estadão), and the partisan judiciary. Unsurprisingly, Tener’s hardline justice minister has also begun to target Muslim communities preemptively. In a country with hardly any history of Islamic terror, that may prove the right way to ignite such resentment.

 

With Russia, Washington’s views are far more assertive. While confidence in Putin has declined in energy-reliant Europe, more than half of the Chinese believe Putin is doing the right thing in world affairs - and so does the ailing Southern Europe (Greece, Italy), which suffers from Western Europe’s austerity.

 

Russia’s cooperation with the U.S. strengthened during the Bush years, particularly with joint efforts to counter terrorism. In contrast, Obama’s ‘new Cold War’ against Russia has been fueled by a series of U.S.-EU sanctions against Moscow, which contributes to Europe’s stagnation. As a result, Russians’ approval of U.S. leadership has plunged from over 20 percent to an alarming 1 percent.

 

Since Clinton supports further NATO enlargement and renewed anti-Russian sanctions, her credibility in Russia is very low. Russians have also not forgotten that it was Bill Clinton’s administration, which pushed for ‘Big Bang democracy’ in Moscow, that led Russian economy to default under Yeltsin’s weak regime, paving way to pro-U.S. oligarchs. In contrast, Trump’s ratings are high in Russia because he has questioned NATO’s role and supports a more cooperative policy with Russia.

 

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As one of the dirtiest U.S. election races in history is about to climax, it is getting even more debasing. But though the campaign spectacles will fade away in due time, economic and strategic realities will remain ever colder.

 

Irrespective of the U.S. election outcome, most emerging economies are buckling up and bracing for an uncertain, volatile, and disruptive future.