Friday News Roundup — December 7, 2018: Remembering President George H.W. Bush; Trade Uncertainty Roils Markets; “Yellow Vest” Protests Rock France

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Greetings from Washington, D.C., where much of the week has been focused on honoring and remembering the legacy of President George H.W. Bush. It has been an extraordinary series of events, from the military precision and ritual of a state funeral to images of mourning that will not be forgotten — especially former Senator Bob Dole rising from his wheelchair to give his friend, fellow veteran, and sometimes political rival one last salute.

In this week’s roundup, CSPC President & CEO Glenn Nye speaks of the example that “41” provides us in terms of leadership and civility. Dan Mahaffee covers how the uncertainty over trade is weighing on the markets and economic projections. In her final week with us, all-star CSPC intern Katherine Atherton breaks down what is going on with the “gilets jaunes” protests in France. As always, we wrap up with stories that you may have missed.

As always, we appreciate your feedback, so don’t hesitate to contact us at Dan.Mahaffee@thepresidency.org or Michael.Stecher@thepresidency.org.

Remembering President George H.W. Bush

Glenn Nye

Department of Defense Photo

The passing of President George Herbert Walker Bush gives us the opportunity to take a step back from our own political moment and contemplate the achievements of a patriot who dedicated his life to the United States of America. President Bush demonstrated the best elements of American leadership when he managed three simultaneous crises — the collapse of the Soviet Union, German reunification, and the Iraqi invasion of Kuwait — that shaped our age. George Bush articulated a vision for the world he wanted the United States to create when he said, “The foundation of lasting security comes not from tanks, troops, or barbed wire; it is built on shared values and agreements that link free peoples.”

It is hard to summarize the life of a man who did so much. George Bush was a decorated officer in the U.S. Navy, before serving as a Member of the House of Representatives, Ambassador to the United Nations, Envoy to China, Director of the Central Intelligence Agency, and Vice President of the United States. He carried himself with grace and dignity in everything he did, even embracing the man who defeated him for reelection to raise money and awareness for global causes. Considering that his watchword was “prudence,” he accomplished an incredible amount and left an indelible mark on our nation.

Perhaps among the strongest elements of President Bush’s enduring legacy is the lesson of conducting political debate with civility and, while pursuing policies consistent with closely-held beliefs, a commitment to bipartisan cooperation in the best spirit of the nation. His passing is a call to Americans to remember how we can reflect greatness in our willingness to work together to pursue the best shared interests of our country.

An Increasingly Shaky “Trade Truce”

Dan Mahaffee

Wikimedia Commons

Following the G-20 summit, markets were briefly buoyed by the prospect that President Trump and President Xi had reached a 90-day truce on trade to allow further negotiations to proceed. At first, it appeared that with a few concessions granted by the Chinese — such as stricter restrictions on fentanyl exports and increased purchases of agricultural good and natural gas — the U.S. side would hold off on further tariff increases.

However, as market analysts unpacked the deal, the analysis of the deal was less sanguine. In their morning commentary, traders at JP Morgan wrote, “It doesn’t seem like anything was actually agreed to at the dinner and White House officials are contorting themselves into pretzels to reconcile Trump’s tweets (which seem if not completely fabricated then grossly exaggerated) with reality.” Beyond the details of the deal, the fact that the White House placed USTR Robert Lighthizer, a noted trade hawk, on point for the negotiations — combined with silence, until Wednesday, from Beijing as President Xi continued to travel following the G-20 — further roiled the markets’ reaction to the news. Confusion from the White House on whether the truce would begin on December 1st or January 1st did not help the situation.

The markets have also been roiled by the inversion of the bond yield curve — one of the more reliable indicators that a recession may be on the horizon — as well as broader concerns about continued interest rate hikes and signs the global economy is cooling. Despite the concern about global economic health, President Trump has continued to reiterate that he will not shy away from using tariffs to pursue his trade policies.

The idea of a U.S.-China truce was further roiled with the news that Canadian officials had arrested Huawei CFO Meng Wangzhou, who is also the daughter of Huawei Ren Zhengfei. U.S. officials have requested her extradition to the United States. It is believed that these charges are related to Huawei’s violation of international and U.S. sanctions restricting the sale of IT equipment to Iran.

In following the arc of U.S.-China trade tensions, it is worth unpacking the tensions related to the “traditional economy” compared to the “innovation economy.” While the Trump administration has largely focused on the traditional economy — areas such as steel, cars, agricultural goods, etc. — there has also been attention to how China’s government and government-linked companies are seeking to build their dominance in the key technologies of the future — the innovation economy of artificial intelligence, cellular systems, digital technologies, etc.

Huawei, along with ZTE, had long been targeted by U.S. and allied officials regarding sanctions violation, intellectual property theft, and concerns about how Chinese-built IT and telecommunications equipment could be used for espionage or cyber sabotage. It is worth remembering that the Trump administration once had ZTE facing a virtual death sentence — a ban on exports of U.S.-built microelectronics to ZTE — before the administration blinked and reached a deal with Xi Jinping to keep ZTE alive with the payment of a $1 billion fine. Based on the presidential Twitter account, it seems that President Trump sees tariffs are a similar fee for doing business in the United States—never mind the fact that the tariffs are paid by American companies and consumers.

China hopes that a trade truce and concessions related to the “traditional economy” can buy time to further their dominance of the “innovation economy.” If Huawei escapes with a fine, like ZTE, it will show that the U.S. rule of law on trade, intellectual property, and sanctions is for sale.

The gap between the United States and China on the traditional economy is more than two decades in the making — and is unlikely to be solved in 90 days. When it comes to the innovation economy, the challenge is more complex. It’ll require continued pressure on Chinese companies that break the rules, along with a stronger, multilateral, strategy to ensure that the future digital economy is based on open and fair competition, rather than Beijing’s goals for technological superiority.

“Les Gilets Jaunes” and the Future of French Politics

Katherine Atherton

About 50 years after the May 1968 French protests that led France into their fifth and current republic, President Emmanuel Macron faces widespread backlash to his rising taxes on petrol and diesel gasoline. Members of the grassroots movement Gilets Jaunes — the “yellow vests” — have taken to the streets the past three weekends to protest rising taxes on petrol and diesel gasoline, and the cost of living.

With France’s deep history of revolution, this large-scale reaction has shown just how fragile Macron’s presidency is, as the protest transitions into a revolt against the current administration as a whole. The more radical elements of the protesters push for a new form of government — one that would transition the country into a new “sixth republic.”

On November 17th, around 280,000 protesters wore their vests in Paris and major cities across the country to support this grassroots movement. Protesters got their name from the yellow “visibility” vests that French law requires to be carried in every vehicle. The demonstration continued through last weekend, garnering more attention when the protests in Paris turned violent as shops on the Champs-Elysées were smashed and looted. The Arc de Triomphe was also vandalized with various messages, including “We have chopped off heads for less than this,” referring to the death by guillotine of Marie Antoinette and King Louis XVI. Riot police took action with water cannons and tear gas. In the end, more than 130 people were injured, and 3 people died.

The root of the protest was a tax designed to curb greenhouse emissions. The tax increase of 7.6-euro cents ($0.09) per liter on diesel is part of the plan to reduce the French vehicle use, adding to the current fuel prices of more than $6 per US gallon. Another increase of 6.5-euro cents was due in January 2019, but Prime Minister Édouard Philippe said in a press conference on Tuesday that the tax increase is now abandoned in the 2019 budget to allow for public discussion. This tax was supposed to be an important step towards fulfilling their promises of the Paris Agreement by lowering carbon emissions and decreasing the nation’s reliance on cars.

This movement, which organized over social media in October and early November originally drew support from retirees, the self-employed, and artisans. The tax disproportionately hit the suburban and rural working class, as those individuals rely on their cars for business and personal transport. This is in contrast to those who live in Paris and Marseille for example. They don’t typically have cars or frequently drive because of the popularity of public transportation like the metro or bike sharing. The working class that is mainly targeted with this tax is already complaining about their lower purchasing power and struggle to make ends meet.

With a lack of clear leadership, these riots have gotten out of hand, and the true mission of the protests is being lost with each passing day. It has been difficult to establish a leader for the purpose of engaging with officials to ease this “volatile and hard to handle” movement. The yellow vests have been able to gain extraordinary support across political parties, but the elected representatives cannot agree about the future for this movement. A meeting with Prime Minister Édouard Philippe and more moderate members of the Gilets Jaunes was planned for Tuesday. These representatives had to later decline their invitation for “security reasons” because they faced threats from more extreme members of the organization. What began as a protest against the rising tax on gas has included more grievances, ranging from gender inequality to immigration policy.

Macron’s business friendly agenda has reportedly made him appear “arrogant and aloof” to the struggles of the working class. Most taxpayers have seen their bills rise as Macron aims to meet the EU’s 3% deficit target by raising the “contribution sociale généralisée” — a more general social tax that is to include social security levies. These moves question whether he can fulfill campaign promises around expanding pensions and unemployment insurance.

Eliminating this tax from the 2019 budget is the first action of Macron’s since returning from the G-20 summit last weekend. The unrest seems to be driven by deeper factors, with the tax increase being a symptom, rather than a cause, of French social and political malaise. These “yellow vests” reportedly have the support of 72% of the republic, so Macron needs to make a strong gesture to reassure the people of France that he is listening, or he may face a true revolution.

News You May Have Missed

Flawed CIA Communications System Reveals Divides with the Agency

During a stretch from 2009 to 2013, the online system used by the CIA to communicate with its human intelligence sources was compromised, resulting in the capture and execution of CIA sources in Iran and China. Now, while the problem is understood, reporting indicates that the institutional and cultural silos between the CIA’s Directorate of Operations (DO) and Directorate of Science and Technology (DS&T) contributed to the breach of the system and the continued difficulty in finding a replacement method for communicating with human intelligence sources. The latest reporting also suggests that the breach may have had an even greater impact, as the system was also used for communications by the Defense Intelligence Agency and British MI6 in programs carried out in cooperation with the CIA.

Study: 64% of American adults have had a Family Member in Jail or Prison

While the United States is already the proud owner of highest per capita incarceration rate in the world, a study by Cornell University and FWD.us has found that 64% of American adults have had an immediate family member spend at least one night in jail or prison. The study also found that one-in-five Americans have had a parent incarcerated, and African American families were 50% more likely to have an incarcerated family member compared to caucasian families.

British Networks Scrap Brexit Debate

British leaders seem not only unable to find a way forward on Brexit, but also incapable of finding an agreeable format to have Prime Minister Theresa May and Labour Party leader Jeremy Corbyn publicly debate the proposed Brexit agreement that is under fire from nearly every side of British politics. While both the BBC and ITV had sought to host a debate, disagreements on the questioning format and participants were unable to be overcome.

Nigerian President Responds to Accusations of Being a Clone

Following a period of extended illness, Nigerian President Muhammadu Buhari has been forced to respond to a growing clamor that he had in fact passed away and had been replaced by a clone of his from Sudan. Addressing these reports while traveling in Poland for an international summit, the President Buhari stated, “It’s real me, I assure you. I will soon celebrate my 76th birthday and I will still go strong.”

The views expressed by contributors are their own and not the view of CSPC.

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