AT PENPOINT
The Madness Theory is being evolved to explain Donald Trump’s foreign policy. It does not postulate that he is mad, which many of his critics accuse him of being, but that he simply behaves as if he is mad, being unpredictable and illogical in his foreign policy decisions. However, two threads have been constant in his foreign policy: it is more transactional than ever, and it focuses on economics to the exclusion of politics.
If anything, Pakistan has benefited from the Madness Theory, for the transactionalism component worked against India. For some time, the USA had been priming India to act as its regional policeman, to be its regional counterweight against China. The main symbols of that were its civilian nuclear agreement with the USA, giving it access to the Nuclear Suppliers Group, and its membership of the Quad, a military alliance just short of an alliance, alongside the USA itself, Japan and Australia. Quad was crucial, because it was a ‘security dialogue’ which was supposed to be the USA’s main tool in the Indo-Pacific region against China.
The clash with Pakistan showed that it could not handle Pakistan, let alone China. The USA could either prop up India further, by supplying it with its latest technology, such as stealth aircraft and air defence systems, or cut it loose.
There were multiple disadvantages to giving India the technology. These are two areas where the USA has an edge over other military powers. Giving India those technologies would create a demand among other allied powers for the same treatment. Another is that India might mess up another confrontation with Pakistan. It would not look good for the PAF, using Chinese technology, to down IAF stealth fighters or overcome US-supplied air defence systems. The deterrent value of US armaments in the Taiwan theatre would go down immediately.
It should be noted that India has already decided to make its own stealth aircraft, while Pakistan is buying the Chinese stealth fighter, the F35, with induction slated for as early as next month. In other words, India does not have to be kept close by giving it any advantage in trade negotiations.
Well, nor does Pakistan actually, particularly as it has shown a distressing loyalty to China, as well as to Iran. However, Pakistan showed a readiness to do what Trump so elegantly described at a White House dinner as ‘kissing my ass’. It seems that part of the whole tariff announcement and negotiation process was to get a show of respect. Why Trump needs that show of respect should be left to psychologists, but it did mean that Pakistan had to respond by such equally crude gestures as nominating him for the Nobel Peace Prize.
The result has been that Pakistani tariffs are lower than India’s. India’s do show some of the tangles Trump is getting into, because India is being penalized for non-economic reasons, mainly its Russian alliance. That means Pakistan could find itself the target of Trump’s ire, especially because it is refusing to abandon Iran.
It should be noted that Pakistan has acquiesced in what amounts to abandonment of the World Tariff Organization mechanism. Trade is no longer to be governed by a rules-based order, but the decisions of a single player. There is nothing to stop the European Union, Russia, Australia or Upper Volta from imposing tariffs according to their will. The only force to stop them will be the market. There, there is a disconnect: the market does not set tariffs, governments do. A rules-based mechanism, like the WTO, was needed for precisely that reason, so that a mechanism existed to enforce rules on the state imposing them.
It was perhaps inevitable that the deal was concluded in haste. After all, while the USA is Pakistan’s largest surplus-trade partner, its $3 billion surplus is the 33rd highest of the USA’s trade partners. China, on the other hand, is the highest, with a $295 billion surplus. Therefore, with the deadline looming so close, and Pakistan not exactly a high priority, whatever promises may have been made arranging the ceasefire with India, a deal had to be struck quickly. However, the deal is not necessarily a good one. Combined with Trump’s now-legendary refusal to be bound by his word, it should be seen more as a work in progress than written in stone.
That said, the prospect of a renewed US effort in oil exploration is to be welcomed. A previous effort only recently went down, so Trump clearly knows more than has emerged. Again, there seem to be geopolitical considerations, for the situation will develop in a number of ways. It puts US oil company personnel in Balochistan, presumably competing with Iran. Further, the personnel will also be in the same area as Chinese nationals working for Chinese companies. It is interesting that there will be a comparatively large influx of Americans in a province with Gwadar as its main port.
Trump also tweeted about the possibility that Pakistan might even end up exporting oil to Iran. That harks back to the notion, promoted by the USA among others, that the path to normalisation with India is increased trade. Indeed, that was the idea between the IPI pipeline, which would have taken Iranian gas to India through Pakistan. The project has stuttered for two reasons: US sanctions have made Pakistan reluctant, while India has not got any inclination to put its energy security in Pakistani hands. That would apply with renewed force to oil exports. Not only would India have put its energy security in Pakistani hands, but it would be paying for the oil, much more than the transit payments for the gas. Trump is obviously getting ahead of himself, but Pakistan may indeed find another pressure on it if the Americans do strike oil.
Oil seems tied up with the deal. One of the steps Pakistan has taken to reduce its deficit is to import crude from the USA. It might seem revenue neutral, because US crude will not be more expensive, and whatever the price differential with the import it substitutes for will be evened out in the refining process. However, there will be a higher transport cost, which would translate into about Rs.50 per litre in the petrol price.
Not insurmountable for the consumers, but more of a difficulty for the government is the oil facility allowed by Saudi Arabia, which acts as a loan, and which is now $1.2 billion. (This is in addition to the $3 billion Saudi deposit with the State Bank). Will the USA accept deferred payments.
Both Trump and Pakistani PM Shehbaz Sharif were deal-makers as businessmen. Trump was in real estate, while Shehbaz had the key dea;-making assignment of acquiring the scrap abroad which went into the Ittefaq steel mills after being melted.The problem will arise when Trump feels there could have been a better deal. Then he will try to turn the screws on Pakistan to get a better deal.
Pakistan has been anxious to get a deal, and the stock exchange reflected that, with a thousand-point index rise on the news of a dea;. But the penney will drop, and Shehbaz will realize that the USA has done nothing about the Indus Waters Treaty, let alone the Kashmir issue. Does either have any place in a trade negotiation? Apparently not, but the IWT’s fate will determine whether Pakistan retains wheat autarky and remains a rice exporter. It could end up importing grain from the USA, after all.
It was perhaps inevitable that the deal was concluded in haste. After all, while the USA is Pakistan’s largest surplus-trade partner, its $3 billion surplus is the 33rd highest of the USA’s trade partners. China, on the other hand, is the highest, with a $295 billion surplus. Therefore, with the deadline looming so close, and Pakistan not exactly a high priority, whatever promises may have been made arranging the ceasefire with India, a deal had to be struck quickly. However, the deal is not necessarily a good one. Combined with Trump’s now-legendary refusal to be bound by his word, it should be seen more as a work in progress than written in stone.
