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The Trump era: Implications for Pakistan

Yousaf Rafiq
There seemed, for the briefest of windows, that the seriousness of real-time decision making in the Oval office would introduce a measure of sobriety to the extreme conservatism that drove Donald Trump’s campaign. But such thoughts went out the window practically before he had finished his inaugural speech. At home he moved fast to rein in Obamacare; ahead of ‘scrapping it off’, as promised, ‘altogether’. And, of course, he’s already beefed up screening for Muslims moving into the United States. On the foreign policy front, he’s very quickly taken up the Mexican border wall — to the extent of triggering unprecedented diplomatic friction with the Mexican leadership in his first week in office. Even more chillingly, he’s ordered an overhaul of NAFTA, the North American Free Trade Agreement that Bill Clinton erected in 1994, and which has formed the basis of continental trade over the last two decades. Far away in the Middle East, plans of shifting the US embassy in Israel from Tel Aviv to Jerusalem, one of the most controversial of his campaign trail promises, seem to be picking up momentum. Energised by the prospect with smooth relations with Washington once again, Netanyahu is ordering acre upon acre of settlements on stolen Palestinian land. Next, foreign policy pundits are expecting the guns to be aimed at China and NATO, though for different reasons.So much has already become reality in the few days that Donald Trump has become US president. But should all this have been so surprising? International capital markets, which are usually the first reliable gauge of direction in the modern world, have been spot on in calling Trump’s impact. Just after the election, when that brief window of reason seemed to appear, the dollar spiked as a sign of confidence in the election. Remember the markets were first rattled when the result was announced. But then saw a method in the madness of the new president elect, and postured for a manufacturing bonanza, higher interest rates, stronger dollar, and overall robust economic expansion. But as soon as the president began his speech and hinted more strongly towards trade protectionism and diplomatic confrontation, the dollar retreated and the markets began factoring in contraction instead. Trump’s reasoning is dictated by the cold reality of the business mind; one that equates decisions with cost-benefit analyses. The Mexican wall has to be erected because illegal immigration is more costly than beneficial. Nafta must be scrapped because it allows weaker countries to reap benefits of America’s economic behemoth. NATO needs to be revised because it sucks in more money from America than it brings benefits or security.There are important lessons in these early days for Pakistan. Since before the Obama presidency we have been stone-walling Washington on some of the same questions. The outgoing president said his most difficult times in office came when negotiating with the Pakistanis, because we would just repeat the same answers year after year without quantifying much. Recently the Republicans have been a little unhappier than usual. In Obama’s last year the Republican dominated Congress stopped Pakistan’s F16 subsidy, blocked Coalition Support Funds (CSF) — with the potential to affect our own war effort — and even debated in the House whether Pakistan was a friend or foe. Under the Trump administration, Islamabad should prepare itself for very stiff questions and answers. We will now have to be very clear on issues like the Afghan Taliban, the Haqqani Network, and the depth and extent of our counter insurgency and counter terrorism struggle. Relations with Washington have been deteriorating for a while.

And with much of the neighbourhood also hostile towards Pakistan, it needs to keep the superpower happy.

Plus there’s the economy to consider. The dropping dollar will bolster the rupee, but that will hardly do anybody any good save Dar sb in the House. That is because oil has begun rebounding; and that is why inflation is steadily on the rise back home. Also, with IMF’s Extended Fund Facility having run out last year, the deficit is coming under pressure as so often. And this being election campaign year, there’s be that added pressure on the exchequer to complete those highways and power plants in time to win votes for the election. That, as always, means the government will turn to the local money market to borrow again, crowding out private investment in the process.

Unfortunately, though, the Pakistani government — with all its hooks and levers — is engaged full-time in the fight concerning the prime minister’s personal family’s ambiguous financial dealings. All senior ministers and all-important party members are concentrating mostly on the case, which has nothing to do with governance or the government. And even new realities and a changing world have not impressed the need of a foreign minister upon the prime minister.

It would be unwise, in the present setting, to sit comfortably thinking CPEC will help us just roll through all our troubles. If anything, the Chinese economy will likely feel the protectionist heat over the coming years, perhaps affecting its own ability to make giant neighbourly investments in the immediate future. And with Washington intending to come down hard on Beijing for a whole host of reasons, the politics might affect us adversely also. That is all the more reason to pull our socks up and get our own house in order. The way things stand, Pakistan has neither the economic resilience, nor the regional clout, nor for that matter the international outreach, to secure its interests in an increasingly hostile new world order.

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