Bitter reality check for US, Israel

IIPM Mumbai Campus

Freedom lies behind a door, closed shut It can only be knocked down with a bleeding fist- Egyptian Poet Ahmad Shawqi (1869-1932)

After seeing US and Israel dithering over the mass uprising in Egypt, one can't help but recall the days leading to the Iranian Revolution. The cables sent by the American and other western Embassies in Tehran to their respective capitals in those days make a humorous read. Phrases like “Epitome of stability”, “Island of Stability”, “Rock solid support”, etc kept the intelligence bosses napping as Ayatollah Khomeini pulled the rug beneath the despot.

Similarly, the comments coming from intelligence bosses at Washington and Tel Aviv prior to the Egyptian uprising were peppered with similar phrases. Noted Israeli analyst Gideon Levy recounts how Israeli intelligence officers, along with their alleged best brain on Egypt, Benjamin Ben-Eliezer, were briefing the country's top bosses that “Egypt was still in our hand” and how "everything is under control". They were under the impression that Cairo was not Tunis and that Mubarak was too strong to be unseated. To give credibility to his report, Ben-Eliezer also maintained that he was in regular touch with his Egyptian counterparts and they were assured that everything was under control.

The stark similarity clearly indicates how less Israeli and western agencies have learnt about the way people act and react.

“We have become tangential in the region. I'll say that US policy in the Middle East is not on purpose evil. The targets are novel. But the problem is, like an old man, the US' complete reference system is dispiritedly obsolete and no longer holds any meaning,” said Robert Grenier, a CIA veteran in the region with over three decades of experience, to TSI.

On the other hand, when Mubarak appointed intelligence chief Omar Suleiman as his deputy, he was essentially playing his last ace in the kitty. Suleiman suits well to both Israelis and Americans. Any kindergarten student can tell that Suleiman, for all practical purposes, had no hold on the Egyptian streets. So why was he chosen? Well, highly placed sources close to this correspondent believe that he was zeroed in on because nobody in Egypt — not even Mubarak himself — knows the men in olive green fatigues better than him. Suleiman, as it turns out, has spent his career keeping officers in line, and on their toe. And if sources are to be believed, the guy knows the profile and history of every single officer in the Egyptian Army by heart and can predict their loyalty or the lack of it by mere sniffing. Naturally, he is going to be Washington's Man Friday in Cairo. And the first job he is expected to do is to make the security apparatus, which has evaporated since last Friday evening, fall in line.

In fact, the most interesting role in this entire episode has been played by the Egyptian Army and even the police. Hosni Mubarak was a man in uniform till he decided to enjoy further largesses. However, even after taking on the mantle of a dictator, he always made sure that his officers got duly rewarded in cash and kind. However, as is the way of the world, there exists no gratitude in politics.

Another veteran CIA man of the region Robert Baer tells TSI, “The forces, as well as the police, has realised that this a mass protest where people from all classes and religions are participating. It is not like the past when they were asked to run through a rag-tag group of agitators or fundamentalists. They thus realised that it will be insane and harmful to their health if they are perceived to be siding with a regime that itself does not know whether it will see the next sunrise or not.”

Somewhere in between, Western capitals are desperately praying that the uprising will choose Mohamed ElBaradei, former head of the International Atomic Energy Agency, as its leader. In fact, they are doing more than merely praying. One needs to just monitor the shifting (and often conflicting) positions and tone taken by CNN and BBC in the past week to understand this larger game. The only problem is that ElBaradei holds far less sway over the Egyptian population than the Western powers have over him.

Theoretically, it is possible that in any interim government dominated by the men in olive green, ElBaradei will act as a straw man. Generals know that he does not have a support base worth a dime and such men are risk free. But his role will finish then and there. Because after the interim government is set up, the elections will come and as much as you might like him, ElBaradei is bound to cut a sorry figure there.

“The likely winner of truly free polls would be the Muslim Brotherhood. They are not as radical as the Islamists. But the first thing they have promised to do if they win power is to hold a referendum on Egypt's diplomatic relations with Israel. And most Egyptians would vote to cancel it,” says Gwynne Dyer, an Arab world watcher based in London whose focus is the modus operandi of the Brotherhood.

Under the circumstances, there is also a space for the rise of the secular Left in the region, the death of which brought radical Islam to the forefront. One can be sure that Leftist voices in the region would be gearing up to act as a balancing force. After all, Mao himself said, “There is great chaos under heaven – the situation is excellent.”

As for the Americans and Israelis, they must understand that it is not enough to have a smattering of embassies in line and intelligence bosses in the pocket to be accepted in West Asia. It is also essential that one invests in goodwill.

In the context, I can not resist the temptation to use the social media joke started by the celebrated Arab-American writer and a friend of mine, Ismail Khalidi. He tweeted, #US and #Israel change relationship status with #Egypt to “It's complicated” on Facebook. #Lebanon, #Syria & #Palestine 'Like' this.

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In retrospect Obama should realise that his protectionist policies could boomerang on the US if other nations decide to follow suit

November 2008: the world, and most specifically Asians, greeted Barack Obama's victory with high hopes expecting that a Black President would engage Asia in dialogue instead of taking unilateral decisions. As the world was still twisting in agony from turbulent and a never-ending financial crisis, many hoped that Obama would tread the free economic market policy path. However, there were sceptics who expressed that the crowing of Obama would bring protectionist measures to the United States. They feared that Obama with his isolationist and inward-looking mindset would be forced to throw in the towel and raise the barriers of US protectionism, which would eventually hurt economies. The sceptics were perhaps as true then as they are today. With congressional elections due, the US and its key politicians as well as policy-makers are inadvertently preparing the ground for a bout of protectionism.

Sample this: "For years, our tax code has actually given billions of dollars in tax breaks that encourages companies to create jobs and profits in other countries... I want to change that." Well, this is US President Obama's economic policy speech, an obvious case of potential protectionism, wherein he clearly advocates giving tax breaks to companies that create jobs in America and not to those who create jobs overseas. If you term the above a political gimmick of a politician merely trying to court voters, do spare a second thought and consider these new developments: the United Steel workers union has filed a 5,000-page legal case with the US administration accusing China of subsidising exports of wind turbines, solar panels, nuclear power plant and other clean energy equipment. There is a controversial legislation to increase fees for the visas in the H1B and L1 categories from $320 to $2,320 and from $320 to $2,570 respectively (hurting India's IT sector as the bill names Indian firms Wipro, Tata, Infosys and Satyam). Above this, the US commerce department's announcement to hike import duty rates from 43 per cent to 289 per cent on Chinese steel wires and import tariffs on Chinese tyres (35 per cent in the first year, 30 per cent in the second year and 25 per cent in the third year) further inflates protectionism. Faced with high unemployment (the Bureau of Labour Statistics puts the unemployment rate at 9.6 per cent and states that 14.8 million people were essentially unemployed in September, 2010) and other economic woes (the national debt is $13.6 trillion and is expected to increase to $15 trillion by 2015), the protectionist measures as adopted by the US are attempts to make scapegoats of the developing countries, including India.

But the US fails to realise that the unilateral approach would worsen the existing economic environment if deficit countries too resort to protectionism to deal with their trade problem – the move will lead to ruin and not to prosperity. Protectionism – ( for the sake of clarity, is defined as economic policy of restraining trade between nations through methods such as tariffs on imported goods, restrictive quotas et al designed to discourage imports and prevent foreign takeover of local markets and companies) even for the sake of national economic survival has inevitable harsh effects on tit-for-tat protectionism. This was very much evident when, in a joint statement, French President Nicolas Sarkozy and German Chancellor Angela Merkel asked the US to "reject the temptations of protectionism." This remark by the European Union, China's censorship of Internet companies such as Google Inc and its unwillingness to allow its currency to appreciate, is in fact a reply to the US' protectionist measures.

Obama's rhetoric towards outsourcing has been well-known since his campaigning days. A few so-called trade pundits explained that it was a campaign tactic and his attitude would certainly change (if not take a U-turn) when he actually assumes office and gets a first hand experience on the real functioning of foreign economic policies. But things have been quite to the contrary. Obama has been vehemently explicit in keeping investment at home and saving American jobs; in a bid to restore confidence he has promised to create 3.5-4.1 million new jobs. At this juncture one would ponder as to how would the President create new avenues for jobs. But as a well-thought strategy, Obama's mantra was against outsourcing jobs to Asia, thereby spelling bad news for the Business process outsourcing (BPO) and information technology sectors. The negative implications of such protectionist measures have had a significant effect on India, Philippines and other countries. The US' protectionist brunt has been borne by relatively more competitive manufacturing centres like China and Vietnam. Surely, India, Philippines, China, Vietnam and other low-cost providers of services and producers of goods in the Asian region would be hurt temporarily given the mutation that the world's largest economic geography is undergoing. The increasingly protectionist measures would undoubtedly redirect trade flows of the Asian countries but will under no circumstance eliminate them. In a positive perspective, exporters in Asia and specifically India, would emerge stronger by the time the US puts an end to the unilateral protectionist approach. Even India and other Asian countries would learn the art and science of directing their efforts to lower their dependence on the US market by looking for consumers elsewhere.

India, which accounts for approximately 50 per cent of the global outsourcing market, has become the world's back office as western firms set up their call centres. However, number crunching and software development outlets to cut costs, have reasons to worry. Considering the fact that the US contributes to about 70 per cent of the India's outsourcing sector's billing (that is close to 5 per cent of India's total economic output), the protectionist approach adopted by the US (which includes an end to tax break for companies which ship jobs overseas and increasing professional visa fees) is bound to reflect on the balance sheet. The Indian viewpoint as expressed by Finance Minister Pranab Mukherjee, in his meeting with the US Secretary of State Hillary Clinton, was that the US protectionism is regressive in nature and would not serve to strengthen the relationship between the two nations. The Indian IT industry should thank the Senate Republicans who blocked the passage of the anti-outsourcing bill, dealing a blow to President Obama's unilateral protectionist measures.

Protectionism ultimately hits the protectionist. Marc Faber warns, "For the US economy, rising protectionism would also mean higher inflation rates, as well as huge competitive disadvantage on the global markets for US corporations." It's time that the US pick a lesson or two from the warnings of the man who is known for his uncanny predictions.

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