The Trump Organization recently sent a letter to the president of Panama in regards to a legal dispute over a Trump-branded property. The letter listed some putative irregularities in the legal proceedings and asked the President of Panama to intervene lest his government be held responsible for denying justice to the Trump Organization. The threat, made quite explicit, is that the Trump Organization would then haul Panama up in front of a panel at the International Center for the Settlement of Investment Disputes (ICSID).
Vox wrote the following: “Even if Varela decides to do nothing about this specific dispute, he could now feel obligated to curry favor with Trump in other ways to make up for the issue and keep US-Panamanian relations stable. That could lead to his government approving specific policies to placate Trump or perhaps covertly acting to ensure that the Trump Organization secures favorable business deals in Panama in the future.”
In other words, Vox and others fear that President Trump’s personal connection to a private venture means that American foreign policy is being perverted to produce private gain.
So is that what is happening? Is this a case of the Trump Organization using the fact that its principal is also President of the United States to muscle a small country for private gain? Well, to know that you need to answer three questions:
- Would the Trump Organization have sent the letter if Donald Trump weren’t President of the United States?
- Will the Panamanian executive react differently to the letter than it would have if Donald Trump weren’t President of the United States?
- Will the United States government take actions against Panama that it would not have taken had Donald Trump not been President of the United States?
The answer to the first question is “yes.” As a colleague of mine at Brookings wrote:
Details of the case a bit unclear, but foreign investors complaining they've been mistreated in local courts (and that this reflects poorly on investment climate) is pretty common... More generally, aggrieved investors will complain to anyone who will listen
— geoffrey gertz (@geoffreygertz) April 9, 2018
The answer to the second question so far is, “We don’t know yet.” But probably not. President Varela does not have a lot of power to intervene and the Trump Organization does not have a particularly good case to bring to ICSID.
Which brings us to the third question. Will the Trump administration use the vasty power of the United States to twist Panama’s arms? To which the right answer is: probably, but what else is new? I wrote an entire book about the rather egregious ways American administrations of all ideological stripes twisted the arms of small countries in fights with American investors. The Obama Administration did that to Argentina when its government tried to ignore an ICSID decision. (Obama later went after Argentina on behalf of U.S. creditors.) And Geoffrey Gertz has found that American investors still rely on official U.S. support to get their way with foreign governments. If the administration leans on Panama to aid the Trump Organization it would be following a long-standing American tradition.
To be honest, the Trump Administration is more likely to fail at getting its way than earlier administrations. First, the current President speaks so loudly and is so unpopular that it would be hard for any foreign government to easily acquiesce. Second, the current President is unpopular at home and actions that might have slid under the radar will get much play.
So stop worrying that Trump corruption will pervert American foreign policy or create some sort of American empire run for the benefit of an investing class. That ship sailed in the 1890s.
What you should worry about is not Trump leaning on foreigners to benefit his private businesses. You should worry about foreigners favoring Trump’s private businesses to benefit their interests. There is evidence that the Philippine government is doing exactly that and we all know about the Russians.
I doubt that President Varela will do much in this particular case (not least because he can’t do much) but others in other countries will. The tail will wag the dog.
What a clear-eyed story! It's so sad that I can't get this kind of thing from the mainstream "misledia" any more.
But I'm glad to have found your site.
Saludos,
Kim G
Redding, CA
Where we are tired of both Dems and Republicans foaming at the mouth.
Posted by: Kim G | June 24, 2018 at 08:12 PM