Free riding on defense by NATO and other allies is not the Trump Administration’s biggest problem.
The largest exploiter of the US and allies are not only not paying anything at all toward the common defense, but, like the Beijing PRC or North Korean regime, are actively undermining and destroying the international system while taking full advantage of it.
During the cold war, diametrically opposite visions of political and economic order created two poles with very little trade or interaction between them beside military and political rivalry. Today, that dimension is replaced with a rivalry closer to geopolitical competition prior to WWI except trade is front and center of every relationship.
Today’s relationship with PRC is very similar to Germany before WWI.
Recall that pre War Germany had the second largest merchant marine fleet after England, colonies around the world, Germans were the largest ethnic minority in the US and many other countries, and Germans dominated many fields like chemicals and heavy industry and was one of the largest trading nations in the world.
World War I resulted in not only the loss of colonies, the ending of trade, but also the seizure of most German owned assets abroad.
Post cold-war, even sanctioned regimes like Russia, North Korea and formerly Iran are partially (never completely) barred from the international trading system.
The PRC is at once the largest trading partner of the US, and at the same time, making full use of the wealth generated from trade, technologies, knowhow, and access to the US led global system to forward their cause.
Minimal sanctions (e.g. ban on arms sales dating from Tiananmen) on the People’s Republic of China do not begin to do justice to the large scale damage and disruption caused by the Beijing regime — or even cause anything but a minor blip in the massive benefits PRC derive from trade.
Meanwhile, PRC is actively undermining the international system with their “sea grab” and expansive claims from “unequal treaties”; and particularly, actively creating expensive to counter security problems like military aid (including transfers of WMDs) and assistance to North Korea, Pakistan, Iran, etc. that is creating existential threats to US and allies and costing substantial resources to counter.
The Beijing regime, in particular, is the largest beneficiary of North Korea’s rapidly advancement in nuclear and missile capabilities — giving Beijing exceptional leverage to demand substantial concessions from the US and allies in other policy areas like trade to pretend to “solve” a problem Beijing created.
Presently, policy instrument “sticks” like sanctions, either narrowly targeted at particular individuals, firms, or broadly targeted at regimes e.g. by barring them from the world financial system, are too blunt an instrument and have little or no positive impact on Bejing’s behavior.
Sanctions either do not offer enough (or too much) of a disincentive.
To regimes like North Korea, used to hardships, the inducements of sanctions is nowhere near enough. Likewise, it did not substantially change the behavior of Cuba’s regime, and (e.g. arms sanctions) had the perverse impact of facilitating the PRC regime developing their own indigenous capabilities that is rapidly catching up with the best western technologies.
Border adjustment taxes, however, offer the chance for a much more finely calibrated instrument that can be more closely tailored to the problem at hand.
Moreover, if properly administered it can be rapidly changed as circumstances dictate.
It may, in fact, be just the tool that US policy makers have been looking for to solve a wide range of issues ranging from predatory and unfair trade practices of the PRC to the regime’s willful support of North Korea’s WMD programs.
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