Recommended Weekend Reads
The New and Growing Threat of Nuclear Weapons, The Challenges of U.S. – Mexican Trade Relations, and Is Bretton Woods Still Relevant?
November 22 - 24, 2024
The New Threat of Nuclear Weapons
Note: With Russian President Vladimir Putin's repeated threats to use nuclear weapons, we thought it important to focus on nuclear weapons policy, how nuclear weapons have changed, and what Russia’s actual nuclear threat looks like. We start with an excellent piece by our Scowcroft Group colleague, Frank Miller and Madelyn Creedon, two leading nuclear weapons experts.
Deterring the Nuclear Dictators Franklin Miller & Madelyn Creedon/Foreign Affairs
For more than three decades after the end of the Cold War, the United States and its allies faced no serious nuclear threats. Unfortunately, that is no longer the case. Russian President Vladimir Putin has been rattling his nuclear saber in a manner reminiscent of Soviet leader Nikita Khrushchev, and Chinese President Xi Jinping has directed a dramatic buildup of China’s nuclear arsenal, which has been described as “breathtaking” in size and scope. These developments pose far-reaching challenges to U.S. national security. The United States no longer has the luxury of ignoring nuclear dangers and concentrating on deterring a single adversary. But Washington’s efforts to modernize the aging U.S. nuclear deterrent have been hampered by inadequate industrial base capacity, materials and labor shortages, and funding gaps. What needs to be done is clear: the next administration should dispense with undertaking an extensive review of either the nuclear deterrence policy or the modernization plans. There is a huge need to just get on with the work of modernization and fix the problems.
Nuclear Challenges: The Growing Capabilities of Strategic Competitors and Regional Rivalries U.S. Defense Intelligence Agency
Countries with mature nuclear weapons programs are increasing stockpiles and/or program capabilities. Russia, China, and North Korea are modernizing their legacy stockpiles by incorporating advanced technologies to penetrate or avoid missile defense systems. Countries are also developing nuclear weapons with smaller yields, improved precision, and increased range for military or coercive use.
How Credible is Russia’s Evolving Nuclear Doctrine? Steven Pifer/Brookings Institute
Russia’s doctrine for the use of nuclear weapons has gone through several evolutions over the past 15 years. Changes in 2010 and 2020 seemed relatively benign. In September 2024, Russian President Vladimir Putin announced additional modifications, which appear more meaningful. These recent modifications were made while Western officials debated whether to allow Ukraine to use Western weapons to conduct strikes into Russian territory. They introduce ambiguity on when Russia might employ nuclear arms in a bid to persuade the West to stand down. But those modifications may well stretch Russian declaratory policy beyond the point of credibility.
Latin America: Focus on Mexico
A Closing Back Door? China’s Evolving FDI Presence in Mexico Rhodium Group
Although it represents a relatively small portion of total foreign investment, Chinese FDI in Mexico is significantly higher than shown in official statistics. Tariff avoidance and supply chain diversification have driven a boom in Chinese investment, first in electronics and consumer goods and, lately, in the automotive sector. However, a growing gap between announced and completed investments hints at growing uncertainty around Mexico’s continued role as a back door to the US market.
A Chinese tiremaker recently broke ground on a $400mn plant in central Mexico. But there will be no sign of such a Chinese project in Mexico’s inward investment data: the Sailun Tire company funding is being made through a Singaporean subsidiary. This is not unusual or a secret — the structure is outlined in the company’s press release — but it will only fuel Washington’s wariness. US-based consulting firm Rhodium Group estimated in a report this month that the stock of Chinese investment in Mexico is about six times higher than shown in official figures. With imports from China also surging, US lawmakers allege the country’s southern neighbor — and top trading partner — is increasingly being used by Beijing as a backdoor to avoid tariffs.
Mexico Congress Takes the First Steps to Scrap Regulatory Bodies Bloomberg
Mexican lawmakers took the first step toward eliminating several autonomous watchdogs, including the antitrust regulator and the transparency institute, as part of a broader reform push. The lower house of Congress on Wednesday night in a 347-128 vote approved the general text of a constitutional proposal to scrap the oversight bodies. The lawmakers approved individual articles of the bill Thursday, clearing the way for it to advance to the Senate, where the ruling coalition only needs one more vote to reach the two-thirds majority required to pass such legislation.
Why Mexico Isn’t Panicking About Another Trump Presidency The New York Times
Mexico is banking on its ability to negotiate with a deal maker like Donald J. Trump, and many officials say the country is better prepared and has more leverage than it did during his first term.
Geoeconomics and Trade
What is Bretton Woods? The Contested Pasts and Potential Futures of International Economic Order Carnegie Endowment for International Peace
Around the world, there is growing demand to restructure governance of the global economy. Sources of dissatisfaction with the current arrangements are varied, but many critics seem to agree on one thing: it is time for a “new Bretton Woods moment.” Would-be reformers seek a multilateral settlement similar to the one established to manage the post- Second World War economy, which first took shape at the 1944 United Nations Financial and Monetary Conference in Bretton Woods, New Hampshire. Those demanding change come from many different corridors of power: ranging from senior U.S. officials to leading figures from developing countries and the heads of the United Nations and International Monetary Fund (IMF). There is persuasive force in calls for reform that are framed around a return to the past. The appeal to Bretton Woods conjures a period of sustained economic prosperity and relative political stability—at least among the liberal democracies of the West. More generally, embracing the authority of history anchors reform proposals on seemingly firm ground during a time of mounting international turbulence. But the call for a new Bretton Woods elides considerable disagreement. There are many competing views of the post-1945 international economic order, and each generates alternative understanding of how Bretton Woods should guide today’s proposed reforms. This paper presents an historical-analytical review of Bretton Woods, based on the assumption that a better understanding of the postwar order can inform today’s efforts to restructure governance of the global economy.
Geopolitics and emerging market capital flows Robin Brooks/The Brookings Institution
The rise in geopolitical risk and mounting trade tensions should have a counterpart in financial deglobalization as investors pull back from global trouble spots. Most obviously, if friend-shoring is a material phenomenon, this should be reflected in foreign direct investment flows, with, for example, stronger flows to Mexico, while China should see weaker inflows or even outflows. A similar trend may be visible in portfolio flows if Russia’s invasion of Ukraine makes markets wary of potential conflict zones. China and Taiwan are clearly a worry here. We assemble quarterly data on nonresident portfolio and direct investment flows to 25 emerging markets (EMs) from 2000 to 2024. These data show a healthy picture for EM overall, though China is a negative outlier. China has seen nonresident portfolio inflows weaken significantly from before Russia invaded Ukraine, in addition to foreign direct investment flows also softening recently. While these data points are consistent with financial deglobalization, a proper investigation will compare flows to a counterfactual linking them to underlying fundamentals such as interest and growth differentials. We leave a more definitive assessment of financial deglobalization for a follow-up post.
The Electoral Impact of Unexpected Inflation and Economic Growth JSTOR
This research piece supports two theoretical changes to models of comparative economic voting. The first is that the distinction between expected and unexpected components of inflation and economic growth is important. We posit that voters are primarily concerned with unexpected inflation and unexpected growth since these changes have real income effects and serve as better indicators of government competence. Empirical analyses of data from nineteen industrialized nations in 1970–94 reveal stronger electoral effects for the unexpected components of inflation and growth than for their overall levels.”