Specificity is rarely a luxury geopolitics affords. Broad, impersonal forces that shape the behavior of nations are usually, by definition, long-term phenomena. Imagine, then, how validating it was this week when our forecast on NAFTA, one of our most discrete predictions, came to pass. To recap: We said a free trade agreement would survive, one way or another, because the political constraints, economic linkages and strategic needs of all three countries demanded that it would. So it did, enduring in spirit but replaced in name by the United States-Mexico-Canada Agreement.


From the Forecast: “The problems Europe has dealt with for the past 10 years – problems that were not so much created by the 2008 financial crisis but exposed by it – will continue to intensify in 2018. Virtually no country will be left untouched by the rising social, political, cultural and economic tensions throughout the Continent. But under this continued instability will lurk a perhaps more troubling development: Germany, concerned with the EU’s disintegration and anxious about the economic calamity it could portend, is going to have to work harder to keep the bloc together.”

Update: Readers familiar with our work know how pessimistic we are about the European Union’s long-term prospects. The economic imbalances created by the 2008 financial crisis have been aggravated by a refugee crisis and by years of loose monetary policy. In this wake, EU members are arguing over who gets to make the rules and how they should be enforced. Brexit, the fight over migration between west and east, the forced austerity on Greece – these and many more are all symptoms of a political construct that is more than a free trade agreement but less than a meaningful political confederation struggling to retain relevance during difficult times.

We forecast that the trends underway in Europe would only continue, adding that they would increasingly manifest in disagreements between states in Western and Eastern Europe and that those disputes would center on the issue of the rule of law. We also noted that EU members would squabble with one another as much as they would with the EU itself. The forecast has generally been on point, but the past month has been especially validating.

The most important development may well be the European Parliament’s decision to launch a disciplinary process against Hungary over “breaches” of “core EU values.” It was the first time the EU triggered this process against a member state as a result of a European Parliament vote, and the second time the EU launched a disciplinary process of this kind against a member state. (Poland received a similar rebuke nine months earlier from the European Commission for judicial reforms that Brussels deemed unacceptable.) Just as notable, however, is the fact that France and Germany have publicly condemned Hungary and Poland for their transgressions. France’s foreign minister said that the leadership of Hungary and Poland were little more than “delusion traders” and that France did not want “to continue paying for this Europe.”

The outsize role France has played this year in advocating EU reform and in confronting potentially rogue member states is not something we anticipated in the forecast. We expected Germany to play this role, but Chancellor Angela Merkel’s weak domestic position, and Germany’s imperative to keep the economic union as unified as possible, has constrained Germany in this regard. Even so, no matter where you look in the European Union, divisions are there. And whether its Brexit, the status of Switzerland, the treatment of Eastern Europe, or the management of Italy’s populist government and its mounting debt, the divisions are growing wider.


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From the Forecast:The cold logic of geopolitics dictates that the U.S. will not attack North Korea. The U.S. would recognize North Korea’s pursuit of nuclear weapons as defensive, not offensive. The U.S. would know that North Korea would not use its nuclear weapons because using them would trigger a counterattack and thus ensure its own demise. The U.S. would assemble a coalition of partners to isolate and manage North Korea while creating a nuclear deterrent just strong enough to persuade Pyongyang to never use the weapons it has spent so long pursuing … But the North Korea crisis does not strictly abide by the cold logic of geopolitics. It is unclear whether Trump would have enough support to authorize a military strike against North Korea if he wanted to. The North Korea crisis is notoriously difficult to predict, but in this context, the status quo is the most likely outcome.”

Update: It’s been nearly two months since last we checked in on what was arguably our biggest forecast failure last year. We were convinced that conflict in North Korea was all but inevitable. This year, we tempered our expectations, and that appears to have been the right decision. For all the highs and lows of the negotiations, the status quo is the status quo.

This despite the fact that the U.S. secretary of state is due to travel to North Korea this weekend to lay the groundwork for another Trump-Kim summit – a relationship as bizarre as it is inconsequential, at least so far. The U.S. wants North Korea to denuclearize, and North Korea continues to say just enough for the U.S. to say it’s making progress when, in fact, it isn’t. Washington hasn’t budged on its position of total denuclearization. North Korea is using the legitimacy earned from the Singapore summit, and its mercurial relations with the Trump administration, to improve relations with South Korea and earn the respect of the international community without actually giving up the weapons that have so concerned outside powers.

The dynamics of the situation, then, have become somewhat fixed. The U.S. does not want to fight a war on the Korean Peninsula, and North Korea knows it. Washington will instead focus on its relationship with China. In that sense, U.S. engagement with North Korea nullifies one of the biggest sources of leverage Beijing had over Washington. Pyongyang won’t listen to Washington, but it will sure listen to Beijing, or so the thinking went. Now that the U.S. is dealing with North Korea directly, it doesn’t need China as an intermediary – and therefore China cannot use relations with North Korea to get relief on tariffs, trade sanctions or freedom of navigation operations in the South China Sea.

The success of the strategy depends on how long North Korea is willing to play along – and on how long China will refrain from pressuring North Korea. It’s always been unclear how close Beijing and Pyongyang truly are, but considering China is also attempting to solidify a closer relationship with South Korea and has been mostly quiet throughout the North Korea talks, it’s not unreasonable to ask whether this can go on forever. That, of course, is not a question to be answered in this space. For the purposes of the Forecast Tracker, the question is merely whether the current balance of imperatives and constraints will prevail for the remainder of the year, and we expect so, even if a high-profile second Trump-Kim summit happens by year’s end.


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