Fire Hydrant of Freedom

Politics, Religion, Science, Culture and Humanities => Politics & Religion => Topic started by: Crafty_Dog on October 09, 2015, 07:46:38 AM

Title: Trade and Globalization Issues:
Post by: Crafty_Dog on October 09, 2015, 07:46:38 AM
I could have swore we had a thread about this already, but I can't find it , , ,  :x

This piece makes the case for it:



By Zachary Karabell
Oct. 8, 2015 7:25 p.m. ET
7 COMMENTS

The 12-nation Trans-Pacific Partnership trade deal signed Monday is poised to become an election-year piñata as the Obama administration works to get it through Congress. Hillary Clinton, who supported the TPP when she was secretary of state, came out against it on Wednesday: “I don’t believe it’s going to meet the high bar I have set.” Sen. Bernie Sanders, her rival for the Democratic presidential nomination, issued a caustic statement: “It is time for the rest of us to stop letting multinational corporations rig the system to pad their profits at our expense.”

On the Republican side of the presidential-nomination race, Donald Trump and Carly Fiorina separately denounced the pact as an assault on American business.

Labor leaders in turn excoriated the TPP for accelerating the loss of American jobs, while companies such as Ford Motors came out against it because of the perceived lack of protection against currency manipulation.
Opinion Journal Video
Editorial Board Member Joe Rago on how pharmaceutical innovation may be impacted by the Trans-Pacific Partnership. Photo credit: Getty Images.

The TPP is the definition of a Big Deal. The dozen countries involved, including Japan, Malaysia, Australia and Mexico, account for about 40% of global GDP. President Obama has made passage a priority, couching the pact in terms of who will write the rules of the new global economy, China or the U.S.

Yet much of the passion stirred by the deal is reminiscent of the wrangling over the North American Free Trade Agreement two decades ago—and feels about 20 years out of date. It isn’t simply that commerce has increased, regardless of tariffs and friction. Supply chains have evolved into an interlocking global lattice in which few countries are unaffected, and the ones left out tend to be the basket cases of the international system, from Afghanistan to North Korea.

The dispersion and complexity of supply chains has happened too rapidly for our statistical map of the world to catch up. Much of global trade today consists of companies shifting parts from factory to factory, country to country, to make a finished good. The result is that our centuries-old understanding of trade hardly captures its reality today.

Think of the iPhone. On the back of each handset, in print so tiny you may need a magnifying glass, it says “Designed by Apple in California. Assembled in China.” That is Apple’s way of communicating a complicated reality that, in the land of trade statistics and common understanding, is reduced to a simple formula: A product is made where it has undergone its last “substantial transformation.” The product is then assigned to that place, and hence an iPhone is, in trade terms, “Made in China.”

But it isn’t, really. The phone is assembled from parts made in multiple countries, and as researchers have found, only a small portion of its value comes from China or goes to China. In trade land’s calculation of imports and exports, however, all of that is moot. The same is true for thousands of products large and small that have multiple parts, from the Boeing 787 Dreamliner to the engine in your car.

The way things are actually made in the world today is largely invisible. But the correlations between the world today and trade pacts are all too visible. Since the General Agreement on Tariffs and Trade became the World Trade Organization in 1995, since Nafta and since dozens of smaller trade agreements in the period that followed, wages in the developed world have been flat and manufacturing jobs have evaporated at an alarming rate. Farmers, whose goods do indeed come from one country and one country only, have faced an uphill battle to maintain domestic prices protected only by tariffs. It is, therefore, easy enough to establish a simple logic that trade pacts cause wage stagnation and job losses.

But it’s much more complicated than that. Tracking the economic effect of the free flow of goods and ideas isn’t easy. (The TPP takes an antiquated approach to intellectual property that could impede the free flow of ideas by strengthening the enforcement of trademarks and copyrights.) A binary view of trade as countries making stuff and selling stuff overlooks not only the multiple-countries-of-origin problem, but also the vast trade in services that we struggle to measure and understand. Tourism and travel of foreign visitors to America, for instance, are counted as a U.S. export of services. And it is one of the major U.S. exports to the world today—at more than $150 billion, it accounts for nearly 9% of all U.S. exports.

Yet the trade debate primarily focuses on goods, because that is what most people think of when they think of trade, and because monthly Census Bureau trade figures by country report only goods. Over the past few decades, the U.S. has imported more and more goods, such as the iPhone, and exported more and more services, such as ideas and tourism. Millions of jobs directly relied on the old export of goods in traditional industries, but the new model of ideas and services employs fewer people directly and who-knows-how-many indirectly. We know how to count what has been lost; we have hardly begun to figure out what is being gained. That helps explain why so many associate more trade with fewer jobs.

The fight over the TPP is a 20th-century argument over who makes what and sells what across borders that are increasingly porous—and cannot contain the flow of ideas and commerce that will define the years ahead.

Mr. Karabell, the head of global strategy at Envestnet, is the author of “The Leading Indicators: A Short History of the Numbers That Rule Our World” (Simon & Schuster, 2014).
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on October 09, 2015, 07:59:50 AM
I presume that Karabel has "read" the agreement? If so, how did he get to see it?

If he has not read it, how does he know it will be good for the US?
Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on October 09, 2015, 08:03:09 AM
Ouch!!! :lol: :lol: :lol:
Title: Re: TPP Trans Pacific Partnership
Post by: G M on October 09, 2015, 08:08:56 AM
I presume that Karabel has "read" the agreement? If so, how did he get to see it?

If he has not read it, how does he know it will be good for the US?

Pat shoots and scores!
Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on November 07, 2015, 10:57:35 AM
I gather the TPP has finally been released?  So, let the analysis begin!
Title: Re: TPP Trans Pacific Partnership - full text
Post by: DougMacG on November 07, 2015, 12:48:29 PM
https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text

Will someone please read this for us.  )

Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on November 07, 2015, 02:59:35 PM
"I that by the US signature it says or must say, nothing in this agreement shall ever be contrued to supercede the authority of the US constitution or US sovereignty over its own affairs."

 :?
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 07, 2015, 03:00:31 PM
Section 3-a, 4.231.27, Under Chapter 132.6, Amendment 625.4 (c)

Anyone who reads this agreement with intent to provide others with an analysis of what exists in the Agreement is subject to Section 14-5 (c), Chapter 137.5 as Amended by 1036.44).

The penalty for violations of the subsections is immediate death by pervasive torture only concluded with the name of the person requesting the service. That person is then sbject to the same penalty.

Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 07, 2015, 03:08:58 PM
For TPP

Rubio
Carson
Cruz
Bush


Against TPP

Trump
Christie because he does not want to give Fast Track authority to Obama
Fiorina - For Free  Trade but does not trust Obama
Huckabee
Paul


Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 07, 2015, 03:23:30 PM
I risked my life doing a quick look at TPP. Key Points:

1. TPP is not specific. It simply sets up the frame work for Fast Track authority whereby Obama or later presidents can implement actions without Congress.

2. It gives the right to any worker group in any country to organize under Unions in accordance with International Labour Organization provisions. State laws be damned.

3. Requires greater Environmental protections. Covers Ozone and other things.

4. Affects immigration. If an out of country firm establishes a business operation in another country, that country must give unlimited visa, etc. to anyone the company wants to send here. No limitations exist at all.

5. Covers whether a product was manufactured fully in a country or not. This sets up what type of regulations exist to cover that product or not.

The TPP is an outline of what is to come. Under TPP, a country can challenge another country or business on a practice. If the two countries cannot agree, then a Panel is set up. Each country designates a panelist and the third panelist is named and agreed to by the two designated panelists. These people decide the issue. Worst part is that the Panelists are to be attorneys familar with INTERNATIONAL LAW and agreements.

What is going to happen is that large bureaucracies and departments will be established to look at each covered product and then decide the rules.

Essentially, this is an ECU type of agreement and subrogates all US laws to the TPP. It is not good for the US.
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 07, 2015, 03:24:43 PM
BTW, please send an ambulance to pick me up. Reading what I did, I just finished slitting my wrists and taking 300 sleeping pills. The door will be unlocked..........
Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on November 07, 2015, 03:26:35 PM
 :-o :-o :-o
Title: Re: TPP Trans Pacific Partnership
Post by: DougMacG on November 08, 2015, 07:57:17 AM
Fixing a bungled post,

Right above the US President's signature on TPP it needs to say:

Nothing in this agreement shall ever be contrued to supercede the
the US constitution or US sovereignty over its own affairs.
Title: Re: TPP Trans Pacific Partnership
Post by: G M on November 08, 2015, 08:22:31 AM
Fixing a bungled post,

Right above the US President's signature on TPP it needs to say:

Nothing in this agreement shall ever be contrued to supercede the
the US constitution or US sovereignty over its own affairs.

Obama wouldn't sign anything that said that.
Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on November 09, 2015, 10:57:52 AM
I have no idea as to the merits of this particular site, but in the spirit of beginning the analysis of the actual language:

https://www.techdirt.com/articles/20151106/07051932731/full-text-tpp-released-really-really-bad.shtml
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 09, 2015, 11:22:37 AM
Try reading the damned website. It is just as confusing as thee TPP.

Can't people ever get it in their heads that they must write in terms that non experts in the field can read and understand?
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 10, 2015, 08:33:07 AM
Here is Dick Morris on TPP and Immigration.  I have read the same complaints in many articles.

http://thehill.com/opinion/dick-morris/239633-dick-morris-tpp-mass-immigration (http://thehill.com/opinion/dick-morris/239633-dick-morris-tpp-mass-immigration)

If correct, then this is just one more bit of evidence that Globalism and Open Borders is the goal, national boundaries be damned. And both the Dems and Pubbies are supporting this.
Title: Re: TPP Trans Pacific Partnership
Post by: DougMacG on November 10, 2015, 12:23:40 PM
Lining up against the TPP, Bernie Sanders, The Nation, Sierra Club, Public Citizen, Common Dreams, and all the leftist Occupy Wall Street types.  Also all the opponents of free trade.  http://www.commondreams.org/newswire/2015/04/28/2009-organizations-call-congress-oppose-fast-track-authority-tpp

The right answer may be for conservatives to oppose it too, but we had better be clear as to what parts of it we favor and what parts (attacks on sovereignty) kill the deal.

Because of the TPP enabling legislation, this will come down to an up or down vote in the House and Senate, probably in late Spring 2016.

Title: A first take by CATO
Post by: Crafty_Dog on November 11, 2015, 09:20:19 AM
http://www.cato.org/blog/how-think-about-tpp
Title: Re: TPP Trans Pacific Partnership
Post by: DougMacG on November 11, 2015, 10:05:17 AM
"On TPP, the vote was for TPA, which both Ryan and Cruz voted for. It removed 66% votes for passage and changed it to 50% plus 1. This legislation provided for Fast Track Authority where by Congress will not have future inputs into regulation changes. The WH wants it, and it is implemented."

Please flesh this out on the TPP thread.  Thank you.

My humble opinion:

pp is right that the authorizing legislation makes it easier to negotiate and pass and Crafty is right that there is a significant distinction between the authorization vote prior to negotiating and supporting or opposing it after it is published.

It is not a flip flop to vote differently on the two.

If you opposed authorization, then a Republican president will never again get authority to negotiate a good or real free trade bill.

This bill has good and bad provisions in it.  The Cato piece is a nice start for looking at it.
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 11, 2015, 12:21:11 PM
Doug,

You cite that if TPA was not authorized, that a Republican President could never get a good Trade Bill passed again. Funny, but it seems that this same argument does not apply to Democrat Presidents. After all, the Pubs control Congress and at least one side of it since 2010, and Obama gets things passed time and again. Of course, the Pubs are wimps.

Now I presume that you are more of a constitutionalist. Such Agreements were required by the Constitution to need 2/3rds majority to pass. Does this not bother you that this changes what the Constitution calls for?

Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on November 11, 2015, 12:22:57 PM
That is a very fair question and it bothers me that candidates I otherwise like do not seem to have a good answer to it.
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on November 11, 2015, 12:31:12 PM
On TPP and China:

Rand Paul accused Trump of being wrong on China being in the TPP. China was not involved. Technically, Paul was correct in that China was not involved. But here is the rest of the story.

1. Trump said that China could be involved through backdoor measures.

2. After TPP is passed, a country can be admitted to TPP without Congressional approval.

3. Two days ago, SecState Kerry offered China the opportunity to join TPP after passed.

So this brings into play another question with TPP. Was it deliberate with TPP that China would not be initially involved because it would make passage more difficult? Is this now why Kerry is offering membership to China after passage?

Would the Obama Admin be this sneaky?
Title: Morris: TPP Trans Pacific Partnership erodes US sovereignty
Post by: Crafty_Dog on November 19, 2015, 06:40:20 PM
http://www.dickmorris.com/tpp-erodes-u-s-sovereignty-dick-morris-tv-lunch-alert/?utm_source=dmreports&utm_medium=dmreports&utm_campaign=dmreports
Title: Tea Party group on TPP
Post by: Crafty_Dog on December 17, 2015, 08:23:57 PM
Reliability completely unknown:

http://www.teaparty.org/alert-obama-set-sign-deal-allowing-foreign-takeover-americas-land-resources-134667/

Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on December 28, 2015, 11:53:14 AM
What is the status of the TPP?
Title: Re: TPP Trans Pacific Partnership
Post by: ppulatie on December 28, 2015, 12:14:14 PM
It cannot be voted on until O'Bummer sends it to the Senate. And O'Bummer believes that it will need Rep support, but the Senate is afraid to vote on it before the election for fear of a backlash against their candidates who vote for it.  (TPP must be signed by Oct 2017 by all countries.)  So don't expect the cowards to move on it until after the election in a lame duck session.

Title: Re: TPP Trans Pacific Partnership
Post by: Crafty_Dog on December 28, 2015, 05:20:10 PM
Ah.  Thank you.
Title: GM as Trojan horse for China
Post by: Crafty_Dog on January 25, 2016, 09:38:13 AM
With Trump's combative approach to trade being what it is I've modified the name of this thread and paste this here from the China-US thread:

http://qz.com/594984/the-secret-history-of-gms-chinese-bailout/?utm_source=YPL
Title: Trans Pacific Partnership - Preamble and Chapters 1 & 2
Post by: DDF on October 03, 2016, 05:02:27 PM
ESTABLISH a comprehensive regional   agreement   that promotes economic  integration to liberalise trade.

  BUILD on  their  respective  rights  and  obligations  under  the Marrakesh Agreement Establishing the World Trade Organization

  RECOGNISE further their  inherent  right  to  adopt,  maintain  or  modify health care systems


In the interest of keeping this short (there are several chapters written that apply to each of the 12 signatories specifically), and gleaning the most important points, this was signed February 4th, 2016 and has not yet been implemented.

CHAPTER 1- INITIAL PROVISIONS AND GENERAL DEFINITIONS


There is much to be stated regarding the criticisms of the WTO, and could by itself, merit an entire investigation to everything they have been accused of. For the purposes of the TPP, it suffices to say that it seeks globalization, and specifically benefits poorer nations in an attempt to standardize wages, laws, and practices throughout each member country. It is written in their policy here:

"The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly."  
https://www.wto.org/english/thewto_e/whatis_e/what_we_do_e.htm

and from an essay they themselves have chosen, here:

"The paper finds that trade liberalization increases overall welfare and provides firms with both new export markets and new sources of competition. Expanding high-paying firms increase wages to recruit better workers at a faster rate. Workers in the firms threatened by competition accept wage cuts to delay their employers’ exit from the market and to keep their job. Using firm-worker data from France, the author shows that, following trade liberalization, inequality initially increases and peaks after three years, but eventually falls back to half of its peak level in the longer term." https://www.wto.org/english/news_e/news16_e/rese_08sep16_e.htm


This primarily is dealt with in the chapters relating to each country specifically, but in Annex 1-A, specifically names the highest level of government in each country, thereby levying the force of Federal and State law (inclisive of any territories that lie within the country's control) , and wields its (WTO) "authority," over citizens also defined in Annex 1-A, expressing jurisdiction over the aforementioned in the "definitions" content, anywhere the specific matter may arise within the TPP agreement.

https://ustr.gov/sites/default/files/TPP-Final-Text-Initial-Provisions-and-General-Definitions.pdf

[/list]

CHAPTER 2 NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS


Means that, "a given level or percentage of goods or services be exported;" thereby guaranteeing participation, whether or not it is what is most beneficial to the exporting nation, as well as waivers of customs duties.


Article 2.6 makes clear, that the TPP is not solely for goods being sold, but services as well, including ship repair (unless it has been previously exempted as it has with Canada), but is an important note, because it lends potential control over the amount of work that can be performed in a country, instead of solely over goods, due to the fact that "performance requirements" can be enforced, and not necessarily by the will or good, of a people in any of the signatory countries, that cede control to an international community.

It also states specifically, that no country may apply a duty to any good that enters the territory temporarily, for the purpose of alteration or repair, thereby, encouraging the export of work to be done, to countries where lower wages are paid.

It goes on to state, that "repair or alteration does not include an operation or process that transforms an unfinished good into a finished good," which is a misnomer. My own experience from the aerospace industry has given me insight into this.

Raw materials are continuously exported, or even sent directly to countries that make low wages, whereby, all manufacturing operations will be completed, leaving only the precursory "finish inspection" required, to consider it a "finished good."



Allows for the duty free import of professional equipment necessary to work in a host country, whilst conducting business activities, specifically mentioning "professional   equipment, including equipment for the press or television, software, and broadcasting and cinematographic equipment, that is necessary for carrying out the business activity,
trade or profession of a person who qualifies for temporary entry pursuant to the laws of the importing Party." Which means, that people can also potentially come to your country, replacing the job of a citizen of the same country, and that it has been allowed for.

Article 2.8 Subsection 4 - allows for shipping containers that are "in use or to be used," from anywhere in the world, duty free, and that may be "fully or partially enclosed,"also detailing "more than one mode of transport;" thereby, applying to every mode of transport unless specifically prohibited elsewhere.

There is actually even more in this section to pick apart, such as "what is being imported, and the fact that it enjoys passage to another "exit port," but I don't want to waste too much time on it. The important portions are mentioned.


As listed above in Article 2.8 (I won't mention anything on Article 2.9 - Ad hoc discussions), Article 2.10 allows potentially anything, from anywhere in the world, to be received, duty free, which is perhaps sealed, to which end,  "unless otherwise provided in this Agreement, no Party shall adopt or maintain any prohibition or restriction on the importation of any  good of another Party or on the exportation or sale for export of any good destined for the territory of  another  Party,  except  in  accordance  with  Article XI of GATT 1994  and  its interpretative notes, and to this end Article XI of GATT 1994 and its interpretative notes are incorporated into and made part of this Agreement, mutatis mutandis. While Article 2.11 addresses everything covered in Article 2.10 to be in reference to re-manufactured goods, the concerns for security and logistics are staggering.

The potential for abuse from this is disastrous, especially from a security perspective. It also mentions that paragraph 3 is specifically in reference to cryptographic goods that have not specifically been altered for government use, but one wouldn't really know whether it has or not, given the nature of cryptography.



Committee will be "addressing barriers to trade in goods between parties," which when referenced to Article 2.17, which specifically states that all parties shall be part of the trade in information technology, could lead to problems with high tech jobs being sent abroad, as well as the inherent security risks associated with that.


The Monsanto giant also has managed to have themselves written into the agricultural agreement in Article 2.19:

"modern biotechnology means the application of:
(a)in vitro nucleic acid techniques, including recombinant deoxyribonucleic acid (rDNA) and direct injection of nucleic acid into cells or organelles; or
(b)fusion of cells beyond the taxonomic family, that overcome natural physiological reproductive or recombinant barriers and that are not techniques used in traditional breeding and selection; and products of modern biotechnology means agricultural goods, as well as fish and fish products, developed using modern biotechnology, but does not include
medicines and medical products.

All of this means that the WTO is determining who will eat what, through force of law, and not just in reference to fruits and vegetables, but also manipulating fish. It is possible that this could also lead to the mandatory consumption of cloned animals. It also means that they can export this to any member party, without necessarily disclosing the nature of the product meant for human consumption.



It allows party members to export timber, without recording the type of timber being sent. I don't know if this is a huge deal. Potential ramifications could be the mass deforestation of timberland and woodlands.

Interestingly, Vietnam is exempt from having to export timber and in fact, expressly forbids it in their Decree  No.  187/2013/ND-CP; yet, the US (and Canada with an almost identical requirement), on the other hand, and again, I am quoting:

"Article  2.3.1  (National  Treatment),  Article  2.10.1 (Import  and  Export Restrictions) and Article 2.10.2 shall not apply to:  
(a) controls on the export of logs of all species;"

This is a clear case of disparity and probable resource redistribution.

Initially it appears that five of the signatories have no regulations placed on them at all, but are mentioned in other places, such as Australia's own Tariff Schedule,
https://ustr.gov/sites/default/files/TPP-Final-Text-Australia-General-Notes-to-Tariff-Schedule.pdf , which highlights "Australia's commitment to Japan," again, a case of preference between one party member and another, annulling any apparent fairness between all member states, which per WTO guidelines, prohibits any "special favors," but allows it here. This is but one example.

A bulk of Annex 2-D are the equivalent to excel spreadsheets, with Australia's for example, comprising 445 pages of gibberish (numbers), Brunei's is 344 pages of excel spread sheets, stating when they will eliminate tariffs, on a line by line basis.

The general note pages from this chapter are roughly between 3-5 pages of general guidelines (Japan's is 20 pages), leading me to believe that the majority of the legislature is microsoft spreadsheets. I will note this again at the bottom of the article, because it may well prohibit people that might have read the law, to not read it, just based on what they perceive the page count to be.




Chapter 2 specifically quotes laws written in language other than English, making anyone not fluent in the language the law being referred to is written in, unclear of what the agreement or law actually is.

Why is this important? Any politician that will vote on this legislature, needs to have read the correct translations, in their entirety. It is doubtful that has happened.
Also, should any sitting court ever have to rule on a disagreement, outside of Geneva, they too will have the burden of both translating and studying the law as it pertains to foreign languages and nations. Refer to Annex 2-A of the section:
"to restrictions pursuant to Article 48 of the Hydrocarbons Law (Ley de Hidrocarburos) published in Mexico’s Official Gazette (Diario Oficial  de  la  Federación)  on  
August  11,  2014,  on  the  exportation from  Mexico  of  the  goods  provided  for  in  the  following  items  of Mexico’s  tariff  schedule  of  the  General  Import  and Export  Duties Law (Tarifa de la Ley de los Impuestos Generales de Importación y  de  Exportación)  published  in  Mexico’s  Official  Gazette  (Diario Oficial de la Federación) on June 18, 2007 and June 29, 2012," and numerous other laws, some of which pertain to hydrocarbon fuels and of which, may give Mexico an advantage over US competitors, should Mexican fuel be sold in the States, without the tax burdens that US suppliers must bear.

Also referencing Decree No. 187/2013/ND-CP (a Vietnamese law) and I quote:

"Nghị định số 187/2013/NĐ-CP của Chính phủ quy định chi tiết thi hành Luật Thương mại về hoạt động mua bán hàng hóa quốc tế và các hoạt động đại lý mua, bán, gia công và quá cảnh hàng hóa với nước ngoài..." http://www.customs.gov.vn/Lists/VanBanPhapLuat/ViewDetails.aspx?ID=7089

The point made is clear.

[/list]


The Monsanto portion, the loss of service based and high tech jobs, the mandatory import of loaded shipping containers from anywhere in the world and the mandatory minimum requirements of party members, are all serious concerns.

***NOTE***

A bulk of Annex 2-D are the equivalent to excel spreadsheets, with Australia's for example, comprising 445 pages of gibberish (numbers), Brunei's is 344 pages of excel spread sheets, and Canada's is 257 pages, Chile - 291 pages, Japan - 1133 pages, Malaysia - 347 pages, Mexico - 395 pages, New Zealand - 511 pages, Peru - 214 pages, Singapore - 325 pages, US of A - 386 pages, and Vietnam - 1000 pages, stating when they will eliminate tariffs, on a line by line basis.

Just this accounts for 5648 pages of the legislation, which is nothing more than spreadsheets.


The general note pages from chapter 2 are roughly between 3-5 pages of general guidelines (Japan's is 20 pages), leading me to believe that the majority of the legislature is Microsoft spreadsheets. I will note this again at the bottom of the article, because it may well prohibit people that might have read the law, to not read it, just based on what they perceive the page count to be.

This chapter also codifies the trade in vehicles between Japan, Canada, and the United States, but does not have laws that govern Mexico by title as Japan, Canada and the US have.

Total number of pages covered between the Preamble, Chapter 1 and Chapter 2 = 6134
To recap - 6134 pages of legislation that Clinton is pushing, to send your job somewhere else, and leave Americans and American students without work in the future. That was just the preamble and chapters 1 &2 of the TPP. There are still have 28 chapters to go, not counting the annexes, and have found thus far, that if you live a little better lifestyle in the US, you better get used to a lower standard of living, because that's exactly what is written in the TPP.



This concludes anything I will post of the Preamble, Chapter 1, or Chapter 2.[/list]

Source - https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: DDF on October 04, 2016, 12:57:36 PM
I didn't notice it, but Obama has chosen to skim read the full text for you.

Here you go.

https://ustr.gov/tpp/#text

At the very bottom of the page, is the link to the full text.

Interesting is that Obama is assuring Americans, that he is "leveling the playing field for American workers & American businesses," and "putting" American workers, businesses, and values, "first."
Title: TPP Labor Policies and What They Mean to Americans
Post by: DDF on October 04, 2016, 03:34:41 PM
https://medium.com/the-trans-pacific-partnership/labour-66e8e6f4e8d5#.slufddkoa linked from the Whitehouse site - https://ustr.gov/tpp/

TPP Labor Policies and What They Mean to Americans

The Trans-Pacific Partnership (TPP) claims to "level(s) the playing field for American workers and American businesses," but how?

They claim to do so by cutting 18,000 taxes other countries place upon American goods, which will "make sure American farmers, ranchers, manufacturers, service suppliers, and small businesses can compete — and win — in some of the fastest growing markets in the world." What isn't brought to the public eye, are the minimum wages (or complete lack of them) in the other participating countries:

(all units in USD per hour, unless otherwise specified and have been converted as of the date of this writing):

Australia - $13.48 Hourly - https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/minimum-workplace-entitlements/minimum-wages

Brunei - No minimum wage - $500 MONTHLY - http://www.bt.com.bn/news-national/2016/03/01/minimum-wage-issue-remains-back-burner

Canada - $7.92 - $9.85 depending upon province - http://www.wageindicator.org/main/salary/minimum-wage/canada

Chile - $391 - $409 MONTHLY - wage increase in effect until 2018 - http://www.bna.com/chile-increase-minimum-n57982075195/

Japan - $7.58 - http://www.tradingeconomics.com/japan/minimum-wages

Malaysia - $240 MONTHLY - http://www.wageindicator.org/main/salary/minimum-wage/malaysia

Mexico - $0.47 Hourly (That isn't a typo) - https://news.vice.com/article/mexicos-tiny-minimum-wage-is-about-to-increase-by-almost-nothing

New Zealand - $10.99 - https://employment.govt.nz/hours-and-wages/pay/minimum-wage/minimum-wage-rates/

Peru - $251.18 MONTHLY - http://www.tradingeconomics.com/peru/minimum-wages

Singapore - $3493.98 MONTHLY - http://www.tradingeconomics.com/singapore/wages

United States - $4.00 - $11.50 in special circumstances, $7.25 Federal norm - https://www.dol.gov/whd/minwage/america.htm

Vietnam - $156.90 MONTHLY - http://www.tradingeconomics.com/vietnam/minimum-wages


It is important to note, that while Australia works a 38 hour work week, many countries work a 48 hour work week, Mexico and Peru being amongst the countries that have a six day work week. Workers in the US average roughly 1748 hours worked per year; whereas, in Mexico, the average is 2228 hours worked per year, a full 21.5% more labor hours produced by Mexicans and paid at more than 15 times less than the American worker is paid. Where the work will go is obvious, and in fact, it already has. The TPP will just open the floodgates and remove control from American voter's hands.

The claim that this will "level the playing field," is accurate, but not for Americans. Americans will suffer greatly, because while the TPP does open the door to foreign markets, that door is open both ways. Also, the United States is relinquishing control of the internet, which it has controlled since its inception, as well as losing sovereignty in the process, cutting the power and and stifling the voice of the American people, by wresting firmly in the hands of an international community, the reins of control, hardly a position any superpower with their self interest and survival in mind, would cede to another governing body.

The TPP proclaims to mandate laws that will stabilize minimum wages, and in fact, to an extent, they do, whilst enforcing control over a plethora of other items that they also feel the need to govern:

"TPP has the strongest protections for workers of any trade agreement in history, requiring all TPP Parties to adopt and maintain in their laws and practices the fundamental labor rights as recognized by the International Labor Organization (ILO), including freedom of association and the right to collective bargaining; elimination of forced labor; abolition of child labor; and the elimination of employment discrimination. It also includes commitments, again required for all TPP Parties, to have laws governing minimum wages, hours of work, and occupational safety and health. All these are fully enforceable and backed up by trade sanctions.

The most important point that needs to be made, is the utter loss of freedom and control. It must also be stated, that while controlling wages (even from a liberal, unionist perspective) must be a good thing, the logic is flawed. Here is how:

Each of the 12 signatories have operated economic systems independent of each other for decades, if not centuries. Each party member has their own currency, banking system, government, all of which, control a number of factors. Everything from exchange rates, interest rates, housing prices, food prices as well as the amount even paid for electrical power (in Mexico for example, the government subsidizes heavily the amount its citizens pay for electricity), all fall within the scope of this, which is to say, that an American couple that have taken out a thirty year mortgage on their home, and perhaps even a 2nd mortgage, and paying $1000 a month for gasoline, light, and food, will now need to compete against a person from another country, that lives in government housing, pays no electrical bills, and survives off of 15 pesos (75 cents) of food per day. There is no possible way to implement the TPP without ripping the homes and livelihoods out of the people that live in the nations that have had traditionally had a higher gross national product.

NAFTA has already signaled a staggering trade deficit with just Canada and Mexico, losing more than a million jobs in the process, and now the intent is to include more nations, that make less than Americans do, increasing the competition against Americans and American products, which cost more to produce, that can't be afforded by someone who makes less, and giving away national sovereignty to achieve this?

This speaks nothing to the additional pain induced when one considers the fact that  unskilled labor will not be the only jobs America is losing. TPP has also made broad strokes to be able to send intellectual property abroad, and bring lower paid workers to the United States, in order to do jobs. That portion can be found in the first 6134 pages of the TPP, which i just the preamble and chapters 1 & 2, not including the rest of what they've hidden in the other 28 chapters of it.

If NAFTA was a bad cold, the TPP is Ebola.

 
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: G M on October 04, 2016, 04:26:35 PM
"If you like your country, you can keep your country".



I didn't notice it, but Obama has chosen to skim read the full text for you.

Here you go.

https://ustr.gov/tpp/#text

At the very bottom of the page, is the link to the full text.

Interesting is that Obama is assuring Americans, that he is "leveling the playing field for American workers & American businesses," and "putting" American workers, businesses, and values, "first."
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: DDF on October 04, 2016, 07:07:55 PM
If only it was funny. He's got a spot waiting at the head of the UN for himself.

"If you like your country, you can keep your country".



I didn't notice it, but Obama has chosen to skim read the full text for you.

Here you go.

https://ustr.gov/tpp/#text

At the very bottom of the page, is the link to the full text.

Interesting is that Obama is assuring Americans, that he is "leveling the playing field for American workers & American businesses," and "putting" American workers, businesses, and values, "first."
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: Crafty_Dog on October 04, 2016, 08:47:44 PM
Very glad to see this getting some serious attention. 
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: DDF on October 05, 2016, 06:41:43 AM
Very glad to see this getting some serious attention. 

Doing my best to process it PGuru Crafty. It's a lot. It's also one of the reasons that I don't think a lot of the media is talking about it, because it's so cumbersome and overreaching, that to write something critiquing all of the problems with it, would itself be a small book if done properly.
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: G M on October 05, 2016, 07:00:11 AM
Very glad to see this getting some serious attention. 

Doing my best to process it PGuru Crafty. It's a lot. It's also one of the reasons that I don't think a lot of the media is talking about it, because it's so cumbersome and overreaching, that to write something critiquing all of the problems with it, would itself be a small book if done properly.

Kind of like Obmacare, we have to pass it to see what's in it.
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: DDF on October 05, 2016, 07:07:23 AM
Very glad to see this getting some serious attention. 

Doing my best to process it PGuru Crafty. It's a lot. It's also one of the reasons that I don't think a lot of the media is talking about it, because it's so cumbersome and overreaching, that to write something critiquing all of the problems with it, would itself be a small book if done properly.

Kind of like Obamacare, we have to pass it to see what's in it.

Exactly. Exactly how it was done as well. I read Obamacare. It took me about a week. At what point exactly, will these politicians get punished, for not reading legislation that they're voting on?

Pelosi's own statement that is quoted here, is a sure reference, that she herself failed to read the legislation, or she would have had solid points with which to sway naysayers.
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: Crafty_Dog on October 05, 2016, 08:54:07 AM
I think we may have some interesting lurkers on this forum DDF.  Indeed we have a running joke about how things we develop here later show up in the repertoire of much bigger fish.  IIRC we are/were listed on a major search engine as one of the top 10 sources for Clinton crimes and corruption. 

(Does someone else remember this?)

Bottom line, the work you do here may find further resonance.
Title: TPP and Food Safety
Post by: DDF on October 05, 2016, 11:20:43 AM
Vietnam, one of the signatories to the TPP, will be processing food, that will be then made available to markets abroad, including the US.

There have already been problems with China and drugs that have made their way into foods and baby products in China, resulting in many people becoming sick and in some cases dying, with products from milk to vegetables to eggs to meat, being affected.

Vietnam has a standard practice within the seafood market, of injecting "CMC," a chemical that they get from China, mix with water to create a gelatinous substance, and inject directly into the shrimp to increase the total weight. The only problem? They don't know exactly what "CMC" is, yet still inject it directly into the shrimp.

For those that don't speak Vietnamese, this video is subtitled and you can see it here:
https://www.youtube.com/watch?v=WQZoWgohz0Q

and here:
https://www.youtube.com/watch?v=TR4v3Sj4s8U

What is CMC? Sodium carboxymethyl cellulose. The FDA classifies it as "generally safe" and therefore does not prohibit its use in foods.
http://www.livestrong.com/article/424545-what-is-sodium-carboxymethyl/


The problem is, given China's long and dated history with health problems arising out of their food and chemical industry, can the use of chemical compounds that will ultimately make their way to the American dinner table, be trusted? History has shown that it cannot. Worse, is the fact that foods processed in other countries and sent for export to foreign markets do not necessarily have to disclose the ingredients nor the processing details. Even the choice of simply not purchasing these goods may not be an option given the fact that through minimum trade requirements, which require a country's participation in TPP trade, any available products from one's home country may have been exported to another market (as is the case with high grade beef in Mexico), leaving only the cheaper, imported products available for consumption. The dangers reported here, are just the beginning.

Even the Young Turks touch the subject with "90% of the shrimp consumed by the American public coming from Asia," which is farmed in ponds that have feces and other pollutants, in effect farming the fish in waters that they pump full of antibiotics. The use of a pond has to be discontinued after seven years due to the toxicity of the water.

https://www.youtube.com/watch?v=QDAPi0r4d9s

At every turn, the TPP seems to be incredibly bad for Americans, so much so, that even dissent in signing the bill into law has united politicians across party lines.

EDIT: In searching for the exact legislation that control food ingredient disclosure, I came across a couple of interesting things:

The FDA states that - "Some additives could be eliminated if we were willing to grow our own food, harvest and grind it, spend many hours cooking and canning, or accept increased risks of food spoilage...." http://www.fda.gov/Food/IngredientsPackagingLabeling/FoodAdditivesIngredients/ucm094211.htm (http://www.fda.gov/Food/IngredientsPackagingLabeling/FoodAdditivesIngredients/ucm094211.htm)

The problem is this: The Federal Government has given itself the right to seize control of food production under the umbrella of the Secretary of Agriculture and Department of Homeland Security.

Executive Order 13603 - signed by Barack Obama March 16th, 2012 https://www.gpo.gov/fdsys/pkg/FR-2012-03-22/html/2012-7019.htm

"``Food resources'' means all commodities and
                products, (simple, mixed, or compound), or complements
                to such commodities or products, that are capable of
                being ingested by either human beings or animals...."

In the interest of national defense, "in peacetime and in times of national emergency," which to be honest, the interest of a ntion being prepared doesn't seem all that far fetched, until you consider the fact that in the wake of the groundwork Obama (and those before him), have laid, clears the way for this:

Which leads to this...

https://www.congress.gov/bill/114th-congress/house-bill/1599

Which was later made a part of S. 794 "A bill to reauthorize and amend the National Sea Grant College Program Act, and for other purposes" which was signed into law by Obama July 29th, 2016. The fact that the Senate stuffed it into another bill to pass it is telling:

"This bill was the vehicle for passage of the Safe and Accurate Food Labeling Act, which is the form it was enacted it. Prior to amendments, the bill regarded defunding Planned Parenthood and the National Sea Grant College Program.

As enacted, the bill created national food labeling standards for "bio-engineered" foods and prohibited the states from mandating their own labeling standards for "genetically engineered" foods."
https://www.govtrack.us/congress/bills/114/s764


Many in the past have attempted to discredit this as "conspiracy theories," and often times, they are correct to do so, except when there is a clear pattern. Monsanto technology written into the TPP, with the lobbying for the SAFE act, along with Americans prohibited from growing their own food should the government say so, and they have, in Texas, Missouri, South Dakota, Florida, and other places, being raided by the USDA and Sheriff's Departments, for a variety of reasons.

In the end, the Senate passed Senate Bill S.510, which gives them the express authority to decide what is safe to consume, and the "right" to lord authority over anyone should the FDA have "reason to believe."

http://www.naturalnews.com/030587_Senate_Bill_510_Food_Safety.html

AND DIRECTLY FROM THE BILL


 “(j) Exemption for seafood, juice, and low-acid canned food facilities subject to HACCP.—

“(1) IN GENERAL.—This section shall not apply to a facility if the owner, operator, or agent in charge of such facility is required to comply with, and is in compliance with, 1 of the following standards and regulations with respect to such facility:

“(A) The Seafood Hazard Analysis Critical Control Points Program of the Food and Drug Administration."

In the FDA's HACCP plan, they "certify" the producer, thereby negating the need to label the food.

"Answer: If the packaging is only what is minimally necessary in order to facilitate transport to the shore and subsequent unloading (e.g. totes or bulk bins), the operations onboard the harvest vessel would not subject it to the regulation. However, if the harvester places the product in packaging designed for marketing purposes (e.g. wholesale or retail packages or cases), then the operations onboard the vessel constitute "processing", and the vessel is covered by the seafood HACCP regulation."

http://www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/Seafood/ucm176892.htm

HACCP being the FDA's method of quality control, they address the subject of additives in detail, regarding both domestic and foreign processing, here:

"Those line entries examined or sampled by FDA are routinely examined or analyzed for microbiological contamination, parasites, decomposition and histamine testing, chemical contaminants (e.g., pesticides, dioxin, methyl mercury, and heavy metals), food and color additives, filth, mold, foreign objects, unapproved new animal (aquaculture) drugs, packaging, and labeling." http://www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/Seafood/ucm150954.htm

Basically, if the FDA approves it, it doesn't need to be labeled.

Noteworthy is the fact that the FDA has banned substances that have been found in fish; yet, still allow imports:

"In China, several antibiotics have been found in farm-raised fish such as tilapia, including leuco-malachite green, which FDA banned for aquaculture use in 1983 because of “serious toxicity.” Three-quarters of the tilapia we eat in this country comes from China."
http://www.foodsafetynews.com/2013/11/imports-and-exports-how-safe-is-seafood-from-foreign-sources/#.V_Z1kiTlysU

Also from the same article, the National Fisheries Institute, whom I have personally worked with in the Bering Sea, along with NOAA, naturally claim that they do an excellent job certifying that everything is safe and caught in accordance to law. Observers working for them, are bright, liberal in nature; therefore, generally care about their jobs, but with the amount of hours worked (round the clock shifts), and with the minimal number of observers, they miss a lot (fillets being dropped on the ground (where chemicals for cleaning boots has been tracked about) and put back into the boxes, and in a worse case scenario, the FDA can simply proclaim the food "safe for consumption."




Getting back to S510 and people growing their own food, Glenn Beck and Fox News addressed the subject of people growing their own food or transferring foodstuffs, noting that people per the bill can indeed, legally be prevented from growing their own food by law.



Without turning this into a survivalist/prepper issue, the above legislation has:


There is much to be made of all of this. It is a federal grab of power, globalization, the epitome of a "nanny state," in which, people that shun the legislation can be and are both punished, and forced into cooperation.

Again, in the words of the FDA, "some additives could be removed," but they didn't say "all additives." The FDA determines what you should consume, how much, and whether you should even know whether you are cognizant of it or not.

The way it is.
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: Crafty_Dog on October 05, 2016, 03:02:03 PM
Excellent points!

BTW, IIRC recently US law/regs were changed so that food that was previously identified as being from China or other countries no longer is so identified.
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: DDF on October 06, 2016, 08:29:25 AM
Excellent points!

BTW, IIRC recently US law/regs were changed so that food that was previously identified as being from China or other countries no longer is so identified.


I updated the preceding post Guru. Two main bills from the Senate (passing in 2010 and 2016) as well as an executive order from Obama from March of this year, all of which grant control to the Federal government, to do what they want, when they want, where they want, however they want to, to whomever they want to. The details are above.

Finishing a page count on the TPP... you have to like it when the chapter summaries put forth by the Whitehouse have a higher page count than the chapter itself...multiple instances of this.
Title: TPP Page Count Breakdown
Post by: DDF on October 06, 2016, 01:57:01 PM
Presenting the Trans Pacific Partnership Agreement - 8762 Pages:

Kept in secret with the exception of supervised scrutiny and no notes allowed until February 4th of 2016, referring to laws in multiple languages.

The novel "War and Peace" by comparison, is 1440 pages long.
Title: Stratfor: China looks to bust a move
Post by: Crafty_Dog on October 19, 2016, 04:58:38 AM
Summary

The fate of the Trans-Pacific Partnership (TPP) is growing less certain by the day, and China, whose rise the U.S.-led trade deal is meant to contain, is seizing the opportunity to promote its own alternatives. Its failure is by no means guaranteed, but if the deal does falter — as current anti-trade sentiment in the United States suggests it might — Beijing will be ready to offer up two replacements. The replacements, as it happens, would be helmed by none other than China, which hopes to create a model for future economic cooperation in the Asia-Pacific.
Analysis

China's Foreign Ministry announced Oct. 6 that it had completed a feasibility study for the Free Trade Area of the Asia-Pacific (FTAAP), a multilateral trade deal that Beijing plans to present at the Asia-Pacific Economic Cooperation summit Nov. 19-20. Then on Oct. 11, representatives from 16 countries convened in Tianjin for the 15th round of talks on the Regional Comprehensive Economic Partnership (RCEP) free trade proposal, which will conclude on Oct. 22.
A Risk of Isolation

So far, few details of either deal have emerged, but some hints paint the outlines of what both might end up looking like. As is true of most major trade agreements, negotiations over the RCEP have been shrouded in secrecy. But the accord, which builds on the 10-country Association of Southeast Asian Nations and its existing free trade agreements with China, India, Australia, Japan, South Korea and New Zealand, is similar in format to the TPP.

Like its U.S.-backed analog, the RCEP has been marketed as a comprehensive framework for liberalizing and harmonizing certain standards among its participants. Those include not only trade regulations for goods and services, but also politically sensitive measures such as intellectual property rights protections and a dispute settlement mechanism. (In fact, a document leaked last year showed that Japanese negotiators asked for intellectual property rights protections akin to those of the TPP.) Nevertheless, anecdotal evidence suggests that the RCEP, if enacted, would focus largely on liberalizing trade in goods, indicating it could be closer in practice to existing East Asian free trade agreements than to the TPP, which calls for a more thorough overhaul of regulations in industries of interest to developed economies like the United States, including pharmaceuticals and information technology.

The FTAAP, by comparison, may look more similar to the TPP — at least at first glance. Unlike the RCEP, which the United States is not party to, the FTAAP would encompass all 12 of the TPP's participants, plus Russia and Taiwan and every RCEP state except India. The United States even reportedly supported the FTAAP in its early stages before shifting its attention to its own version of the deal that cut China out of the picture.

But for the most part, membership is where the FTAAP and TPP's similarities end. The latter, for instance, includes stringent requirements on a host of issues — intellectual property rights and public divestment from state-owned enterprises, to name a few — that China would have a hard time meeting even if it opted to sign onto the deal. (Chinese President Xi Jinping's recent statements on the importance of the Communist Party's maintaining control over state-owned enterprises highlight these hurdles.) Perhaps more important, though, the TPP — regardless of its original intent — has developed an overtly strategic dimension in the past two years. It means to lay the foundation of future competition in the Asia-Pacific, a set of rules that China, unsurprisingly, is unlikely to accept. From the United States and Japan's point of view, the deal is a means to try to force China to get onboard with their interests or risk isolation.
A Clear Choice

For China, the FTAAP is a far better option. Compared with the TPP, the agreement — which is more theoretical construct than actual pact — would have fewer conditions for membership and encourage freer trade in goods and services throughout the region. It would not impose substantial protections for the technology industry or other sectors like it, an approach that the United States has staunchly opposed. After all, promoting free trade while failing to protect intellectual property would, in Washington's opinion, serve China's interests far more than those of the United States. Though the United States would still stand to gain in absolute income from the FTAAP, according to the Peterson Institute of International Economics, its relative gains would be dwarfed by China's gains. The same cannot be said of the TPP, which — though less profitable on the whole for the United States than the FTAAP could be — would benefit the United States far more than it would China.

In many ways, the FTAAP is a more desirable deal for Beijing than the RCEP is, too. In addition to the United States, it includes four countries in the Western Hemisphere — Mexico, Canada, Chile and Peru — where China wields little influence. Russia would also be a member, giving China a partner that it could count on to push back against Washington's initiatives in the Asia-Pacific. Of course, China is unlikely to abandon the RCEP entirely, especially if the United States begins to make headway in ratifying the TPP, which could prove complementary to the RCEP in the long run. But should the TPP fail, Beijing will undoubtedly renew its efforts to see the FTAAP through.

The TPP's members, which signed the deal in February, have a two-year window to ratify it. Within that time, the national legislatures of at least six signatories that collectively account for 85 percent of the bloc's total gross domestic product must approve the agreement. Because the United States represents more than 60 percent of the trade area's GDP, U.S. ratification is necessary to keep the deal alive. But with popular resistance to trade rising and the two major U.S. presidential candidates openly opposing the TPP, the chances of the deal being shuttered before it even gets off the ground cannot be ignored.
Title: CA Bullet Train might not be made in America
Post by: Crafty_Dog on November 12, 2016, 08:33:28 AM


http://www.capoliticalreview.com/capoliticalnewsandviews/governors-bullet-trains-might-not-be-made-in-america/

So, what is the argument here?  That we should pay more?
Title: Post election campaign now we get to the complexities of trade
Post by: Crafty_Dog on December 03, 2016, 09:33:09 AM
http://www.nytimes.com/2016/12/02/business/economy/trump-manufacturing-jobs-world-trade-china.html?emc=edit_th_20161203&nl=todaysheadlines&nlid=49641193
Title: Trump's Pay to Leave policy
Post by: Crafty_Dog on December 05, 2016, 07:25:14 PM
I'm having some trouble with Trump's concepts here.  Is he saying he will be paying a 35% import tax on the ties he has made for him in China?
Title: WaPo: Plans to make fighter jets in India
Post by: Crafty_Dog on December 06, 2016, 09:58:51 AM
https://www.washingtonpost.com/world/asia_pacific/as-trump-vows-to-stop-flow-of-jobs-overseas-us-plans-to-make-fighter-jets-in-india/2016/12/05/a4d3bfaa-b71e-11e6-939c-91749443c5e5_story.html?utm_term=.3d2a9e5622b9
Title: Re: Trade Issues, Greg Mankiw, trade 'deficits' pro and con
Post by: DougMacG on December 14, 2016, 05:42:56 AM
Greg Mankiw,  Chair of Harvard Econ Dept on pros and cons of trade 'deficits'.
NY Times Dec 2 2016

Want to Rev Up the Economy? Don’t Worry About the Trade Deficit
87

DECEMBER 2, 2016
Economic View
By N. GREGORY MANKIW
The economic policy of President-elect Donald J. Trump is still a work in progress. But if campaign rhetoric is a reliable guide, reorienting trade policy may become one of the main goals of the new administration.

Perhaps the best indication of Mr. Trump’s thinking is a report released by the campaign in September. The report, “Scoring the Trump Economic Plan: Trade, Regulatory and Energy Policy Impacts,” was written by Peter Navarro and Wilbur Ross. Mr. Navarro is an economics professor at the University of California, Irvine. Mr. Ross is an investor whom Mr. Trump has chosen to be secretary of commerce.

A major theme of the report is concern about the trade deficit. In recent years, American imports have exceeded exports by about $500 billion a year. Mr. Navarro and Mr. Ross argue that if better policies eliminated this “trade deficit drag,” gross domestic product would be higher and more people would be employed.

That conclusion is correct, but only in a superficial sense. Gross domestic product is, by definition, the sum of consumption spending, investment spending, government purchases and the net exports of goods and services. If net exports rose from their current negative value to zero, and the other three components stayed the same, domestic production would increase and, consequently, so should employment.

But a fuller look at the macroeconomic effects of trade deficits suggests that things aren’t so simple.


The most important lesson about trade deficits is that they have a flip side. When the United States buys goods and services from other nations, the money Americans send abroad generally comes back in one way or another. One possibility is that foreigners use it to buy things we produce, and we have balanced trade. The other possibility, which is relevant when we have trade deficits, is that foreigners spend on capital assets in the United States, such as stocks, bonds and direct investments in plants, equipment and real estate.

In practice, these capital inflows from abroad have been large. Net foreign ownership of American capital assets has risen to about $8 trillion from $2.5 trillion at the end of 2010. American companies moving production overseas get a lot of attention, but this data shows that capital has, over all, moved in the opposite direction.

It is easy to understand why foreigners are eager to buy American assets. Despite the meager recovery from the financial crisis and recession of 2008-9, the United States remains one of the more vibrant economies of the developed world. And if you want a safe place to park your wealth, United States Treasuries are your best bet.

The trade deficit is inextricably linked to this capital inflow. When foreigners decide to move their assets into the United States, they have to convert their local currencies into American dollars. As they supply foreign currency and demand dollars in the markets for currency exchange, they cause the dollar to appreciate. A stronger dollar makes American exports more expensive and imports cheaper, which in turn pushes the trade balance toward deficit.

From this perspective, many of the policies proposed by Mr. Trump will increase the trade deficit rather than reduce it. He has proposed scaling back both burdensome business regulations and taxes on corporate and other business income. His tax cuts and infrastructure spending will most likely increase the government’s budget deficit, which tends to increase interest rates. These changes should attract even more international capital into the United States, leading to an even stronger dollar and larger trade deficits.

We have already started to see some of these forces at work. In the 10 days after Mr. Trump’s victory, the interest rate on 10-year Treasury bonds increased by 46 basis points (0.46 of a percentage point). The dollar appreciated by about 4 percent against a broad basket of currencies to its highest level since 2002.

But what about those tariffs that Mr. Trump sometimes threatens to impose on foreign countries? They would certainly curtail the amount of international trade, but they are unlikely to have a large impact on the trade deficit.

When American consumers facing higher import prices from tariffs stop buying certain products from abroad, they will supply fewer dollars in foreign-exchange markets. The smaller supply of dollars will drive the value of the dollar further upward. This dollar appreciation offsets some of the effects of the tariff on imports, and it makes American exports less competitive in world markets.

But it doesn’t matter much, anyway, because in reality, trade deficits are not a threat to robust growth and full employment. The United States had a large trade deficit in 2009, when the unemployment rate reached 10 percent, but it had an even larger trade deficit in 2006, when the unemployment rate fell to 4.4 percent.

Rather than reflecting the failure of American economic policy, the trade deficit may be better viewed as a sign of success. The relative vibrancy and safety of the American economy is why so many investors around the world want to move their assets here. (And similarly, it is why so many workers want to immigrate here.)

Mr. Trump says he wants to restore more rapid economic growth. That is a sensible goal. But focusing on the trade deficit is not the best way to achieve it.
Title: Re: Trade Issues, Greg Mankiw, trade 'deficits' pro and con
Post by: DDF on December 14, 2016, 10:02:10 PM
Greg Mankiw,  Chair of Harvard Econ Dept on pros and cons of trade 'deficits'.
NY Times Dec 2 2016



But a fuller look at the macroeconomic effects of trade deficits suggests that things aren’t so simple.

Always trying to overcomplicate something that is basic math.

When the United States buys goods and services from other nations, the money Americans send abroad generally comes back in one way or another.

Right into the pockets of people that are already rich, of the Chinese buying American land.

One possibility is that foreigners use it to buy things we produce, and we have balanced trade. The other possibility, which is relevant when we have trade deficits, is that foreigners spend on capital assets in the United States, such as stocks, bonds and direct investments in plants, equipment and real estate.

As I stated above.



Mr. Trump says he wants to restore more rapid economic growth. That is a sensible goal. But focusing on the trade deficit is not the best way to achieve it.

Spoken like a die hard liberal.... Sorry... He's a Harvard guy. Could have been Yale I guess. He could take Kerry on a date I suppose, hold hands.
Title: Re: Trade Issues, Greg Mankiw, trade 'deficits' pro and con
Post by: DougMacG on December 15, 2016, 06:58:12 AM
DDF,  Thanks for your view on that.

My opinion, BOTH imports and exports are good.  It is the uneven playing field that isn't.  We don't have control over their playing field, but we do have considerable influence over it and that is where the tough talk and action by Trump could be very helpful.

To increase exports by making it less punitive to produce here in terms of taxes and regulations is great policy and great for income and wealth creation.  But to have government curtail our right and freedom to buy anything we want from anywhere around the world (with legitimate exceptions like national security interests) is leftist, anti-freedom policy IMHO, and even our own recent leftists didn't do much of that.

A trade deficit is a symptom of things, not a central problem in itself.  Imports and exports are two different phenomena that grow at different rates at different times.  There is no reason they should be exactly the same.  Yet when they are way out of whack, other problems arise like currency rate changes and capital flows.

Besides anti-productive policies at home, the other factor limiting our exports is that the economy sucks nearly everywhere else in the world even worse than here.  We don't have any US-sized, prosperous, high growth countries to sell to.   When Margaret Thatcher and Ronald Reagan turned Britain and the US around, the rest of the world was forced to reform some of their own problems too in order to compete.  Watch for that effect with Trump if our policies really do get turned around and our economy really does start moving again.  We don't want IMHO to bring imports down to the size of lethargic exports; we want to grow business on all fronts for all our people who want to produce.

To put a special incentive or economic penalty on some businesses and not others in similar circumstances is a violation of equal protection under the law.  Reagan did it a couple of times in temporary and emergency situations, but those were the exceptions or violations of his principles, not the engine of the growth he brought. 

If Trump focuses on doubling the growth rate of the whole economy rather than micromanaging the sectors of where and how that happens, we will be far better off.
Title: Re: Trade Issues: (TPP Trans Pacific Partnership and more)
Post by: DDF on December 15, 2016, 03:09:20 PM
I agree with your analysis 100%.

There is no way to compete with the 156 dollars a month they make in Vietnam, or the daily wage here in Mexico, without finding a way to stimulate their economies too, because if it comes down to dollars versus dong or pesos in terms of manufacturing, we lose. I've seen it. Key focus is getting other corrupt governments to play ball. I've seen that personally as well.
Title: WaPo on Ford's decision to build in US
Post by: Crafty_Dog on January 04, 2017, 09:17:55 AM
https://www.washingtonpost.com/news/wonk/wp/2017/01/04/the-real-reason-ford-abandoned-its-plant-in-mexico-has-little-to-do-with-trump/?utm_term=.84b58104863a&wpisrc=nl_most&wpmm=1
Title: Stratfor's analysis of prospects for NAFTA
Post by: Crafty_Dog on January 04, 2017, 09:19:48 AM
second post

Trade Stays Intact

The North American Free Trade Agreement will remain largely intact in 2017 despite U.S. campaign promises made to the contrary in 2016. The fact of the matter is that the trade ties and supply chains of North America are so tightly bound that a sudden and dramatic reversal to an agreement such as NAFTA would contravene the interests of all its members. The United States will nonetheless renegotiate the deal, albeit gradually, to honor the campaign promises made by president-elect Donald Trump. Those talks will likely extend beyond 2017.

That is not to say the United States is without options for improving the terms of the contract. The Trump administration could increase regional content requirements for products to qualify for tariff-free export to the United States and use non-tariff barriers more selectively. Mexico will have much more at stake in the negotiations, but its imperative is far simpler. It means to leverage its low labor costs and its high number of free trade agreements to maintain as much of the status quo as possible on trade and to maintain foreign direct investment flows into domestic manufacturing. And so Mexico will have a few tools to use against the United States. Mexico could influence the Trump administration by allying with businesses and states that would be hurt by more expensive labor and goods. (As a matter of fact, it has already begun to do so.) It could, moreover, leverage intelligence cooperation on counternarcotics operations to try and shape the dialogue.

Lower investment flows that could result from the uncertainty surrounding the NAFTA negotiations could hurt Mexico in the meantime. But even this will be tempered by Mexico's proximity to the United States and its multitude of free trade agreements. Canada, with its advanced economy and high labor costs, will receive much less scrutiny. The Canadian government has indicated its willingness to take part in the NAFTA talks and will be seeking measures to protect its own manufacturing sector.

Canada could also renegotiate NAFTA's investor-state dispute settlement, which allows an investor to sue a foreign government in international arbitration without going through domestic courts. Having been challenged under the ISDS procedure, Canada will certainly want to revisit its terms, even if a business-friendly Trump Cabinet were to resist measures that undermine foreign corporate protection abroad.

The negotiations will be slow going, no matter how they play out. Many of the points up for discussion would still center on concentrating economic production in North America, where supply chain interdependencies are developing organically.
A Tighter Energy Bloc

The Trump administration will loosen regulations on domestic energy, enabling North America to more easily integrate as an energy bloc. It plans to streamline the process for federal permits on energy projects and to pull back from climate change initiatives, measures that could also provide a relative boost to the coal and nuclear power industries. They could also enable the beleaguered U.S. energy sector to rebound after a prolonged depression in the price of oil. A gradual recovery in North American production will, in turn, allow for a modest increase in global oil prices since it will take time for increased North American oil output to offset coordinated production cuts by the world's oil producers.

Canada and Mexico will meanwhile continue to make measured progress in energy integration with the United States. In Canada's case, this will include increased cross-border pipeline construction and supply integration. In Mexico's case, it will entail implementing broader energy reforms, including further liberalizing domestic energy prices and loosening Pemex's dominance in refining and distribution.
The Pinch of Low Prices

Latin American commodities exporters will continue to feel the pinch of low commodities prices in 2017. The economies of Brazil, Argentina, Chile and Colombia will begin to recover somewhat, but slow demand growth from China, low oil prices and an oversupply of agricultural commodities such as soybeans will otherwise keep exports largely depressed.

Further stunting economic growth and fiscal health is the strength of the U.S. dollar. Colombia, Brazil, and Chile have substantial dollar-denominated debt, which will become harder to repay or rollover. For Venezuela, which is already on the edge of default, heavier debt payments will increase the risk of default. For Brazil, Chile, Mexico and Argentina, more expensive debt payments amid the general commodity downturn will limit the amount governments can spend on domestic priorities.

A modest increase in global oil prices could meanwhile bring temporary relief for oil producing nations in Latin America. Even a temporary hike would be a welcome reprieve for central governments, which would then have a little more leeway in managing public finances. For Venezuela, a country already in an extreme state of economic deterioration, even a slight rise in oil prices could lower the odds that it will default on its foreign debt.

And so, faced as they are with relatively low export growth, certain Latin American countries will seek increased access to markets abroad by advancing trade agreements with nations outside the region. In light of the demise of the Trans-Pacific Partnership and the rise of new if limited NAFTA negotiations, Mexico will tentatively try to enter discussions on trade deals with Asian states, particularly with China. The countries that comprise Mercosur, or the Common Market of the South, will also continue to negotiate with the European Union on a future trade agreement, though political constraints on both sides of that dialogue could drag things out.
Title: China Trade Shock
Post by: Crafty_Dog on January 19, 2017, 10:55:50 PM
http://www.aei.org/publication/what-now-for-workers-after-the-china-trade-shock-short-read-version/?utm_source=paramount&utm_medium=email&utm_content=AEITODAY&utm_campaign=011917
Title: WSJ: Trump's real trade problem is money
Post by: Crafty_Dog on January 25, 2017, 05:14:36 AM
Not sure that I understand this , , ,
===============================

Trump’s Real Trade Problem Is Money
Protectionism won’t cure the import-export imbalance. The solution lies in monetary policy.
Photo: iStock
By John D. Mueller
Updated Jan. 24, 2017 7:25 p.m. ET
42 COMMENTS

Neither President Trump nor any of his economic advisers appear to have heard of, let alone be worried about, the Triffin Dilemma. But Mr. Trump’s economic and trade policies will fail unless he finds a solution to the dilemma—the inherent incompatibility, in a reserve-currency country, of domestic policy with the international monetary order.

A gold or other precious-metal standard prevents the financing of budget deficits through the monetary system. When America had a gold or silver standard, the federal budget ran an annual surplus averaging 0.4% of gross domestic product; when it hasn’t, the average deficit has been 2.7%. Similarly, from 1979-2015, U.S. state governments—which cannot print money—averaged budget deficits of 0.3% of GDP, while in the same economy the federal deficit averaged 3.3%. There has been no long-term inflation under the gold or silver standard in American history; substantial inflation (or deflation) has occurred only with paper money.

The move away from precious metals began more than a century ago. John Maynard Keynes argued in 1913 that whether a monetary authority holds gold or foreign-exchange reserves “is a matter of comparative indifference.” Colonial India’s “Gold-Exchange Standard,” he wrote, “far from being anomalous, is in the forefront of monetary progress” toward what he called “the ideal currency of the future.” British experts succeeded in promoting foreign-exchange reserves at the 1922 Genoa Conference, to forestall redemption of British World War I debts in gold. That ended the international gold standard born in Genoa in the 1440s, after the Hundred Years War.

The French economist Jacques Rueff explained in 1932 why the gold-sterling-dollar standard had collapsed: With the creation of—for example—dollar reserves, purchasing power “has simply been duplicated, and thus the American market is in a position to buy in Europe, and in the United States, at the same time.” Hence the purchase of dollar reserves causes inflation (and the sale of dollar reserves, deflation) for countries with currencies tied to the reserve currency. Moreover, the credit duplication makes prices rise faster in the reserve-currency country, causing its goods to be uncompetitive and turning it from an international creditor to a debtor.

The post-World War II Bretton Woods gold-dollar-exchange standard broke down in 1968-71, for essentially the same reasons that had caused the interwar gold-sterling-dollar standard to collapse. Since 1971, international payments have been made chiefly in paper dollars.

Thus the Triffin Dilemma, named for Belgian-American economist Robert Triffin. National income (or output) is the sum of private consumption, private investment, government consumption, government investment, and net exports. Many economists wrongly assume that total world net exports must equal zero, but in fact countries participating in the international gold standard had combined net exports equal to the total increase in world gold reserves (which in turn approximated world gold exports). As a result, world monetary policy was countercyclical: When the prices of other goods fell, the profitability of gold mining rose.

Triffin showed that a monetary system based on a reserve currency is unsustainable, since foreign official dollar reserves (for example) are acquired and must be repaid in goods. In other words, the increase in official dollar reserves equals the net exports of the rest of the world, which means it must also equal U.S. international payments deficits—an unsustainable situation.

As the nearby chart shows, the cost of German manufactured goods has roughly tripled since 1955, but the cost of American manufactured goods has more than sextupled. That is why U.S. trade and budget deficits will be impervious to any Trump administration “deals” that focus on trade rather than monetary reform.

There are three main alternative solutions to the Triffin Dilemma:

First, muddle along under the current “dollar standard,” a position supported by resigned foreigners and some nostalgic Americans—among them Bryan Riley and William Wilson at the Heritage Foundation, James Pethokoukis at the American Enterprise Institute and Ramesh Ponnuru at National Review.

Second, turn the International Monetary Fund into a world central bank issuing paper (e.g., special drawing rights) reserves—as proposed in 1943 by Keynes, since the 1960s by Robert A. Mundell, and in 2009 by Zhou Xiaochuan, governor of the People’s Bank of China. Drawbacks: This kind of standard is highly political and the allocation of special drawing rights essentially arbitrary, since the IMF produces no goods.

Third, adopt a modernized international gold standard, as proposed in the 1960s by Rueff and in 1984 by his protégé Lewis E. Lehrman, writing on this page, and then-Rep. Jack Kemp.

The stakes are high. The Great Depression began with the collapse of the interwar monetary system in 1929-32, aggravated by the trade war that America’s Smoot-Hawley tariff triggered. Ironically, if Mr. Trump ignores the Triffin Dilemma, he will perforce promote the cosmopolitan crony capitalism by which the Clinton Foundation stuffed itself with so much cash from America’s client-states.

Mr. Trump’s own nostrum of trade protectionism is an understandable but easily exploded fallacy. The current account (the broadest measure of the trade balance) must equal the excess of national saving over investment. Therefore, while tariffs can curb imports, they cannot increase the trade balance, because they don’t affect the saving-investment balance; instead, they cause the currency to rise and exports to fall.

From 1971 through 2015, U.S. current account deficits totaled 93% of GDP because of the Triffin Dilemma: The increase in dollar reserves must equal the rest of the world’s surplus (and America’s deficits) in net exports. Perhaps it would take a deal-maker in Alexander Hamilton’s league to end the exorbitant burden of the dollar’s reserve-currency role and replace it with the only monetary standard that has worked in American or world history: gold.

Mr. Mueller directs the economics and ethics program at the Ethics and Public Policy Center.
Title: Scott Grannis comments on the Mueller article
Post by: Crafty_Dog on January 25, 2017, 10:34:10 AM
second post

"Mueller is right, but this is just one more way of demonstrating that Trump utterly fails to understand how international trade and the balance of accounts work. In our current system is it not only impossible but also foolhardy to attempt to have a balance in our international trade accounts. Trade ignorance is the most glaring of Trump’s deep-seated faults. On almost every other issue he is moving correctly. Too bad he’s not perfect. We can only hope that someone sets him right on this issue before he does something stupid."
Title: WaPo: Trade Issues and Capital Flows
Post by: Crafty_Dog on February 17, 2017, 10:13:29 AM
Not impressed with this article but I post it because it does make an argument of some relevance:

https://www.washingtonpost.com/posteverything/wp/2017/02/16/why-is-president-trump-attacking-foreign-investment-in-the-united-states/?utm_term=.1dbc4a4e02ea
Title: POTH: Trump talk rattles aerospace industry
Post by: Crafty_Dog on February 26, 2017, 07:36:22 AM
https://www.nytimes.com/2017/02/23/us/trump-talk-rattles-aerospace-industry-up-and-down-supply-chain.html?hpw&rref=us&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well
Title: WSJ: Chinese firms setting up shop in US
Post by: Crafty_Dog on February 27, 2017, 07:36:48 AM
https://www.wsj.com/articles/for-more-chinese-firms-it-pays-to-make-it-in-the-u-s-a-1488127931?mod=djemCFO_h
Title: Wesbury makes the case for Free Trade
Post by: Crafty_Dog on February 27, 2017, 11:17:03 AM
Monday Morning Outlook
________________________________________
Trade Is Not Our Enemy To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 2/27/2017

We think it was Art Laffer who said it best. Let's say the US invented a cure for cancer and China a cure for heart attacks. If China decided to ban the cure for cancer, should the US retaliate by banning the cure for heart attacks?

Obviously not! The US is better off trading with China regardless of what China does. And although things like computers and toys are not nearly as serious as a heart attack, the same principal applies. Think about this idea the next time you hear about some other country "killing" the US on trade.

The US has run a merchandise trade deficit every year since 1975. The US has also run persistent trade deficits with many countries around the world, including Canada and Germany for the past 40 years, China for 35 years, and Mexico for the past 20 years. And yet it's the US that remains a magnet for immigrants from around the world. If the US is getting killed economically, wouldn't people be leaving, not trying to get here? People vote with their feet and the votes clearly suggest there is more economic opportunity in America, enough more that people enter illegally.

Some are concerned that global trade flows for the US have peaked, and it is true that overall imports and exports slowed in late 2014, 2015 and 2016. But we attribute this to the large drop in oil prices. We spent less on oil imports and oil exporters (like OPEC) earned fewer dollars to spend back here.

But, "real" (inflation adjusted) US goods exports outside the oil sector rose 5% in 2016 and are up 2.6% per year in the last decade. The real value of non-oil imports increased 4.2% in 2016 and are up 2.5% per year in the past decade. All of these figures are outstripping real economic growth in the US. Trade is an unambiguous positive for growth worldwide.

Although some analysts have spread fear about our trade in services, we see no reason for concern. US service sector exports ended 2016 at an all-time high. Service exports did decline 1.1% in 2015, but if that's supposed to be a leading sign of economic weakness, why didn't we have a recession in 2016? And why are broader measures of the economy still improving? We think the 2015 drop was a result of less dollars flowing through the trade system as oil prices fell.

Some argue that trade deficits must be offset by future trade surpluses. We beg to differ. The US finances its trade deficits with a surplus of capital coming in from the rest of the world. If foreigners were buying US assets that generated a high return on capital, you can make up a story where that could eventually be a problem. We could find ourselves in a situation where we have to both pay for our trade deficits and give foreign investors a healthy return.

But foreign investors are willing to earn a very low rate of return on their US assets – the price they pay for the safety and security of the US. That return is so low, in fact, that despite owning considerably more US assets than the amount of assets Americans own in foreign countries, foreigners earn far less on American assets than US investors earn on foreign assets.

Ultimately, free trade is critical to the prosperity of the US. Policies that seek to protect certain industries or companies are just a way of putting politicians in charge and weakening the inherent resourcefulness of the American people.
Title: A theory about Chinese History
Post by: Crafty_Dog on March 02, 2017, 08:05:19 AM
http://www.businessinsider.com/china-zhenge-he-treasure-fleet-elite-free-trade-2017-2?IR=T
Title: The case for Trump Trade Theory
Post by: Crafty_Dog on March 06, 2017, 07:03:28 AM
Why the White House Worries About Trade Deficits
An imbalance imperils economic growth—and could put U.S. national security in jeopardy.
The then-president-elect speaking at Carrier Corp. in Indianapolis, Dec. 1, 2016.
The then-president-elect speaking at Carrier Corp. in Indianapolis, Dec. 1, 2016. Photo: Bloomberg News
By Peter Navarro
Updated March 5, 2017 6:21 p.m. ET
120 COMMENTS

Do trade deficits matter? The question is important because America’s trade deficit in goods is large and persistent, about $2 billion every day.

The economic argument that trade deficits matter begins with the observation that growth in real GDP depends on only four factors: consumption, government spending, business investment and net exports (the difference between exports and imports). Reducing a trade deficit through tough, smart negotiations is a way to increase net exports—and boost the rate of economic growth.

Suppose America successfully negotiates a bilateral trade deal this year with Mexico in which Mexico agrees to buy more products from the U.S. that it now purchases from the rest of the world. This would show up in government data as an increase in U.S. exports, a lower trade deficit, and an increase in the growth of America’s GDP.

Similarly, if the U.S. uses its leverage as the world’s largest market to persuade India to reduce its notoriously high tariffs and Japan to lower its formidable nontariff barriers, America will surely sell more Washington apples, Florida oranges, California wine, Wisconsin cheese and Harley-Davidson motorcycles. Just as surely, the U.S. trade deficit would fall, economic growth would increase, and real wages would rise from Seattle and Orlando to Sonoma and Milwaukee.

Now, what about the investment term in the GDP equation? When U.S. companies offshore their production because of America’s high taxes or burdensome regulations, that shows up in government data as reduced nonresidential fixed investment—and a growth rate lower than it would be otherwise.

That isn’t the end of the story. If such offshored production then generates products for export back into the U.S.—say, an American consumer buys a Ford Focus imported from Mexico rather than assembled in Detroit—the trade deficit rises, further reducing growth.

To better understand these complex adjustments, consider Carrier. Its management had announced the company would close its air-conditioner factory in Indianapolis and move to Mexico—and then sell products back into the U.S. tariff-free. But President-elect Trump and Vice President-elect Pence negotiated a deal to keep Carrier in the U.S. and expand its facilities. How will this show up in government statistics? Fixed nonresidential investment will increase rather than decrease. Imports from Mexico will be lower than they would be otherwise, and U.S. exports will be higher. In today’s parlance, that’s “all good.”

The national-security argument that trade deficits matter begins with this accounting identity: Any deficit in the current account caused by imbalanced trade must be offset by a surplus in the capital account, meaning foreign investment in the U.S.

In the short term, this balance-of-payments equilibrium may be benign, as foreigners return our trade-deficit dollars to American shores by investing in U.S. bonds and stocks and perhaps by building new production facilities. The extra capital keeps mortgage rates lower, the stock market abundantly capitalized, and Americans more fully employed.

But running large and persistent trade deficits also facilitates a pattern of wealth transfers offshore. Warren Buffett refers to this as “conquest by purchase” and warns that foreigners will eventually own so much of the U.S. that Americans will wind up working longer hours just to eat and to service the debt.

Dark though it is, Mr. Buffett’s scenario may still be too rosy. Suppose the purchaser is a rapidly militarizing strategic rival intent on world hegemony. It buys up America’s companies, technologies, farmland, food-supply chain—and ultimately controls much of the U.S. defense-industrial base. How might that alternative version of conquest by purchase end for our sons and daughters? Might we lose a broader cold war for America’s freedom and prosperity, not by shots fired but by cash registers ringing? Might we lose a broader hot war because America has sent its defense-industrial base abroad on the wings of a persistent trade deficit?

Today, after decades of trade deficits and a mass migration of factories offshore, there is only one American company that can repair Navy submarine propellers—and not a single company that can make flat-panel displays for military aircraft or night-vision goggles. Meanwhile, America’s steel industry is on the ropes, its aluminum industry is flat on its back, and its shipbuilding industry is gathering barnacles. The U.S. has begun to lose control of its food-supply chain, and foreign firms are eager to purchase large swaths of Silicon Valley’s treasures.

Much of Wall Street and most economists simply don’t care. But to paraphrase Mike Pence on the 2016 campaign trail, the people of Fort Wayne know better. The analysts at the Pentagon know better, too. That’s why, for both economic and national-security reasons, it is important to bring America’s trade back into balance—through free, fair and reciprocal trade.

Mr. Navarro is director of the White House National Trade Council. This article is adapted from his March 6 address in Washington before the National Association of Business Economists.
Title: WSJ/Bolton: Trump, Trade, and Sovereignty
Post by: Crafty_Dog on March 08, 2017, 10:00:55 AM

By John Bolton
March 7, 2017 6:59 p.m. ET
78 COMMENTS

President Trump’s trade rhetoric until now has been simple and effective: America is getting ripped off, he says, and things need to change. Simplicity works on the campaign trail, but how does it translate into actual governance?

Earlier this month the administration submitted the annual National Trade Policy Agenda to Congress. The submission takes particular aim at the World Trade Organization’s “Dispute Settlement Understanding,” which provides a quasi-judicial process for resolving international trade disagreements. Although technical, even arcane, the DSU is dear to the hearts of global-governance advocates. The Trump administration is right to criticize its performance.

Agreed to during the Uruguay Round of world trade talks in 1994, the DSU has had some successes. But it is often criticized for failing to deter violations of the WTO’s substantive trade provisions and for too often exceeding its mandate by imposing new obligations on one or more parties, particularly against American interests.
–– ADVERTISEMENT ––

This alarming trend extends beyond trade. A rising number of international agreements create “judicial” or “legislative” bodies that interpret and expand obligations well beyond what is laid out in underlying treaties, placing them beyond the effective control of domestic democratic institutions. This trend raises legitimate fears among states that they will lose sovereign authority. This fear is particularly acute in America, where the Constitution unmistakably fixes sovereignty in “We the People.”

The U.S. has in the past rejected or renounced international agreements that were not conducive to its interests. In 1986 the Reagan administration withdrew from the compulsory jurisdiction of the International Court of Justice. In 2002 the Bush administration unsigned the Rome Statute, which created the International Criminal Court. The U.S., thankfully, still has not ratified the Law of the Sea Treaty, thereby avoiding the jurisdiction of the tribunal it creates.

Washington has also blocked declarations by periodic “treaty-review conferences,” which have a similar tendency to expand member-state obligations beyond those contained in the original agreements. Likewise, the Trump administration is considering withdrawing from the U.N. Human Rights Council, whose creation the Bush administration voted against in 2006, and which the U.S. did not join until President Obama took office in 2009. The American people are often the last to learn of their new and purportedly legally binding commitments.

That isn’t to say that these international decision-making bodies are established exclusively to evade the burdens of America’s Constitution, only that evasion is their clear consequence. The unspoken objective is to constrain the U.S., and to transfer authority from national governments to international bodies.

The specifics of each case differ, but the common theme is diminished American sovereignty, submitting the United States to authorities that ignore, outvote or frustrate its priorities. Nothing in the Constitution contemplates such submission to international treaties or bodies. While many European Union governments seem predisposed to relinquish sovereignty, there is scant hint of similar enthusiasm in America. Moreover, the United Kingdom just dealt a stunning blow to the notion of Europe’s “ever closer union.” By reasserting their sovereignty, the British are in the process of escaping, among other things, the European Court of Justice and the European Court of Human Rights.

That brings us back to trade. The DSU is not, as some say, analogous to U.S. courts, which preserve the Constitution’s nationwide free-trade area through the “dormant Commerce Clause” doctrine. America is a real civil society where real courts have real enforcement capabilities—a far cry from the “global community” fantasyland. If Americans feel increasingly unable to restrain the exercise of judicial and legislative power at home, why should anyone be surprised to learn that international bodies are even worse?

Limiting an aggrieved country’s ability to resort to the DSU is not a rejection of free trade. To the contrary, it is a rejection of the unaccountable, legalistic morass into which free trade can all but disappear. In reality, ignoring DSU outcomes has always been an option for those prepared to face the consequences.

What is the World Trade Organization’s central objective? Is it to promote actual free trade, or is it merely to reify the DSU? If, in fact, this faltering dispute-resolution mechanism is the WTO’s central pillar, without which global free trade is doomed to collapse, we can legitimately conclude there is something gravely wrong with the direction of the basic enterprise.

Some countries cause more global trade problems than others. China is doing tangible harm to the regime of liberal international trade by striking first, and sometimes repeatedly, in violation of substantive WTO obligations in fields like intellectual property protection. Such countries—not those that retaliate rather than submit to the DSU—deserve the world’s ire.

If the DSU fails to deter repeated acts of trade aggression because of its cumbersome nature and faulty decisions, then the problem is likely the DSU, not its critics. Ironically, many global-governance advocates play down the DSU’s significance since it involves only trade, not existential political questions. Such modesty might seem becoming, but precedents established in one aspect of international affairs inevitably bleed into others.

The burden properly lies with the White House to specify how it will confront the DSU’s failings, many of which seem embedded in its design. Whatever steps President Trump recommends should be understood and measured against the larger dangers of global governance. The shadows cast by other flawed multilateral “authorities” make clear that U.S. sovereignty is at stake.

Mr. Bolton is a senior fellow at the American Enterprise Institute and author of “Surrender Is Not an Option: Defending America at the United Nations and Abroad” (Simon & Schuster, 2007).
Title: Trump EOs on China trade week before meeting Chinese Xi
Post by: Crafty_Dog on March 30, 2017, 08:52:44 PM
http://www.cnn.com/2017/03/30/politics/trump-executive-orders-trade-china/index.html
Title: Trade Issues: Trump advisers wrong on Korean trade agreement
Post by: DougMacG on April 06, 2017, 07:22:05 AM
Anti-free trade tough talk requires reliance on false facts.
-------------------------------------------------------------------
Trump Advisers Are All Wrong about South Korea Trade Deal
By ALAN REYNOLDS
https://www.cato.org/blog/trump-advisers-are-all-wrong-about-korea-trade-deal-korus

The Wall Street Journal reports: “Mr. Trump’s nominee for U.S. Trade Representative singled out Mexico and South Korea during his Senate confirmation hearing as sparking American trade deficits. ‘In some cases, the rules don’t seem to be working as well as others,’ Robert Lighthizer said. Critics say the deal has led to a flood of South Korean cars, auto parts, memory chips, motors and pumps into the U.S., weighing on American competitors and jobs. A U.S. Trade Representative report this month said the pact… doubled the U.S. trade deficit in goods with South Korea.”

National Trade Council boss Peter Navarro has likewise claimed “We lost 100,000 jobs because of that South Korean deal. Our trade deficit has doubled, and, more importantly, 75 percent of the damage that has been caused by that deal has been to the auto industry itself, which, of course, is based in Michigan.”

Navarro, Lighthizer and the Journal’s unnamed critics are entirely wrong about the March 15, 2012 Korea/U.S. Free Trade Agreement (KORUS). 

KORUS could not possibly have “led to a flood of South Korean… memory chips, motors and pumps into the U.S.” because memory chips were already duty-free before that FTA, and so were motors (HS code 8501) and pumps (8413).

KORUS could not possibly explain the post-recession 2010-2015 rise in U.S. imports from South Korea because most U.S. tariffs were scheduled to be reduced from 2016 to 2021 – not from 2010 to 2015.

KORUS had precisely zero effect on U.S. imports of Hyundai and Kia vehicles before 2016 because the U.S. tariff on Korean cars (HS code 8703) was 2.5% before KORUS and remained at 2.5% through 2015.  Ironically, when U.S. tariffs on autos and other products finally did come down in 2016, total U.S. imports from South Korea fell 2.6% (by $1.9 billion).

 The Korean tariff on imports of U.S. cars was cut from 8% in 2012 to 4% in 2015 and zero in 2016 and a 10% Korean tariff on U.S. trucks was eliminated.  Even before Korea cut its tariff on U.S. cars to zero in 2016, U.S. exports of cars to So. Korea tripled from $418 million in 2011 to $1.3 billion in 2015, according to the USTR.  Incidentally the USTR also notes that “Korea is currently our fifth-largest market for agricultural exports thanks to KORUS,” with farm exports up 208% from 2011 to 2015.

What has been most changed about the auto industry since KORUS is that South Korea exported a sizable share of its auto industry to the United States, displacing previous Korean imports and adding to U.S. auto exports. More than half the Hyundais sold in the U.S. are now assembled in Alabama, and more than 40% of Kias in Georgia (contrary to Peter Navarro,  82.5% of U.S. auto industry jobs are not in Michigan). The Hyundai Santa Fe and Kia Sorento have 67% domestic content. Hyundai has invested $2.8 billion in the U.S. and plans to add $3.1 billion more.

U.S. Korea Trade  (graph at link)

As the Graph shows, U.S. routinely ran sizable trade deficits with South Korea long before the FTA (and the U.S. routinely runs surpluses with other FTA countries, Australia and Singapore).  The U.S. trade deficit with South Korea and other countries came way down in 2009-2011 because deep recessions always slash U.S. imports, particularly industrial imports.

The graph includes services which, like farm products, were an important part of the deal.  The U.S. trade surplus in services with Korea rose from $6.9 billion in 2011 to $10.7 billion in 2016.  With services included, U.S. imports from South Korea did not rise at all from 2014 to 2016 ($81.4 billion in both years), and goods imports fell in 2016.

South Korea’s imports of goods from the U.S. rose from $29.7 billion in 2009 to $46.3 billion by 2014 before falling 8.4%to $42.4 billion in 2016.  Even with services included, South Korea’s imports from the U.S. fell from $66.5 billion to $63.9 billion since 2014.

KORUS could not possibly have had anything to do with the 2014-2016 drop in Korean imports from the U.S. because that agreement lowered rather than raised Korean tariffs.

South Korea’s demand for imports weakened because annual growth of industrial GDP fell to 2.5% from 2012 to 2015 – down sharply from a 6% pace from 2000 to 2011. One reason for Korea’s post-2014 import slump is that China’s imports from South Korea fell from more than $20 billion in October 2014 to $10-12 billion recently. 

The Trump Administration’s top trade advisers are entirely wrong about what happened when with respect to trade between the U.S. and South Korea.  KORUS had no effect at all on U.S. imports of auto, chips, motors or pumps between 2009 and 2015, because the U.S. auto tariff was unchanged until 2016 (when overall U.S. imports fell) and most other industrial products were already tariff-free before KORUS.

The Korea-U.S. trade deficit in goods did not rise from 2011 to 2015 (or fall in 2016) because of U.S. auto tariff cuts in 2016, but because the U.S. economy strengthened after 2010 and the Korean economy weakened after 2014. 
--------------------------------------------------------------------------
Blaming free trade agreements helped elect Trump.  Now what?  Double down on wrong?

Title: WSJ: Trump-Ross's trade deal with China
Post by: Crafty_Dog on May 15, 2017, 11:26:55 AM

May 14, 2017 5:11 p.m. ET
26 COMMENTS

Wilbur Ross made some startling claims after Thursday’s announcement of a 10-point agreement with China on trade. The U.S. Commerce Secretary boasted that the “herculean accomplishment” was “more than has been done in the whole history of U.S.-China relations on trade,” putting the relationship on “a new high.”

The hyperbole may be due to the Trump Presidency’s bumpy ride and the need for a policy victory. But overstatements tend to backfire, as this one did once trade experts examined the details. That’s unfortunate because the Administration deserves credit for setting aside its protectionist threats for the hard work of negotiating a trade-expansion agreement.

The deal is modest but potentially significant. Beijing’s two most important pledges are an end to the ban on U.S. beef and to the barriers against payment giants Visa and Mastercard entering the Chinese market. We’ve heard those promises before. Premier Li Keqiang said in September that beef imports would resume “soon,” and China was supposed to end the monopoly of its Unionpay payments network under its 2001 accession to the World Trade Organization. Nevertheless, the July time frame is new and encouragingly close.

In return, the U.S. will allow imports of Chinese cooked chicken and sell natural gas to China. The latter is largely meant as political reassurance to investors in U.S. LNG export terminals. The U.S. also gave reassurance that investment by Chinese entrepreneurs is welcome and recognized the importance of President Xi Jinping’s “Belt and Road” initiative to improve trade infrastructure in Asia.

The deal is positive for both sides and should dial back tension over trade in the short term. But Mr. Ross may have planted a land mine by claiming that China’s market opening will reduce the bilateral trade deficit this year. That seems unlikely. Beef exports are expected to reach a few billion U.S. dollars a year, a modest sum in the overall relationship. Building facilities to export natural gas will take years, and Mastercard and Visa will need about 18 months at least to expand in China.

The trade deal comes at a moment when consistency in U.S. relations with China is imperative. On Sunday North Korea launched what appears to be a new type of ballistic missile, which some experts said could have flown 2,800 miles on a normal trajectory.

No doubt the urgency of dealing with this threat is one reason Mr. Trump in an interview with the Economist magazine last week praised Mr. Xi as “a great guy.” But his seeming willingness last month in Mar-a-Lago to accept the Chinese President’s excuses for failing to rein in North Korea no doubt discomfited allies and friends in Asia, already anxious about Beijing’s maritime aggression. The U.S. is now asking these nations to unite as it works to shape a policy to deal with Pyongyang.

While it’s good that Mr. Trump has pulled back from protectionism, dampening the swings in the way his Administration portrays China relations would bring better results. Mr. Ross’s accomplishment would have found a more appreciative reception if he had simply said that hard negotiating gets results from Beijing but much work remains to be done.
Title: Grannis: Durable Goods deflation
Post by: Crafty_Dog on May 31, 2017, 11:43:18 AM
http://scottgrannis.blogspot.com/2017/05/durable-goods-deflation-is-wonderful.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
Title: WSJ: With or without US, trade goes on
Post by: Crafty_Dog on July 06, 2017, 08:46:18 PM
Japanese and European Union leaders on Thursday announced an agreement in principle to remove tariffs on 99% of goods as well as other barriers to trade. While it will be phased in over many years and some obstacles remain, the deal overcomes Japan’s reluctance to open its market to food products as well as Europe’s resistance to a free market for Japanese cars. Some have dubbed the deal “cars for cheese,” but its effects will be more far-reaching than bilateral trade.

In particular it contains a message for Donald Trump, who pulled the U.S. out of the Trans-Pacific Partnership deal with Japan and 10 other Pacific nations and has halted negotiations with Europe on the Transatlantic Trade and Investment Partnership. Trade will go on around the world whether or not the U.S. decides to participate. Had the U.S. remained in the Pacific pact, American farmers and other exporters could have enjoyed the increased sales to Japan that are now on offer to Europeans.

Meanwhile, the Trump Administration is considering punitive tariffs on imported steel and other products under an obscure provision of a 1962 law. This could lead to tit-for-tat sanctions against American exporters, tie up the U.S. in cases at the World Trade Organization and make it more difficult to secure the opening of foreign markets to American goods.

If the U.S. continues on this protectionist path while the rest of the world pursues far-reaching trade deals, the effects are predictable. American exporters will have to pay more for their materials and face higher barriers abroad than their competitors. Consumers will pay higher prices. This will cost American jobs and reduce incomes.

The Trump Administration says it still plans to pursue bilateral trade deals, which is in keeping with the President’s transactional view of diplomacy. But this may prove difficult if the U.S. is simultaneously raising tariffs and defending WTO cases brought by trading partners.

The U.S. will pay a steeper price if trade blocs such as TPP proceed without America and forge links with other regions. While other countries’ firms will benefit from new multilateral rules, U.S. companies will have to navigate what Columbia University economist Jagdish Bhagwati calls a “spaghetti bowl” of rules under bilateral agreements.

For instance, a preferential tariff on a particular product may only be available if the exporter can show that a certain percentage of the content was made in that country. The bureaucratic complications mean that many companies don’t even apply to use the benefits offered under bilateral deals, and it may mean U.S. companies with global customers must move plants out of America to stay competitive.

That’s why multilateral agreements are key to the formation of the complex supply chains trading the components that make up most consumer goods. The Japan-EU deal is still bilateral, but it could become the basis for more deals that exclude the U.S. If Washington cedes trade leadership, it risks being left behind as other countries set the rules and expand trade among themselves.

The irony is that the productivity of American manufacturers leads the world, and employment is rebounding. At a moment when U.S. firms could grow their exports, the Trump Administration is burning bridges. The EU-Japan deal is a warning that others will take up trade leadership and capture the prosperity that Americans should enjoy.
Title: Maudlin: Trade War Games
Post by: Crafty_Dog on July 24, 2017, 08:49:27 AM

Trade War Games

By John Mauldin

July 19, 2017


“We’re already in a trade war with China. The problem is we’ve not been fighting back.”

– Peter Navarro

“The battle for Helm’s Deep is over. The battle for Middle Earth is about to begin.”

– Gandalf the White

 
Image: Wikimedia Commons

This letter should find you buckled in for the turbulence I described last week. If not, I hope this one convinces you. The storm is seven days closer now. There are times when normality slips out of reach, and I believe we are approaching such a time.

I have lived through recessions and bear markets; I know what they look like. I wish I could forget what they feel like. They don’t come out of nowhere; there are always warning signs. Many investors choose to ignore those signs; I choose not to. I hope you make the same choice.

The monster can come from different directions. Imagine the horror movie where the doomed victim knows the creature is out there. He hears its growls and desperately looks all around for their source. Then the camera pans left and you see the darned thing sneaking up on him from behind. [Cut, add scream, fade to black.]

Over the next few letters we will consider the various monsters that may set upon us. Any one on its own might be manageable, but we’ll be out of luck when several hit us in rapid succession. We’ll start with this big bad boy: Trade War.

For the last 20 years, the biggest monster in my worry closet has been protectionism and trade wars. Last year both presidential campaigns voiced ideas about protectionism and trade that reflected appalling economic ignorance about the importance of trade to global prosperity, and particularly to the prosperity of the US. As I explained in “The Trouble with Trade,” I hoped then that the talk was all just campaign rhetoric and political pandering. No such luck.

Comparative Advantage

Trade is the global economy’s bloodstream. The more freely it flows, the better for all. As David Ricardo explained 200 years ago, different peoples have unique characteristics that enable them to produce certain goods at lower opportunity costs than other can. Free trade gives consumers access to the best goods and services at the lowest prices.

However, what we now call “free trade” is not what Ricardo had in mind. We have instead managed trade designed to benefit certain favored parties and to disadvantage others. You can’t blame free trade for our problems, because we haven’t got it.

Those who have seen their interests short-changed in the managed-trade game have had enough. That’s one reason Donald Trump is now president and anti-globalization movements are active in so many countries.

Candidate Trump talked about renegotiating trade agreements to help American workers. I support that goal. The problem is that President Trump seems intent on starting a trade war that will hurt those same workers. We are on a very dangerous course. Worse, if a report I saw last week is accurate, that course is already locked in.

Consequential and Contentious

The report comes from Axios, a Washington-based news site recently launched by some Politico veterans who want to disrupt the mainstream media. This is what Axios reported June 30, based on the input of anonymous Trump-administration sources:

With the political world distracted by President Trump’s media wars, one of the most consequential and contentious internal debates of his presidency unfolded during a tense meeting Monday in the Roosevelt Room of the White House, administration sources tell Axios....

With more than 20 top officials present, including Trump and Vice President Pence, the president and a small band of America First advisers made it clear they’re hell-bent on imposing tariffs – potentially in the 20% range – on steel, and likely other imports....

One official estimated the sentiment in the room as 22 against and 3 in favor – but since one of the three is named Donald Trump, it was case closed.

No decision has been made, but the President is leaning towards imposing tariffs, despite opposition from nearly all his Cabinet.

The following Sunday, July 2, the Wall Street Journal’s William Mauldin (no relation to me) filed this:

The Trump administration missed a self-imposed Friday deadline for concluding a major probe of steel imports, a delay officials said was driven by unanticipated complexities in engineering such a big shift in U.S. trade policy.

The administration has faced challenges in implementing its “America First” policy amid resistance from lawmakers and many business groups who worry that new curbs on steel imports could drive up costs for American manufacturers and spark retaliation from trading partners.

That report suggests that the June 26 meeting was less conclusive than Axios opined – but the trade hawks have not given up. The “America First” side is probably headed by presidential advisor Steve Bannon and Peter Navarro, director of Trump’s National Trade Council (a new office created by Trump), along with Trump himself.

Navarro, a former University of California, Irvine economics professor, was already a well-known protectionist when Trump hired him as a campaign advisor last year. Author of a book called Death By China, he is opposed to trade deficits and has accused China and Germany of currency manipulation. Very few academic economists share Navarro’s views. The simple fact is that Navarro embraces fallacious economics ideas. Kevin Williamson in the National Review takes his measure:

Professor Navarro, among other things, makes economics errors that would be obvious to an undergraduate. This has been commented on at some length elsewhere, most prominently after he published a review of the Trump economic plan (a review co-authored with Wilbur Ross, who is not an economist but is now Secretary of Commerce) in which he proffered the schoolboy argument that, because GDP is defined as the sum of consumption, investment, government spending, and net exports, eliminating our trade deficit with China would add substantially to GDP. In economics terms, he has mistaken an accounting identity for real-world causality; in layman’s terms, this is horsepucky, “a mistake that an econ professor like him really shouldn’t be making,” as Noah Smith of Bloomberg put it.

This is an appalling mistake for anyone, but for an economics professor to do this? And one that is actually in a position to influence trade policy?

In his books and writings, Navarro peddles analogies he pulls out of thin air as “facts,” without a shred of evidence to back them. For instance, as Williamson notes,

His sloppiness with sources is general. Navarro cites a Rand Corporation report suggesting that China is behind Iran’s nuclear program without mentioning that the report is a quarter-century old, that it identifies China as a “moderate threat to U.S. interests,” or that subsequent Rand analysis suggests that Chinese involvement with Iranian nuclear ambitions seems to have ended around 1997. He does not even cite any particular Rand report, simply attributing a long quotation to “the Rand Corporation.”

Navarro makes up stories about a future where poorly made Chinese cars are crashing and killing US citizens (even though a few extraordinarily well-made Volvos are the only cars made in China that are driven in the US). He claims that the Chinese keep unemployment high so that wages can remain low, even though their wages have been rising significantly for the last 15 years.

Professor Peter Navarro and the ideas he espouses are dangerous. Certainly, we can be smarter about how we negotiate trade deals in order to get the best terms possible. Peter Navarro is simply not the man to be advising on that.

Most leaders of larger businesses have no interest in truly free trade, either, but they dislike Navarro’s ideas. There is a stand-off within the administration. The battle pits trade advocates and businesspeople vs. Bannon and Navarro. Trump apparently leans Bannon and Navarro’s way but hasn’t made a final decision yet.

The proposed steel tariffs are more significant than they may seem. A Commerce Department study is trying to determine whether imported steel represents a national security threat to the US. If so, a 1962 law gives the president vast powers to impose tariffs and other barriers, without congressional approval.

If Trump wants to start a trade war, Congress and the courts probably can’t stop him unless they can pass new laws by a veto-proof margin. The chances of that happening are near zero.

That meeting in the Roosevelt Room may turn out to be as consequential as Bretton Woods was, if Trump acts to launch major trade sanctions. Trade sanctions will slow down already slow global economic growth and could trigger a much wider systemic crisis.

What Would Steel Tariffs Really Mean?

It makes a difference whether the administration decides to impose quotas on current steel imports or initiate a tariff. Quotas would be harmful, but a tariff would be far worse.

Let’s look at who would actually be damaged. First, for all the talk about trade deficits with China, we don’t import all that much steel from China. In fact, China isn’t even in the top 10 countries that we import steel from, as shown in this chart from the Financial Times:

Secondly, using national security as an excuse to impose tariffs is really fraught with potential problems. The Financial Times report (well worth reading) in which our chart appears notes two:

The first is that in the trade realm, invoking national security to erect barriers is considered a nuclear option. World Trade Organisation rules include a national security exemption designed to be used in times of war. But many experts believe the forthcoming steel move would flout those rules and would thus be challenged by other WTO members. Such a challenge in itself could be dangerous. It would be the first real test of the WTO’s national security exception. Were the WTO to find against the US and the Trump administration to ignore that decision, it would be a huge blow to the WTO’s credibility. Were the WTO to find in the US’s favour experts fear it could give carte blanche to all WTO members to invoke national security more often, leading to a new protectionist free-for-all.

The second is that the US is the world’s largest steel importer and a broad move on steel would probably hit US allies such as Canada, Germany, South Korea and Mexico far more than China, its real intended target. In an unusual move, it has prompted Nato allies to complain and to try to have the Pentagon lobby on their behalf.  It also could provoke a messy trade war with other countries feeling compelled either to impose their own national security restrictions on steel imports or to retaliate against the US in other ways.

The third reason to oppose tariffs is that clamping down on steel imports threatens considerably many more jobs than “protecting” the steel industry from foreign competition can save. As Dan Pearson of the Cato Institute noted recently: “Steel mills employ 140,000 workers. Manufacturers that use steel as an input 6.5 million, 46 times more.” Steel mills’ $36 billion of productivity in 2015 represented just 0.2 percent of US GDP, Pearson explains, while the economic value contributed by US firms that use steel was 29 times larger.

We actually have a recent case study. George W. Bush approved steel import tariffs of 30% in 2002. What happened? Two hundred thousand American workers lost their jobs, as this chart from the Heritage Foundation illustrates.

Scores of different types of steel are used for special manufacturing processes and equipment. The US doesn’t manufacture everything we need or have the capacity to do so. Thus a tariff would increase costs to consumers without doing one thing for steelworkers.

Yes, the number of American steelworkers is down from 500,000 to 147,000 in the last 35 years. As in so many industries, we simply don’t need the number of workers that we used to. Steelworkers, whose wages have tripled, are producing five times the amount of steel per hour worked as they did 35 years ago.

China is already working to curb its steel production capacity, as demand for steel is flat to down. Now I agree that Chinese overproduction is forcing global steel prices down, but do we really have a problem when gasoline prices go down? Do we feel sorry for the oil companies?

No doubt American steelworkers and steel companies would love to see barriers to entry for their product. I bet McDonald’s would like to have Jack-in-the-Box stores banned, too. Ultimately, higher prices offset the theoretical benefits of a steel tariff or quota. You and I are the ones who pay.

Buy American

The federal government has other ways to punish foreign competitors. In April President Trump visited the Wisconsin headquarters of Snap-on Tools, where he signed a “Buy American, Hire American” executive order. The bureaucracy is now working to implement the order.

Laws dating back to the Great Depression require federal agencies to give first preference, in government contracts, to US-made products. Over time, it became routine for acquisition officers to grant waivers to those requirements. President Trump’s order will crack down on those waivers. This will soon be evident at the Pentagon, where two laws apply:

The two laws in question are the 1933 Buy American Act, which requires the Pentagon to purchase domestically produced products for purchases over a $3,500 threshold, and the more-restrictive 1941 Berry Amendment, which applies mainly to clothing and food products purchased by the military.

Together, these laws ostensibly require that the U.S. military’s entire supply chain be sourced from inside the country….

By enforcing these laws, President Trump can redirect billions of dollars in spending from foreign companies to US suppliers – assuming US suppliers exist. They may not, in some cases, and they may cost more if they do. Defense contractors will face some serious headaches.


AP Photo

Other trade actions are popping up, too. Boeing has asked the government to investigate what it considers to be unfair competition by Bombardier, a Canadian aircraft manufacturer. If Boeing succeeds in sidelining Bombadier, other US companies are likely to make similar claims.

But, truth is, dozens of countries manufacture major parts of those Boeing airplanes; Boeing doles out contracts to other countries in order to encourage them to buy the planes. Many of those components are made in Canada. And I will bet you a dollar to 47 doughnuts that significant components of Bombardier planes are made in the United States by US workers. It behooves us to remember that Canada and all our other trade partners have options, too.

Tit for Tat

The trade war, if it happens, will spring from the administration’s failure to appreciate one simple fact: Other countries will respond. The Trump administration’s steel tariff idea, for example, has already provoked European Union officials. EU trade commissioner Cecilia Malmstrom warns, “We want of course to avoid anything dramatic here but if that would have hit our companies we will have to respond, of course.”

The EU and other trade partners will not simply roll over and accept US tariffs. They will retaliate in ways specifically calculated to hurt American businesses and consumers. My fear is that the US will then up the ante with yet more tariffs or other barriers, and the fight will get ugly, causing real pain and losses for both sides.

All this will be completely unnecessary. Can existing trade agreements be improved? Yes, definitely. But trade negotiations are insanely complex in the best of circumstances. Multiplayer game theory applies. Right now we have general trade equilibrium, with minor adjustments all the time. Not everyone has everything they want, but no one is angry enough to stop playing. If one major player changes the rules, however, all the other players in the game have to respond. Those national players have their own businesses and voters that they must pander to. The game can collapse quickly.

Pile that risk on top of our many other economic vulnerabilities, such as the increasing political turmoil in Europe, and we might see major fireworks.

President Trump campaigned on the promise that he would negotiate better deals. Well then, Mr. President, rather than impose tariffs and destroy a few hundred thousand high-paying jobs in US manufacturing, let’s find out how well you can negotiate. And send Professor Navarro, whose supposed expertise is in utilities, of all things, back to California.

Before I close, I want to announce that we’re hosting another webinar with my friend Marc Chaikin of Chaikin Analytics, on July 25, at 4:15 PM EST.

I’ve long been a fan of the Chaikin Analytics Power Gauge, so last year I told my team of analysts to try it out. A few weeks later they came back to me and said, “It’s great, we’re using it for everything!’’

Because we’re so impressed with the Power Gauge system, we’d like to give you the opportunity to access it, too. You can click here for the free webinar “The Ultimate Stock Checklist & Best Small-Cap Stocks to Buy Today.”

Grand Lake Stream, Colorado (?), and Lisbon

Shane and I will be going to Las Vegas next week for Freedom Fest, then we’ll come back home to Dallas for a few weeks before I’m off to Grand Lake Stream, Maine, for the annual economics schmooze and fishing trip known as Camp Kotok. Afterward, I am thinking about going to somewhere in Colorado for a few days to escape the Texas heat. There are a lot of potential trips in September, but the next outing now on the books will be to Lisbon, Portugal.

Over the weekend what was going to be a short family meeting turned out to be much lengthier and much happier than I envisioned. As a result, this letter is coming to you later than usual. (Sometimes life just happens when you’re making plans.) I hope you, too, have an unexpectedly wonderful week.

Your hoping we walk away from protectionism analyst,

John Mauldin
Title: Stratfor: US-Canada aviation dispute- Boeing and Bombardier
Post by: Crafty_Dog on September 28, 2017, 01:20:05 PM
Boeing and Bombardier Take Their Dogfight to Court
A new Bombardier C Series aircraft takes flight.
(CLEMENT SABOURIN/Getty Images)


    The U.S. Department of Commerce issued a preliminary determination which, if it is upheld, will place a 219.6 percent tariff on a Canadian-built aircraft.
    The determination has implications not only for Canada, but for the United Kingdom where some parts for the targeted aircraft are produced.
    As Canada and the United States continue NAFTA negotiations, discussions on methods to appeal trade decisions under the agreement will become central.

The aviation sector is one of the few that intersects significantly with geopolitics, and the challenges Canadian plane manufacturer Bombardier faces in the United States will reverberate around the world. On the evening of Sept. 26, the United States Department of Commerce issued a determination on the import of Canadian-built aircraft. The Department of Commerce's preliminary duty determination would place a 219.63 percent tariff on the sale of airliners built by the Canadian-based company Bombardier — including the next generation C Series — once an investigation is complete.

Bombardier has already begun criticizing the investigation, and Canadian Prime Minister Justin Trudeau spoke out against it ahead of the announcement. British Prime Minister Theresa May's office stated that the United Kingdom was bitterly disappointed by the result — which comes as no surprise, given that Bombardier's plant in Belfast builds wings for the company's next generation C Series and its closure could hurt her political position.
The Dispute Takes Wing

The dispute began after Bombardier reached a deal to sell 75 CS100 aircraft to U.S.-based Delta Airlines in April 2016. Boeing has since claimed that Delta is buying the aircraft for $19.6 million each, far below the listed price of $80 million — a point that both Delta and Bombardier dispute. Boeing filed a petition with the Commerce Department in April 2017, asking it to level the playing field by imposing duties of at least 160 percent. Boeing also claimed that the Canadian airplane manufacturer was selling its aircraft to Delta for a price more than 40 percent below production costs. However, Bombardier and others — including several other U.S. airlines like JetBlue — oppose the investigation, and some have argued that production costs often exceed the sale price of an airplane when it is new to production: Delta is, after all, the first purchaser of the new C Series plane. Boeing did not begin selling its own 787 Dreamliner for more than it cost to produce until this year, five years after it first began delivering the plane to customers.

Though Boeing's argument against Bombardier's sales practices is controversial, Boeing and the United States are not the only ones criticizing Canada's financial support for the Quebec-based company. Earlier this year, Brazil asked the World Trade Organization (WTO) to set up a dispute settlement panel for its complaints against Canadian support for the C Series. In its filing, Brazil claimed that the C Series had received $3 billion in support from subsides. Last year, for example, Quebec's provincial government completed a $1 billion investment in the company, acquiring 49.5 percent interest and a limited partnership with Bombardier. The partnership now covers all of the assets, liabilities and obligations related to the C Series, and Canada's federal government approved $372.5 million in interest-free loans to the company in February.

Protectionism — often focused on jobs — has long been rampant in the aviation industry, and political motivation is high. Canadian Prime Minister Justin Trudeau and Foreign Affairs Minister Chrystia Freeland have already linked Boeing's complaint against Bombardier to future purchases of Boeing military aircraft, including the recently approved purchase of 18 F/A-18 fighter jets for $5 billion. Despite this, the U.S. Commerce Department's large determination — the 219.63 percent tariff is more than the 159.91 percent tariff Boeing pushed for — is just the next major protectionist measure the Trump administration has made in its attempts to prioritize trade enforcement.
What Won't Fly

Bombardier's challenges are also important for Brexit policies. As London continues to negotiate its future economic relationship with the European Union, the aviation and defense industries will play an important role. U.S. criticism is not the only challenge that Bombardier is facing. This week's merger between French-based Alstom and German-based Siemens rail unit threatens the company's rail division, and French President Emmanuel Macron's EU-wide protectionism platform presents other challenges. Should Bombardier and its Northern Irish Plant (Bombardier is the largest employer in Northern Ireland's high-tech sector) lose access to Europe's single market, the effects would only be magnified. The possibility has increased pressure on Prime Minister Theresa May for her failure to protect British jobs, which Labour Party leader Jeremy Corbyn has already begun to criticize her for. It's no surprise, then, that May has come out strongly against the deal and London has begun reviewing its defense contracts with Boeing.

In the next step, the United States International Trade Commission (USITC) will make its own determination on whether the C Series sales threaten material injury to Boeing and the U.S. aircraft industry and, by extension, whether duties may be imposed. As an independent, bipartisan federal agency, the USITC is far less open to political manipulation than the Department of Commerce, which is key.

Bombardier contends that Boeing is trying to block sales of the C Series in general, and the CS300 hundred in particular, because it would directly compete with Boeing's next generation 737 MAX 7 aircraft in the high passenger capacity aircraft market.

Meanwhile, Delta has argued that Boeing — the only U.S.-based manufacturer of large civilian aircraft — does not produce an aircraft with a similar seating capacity to those Delta was attempting to buy, nor has it done so since 2006. Bombardier contends that Boeing is trying to block sales of the C Series in general, and the CS300 hundred in particular, because it would directly compete with Boeing's next generation 737 MAX 7 aircraft in the high passenger-capacity aircraft market.

Should the USITC rule in Boeing's favor, Bombardier could still appeal the decision to the United States Court of International Trade and, more importantly, a binational dispute panel under NAFTA's Chapter 19 dispute mechanism. The latter is particularly sensitive now, given the ongoing status of NAFTA negotiations in which the United States has already pushed to remove Chapter 19, or at least heavily modify it. Under Chapter 19, Canada and Bombardier can request a special binational dispute panel to review the USITC's ruling, instead of appealing to domestic courts. Canada was adamant that the mechanism be included in the 1980s and has already outlined it as a key interest in the NAFTA negotiations.

A Chapter 19 dispute panel sits at the heart of the long-standing softwood lumber dispute between Canada and the United States. The United States has previously tried to impose duties on imported Canadian lumber, only to see binational and WTO dispute panels reject U.S. justifications. As the Boeing-Bombardier fight picks up steam, that option is going to become even more closely inspected and debated in future NAFTA negotiations, the third round of which ended on Sept. 27.
Title: WSJ: TPP withdrawal hurts US
Post by: Crafty_Dog on October 05, 2017, 05:20:17 PM
The Editorial Board
WSJ
Oct. 5, 2017 7:26 p.m. ET

The Trans-Pacific Partnership trade pact is regaining momentum despite the Trump Administration’s January decision to withdraw. Representatives of the remaining 11 TPP members met last month in Japan to push for ratification as early as November in the hope that Washington will rejoin. But even without the U.S., members stand to make significant gains.


A January study by Tokyo’s National Graduate Institute for Policy Studies makes the economic case for the smaller pact. Vietnam, originally expecting a 30% increase in exports under TPP by 2030, would still get a bump in textiles and apparel, as trade in those products is expected to grow $3 billion among the 11 member states. Malaysia would see a 20% increase in GDP due to reductions in nontariff barriers. Brunei would diversify its oil-dependent economy into biotech and agribusiness. New Zealand, Australia and Canada would actually enjoy bigger GDP boosts if the U.S. stays on the TPP sidelines. Their beef producers would secure preferential access to Japan’s market and take market share from American ranchers.

That shows how the Trump Administration has set back U.S. exporters by withdrawing from TPP. The U.S. is now seeking to renegotiate the North American Free Trade Agreement to obtain market-opening provisions that are part of the TPP. But Mexico and Canada don’t want to make concessions that were given in return for the broader benefits of TPP.

Keeping TPP alive hasn’t been easy. The lack of a U.S. market carrot led members to backtrack on some commitments. Vietnam, the only nonmarket economy in the pact, wants to freeze provisions on labor standards and intellectual property. But one positive surprise has been Japan’s leadership in the new negotiations. Tokyo is pushing members to reduce the number of provisions they want suspended to single digits by November.

Leaders seem to recognize that TPP is even more important in the Trump era. The common goal of the 11 nations is to convince the U.S. that TPP is essential to its influence in Asia. While Mr. Trump is unlikely to have a free-trade epiphany, the deal offers benefits to American exporters that the U.S. will struggle to secure on a bilateral basis. If the 11 remaining members hold out for a U.S. return, it’s possible that rational American self-interest will prevail over protectionist bluster.

Appeared in the October 6, 2017, print edition.
Title: Re: WSJ: TPP withdrawal hurts US
Post by: DougMacG on October 06, 2017, 08:00:26 AM
That's right.  The US should be the leader of the Trans-Pacific Partnership trade pact talks and every clause in it should be about free trade, not giving up sovereignty.  Now it will be negotiated badly and we'll still be pressured to join.
Title: Chamber of Commerce weighs in on NAFTA renegotiation
Post by: Crafty_Dog on October 06, 2017, 10:55:54 AM
y Jacob M. Schlesinger
Updated Oct. 6, 2017 12:48 p.m. ET
28 COMMENTS

WASHINGTON—The U.S. Chamber of Commerce on Friday outlined a long list of objections to the Trump administration’s proposals for rewriting the North American Free Trade Agreement and said it was launching an effort to try to keep the ideas from advancing in talks with Mexico and Canada.

“We see these proposals as highly dangerous,” John Murphy, the top trade official at the U.S. Chamber of Commerce, told reporters Friday morning at a press briefing.

“We’re at a crossroads here,” Mr. Murphy added. “It’s very worrying.”

Mr. Murphy cited as objectionable a number of proposals that the administration has either already submitted or told business groups and members of Congress that it plans to submit during the continuing talks. These include proposals to impose new requirements for U.S. content in all cars qualifying for Nafta’s special treatment; weaken or scrap provisions for arbitrating disputes among governments and companies in the three countries; create new limits on Canadian and Mexican access to U.S. government procurement; create a new “sunset” clause in the pact that would make it expire unless the countries regularly agree to renew it.

What Impact Could a Remade Nafta Have On You?

Representatives of the U.S., Canada and Mexico are kicking off talks to renegotiate the North American free trade agreement on Wednesday. The WSJ’s Shelby Holiday looks at how that could change the prices of the cars, tacos and clothes you buy. Photo: Evan Engel

“Even one of them could be sufficient to move the business and agriculture communities to oppose an agreement that included them,” Mr. Murphy said.

The chamber’s senior vice president for international policy said that the business lobby would ramp up coordination with other trade groups in the coming days to amplify their concerns to administration officials, lawmakers, and the general public, particularly in states that Donald Trump carried in the 2016 election and depend heavily on exports to Nafta countries. He didn’t elaborate.


A spokeswoman for U.S. Trade Representative Robert Lighthizer, who is leading the negotiations for the Trump administration and has crafted many of the proposals, said the president’s objectives in the Nafta talks are aimed at creating jobs and reducing the trade deficit.

“The president has been clear that Nafta has been a disaster for many Americans, and achieving his objectives requires substantial change,” said USTR spokeswoman Emily Davis. “These changes, of course, will be opposed by entrenched Washington lobbyists and trade associations. We have always understood that draining the swamp would be controversial in Washington.”

The chamber and other groups have worked closely with the administration on policies like deregulation and the effort to implement big tax cuts. And, as Mr. Trump regularly notes in speeches and on Twitter, business confidence gauges, and stock market indexes, have hit new highs during his administration.

However, there have been tensions in other areas. Prominent executives have tangled with Mr. Trump on a number of fronts. Business leaders in August disbanded two CEO councils created by the White House, protesting what they said was the president’s failure to sufficiently condemn racism after the violent Charlottesville, Va., protests.

The chamber openly attacked Mr. Trump over his pledges during the campaign to rip up Nafta and other trade agreements. Mr. Trump threatened to withdraw from Nafta in April but the tensions eased after the administration agreed instead to renegotiate, and, in the early rounds, put forth modest proposals that business supported.

Mr. Trump has long said he disagreed with the trade policies fixed over the past half-century, in cooperation with big business, and was prepared to listen more to ideas embraced by labor unions and other free-trade critics.

Mr. Murphy said that the chamber and other business groups have repeatedly voiced their objections to emerging Trump Nafta proposals and “the expert analysis and the views of industry have too often been brushed aside.”

The chamber and others are “urging the administration to recalibrate its approach,” he said. “They should stop and listen to the business community.”
Title: WSJ on Trump and NAFTA
Post by: Crafty_Dog on October 16, 2017, 08:53:47 AM

By The Editorial Board
Oct. 15, 2017 6:15 p.m. ET
235 COMMENTS

Donald Trump is threatening again to terminate the North American Free Trade Agreement if Canada and Mexico don’t agree to his ultimatums. If this is a negotiating tactic of making extreme demands only to settle for much less and claim victory, maybe it will work. Otherwise Mr. Trump is playing a game of chicken he can’t win.

Mr. Trump’s obsession with undoing Nafta threatens the economy he has so far managed rather well. The roaring stock market, rising GDP and tight job market are signs that deregulation and the promise of tax reform are restoring business and consumer confidence. Blowing up Nafta would blow up all that too. It could be the worst economic mistake by a U.S. President since Richard Nixon trashed Bretton-Woods and imposed wage and price controls.

U.S. demands in the Nafta renegotiations—which returned to Washington last week—are growing more bizarre. U.S. Trade Representative Robert Lighthizer now wants to add a sunset clause, which would automatically kill it in five years unless all three governments agree to keep it. In other words, the U.S. proposes to increase economic uncertainty and raise the incentive for businesses to deploy capital to more reliable investment climates.

The U.S. also wants to change Nafta’s “rules of origin” for autos. Cars now made in North America can cross all three borders duty-free if 62.5% of their content is Nafta-made. Mr. Lighthizer wants to raise that to 85% and add a subclause requiring 50% be made in the U.S.

Mr. Lighthizer needs to get out more. Nafta’s current rules-of-origin for autos are already the highest of any trade agreement in the world, says John Murphy of the U.S. Chamber of Commerce. Raising them would give car makers an incentive to source components from Asia and pay America’s low 2.5% most-favored-nation tariff. A higher-content rule would hurt Mexico, but it won’t bring jobs to the U.S.

Adding a domestic content requirement also would violate World Trade Organization rules, so neither Mexico nor Canada are likely to agree. And if they did, it would harm U.S. workers. Auto companies that now make cars for export in the U.S., using Nafta-made components, would simply move abroad more of their manufacturing.

It’s hard to overstate the damage that ending Nafta would inflict on the U.S. auto industry. Under Nafta, companies tap the comparative advantages of all three markets and have created an intricate web of supply chains to maximize returns. As Charles Uthus at the American Automotive Policy Council said last week, Nafta “brings scale, it brings competitiveness, it brings efficiencies [and] synergies between all three countries, and it brings duty-free trade.” Its demise would be “basically a $10 billion tax on the auto industry in America.”

Last week the Boston Consulting Group also released a study sponsored by the Motor & Equipment Manufacturers Association that found ending Nafta could mean the loss of 50,000 American jobs in the auto-parts industry as Mexico and Canada revert to pre-Nafta tariffs.

Mexico has elections next year and no party that bows to unreasonable demands by Mr. Trump can win. The Mexican political class appears willing to call his bluff, which is making American business very nervous. More than 300 state and local chambers of commerce signed an Oct. 10 letter to Mr. Trump imploring him to “first ‘do no harm’ in the Nafta negotiations.”

It noted that 14 million American jobs rely on North American daily trade of more than $3.3 billion. “The U.S. last year recorded a trade surplus of $11.9 billion with its NAFTA partners when manufactured goods and services are combined,” the letter said. “Among the biggest beneficiaries of this commerce are America’s small and medium-sized businesses, 125,000 of which sell their goods and services to Mexico and Canada.”

Ending Nafta would be even more painful for U.S. agriculture, whose exports to Canada and Mexico have quadrupled under Nafta to $38 billion in 2016. Reverting to Mexico’s pre-Nafta tariff schedule, duties would rise to 75% on American chicken and high-fructose corn syrup; 45% on turkey, potatoes and various dairy products; and 15% on wheat. Mexico doesn’t have to buy American, and last week it made its first wheat purchase from Argentina—30,000 tons for December delivery.

Canada and Mexico know that ending Nafta will hurt them, but reverting to pre-Nafta tariff levels could hurt the U.S. more. Mr. Trump can hurt our neighbors if he wants, but the biggest victims will be Mr. Trump’s voters.

Appeared in the October 16, 2017, print edition.
Title: Re: Trade Issues: Reagan, 1988, Freedom to Trade
Post by: DougMacG on October 19, 2017, 09:32:09 AM
https://www.youtube.com/watch?time_continue=247&v=Tp1T7kPEdDY

The video above of President Reagan’s radio address towards the end of his second term on November 26, 1988, was just released today by the Reagan Library. Although Reagan’s comments on trade were made almost 30 years ago, they are still fresh and relevant today, maybe even more so in the new era of rising protectionism. And Trump, “the first authentic protectionist to win the White House since the 1920s,” should pay especially close attention to Reagan’s remarks, which expose many of Trump’s faulty ideas on trade. For example:

Part of the difficulty in accepting the good news about trade is in our words. We too often talk about trade while using the vocabulary of war. In war, for one side to win, the other must lose. But commerce is not warfare. Trade is an economic alliance that benefits both countries. There are no losers, only winners; and trade helps strengthen the free world. Yet today protectionism is being used by some politicians as a cheap form of nationalism.
… Our peaceful trading partners are not our enemies. They are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends, weakening our economy, our national security and the entire free world. All while cynically waving the American flag. The expansion of the international economy is not a foreign invasion. It is an American triumph.

(President Trump, listen up!)
http://www.aei.org/publication/for-president-trump-president-reagans-radio-address-on-free-trade-from-november-26-1988/
Title: Re: Trade Issues:
Post by: Crafty_Dog on October 19, 2017, 10:46:07 AM
Nice find.

Title: Re: Trade Issues:
Post by: Crafty_Dog on December 05, 2017, 09:20:47 AM
The Trade Deficit in Goods and Services Came in at $48.7 Billion in October To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 12/5/2017

The trade deficit in goods and services came in at $48.7 billion in October, larger than the consensus expected $47.5 billion.

Exports were unchanged in October. Imports rose $3.8 billion, led by crude oil and other goods.

In the last year, exports are up 5.6% while imports are up 7.0%.

Compared to a year ago, the monthly trade deficit is $5.7 billion larger; after adjusting for inflation, the "real" trade deficit in goods is $4.1 billion larger. The "real" change is the trade indicator most important for measuring real GDP.

Implications: The trade deficit expanded in October, coming in at $48.7 billion, a larger trade deficit than the consensus expected. Exports were unchanged, remaining at their highest level since December 2014. Imports rose $3.8 billion, hitting a new record high, with all major categories growing except for capital goods. Both exports and imports are up from a year ago: exports by 5.6%, imports by 7.0%. We see expanded trade with the rest of the world as positive for the global economy, and total trade (imports plus exports), which is what really matters, is up 6.3% in the past year, a great sign. Look for more of that in the year to come as economic growth accelerates in Europe and Japan. Better growth in Europe will increase global trade and US exports as well. In fact, exports to the EU are up 11.8% in the past year. Although rising imports are a positive sign for the underlying strength of the American economy, for GDP accounting purposes they mean growth in production is temporarily lagging behind the growth in spending. Because of this, international trade is on track to be a significant drag on real GDP growth in Q4, subtracting 0.5 to 1.0 percentage points from the real GDP growth rate for the quarter. In turn, this suggests real GDP is growing at the low end of our prior range of 3.0 – 4.0% for Q4. Trade is one of our four pillars to prosperity; freer trade leads to improved economic growth over time. And while we have our qualms with some of the talk coming out of Washington related to paring back free trade, there has been significantly more hot air than substance. We will continue to watch trade policy as it develops, but still don't see any reason yet to be sounding alarm bells.
Title: Re: Trade Deficit, Wesbury
Post by: DougMacG on December 05, 2017, 10:43:46 AM
It will be interesting to watch how exports are affected by business tax reform.

Wesbury admits both exports and imports are good for the economy but still reports the difference between the two as a "deficit".  Maybe we can get back to a "surplus" like we had in the depths of the Great Depression. *  I would add them together and track total trade or just report exports and imports separately.

* http://cafehayek.com/2006/12/if_trade_surplu.html
Title: Stratfor: The Future of US Trade Policy
Post by: Crafty_Dog on January 14, 2018, 02:09:29 PM


Jan 13, 2018 | 15:03 GMT
4 mins read
The Future of U.S. Foreign Policy? Trade

Board of Contributors
U.S. President Donald Trump speaks during a retreat with Republican lawmakers. On Jan. 30, Trump will give his first State of the Union address, in which he will outline foreign and domestic policies that may be more interrelated than usual.


In the rhythm of U.S. foreign policymaking, the first few weeks of every year are a dramatic pause. Experts in the field make preparations in early January as they await the president's State of the Union address, slated this year for Jan. 30, somewhat later than usual. After a spate of "year-in-review" articles, followed by "what-to-expect" pieces, the experts turn their attention to the annual speech to see what course of action the White House plans to take.

The current president, however, is different from his predecessors. The leading publications and established institutions specializing in international affairs may be less useful sources for gleaning the direction of U.S. foreign policy this year than they have been in the past. Rather, the primacy of domestic policy will dictate the course of new foreign policy initiatives. Now that Congress has passed a new, far-reaching tax bill — leaving few easy domestic legislative projects ahead — the best way for President Donald Trump to demonstrate that he is keeping his promises to his constituency is to seize on a domestic issue that translates into foreign policy: trade.

This is the year in which Trump must move forward with his trade agenda; there simply is no alternative. He can no longer just talk about his opposition to the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership, to multilateral trade agreements, or, indeed, to what he considers unfair bilateral trade agreements, such as the U.S.-Korea Free Trade Agreement. If he wants to keep his word — and it's clear that he means what he says — the president will have to take steps to correct what he sees as a negative environment for trade.

In a recent article in The Wall Street Journal, former World Bank President Robert Zoellick wrote that it may be easy for Trump to disavow previous agreements, but it will be awfully hard to negotiate new ones. The reason, Zoellick maintains, is that the president doesn't really want to create new mechanisms to promote free trade but rather new structures that will promote managed trade. Zoellick believes Trump is focused on eliminating or at least reducing trade deficits. Instead of following the pattern of previous administrations, which worked to eliminate barriers to U.S. exports to enable the United States to exercise its strength on a level playing field abroad, the current administration wants to prevent what it sees as unfair practices by foreigners accessing the U.S. market. Levying tariffs on imported steel is one such area of focus. 

It's likely, then, that the State of the Union address, in which the president will try to reach out to his supporters while demonstrating the strength of American resolve in seeking fair agreements, may emphasize messages that aim domestically but land abroad. Though he may calculate that other countries need the United States more than the United States needs them, this imbalance isn't his primary point. The president is underscoring that the promises he made during his 2016 campaign are promises to Americans, not foreigners.

The same is true for U.S. trade partners near and far. The Canadian and Mexican governments, for example, agree on the need to update NAFTA, but at some point they will need to demonstrate to their domestic constituencies that there are mutual benefits to such a project. But all eyes will be on trade relations with China.

If the president blocks Chinese imports with new tariffs designed to combat China's allegedly unfair trade practices, he may indeed be keeping his promise to American industries. There's little doubt, though, that such a move would, in turn, have an effect on U.S.-Chinese relations. Trump enjoyed a warm reception when he visited Beijing in November; nevertheless, the Chinese government understands the implications of "America First" and is prepared for the policies that will follow. China's leaders may wonder about U.S. trade policy and find that, in fact, their country is merely the collateral damage of a domestic debate about the future of American industry. Other countries in Asia, by contrast, are simply holding their breath as they wait to see what the new U.S. trade regime looks like.

Trade will be one of the most important and most contentious elements of the State of the Union address. Viewers can expect a new vision for trade and new stance toward China, the ramifications of which could reach far and wide. More broadly, pundits may question whether the president is challenging the traditional rules-based trading system. Not really. His does not seem to be a systematic world, but rather one in which action — and winning — is the bottom line.
Title: George Friedman: Growing Economise should bring little cheer
Post by: Crafty_Dog on January 30, 2018, 07:17:49 AM
Growing Economies Should Bring Little Cheer
Jan 29, 2018
By George Friedman

For the first time since 2008, all the world’s major economies are growing. A decade after the financial crash, the impediments to growth have mostly faded away. It goes without saying that economic growth is preferable to stagnation or decline, but not all the marks of the 2008 crash have been wiped away. What happened ceased to be a primarily economic problem years ago, and the effects of 2008 on the global political and social systems are to a great extent beyond the ability of economic growth to repair.

Socially, 2008 widened the existing division between the elite and the middle and lower classes. But the problem isn’t simply inequality; it’s that the decline in living standards has hit the lower and middle classes disproportionately hard and has done significant damage to those near the median income. This has particularly been true in the U.S. and Europe, which together make up about half the global economy. In a continuation of a process that was underway before 2008, industries that employed many people continued to deteriorate or shift production overseas. Renewed growth will likely increase the incomes of those above the median income line but will do nothing to end the hollowing out of incomes below the line.

This process has had a major political effect. Across European and American society, economic classes that were traditionally linked to left or center parties have shifted their allegiance. One major reason has been that the parties they have traditionally supported were advocates of free trade. The theory of free trade is that it benefits nations in the long run. The reality is that the benefits don’t necessarily get distributed to everyone. As important, the negatives of free trade are borne by the classes that can least bear it. Increased imports lower prices for those who can afford the goods, but for those who are unemployed or underemployed as a result of free trade, this is little consolation. In the long run it may all work out, but for a 50-year-old worker laid off from his job and now struggling at much lower pay in a more menial job, the long run is a meaningless concept.

The employment problems generated by free trade inevitably express themselves as hostility toward immigration. In both the United States and Europe, hostility toward immigrants has soared, and immigration has gone from a peripheral issue to a central one. Citizens of these countries worry about threats to their culture as well as to their safety and security. Above all else, though, is the fear of job loss. When a class is hit by uncontrollable economic forces, the fear of unemployment or surplus labor is powerful. People with their backs against the wall respond sharply to any additional pressure.

All this generated a powerful political response in the U.S. and Europe. The lower class, badly hurt by 2008 and untouched by the return of economic growth, turned on free trade and immigration. A political movement took shape, and it was made stronger by the fact that those who supported free trade and immigration were above the median income line. The two groups have rarely been so far apart. In the United Kingdom, for example, many people who opposed Brexit said they didn’t know anyone who supported it, and vice versa. Similar things were said in the U.S. after Donald Trump defeated Hillary Clinton in the presidential election, and in Germany after the nationalist Alternative for Germany party surged to become the country’s third-largest party, in the process badly damaging the party of longtime Chancellor Angela Merkel.

The fixation on economic recoveries misses the point. The consequences of 2008 have taken root, and achieving higher economic growth without also solving these problems only increases tensions between those who benefit from the growth and those who don’t. And it isn’t only the poor resenting the wealthy; the wealthy regard the rise of nationalist political parties as somehow illegitimate. Just as the weaker classes fear for their futures, the wealthier classes dread seeing the poor rally around a cause that threatens the interests of the wealthy. In Brexit, Trump and many other elections, the well-to-do tend to feel that the outcome was in some way illegitimate. As some said of the Brexit vote, the people who voted “leave” were fooled by lies and simply couldn’t understand what they were doing. That is of course possibly true, but it’s hardly likely to heal social divisions.

2008 cemented into place a social division, which turned into a powerful political movement, unbounded by borders or oceans, challenging the legitimacy of old mainstream parties and, with them, the social legitimacy of those above the median income line. Two ideologies have emerged. One is the older liberal theory. The other is the newer nationalist theory. The older parties and those benefiting from the economic recovery are waiting for these movements to go away. They become excited at reports of economic growth. But these movements are not going away, and this ceased to be a matter of economics years ago.
Title: Trump administration considering FDI reciprocity
Post by: Crafty_Dog on February 10, 2018, 09:17:11 AM
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Feb 10, 2018 | 15:25 GMT
3 mins read
Tit for Tat? The Shape of U.S. Restrictions on Chinese FDI
An investor in China examines a map showing investment opportunities in real estate, including in the United States.
(MARK RALSTON/AFP/Getty Images)
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    In hopes of forcing China to open further, the United States is considering investment restrictions that would mirror those imposed by China.
    China’s investment goals are to cement its position in the stable, developed U.S. economy and fuel growth in sectors key to its economic transition.
    As such, China has two concerns: Sectors where its own restrictions will mean harsh U.S. measures and those sectors of high priority to Beijing.

In its ongoing pushback against Chinese trade and investment, the White House is reportedly mulling restrictions on Chinese investment that mirror the restrictions imposed by Beijing on U.S. investment in China. Since 2005, the United States has attracted approximately 10 percent of all outbound Chinese foreign direct investment, or FDI. The amount of Chinese FDI heading to the United States has grown tremendously since 2010 in parallel with more Chinese investment in developed markets generally, particularly in those that Beijing has sought to beef up domestically. Because of China’s tight investment policies, the possible move by U.S. President Donald Trump's administration could have a major impact on the billions of dollars Beijing pours into U.S. industries, especially in sectors that China has prioritized for growth, such as technology, consumer goods and services. It bears noting that Washington is contemplating such measures only against China, but the nature of Chinese investment in the United States provides an indication of the course U.S. authorities may pursue.
Title: Stratfor: Trump's Trade Challenges
Post by: Crafty_Dog on February 22, 2018, 06:57:58 AM
Trump's Trade Challenges

U.S. President Donald Trump has a chance to pursue protectionist trade measures that could be his most significant trade restrictions yet. After an investigation launched in April 2017, the Commerce Department has found that steel and aluminum imports threaten to impair U.S. national security. To counter that threat, it has recommended a wide range of remedies, including a global tariff on steel imports of at least 24 percent and quotas restricting imports to just 63 percent of their 2017 volume. Trump and his administration now have until April 11 and 19 to decide what measures to take on steel and aluminum imports, respectively.

If implemented, the restrictions could be the start of a series of trade measures advancing the White House's protectionist agenda. Though the implications of these measures would be significant, legal challenges and domestic division could prevent them from being effective. Stratfor will be watching for the following in the lead-up to Trump's decision and immediately after.

Divisions Within the West Wing

The Trump administration has been long-divided between a protectionist wing that backs more aggressive measures to increase trade enforcement and protect U.S industries, and a globalist wing that has pushed back against trade restrictions. While Trump has regularly called for trade deals that benefit the United States more strongly, other voices from within the White House have argued, for example, that several of the United States' largest trading partners in steel are close U.S. allies with important defense treaties. The division has played out significantly in trade investigations, with the globalist wing — led by Treasury Secretary Steven Mnuchin, Secretary of State Rex Tillerson and a chief economic adviser, Gary Cohn — often butting heads with the protectionist camp — led by U.S. Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross and the director of the National Trade Council, Peter Navarro.

Although Trump requested the Section 232 investigation that brought about the newly recommended measures in June 2017, this break between the protectionist and globalist wings caused a delay until the legally mandated deadline in January 2018. And this division has also played out between businesses. The steel industry and its unions have called for Trump to follow through on his campaign promises by enacting the measures, but other industries, particularly those reliant on steel, will doubtless push back. And this debate could temper whatever action — if any — that Trump takes.

Whatever the result, the recommendation will provide important information on the balance of power between the two camps in the administration. Moreover, it will test the extent to which Trump is willing to go against certain business interests.

Legal Loopholes

The Commerce Department's investigation has already come under criticism from trade experts who claim it uses national security as a pretext for clear-cut protectionism. While it's difficult for Trump to unilaterally change U.S. trade policy in other areas, such as NAFTA, a Section 232 trade investigation provides a potential avenue toward Trump's trade goals. However, domestic opposition and legal precedents mean that court challenges are likely. Challengers could claim, for example, that the United States is throwing out decades of standard practices in similar investigations and casting aside previous definitions of what constitutes a threat to U.S. national security.
This is not the first time the steel and iron ore sector has been the subject of such an investigation. In 2001, an investigation into imports of iron ore and semifinished steel determined there was no evidence that such imports threatened U.S. national security. And if it can be successfully argued that protectionist measures were the Trump administration's goal all along, the United States could face a legal argument that Section 232 is not being put to its intended use.

Anger Abroad

Challenges to any new U.S. trade measures will also come from abroad. U.S. trade partners could respond with direct retaliation, and China and the European Union have already begun considering responses. China has launched its own investigation into trade dumping of U.S. sorghum, and it has floated the possibility of targeting U.S. soybean exports or the U.S. agricultural sector as a whole. The European Union, meanwhile, has reportedly launched investigations into its own trade measures on Wisconsin dairy products and on Kentucky bourbon.

In addition, U.S. tariffs could be challenged through the World Trade Organization (WTO). South Korea's trade ministry said Feb. 19 that it would consider filing a WTO complaint if the United States follows through on the suggested tariffs or quotas. Though there is technically an exemption for national security under WTO rules, it has never been through a full WTO litigation. Creating a legal precedent by allowing the United States to claim national security could open the floodgates for other countries to use the same argument in situations where it is even less applicable. But litigating the national security exemption would be a lengthy process, and the United States would continue implementing the tariffs in the short term.

For now, the most important outcome of the ongoing U.S. trade investigations hints at what is to come. The investigation into China's intellectual property rules and technology transfers will be completed later this year, and there are signs that the White House seems to have internal divisions over how aggressively to go after China. Should Trump accept the Commerce Department's recommendations and put significant trade measures into place, that could be a harbinger for even more significant action against China later this year.

Title: Re: Stratfor: Trump's Trade Challenges
Post by: DougMacG on February 22, 2018, 08:23:26 AM
Maybe he can undo with trade protectionism all the good he has done with deregulation and tax cuts, and give tax cuts a bad name so that we never try shrinking the burden of government ever again.  (
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 01, 2018, 12:13:16 PM
Market VERY unhappy with Trump's steel and aluminum tariff announcement today , , ,
Title: Re: Trade Issues:
Post by: DougMacG on March 02, 2018, 04:06:46 AM
Market VERY unhappy with Trump's steel and aluminum tariff announcement today , , ,

Very bad move.  One of the reasons I opposed him.  Building an economy as a two-legged stool, sure to give tax cuts and deregulation the blame if it tips over.
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 02, 2018, 04:20:57 AM
One of his trade aides was on Tucker Carlson last night.  The argument was that without these tariffs our steel and aluminum industries would fail and that having steel capacity was a matter of national security, that China was selling steel for less here than at home i.e. dumping so as to break our steel industry.  Intrusion from reality:  China is not among our top steel suppliers, who actually include major allies such as Canada and Britain.

Apparently this move was supposed to be announced next week and, how rare, President Trump jumped the gun.  Hopefully as the back filling is done, our allies will not be included.
Title: WSJ on the Trump Steel Tariffs
Post by: Crafty_Dog on March 02, 2018, 05:38:29 AM
Trump to Impose Steep Aluminum and Steel Tariffs
President plans next week to approve 25% duties on steel imports and 10% on aluminum over the objection of allies and some advisers
‘When it comes to a time when our country can’t make aluminum and steel, you almost don’t have much of a country,’ Mr. Trump told steel and aluminum executives at the White House on Thursday.
‘When it comes to a time when our country can’t make aluminum and steel, you almost don’t have much of a country,’ Mr. Trump told steel and aluminum executives at the White House on Thursday. Photo: Evan Vucci/Associated Press
By Jacob M. Schlesinger,
P
eter Nicholas and
L
ouise Radnofsky
Updated March 1, 2018 9:48 p.m. ET
1558 COMMENTS

WASHINGTON—President Donald Trump’s pledge Thursday to impose stiff tariffs on steel and aluminum imports sparked worries of a looming global trade war, sending stocks tumbling, drawing protests from a broad swath of American industries dependent on the metals, and prompting threats of retaliation across Asia, Europe, and North America.

The move fulfills a Trump campaign promise that helped fuel his surprise 2016 campaign victory in the industrial Midwest, and he told a White House meeting of industry executives that his coming measures—25% tariffs on steel imports, 10% on aluminum—would revive domestic manufacturing. “You’re going to see a lot of good things happen. You’re going to see expansion of the companies,” the president said.

But the impact on companies that use steel was swift and sharp. The Dow Jones Industrial Average tumbled more than 500 points, or 2%, after the announcement, as shares of big steel users, including auto makers Ford Motor Co. and General Motors Co., dropped even further.
Heard on the Street

A cascade of industry trade groups moved quickly to denounce the moves, including beer and boat makers worried about costlier aluminum, and manufacturers of chemicals, air conditioners, and oil pipelines all concerned about pricier steel inputs.

“It’s going to be expensive,” said Ed Bolas, chief financial officer at DyCast Specialties Corp., a Minnesota maker of parts for products including cutting tools and engines. “All of it will impact the consumer.”

Mr. Trump’s announcement marks his biggest move to date to carry out his “America First” trade policy aimed at upending decades of U.S. leadership fostering globalization. The swift backlash underscores the dramatic ways that system may now be changing.

The decision was controversial inside his own administration, coming over the objections of some top advisers, and surprising many in the White House who first learned of the plans from news reports Wednesday night. Mr. Trump’s Defense Department had weighed in against the move, with a memo cautioning against harm to “our key allies” like Canada and Japan.

“These U.S. measures will have a negative impact on trans-Atlantic relations and on global markets,” warned Europe’s trade commissioner, Cecilia Malmstrom.
Will Trump's Import Tariffs Cause Trade Wars?
President Trump signed an executive order in late January that imposed tariffs on washing machines and solar panels. WSJ's Gerald F. Seib examined whether these moves could ignite a trade war with South Korea and China. Photo: AP (Originally published Jan. 24, 2018)

Mr. Trump portrays those markets fostered by his predecessors in alliance with Europe and other nations as having destroyed American industry, telling the steel and aluminum representatives that they had “been horribly treated by other countries.”

The president justified the tariffs by invoking a little-used Cold War era law that gives presidents broad discretion to curb imports deemed a threat to “national security.” The announcement was based on studies conducted by the Commerce Department, made public last month, which concluded metals imports had eroded the country’s ability to make its own weapons, tanks, and aircraft.

As a sign of how eager the president was to take big action, he chose the toughest of the three options presented to him by Commerce, which had also outlined a more targeted approach aimed only at certain countries.

Mr. Trump also felt such urgency to announce the decision that he did so providing no further details beyond the broad numbers, saying the concrete policies wouldn’t be announced until next week.

The new tariffs underscore Mr. Trump’s pivot in his second year in office to reorient decades of American policies aimed at expanding free trade and globalization. Thursday’s move comes about a month after the White House unveiled similar tariffs and quotas on solar panels and washing machines, invoking a different little-used 1974 trade law allowing U.S. industries to seek sweeping protection if they can show significant injury from a sudden surge in foreign competition.

Trump aides are also weighing a broad package of trade and investment penalties against China, as they complete a detailed study accusing Beijing of widespread theft and expropriation of American intellectual property. Thursday’s decision is aimed in particular at China, whose steel overcapacity has fueled a global glut hampering American producers.

Mr. Trump’s announcement appeared to be a diplomatic jab at Chinese President Xi Jinping, coming the same day his top economic adviser was meeting at the White House with the Trump economic team to try to ease trade tensions.

The new tariffs seem to reflect rising power inside the Trump administration of his economic nationalist aides, who have tangled over the past year with his more globalist free-trade oriented advisers. The infighting was evident Wednesday night, with some officials insisting a decision was imminent and others saying it was still being deliberated.

Peter Navarro, an economist who crafted much of Mr. Trump’s protectionist 2016 campaign platform, is slated for a promotion that would give him a greater voice in internal debates, after staff secretary Rob Porter, a free-trade Republican aide tasked with overseeing coordination of trade policy, was forced out in a spousal abuse scandal.

Mr. Trump has repeatedly said that his campaign pledge for greater steel protection won him the presidency, and his U.S. trade representative, Robert Lighthizer, talks of tougher trade policies creating a “new coalition” in support of trade, by winning over Democrats who have grown increasingly hostile to globalization over the past quarter-century. Mr. Trump is hoping to solidify his political base in advance of midterm congressional elections this year, and the announcement comes ahead of a March 13 special House contest in Pennsylvania steel country.

Indeed, many congressional Democrats and labor unions joined the metals executives in cheering new policy, which they had long advocated.

“This welcome action is long overdue for closed steel plants across Ohio,” said Ohio Democratic Sen. Sherrod Brown, who has been working closely with Mr. Trump and his trade team to craft such new policies. AFL-CIO President Richard Trumka issued rare praise for Mr. Trump, calling the move “a great first step” and pledging to “continue to work with the administration on rewriting trade rules to benefit working people.”

Knotty Ties

As the U.S. weighs how to curb rising steel imports, including Chinese product that comes through third nations...

...it faces a challenge: Other top exporters are U.S. allies like Canada and Japan.

U.S. steel imports as a share of domestic market*

Share of U.S. steel imports by country, 2017†

30%

16.1%

Canada

13.0

Brazil

25

10.2

South Korea

9.0

Mexico

2017†

27.5%

20

Russia

8.7

6.3

Turkey

15

Japan

5.0

10

Germany

3.8

Taiwan

3.5

5

India

2.4

China

2.2

0

19.8

Others

’05

’15

’10

2000

*Finished steel products (excludes semi-finished)   †Through October 2017

Source: U.S. Department of Commerce

But the decision also is likely to open a rift between the White House and traditional free-trade Republicans in Congress, who have become increasingly vocal in recent weeks urging Mr. Trump to avoid taking such action.

Even Sen. Pat Toomey, a Republican representing Pennsylvania, blasted the move, saying that “invoking national security as a means of imposing new, huge tariffs on all kinds of imported steel is a big mistake that will increase costs on American consumers, cost our country jobs, and invite retaliation from other countries.”

The move also drew complaints from allies and trading partners, who have repeatedly warned that such action could prompt them to retaliate.

“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk,” said Jean-Claude Juncker, president of the European Commission, vowing “countermeasures against the U.S. to balance the situation.”

Canadian Foreign Minister Chrystia Freeland said that “should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”

A Chinese foreign ministry spokeswoman said “The U.S. has overused trade remedies” adding that “China will take proper measures to safeguard its interests.”

Opponents warn that the moves could undermine the global free-trading system, as the U.S. imposes broad trade restrictions unilaterally without first going through the World Trade Organization. U.S. presidents have generally avoided such actions since the WTO’s 1995 creation as a way of encouraging other nations to take their trade disputes to the Geneva-based arbiter.

Free-traders worry also about the Trump administration invoking “security” as a justification for a new trade policy. Global commercial rules do little to regulate such moves out of deference to national sovereignty, and many trade lawyers consider it a loophole that, if used widely, could undermine the force of the international system. That fear has for years discouraged most countries from using “national security” trade protections.

But Mr. Trump and his aides have been openly skeptical about the effectiveness and fairness of the WTO, and have regularly signaled a willingness to challenge its authority.

As the president told the executives Thursday: “The WTO has been a disaster for this country.”

—Bob Tita, William Mauldin and Andrew Tangel contributed to this article.
Title: Stratfor: Trump's Trade Challenges, Revisited
Post by: Crafty_Dog on March 02, 2018, 06:38:14 AM
third post

Trump's Trade Challenges, Revisited

Highlights
•   President Donald Trump's announcement that large tariffs are coming next week on steel and aluminum imports is just the start of a bigger trade push, ostensibly targeting China.
•   Over the next week, other countries and certain U.S. steel and aluminum consumers will lobby for country- and product-specific exemptions to the tariffs, but Trump is likely to minimize the number of exceptions he gives.
•   In launching the tariffs under the guise of national security, the United States will face international backlash, both in retaliatory trade measures, but also at the World Trade Organization.
________________________________________
A chaotic series of events unfolded at the White House after news broke late on Feb. 28 that President Donald Trump would announce his decision on import tariffs on steel and aluminum the next day. But reportedly, many senior administration officials had been caught off guard by the news of a planned announcement, and no decision on tariffs had been made. And then during a March 1 meeting with executives from the steel and aluminum industries, Trump said he will formally announce a 25 percent tariff on steel imports and a 10 percent tariff on aluminum next week. The details clearly remain unresolved as legal teams continue to pore over the final text, but action also clearly looms.

Nearly two weeks ago when the U.S. Commerce Department released its report on whether steel and aluminum imports threaten to impair U.S. national security, Stratfor wrote a guidance outlining what we would be watching for as Trump's final decision neared. With the president's decision now apparently on its way next week, we offer an updated guidance addressing the critical questions surrounding the issue.

The Big Picture

________________________________________

In Stratfor's 2018 Annual Forecast, we said that the United States would face a decision in the next few months over whether to restrict imports of steel and aluminum after investigations into the effect of those imports on U.S. national security concluded. With reports detailing the results of those inquiries sitting on President Donald Trump's desk, we are now seeing concrete steps being taken toward significant action.
________________________________________

2018 Annual ForecastAmericas
Divisions Within the West Wing

The White House remains deeply divided on trade issues and the degree of protectionism to pursue, but now that it looks as if large tariffs are coming, it is clear — or at least it seems to be clear for now — that the administration's protectionist faction is making headway. The steel and aluminum tariffs Trump mentioned March 1 are both slightly higher than the tariff levels the U.S. Commerce Department recommended last month. What remains to be seen is whether the administration's globalist wing and the national security establishment can blunt Trump's decision by pushing for exemptions for U.S. allies or for certain products.

There are other signs pointing to the elevation of the protectionist wing in the White House. Rumors emerged on Feb. 23 that Peter Navarro, a trade hawk, was being promoted to special adviser to the president, giving him a direct line to Trump for the first time since he fell out of favor in September. The strength of the protectionist wing also comes ahead of major decisions on the Section 301 investigation into Chinese technology-transfer rights, an investigation that must be completed by mid-August. Navarro, as well as U.S. Trade Representative Robert Lighthizer, are both vocal anti-China trade hawks. If their position is gaining momentum, then an even more significant action against China may be pending than the already large action that is anticipated.

It's also clear that most U.S. industries are not happy with Trump's steel and aluminum tariff plans. While steel and aluminum producers and their workers' unions support tariffs, the vast majority of U.S. industries are steel and aluminum consumers and soon will have to face higher prices for some of their critical materials. This distinction between consumer and producer was apparent in Wall Street's reaction to Trump's remarks. The stock of U.S. Steel, for example, rose more than 6 percent in just a few hours after Trump spoke, while Ford Motor Co. and Boeing Co., major consumers of steel and aluminum, saw their stocks fall by more than 3 percent.

Legal Loopholes

Trump's team is poring over the legality of a blanket tariff on steel and aluminum imports, seeking to minimize any legal challenges that could emerge. Not all of the legal challenges can be addressed, of course. No matter what the United States does, cases objecting to the moves will be filed at the World Trade Organization (WTO) and elsewhere. In general, a blanket tariff is the simplest and most efficient way to institute protectionism. Establishing a quota system or singling out specific countries for tariffs would bring additional challenges, since the United States, through the WTO's most-favored nation principle, has promised to treat all WTO members the same when it comes to imports and tariffs.

Anger Abroad

Major U.S. steel and aluminum trading partners have lobbied for exemptions and lesser action. Brazil and Mexico have sent delegations to the United States, with Brazil in particular considering retaliatory tariffs against U.S. coal imports — a threat that remains on the table. The European Union, Canada and other major exporters have issued similar threats: retaliatory action and WTO challenges.

Trump's planned tariffs are also ostensibly directed against China implicitly, though Chinese steel has been largely priced out of the U.S. market because of heavy tariffs already in place through anti-dumping and countervailing duty investigations. (Many of the tariffs in place dwarf the 25 percent figure Trump mentioned March 1.) Still, China will be affected. The foreign supplies kept out of the U.S. steel and aluminum market by tariffs will head elsewhere, where they will eat into the market share of Chinese steel in particular and could result in some consuming countries instituting their own safeguards against a glut of steel and aluminum being diverted from the Chinese markets.

Trump's remarks coincided with a five-day visit to the United States by Liu He, China's top economic policymaker, who is in Washington to try to defuse U.S. trade pressure. Beijing has been trying to work various backchannels to the White House to gauge U.S. options and to revive their suspended economic dialogue to see where its concessions could fit. China has been holding out on promises to increase U.S. imports and expand market access to U.S. investors in the agricultural, energy and financial industries, and also has signaled it could ease up on forced tech transfers on foreign companies. But Beijing will equally respond to U.S. trade policies through proportional tit-for-tat measures. Already, China has launched one-year investigations on U.S. sorghum and has also weighed its options on other key U.S. agricultural exports, such as soybeans and corn. U.S. chemical products, aviation and firms operating inside China could also face retaliatory pressures.
Title: The Atlantic makes the case against the tariffs
Post by: Crafty_Dog on March 02, 2018, 11:04:29 AM


Trump's ‘Smart’ Tariffs Don't Make Economic Sense

The president says they'll protect American jobs and bolster national security. They'll likely do neither.

 


President Donald Trump’s long-anticipated tariffs are finally here: 25 percent on imported steel and 10 percent on imported aluminum, with a formal announcement on the measures to be made next week.

The White House has argued that the tariffs would punish China for unfair trade practices and help American blue-collar workers afflicted by decades of manufacturing job losses and wage stagnation. “We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!,” President Trump wrote on Twitter on Thursday. But business leaders and economists from across the ideological spectrum question how much good Trump’s tariffs would do—and whether they might even backfire, raising costs for American consumers, hurting American exporters, straining American economic relationships around the world, and ultimately slowing down growth.

That is not to say that the tariffs do not have a constituency among certain manufacturers, or that they are not meant to address real and painful changes in the American economy. Steel production has fallen to 82 million metric tons a year from nearly 100 million a decade ago, with three out of four domestic aluminum smelters shuttering over the past few decades. That has meant thousands and thousands of job losses. At the same time, foreign producers have ramped up production, pushing down prices and leading to increased American imports.


The issue, the Trump administration has argued, is not just one of jobs, wages, imports, and exports. It is also one of defense strategy: The U.S.’s reliance on imports leaves critical industries vulnerable to potential embargoes and trade actions by its enemies.

But trade experts see a number of problems with the White House’s argument for instituting tariffs on security grounds. Trump himself has repeatedly mentioned China’s trade practices as justification for the tariffs, for one. And the vast majority of  the U.S.’s imports come from strong allies: Canada, South Korea, Mexico, Germany, Japan, and Brazil all export more steel to the United States than China does. “There is no question that steel and aluminum, materials used in the production of weapons and military systems, are vital for America’s military superiority,” a group of conservative think-tank scholars argued in response to then-potential tariffs in late February. “But it is not realistic to expect that foreign producers would withhold supplies in the case of a national security emergency.”

The flimsiness of Trump’s justification raises the risk of retaliation by the United States’ trading partners, many of whom have lobbied against the tariffs since the earliest days of the Trump presidency and are expressing their frustration with the tariffs now. Trade experts expect tit-for-tat actions, meaning lower sales for American businesses abroad. “If the United States goes down this path for steel and aluminum, there is little to prevent other countries from arguing that they too are justified to use similar exceptions to halt U.S. exports of completely different products,” argues Chad P. Bown of the Peterson Institute for International Economics, a Washington-based think tank broadly supportive of free trade. “Because this leads to a downward spiral and erodes meaningful obligations under international trade rules, justifying import restrictions based on national security is really the ‘nuclear option.’”


To that end, China has indicated that is ready to take action. “China urges the U.S. to use trade protection tools with restraint and comply with multilateral trade rules so as to make positive contribution to the international economic and trade order,” its Ministry of Commerce warned last month, adding, “China will definitely take necessary measures to safeguard its legitimate rights.”

The specter of a trade war undercuts Trump’s economic argument. The president has promised that steel and aluminum tariffs will bolster domestic industries and boost American payrolls, with some labor leaders and business executives in agreement. “U.S. steel and aluminum industries have been heavily injured by massive growth of excess capacity and overproduction in China and other countries,” argues Robert E. Scott of the Economic Policy Institute, a left-of-center think tank. “More than 13,000 U.S. jobs have been lost in aluminum since 2000—and 14,000 steel jobs disappeared in [the] last two years alone.” But America’s steel and aluminum industries simply do not employ that many workers. Restoring all those jobs would be but a blip in a monthly payroll report.

More broadly, the tariffs will raise costs for a vast sweep of businesses, given that steel and aluminum are major inputs in auto manufacturing, oil and gas extraction, and construction, as well as in the production of everything from beer cans to golf clubs. Manufacturers “will be paying higher prices for our stainless steel going forward, ironically making us less competitive against foreign-finished goods,” said Greg Owens, the president of the flatware maker Sherrill Manufacturing, in a press release. He wants the White House to take measures to ensure that foreign goods would not be cheaper as a result of the tariffs, “a critical next step that if left unaddressed will turn this first positive step into a catastrophe for American manufacturing.”

Plus, the tariffs will invite retaliatory actions that could hit a huge number of American exporters. “Every time you do this, you get a retaliation, and agriculture is the number one target. I think this is terribly counterproductive,” Senator Pat Roberts, a Kansas Republican, told reporters on Thursday. There are numbers to back this economic case up: A study of a similar trade actions taken by the George W. Bush administration found that they cost the economy an estimated 200,000 jobs, including roughly 11,000 in Ohio, 10,000 in Michigan, 10,000 in Illinois, and 8,000 in Pennsylvania.

Trump’s “smart” trade action, then, might spark a trade war, hurt the auto industry, bleed jobs from the Rust Belt, and anger American allies around the world. A small number of companies and workers stand to benefit, but a far larger number are now at risk.
Title: Trump argues reciprocity , , ,
Post by: Crafty_Dog on March 02, 2018, 11:21:10 AM
second post

The reciprocity argument is not without considerable power, but glibness about winning trade wars has considerable risk , ,,

http://thehill.com/homenews/administration/376400-trump-defends-new-tariffs-trade-wars-are-good-and-easy-to-win?userid=188403

Title: Stratfor: this is just the beginning of Trump's strategy viz China
Post by: Crafty_Dog on March 02, 2018, 11:27:03 AM
third post

After months spent laying the legal groundwork, the United States has begun making moves against its top strategic competitor, China. On March 1, the U.S. Senate passed the Taiwan Travel Act without opposition. Once signed into law, the bill, which the House of Representatives passed in early January, will permit high-level official visits between the United States and Taiwan. Shortly afterward the Senate vote, U.S. President Donald Trump announced that the United States would impose import tariffs of 25 percent on steel and 10 percent on aluminum. The administration justified the trade duties after a national security review and Section 232 investigation. But the real message for China may be that the United States is only beginning to increase pressure.

Though the tariffs are aimed at China, they might actually hit other countries the hardest. China's steel exports accounted for slightly more than 2 percent of U.S. demand in 2017, and that figure has declined significantly since 2014 because of previous U.S. trade actions. Other top steel exporters to the United States — Canada, Brazil and South Korea — are likely to feel the effects of the decision more, and some of them are strategic U.S. allies. Still, China will strongly feel secondary effects. Without access to the United States, steel exporters will have to sell their steel in other markets, leading to additional competition. As a consequence, Chinese steel, which accounts for half of global production, could run into safeguards put up by the European Union, Japan and others, when this competition heats up.

For China, the steel tariff is just the tip of the iceberg. It is an indicator that Washington is becoming more serious about forcing it to reshape its trade practices, from market restrictions and industrial subsidies to technology transfers and protections for state-owned enterprises. And the disputes are part of a bigger picture. China is transitioning from being an inward-looking nation to an outward-acting one. As a consequence, its interests are expanding elsewhere, and it is challenging the global status quo. Its size and influence, accompanied by more aggressive actions, make it an easy target and put it on an inevitable course that directly challenges core U.S. strategic interests.   

The recent U.S. actions, in turn, are an uncoordinated reaction to this expansion. Congress, historically proactive on Taiwan, is reaching out to the island to guard against a more assertive China in the South China Sea, and it wants to shore up Taiwan's security and independence. In targeting tariffs, the administration is also moving to realize a set of domestic political priorities, particularly the promises to get tough with China and to support domestic heavy industry.

Currently, many in Congress do not favor the tariffs. And a lack of consensus within the branches of the U.S. government may give China a way to manage, if not counter, these U.S. initiatives. But this bilateral friction could show up in other areas, leaving many bystander countries scrambling to adjust as two great powers struggle.
Title: Re: WSJ on the Trump Steel Tariffs, Self inflicted wounds
Post by: DougMacG on March 02, 2018, 03:44:42 PM
This is not small, not narrow, not insignificant and not wise.

Wesbury was right, you add imports to exports to calculate total trade, all good mutually beneficial transactions.  You don't subtract one from the other and meaningfully call it a deficit.  Who do we lose what to?  Financial flows are valuable too, not just goods.  How does it help our manufacturers to raise their material costs compared to what their competitors around the world pay?  When you pay more for the same goods, the consumer price index goes up and our standard of living goes down.

I understand that Trump threatens stuff like this in negotiations.  Keep them off guard, but don't do it.  We buy 2.2% of our steel from China and buy more from Canada than any other 'foreign' country.  Buying raw materials from Canada threatens our national security?  Good grief.

Dumb. Dumb. Dumb.  MHO.
-------------------------------------
https://nypost.com/2018/03/01/trumps-trade-war-could-erase-all-the-tax-cut-gainst/
Trump’s trade war could erase all the tax-cut gains
By John Podhoretz March 1, 2018
-------------------------------------

A test of the President and the success of his administration will be measured by how quickly he reverses this wrong-headed policy.  If he backs off of this before it goes into effect next week, America will be off to the economic races.  That way he has made his point but minimized the damage.
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 02, 2018, 09:02:05 PM
Trump has been on this Trade kick for decades now.

If he had framed this, as he often does, as a matter of requiring reciprocity, he would have had a very good and politically effective point but instead , , , this.  NOT GOOD.
Title: AEI: The Destructive Path of Protectionism
Post by: Crafty_Dog on March 03, 2018, 06:03:22 PM
http://www.aei.org/publication/the-destructive-path-of-protectionism/?mkt_tok=eyJpIjoiWmpJNE9HRXpNakU0TmpjeSIsInQiOiJUZlFCQVwvUXRsNGp2cDNlWlJwc0FoVE5aZUpoK1NJTmJPQXN5WUUrVVNZS3NKM3lqNEdMTk9BcW1rMzJmSG5ReXI5MnVYSWloYklLR3JXSnhPRmdjSkxzclptcTVkNmRCUWZhS1VXODNsTUJPWnJcL01EQ0V2Rnc2XC9HR0tudktFZCJ9
Title: GPF: George Friedman: Trade War and the Correlation of Forces
Post by: Crafty_Dog on March 05, 2018, 06:24:52 AM
Some of us may remember that I suggested seriously considering trade war with China as a way to defend the South China Sea , , ,

=================================================

Trade War and the Correlation of Forces
Mar 5, 2018
By George Friedman

During the 1970s, the Soviets developed a model for analyzing military conflict through measuring the correlation of forces. This measured the military force each side would bring to bear in an engagement, from nuclear war to small unit combat. It did not address the question of whether the battle or war was wise, whether victory was worth the price, or the long-term consequences. It focused on a single, partial, yet indispensable question: Who would win? This is a question that should be applied to the current debate over steel and aluminum tariffs: Who would win a trade war? It would not answer the question of the wisdom of the war, or the cost. It would simply measure the likely winner, however damaged that party might be by the war.

The first question to be asked is simple, as all first questions should be: How important is trade, particularly exports, to the major players? According to 2016 World Bank figures, global exports make up 29 percent of global gross domestic product. For high-income countries, exports make up 30 percent of GDP. Exports account for roughly 20 percent of China’s GDP, 26 percent of Russia’s, 42 percent of South Korea’s, 31 percent of Canada’s and 38 percent of Mexico’s.

By comparison, exports make up 12 percent of U.S. GDP. This means that the decline in exports has less impact on the United States than on most other countries. Put another way, the United States’ economy maintains higher domestic demand than other countries relative to production, and therefore is less dependent on exports. This is connected to the sheer size of the American economy. It dwarfs others, including China.

The United States is also the largest importing country in the world. (The European Union as a whole is larger, but the EU is not a country. It is a treaty organization, and a dysfunctional one at that when it comes to economic issues.) China’s exports to the U.S. in 2016 were worth $386 billion, while it’s imports from the U.S. were worth only $135 billion. In a trade war, this trade surplus would become a Chinese weakness. China derives about 3 percent of its GDP from exports to the United States; the United States derives around 0.5 percent of its GDP from exports to China. Similar or greater imbalances can be found in other countries mentioned.

What Happens in a Trade War?

The United States currently runs a large trade deficit. That actually makes the U.S. the stronger party in a potential trade war. The U.S. is less dependent on exports than the countries that export to the U.S. market. As a result, the “correlation of forces” is such that the cost of a trade war is greater to U.S. trading partners than to the U.S. If the U.S. does institute the steel and aluminum tariffs (and it appears that it will), U.S. consumers will have to worry about an increase in the price of goods, and U.S. companies that are disproportionately exposed to exports will face significant problems. But the countries that depend on the U.S. to buy their goods have a much bigger problem. There is simply no other market in the world that compares to the U.S. in size and demand. The U.S. would not emerge from a trade war unscathed – but it would fare better than U.S. trade partners who depend on access to the U.S. market. This puts it in a powerful position against smaller economies that are efficient exporters and therefore much more vulnerable in a trade war.

It follows that the risks from an escalating trade war would be substantially greater on China, South Korea or Canada than they would be on the United States. Each countermove costs the United States less than it does its counterpart. So even if other countries hurt the United States in a countermove to President Donald Trump’s threatened tariffs, the reaction from the United States can hurt them far more. The percentage of GDP at risk in a trade war for U.S. counterparts is much greater than for the United States, which means, on the surface, that the United States will win such a war. More to the point, it makes it unlikely that opponents will risk a trade war.
I want to emphasize that this is a simplistic analysis, as it is meant to be. Evaluating the correlation of forces necessarily excludes evaluation of other key elements to the battle – in this case, elements like supply chain disruption, the threat to ruling political coalitions and so on. War is a complex thing, and the correlation of forces tells you only about the exchange of fire. But talking about trade wars without starting with the simplistic is dangerous. The core reality of a war is, after all, the exchange of fire and a summation of the net consequence of that exchange. Leaping to more sophisticated models that exclude the correlation of forces risks putting the cart before the horse.

What the simplistic model says is that U.S. partners can bluff a trade war, but not wage that war, because with each move, the damage to them will be greater than the damage they can inflict. Efficiency in exports creates pyramiding vulnerabilities in a trade war. But of course, this does not take into account sectoral damage, strategic relationships outside of trade or unequal domestic consequences. Having stated the obvious, these are the questions we will turn to next.
Title: Trade Issues: Six Reasons the Free Traders are Wrong?? ??
Post by: DougMacG on March 06, 2018, 10:20:58 AM
From Kevin McCullough at Townhall.  Each of these reasons is quite weak IMHO.  It might not set off a trade war?  The aluminum cost is a small part of a beer.  We are going to protect industries for national security - in case Canada turns against us?

https://townhall.com/columnists/kevinmccullough/2018/03/04/six-simple-reasons-they-are-wrong-on-tariffs-n2457025
Title: Trade Issues: Protectionism triggered the Great Depression
Post by: DougMacG on March 06, 2018, 11:33:40 AM
Not to say there was one cause, but trade protectionism punched us in the gut way above its weight class.  The Great Depression was a Trump defined win: imports fell more than exports!  Both were affected far more than GDP demonstrating truth in the alleged multiplier effect.  And GDP fell by more than a quarter...

(From our other trade thread)
Smoot Hawley Tariff Act:  raised tariffs on 20,000 items by 6.3% to 19.8%.
Effective‎: ‎March 13, 1930   
Imports: fell 66%
Exports: fell 61% 
GDP: fell over 25%
The "trade deficit" "improved"!
We are FAR more reliant on both imports and exports today.

http://dogbrothers.com/phpBB2/index.php?topic=2240.msg100985#msg100985
-----------------------------------------

"I could have swore we had a thread about this already, but I can't find it , , , "

http://dogbrothers.com/phpBB2/index.php?topic=2240.0
Title: Re: Trade Issues: Six Reasons the Free Traders are Wrong?? ??
Post by: G M on March 06, 2018, 11:42:16 AM
From Kevin McCullough at Townhall.  Each of these reasons is quite weak IMHO.  It might not set off a trade war?  The aluminum cost is a small part of a beer.  We are going to protect industries for national security - in case Canada turns against us?

https://townhall.com/columnists/kevinmccullough/2018/03/04/six-simple-reasons-they-are-wrong-on-tariffs-n2457025


I see this more as the economic phase of the US China war.
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 06, 2018, 12:19:50 PM
I've asked our webmaster to merge the threads.
Title: Protectionism: We do to ourselves in peacetime what enemies do to us in war.
Post by: DougMacG on March 06, 2018, 12:25:29 PM
I see this more as the economic phase of the US China war.

Right.  Economic Mutually Assured Destruction.  He wants China's attention on a number of matters.  He proves he is willing to take the heat of announcing such a bold move, no matter the damage it causes to the US economy and the world.  But then what?

I predicted he is bluffing.  He will delay implementation, scale it down, narrow it.  Or cancel it and say he got the concessions he wanted.

But let's say he doesn't get concessions.  Then what?  He backs down anyway?  Goes ahead with it??

The concessions he is demanding are unspecified.  Maybe Trump's representatives are busily pursuing this with our evil trading partners right now as we write.  

Besides China, he just expanded the fight with Europe on cars.
 
I was in the export business when NAFTA happened.  Someone more honest than Trump can tell me how this was not a great deal for the US, for them to remove their tariffs when we already had virtually none.

China steals our technology.  This addresses that how?  China propped up DPRK.  This motivates them to fix that?  China has been overly and illegally aggressive in the Taiwan to Singapore Sea.  Now they will respect international and sovereign waters??

If Trump was right to do this for the reasons he gave, and the cost isn't that high, why does he ever back off of it?
---------------------
"One of the ironies of trade protectionism is that tariffs and import quotas are what we do to ourselves in times of peace what foreign nations do to u‎s with blockades to keep imports from entering our country in times of war." - Arthur B. Laffer, Lawrence Kudlow and Stephen Moore March 3, 2018
https://www.cnbc.com/2018/03/03/kudlow-mr-president-tariffs-are-really-tax-hikes.html


Title: Trump tariffs trigger Chinese solar company into building in US
Post by: Crafty_Dog on March 06, 2018, 10:05:11 PM
http://money.cnn.com/2018/01/30/news/economy/jinko-solar-us-china-trump/index.html
Title: Re: Trade Issues:
Post by: G M on March 06, 2018, 11:48:16 PM
China cannot afford a major economic downturn. It could present a real threat to internal stability.
Title: Re: Trade Issues:
Post by: DougMacG on March 07, 2018, 05:42:23 AM
China cannot afford a major economic downturn. It could present a real threat to internal stability.

I agree and if we had a unified national security policy to take down the regime of China for the good of the world this would be it.  China is more dependent on trade than we are and would fall much further if we acted with lasting resolve until they lose power.  But we can't. 

Let's say Trump takes down our own economy by 20% and the result of these policies and trade war takes down China's economy by 40%.  The China regime can't survive that for long, but neither can Trump.  He would lose his fragile popularity instantly.  A president with 30% approval or lower is barely President.  He would lose the agenda, lose on policy, lose the midterms, trigger impeachment and lose reelection - to the Leftists - if he were to make it that far.  The Leftists he would lose to could care less about China gaining world military supremacy or ruling the Asian seas and shipping lanes.  They would reverse enough of the bad trade policies to get us back to stagnation where they seem to be most comfortable, and let China off the hook.

This is either a bluff or a catastrophe as I see it.
Title: Re: Trade Issues / Freedom to Trade:
Post by: DougMacG on March 07, 2018, 06:17:14 AM
I've asked our webmaster to merge the threads.

I hope we will retain the "Freedom to trade" part of the name as a reminder that the focus here generally is more on how to keep our individual liberties than to find more ways to expand government powers over our private and consensual activities.

There is a time and a place to curtail our freedom to trade, crucial national security interests for example, but we should still recognize when we do sowe are curtailing the economic liberty to raise our standard of living by buying and selling products and services around the world.
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 07, 2018, 07:06:55 AM
So noted.


Title: Who could have seen this coming?
Post by: Crafty_Dog on March 07, 2018, 12:14:27 PM
http://thehill.com/homenews/administration/377233-wh-mexico-canada-could-receive-tariff-exemptions?userid=188403
Title: WSJ: How a trade war escalates
Post by: Crafty_Dog on March 07, 2018, 09:27:21 PM
How a Trade War Escalates
Europe retaliates against U.S. exports and Republican states.
By The Editorial Board
March 7, 2018 7:04 p.m. ET
81 COMMENTS

The European Union on Wednesday released its target list of retaliatory tariffs on American exports worth $3.5 billion if President Trump pushes ahead with his steel and aluminum tariffs. This is how Mr. Trump’s trade irruptions could imperil American exporters and become a destructive spiral.

The EU is acting with some restraint—for now—in crafting a narrow list of items on which to impose tariffs, including bourbon, orange juice, corn, ladders and motor boats. None are vital to European industry, but they are politically shrewd in targeting exports from states represented by Republicans on Capitol Hill. The point is to punish voters in states Mr. Trump carried in 2016 and Republicans running for re-election this year. Too bad Europe can’t impose a tariff on Wilbur Ross and Peter Navarro, the architects of this fiasco.

The danger for the EU is that this will inspire Mr. Trump to indulge his schoolyard impulses and hit back at the EU again. “The European Union has been particularly tough on the United States. They make it almost impossible for us to do business with them,” Mr. Trump said at a White House presser with Swedish Prime Minister Stefan Löfven. He’s also threatened tariffs on European cars.

Since White House aide Gary Cohn soon won’t be around the White House to explain how unconnected to reality this is, we’ll try. It is not “almost impossible” for American companies to do business in Europe. The bilateral trading relationship between the U.S. and the combined EU states is the largest in the world. In 2016 American companies sold goods worth $270 billion in the EU and services worth $231 billion. America has a bilateral trade deficit in goods with the EU—$147 billion in 2016—but a services surplus of $55 billion.

The flip side of the trade deficit is a substantial flow of investment into the U.S. from Europe. Around half of new direct investment in America (measured as acquisition of an American firm, or creation or expansion of a subsidiary) came from Europe in 2016—nearly $200 billion.

Such investments, made over decades, supported roughly 4.7 million jobs of Americans employed directly by affiliates of European companies as of 2015, according to U.S. Bureau of Economic Analysis data (counting all of Europe, including some countries that aren’t EU members). And that ignores Americans employed by companies that sell to those European affiliates, and those who work for U.S. firms that benefit from European investment in equity markets and so on. This is what economic “winning” looks like.

American leaders at least dating to George Marshall have understood that close economic ties between the U.S. and Europe are necessary to support the trans-Atlantic military alliance. Not coincidentally, the Continent’s most vigorously pro-trade politicians also tend to be its most pro-American. A perverse consequence of Mr. Trump’s trade wrangling is that he’s alienating them. That includes French President Emmanuel Macron, a rare European leader to eschew outright hostility to Mr. Trump.

There’s plenty of scope to improve the U.S.-EU trading relationship. One sore spot on both sides remains agricultural protectionism, often related to dubious safety concerns. Another is Europe’s treatment of American tech companies such as Microsoft , Amazon, Google and Apple on questionable antitrust and tax concerns.

Those and other issues are best addressed through negotiations rather than tariffs. Mr. Trump would better serve American workers and businesses by urging the EU to join him in dusting off stalled free-trade talks. If he persists instead in stoking a trade war with America’s most important strategic and economic partner, he and America will lose—and big.
Title: US Steel reopening plant
Post by: Crafty_Dog on March 07, 2018, 09:28:20 PM
https://www.cnbc.com/2018/03/07/us-steel-reopening-plant-and-bringing-back-jobs-ceo-on-trump-tariffs.html
Title: Re: US Steel reopening plant
Post by: DougMacG on March 08, 2018, 07:09:34 AM
https://www.cnbc.com/2018/03/07/us-steel-reopening-plant-and-bringing-back-jobs-ceo-on-trump-tariffs.html

Building primary metals requires fewer workers than it used to, thanks to technological advancements:

(https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iaL.1jCdNtl4/v1/-1x-1.png)
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 08, 2018, 07:35:45 AM
A relevant chart, thank you Doug.  It does seem to undercut the argument that the remainder of the US's steel capacity is on the way out, though declining profitability numbers could flesh things out in a way contrary to the visuals of the chart-- I have no idea whether such is the case.

At any rate, as I understand it, part of the argument is that we have only ONE mill left with the capacity to make certain high grade steel of a sort necessary for military application; and only one aluminum smelter capable of making the sort of aluminum necessary for aircraft.
Title: Re: Trade Issues:
Post by: DougMacG on March 08, 2018, 08:24:16 AM
A relevant chart, thank you Doug.  It does seem to undercut the argument that the remainder of the US's steel capacity is on the way out, though declining profitability numbers could flesh things out in a way contrary to the visuals of the chart-- I have no idea whether such is the case.

At any rate, as I understand it, part of the argument is that we have only ONE mill left with the capacity to make certain high grade steel of a sort necessary for military application; and only one aluminum smelter capable of making the sort of aluminum necessary for aircraft.

I regret the loss of domestic sources as well but don't see how this can be the solution.

In Japan they protect rice for national security.  The nation can't be shut down by an enemy rice embargo, meanwhile they enter a 3rd decade of zero growth. [I digress.]

More importantly, putting artificial protection on suppliers is the opposite of applying market forces on producers to maximize efficiency.  Domestic producers already have the obvious advantage of shipping costs over China to the US, or the purchase of Chinese steel shipped through other countries to the US.  Paying 25% more for steel doesn't put us back on even footing with China or anyone else!

The chart shows that labor costs aren't the key factor.  The imposition of tariffs isn't an efficient way to gain jobs.  It isn't a net gain in jobs at all.  It isn't a move toward more efficient use of capital. The national security argument isn't very compelling either.  With a limited defense budget, we will build fewer ships, fewer aircraft, fewer submarines, fewer missiles, fewer missile defense sites with more expensive steel and aluminum.  Since military spending is tied to GDP, the collapse in production will be even more dramatic.  Lack of GDP (while they protected local producers) is what sunk the Soviet Union in the arms race with Reagan.  Tariffs by definition put central planning of the public sector above decentralized decision making of the private capital sector.

How does the timing of tariffs work with our big infrastructure idea?  Construction is the number one user of steel.  A trillion in infrastructure now means fewer bridges. How does that help America?

What is dumping?  Our rival and enemy wants us to have essential raw materials below their cost.  Really? They subsidize our military, infrastructure, elevators, automobiles, motorcycles and beer cans?  This hurts us how?

The point where it hurts us is when they stop dumping and start charging higher than market prices due to an acquired monopoly status.  That is hard to imagine right now in a market of over-supply.  "Dumping" hurts us when it stops and the price goes up.  And we want that day to come sooner.  We want higher prices now!

Politically, the next two elections will come down to how well the economy is performing, GDP of the voters measured in ppp - purchasing power parity.  Add a hundred jobs, lose a thousand and drive the cost of everything up for everyone does not get you there.  Republicans damaging the economy means inevitable the return of the Leftists, more central planning, less free markets, a stagnant economy.  As Hillary might say, at this point, with American industries dead, what difference does it make?

I didn't imagine the day would come when I would see Al Gore as a better free market capitalist than an elected Republican (in name only) President:
https://www.youtube.com/watch?v=0fi8OOAKuGQ
http://knowledge.wharton.upenn.edu/article/naftas-impact-u-s-economy-facts/

Krugman, too, more free market than a Republican President:
https://www.nytimes.com/2018/03/03/opinion/the-macroeconomics-of-trade-war.html

Senator Bernie Sanders promised to impose tariffs on China "until they stop dumping steel into the United States" during his 2016 presidential campaign, but his office declined to comment on Trump's tariff proposal.
https://berniesanders.com/press-release/job-killing-trade-deals-hurt-pennsylvania-workers/

Speaking of strange bedfellows, trade barriers were an early part of the Hugo Chavez agenda.  Stratfor 2001:  "Venezuela's trade minister has threatened to impose a range of import quotas and tariffs to stem a rising tide of imports and stimulate domestic industry. The move may bolster President Hugo Chavez's waning domestic political support. But his increasing intervention in the economy will deter private investment and hinder economic growth while deepening Venezuela's international isolation."
https://worldview.stratfor.com/article/venezuela-building-trade-barriers

How's that going?  

A tariff is a tax on the US buyer, not on the foreign seller.  If the tariff is successful and deters the transaction, China avoids the below cost transaction, keeps their iron and steel.  Our businesses and consumers pay more for the same product, buys less, and our government collects no revenue, actually less revenue as costs go up and profits and incomes go down.  That thinking fits the Chavez model better than it does a free market model.

International trade is inevitable and beneficial.  If one doesn't agree with the latter, see the former.   - The late Robert Bartley, WSJ
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 08, 2018, 02:21:35 PM
Representing the other side of this conversation:

BEGIN
"What is dumping?  Our rival and enemy wants us to have essential raw materials below their cost.  Really? They subsidize our military, infrastructure, elevators, automobiles, motorcycles and beer cans?  This hurts us how?

The point where it hurts us is when they stop dumping and start charging higher than market prices due to an acquired monopoly status.  That is hard to imagine right now in a market of over-supply.  "Dumping" hurts us when it stops and the price goes up.  And we want that day to come sooner.  We want higher prices now!
END

Remember when the Chinese bullied the Japanese in the South China Sea and threatened to use its Rare Earth Element near monopoly to sink Japanese electronics?  (REE's relevant to missile guidance systems too , , ,)

Separately, industries like steel have substantial barriers to entry and re-entry.  Skilled labor once gone is , , , gone. 

Chinese companies are not just subject to market forces; they are also agents of the Chinese government. 

Some things to think about.
Title: Goldman Sachs: GM & Ford will be hurt $1B
Post by: Crafty_Dog on March 08, 2018, 02:30:12 PM
second post

https://www.marketwatch.com/story/gm-and-ford-would-suffer-a-1-billion-profit-hit-if-steel-tariffs-are-enacted-says-goldman-2018-03-05?siteid=bnbh&link=sfmw_fb
Title: Re: Trade Issues:
Post by: DougMacG on March 09, 2018, 07:40:01 AM
Representing the other side of this conversation:

BEGIN
"What is dumping?  Our rival and enemy wants us to have essential raw materials below their cost.  Really? They subsidize our military, infrastructure, elevators, automobiles, motorcycles and beer cans?  This hurts us how?

The point where it hurts us is when they stop dumping and start charging higher than market prices due to an acquired monopoly status.  That is hard to imagine right now in a market of over-supply.  "Dumping" hurts us when it stops and the price goes up.  And we want that day to come sooner.  We want higher prices now!
END

Remember when the Chinese bullied the Japanese in the South China Sea and threatened to use its Rare Earth Element near monopoly to sink Japanese electronics?  (REE's relevant to missile guidance systems too , , ,)

Separately, industries like steel have substantial barriers to entry and re-entry.  Skilled labor once gone is , , , gone.  

Chinese companies are not just subject to market forces; they are also agents of the Chinese government.  

Some things to think about.

I agree, those points are the test here - and I don't find them persuasive.

Is steel analogous to rare earth elements?  Are the Chinese on a path to monopolize or capable of that?  Could they withhold from us in a way that would hurt our national security?  Could we rebuild our industry fast enough if we faced an embargo?  Could the Chinese pull off an embargo?  I don't see it.

Steel is perhaps the opposite of rare earth elements.  Iron ore is all over northern MN for example and we have the Great Lakes for shipping.  The largest Molybdenum mine in the world, a steel strengthener, is in Leadville Colorado.  

"industries like steel have substantial barriers to entry and re-entry"  

This is an important consideration  Like an oil refinery or a nuclear plant, these large facilities don't just pop up or shut down with a snap of the fingers, but I am reminded of how our economy turned itself inside out to supply a world war effort last time and we have a better capability to do that 80 years later if need be.  Outdated steel mills was our economic problem in the first place.  New ones I assume use new technology.

70% of US steel comes from the US already.  It is not a unique product nor a cornered market.  I'm guessing that figure is misleading because of recycled steel, not the highest quality for certain applications, but neither is steel in many cases.  Plenty of other materials are lighter, stronger, more resilient for certain high end applications.  Economics IS part of steel's strength.  If it was all about weight and strength issues, steel loses for many, many uses.  That we don't have a country without steel (Trump yesterday)is political drivel.  We have a country and we have steel, domestic and foreign, and many other materials.

Why is global demand slowing if steel is so strategic?
"a long-term decline in steel intensity due to technological and environmental factors will continue to weigh on steel demand in the future"
https://www.reuters.com/article/us-steel-demand-global/global-steel-demand-growth-to-slow-in-2018-worldsteel-says-idUSKBN1CL0Q8

When copper prices went up we started making plumbing pipes out of PEX (plastic) and sending information over glass (fiber optics), gained many advantages, never to fully go back.

Trump made the national security argument yesterday as convincing as he could and it fell flat IMHO, then he went on to make other economic arguments that are nothing other than political.  Why do we need the other arguments if the national security argument is fully valid?  

Here is the economic argument:  The tariffs would add 33,000 steel and aluminum jobs, while costing 179,000 jobs in other industries and raising costs for everyone.

Could China corner the market and cut off our supply?  No.  Here are some other places where production could be increased, besides building it ourselves (all over the world):
https://www.worldsteel.org/en/dam/jcr:4af7fffe-1529-4954-86df-7398b050a076/World-Steel-in-Figures-2017-Infographic_web1.jpg
The world makes steel in 44 countries: China, [European Union], Japan, India,  United States, Russia, South Korea, Germany, Turkey, Brazil, Italy, Taiwan, Ukraine, Iran, Mexico, France, Spain, Canada, Poland, Vietnam, Austria, Belgium, United Kingdom, Egypt, Netherlands, South Africa, Australia, Slovakia, Pakistan, Saudi Arabia, Indonesia, Sweden, Argentina, Czech Republic, Thailand, Kazakhstan, Finland, Romania, United Arab Emirates, Malaysia, Qatar, Luxembourg.
Yes, Luxembourg makes steel!  What kind of a world war wouldn't have a good number of these places on OUR side, and how much of the next war, think cyber-war, electronic war, neutron bomb, will be fought with steel?
https://en.wikipedia.org/wiki/List_of_countries_by_steel_production
We are 4th in the world because it is NOT particularly high tech or strategic IMO.

We could buy up Chinese excess steel now while they are 'dumping' if it is strategic and buy us time to open new plants during the (imagined) embargo.

In what situation would China embargo steel against the US and how successful would it be?  China is over-invested in steel and the world has an over-supply problem.  Shutting off their supplies means shutting down their cash register.  Wouldn't we be able to break an embargo like every other country does.  China sells to Europe and we buy from Europe?  Or does China shut down all production and all exports and fights war without money or an economy?  What is the regime of China without exports, without an economy, without money?  Not a powerhouse or a worthy foe.  Have any of the trade protectionists thought this through??

Important quote from G M: " China cannot afford a major economic downturn. It could present a real threat to internal stability."  

China cannot cut off steel to the world in crisis without setting off a full blown trade war and that would cause them unsurvivable downturn and internal chaos.  They could do that out of unilateral madness but not as a thoughtful, strategic move.

"Chinese companies are not just subject to market forces; they are also agents of the Chinese government."

True but then the Chinese government is subject to market forces at some point.  They cannot devalue their way to prosperity.  They cannot sell anything big below cost in the long run.  They cannot keep making bad loans or prop up large failed industries long term.  Most of all, they cannot strategically match over-capacity with limiting sales.  Their alleged dumping is a sign of weakness, not strength.  They have a day of economic reckoning coming and a number of us here have been watching for signs of that.

Our relationship with China is one of co-dependency as much as it is enemies or rivals.  We could balance our budget and stop borrowing from them if we wanted to.  We could make our own steel if we wanted to.  We could make box store products here and buy cheap stuff from a hundred countries instead.  But take away the US and maybe European markets from China and what is left of their economy?  Shambles.  The day they start a full blown economic war with the US will be the beginning of the end for China.  
 
A few more points:
1) The US constitution gives Congress the power of taxation.  A tariff is a tax!  The national security emergency argument is the only approach Trump can try without Congress so he tried it.  The US constitution also gives Congress the only authority to declare war so national security isn't strictly in the Article Two domain either.  The steel market has been evolving since the 1970s, what is the national emergency today that justifies going around Congress?  There isn't one.  This exact proposal could have been put through Congress over the past 12 months and it wasn't for one reason - because like with Obama's executive orders, it wouldn't have passed.  Ends justify means.  Like gun control, we must do something!  Or at least tell key constituents that we did.
2) Equal treatment under the law. [Who gives a rip about that anymore?!]  Tariffs targeting specific products and industries fail this test, require the central planning of government to cozy up with the selected protected, see Trump's smiling photos with the steel industry.  But the allegation is that the Chinese government meddles in ALL its strategic industries and manipulates its currency relating to ALL its exports.  Answering that with an arbitrary, crony government response of our own is wrong and fails this important constitutional test miserably, IMHO
3)  No mention in all the China allegations, manipulating their currency, subsidizing industries, that we manipulated our currency to the tune of $4.5 trillion over the Obama years and subsidized everything from auto makers to solar.  Oh that.

We can compete with the Chinese by being MORE free, not less, and this if really needed should go through Congress and should apply to all our people and all our industries equally.
Title: Re: Trade Issues:
Post by: ccp on March 09, 2018, 08:27:45 AM
The national security angle is persuasive

especially if  "once their gone their gone" is true.

so what if prices rise a penny .

Title: Re: Trade Issues:
Post by: DougMacG on March 09, 2018, 09:05:04 AM
"The national security angle is persuasive

especially if  "once they're gone they're gone" is true.

so what if prices rise a penny"
-----------------------------------
The old steel worker jobs are already gone in the plants that were 25% out of date in terms of efficiency.

Save one industry or two, then where does the centrally planned economy begin and end?  If govt can set prices and decide production, why not have them build it?  It isn't a private sector anymore when the government is running it.

I'll take a dynamic economy over government preservation of economic dinosaurs any day, and what about the constitutional argument?  Declare an emergency for an admitted multi-decade trend and have one person decide what the constitution says must go through the deliberative processes of 536 (House plus Senate plus President) of the people's elected representatives?  Are we now "The One"?  We know better? Better than a free market, better than our elected representatives and our constitutional process?
  https://www.youtube.com/watch?v=molWTfv8TYw  (Obama 2008, "We are the ones we have been waiting for.")

Regarding the penny, that's roughly what the tea tax, a tariff, was in Boston, 1773.  
Title: Re: Trade Issues:
Post by: ccp on March 09, 2018, 09:23:58 AM
" Regarding the penny, that's roughly what the tea tax, a tariff, was in Boston, 1773.  "

I recall seeing a menu from a late 1700's era tavern .  A steak was listed at 2 cents.

The US mint started producing patterns in 1792 and real cents i 1793 .  Those pennies today even in the worst conditions are hundreds of dollars  on up to a million dollars for the finest.

A penny was real money in those days.

Title: Re: Trade Issues:
Post by: DougMacG on March 09, 2018, 09:27:10 AM
" Regarding the penny, that's roughly what the tea tax, a tariff, was in Boston, 1773.  "

I recall seeing a menu from a late 1700's era tavern .  A steak was listed at 2 cents.

The US mint started producing patterns in 1792 and real cents i 1793 .  Those pennies today even in the worst conditions are hundreds of dollars  on up to a million dollars for the finest.

A penny was real money in those days.

IIRC the tea tax was 2 cents per year of ordinary usage.  The war was not about the amount of the tax.
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 09, 2018, 12:58:11 PM
Good posts Doug et al.

FWIW, it is not only the quantity of the steel (and aluminum) but the quality of the steel and aluminum.  For example, apparently we have only one plant left that can produce what high tech aircraft need.

Observation: PA has a big congressional race coming up and also note PA Supreme Court is redistricting the state to Reps detriment and that this may play well in PA. 

Observation:  This may also be a warning shot across China's bow a) with regard to the major play coming up with the Norks, and b) President Trump's submission of a "suggestion" that the Chinese should be coming up with a way to trim $100B from their trade surplus with us.
Title: Re: Trade Issues:
Post by: DougMacG on March 09, 2018, 05:57:57 PM
FWIW, it is not only the quantity of the steel (and aluminum) but the quality of the steel and aluminum.  For example, apparently we have only one plant left that can produce what high tech aircraft need.

Yes, but the quantity of the high quality material we need for defense purposes is relatively small, well within what we build here right now.  Not a national security emergency.

Observation: PA has a big congressional race coming up and also note PA Supreme Court is redistricting the state to Reps detriment and that this may play well in PA. 

Yes it serves various political purposes including that race.  He gave an economic speech after the Indiana primary.  I disagreed with the whole analysis, bad trade agreements are killing them, but he went on to win Mich, Penn and Wisc in the general election - inside the blue wall.  Rubio, Cruz and others would have lost those states.

Observation:  This may also be a warning shot across China's bow a) with regard to the major play coming up with the Norks, and b) President Trump's submission of a "suggestion" that the Chinese should be coming up with a way to trim $100B from their trade surplus with us.

I agree this is Trump negotiating.  It moves him from defense to offense with all negotiating parties.  Not just China, it puts him in a stronger position with Kim Jung Un.  He is willing to take bold action against Xi and Merkel and everyone else, he is most certainly able to order a major strike on a belligerent DPRK including the Presidential palace where he will sleep tonight.  He doesn't care what others think.  Can't say that about his predecessors BHO, GWB and WJC.  He defies his top economics adviser on economics, he most certainly can defy his top military brass and diplomats on NK.  With trade he says no trade war then threatens one.  He just wants better deals with countries.  He says he can take countries on or off the list and change the rate anytime he wants.  That puts him in a very strong position in negotiations - until some judge tells him he doesn't have that kind of power.  Even if a court puts a constraint on Trump's power, it makes him look strong to take such bold action.  He means what he says, no matter how wrong.

The success of this administration will be measured by how quickly he can declare victory on trade and reverse this before it does real damage..
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 09, 2018, 08:36:31 PM
You make excellent points Doug.  

I offer one more for your consideration:  You analysis is limited to the economic, but when dealing with mercantilist/fascist states such as China, a free market analysis alone is insufficient.
Title: Navarro
Post by: Crafty_Dog on March 11, 2018, 11:54:15 AM
http://thehill.com/policy/finance/377680-trade-adviser-ascends-in-trump-white-house?userid=188403
Title: Re: Trade Issues:
Post by: DougMacG on March 12, 2018, 10:25:37 AM
..."Your analysis is limited to the economic, but when dealing with mercantilist/fascist states such as China, a free market analysis alone is insufficient."

Good point.  We are sick of having our lunch eaten by China.  Elon Musk pointed it out this way, not even counting the tech theft problem:  China applies a 25% tariff to his car sold in China.  US levies a 2.5% tariff on Chinese electric cars sold here -while they openly try to dominate the world market for electric cars.  That is wrong - by TENFOLD!  And something should be done about.  Bold action from our side to force change on their side.

But IF you buy this part:
"the quantity of the high quality material we need for defense purposes is relatively small, well within what we build here right now..."
Then there is not a national security emergency right now and therefore the constitutional power of taxation by choice and for strategic positioning comes back to Congress.  Yes we are at a disadvantage playing hardball with totalitarian regimes while working within an open and consensual form of government.  Does that make extra-constitutional tactics right?

I hear no one else making this argument.  Am I missing something?
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 12, 2018, 11:30:31 AM
President Trump is acting with statutory authority.  What is the basis of your assertion that what he is doing is unconstitutional.
Title: Re: Trade Issues:
Post by: DougMacG on March 12, 2018, 11:57:12 AM
President Trump is acting with statutory authority.  What is the basis of your assertion that what he is doing is unconstitutional.

Article I, Section 8, Clause 1: The Congress shall have Power to lay and collect Taxes, Duties,
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 12, 2018, 12:07:02 PM
Right!  And President Trump is using statutorily granted authority-- so what is the problem?
Title: Re: Trade Issues:
Post by: DougMacG on March 12, 2018, 12:41:01 PM
Right!  And President Trump is using statutorily granted authority-- so what is the problem?

I assume you mean this:

Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) authorizes the Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the United States.

Section 232 investigations help to determine the effects of imports on America’s national security and give the President the ability to address any threats to national security by restricting imports through tariffs.
https://www.whitehouse.gov/briefings-statements/need-know-section-232-investigations-tariffs/

This is a national security threat and that clause of that act negates the constitution?  

This is a national security threat (to me) about like Filburn cornered the world grain market by feeding his own chickens.  If they say it's interstate commerce, then it's interstate commerce.  Or is it?  If we declare it a national security threat, it's a national security threat.


Title: Re: Trade Issues:
Post by: Crafty_Dog on March 12, 2018, 01:00:48 PM
I'm guessing the judicial level of review would be "reasonable basis" (contrast "strict scrutiny") and it is easy enough to say that there is a reasonable basis for saying the US needs a domestic capability for steel and aluminum, especially high grade for military and aerospace capabilities.
Title: Re: Trade Issues:
Post by: DougMacG on March 12, 2018, 01:09:34 PM
Can the 87th Congress legislate away the constitutional authority of the 115th Congress?  

If so, Sen. Mike Lee wants to correct that:  His Bill Would Help Restore Congressional Authority on Tariffs
http://dailysignal.com/2018/03/12/bill-help-restore-congressional-authority-tariffs/
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 12, 2018, 01:19:33 PM
A bit of a "wife beater" quality to the phrasing of the question, but the short answer is "yes"-- it's called legislation.  The answer is , , , drum roll , , , legislation changing that, which is exactly what Sen. Lee is proposing.
Title: Re: Trade Issues:
Post by: DougMacG on March 12, 2018, 01:23:14 PM
As you might guess, it's a pet peeve of mine.  Thanks for the explanations.
Title: Trade Issues: WSJ, National Security Tariff Ruse
Post by: DougMacG on March 13, 2018, 10:38:27 AM
https://www.wsj.com/articles/the-national-security-tariff-ruse-1520897310
"No President has used 232 since the World Trade Organization was created in 1995."
Not even the Pentagon buys the national security argument.  Matthis: “As noted in both Section 232 reports, however, the U.S. military requirements for steel and aluminum each only represent about three percent of U.S. production. Therefore, DoD does not believe that the findings in the reports impact the ability of DoD programs to acquire the steel·or aluminum necessary to meet national defense requirements.”

"Mini-mills can throttle back when demand slows without losing a lot of money, and thus can endure lower capacity use. This is one reason mini-mills have captured two-thirds of domestic production. Nucor , the largest U.S. mini-mill operator, turned in its largest quarterly profit in eight years in the first three months of 2017."   [So let's raise the price 25%.]

WSJ Opinion: "The Trump Administration has pulled the 232 stunt because it gives the President power to act unilaterally. "

Doug:  Constitutionally dubious.
Title: Re: Trade Issues: Marco Rubio, more than tariffs against China
Post by: DougMacG on March 14, 2018, 04:18:44 AM
https://mobile.nytimes.com/2018/03/13/opinion/rubio-china-trade-tariffs.html?rref=collection%2Fsectioncollection%2Fopinion&action=click&contentCollection=opinion&region=rank&module=package&version=highlights&contentPlacement=1&pgtype=sectionfront&referer=https://www.realclearpolitics.com/
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 14, 2018, 09:39:05 AM
Sounds good to me!
Title: Re: Trade Issues:
Post by: DougMacG on March 14, 2018, 10:20:55 AM
[Rubio plan] Sounds good to me!

Yes.  Trump needs to apply his pressure and get his negotiating wins quickly, and get us back to free and freer trade.  His Presidential power will not survive economic downturn or Obama-like stagnation. 

A trade war means a contraction and he has less than two quarters to show great economic momentum.  People aren't going to support him for just his personality. 
Title: Re: Trade Issues:
Post by: DougMacG on March 16, 2018, 09:07:51 AM
"Observation: PA has a big congressional race coming up and also note PA Supreme Court is redistricting the state to Reps detriment and that this may play well in PA. "

Tariffs (taxes) being mostly a Democrat tool, the Dem in the race effortlessly sided with Trump on the tariffs, neutralized the issue and won the race. 
-------------------------------------

The tariffs are just two tenths of a percent the US economy (pennies), not counting the ripple (or spiral out of control) effect:

https://www.realclearpolitics.com/articles/2018/03/07/trumps_tariffs--a_triumph_of_pride_over_policy_136462.html
Two tenths of a percent of lost economic growth might be the difference between Republicans or Democrats winning the next two elections and setting the future direction of the country.
--------------------------------------
The European Union has announced plans to retaliate against US exports, but in the end the EU may negotiate – and agree to reduce current tariffs on US products that exceed US tariffs on European products.
https://www.project-syndicate.org/commentary/trump-steel-tariffs-targeting-china-by-martin-feldstein-2018-03

If so, then one part of this mission is accomplished.  When will we get positive news on this?  Who has the authority to reduce tariffs at the EU?

From the Martin Feldstein link above, he sees the steel/aluminum tariffs as a way of getting other concessions from China, "US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China’s government to abandon the policy of “voluntary” technology transfers."

"Because the tariffs are being levied under a provision of US trade law that applies to national security, rather than dumping or import surges, it will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China and avoiding the risk of a broader trade war. The administration has not yet said that it will focus the tariffs in this way; but, given that they are being introduced with a phase-in period, during which trade partners may seek exemptions, such targeting seems to be the likeliest scenario.

For the US, the most important trade issue with China concerns technology transfers, not Chinese exports of subsidized steel and aluminum. Although such subsidies hurt US producers of steel and aluminum, the resulting low prices also help US firms that use steel and aluminum, as well as US consumers that buy those products. But China unambiguously hurts US interests when it steals technology developed by US firms.

Until a few years ago, the Chinese government was using the Peoples Liberation Army’s (PLA) sophisticated cyber skills to infiltrate American companies and steal technology. Chinese officials denied all wrongdoing until President Barack Obama and President Xi Jinping met in California in June 2013. Obama showed Xi detailed proof that the US had obtained through its own cyber espionage. Xi then agreed that the Chinese government would no longer use the PLA or other government agencies to steal US technology. Although it is difficult to know with certainty, it appears that such cyber theft has been reduced dramatically.

The current technology theft takes a different form. American firms that want to do business in China are often required to transfer their technology to Chinese firms as a condition of market entry. These firms “voluntarily” transfer production knowhow because they want access to a market of 1.3 billion people and an economy as large as that of the US.

These firms complain that the requirement of technology transfer is a form of extortion. Moreover, they worry that the Chinese government often delays their market access long enough for domestic firms to use their newly acquired technology to gain market share.

The US cannot use traditional remedies for trade disputes or World Trade Organization procedures to stop China’s behavior. Nor can the US threaten to take Chinese technology or require Chinese firms to transfer it to American firms, because the Chinese do not have the kind of leading-edge technology that US firms have.

So, what can US policymakers do to help level the playing field?

This brings us back to the proposed tariffs on steel and aluminum. In my view (Feldstein), US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China’s government to abandon the policy of “voluntary” technology transfers. If that happens, and US firms can do business in China without being compelled to pay such a steep competitive price, the threat of tariffs will have been a very successful tool of trade policy."
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 16, 2018, 11:58:23 AM
Thanks for the Feldstein piece.
Title: An interesting recast of the Balance of Trade issue
Post by: Crafty_Dog on March 20, 2018, 05:28:48 AM
http://www.aei.org/publication/the-first-lesson-that-larry-kudlow-should-deliver-to-trump-trade-deficits-are-made-in-the-usa/?mkt_tok=eyJpIjoiTldSa1ptWXdZVFkzTjJWaSIsInQiOiJmRlpBVTVaRG8rZlBUT3FEUW51Z25pa1Z6RDZoNDRiNFFaeENCVU9QUittMXNMZzBUMmtVS0RoNUNyYTduOTQ5UVk5WHVsYmI4K1dKXC9oNGdNcGlxSlA0c0VpcE0wNHVpMnV0RDM0XC9SMWc0enk4Vm91V3Q4V1k3K1Q5TTlJRndiIn0%3D
Title: WSJ offers its solution to Chinese misbehavior
Post by: Crafty_Dog on March 20, 2018, 09:50:26 PM
Tackling China’s Protectionism
A better way than tariffs to challenge Beijing’s mercantilism.
Shipping containers sit stacked in Container Terminal 9 at Kwai Tsing Container Terminals in Hong Kong, Jan. 30.
Shipping containers sit stacked in Container Terminal 9 at Kwai Tsing Container Terminals in Hong Kong, Jan. 30. Photo: Anthony Kwan/Bloomberg News
By The Editorial Board
March 20, 2018 6:32 p.m. ET
81 COMMENTS

The Trump Administration is expected to announce more tariffs as early as this week in an attempt to reduce China’s trade surplus with the U.S. While these taxes are a mistake, as is Mr. Trump’s obsession with trade deficits, there’s no denying that Beijing’s mercantilism has fueled the political backlash against free trade.

China’s increasingly predatory behavior, especially intellectual-property theft, poses a particular problem to a sustainable trading system. The question is how to respond in a way that encourages better Chinese behavior without harming the global economy and American companies and workers. It isn’t clear that the Trump Administration has given this much careful thought, and the danger is a tariff tit-for-tat that harms everyone.

U.S officials say tariffs will provide leverage to get China to agree to change its behavior. But past experience suggests that Beijing is more likely to respond in kind at such a broad public assault on its goods. China’s accession to the World Trade Organization (WTO) in 2001 initially led to lower tariffs, but its recent record of noncompliance is miserable. Nontariff barriers and subsidies have proliferated.

The experience of foreign companies doing business in China shows there is a better approach than broad and scattershot tariffs. Instead of relying on contracts, they constantly monitor the behavior of their Chinese joint-venture partners and suppliers. When problems arise, they take immediate, proportionate action to restore mutual respect and trust.

How would this model apply to trade? First consider how Beijing has turned to mercantilism over the last decade. In 2011 the Chinese government picked seven “strategic emerging industries” to support with public investment. The plan called for the industries to grow to 15% of GDP by 2020, up from 5% in 2010. The government gives subsidies in several forms, including loans from state-owned banks on easy terms and low interest rates.

Four years later the initiative grew into the “Made in China 2025” plan, which seeks to make China the global leader in 10 industries, including electric vehicles and biotechnology. Along with subsidies and government help in acquiring foreign companies, the policy explicitly requires foreign companies to transfer intellectual property in return for access to the Chinese market. The goal is to reduce the foreign-supplied value in Chinese manufactured goods below 30%.

Beijing has also stepped up its use of regulations to discriminate against foreign companies. For example, officials use the 2008 Antimonopoly Law to pressure firms to transfer intellectual property that gives them a dominant market position in China.

All of these policies violate WTO agreements, but China’s trading partners have struggled to bring cases at the WTO. Chinese officials threaten to retaliate against foreign companies if they participate in complaints. The organization’s rules on how to enforce its agreements are outdated and lawsuits proceed slowly.

Bringing cases can still have value, but another mechanism is needed to deter Beijing’s protectionism without destroying the WTO. That mechanism would quickly identify Chinese policies that break trade agreements, coordinate with the governments of other affected economies and come up with responses that would be withdrawn once Beijing backs down.

The remedies should be based on the principle of reciprocity. If Beijing pressures multinational car companies to build electric cars in China, the U.S., EU and Japan could impose a tariff on Chinese-made vehicles and restrict the transfer of related technology.

This would avoid the Trump Administration’s approach of tariffs on a wide variety of goods, a policy that alienates allies and raises the risk of a wider trade war. A targeted approach would limit damage to the U.S. economy, since affected industries would remain open to competition from other countries. It could even strengthen the WTO as China would have an interest in modernizing and using the organization’s courts to resolve the disputes.
***

We believe in the free-trade principle that if China wants to subsidize cheap goods for U.S. consumers, then Americans benefit at the expense of Chinese taxpayers. The damage from cheaper Chinese goods since Beijing entered the WTO is overstated and in any case is mostly complete. Tariffs on Chinese goods won’t rebuild U.S. industry and are likely to shift foreign production to other countries that will still export to the U.S.

The China problem now is the predatory use of government power to punish foreign competitors to benefit Chinese companies. These columns have warned China for years that this behavior has eroded goodwill in the U.S. and Europe, and it now threatens political support for free trade. This justifies some U.S. government response.

The Trump Administration is right to take a tougher line, but it also needs a smarter approach than its new steel and aluminum tariffs. The Chinese think strategically for the long term, and so should the U.S.

Appeared in the March 21, 2018, print edition.
Title: Re: An interesting recast of the Balance of Trade issue
Post by: DougMacG on March 21, 2018, 08:44:56 AM
http://www.aei.org/publication/the-first-lesson-that-larry-kudlow-should-deliver-to-trump-trade-deficits-are-made-in-the-usa/?mkt_tok=eyJpIjoiTldSa1ptWXdZVFkzTjJWaSIsInQiOiJmRlpBVTVaRG8rZlBUT3FEUW51Z25pa1Z6RDZoNDRiNFFaeENCVU9QUittMXNMZzBUMmtVS0RoNUNyYTduOTQ5UVk5WHVsYmI4K1dKXC9oNGdNcGlxSlA0c0VpcE0wNHVpMnV0RDM0XC9SMWc0enk4Vm91V3Q4V1k3K1Q5TTlJRndiIn0%3D

(Imports – Exports) ≡ (Private Investment – Private Savings) + (Government Spending – Taxes)

Funny how balancing our federal budget (or lack thereof) which necessarily means getting federal spending under control keeps rearing its ugly head.  For what economic reason are we spending more than we take in - at alleged full employment?
Title: Trade Issues: WSJ Mary Anastasia O’Grady
Post by: DougMacG on March 21, 2018, 08:56:32 AM
https://www.wsj.com/articles/trumps-losing-trade-gambit-1521397553

Trump administration’s failure to grasp the complexity of the supply chains that interconnect the global economy.
...
Brazil is in the line of fire. It’s the second-largest supplier of steel to the U.S., according to the January Commerce Department report that the administration wrote to justify the import protection. China, by the way, is No. 11.
...
U.S. would lose 18 jobs for every job created in steel and aluminum, for a net loss of nearly 470,000
...
large net employment losses in the states in which the steel and aluminum sector figures prominently: Illinois (-17,950), Indiana (-7,282), Michigan (-14,021), Ohio (-15,718), Pennsylvania (-16,535) and Wisconsin (-8,964)
...
Even if Brasília does not retaliate, the American coal industry could lose big in Brazil. According to the U.S. Energy Information Administration, Brazil was the second largest export market for American coal in 2016. Brazil uses coal to make steel; less steel production means less coal consumption.  Brazil could also buy its coal elsewhere.
-----------------
Like India, isn't Brazil one of those (large) countries that OUGHT TO BE close allies of the United States?
Title: WSJ: Trump's China Tariffs
Post by: Crafty_Dog on March 23, 2018, 12:14:01 PM
Trump’s China Tariffs
Stocks fall as markets doubt the White House has a trade strategy.
Laborers work in the steel market in Yichang in central China's Hubei province in 2016.
Laborers work in the steel market in Yichang in central China's Hubei province in 2016. Photo: /Associated Press
By The Editorial Board
March 22, 2018 7:26 p.m. ET
343 COMMENTS

President Trump announced his long-awaited trade assault on China Thursday, and this time at least he is closer to the right target. But his decision seems unconnected to any larger trade strategy, and his main remedy of tariffs will harm American consumers and businesses as much as they will the People’s Republic.

No one should be surprised by the $60 billion in border taxes on China, given that Mr. Trump campaigned on worse. He is also responding to the genuine problem of Chinese mercantilism. China’s government steals the intellectual property of U.S. companies or forces them to turn it over, and Beijing uses regulation to discriminate against foreign firms.

This might have been tolerable when China was a smaller economy trying to reform, and the U.S. made a reasonable bet in 2001 when it let China enter the World Trade Organization. The gamble was that China would continue to reform, adapt to global trade norms, and eventually become a genuine market economy.

That hope showed early promise but has become forlorn as President Xi Jinping has pushed “national champions” like Huawei and Tencent. Facebook still can’t operate in China, and Tesla is punished with a 25% tariff on imported electric cars. The U.S. tariff on cars from China is 2.5%. China’s predatory behavior has eroded political support in the West for the very free-trade rules that have lifted hundreds of millions of Chinese out of poverty.
***

In typical Trumpian fashion, however, the President combines a useful focus on these practices with nonsense trade economics. He said Thursday that he’s asked China to “reduce the trade deficit” with the U.S. “immediately by $100 billion,” as if that would be a political or economic victory.

The reality is that the $375 billion annual U.S. trade deficit with China has many causes, and it is the reverse of America’s capital surplus. Faster growth under Mr. Trump’s policies will attract more global capital, which under national trade accounting means a larger trade deficit. Someone in America is buying that $100 billion in goods, and those Americans would suffer if they suddenly couldn’t.

Apple’s iPhones are assembled in China, for example, but China’s contribution is mainly labor. Most of the value, including the phone’s design from California, is imported from elsewhere and then re-exported by China to the U.S. Yet the trade figures count most of the value of the iPhone as part of the U.S.-China deficit.

Is Mr. Trump going to impose a tariff on iPhones? Mr. Trump has given his trade rep, Robert Lighthizer, 15 days to come up with a list of tariff targets. Presumably Apple has enough clout to win an exemption.

But the tariff process is inherently political and introduces new uncertainty to investment decisions. Over time Apple and other companies could adapt their global supply chains to reduce their exports from China, but then other countries would supply that $100 billion in goods. The overall trade deficit wouldn’t change much.

Then there’s the matter of how China will retaliate. Beijing officials have easy targets among the $130 billion in annual U.S. exports. One will be U.S. farm goods that have a large market share in China but also have global competition. U.S. farmers sell $12.4 billion in soybeans to China that Brazil could replace. Ditto for $1 billion in pork exports that Canada or Europe could supply.

The collateral damage in a tariff war with China is likely to include the economies of states that supplied Mr. Trump with his Electoral College victory: Iowa, Indiana, Wisconsin, Michigan and Texas. Other victims are likely to be companies that Mr. Trump touts as the winners from his tax and regulatory reform. Boeing fell more than 5% Thursday amid investor worries about the trade fallout. China can always buy Airbus planes.
***

Which brings us to Mr. Trump’s overall trade strategy, which is hard to discern. If bad Chinese practices are his main target, then he’ll need allies in Europe and Asia to present a united front. Yet the President began his protectionist barrage this year by announcing a global tariff on steel and aluminum imports. Mr. Trump then exempted Canada and Mexico, and Thursday he added the European Union, Australia, Argentina, Brazil and South Korea to the exemption list. But then why alienate these trading partners in the first place?

The economic worry is that Mr. Trump has no real strategy other than to show he’s “tough” on trade. Liu He, China’s main economic policy maker, visited Washington recently to negotiate on trade but found no one willing or able to make decisions.

The President’s trade hawks, led by White House aide Peter Navarro, want to punish China more than they want to change its behavior. Mr. Navarro really does believe that China today is the equivalent of Germany a century ago. Mr. Trump said Thursday that this tariff action would be “the first of many.”

This is the mentality that could lead to a trade war and economic damage for everyone. Equity markets reflected that worry Thursday by falling nearly 3% on the day, and 724 points on the Dow Jones Industrial Average.

If Mr. Trump is smart, he’ll take this market reaction as a useful warning. Investors sent him a similar jolt when he announced his steel tariffs, and markets recovered as he allowed exemptions. But the stock rally that followed the Republican triumph on tax reform has essentially ended amid fears of a trade war.
***

A rising and aggressive China poses considerable risks to world order, but persuading its leaders to conform to trading norms requires more than scattershot tariffs. It demands patient, sophisticated American leadership to rally other nations to join the effort.

Appeared in the March 23, 2018, print edition.
Title: Steel issues in the knife industry
Post by: Crafty_Dog on March 26, 2018, 08:21:35 AM
http://www.alloutdoor.com/2018/03/19/cold-steels-steel-switch-might-mean-knife-industry/?utm_source=Newsletter&utm_medium=Email&utm_content=2018-03-24&utm_campaign=Weekly+Newsletter
Title: POTH TradeDeal with Sorks
Post by: Crafty_Dog on March 27, 2018, 06:18:54 PM
BREAKING NEWS
President Trump secured his first major trade deal: a pact with South Korea. It may have been driven by looming talks with North Korea.

Tuesday, March 27, 2018 9:08 PM EST


The deal, which could be formally announced on Wednesday, opens South Korea’s market to American autos by lifting existing limits on manufacturers like Ford Motor and General Motors, extends tariffs for South Korean truck exports and restricts, by nearly a third, the amount of steel that the South can export to the United States. President Trump used his threat of stiff steel and aluminum tariffs as a cudgel to extract the concessions he wanted, helping produce an agreement that had stalled amid disagreements this year.
But winning the deal may have had more to do with the geopolitical realities confronting the United States and South Korea as America embarks on tricky nuclear discussions with North Korea. The United States cannot afford a protracted trade standoff at a moment when it needs the South as an ally.
Title: US Trade Strategy
Post by: DougMacG on March 30, 2018, 07:54:45 PM
1. Make a great new free trade agreement with the new Brexit Britain, best trade agreement ever.
2. Offer that deal to others in exchange for dropping the tariffs.
Title: Re: Trade Issues:
Post by: Crafty_Dog on March 30, 2018, 08:29:39 PM
That is very good thinking!!!
Title: The Economist: How to help those whom globalization has marginalized
Post by: Crafty_Dog on April 01, 2018, 10:17:59 AM


http://discovery.economist.com/features/21730406-what-can-be-done-help-them-globalisation-has-marginalised-many-regions-rich-world-149855071
Title: Re: Trade War On, growth agenda ended, Congress lost
Post by: DougMacG on April 04, 2018, 06:02:43 AM
How are your stocks doing there Mr. Smoot?

I was wrong, Trump will lose power before Xi will in a trade standoff.
Title: Re: Trade and Globalization Issues:
Post by: ccp on April 04, 2018, 06:24:02 AM
Who is Mr Smoot?
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on April 04, 2018, 08:26:20 AM
Who is Mr Smoot?

https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act
Reed Smoot was a Republican from Utah and chairman of the Senate Finance Committee.

Smoot Hawley passed the House on May 28, 1929, was enacted in 1930.  Stock market crash began October 24, 1929.
Protectionism strengthened our manufacturing base and enriched farmers as follows:

Smoot Hawley Tariff Act:  raised tariffs on 20,000 items by 6.3% to 19.8%.
Effective‎: ‎March 13, 1930  
Imports: fell 66%
Exports: fell 61%  
GDP: fell over 25%
http://dogbrothers.com/phpBB2/index.php?topic=2240.msg100985#msg100985

The "trade deficit" "improved", if that is how we want to measure it.  A better measure is total trade, exports PLUS imports, which tanked and destroyed GDP and wealth.

The 20s were a prosperous time.  The 30' were the opposite.  What change did investors see coming at the inflection point? Nothing more clear than trade protectionism.

Automobile executive Henry Ford spent an evening at the White House trying to convince Hoover to veto the bill, calling it "an economic stupidity."J. P. Morgan's chief executive Thomas W. Lamont said he "almost went down on [his] knees to beg Herbert Hoover to veto the asinine Hawley-Smoot tariff.
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Can Trump pull this off differently?  Does he with a power-ending midterm coming up in months have more staying power than leader-for-life Xi?
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"President Donald Trump responded with some bellicose tweets, arguing that the U.S. had already lost a trade war with China and that it didn’t have much to lose by ramping up the retaliation. New chief economic advisor Larry Kudlow urged Wall Street not to overreact to the trade spat."
https://www.barrons.com/articles/intraday-update-whats-behind-the-markets-bounceback-1522858869

His trade war isn't only with China.  Canada, Mexico, Europe and everywhere else (including the US!) are also affected.  The Commander in Chief is playing chicken and his advisers advise us not to overreact.  Let me get this right, I'm supposed to know he's bluffing but China doesn't.
Title: Jude Wanniski's "The Way the World Works"
Post by: Crafty_Dog on April 05, 2018, 06:10:54 AM
The conceptual basis for Reagan Revolution owes much to a circle of intellectuals such as George Gilder, Art Laffer, and Jude Wanniski.

Though Jude's final years went off the rails (working from less-than-certain memory, there was anti-semitism and possibly taking money from Saddam Hussein to flack for him in the run up to our invasion of Iraq) in the late 70s and early 80s he was an important editorial writer for the WSJ-- a time when that page was a genuine intellectual leader.

In a manner similar to Thomas Paine's "Common Sense" built the case in the early 1770s for American independence,  Jude's book "The Way the World Works" built the case for the Reagan tax rate cuts.  Of course  Art Laffer was the intellectual author, but Jude was an apostle of importance in making the case.

"The Way the World Works" (in 2001 rated by the WSJ as "one of the 100 most important books of the 20th century") was, and is, and extraordinary work.  Just as physics seeks to develop a set of principles to explain how the physical world works (a physics prof from UCLA one explained to me that "progress in physics consisted of REDUCING the number of principles needed) Jude sought to state the principles of how political economics worked-- an extraordinarily ambitious mission!

Each chapter of the book begins with the statement of a principle, and then develops the case for it.  Chief among these was the importance in marginal tax rates (i.e. the Laffer Principle).  His discussion included a superb application of the principle to explain the collapse of the Roman Empire.

I'm not remembering the details of the intellectual progression of the principles but eventually the book comes to one of its most extraordinary chapters-- the one that explains the Crash of 1929 and the Great Depression.

For most people the received wisdom is that the Crash and the Depression were the result of the excesses of capitalism and proved the need for government guiding economic activity -- "FDR saved capitalism" blah blah.  In that this lies at the core of the vast expansion of the role of government in America since then, this is a matter of considerable importance.

At the time Wanniski was writing, the only intellectual challenge was Milton Friedman's monetarism, which posited that the Great Depression was a recession pushed over the cliff by the Fed shutting down banks for insolvency, thus contracting money supply when the correct response would have been the opposite (do I summarize this accurately here?)

Wanniski has a third approach-- that the volatility of the market in '29 leading up to the Crash DIRECTLY tracked the movement of Smoot-Hawley bills in Congress.  When the bill moved forward, the market would drop sharply, and when it got bottled up in committee the market would rally, etc and that the big Crash came as it became certain the bill would pass (and other countries were reciprocating in various ways, including "beggar thy neighbor" exchange rate policies)  and marginal tax rates looked to increase due to the governmental deficits that came from the ensuing contraction in economic activity.

The key point Wanniski made was these policies (ours and those of other governments) resulted in the fragmentation of the world's economy.

However, all that said, IMHO it does not suffice here and now to answer the policy questions of the present.  There is the matter of China and its economic fascism-- its various ways of cheating (theft of trade secrets and patents, spectacularly non-reciprocal policies, etc etc etc) in pursuit of geopolitical dominance.

Title: WSJ: Martin Feldstein: How to Make Trade Peace with China
Post by: Crafty_Dog on April 05, 2018, 07:07:19 AM
second post

Too bland for me, but MF is a serious player and I post his thoughts for consideration.

============================
By Martin Feldstein
April 4, 2018 6:19 p.m. ET
90 COMMENTS

Beijing

I have spent a week talking with officials and old friends here about the increasing trade conflict between the U.S. and China. The Chinese are nervous about a potential trade war and uncertain about what the U.S. wants. They say we need negotiations to reduce the trade tensions.

I explain that the U.S. has several straightforward goals and negotiations are not necessary. What is needed is a change in Chinese behavior to conform to the rules Beijing accepted when it joined the World Trade Organization in 2001.

The most important issue is the demand that U.S. companies transfer their technology to Chinese counterparts as a condition of doing business in China. American businesses that want to produce or sell in China are often required to enter into a joint venture with a Chinese firm that then has access to U.S. technology. Chinese companies then use that technology to expand their own production and sales at home and to displace American firms in the rest of the world. The result is a loss of income to the American businesses.

The Chinese government acknowledges that WTO rules forbid making the transfer of technology a condition for access to a nation’s economy. But it argues that the practice is “voluntary” because American firms aren’t forced to do business in China—their other option is to stay out of the country. American companies and officials say it’s a form of extortion because U.S. firms should have access to the Chinese market, as they do to markets in Europe and elsewhere, without losing their intellectual property.

Although the Chinese practice violates WTO rules, it is difficult to bring a successful technology-transfer case because American companies fear retaliation by Beijing if they complain openly or provide detailed evidence that the U.S. government can use in pursuing such a case. Even so, the U.S. government began an investigation in August 2017, as called for by WTO rules, and concluded last month that China does violate the rule that market access may not be conditioned on technology transfer. The U.S. then imposed tariffs and other penalties.

This is not the first accusation that China has taken intellectual property from American companies. The U.S. previously complained that Beijing was using sophisticated cyber tools to invade the computer systems of U.S. manufacturers, extract valuable technology, and transfer it to Chinese companies. The Chinese government denied it.

President Obama met with President Xi Jinping in 2013 and showed the Chinese leader evidence obtained by U.S. intelligence that the Chinese army was infiltrating the computers of American companies. At the end of that meeting, the U.S. and China issued a statement that neither government would use its cyber skills to acquire foreign commercial technology. There was no admission of wrongdoing. I understand that such cyber exploitations of American commercial technology declined significantly afterward.

That experience may provide a good model for dealing with the current form of technology transfer. Presidents Trump and Xi could meet and agree that both countries would now accept a literal interpretation of the WTO rule barring technology transfer as a condition for market access, meaning any such practice should not be interpreted as voluntary. There is no need to look back at past actions or admit past violations of WTO rules.

Although the U.S. does not require a transfer of technology by companies that want to do business there, Chinese firms like Baidu that are very sophisticated in artificial intelligence or other fields may welcome such a promise by America.

Other trade issues should be easy to resolve. The U.S. would like China to reduce its excess capacity in steel and other industries and to stop selling the resulting products on the global market at below cost, in violation of WTO rules. Mr. Trump’s tariffs on steel are a way of putting extra pressure on China to accelerate its reduction of excess capacity.

The U.S. has an overall trade deficit of 3% of gross domestic product because Americans want to consume more than they produce. Reducing the large U.S. bilateral trade deficit with China would not reduce America’s global trade imbalance, but it still would be a politically significant achievement. This could be achieved if China were to substantially shift its global purchase of natural gas toward American producers.

As the Chinese economy grows and Beijing deploys increased military and diplomatic force around Asia and in the rest of the world, the U.S. faces significant geopolitical challenges. Trade issues and the transfer of intellectual property should not be allowed to exacerbate those tensions.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of the Journal’s board of contributors.
Title: Re: Jude Wanniski's "The Way the World Works"
Post by: DougMacG on April 05, 2018, 09:14:36 AM
Great points Crafty, that is definitely a world changing book.  The same issues and concepts apply today.  His later wanderings do not take away from the wisdom of his books and articles.

More on that book here:
https://www.commentarymagazine.com/articles/the-way-the-world-works-by-jude-wanniski/
[The book is a bargain on eBay.]

Yes, most people are told that all the ups and downs of markets and "business cycles" are caused by the excesses and defects of capitalism when in fact they are primarily caused by public policy blunders.  Government blunders before and during the depression made a correction into a human catastrophe.  Amity Schlaes has a more recent book on that:
https://www.amazon.com/Forgotten-Man-History-Great-Depression/dp/0060936428

My view is that Milton Friedman and Jude Wanniski are both right.  There was not just one policy blunder. 

Crafty:  "At the time Wanniski was writing, the only intellectual challenge was Milton Friedman's monetarism, which posited that the Great Depression was a recession pushed over the cliff by the Fed shutting down banks for insolvency, thus contracting money supply when the correct response would have been the opposite (do I summarize this accurately here?)"  [Sounds right to me.]

[Crafty continued] Wanniski has a third approach-- that the volatility of the market in '29 leading up to the Crash DIRECTLY tracked the movement of Smoot-Hawley bills in Congress.  When the bill moved forward, the market would drop sharply, and when it got bottled up in committee the market would rally, etc and that the big Crash came as it became certain the bill would pass (and other countries were reciprocating in various ways, including "beggar thy neighbor" exchange rate policies)  and marginal tax rates looked to increase due to the governmental deficits that came from the ensuing contraction in economic activity."

[Crafty]"The key point Wanniski made was these policies (ours and those of other governments) resulted in the fragmentation of the world's economy."

Doug:  Yes.  As I see it, the threat of tariffs and trade war was the trigger and the actual tariffs and trade crash acted as a giant brake on the economy.  Killing off momentum and supply and demand and jobs and output in an economy can have enormous impact.  Trade's impact is noted in the stats I keep posting, trade shrunk 60+% while GDP shrunk 25%.  The trade collapse had a massive negative impact (and we are FAR more dependent on both imports and exports now).  From there, the Friedman-documented monetary squeeze made a bad economic situation horrible.

[Crafty] However, all that said, IMHO it does not suffice here and now to answer the policy questions of the present.  There is the matter of China and its economic fascism-- its various ways of cheating (theft of trade secrets and patents, spectacularly non-reciprocal policies, etc etc etc) in pursuit of geopolitical dominance.

Doug:  The theft and gift or extortion of American intellectual property is inexcusable, especially since we are also military rivals!  Their lack of reciprocity to our products is unfair.  Why is this possible in a post WTO world?  Another failed international treaty!  If Trump's efforts solve this, it will be quite an accomplishment.  But that is not how he set this out.  He set it out with an allegation made largely for political purposes that unfair steel and aluminum practices constitute a national security emergency.  He applied the new tariff (words only so far) to the whole world instead of singling out China.  Important point here from Crafty and 1929, the words of tariff and retaliation affected the markets and the economy, not just the actual tariffs that followed.

If he succeeds in stopping intellectual property threat, great!  But it is hard to be a disciple of free trade principles and follow and support him down all the ugly twists in his path. 

If tariffs and a trade war bring down the US economy by so much as a tenth of a percent of GDP growth, it could make the difference in the already fragile midterms this year and in the Presidential election in 2 years, and hand power back to the other side for a generation or forever.  Without growth, meaning enough growth to offset the lower tax rates in the collection of revenues, Trump and the Republicans and tax rate cuts are out and Leftist rule is back, lock, stock and barrel.
Title: Kudlow firmly behind Trump on trade policy
Post by: ccp on April 05, 2018, 09:27:50 AM
https://www.newsmax.com/newsfront/larry-kudlow-china-trade-war-donald-trump/2018/04/04/id/852556/?ns_mail_job=DM759_04042018&s=acs&dkt_nbr=0105029yth1s&ns_mail_uid=1d2415ee-e7b3-47a2-873d-168cec485331
Title: Re: Kudlow firmly behind Trump on trade policy
Post by: DougMacG on April 05, 2018, 06:36:39 PM
https://www.newsmax.com/newsfront/larry-kudlow-china-trade-war-donald-trump/2018/04/04/id/852556/?ns_mail_job=DM759_04042018&s=acs&dkt_nbr=0105029yth1s&ns_mail_uid=1d2415ee-e7b3-47a2-873d-168cec485331

Kudlow is a skilled communicator, getting people to take a breath. 
"What you got is the early stages of a process that will include tariffs, comments on the tariffs, then ultimate decisions and negotiations," Kudlow said. "There's already backchannel talks going on."

Talks and negotiations, not really tariffs.

We avoid the trade war if China makes big concessions, otherwise economic collapse.  No pressure.

I think our odds for cooperation with China are better on the N.K. crisis than with trade.  Let's see, they are stealing our technology, taking half the profits on our side and selling into our market with unfettered access and getting away with it.  They can make our S&P crash and make Trump lose power by just saying they will retaliate with tariffs of their own and buy their soybeans from elsewhere.

Still I am hopeful.

Remember when party differences (allegedly) ended at the edge of our shore?  If Trump had patriotic opposition, they would get behind him in these negotiations and tell the Chinese all these steps will continue and get stronger until China opens up and plays fair no matter who is in power.
Title: Stratfor: Trolling China with a Trade War
Post by: Crafty_Dog on April 07, 2018, 09:28:43 PM
Trolling China With a Trade War. Now is the time to get nervous. U.S. President Donald Trump has proposed a second round of tariffs against China on $100 billion worth of Chinese imports. (The tariffs would be punishment for Beijing targeting U.S. goods following an initial move by the Trump administration to place tariffs on nearly $50 billion worth of Chinese goods over intellectual property violations.) Trump's proposal was not a shoot-from-the-hip quip on Twitter; it was a formal White House proposal that U.S. Trade Representative Robert Lighthizer has endorsed as an "appropriate" response. And the United States is not finished yet. In addition to metals tariffs and a doubling down on tariffs on a broader set of Chinese goods, the Trump administration has also been studying use of an emergency act that would impose the same investment restrictions against Chinese businesses that apply to Americans in China.

To be clear, the tariffs have not yet been imposed. Negotiations are underway, and there is room for both sides to back down and avert a worst-case trade war scenario. Chinese President Xi Jinping's April 10 speech at the Boao Forum for Asia will be key to watch to see how far China is willing to go in liberalizing parts of its economy to appease the United States. But no matter what comes out of the negotiations over these next two months, a fundamental gap will remain between the United States' expectation of China to rapidly comply with free market rules under American duress and China's strategic imperative to rebalance and advance its economy though a state-driven approach. Even as White House trade tacticians are trying to leverage Trump's perceived impetuousness for maximum gain in these negotiations, that gap in imperatives is what raises the real risk of tit-for-tat tariffs escalating into a trade war with global ramifications.
Winning in the Western Hemisphere. Trump will try to sell to a wary audience a message of solidarity against predatory Chinese trade when he travels to Lima, Peru, for the Summit of the Americas on April 13 and 14. Though they had to work to secure exemptions from metals tariffs, Brazil and to a lesser extent Argentina have been big beneficiaries of Trump's trade assaults against Mexico and China. From soybeans to orange juice, American farmers are losing market share to their South American competitors as Mexico and China seek out U.S. agricultural alternatives. And warnings of Chinese debt traps aside, the region has also benefited greatly from billions of dollars of direct investment and expanding trade ties with China.

The main headline out of Lima may end up being NAFTA. Trump's desire to announce a framework deal for the North American Free Trade Agreement at the summit has negotiators working around the clock, with the United States notably showing some signs of moderating its original demands on automotive rules of origin. These are cues China will be paying close attention to as it tries to decipher rhetoric from results in its own trade standoff with the United States. Venezuela, which has been barred from the summit, will be another big point of discussion. We have been watching quiet visits between Venezuelan officials and U.S. Sen. Dick Durbin and U.S. Rep. Pete Sessions over the potential release of Joshua Holt, an American imprisoned in Venezuela. With the threat of crippling U.S. sanctions looming ahead of Venezuela's May 20 presidential election, Venezuela is trying to use Holt as leverage for economic reprieve. We'll be looking for any signs that the White House is actually willing to use a potential compromise on Holt to engage in a more serious negotiation centered on an early exit strategy for Venezuelan President Nicolas Maduro.
Title: POtH: Why China thinks it will win the Trade War
Post by: Crafty_Dog on April 07, 2018, 09:57:46 PM
https://www.nytimes.com/2018/04/05/world/asia/china-trade-war-trump-tariffs.html
Title: WSJ: China differs from 1980s Japan
Post by: Crafty_Dog on April 09, 2018, 09:58:27 AM


In Trade Fight, China Today Differs From 1980s Japan
Tokyo never threatened to retaliate; Beijing says it is prepared to strike back
By Bob Davis
Updated April 8, 2018 12:36 p.m. ET
117 COMMENTS

WASHINGTON—The White House is looking at the U.S. trade fight against Japan in the 1980s and 1990s for lessons in its trade battle against China. But the two eras are as striking for their differences as they are for their similarities.

U.S. trade officials admire Ronald Reagan’s use of tariffs to get Japan to open its semiconductor market and limit steel and other exports to the U.S. Current Trade Representative Robert Lighthizer, then a midlevel U.S. official, helped carry out that strategy.

Japan back then, like China today, ran a large trade surplus with the U.S. Japan, like China, used industrial policy to turn favored companies into global powers and like China was looking to get U.S. technology any way it could.

The main tool the U.S. used to get Japan to change course, section 301 of the U.S. Trade Act of 1974, is the one the Trump administration is using to confront China. It gives the president broad powers to retaliate through tariffs and other means in trade disputes. “The last time it was used [with Japan], it worked,” says Clyde Prestowitz, a prominent Republican trade warrior from that era.

But even Mr. Prestowitz doubts such tactics will work again.

“China is a different animal,” he says.
Mirror ImageU.S. trade deficits in goods with Japan and China as a percentage of GDPSource: U.S. Commerce Department
%ChinaJapan1985’90’952000’05’10’15-2.5-2.0-1.5-1.0-0.50.0Japanx2006x-0.6%

Along with targeting Japan, the U.S. used section 301 to pressure India. Washington threatened tariffs unless Delhi liberalized its protected insurance market. India was so incensed, it refused to negotiate. “It is not for [the U.S.] to decide the Indian policy matters,” said India’s finance minister at the time. The U.S. backed off.

China today is more like India of that era than Japan. Like India, China is a huge, nationalist country. Its leaders believe they are destined to reclaim China’s place as a world leader and are building a world-class military in the process. Japan was a relatively small nation, whose global aspirations were snuffed out during World War II. It depended on Washington for its security.

While Tokyo frustrated the U.S. through delay, it ultimately had to accommodate Washington’s demands. Among other things, says Mr. Prestowitz, “Japan needed us to protect them from China.”

In practice, that meant Japan never retaliated against U.S. trade actions by putting tariffs on U.S. goods—indeed, it never even threatened to retaliate.

Contrast that with China today. Less than 24 hours after the Trump administration threatened tariffs on $50 billion of Chinese imports to the U.S., China published its own $50 billion hit list of U.S. goods. When President Trump added another $100 billion of Chinese goods subject to levies, a spokesman for Beijing’s Commerce Ministry pledged, “China is fully prepared to hit back forcefully.”

Japan de-escalated the trade battles by allowing some of its most successful auto and electronics companies to build factories in the U.S. Japanese companies continue to invest in U.S. plants, and today directly employ hundreds of thousands of U.S. workers, and through that investment have cultivated useful political allies, particularly among Republicans.

That avenue isn’t as open to Beijing. Chinese investment in the U.S. was $29 billion in 2017, estimates the Rhodium Group a market-research firm. That was down by about one-third from a year earlier. The U.S. is increasingly blocking Chinese purchases of semiconductor and other technology firms because of concerns about national security.


China is fighting back by targeting politically sensitive goods for sanctions, especially U.S. agriculture and aircraft. The idea is to make a trade war so costly, that the U.S. will back off, even if the fight harms China’s economy.

When it comes to imposing tariffs, there is another lesson from the Japan fights: Domestic opposition blunts White House plans. In 1995, the Clinton administration was set to put 100% tariffs on imported Japanese luxury cars to pressure Japan to buy more U.S. auto parts. Few U.S. consumers would be affected and, some Clintonites assumed, they were mainly Republicans anyway.
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But the uproar from U.S. auto dealers put pressure on the White House to cut a deal that mainly required Japan to expand production in the U.S., which it was planning to do anyway.

In the current fight with China, U.S. lobbyists are focusing on the potential harm to farmers—a politically sympathetic and powerful group that is an important part of Mr. Trump’s political base. The president last week said the administration would come up with a plan “to protect our farmers,” but provided no details.

U.S. presidents have long overestimated their advantages in trade fights. In the early 1800s, President Thomas Jefferson embargoed British exports to get Britain to stop harassing U.S. ships, figuring the move would damage the British economy. The plan backfired. When trade collapsed, the U.S. was the loser. “Jefferson was delusional,” says Dartmouth trade historian Douglas Irwin.

Former U.S. Trade Representative Mickey Kantor, who helped negotiate U.S. deals with Japan in the 1990s for the Clinton administration, says his biggest takeaway from those days is the need to be steadfast in deciding goals and strategy.

President Donald Trump has threatened massive retaliation against China but his aides then tried to calm markets by claiming there is no trade war. “The uncertainty undermines your credibility domestically and with the Chinese,” Mr. Kantor said.
Title: Stratfor: Why White House may revisit TPP
Post by: Crafty_Dog on April 18, 2018, 06:42:22 AM
Highlights

    The United States cannot achieve its goal of countering China's rising economic influence and strength unilaterally.
    The Trump administration's re-examination of the Trans-Pacific Partnership (TPP) reflects the necessity of a multilateral approach.
    But the likelihood of a U.S. return to the trade pact remains low in the near future, since the White House would demand significant changes to the agreement.

Has the White House shifted its trade policy? U.S. Sen. Ben Sasse, a Republican from Nebraska, announced April 12 that President Donald Trump had directed his two top officials — new National Economic Council Director Larry Kudlow and U.S. Trade Representative Robert Lighthizer — to explore rejoining the Trans-Pacific Partnership (TPP). One of Trump's first moves after taking office in January 2017 was to pull out of the trade deal, which his predecessor, Barack Obama, had agreed to. Trump responded to the reports that he would revisit his TPP decision by emphasizing that he had no timeline for a review and that the United States would re-enter the agreement only if its terms changed.

Trump first floated the possibility of rejoining and renegotiating the pact in January as the TPP's remaining 11 members — Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam — which had continued negotiations without the United States — were putting the finishing touches on a new agreement, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). (They signed it in March.) Trump's apparent order to re-examine U.S. participation in the deal raises questions about why the White House may be reconsidering its position and about many of the issues that will emerge as a result. Nevertheless, while longer-term geopolitical forces will nudge the United States to eventually return to this trade grouping, several political obstacles still stand in the way of its doing so immediately. Following is a rundown of the issues driving the re-examination and the complications that could arise from it.

The Big Picture

Domestic politics often meets geopolitics. Just a few days after his inauguration, President Donald Trump withdrew the United States from the Trans-Pacific Partnership, a trade pact with 11 Pacific Basin countries that was designed to be a palisade to China's rise in the region. His rationale was to circumvent the possible damage that the deal could wreak on U.S. manufacturing jobs. But now as Trump ramps up his attempts to counter China politically and economically, the White House appears to be dusting off the old playbook and looking at the TPP as a viable strategy for doing so.


Though Trump has argued that the TPP would have damaged U.S. employment because of the access to U.S. markets it would give other countries, being on the sidelines of a deal between the rest of the TPP members will hurt U.S. exporters. The 11 signatory countries will have tariff-free access to one another's markets when the CPTPP comes into force. U.S. businesses will not. When touting the original TPP deal, the Obama administration trumpeted the reduced tariffs that U.S. exporters would enjoy on 18,000 products, including machinery and automotive and agricultural products.

A key selling point for the TPP was that it would break down trade barriers with Japan. Under the deal, the United States would have gained much cheaper access to the country's heavily protected agricultural markets, such as its lucrative beef market. Now, Australia's beef exporters have gained that advantage instead. Disquiet with the turn of events has spurred backlash from the U.S. agricultural sector and other export-oriented groups that wield considerable influence in the normally pro-free trade Republican Party, perhaps influencing Trump's view of the TPP decision. When he ordered the U.S. withdrawal from the pact, the president vowed to seek bilateral trade deals with signatory countries such as Japan in place of the TPP. But in the intervening months, Tokyo's interest in such a deal has been virtually nonexistent. Japan didn't even bother trying to secure an exemption for its steel when the United States recently slapped tariffs on all such imports.

Countering China

Washington's initial interest in the TPP was its utility as a counterweight to China's rising economic influence in the region. The idea was that by sealing a cross-Pacific trade deal similar to the North American Free Trade Agreement — and one that would have functioned as de facto replacement for much of NAFTA — the United States could further tie the TPP economies to its own, giving its fellow signatory countries options to resist Chinese economic pressure. In addition, the United States hoped that the highly advanced TPP deal would serve as the model for all future global trade pacts. It included elevated labor and environmental standards, intellectual property protections, and coverage for digital and data trade. It also — in a not-so-subtle dig at China — included language stating the need for state-owned companies to compete in a market economy.

As the current White House puts China in the crosshairs of its economic and trade policies, many of the strategic underpinnings of TPP are becoming more attractive to Trump as a means to counter China. Washington now hopes to push Beijing to cut its support to state-owned companies, remove its trade barriers and dial back its intellectual property rules, among other things. The question, however, is whether the Trump administration can find a way to merge its strategic concerns over China with the president's protectionist agenda at large. And will the overlap be acceptable to the rest of the TPP's original members?

What Would the U.S. Want From the TPP?

It's not clear how the United States would approach rejoining the TPP or its successor deal, the CPTPP. It could take any number of paths, including trying to join the CPTPP without any major changes — though that option would present a challenge. Many of the original deal's more stringent demands, which the rest of the TPP's members had begrudgingly accepted at the United States' insistence, didn't make it into the CPTPP. The new CPTPP retained 22 of the TPP's original articles as suspended chapters, and most of them fit within core strategic U.S. interests. Many of these are related to protections for intellectual property, provisions that the United States would want to restore before signing on to the CPTPP. The deal's members would also have to revive the TPP's investor-state dispute settlement for the pact to win approval in the U.S. Congress. Some strategic provisions — such as the treatment of state-owned companies — are still in place, however.

The United States could simply demand the pertinent chapters' reinstatement before rejoining the TPP, but the Trump White House likely instead would push for its own changes, tantamount to renegotiating the deal. If the current NAFTA renegotiations are any indication, the demands could be aggressive. U.S. negotiators in the NAFTA talks have made a push to undermine Mexico's competitive advantage in wages, an advantage many CPTPP members share. The United States also has pursued modifications to set regional content levels in the automotive sector as high as 85 percent (since reduced to 75 percent) to qualify for reduced tariffs under NAFTA. Similar CPTPP requirements for the sector range from 35 to 45 percent — a far cry even from the 62.5 percent regional content requirement in the original NAFTA deal.

And should the United States decide to rejoin TPP (or to join CPTPP), it would raise questions about NAFTA. Mexico and Canada, as CPTPP signatories, might opt to use the newer pact's rules in lieu of NAFTA's provisions, choosing whichever is more desirable.

How Would CPTPP Members React?

CPTPP members' reaction to a re-entry by the United States will be critical. Before the TPP, some participating countries lacked a free trade agreement with the United States. Joining the TPP granted them the prospect of greater access to the world's largest market despite the costs on their political or economic systems. Some participants also shared the U.S. strategic objective of gaining trade options beyond China. These factors could give participants an incentive to accept a U.S. return, even if it means changing the agreement. Even so, negotiators for some current members would be leery about the extent of any protectionist measures the United States may try to introduce. The possibility of the United States' inclusion in the deal, moreover, may compel some potential members — such as Thailand, South Korea or the Philippines — to more carefully consider their plans to join the agreement lest they give the impression of taking Washington's side in its heightened competition with Beijing.

The Midterm Factor

Any substantial move to rejoin the TPP or to enter the CPTPP will be a topic of much debate in the United States. When Obama signed the TPP, it wasn't clear that the deal would muster enough votes for ratification by the U.S. Senate or House. Trump could use the fast-track authority in the Trade Promotion Act to make approving the deal a matter of securing a simple majority in the Senate. The law's timing requirements, however, are strict: Once a deal is agreed to and signed, a six-month review period starts in Congress. Even if the United States decides to rejoin TPP and quickly reaches an agreement on terms with the pact's members, the Trump administration would have to sign and present the new deal to Congress by midsummer for lawmakers to vote on it during the current session. A delay could push the pact's ratification beyond U.S. midterm elections and into the 116th Congress, in which Republicans could potentially lose control of the House. Many Democrats rejected the original draft of the TPP, and they may still harbor the same objections to the pact. As a result, it's unclear whether they would consider, much less approve, the trade plan under Trump.
Title: Re: Stratfor: Why White House may revisit TPP
Post by: DougMacG on April 18, 2018, 07:13:59 AM
From the article: "The 11 signatory countries will have tariff-free access to one another's markets when the CPTPP comes into force. U.S. businesses will not."


The US can achieve the same with (11) bilateral agreements, but must get going on that!  Same for agreement with post Brexit Britain.  Obama said they can get in the back of the line, while trying to influence their election.  Why is there a line??  Let's offer great trade agreements to all our trading partners.

The original TPP agreement had clauses outside of trade that were offensive to us in terms of loss of sovereignty.  Let's write our agreements without those.

Interesting that Canada and Mexico are part of TPP so NAFTA and TPP are intertwined with or without the US in both.  Exempting Canada and Mexico from our new tariffs gives China and others a loophole to get into the US:
https://theconservativetreehouse.com/2018/04/17/breaking-mexico-agrees-to-pay-for-wall-offering-emergency-deal-to-close-nafta-tariff-loophole/#more-148197

Complicating the tortoise-paced trade negotiations is the prediction Mexico is electing a Marxist government on July 1.
https://www.worldcrunch.com/opinion-analysis/far-left-frontrunner-for-mexican-presidency-may-get-help-from-moscow-1


Title: GPF: The Real US Trade War with China
Post by: Crafty_Dog on April 19, 2018, 05:57:36 AM
The Real US Trade War With China
Apr 19, 2018
By Phillip Orchard

During a meeting with farm-state lawmakers last week, U.S. President Donald Trump ordered his economic team to look into rejoining the Trans-Pacific Partnership. Trump withdrew the U.S. from the 12-nation trade pact on his first day in office, leaving it for dead as signatories wondered how to offset the loss of the ultimate trade carrot: unfettered access to the world’s largest economy. Improbably, the remaining 11 members found a way, signing a slightly slimmed down pact in March. And now Trump, just as improbably, is rethinking the value of the deal he repeatedly lambasted on the campaign trail.

Let’s be clear: For numerous political and technical reasons, the U.S. won’t rejoin the TPP anytime soon. But even Trump’s notional interest in the pact tells us two things about U.S. trade strategy. First, the political obstacles driving the U.S. away from its historical role as architect of the global trading system are by no means permanent. Second, the real trade war isn’t about the deficit – and this fight can’t be won without friends.

Politics by Other Means

When forecasting a trade war, as with a shooting war, it’s not enough to look merely at who can inflict the most pain, but also differing thresholds of pain. Even though the Chinese economy is far more dependent on the U.S. than vice versa, variables like political will also matter.

Though China is evolving into a dictatorship, it has a searing fear of unemployment sowing mass discontent. However, China has an immensely powerful president who doesn’t have to ask his legislature for permission to pass social measures to ease the pain of a trade war (nor for forgiveness if he deems it necessary to crush any sign of backlash). He also has an immense propaganda arm. It won’t be hard for Beijing to rally the nation around the flag and amplify the narrative that the government is merely doing what it must to stand up to the bullying Americans and take China to the promised land. The U.S., by comparison, has an embattled president grappling with a divided public, powerful lobbies and a slow-moving congress whose attention is fixed firmly on the upcoming midterm elections. Even in the best of circumstances, the fractiousness inherent to most democracies can make the politics of trade exceedingly tricky. This is why trade pacts require years of tortuous negotiations – even when broader strategic concerns compel leaders to commit political capital to seeing them through.

(MARC:  This is a powerful point, one that I had not properly considered)

China is proving adept at the U.S. political game. According to Brookings, 82 percent of the counties expected to see job losses from Chinese retaliatory measures were won by Trump. Farmers, in particular, are squarely in Beijing’s crosshairs, with heavily exported U.S. crops like soybeans, wheat and corn facing 25 percent tariffs. This explains why farm-state leaders have been pushing Trump to reconsider TPP. The benefits of rejoining the pact likely wouldn’t be felt for years, but it would likely pry open tightly protected markets such as Japan’s to U.S. agriculture over time.

The difficulty of finding enough carrots to please an array of cantankerous constituencies in pursuit of the broader national interest is why much-maligned multilateral deals often end up making sense – and why presidents often flip-flop on trade. Barack Obama campaigned on overhauling NAFTA before concluding that TPP – which Canada and Mexico both signed, partly to offset U.S. demands on NAFTA – was the best way to update it. It’s why, at least in part, Trump is evidently warming to the trade pact. And it’s why the remaining 11 TPP members designed the revived pact to make a U.S. return as easy as possible. Whether or not the Trump administration moves in this direction, the world expects the U.S. to eventually re-embrace the notion that others have a role to play in making America great again.

It’s a Tech War, and the U.S. Needs Allies

The trade deficit with China is a sideshow, and so too are measures ostensibly meant to decrease it. The U.S. isn’t a major importer of Chinese steel and aluminum, for example, and the U.S. metals sectors – which already enjoyed strong protections – won’t be restored to their past glory by the U.S. tariffs that kicked in on March 23. Meanwhile, as Chinese consumer power has grown, so too have U.S. exports to the Middle Kingdom – by some 500 percent since 2001, with China accounting for 8 percent of all U.S. exports by 2016. General Motors sold nearly a million more cars in China last year than in the U.S. According to a study by Oxford Economics, the combination of U.S. exports of goods and services to China and bilateral foreign direct investment flows contributed to the creation of some 2.6 million jobs in the U.S. in 2015. The same study said cheap Chinese goods such as washing machines and solar panels (both of which were targeted with tariffs in January) have saved the average American household some $850 annually.

All this speaks to the broader issue at hand. The United States’ comparative advantage over lower-cost manufacturers like China is in high-tech goods and services. And the real Chinese threat to U.S. economic and strategic interests is that China eats into this advantage – and then uses its newfound economic heft to try to unravel the U.S.-led postwar order in the Indo-Pacific.

As part of its attempt to address enormous socio-economic challenges today – ones that may well make all this moot – China is laying the groundwork for its much longer-term goals. Underpinning the country’s economic rise over the past half-century has been low-cost manufacturing. But this has made China intolerably vulnerable to rising competition from its lower-cost neighbors, productivity declines as its workforce ages, and downturns in Western economies. This was exposed in 2008-09, when Chinese exports contracted sharply.

Thus, China needs to make a mad dash up the manufacturing value chain. Its blueprint is its “Made in China 2025” initiative, which outlines steps to leapfrog the U.S. as a technological innovator in the industries that will matter most over the coming century (for both commercial and military applications), such as semiconductors, robotics, aerospace, artificial intelligence, green energy and biotech.

The U.S. isn’t opposing China’s development goals reflexively – after all, there is ample money to be made for Western firms – but rather how Beijing is pursuing them. China’s systematic use of four practices, in particular, were cited by the U.S. as rationale for the punitive tariffs announced on April 4: pressure on foreign firms in China to enter into joint ventures with their Chinese counterparts and, in many cases, hand over invaluable intellectual property; laws that require foreign firms to license technology to Chinese companies on unfavorable terms; state support for Chinese acquisitions of overseas competitors in high-tech sectors; and state-sanctioned commercial hacking.
The U.S. is attempting to address the second issue – unfair licensing practices – through the World Trade Organization, and it’s increasingly using the Committee on Foreign Investment in the United States to block Chinese acquisitions in sensitive sectors. But deterring forced technology transfers is more complicated, since such preconditions are typically made informally (to avoid running afoul of WTO regulations), and private Western firms are free to strike whatever deals they think best suit their bottom lines anyway, with little regard for the national interest. Meanwhile, Beijing will never admit to supporting cyberespionage, and even if it did, such activities are exceedingly difficult to detect. Thus, the U.S. is stuck hoping that indirect measures, punitive tariffs in particular, will cause China to behave – and discourage other states from adopting China’s mercantilist tools.

The problem is that punitive measures are a rather ham-fisted means of recourse. This is, in part, because the U.S. does not have a monopsony on Chinese exports, nor a monopoly on the technology and industrial inputs China craves most. Though a trade war would be disruptive in the short term, over time, market adjustments would offset some of the loss of the U.S. consumer base for some Chinese goods. Commodities are fungible, meaning China won’t end up paying much more for inputs such as soybeans. And what China loses in access to technology from U.S. firms like Boeing, for example, it may still be able to get from Airbus. Finally, given the sprawling nature of supply chains today – with China often contributing to only a small percentage of the value of a finished good made with components manufactured elsewhere – tariffs are likely to end up hurting, perhaps as much as China, U.S. allies and partners that are central to broader U.S. strategic aims. Taiwan’s central bank, for example, estimated that a full-blown trade war between the U.S. and China would cut the self-ruled island’s gross domestic product by 1.8 percent.

To gain overwhelming leverage over China, the U.S. would need to limit Beijing’s ability to find substitute imports and markets, incentivize broader participation in the rules-based trading system, and shield U.S. consumers and allied economies from the fallout. In other words, the U.S. needs a multilateral framework that supports these aims – like TPP. Trump’s new chief economic adviser unwittingly made this case in February, when he called for a “trade coalition of the willing” to counter Chinese flaunting of international trade rules.

Cobbling together another TPP-like coalition wouldn’t solve these challenges overnight, particularly if it didn’t attract more economic heavyweights. But it would deepen adoption of the sorts of intellectual property protections that are key to the “knowledge-based” industries of the future, while making it harder for China to distort markets and tilt the playing field in its favor through alternative, Beijing-led trade pacts. Ultimately, it would pull countries more firmly into the U.S. economic and security orbit and assuage their doubts about long-term U.S. commitments, while weakening their vulnerability to Chinese economic coercion. Hence why South China Sea littoral states like Malaysia, Brunei and Vietnam were so eager to join TPP in the first place.

China is playing a long game here – and one that will demand more than tit-for-tat tariffs in response. Unless tariffs push China to the brink of mass economic and political instability – or unless China’s colossal financial risks do the trick on their own – Beijing won’t sacrifice its core national development goals for short-term relief. More likely, tariffs will merely reinforce Beijing’s view that dependence on foreign technology is a potentially crippling risk to national security. The White House’s nascent turn toward multilateralism, however half-hearted, is in recognition of this long-term strategic reality.

The post The Real US Trade War With China appeared first on Geopolitical Futures.

Title: Re: GPF: The Real US Trade War with China
Post by: DougMacG on April 19, 2018, 08:41:02 AM
This is very good analysis on the trade war negotiations.

[In war and in trade] "it’s not enough to look merely at who can inflict the most pain, but also differing thresholds of pain."

Both sides fear an uprising of the masses if they screw up their economy but Trump has a mid-term coming up and the Chinese people don't have a revolution ready right now - the government owns all of the tanks.

GPF:  "the real trade war isn’t about the deficit"

It's about having a fair playing field only, not the results on the field.

"this fight can’t be won without friends."
"Commodities are fungible, meaning China won’t end up paying much more for inputs such as soybeans" [from Brazil for example, and aeronautics from Airbus, France]

Right.  A fight against China should not have been framed as USA vs. the world.

[Free trade with the US is] "the ultimate trade carrot: unfettered access to the world’s largest economy"

That is a good position to be in when cutting great trade deals, bilateral or otherwise.  No country can fully compete in a global economy without access to the largest market if their competitors have that access.  Advantage of bilateral agreements is that each country can feel they will be the only one left out if they don't come to an agreement with the US, on reasonable and fair, US dictated terms.  On the multilateral side, WTO failed and led to the current crisis.  You take your dispute to a neutral party; where are they from?  Mars?
-----------
Recall that TPP had sovereignty issues.  5554 pages is not a free trade agreement; a free trade agreement can be written on one side of a cocktail napkin.
https://www.mfat.govt.nz/en/about-us/who-we-are/treaties/trans-pacific-partnership-agreement-tpp/text-of-the-trans-pacific-partnership

Provisions of the TPP, at least as we left it, contain "global-governance components." Required countries to adopt and maintain faulty economics including minimum-wage regulations, and promote corporate social responsibility, whatever that means to an international body.  We already have a failed UN and IPCC.  

"Trade agreements should stick to trade."  - Andrew McCarthy
https://www.nationalreview.com/2017/01/tpp-deal-protectionist-american-sovereignty-undermined/
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on April 20, 2018, 09:23:59 AM
Very good comments Doug.
Title: Mankiw on Benefits of Free Trade
Post by: DougMacG on April 23, 2018, 08:24:16 AM
Source: NYT Feb 16, 2018
“a rise of one percentage point in the ratio of trade to G.D.P. increases income per person by at least one-half percent.”

I like the part of Roger Federer probably being great at mowing his own lawn, but economically he has a larger advantage playing tennis and should focus on that.
[A quick skill demo by Roger Federer:  https://www.youtube.com/watch?v=RAGaTNSuSRg   Gillette commercial 'Trick Shot' 2012.]

Trump is trying to get concessions from trading partners and I hope he succeeds.  But at the end of the ordeal, we are either on a path to freer trade or we are on a path to declining incomes.
-----------------------------------------------------------------
Why Economists Are Worried About International Trade

By N. GREGORY MANKIW FEB. 16, 2018

The Trump administration has imposed a tariff on imported solar panels, raising questions about America’s commitment to free trade.

When President Trump imposed tariffs on imported solar panels and washing machines, I was reminded of a line from George Orwell: “We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.”

While Orwell’s comment was focused on military and political issues of the late 1930s, my subject is economics, and to most people in my field, the benefits of an unfettered system of world trade are obvious. Any good student of Econ 101 can explain the logic.

But in light of the growing evidence of the Trump administration’s apparent disdain for free trade, from the recent tariffs, to a report recommending fresh quotas or tariffs on steel and aluminum, to its earlier rejection of the Trans-Pacific Partnership, it may be worth reviewing the theory, as well as the evidence that convinces economists that the theory is right.

The place to start is 18th-century Scotland. Adam Smith’s book “An Inquiry Into the Nature and Causes of the Wealth of Nations” is often credited as the beginning of economics. The case for free trade is one of its major themes.

Smith argued that trade among nations is like trade among people. No one feels compelled to sew his own clothes and grow his own food simply to keep busy. Instead, we find employment doing what we do best and rely on other people for most goods and services. Similarly, nations should specialize in producing what they do best and freely trade with other nations to satisfy their consumption needs.

This argument was expanded by David Ricardo in the 19th century. Ricardo addressed the question: What if one nation does everything better than another? His answer was that trade depends on comparative advantage — how good a nation is at producing one thing relative to how good it is at producing another.

Ricardo used England and Portugal as an example. Even if Portugal was better than England at producing both wine and cloth, if Portugal had a larger advantage in wine production, Portugal should export wine and import cloth. Both nations would end up better off.

The same principle applies to people. Given his athletic prowess, Roger Federer may be able to mow his lawn faster than anyone else. But that does not mean he should mow his own lawn. The advantage he has playing tennis is far greater than he has mowing lawns. So, according to Ricardo (and common sense), Mr. Federer should hire a lawn service and spend more time on the court.

By the way, Ricardo was not merely a theorist. He was also a successful stock trader and a member of Parliament. During his political career, he fought for free trade, notably, by opposing the Corn Laws, which imposed tariffs on grain imports.

More recently, economists have emphasized how trade affects productivity. In a model pioneered by my Harvard colleague Marc Melitz, when a nation opens up to international trade, the most productive firms expand their markets, while the least productive are forced out by increased competition. As resources move from the least to the most productive firms, overall productivity rises.

A skeptic might say that all this is just theory. Where’s the evidence?

One approach to answering this question is to examine whether countries that are open to trade enjoy greater prosperity. In a 1995 paper, the economists Jeffrey D. Sachs and Andrew Warner studied a large sample of nations and found that open economies grew significantly faster than closed ones.

A second approach is to look at what happens when closed economies remove their trade restrictions. Again, free trade fares well. Throughout history, when nations have opened themselves up to the world economy, the typical result has been an increase in their growth rates. This occurred in Japan in the 1850s, South Korea in the 1960s and Vietnam in the 1990s.

These results, while suggestive, come with a caveat. Trade restrictions often accompany other government policies that interfere with markets. Perhaps these other policies, rather than trade restrictions, impede growth.

To address this problem, a third approach to measuring the effects of trade, proposed by the economists Jeffrey A. Frankel of Harvard and David C. Romer of the University of California, Berkeley, focuses on geography. Some countries trade less because of geographic disadvantages.

For example, New Zealand is disadvantaged compared with Belgium because it is farther from other populous countries. Similarly, landlocked nations are disadvantaged compared with nations with their own seaports. Because these geographic characteristics are correlated with trade, but arguably uncorrelated with other determinants of prosperity, they can be used to separate the impact of trade on national income from other confounding factors.

After analyzing the data, Mr. Frankel and Mr. Romer concluded that “a rise of one percentage point in the ratio of trade to G.D.P. increases income per person by at least one-half percent.” In other words, nations should take the theories of Smith, Ricardo and Melitz seriously.

To be sure, expanding trade hurts some people in the short run, especially those in import-competing sectors who have to find new jobs. That fact may call for a robust safety net and effective retraining. But it does not undermine the conclusion that free trade raises average living standards.

That is the theory and evidence regarding international trade. ...
N. Gregory Mankiw is professor of economics at Harvard University.
Title: Economists, expert panel polled on free trade, guess what? 0% disagree
Post by: DougMacG on April 23, 2018, 08:40:21 AM
Economists polled from Harvard, Yale, MIT, Berkeley, Princeton, Univ. Chicago, Stanford.  See list at link.
98% say NAFTA had a net positive effect for the US?  Who knew?

These numbers are higher than for dentists who recommend sugarless gum to their patients who chew gum.
----------------------
1) Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.

96% of economists polled agree, 4% uncertain, 0% disagree. Weighted by expert confidence level.

2) On average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been if the trade rules for the U.S., Canada and Mexico prior to NAFTA had remained in place.

98% of economists polled agree, 2% uncertain, 0% disagree.  Weighted by confidence level.

http://www.igmchicago.org/surveys/free-trade

Title: Trade "Deficit" is a most meaningless measure
Post by: DougMacG on May 08, 2018, 09:16:25 AM
[China stealing our technology is another matter.]

Opinion piece at investors business daily, Adam Brandon is President of Freedomworks.  He makes points I have been trying to make on these pages.

https://www.investors.com/author/adam-brandon/
Trade Deficit Is Most Meaningless Economic Indicator Of All
ADAM BRANDON 5/04/2018
The trade deficit doesn't matter. There shouldn't be anything controversial about this fact. As Adam Smith, the father of modern economics, wrote in "An Inquiry into the Nature and Causes of the Wealth of Nations," "Nothing ... can be more absurd than this whole doctrine of the balance of trade."
...
Trade deficits, however, simply are not a concern. Well, at least not in the way politicians who preach fear would have you believe.

A trade deficit is a sign that Americans have purchasing power and are creating demand for products. When the economy is in a downturn, the trade deficit shrinks. In 2006, for example, the trade deficit was $762 billion and the unemployment rate was 4.9%. By the end of 2009, the trade deficit declined to $384 billion, and the unemployment rate peaked at 10%.

Trade Deficit And Jobs
As the economy slowed during the Great Recession, manufacturing output also declined. But as the economy has improved, real manufacturing output has increased, reaching near pre-recession levels and record highs.

Citing data from the Bureau of Labor Statistics, the Pew Research Center noted, "After adjusting for inflation, manufacturing output in the first quarter of (2017) was more than 80% above its level 30 years ago." It's true that the manufacturing sector has experienced job losses, but increased worker productivity and automation have created the need for fewer workers in this sector, not trade.

Many politicians wrongly view the trade deficit as a sign that Americans are being taken advantage of by other countries. Correcting this notion, Rep. Justin Amash, R-Mich., recently put the trade deficit in the context of something as mundane as basic consumer transactions with a business:

"Trade deficits do not mean that anyone is taking advantage of anyone else. The grocery store will have a trade deficit with a farmer or supplier, just as you have a trade deficit with the grocery store," Amash tweeted. "This basic economic concept applies to international transactions just as it applies to neighborhood transactions."

Whether you purchase groceries from a Kroger in Chattanooga, Tenn., a new television from a Best Buy in Cleveland, Ohio, or an Echo Dot from Amazon.com, you have created a trade deficit with that company. You probably don't view these transactions this way, and you shouldn't. After all, these transactions are mutually beneficial exchanges of goods or services. In a mostly free economy, it isn't a zero-sum game.

What's more, the concept of the United States running a trade deficit with other countries is faulty. As economist Mark J. Perry explains, "It might be a subtle point, but it's important to realize that countries don't trade with each other as countries — rather it's individual consumers and individual companies that are doing the buying and selling."

Certainly, some politicians want to appeal to core constituencies, such as labor unions or companies that rely on antiquated business models, by espousing fear about the trade deficit. Such absurd rhetoric leads to policies that harm American workers and consumers, but it also ignores that we have a capital account surplus and a services surplus.
...
 the trade deficit is a sign of a healthy economy. Americans have more money to spend, which means more jobs created by businesses and more investment in the economy. This is what creates prosperity, which benefits all Americans, and that is not a zero-sum game.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on May 08, 2018, 03:21:06 PM
I used to think as that piece writes, but now I find myself wondering if things are more complex.

What happens when a mercantilist strategy pairs up with an elite spending the wealth of a country outside the country?

This was (and is?) seen in Latin America; is the same happening with China and America?  What meaning is to be imputed to high tech surrendering American high tech in order to sell in China?

Title: Re: Trade and Globalization Issues:
Post by: DougMacG on May 08, 2018, 07:31:06 PM
I used to think as that piece writes, but now I find myself wondering if things are more complex.

What happens when a mercantilist strategy pairs up with an elite spending the wealth of a country outside the country?

This was (and is?) seen in Latin America; is the same happening with China and America?  What meaning is to be imputed to high tech surrendering American high tech in order to sell in China?

Starting with the last part,
"What meaning is to be imputed to high tech surrendering American high tech in order to sell in China?"

This is a real problem, theft and extortion, and not "mostly free" trade.  Maybe grounds for a trade war, and hopefully this gets fixed in Trump's trade war.

On the first part, let's say China is accumulating monetary reserves and US buying what it needs at good prices, who is better off?
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on May 09, 2018, 09:54:11 AM
A big part of the US becoming the #1 power in the world had to do with it becoming a creditor nation. 

China is now establishing a formidable world-wide resource web in Africa, Latin America, and Central Asia as it captures the South China Sea in slow motion.  Our interest payments to it if not now will soon pay for all of its military spending!!!
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on May 09, 2018, 11:34:06 AM
A big part of the US becoming the #1 power in the world had to do with it becoming a creditor nation. 

China is now establishing a formidable world-wide resource web in Africa, Latin America, and Central Asia as it captures the South China Sea in slow motion.  Our interest payments to it if not now will soon pay for all of its military spending!!!

China owns $1.17 trillion of our 20T debt. 
https://www.investopedia.com/articles/investing/080615/china-owns-us-debt-how-much.asp
With interest rates below 3% that makes $30 billion and rising.
The US military budget is US$600 billion, 20 times greater than their interest return.

Balance our budget, grow our economy, and they will never catch up.

The interest they earn on our federal debt is in lieu of having that money invested elsewhere - like buying up assets in Latin America or investing in their own companies.  How much do they gain having a large sum invested at a low return?  None, really IMHO. Then let's say they fight us over the S. China Sea and payments get curtailed?  It is a risky dependence - for them.

Japan owns a nearly identical amount of our debt and it doesn't seem to help their growth or military.

Deductibility of corporate debt was curbed in the latest tax reform making our country less debt dependent and more equity oriented going forward.  (A Trump accomplishment.)  https://www.reuters.com/article/us-usa-tax-privateequity/u-s-tax-curbs-on-debt-deduction-to-sting-buyout-barons-idUSKBN1EF1G5
We already ended personal debt deductibility except for mortgage interest.

In the last century at least, a shrinking trade deficit for goods and services has been associated with bad economic times.  Trade wars also correlate with bad economic times. 

China blocks its consumers and businesses from the right to buy goods and services from around the world that would benefit them.  Who benefits from that?  No one?

Stealing our technology is another matter, unacceptable, period.

The point of the original article is that each trade is mutually beneficial.  That is to say we benefit from each and every trade whether it is a buy or a sell.  To the previous question, "let's say China is accumulating monetary reserves and US is buying what it needs at good prices, who is better off?", I think the answer is both but most certainly us.

In war we (or they) would shut down trade, hurting both sides.  If Trump did that to China now as a strategy to take down their intellectual property theft ring, and if it succeeded in breaking them, I would be fine with that.  But that is different point entirely than voluntarily curtailing our own economic freedoms including freedom to buy and sell goods and services around the world.   We won't be number one in the world without these freedoms.  I'm not saying you support curtailing that; I'm just not clear what you are proposing or favoring.
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on May 10, 2018, 07:26:20 AM
Followup thoughts to yesterday's post.

Again, I would like to separate out the intellectual property theft issue with China.  If we want to get the free world together, form a coalition and have an embargo and all-out temporary trade war with them for the purpose of breaking down their barriers and ending their theft extortion policies, I am fine with that.

Mercantilism in general, from google:  "Adam Smith coined the term “mercantile system” to describe the system of political economy that sought to enrich the country by restraining imports and encouraging exports. This system dominated Western European economic thought and policies from the sixteenth to the late eighteenth centuries."

Let's take some examples of restricting imports, Reagan protected Harley Davidson temporarily by restricting imports of Japanese motorcycles.  Trump levied (or threatened) 25% and 15% tariffs on steel and aluminum.  China has a 25% tariff on foreign made automobiles and many other imports.  In a different way the US government bailed out Chrysler, Ford, GM. That is also a trade intervention like what we accuse of China and Europe. 

At its very best, government can pick winners and losers and look good doing it when they are right.  There is a lot of nationalist and Wisconsin pride in Harley motorcycles, still alive and profitable.

My view is that is a losing battle.  For the most part, government will: choose the wrong cause, protect the wrong industry, harm the industry with its protection, and make its choices for political instead of economic reasons. It is a classic fight between central planning versus the aggregate of millions of individual economic decisions made in a free market.  The failures of businesses is an ugly part of dynamic capitalism.  But like democracy, it beats all the alternatives.

How do we measure success?  Standard of living, it's not easy or perfect but look at income, per capita, measured in PPP purchasing power parity. 

When you add the 25% import tax to Chinese consumer, what does that do to their standard of living? What does protecting your own industries do for their competitiveness?  China, if it were a state, comes in at about a third of the income of our 50th richest state.  http://www.aei.org/publication/us-gdp-per-capita-by-state-vs-european-countries-and-japan-korea-mexico-and-china-and-some-lessons-for-the-donald/print/

They are growing faster than us because a) they lie about their statistics, b) we restrain our own growth rate, and c) the potential growth rate is higher in a less developed country.  Also they steal technology and get away with it.

(https://qph.fs.quoracdn.net/main-qimg-c1cb0cc8229289b3eb520b1f3fe82fda)

Back to the other examples, let's look at the US as it was growing into the world's largest economy.  We were far less dependent on foreign trade.  Yes we had tariffs but that was lieu of all other federal taxes and federal programs that now slow our growth.  I would argue that our success came from our freedoms more so than from our import taxes.

Currency manipulation is another trick to favor exports over imports.  From our point of view, a low dollar makes exports more competitive and imports more expensive.  Canada has a low dollar now and Europe a relatively low euro.  How is that working for them?  Badly I would argue.  When your currency devalues, so does your income and wealth.  Most economists on our side argue instead for a neutral, non-interventionist monetary policy, see George Gilder's 'Scandal of Money', Prof. John Taylor, Wesbury, Grannis, et al.

Mercantilism in Latin America.  I'mnoexperton this but mercantilism necessarily involves government interventionism which I would argue was their downfall. 

Financial times, 2012:
https://www.ft.com/content/878bab8a-729d-11e1-9c23-00144feab49a

Brazil is shielding its car industry from Mexican competition and its vintners want protection from Chilean imports. Argentina, a prodigious inventor of eccentric economic policies, is requiring importing businesses to sell something – anything – to foreigners worth as much as what they buy from them.

Such policies do nothing to fend off currency-driven price competition from China or the rich world. Worse, they undermine the sort of policies that would shore up Latin America’s industrial base.
----------------
Other than (failed) public policies there is no reason I know of that Latin America shouldn't have GDP at least on par with the US.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on May 10, 2018, 07:46:32 AM
Doug:

You make and support your case very well and I cannot cite where I read to the contrary, but I cannot shake the feeling that something is badly off with the idea that we are paying only $30B in interest to China.
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on May 10, 2018, 08:50:34 AM
Doug:
You make and support your case very well and I cannot cite where I read to the contrary, but I cannot shake the feeling that something is badly off with the idea that we are paying only $30B in interest to China.

I think there is an assumption out there that we borrow all our debt ($20T) from China and pay all our interest (475B in 2017) to them, and that debt could go to 30T in the foreseeable future and interest rates could easily go to 10% and we would soon be talking about multiple trillions.

But we borrow a good part of the debt from within our own government (Intragovernmental holdings $5.4 trillion), a little less than half the debt held by the public, and the rest, 6T 2014, from foreign governments.  Of that,  $1.17 T is from China, 2017, and they haven't been increasing that position much over the last several years.

See this chart of which foreign governments own how much US debt: 
https://upload.wikimedia.org/wikipedia/commons/thumb/9/9d/Composition_of_U.S._Long-Term_Treasury_Debt_2000-2014.svg/1251px-Composition_of_U.S._Long-Term_Treasury_Debt_2000-2014.svg.png
Title: POTH: Huh? Trump vows to save Chinese jobs lost due to sanctions?!?
Post by: Crafty_Dog on May 13, 2018, 12:15:46 PM


https://www.nytimes.com/2018/05/13/business/trump-vows-to-save-jobs-at-chinas-zte-lost-after-us-sanctions.html?emc=edit_na_20180513&nl=breaking-news&nlid=49641193ing-news&ref=cta
Title: ZTE
Post by: Crafty_Dog on May 14, 2018, 09:45:37 AM
https://www.themaven.net/theresurgent/erick-erickson/president-trump-and-the-united-states-should-not-help-zte-UG1j6MGpeEaMjjfky_zovA/?full=1
Title: WSJ: ZTE
Post by: Crafty_Dog on May 14, 2018, 02:15:59 PM

By James Freeman
May 14, 2018 3:02 p.m. ET
336 COMMENTS

Is President Donald Trump’s emerging trade deal with China as bad as it looks? It’s hard to see how he will be able to call it a win—unless perhaps the deal’s most important terms have nothing to do with trade.

Late Sunday morning Mr. Trump tweeted,“President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”

Protecting jobs in China was not exactly part of the agenda Mr. Trump campaigned on in 2016 and the announcement seems to have caught some members of his administration by surprise. Amid concerns about the terms of trade he’s negotiating with communist China, President Trump advised his Twitter followers on Sunday to “be cool” and promised “it will all work out!”

If one were to create a list of the companies where Americans should not want jobs created, the telecommunications giant ZTE might be at the top. The history of cyber attacks emanating from China and the security risks of any Chinese company having a major role in the world’s telecom infrastructure are natural reasons for caution. And then there is the particular record of ZTE.

Last month the Journal reported:

    ... the Commerce Department said Monday that ZTE had violated the terms of a previous settlement, alleging it illegally evaded sanctions. The department said ZTE agreed last year to combined civil and criminal penalties and forfeiture amounting to $1.19 billion for allegedly shipping sanctioned telecom gear to Iran and North Korea.

    The agency said Monday it has since determined ZTE made false statements during and after the settlement talks. Moreover, the company didn’t discipline executives involved, as agreed, and paid them full bonuses.

    It said as a result, ZTE would no longer be able to buy components from U.S. manufacturers. The move could impact ZTE supply lines and U.S. firms that have come to rely on ZTE as a customer.

Maybe there’s an argument for letting this bad actor off the hook in return for China ending its theft of U.S. intellectual property and its coercion of U.S. companies to share technology and trade secrets. But that doesn’t appear to be happening. Today the Journal reports:

    The U.S. and China are closing in on a deal that would give China’s ZTE Corp. a reprieve from potentially crippling U.S. sanctions in exchange for Beijing removing tariffs on billions of dollars of U.S. agricultural products, said people in both countries briefed on the deal.

    The negotiations would also ease roadblocks in China faced by a U.S. semiconductor company Qualcomm Inc., whose proposed acquisition of NXP Semiconductors NV of the Netherlands has been held up by Beijing....

    The unfolding deal is already kicking up criticism from trade allies of the administration. “It’s outrageous,” said American Enterprise Institute China scholar Derek Scissors. “We are giving up on punishing ZTE for the Chinese restoring the trade status quo.”

The Chinese agricultural tariffs were mainly a response to Mr. Trump’s threatened tariffs. So the grand bargain is simply to help revive a sanctions-busting Chinese firm that poses a strategic threat?

This column asked a senior administration official if Mr. Trump’s proposed ZTE relief will come in return for China applying extreme pressure to North Korean dictator Kim Jong Un. The reply: “Perhaps.”
Title: ZTE
Post by: Crafty_Dog on May 14, 2018, 05:26:30 PM
third post

http://thehill.com/policy/technology/387645-trump-stuns-lawmakers-with-push-to-help-chinese-company?userid=188403
Title: Re: WSJ: ZTE
Post by: DougMacG on May 14, 2018, 07:52:07 PM
"asked a senior administration official if Mr. Trump’s proposed ZTE relief will come in return for China applying extreme pressure to North Korean dictator Kim Jong Un. The reply: “Perhaps.” "

That's about what I was going to guess, there is something else going on with this.  Xi needs ZTE more than he needs N.K. and Trump wants the N.K. deal.
Title: Jabril Khan: Trump making it harder to stop Chinese cheating
Post by: Crafty_Dog on May 18, 2018, 09:29:09 PM
https://www.nationalreview.com/2018/05/trump-trade-policy-on-china-not-about-enforcing-rules/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202018-05-18&utm_term=NR5PM%20Actives
Title: Did Trump flinch?
Post by: Crafty_Dog on May 22, 2018, 10:31:55 AM


Not liking that Trump backed off on ZTE  :x

What about tech, trade secret, and patent theft?!?

Maybe he's waiting until after the mid-terms?

========================================


An agreement by China to increase imports of U.S. goods and services appears to have cooled off some of the heated trade rhetoric that had been building between the countries over the past few months. But a statement issued May 19 after two days of talks in Washington between trade delegations that included Chinese Vice Premier Liu He and U.S. President Donald Trump left the details of those purchases vague. Although the immediate danger of a trade war between the United States and China appears to have eased, the longer-term competition between the world's largest economies will continue to put them at loggerheads.

U.S. Secretary of Commerce Wilbur Ross will reportedly travel to China next week to hammer out some of the details of the agreement that, if finalized, would reduce the trade imbalance between the countries. Shortly after the agreement, China announced plans to reduce import tariffs on selected automobiles from an average of 25 percent to 13.8 percent and those on auto parts to 6 percent. In response to China's moves, the United States, despite its internal divisions, has indicated it will ease its death penalty on China's telecom giant ZTE, which was banned from receiving core technology from American suppliers.

In the statement, China also promised to increase its purchases of U.S. agricultural and energy products, and to push forward reforms of its intellectual property laws. But no specifics over volume of trade or the time frame for the reforms were detailed in the agreement. Although U.S. Secretary of the Treasury Steven Mnuchin said that Chinese agricultural purchases could rise by as much as 40 percent this year and that U.S. energy sales to China were expected to double in three to five years, details have yet to be worked out. If the United States does not like what it hears from Chinese negotiators during those talks, it could still slap tariffs on Chinese goods and exercise other aggressive non-tariff options.

Here's what is known about the situation based on the joint U.S.-Chinese statement and what to watch for as more detailed negotiations between the two sides get underway.
What the Joint Statement Detailed

It is unknown at this point what agricultural and energy products are involved. But during the so-called "100-day plan" signed in 2017, China pledged to ramp up its purchases of liquified natural gas (LNG), beef and chicken from the United States. Some progress has been made. For instance, China has signed its first long-term LNG contract with U.S. firms. But the escalatory trade spats also compelled Beijing to hit key U.S. agricultural products such as apple, sorghum and potentially soybeans and pork in a bid to impose political costs on the Trump administration.

Deescalating trade spats could, at a minimum, avoid negatively impacting some of the more sensitive U.S. agricultural exports, such as soybeans and sorghum, for the short term. It also raises the prospect of increased Chinese imports of U.S. natural gas, particularly as the country pushes to upgrade its industrial sector and contain pollution. Demand for U.S. LNG has already been rising in China, which has set a goal of doubling natural gas consumption by 2020 from 2015 levels. It imported six times more LNG from the United States in 2017 than the previous year. And with four more U.S. LNG export terminals coming online over the next two years, increasing Chinese imports are a benefit for both sides. But U.S. LNG exports are also in demand in other countries that have been the subject of trade rancor from the White House, including Japan and South Korea. And even with its annual imports of U.S. agricultural products totaling about $20 billion and its oil and gas purchases coming to around $7 billion, doubling or tripling the purchases wouldn't make up for a substantial reduction in trade surplus, let alone the 200-billion-dollar reduction that the United States has demanded.
What the Joint Statement Omitted

There were no indications of how quickly China would move toward increasing intellectual property protections or how broadly those changes would be instituted. Foreign competitors have long complained that lax intellectual protections and forced technological transfers have given China's industries an unfair competitive advantage, and it has been a core component to U.S. demands that China work to reshape these practices.

Other points of contention left unaddressed include how Beijing would approach reducing restrictions on foreign investment in China and when or whether it would open economic sectors that are now closed to such investment. The U.S. Treasury Department, meanwhile, was expected to propose its own revised rules on Chinese investment into the United States.
The Lasting Competition Between the U.S. and China

Even if the two sides sign off on the details that fill in the broad outlines of their trade agreement, the fundamental differences between China and the United States over trade and economic practices will remain. China's companies and markets are better able to weather foreign competition, and as it cultivates an environment to enhance innovation and develop its tech sectors, it acknowledges the needs for IP protection. Thus, the agreements to shrink China's U.S. trade surplus were relatively easy to reach, along with China's pledge to open its markets and enhance intellectual property protections at its own pace, compared with other issues brewing between the countries.

Some of those stickier issues were not addressed in the joint statement. For instance, China will not give up its state-funded"Made in China 2025" initiative, the strategy to support its maturing domestic technology sector, even if it risks sparking a trade war with the United States. Although Beijing is reportedly considering inviting foreign companies to take part in the program, in part to defuse trade tensions with the United States, the U.S. sanctions targeting Chinese telecommunications equipment maker ZTE only strengthened Beijing's resolve to achieve state-led tech independence.

Another point of contention was the U.S. restrictions on high-tech exports to China. Beijing has long argued that relaxing U.S. export rules on technology would help reduce the trade imbalance between the countries. The New York Times reported that such discussions had been included in the Washington talks, with Mnuchin reportedly pushing to relax the rules, but that idea faced pushback from the U.S. Department of Defense.

However this round of trade competition between the United States and China plays out, the underlying economic and strategic differences between the two global heavyweights are not easily resolved. And even if this pause in the trade skirmishes between the countries holds, and a full-blown trade war can be averted, those fundamental differences will continue to manifest themselves in the economic arena.

Stratfor
Title: Senate committee votes to block Trump from saving ZTE
Post by: Crafty_Dog on May 22, 2018, 02:40:06 PM
https://pjmedia.com/news-and-politics/senate-committee-overwhelming-votes-to-block-trump-from-saving-chinese-telecom-giant/
Title: Re: Senate committee votes to block Trump from saving ZTE
Post by: DougMacG on May 23, 2018, 03:18:11 PM
https://pjmedia.com/news-and-politics/senate-committee-overwhelming-votes-to-block-trump-from-saving-chinese-telecom-giant/

Two cents of observations.
1.  I don't think Trump's goal is to save Chinese companies.  He is working on a few things larger than the fate a handset manufacturer, denuclearizing North Korea, stopping their threat to bomb Guam, Japan, South Korea, LA, etc, restoring global non-proliferation that could save the planet or prevent the next world war, and opening up the world's largest market outside of the US to US manufacturers.
2.  Foreign policy works better if not conducted by a committee of 535.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on May 23, 2018, 10:03:21 PM
Fair points, but

a) the details of the ZTE thing are disconcerting, and strike at the core of his reputation;

b) he can use the vote in question as "bad cop" to which he plays "good cop".
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on May 24, 2018, 04:14:08 AM
Fair points, but

a) the details of the ZTE thing are disconcerting, and strike at the core of his reputation;

b) he can use the vote in question as "bad cop" to which he plays "good cop".

A. Yes, what you think of this action by Trump depends on what you thought of him before he took it. On the face of it, it makes no sense. My take, he is the only person getting tough with China (and North Korea) so I am inclined to give him benefit of the doubt on negotiating details.
B. True, good point.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on May 24, 2018, 07:34:43 AM
http://thehill.com/homenews/administration/389097-trump-on-collision-course-with-congress-on-zte?userid=188403

http://thehill.com/homenews/senate/388913-republicans-think-trump-is-losing-trade-war?userid=188403
Title: Stratfor: CAATSA
Post by: Crafty_Dog on May 28, 2018, 08:08:31 AM
•   Middling powers in Europe, Asia and the Middle East will face increasing pressure from Washington on their ties with Russia because of the United States' new sanctions legislation.
•   Germany, Vietnam and Turkey are some of the major states most likely to defy U.S. pressure on their Russia relations.
•   In Asia, India may struggle to cope with the U.S. sanctions, while Indonesia could go either way.
•   Saudi Arabia, Qatar and the United Arab Emirates will find it easier to comply thanks to their limited links to Russia and deep defense relationships with Washington.
•   Measures such as the Countering America's Adversaries Through Sanctions Act will encourage U.S. partners to adopt a more multilateral strategy in an emerging world of great power competition.

Yesterday was Tehran and today it's Moscow. As the United States, Russia and China engage in a great power competition, growing tensions between Washington and Moscow could soon have a major effect on U.S. relations with other countries. Upset by the Kremlin's actions around the world, U.S. lawmakers are hoping to hit Russia where it hurts most, its defense and energy business, through the Countering America's Adversaries Through Sanctions Act (CAATSA), which applies secondary sanctions to countries engaging in business with Moscow in these fields. CAATSA has faced some resistance — not least from the commander in chief himself — but its gradual implementation promises to have far-reaching effects on all concerned.

The Big Picture

In its second-quarter forecast for 2018, Stratfor noted that the United States would turn its attention toward its competition with Russia and China. Washington already has targeted Beijing with trade tariffs, and now it is finally starting to implement measures that could change Russia's strategic ties around the world under the Countering America's Adversaries Through Sanctions Act.

See 2018 Second-Quarter Forecast
A Potent New Process

Secondary sanctions are hardly new to U.S. foreign policy. Washington used them extensively against Tehran in an effort to force the Islamic republic to modify its behavior before the Iranian nuclear deal's signing in 2015. But Russia occupies a different position from Iran in the international system as a great power that boasts robust energy relationships with Europe and China, as well as diverse defense ties with many states, particularly in Asia and the Middle East. CAATSA also targets Iran, along with North Korea, yet it is the secondary sanctions against Russia — especially those stipulated in sections 231 and 232 of the act — that could affect the United States' partnerships the most.

Under Section 231 of CAATSA, any third-country firm or individual that engages in a "significant transaction" with Russia's defense or intelligence sectors will face a penalty. Companies and individuals can apply for an exemption from the sanctions. Getting one, however, would require U.S. authorities to certify not only that the exemption would not harm the United States' national security interests but also that Russia had made "significant efforts to reduce the number and intensity of cyber intrusions."

Given that the Kremlin is unlikely to meet the second condition anytime soon, countries wishing to continue trade with Russia's defense or intelligence sectors could opt for a waiver under Section 231. The waiver, which has a maximum length of 180 days, requires U.S. officials to certify that the applicant is "substantially reducing the number of significant transactions" with targeted Russian interests. (The U.S. Congress is also currently considering the 2019 National Defense Authorization Bill, legislation that would replace the waiver process with an upfront certification that determines whether the entity in question is taking "significant and verifiable steps" or "has agreed to reduce reliance" on Russia over a "specified period.") But the waiver could draw unwanted attention to countries engaged in trade with Russia and give Washington leverage to try to exact concessions from them.

Section 232, meanwhile, focuses on energy, targeting investments of $1 million or more in Russian pipelines or support for building or operating pipelines — in goods, services, technology and information — worth an annual total of at least $5 million. Unlike those prescribed under Section 231, Section 232 sanctions are discretionary rather than mandatory.

The waiver could draw unwanted attention to countries engaged in trade with Russia and give Washington leverage to try to exact concessions from them.
•   
•   
•   
•   
Off to a Slow Start

U.S. President Donald Trump opposed CAATSA (the act largely stems from a unilateral initiative by Congress, which took action out of concern that the U.S. leader could become too conciliatory toward Russia). Nevertheless, it passed by veto-proof majorities in the Senate and House of Representatives alike. The president then delayed its implementation beyond the Jan. 29 congressional deadline, arguing that the date signified the start, rather than the end, of the process.

Facing growing pressure from Congress, Trump has signaled that he will begin applying the law. The State Department has tried to define "significant transaction" and is already engaged in conversations with many countries on their relationships with Russia. At the same time, U.S. diplomats also tried to entice countries to expand their defense ties with Washington to compensate for the loss of Russian supplies. The overtures suggest that CAATSA's aim is not simply to penalize Russia for its perceived bad behavior but also to expand U.S. arms sales wherever possible. Still, some prominent members of the U.S. Congress are dissatisfied with the progress toward implementing the act. Key Democrats, such as Sen. Robert Menendez, and some Republicans, in fact, recently requested a rare multiagency investigation into the delays in the law's application. But regardless of the snags in its implementation, CAATSA demonstrates that the United States is more strident than ever in pushing other countries to reduce their defense and energy ties with Russia.

Addressing Russia's Worldwide Influence

According to the Stockholm International Peace Research Institute, Russia is the world's second-largest arms exporter. From 2013 to 2017, the country accounted for 22 percent of the globe's weapons exports, lagging behind only the United States at 34 percent. (All other exporters' contributions, by contrast, are in the single digits.) Russia also has numerous clients in diverse fields that purchase its air defense systems, aircraft, missiles, ships, armored vehicles and aircraft engines. Nearly two-thirds of Russia's exports go to Asia, though the Middle East and Africa also receive a significant portion of the country's arms.

Regardless of the snags in its implementation, CAATSA demonstrates that the United States is more strident than ever in pushing other countries to reduce their defense and energy ties with Russia.
•   
•   
•   
•   
Russia's deepest defense relationships are with China, India and Vietnam, which together account for 58 percent of Russian exports. China has received top-of-the-line Russian equipment of late, including the S-400 air defense system and Su-35 aircraft, while India and Vietnam have been purchasing and using Russian equipment since Soviet times. Farther afield, Russia has signed major arms deals with Indonesia and Turkey, and it's in talks with Saudi Arabia and Qatar over the sale of the S-400 system. The United Arab Emirates, too, is considering the purchase of Su-35 aircraft. Although these countries are some of Russia's biggest customers — or prospective customers — they aren't the only ones that could run afoul of CAATSA. States such as Algeria, Myanmar, Malaysia, Kazakhstan and Ethiopia also could soon find themselves in hot water with the United States because of their "significant" defense relationships with Russia.

Mulling a Response

China

As one of the biggest purchasers of Russian arms, China will likely have the most difficulty scaling down its ties with Russia — all the more so since Washington has already targeted Beijing in separate trade disputes. Its connections with Russia are so deep and strategic that China will be unlikely to make more than token concessions on its core defense purchases from Moscow. (But even without the threat of U.S. sanctions, China is destined to purchase less Russian military hardware as it develops technology that would allow it to manufacture its own arms.) Similarly, major energy projects such as the Power of Siberia gas pipeline from Russia to the Far East are more or less irreversible.

As one of the biggest purchasers of Russian arms, China will likely have the most difficulty scaling down its ties with Russia — all the more so since Washington has already targeted Beijing in separate trade disputes.
•   
•   
•   
•   
India

Russia also has deep relations with China's rival over the Himalayas, India. Moscow supplies most of the arms for the Indian military, including combat aircraft, naval destroyers, battle tanks and a lone nuclear submarine. The BrahMos missile — the product of Russian-Indian cooperation — is a signature success for New Delhi's defense establishment that also has great export potential. Furthermore, Russian arms deals offer generous terms, such as technology transfers and opportunities for joint production, that are important to India's strategic autonomy doctrine.

If push comes to shove, India will not sacrifice its relationship with Russia. Instead, it will try to compromise with the United States by purchasing more U.S. arms or by signing the two outstanding foundational defense agreements with the country. Despite its historical links with Moscow, New Delhi has expanded its security and economic relationship with the United States over the past two decades to try to increase its clout in the global system. Their ties are now strong, and India increasingly relies on the United States to balance China's rise in Asia. As a result, Washington has greater leverage over New Delhi, which, in turn, is more vulnerable to CAATSA's stipulations than Beijing is. In the longer run, however, the CAATSA process could rekindle anti-American sentiment in the Indian defense bureaucracy and the political class, two decades after a reset in U.S.-Indian relations consigned such nationalism to the margins.

Vietnam

In Southeast Asia, Vietnam — whose military gets nearly all its equipment from Russia — also has been more open to U.S. defense ties since the United States lifted an embargo on lethal arms sales to Hanoi in 2016. The United States has sold patrol boats to Vietnam, and a U.S. aircraft carrier even docked at the country's Cam Ranh naval base. Even so, Vietnam's connections to the United States remain limited at this nascent stage of their rapprochement. That means Vietnam will be in a stronger position than India in negotiations with Washington over CAATSA — even though it has deeper ties with Russia. In fact, the CAATSA process could discourage Vietnam from further building its defense relationship with the United States, if only to avoid future compromises to its strategic autonomy.

Indonesia

Indonesia could go either way in its ties with Russia. Its military has long relied on suppliers from multiple countries, including Russia, with which it is drafting a strategic partnership agreement. Indonesia reportedly defied U.S. pressure in February when it proceeded with a new order for 11 Su-35 jets in a deal with Moscow. At the same time, though, the Southeast Asian country counts the United States as a major export destination and tends to be less assertive than Vietnam.

Turkey

Toward the other end of Eurasia, Turkey would seem to be an unexpected target for CAATSA as a member of NATO, the gold standard for U.S. alliances. But Ankara has been moving to engage in more transactional relationships with all powers, including putative ally the United States. In a symbolic departure from the practices of alliance behavior, Turkey inked an agreement to acquire the S-400 air defense system from Russia, a NATO adversary.

The Trump administration has demanded that Ankara scuttle the deal, only to trigger a hostile response from the Turkish government. Now the U.S. Congress appears to
be upping the ante with a draft defense bill that would include provisions to suspend the sale of 100 F-35s to Turkey until U.S. authorities provide a report assessing the effects of Washington and Ankara's strained relations on U.S. operations in Turkey. And as in military matters, so in energy: Ankara is expected to defy Washington on the Turk Stream natural gas pipeline between Russia and Turkey, which could become a target of sanctions. If the United States becomes insistent in its demands, Ankara could use its cooperation in Syria as further leverage against Washington.

The Gulf States

Saudi Arabia, Qatar and the United Arab Emirates, meanwhile, have far fewer defense ties with Russia than with the United States, meaning they will find it easier to demonstrate a reduction in defense transactions with Moscow.

Germany

In terms of energy, another of the United States' most enduring allies, Germany, will find itself in the CAATSA crosshairs. Large European energy firms such as Royal Dutch/Shell, Uniper, OMV and Engie could all suffer U.S. sanctions because of their financial involvement in Nord Stream 2, a controversial pipeline that will bring natural gas directly to Germany from Russia. Germany, which has publicly condemned CAATSA's provision regarding Nord Stream 2, is well-placed to resist U.S. demands, thanks to its position as a major global player. Yet its strong economic ties with the United States will also make it vulnerable to punitive U.S. action.

Risks and Rewards

Secondary sanctions are part of the United States' broader strategy to achieve a set of objectives with regard to an adversary by imposing its laws on other countries. Washington has applied extraterritoriality in this way several times in the post-Cold War era, to Cuba, Iran and Libya in the 1990s, and once again to Iran in the 2000s.
If CATSAA succeeds, the rewards for Washington will be nothing less than altering Russia's behavior or curtailing its influence in the international system.
•   
•   
•   
•   
Most countries view energy and defense as delicate areas in which market dynamics compete with strategic considerations. Defense relations, however, naturally involve sensitivities that exceed those of energy ties. Price negotiations are often protracted, and it might take years to complete an order. Any major weapons system, moreover, requires contracts for maintenance, spare parts and potential upgrades. Supplier reliability is a huge concern — as are technology transfers and joint production, which importers value. Consequently, reorienting core defense relationships can be quite disruptive for the importer.

The CAATSA process is full of lofty ambitions. If it succeeds, the rewards for Washington will be nothing less than altering Russia's behavior or curtailing its influence in the international system. But it also carries risks. In today's world, middle powers are increasingly assertive and refuse to tie themselves to any single great power. The United States' reliance on the blunt tool of extraterritoriality could eventually backfire if it's not careful.
Title: Saudi Arabia stops new business with Germany over its' pro-Iran policy
Post by: Crafty_Dog on May 28, 2018, 02:01:51 PM
https://www.jpost.com/Middle-East/Saudi-Arabia-stops-new-business-with-Germany-over-its-pro-Iran-policy-558431
Title: Stratfor: Washington's next moves.
Post by: Crafty_Dog on May 29, 2018, 06:56:11 PM
After little more than a week of easing trade tensions between the world's two largest economies, the United States is putting down the carrot and reaching for the stick as it attempts to pressure China. The United States has announced that it will soon present the final list of goods that will be hit by tariffs as part of the long-standing case against China's intellectual property practices.
________________________________________
2018 Second-Quarter ForecastGlobal TrendsGlobalization, EvolvedChina in Transition
After a brief period of calm in the fight over trade between the United States and China, Washington has issued a news release laying out the next steps it will take to retaliate against Beijing's policies on intellectual property and technology transfers.

Washington's Next Moves

•   By mid-June, the United States will complete a list of roughly $50 billion worth of Chinese imports that will receive a 25 percent tariff.

•   The United States will announce potential investment restrictions and stronger export controls for Chinese citizens and entities by the end of June, targeting sectors with industrially significant technology.

•   The United States will continue to pursue litigation in the World Trade Organization against China's technology practices.
Now that Washington is increasing the pressure on Beijing, China will be contemplating its response ahead of U.S. Commerce Secretary Wilbur Ross' visit to China during June 2-4. As it does so, China must bear three considerations in mind before responding to the United States.

The Fate of ZTE

While the U.S. export ban on Chinese telecommunications giant ZTE Corp. is more than just a trade issue, removing the ban is a major priority for China in trade talks — even if it comes at the cost of accepting U.S. tariffs. While China can handle tariffs on $50 billion in exports, ZTE has already been significantly damaged, and protecting the tech firm is a major priority for China. The tech giant expects to lose $3.1 billion in sales to the ban, and a settlement package to see it lifted will require a large fine and a management restructuring. Because the ban falls under the U.S. Commerce Department's jurisdiction, it will likely take priority in Ross' upcoming meetings in China. The U.S. Congress has demanded that President Donald Trump do more to pressure ZTE, potentially giving China a small window to negotiate with the administration before Congress steps in.

Potential Pushback

China faces a difficult decision over whether to follow through with a response to U.S. tariffs on $50 billion worth of imports. Doing so would not only undermine China's short-term priority to lift the ban on ZTE but would also risk further retaliation and escalation from the United States. When China announced it would retaliate to tariffs in April, Trump quickly responded by saying he would direct the U.S. trade representative to determine whether to triple the value of Chinese goods targeted with tariffs in retaliation. The rumor mill has gone silent on whether those tariffs are still on the table, but China still needs to think twice about following through with its threat. While Beijing ultimately wants to negotiate and reduce tensions with the United States, responding in kind with measures that target politically sensitive areas of the U.S. economy — such as soybeans — could give China negotiating leverage.

Creating Cooperation

Beijing appears willing to continue offering some concessions. Last week, signs emerged of a potential deal in which China would increase imports from the United States by $200 billion — a figure that was never confirmed — and China has dangled concessions on agricultural imports in talks on ZTE. However, some Chinese negotiators may now be questioning whether the White House truly wants to talk. The Trump administration has come under fire politically for appearing soft on ZTE, and the $200 billion trade agreement was widely perceived as a better deal for China than it was for the United States. The White House may now be backed into a corner as China hawks fly into view to criticize Trump's strategy on China ahead of important midterm elections.

Dates to Watch

•   June 2-4: U.S. Commerce Secretary Wilbur Ross visits China.
•   June 15: The deadline arrives for the United States to present the finished list of $50 billion worth of imports from China that will be hit with a 25 percent tariff.
•   June 30: The deadline arrives for the United States to announce potential investment restrictions and strengthened import controls for Chinese citizens and entities attempting to make deals in sectors with industrially significant technology.
Title: Trump trade war
Post by: DougMacG on June 01, 2018, 07:46:48 AM
Mark Levin asks, if a 25% tariff is good, why isn't a 100% tariff better?
------------------------------------------------
We can build it all here and be all industrialized - like Brazil.

How do you isolate China by declaring war on Canada and Europe?

They won't retaliate.  What?  Ooops!
https://www.cbsnews.com/news/canada-eu-steel-aluminum-tariffs-retaliate/

How does higher steel and aluminum prices 'square with Mr. Trump’s goal of making more cars in America?'

Luckily, American cars have more health care and retiree pensions in them than steel and aluminum...

Nebraska Senator Ben Sasse tweeted, “You don’t treat allies the same way you treat opponents.”

WSJ:  "He aspires to be Ronald Reagan but his tariff folly echoes of Herbert Hoover."
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on June 01, 2018, 05:41:11 PM
And while stabbing us in the back by trading with Iran, they are sanctimonious with us here , , ,
Title: Defense Industry
Post by: Crafty_Dog on June 03, 2018, 12:15:21 AM
http://thehill.com/policy/defense/390330-defense-industry-braces-for-hit-from-trump-tariffs?rnd=1527987117
Title: Stratfor: US and Canada: Steel and Aluminum
Post by: Crafty_Dog on June 04, 2018, 02:53:54 AM
Aluminum and steel are metals that are not only essential for industry to thrive, but they are also needed to build infrastructure and to ensure national security.

Because of the importance of these metals, countries in North America have been cooperating for many decades to guarantee the best possible supply chains for both aluminum and steel.
The History: Aluminum and Steel

Here are some of the major events that involve the two metals, from the perspective of North American trade and cooperation.

1899
The Pittsburgh Reduction Company, later the Aluminum Company of America (Alcoa), begins construction of a power plant and aluminum smelter in Shawinigan Falls, Quebec.

1901
The company produces the first aluminum ever on Canadian soil.

1902
This Canadian division is renamed the Northern Aluminum Company
New Uses & WW1

1903
The Wright brothers use aluminum in their first plane at Kitty Hawk, North Carolina.

1908
The first Model T rolls off the assembly line, and steel is a primary component.

1910
The U.S. and Canadian steel industries surround the Great Lakes region. At this point the U.S., produces more steel than any other country in the world.

1913
The US passes the Underwood Tariff, a general reduction in tariff rates that affected Canadian exporters. Zero or near-zero tariffs were introduced for steel. (The Canadian Encylopedia)

1914
At this point, 80% of American-made cars had aluminum crank and gear cases.

World War I
The Great War breaks out. It's the first ever "modern war", and metals become strategically important in a way like never before. For the first three years, the U.S. helps the Allies — including Canada — which is already at war, by providing supplies.

Steel was crucial for ships, railways, shells, submarines and airplanes. Meanwhile, aluminum was used in explosives, ammunition, and machine guns — and the Liberty V12 engine, which powered Allied planes, was 1/3 aluminum.

During this stretch, America produced three times as much steel as Germany and Austria. By the end of the war, military usage of aluminum is sucking up 90% of all North American production.
Interwar Period

1919
After the war, the interruption of European aluminum shipments to North America drives up Northern Aluminum sales to the United States. In 1919, U.S. aluminum imports from Northern Aluminum totals 5,643 tons, while all European producers add up to 2,360 tons.

1925
After aluminum gains post-war acceptance from consumers, Alcoa uses this new momentum to strike a deal to build one of the world's greatest aluminum complexes in Quebec on the Saguenay River.

These facilities become the base for Northern Aluminum, which changes its name to the Aluminum Company of Canada (Alcan). By 1927, the area includes an entire new company town (Arvida), a 27,000 ton smelter, and a hydro power plant. This complex would eventually become the world's largest aluminum production site for WWII.

1929
The "Roaring Twenties" saw consumer culture take off, with autos and appliances flying off the shelves. Steel and aluminum demand continues to soar.
World War II

1940
Canada and the U.S. establish the Permanent Joint Board on Defense, still in operation today. Near the same time, the Canadian-American defense industrial alliance, known as the Defense Production Sharing Program, is also established.

1941
Canada and the U.S. agree to coordinate production of war materials to reduce duplication, and to allow each country to specialize, with The Hyde Park Declaration of 1941.

The principles of this declaration recognize North America as a single, integrated defense industrial base.

1942
Canada builds the Bagotville airbase to protect the aluminum complex and hydro plants of the Saguenay region, which were crucial in supplying American and Canadian forces. A Hawker Hurricane squadron is permanently stationed, to protect the area.

1945
The Saguenay facilities were so prolific that Canada supplied 40% of the Allies' total aluminum production.

"The record proves that in peaceful commerce the combined efforts of our countries can produce outstanding results. Our trade with each other is far greater than that of any other two nations on earth." — Harry Truman, 33rd U.S. President, 1947
Cold War & North American Integration

1952
The U.S. focuses on Canadian resources after the President's Materials Policy Commission warns of future shortages of various metals, which could make the U.S. dependent on insecure foreign sources during times of conflict.

1956
Canada and the U.S. sign the Defense Production Sharing Agreement, which aims to maintain a balance in trade for defense products. At this point, Canada relies on the U.S. for military technology — and the U.S. relies on Canada for important military inputs.

1959
The St. Lawrence Seaway opens, providing ocean-going vessels access to Canadian and U.S. ports on the Great Lakes. This facilitates the shipping of iron ore, steel, and aluminum.

1965
The Canada-U.S. Auto Pact allows for the integration of the Canadian and US auto industries in a shared North American market. This paves the way for iron ore, steel, and aluminum trade.

1989
The U.S. and Canada sign a free trade agreement, which eventually gets rolled into NAFTA in 1994.

Modern Aluminum and Steel Trade

2007
U.S. Steel buys the Steel Company of Canada (Stelco) for $1.9 billion

Today
The U.S. and Canada are each other's best international customer for a variety of goods — including steel and aluminum.
Title: GPF
Post by: Crafty_Dog on June 04, 2018, 03:21:52 AM
second post of the morning:

By Jacob L. Shapiro

An already eventful week in geopolitics has ended with a flurry of activity. Washington, already unexpectedly slap-happy with tariffs this week, upped the ante again on May 31 when it announced it would no longer exempt Canada, Mexico and the European Union from steel and aluminum tariffs. The announcement, which rattled global markets, was met with widespread condemnation from the countries targeted. The move comes just one day after Japanese Prime Minister Shinzo Abe characterized a U.S. proposal to impose tariffs on U.S. imports of Japanese motor vehicles as “incomprehensible and unacceptable.” And it comes just two days after the White House made a surprise announcement that it would indeed place a 25 percent tariff on $50 billion worth of Chinese goods and impose restrictions on Chinese investments in U.S. high-tech industries.

The cheap and easy conclusion from this is to say the winds of a trade war are blowing strongly once more. The truth is less dramatic and more complicated. The European Commission, for example, talked up the severity of its response, but talk is cheap. The EU’s actual plan to retaliate is to levy tariffs on $7.5 billion worth of U.S. goods, or a paltry 0.5 percent of U.S. exports. In any case, there is no indication that U.S. President Donald Trump plans to levy tariffs on other goods, nor is there any evidence to suggest he has the power to do so currently. As for Canada and Mexico, these tariffs are more of a ploy in NAFTA negotiations than they are a prelude to a trade war.

Still, these countries have reason to be angry. The reason for the steel and aluminum tariffs isn’t Canada, Mexico or the EU. It’s China. Over the past few decades, Chinese production of steel and aluminum has soared, but China could neither consume what it produced nor afford to lay off the workers who produced it. Beijing dumped the leftover metals into foreign markets, depressing prices and driving U.S. producers out of business. Punishing Canada, Mexico and the EU doesn’t fix Chinese dumping, nor does it enhance national security, which is the legal basis of the tariffs. What it does is improve Trump’s image among his support base, to which he pledged to put “America First.” The merits of the policy are for others to debate. Suffice it to say, the policy will complicate relations with U.S. partners and raise prices for U.S. consumers.

(click to enlarge)

Responsible though China may be, the hysteria surrounding the tariffs far exceeds the affect they will have. After all, $50 billion worth of Chinese exports is roughly 2 percent of China’s total exports to the world. More important yet often overlooked are the restrictions the U.S. has threatened to put on Chinese investments in U.S. high-tech industries. China’s need to move its exports up the value chain is matched only by its desperation to acquire the technology and expertise needed to do so. Because of the structural inconsistencies in the Chinese economy, Beijing doesn’t have time for that technical know-how to evolve organically: It has to cut to the front of the line. (U.S.-China trade relations have also become tied to the North Korea negotiations, so it’s no coincidence that when one is schizophrenic, so is the other.)

(click to enlarge)

Despite its comparative advantage over China, the U.S. is doing its best to shoot itself in the foot. Last week, U.S. Treasury Secretary Steven Mnuchin said the U.S.-China trade war was “on hold.” A few days later, tariffs and restrictions on investment were back on the table, and on May 30, a White House trade adviser called the treasury secretary’s remarks an “unfortunate soundbite.” The U.S. commerce secretary is due in Beijing this weekend to discuss the matter – and yet the White House press secretary says all of this is up to Trump and no one else. Perhaps this mixed messaging is a tactic to keep Beijing off kilter. But if the White House’s public contradictions reflect an inability to clearly define U.S. interests, then the Chinese could use it to their advantage.

U.S.-China relations are not only about trade, of course. They are increasingly defined by competition at sea. According to a spokesman from the Chinese Defense Ministry, China now possesses a fully operational and combat-ready carrier battle group – a much bolder claim than Beijing is wont to issue. An aircraft carrier is just one ship. Its strategic value comes not from the ship itself but from the creation of a larger, coordinated battle group built around the carrier’s air power. China has no experience in carrier operations, but the fact that it has been undertaking drills on an antiquated (if refurbished) Soviet ship is a reminder that the Chinese navy is improving as quickly as it can.

(click to enlarge)

The United States will not sit idly by as this happens. Hence why, just last week, a U.S. defense contractor announced it had successfully tested two long-range anti-ship missiles, striking a moving vessel from a B-1B strategic bomber. The missiles will be integrated into U.S. bombers and fighter aircraft over the next two years. The move is notable because of what it means for the future of war. Since World War II, U.S. naval power has been focused on its own carrier battle groups. But in an age of precision-guided munitions, carrier battle groups can make for better targets than assets. Whereas carriers are tremendously expensive – they cost billions of dollars to produce and millions to operate daily, not to mention all the vessels and aircraft that accompany them – a long-range anti-ship missile such as the one the U.S. tested costs roughly $3 million. And even the best missile defense systems cannot always ensure a carrier’s successful defense.
Title: WSJ: Things getting complicated
Post by: Crafty_Dog on June 04, 2018, 03:40:50 AM
Third post of the morning:

June 3, 2018 8:02 p.m. ET
115 COMMENTS

The Trump administration showed no sign of backing down from restrictive tariffs in the face of pushback from allies and China over the weekend, isolating the U.S. and complicating the president’s meeting later this week with leaders of Washington’s staunchest partners.

Top finance officials from the Group of Seven leading nations met in Canada, where the non-U.S. members issued a public rebuke of Washington’s new steel and aluminum tariffs. Those six—the host Canada, along with France, Germany, Italy, Japan and the U.K.—adopted a formal statement Saturday expressing their “unanimous concern and disappointment.”

The following day in China, Beijing said it wouldn’t abide by any agreement to buy more U.S. products without assurances that the U.S. wouldn’t go ahead with plans to hit it with tariffs on $50 billion on Chinese imports.

But even with retaliatory moves under way in China as well as in Europe and North America, there was no sign over the weekend that the administration was wary of inching closer to a trade war.

“When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War!” President Donald Trump said in a Twitter message Saturday. “The U.S. has been ripped off by other countries for years on Trade, time to get smart!”
Related

    U.S., China Make Little Headway in Talks
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The disputes come just as the Trump administration has its arms full of difficult negotiating tasks. Most immediately, Mr. Trump himself now must face leaders of countries who have termed his policies extreme, unwise and in some cases illegal when he arrives in Quebec for a summit of G-7 heads of state scheduled for Friday and Saturday.

That will be followed by a planned summit with North Korea in Singapore just three days later, on June 12. Mr. Trump also is facing European opposition to his push to rewrite the 2015 Iran nuclear deal, and is planning for a summit with Russian President Vladimir Putin.

Still, the push to impose tariffs is causing the most immediate friction. The White House has said the tariffs imposed last week—25% on steel and 10% on aluminum from Canada, Mexico and the European Union—were designed to address the role steel imports have played in undermining the viability of the U.S. steel industry, without which the country would have difficulty mobilizing for its defense.

The administration has signaled its intent to use a similar security argument to affix tariffs on cars from Germany and Japan, and industrial supplies from China.

In response to the tariffs, the administration absorbed one punch after another. Canadian Prime Minister Justin Trudeau called the U.S. move “frankly insulting and unacceptable” in a televised interview Sunday, while his foreign-affairs minister compared it to pre-Depression U.S. policies.
Trade Tensions Intensify as Allies Rebuke U.S., Testing Trump Ahead of G-7

“We know that beggar-thy-neighbor policies don’t work. That was the lesson of the 1920s and the 1930s,” said the minister, Chrystia Freeland, on CNN. “And I really hope people will take some time to reflect on the lessons of history, and not go down that path again.”

Mário Centeno, the Portuguese finance minister who participates at the G-7 by virtue of being president of the Eurogroup, the association of eurozone finance ministers, described the U.S. position within the G-7 in stark terms.

“We can say the U.S. went into the tariff issue alone and they remain alone around the table,” said Mr. Centeno in an interview.

With U.S. lawmakers set to return from a Memorial Day break, many top Republicans such as Sen. Orrin Hatch, chairman of the Senate Finance Committee, are warning the administration to change course. In March, more than 100 congressional Republicans urged Mr. Trump in a letter to avoid tariffs.

The decision to impose tariffs contributed to volatility in global financial markets and led to predictions of potentially adverse economic impacts.

Economists warned that retaliation leading to increased trade barriers on the order of those that existed in the early 1990s could cost thousands of American jobs and even point the U.S. toward recession. Business groups said the number of jobs lost, in the worst case scenario, could climb into the millions.

As the weekend’s dust was settling, Mr. Trump’s top economic adviser, Lawrence Kudlow, played down the eruption. He said tariffs are necessary to close loopholes and “correct several decades of abuse” in global trade, telling Fox News that Mr. Trudeau, in particular, was overreacting to a “family feud.”

“The president has a quiver of tools, and tariffs are part of that quiver,” he told The Wall Street Journal.

The G-7 gathering was held for finance chiefs in advance of the summit of those countries’ top leaders. The G-7, a club of industrialized nations formed around common interests, rarely issues such strong condemnation aimed at one of its members.

More unlikely is the fact that the target of the criticism is the U.S., which has done more than any other country to establish the free-trade principles upon which the global economy functions today.

“I do not ever recall an instance where the U.S. was singled out for rebuke,” said Daniel Price, managing director of Rock Creek Global Advisors, who represented the George W. Bush administration for G-7, G-20 and Asia-Pacific Economic Cooperation summits. “Traditionally, the U.S. has been a driver of G-7 unity, and typically leads efforts to reach consensus. On trade, the U.S. has quite dramatically become a source of discord and division.”

As the source of the consternation, Mr. Trump now must face G-7 leaders in five days’ time. As he does, other countries are adopting a wary stance even if they have so far been spared by Mr. Trump.

“Trump is trying to get rid of bilateral trade deficits,” said former U.S. Trade Representative Carla Hills, a Republican critic of the Trump administration’s trade strategy. “He’s lining up [trade disputes] one by one.”

Ms. Hills said she thinks the administration has taken the wrong strategy on China by fighting first with allies over steel and aluminum, especially given that U.S. complaints about China mirrored those of Washington’s friends.

“It would have been more effective if we joined with six of our closest allies and acted together,” she said. “Instead, we went after our allies and acted unilaterally” on China.

Treasury Secretary Steven Mnuchin, who attended the G-7 finance officials’ meeting, denied the U.S. was left outside the consensus on all matters and insisted Washington is playing a central role. “I don’t think in any way the U.S. is abandoning its leadership in the global economy,” Mr. Mnuchin said.

“These are our most important allies,” Mr. Mnuchin said. “We’ve had longstanding relationships with all these countries that are very important across all different aspects.”

—Lingling Wei in Beijing and Dave Michaels and Harriet Torry in Washington contributed to this article.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Bob Davis at bob.davis@wsj.com
Title: WSJ: How China skirts limits
Post by: Crafty_Dog on June 04, 2018, 08:44:18 AM
Three years ago, the steel mill outside the small city of Smederevo, Serbia, appeared headed for the scrap heap.

The Serbian government, which owned the mill, had stopped subsidizing it after six straight years of losses. Hemorrhaging cash, it struggled to buy spare parts and raw materials such as iron ore.

“It was like trying to drive a car without tires,” says Siniša Prelić, a union leader at the factory.

Now production is hitting all-time highs under its new owner, Hesteel Group, a Chinese state-owned steel producer. Exports from the plant, which is backed by tens of millions of dollars from Chinese state banks and investment funds, are surging. And it has started shipping steel to the U.S.

As the Trump administration ramps up its fight against Chinese steel and Commerce Secretary Wilbur Ross ended trade talks with Beijing over the weekend without a settlement, U.S. officials are confronting a strategic shift from China’s state-backed manufacturers. For the past several years, they have been shutting production at home and expanding overseas, fueled by tens of billions of dollars from Chinese state-owned lenders and funds.
Global Expansion
Chinese steelmakers have been buying and building plants overseas, fueled by tens of billions of dollars from Chinese state-owned lenders and funds.

Chinese overseas steel projects, in millions of metric tons of production capacity

Operational

Malaysia

3.5

Indonesia

3.0

Serbia

2.2

Under construction

Indonesia

6.0

India

2.0

Texas

0.5

Planned

Brazil

10.0

Indonesia

7.5

Bangladesh

2.0

Note: Projects for Tsingshan, Alliance Steel, Hesteel, Kunming Iron and Steel Holding Company, CBSteel
Shaanxi Iron & Steel Group, Tsingshan, Tianjin Pipe, Delong Holdings

Sources: Xinhua; Maranhão State of Brazil; the companies

By owning production abroad, Chinese steelmakers aim to gain largely unfettered access to global markets. Their factories back in China are constrained by steep tariffs imposed by the U.S. and numerous other countries—largely before President Donald Trump took office—to stop Chinese steelmakers from dumping excess production onto world markets. But their factories outside China face few so-called antidumping tariffs.

The Trump administration in March jolted the global trading system by imposing additional tariffs of 25% on all imported steel and 10% on aluminum, a move aimed at ratcheting up pressure on China to shut domestic steel and aluminum plants. (Last week, those tariffs were extended to Canada, Mexico and the European Union.) The EU is considering its own tariffs to stop metals exports blocked by the U.S. tariffs from flooding into Europe.

Even though the new U.S. tariffs apply to Chinese steelmakers that moved production abroad, the moves are still paying off. The Trump tariff rate is much lower than existing U.S. antidumping tariffs on steel produced inside China, which often exceeded 200%.

A spokesman for Hesteel declined to comment. China’s Ministry of Industry and Information Technology, which oversees the steel and aluminum industries, didn’t respond to inquiries.

Chinese overcapacity has depressed global steel prices and wreaked havoc on China’s competitors. After cajoling Beijing to cut domestic capacity, Western officials have watched with exasperation as Chinese companies boost production around the world. And Western industry executives worry the overseas investments are helping Chinese steelmakers avoid the antidumping tariffs that governments have imposed to protect their companies against allegedly unfair Chinese trade practices.
Chinese steel production rose sevenfold between 2000 and 2013. A worker helps load steel rods at a plant in Hebei province.
Chinese steel production rose sevenfold between 2000 and 2013. A worker helps load steel rods at a plant in Hebei province. Photo: Kevin Frayer/Getty Images

China’s steel-production boom took off around the turn of the century as Beijing threw its support behind a sector seen as vital to the nation’s emergence as a global economic power. The 2008 financial crisis prompted Beijing to undertake an economic stimulus program that included the construction of hundreds of new steel plants. Chinese steel production rose sevenfold between 2000 and 2013, when it accounted for half of all global capacity.

By 2013, China’s domestic economy was slowing, leading Chinese steel and aluminum producers to flood global markets and drive down prices. The average price of Chinese steel exports fell by about 50% between 2011 and 2016.

Governments around the world responded by imposing more than 130 antidumping tariffs against Chinese metals manufacturers, mostly on steel, depriving the domestic market of an important outlet.

Beijing responded by ordering capacity cuts: a net of 150 million tons of annual steel capacity is slated to be shut between 2016 and 2020, as are aluminum plants that were built without government approval. At the same time, in 2014, the government launched a plan, called International Capacity Cooperation, that enlisted Chinese state financial institutions to help manufacturers add production overseas.

Analysts and Western government and industry officials say Chinese manufacturers are receiving hundreds of billions of dollars of state support to build and purchase plants on foreign soil, through money provided by institutions such as China Development Bank, Bank of China and funds like China Investment Corp. The overseas plants are likely to be tapped as exclusive suppliers for the “One Belt, One Road” initiative, Beijing’s trillion-dollar infrastructure plan to project economic influence across Eurasia and Africa.

“China is just moving whole industrial clusters to external geographies and then continuing to overproduce steel, aluminum, cement, plate glass, textiles, etc.,” says Tristan Kenderdine, research director at Future Risk, a consulting firm that tracks China’s overseas investments. “None of this is economically viable under a supply-demand regime without state subsidies.”
Big Steel in ChinaBeijing has sharply increased domestic steel-production capacity and has made far more steel than it hasused inside the country.Sources: World Steel Association (production, use); Group of 20 nations and the Organization for Economic Cooperation andDevelopment (capacity)
.billion metric tonsDomestic productionDomestic useDomestic capacity2007’08’09’10’11’12’13’14’15’16’170.30.40.50.60.70.80.91.01.11.2

Chinese steel companies have signed agreements to build plants in Malaysia, Pakistan, India and elsewhere.

In northern Brazil, a Chinese consortium is expected to break ground later this year on an $8 billion project to build one of the world’s biggest steel plants, expanding Brazil’s potential steel output even though the industry there operates at less than 70% of capacity.

“This is total nonsense, with all the idle capacity that we have,” says Alexandre Lyra, chairman of the Brazilian Steel Institute, which represents Brazilian producers.

Chinese companies also are building new steel mills in Indonesia. Last year, Tsingshan Group Holdings, a state-backed steel producer based in Wenzhou on China’s southeastern coast, opened a two-million-ton stainless-steel plant on the Indonesian island of Sulawesi that accounts for 4% of the world’s stainless-steel production. The mill, built using a $570 million loan from the China Development Bank, is now pushing down prices from Asia to the U.S., industry executives and analysts say.

“We are seeing tenders in the area from Tsingshan at very, very, competitive prices,” Miguel Ferrandis Torres, financial director at stainless-steel company Acerinox , told analysts in April. Tsingshan is likely losing money on those shipments from its Indonesian plant, Mr. Torres said.

Tsingshan declined to comment.

Tsingshan’s product is entering the U.S. through a joint venture with Pittsburgh-based stainless-steel producer Allegheny Technologies Inc. The joint venture is restarting a stainless-steel rolling plant in western Pennsylvania that Allegheny had shut in 2016 partly because of pressure from inexpensive Chinese imports. The new company is importing 300,000 metric tons of semifinished stainless-steel slabs from Tsingshan’s Indonesian plant—replacing slab Allegheny made in a now-closed production line—and processing them into sheets for products ranging from household appliances to medical equipment.

That put downward pressure on U.S. stainless-steel prices last year, industry executives say. “We’re moving from being a high-cost producer, which we’ve been for a while, to being the low-cost producer in the market,” Robert Wetherbee, an Allegheny executive, told analysts in November.

The Trump tariffs that came into force in March hit the stainless steel Tsingshan was importing from Indonesia to its joint-venture plant in Pennsylvania. Allegheny has asked the Trump administration for an exemption from the tariffs on those imports.

Tsingshan is expanding its Indonesian plant, and Jiangsu Delong, a Chinese producer based in Jiangsu province, is building another plant nearby. Those projects alone will increase global stainless-steel capacity by 9% from 2017 levels, according to Michael Finch, a steel analyst at  CRU Group in London, even though the stainless-steel industry has significant spare capacity.
Hebei province, a pollution-choked region near Beijing, is home to steelmaking operations like this one in Qianan.
Hebei province, a pollution-choked region near Beijing, is home to steelmaking operations like this one in Qianan. Photo: Ng Han Guan/Associated Press

In 2014, officials from Hebei province, a pollution-choked steelmaking region near Beijing, began hunting for overseas investments for the province’s most important company: Hebei Iron & Steel Group, renamed Hesteel Group in 2016.

When Hebei officials approached the Serbian government in 2014 about investment opportunities in the country, Belgrade immediately thought of the Železara Smederevo steel company, which had a mill on the Danube River, say people familiar with the deal.

The Serbian government had purchased the plant in 2012 for $1 from United States Steel Corp. After shutting the plant for several months, Belgrade restarted it to make it attractive for potential buyers, pumping tens of millions of dollars into it to keep it alive.

But with its public finances deteriorating, Serbia in 2014 sought a standby loan facility from the International Monetary Fund, which along with the European Commission, ordered it to stop subsidizing the steel company.

In early 2015, the Serbian government pulled the plug on subsidies for Železara, says Bojan Bojkovic, who was in charge of efforts to sell the mill for the Serbian government. “A lot of people, especially so-called economists, wanted to shut it down immediately,” he says.

Meanwhile, in March 2015, Hesteel signed an agreement with China Investment Corp., which has more than $200 billion in foreign assets, to fund Hesteel’s overseas expansion.
Beijing touted the $54 million acquisition of the steel plant in Serbia as one of China’s flagship overseas investments.
Beijing touted the $54 million acquisition of the steel plant in Serbia as one of China’s flagship overseas investments. Photo: Nemanja Cabric/Xinhua/ZUMA PRESS

During the talks with the Serbians, Hesteel pledged to invest at least $300 million in the plant over the next three years. Beijing touted the €46-million ($54 million) acquisition as one of China’s flagship overseas investments. Chinese President Xi Jinping visited the mill for the June 2016 signing ceremony.

Hesteel executives have said that they quickly turned around the money-losing plant after taking control in June 2016. Serbian corporate records show an operating loss of $34 million over the next six months. Records for 2017 aren’t yet available.

“This is all part of a huge political initiative,” says  Markus Taube, professor of East Asian economic studies at the Mercator School of Management in Duisburg, Germany. “They are extremely insensitive to losses.”

The EU for years has applied tariffs to low-price Chinese steel exports. Now, Hesteel’s Serbian plant can export tariff-free into the 28-nation bloc.

“We feel like the Serbian plant is a Trojan horse,” says Sonia Nalpantidou, a trade-policy expert with Eurofer, a trade association representing EU steel producers.

At a steel expo in Beijing last month, a “Hesteel of the World” banner hung near the company’s booth. Pins in a map marked countries where Hesteel had invested—Serbia, Macedonia, Switzerland, South Africa, Australia and the U.S. A company representative said overseas expansion is now a core strategy. The company is planning to build more plants in regions such as North America, she said, and plans to derive 20% of revenue from non-Chinese markets by 2020.

“Products made in Europe shouldn’t be subject to European tariffs,” the representative said.

Late last year, Hesteel offered $1.5 billion for a large steel mill in Slovakia owned by United States Steel, according to a person familiar with the talks. The Slovak prime minister said last month that U.S. Steel wouldn’t sell the plant to Hesteel. A U.S. Steel spokeswoman declined to comment.
After purchasing the plant in Serbia, Hesteel began selling its output onto the U.S. market.
After purchasing the plant in Serbia, Hesteel began selling its output onto the U.S. market. Photo: Marko Risovic for The Wall Street Journal

After purchasing the plant in Serbia, Hesteel began selling its output, including a sheet-steel product called wide hot-rolled coil, onto the U.S. market through Duferco, a Swiss trading company in which it owns a 51% stake.

Since 2001, China’s domestic producers of that product have faced antidumping tariffs of more than 64% at U.S. borders, effectively shutting them out of the market. Hesteel’s Serbian plant could export to the U.S. with minimal tariffs—until the additional Trump tariffs took effect earlier this year.

In March, one of the Serbian plant’s U.S. customers, Priefert Ranch Equipment of Mt. Pleasant, Texas, asked the Trump administration for an exemption from the tariff to import 28,000 metric tons of steel sheet annually made at the plant. Priefert argued that it has long relied on overseas steel mills to supply product that domestic mills don’t produce. Priefert executives didn’t respond to a request for comment. The Trump administration hasn’t yet decided on the request.

“We want to be the world’s Hesteel,” Yu Yong, the company’s chairman, said when signed the deal to buy the Serbian plant. He pledged to make the Serbia plant “the most competitive steelmaker in Europe.”

Write to Matthew Dalton at Matthew.Dalton@wsj.com and Lingling Wei at lingling.wei@wsj.com
Title: Re: WSJ: How China skirts limits
Post by: DougMacG on June 04, 2018, 08:59:51 AM
Good information.  I find it incongruent that China is making money hand over fist by massively dumping product below cost (they make it up on volume?), and that the Chinese government is forcing US businesses out of business that governments in the US already forced out of business.

Big mining controversy in MN that has nearly turned MN from bluest blue to narrowest of red:
https://www.mprnews.org/story/2018/01/05/4-things-to-know-about-polymet-mine

If we don't want to produce materials here, why not buy from overseas as cheaply as we can?
Title: Wesbury: April Trade Deficit-- some interesting comments
Post by: Crafty_Dog on June 06, 2018, 08:57:46 AM
The Trade Deficit in Goods and Services Came in at $46.2 Billion in April To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 6/6/2018

The trade deficit in goods and services came in at $46.2 billion in April, much smaller than the consensus expected $49.0 billion.

Exports rose $0.6 billion, led by fuel oil, soybeans and corn. Imports fell $0.4 billion, led by cellphones & other household goods, autos, and pharmaceuticals.

In the last year, exports are up 9.9% while imports are up 8.0%.

Compared to a year ago, the monthly trade deficit is $0.1 billion larger; after adjusting for inflation, the "real" trade deficit in goods is unchanged from a year ago. The "real" change is the trade indicator most important for measuring real GDP.

Implications: The trade deficit fell to a seven-month low in April, coming in at $46.2 billion. As a result, it now looks like the direct effects of a shrinking trade deficit will add almost a full percentage point to real GDP growth in the second quarter. In turn, that means our long-held forecast for a real GDP growth rate of 4.0% in Q2 is probably too low. We're now lifting that forecast to 4.5% and a growth rate of 5.0% is even possible. This helps explain why the job market has been so strong lately and adds to our confidence that real GDP will grow north of 3% this year, which would be the first that's happened since 2005. Exports grew by $0.6 billion in April to a new all-time record high; imports fell $0.4 billion. The strength in exports in April was driven by fuel oil, soybeans and corn. Meanwhile, imports fell mostly due to the cellphones & other household goods. In the past year, exports are up 9.9% while imports are up 8.0%, signaling healthy gains in the overall volume of international trade. While some are worried about protectionism from Washington, we continue to believe this is a negotiating tactic, and the chances of an all-out trade war are slim. Most likely, what will ultimately come from all the chaos will be better trade agreements for the United States. According to the World Trade Organization, average tariffs in the US are 3.5% compared to 5.2% in the EU, 9.9% in China, 4.1% in Canada and 7.0% in Mexico. It's time for tariffs to be lowered around the world, and the US holds a lot of power. Take NAFTA for example. In 2017, Canada exported $300 billion to the US. Its next biggest importer was China at only $20 billion. Mexico exported $314 billion to the US. Its next biggest importer? Canada at only $29 billion. Eventually a deal will be done. Moreover, many of the policies President Trump has passed, including cutting tax rates and allowing for construction of more energy infrastructure, which will make the US an even stronger magnet for capital from abroad. We will continue to watch trade policy as it develops, but don't see any reason yet to sound alarm bells.
Title: GPF: The Illusion of Free Trade
Post by: Crafty_Dog on June 07, 2018, 05:35:37 AM
The Illusion of Free Trade
Jun 7, 2018
By George Friedman

The United States’ decision to impose tariffs on steel and aluminum imported from certain countries has added to the fears of a trade war. Some believe that these tariffs are a dangerous move by the U.S. because they will invite retaliation and thus could lead to a massive breakdown of trade. The problem with this way of thinking, however, is that it focuses primarily on formal barriers to trade and ignores informal and indirect barriers. Even if there is a free trade agreement between two countries, it does not necessarily mean that businesses in both countries will be able to trade with each other without impediments, as is often assumed.

Governments have a range of tools available, formal and informal, designed to mitigate the effects of free trade. In other words, a free trade agreement will eventually evolve into something very different. For example, regulations can be put in place that impose massive additional costs on an exporting country, forcing increases in prices. This wouldn’t involve the imposition of tariffs, but it would make it more difficult for exporters to compete with domestic manufacturers. Antitrust laws can be implemented that fine companies and force them to cut back their market share. The cost of domestic production can be reduced by relaxing labor laws. Countries may also enter into agreements knowing full well that their consumers have little interest in certain imports, such as Japanese consumers spurning American cars. And exporters may be forced to sell products in a country through certain wholesalers that dominate the domestic market, and having to do that may slash their revenue.

Free trade, in its purest form, is said to be financially beneficial to all countries. That may be true, but this assumption ignores three vital variables. The first is timing. When will the benefits will show themselves? It could take years or even decades. The second is short-term vs. long-term impact. Some industries may become uncompetitive and even collapse before others flourish. The third is is how patterns of economic activity change based on foreign competition. Some businesses will win, others will lose.
 
(click to enlarge)

Free trade is not only an economic process but also a political one. The destruction of an industry can destroy the livelihoods of millions of people, even if the country’s gross domestic product surges. In economics, the assumption is that individuals will pursue their self-interest. Oddly, economists tend to assume that they will – or at least ought to – pursue those interests only through economic activity. But people can also pursue their self-interest politically. A government that negotiates a free trade agreement that damages this generation with the promise of better things later is likely to face serious political repercussions. The next government will take a different approach.

Economics is a subset of politics, and the political system moves to protect the interests of citizens to maintain social stability and, in democracies, keep governments in place. The focus on tariffs misses the reality of international trade, which has both an economic dimension, focused on increasing the wealth of nations, and a political dimension, focused on assuring that the wealth doesn’t flow into the hands of a few while the rest are left devastated.

The United States is not yet in this extreme condition, but it has entered into a series of trade agreements that, while beneficial on the surface, have had some negative consequences. The most important consequence has been the transfer of factories out of the U.S. to low-wage countries. By the law of comparative advantage, this should in the long run benefit the United States. But it will do so at a massive cost to one sector. GDP might rise, but that in no way indicates that wealth would be distributed in a way that the political system can endure.

Every government has to consider three factors when entering into a trade agreement. The first is the benefit to an industry that will have access to a new market. The second is the damage the agreement will do to those who will lose their jobs. The third, and trickiest, is how the foreign government with whom the trade deal is agreed will use non-tariff tools to shift the agreement to their advantage and, by definition, against their trading partner.

People shouldn’t worry about a new trade war emerging because a constant and intense guerrilla war is already underway in every trade regime to undermine the agreement and reshape it through subtle intrusions. This is why multilateral trade agreements have grown so troubling. A trade agreement that creates a single regime encompassing drastically different economies is inherently implausible. The non-tariff trade barriers in each country, not to mention the challenges of monitoring and enforcing the agreement, create mindboggling hurdles. The World Trade Organization can be used to settle some disagreements, but its decisions can be difficult to enforce.

Free trade is rarely free, and when it is free, it imposes costs in unexpected places. The decision of the U.S. to force a renegotiation of trade relations is a result of the fact that certain sectors of the U.S. economy have been hurt by prior trade regimes, and the U.S. is now using the political process to pursue its self-interest. This is not new, nor is the surprise of those who have benefitted from the old regime or who are ideologically committed to the illusion of free trade. It is part of an ongoing shift in economic relations driven by political realities.

The post The Illusion of Free Trade appeared first on Geopolitical Futures.
Title: Re: GPF: The Illusion of Free Trade
Post by: DougMacG on June 07, 2018, 07:41:21 AM
"Free trade, in its purest form, is said to be financially beneficial to all countries. That may be true, but this assumption ignores three vital variables. The first is timing. When will the benefits will show themselves? It could take years or even decades. The second is short-term vs. long-term impact. Some industries may become uncompetitive and even collapse before others flourish. The third is is how patterns of economic activity change based on foreign competition. Some businesses will win, others will lose."

Yes, the evils and dangers of runaway economic freedom!  Friedman IMHO mistakes treaties that are not free trade with free trade.

I look forward to the sequel analysis, the alternatives to free trade where central governments make the decisions that replace individual free choice.  Ivy league technocrats and crony-bribed officials decide for us which businesses and industries to protect, how much for how long.  Consumers suffer until the inevitable result of becoming an uncompetitive, dysfunctional third world economy sets in with restricted economic freedoms and all people, businesses and industries decidedly worse off.

Why not instead use the Heritage index as a guide, https://www.heritage.org/index/ranking  Look toward the top and the bottom of trade freedom https://www.heritage.org/index/explore and see who you want to emulate.  Hong Kong, Singapore, Switzerland or Ethiopia, Bangladesh, Niger, just for examples.   Which are the rich countries at the bottom of the trade freedom index, North Korea?  The world leader in protecting domestic industries from foreign competition is not rich.  Results are all over the globe and throughout history.  We don't have to wait for the long term to know the result.

If you fail at making horse shoes, you can make brake shoes, or install imported ones, not starve to death in a growing, prosperous, dynamic economy.

I'll take my chances with the winners and losers of freedom over a planned and controlled economy any day.
Title: Trade Issues:
Post by: DougMacG on June 08, 2018, 08:07:47 AM
Trump tweet last night:  "Why isn’t the European Union and Canada informing the public that for years they have used massive Trade Tariffs and non-monetary Trade Barriers against the U.S. Totally unfair to our farmers, workers & companies. Take down your tariffs & barriers or we will more than match you!"


If he wants to win at least the public opinion on what he is doing and why, he should be much more specific on this.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on June 12, 2018, 12:00:38 PM
He's been rather busy the last few days with the Norks , , ,
Title: From now on, Angela Merkel should only be known as
Post by: G M on June 12, 2018, 07:55:32 PM
(https://i.redditmedia.com/tEkE9aCXomkMKkV7wGcaA7vFgiqO-XBQRX_szWXWKks.jpg?s=37c6b67568f713f1c968c86891397f2b)

"German Hillary"
Title: Look for something positive to happen soon on the trade with allies front
Post by: DougMacG on June 14, 2018, 08:51:46 AM
He's been rather busy the last few days with the Norks , , ,

Absolutely.  These issues made it to the forefront on his way to Singapore and then he had to leave.  After he takes a breath, and the other leaders return home and back to work, something needs to happen SOON regarding the trade war with our allies. 

It seems to me the ball is in their court.  Europe has unfair barriers to US products.  Trump levied some tariffs on our side.  They (Europe plus Canada) levied retaliatory tariffs.  Then Trump said, why don't we end all tariffs and trade barriers?  Why don't we!

Trump said he discussed the idea of eliminating tariffs with his G7 counterparts.
"I did suggest it ... I guess they are going to go back to the drawing board and check it out," Trump said.

https://www.cnn.com/2018/06/09/politics/trump-g7-tariffs-trade/index.html

Paraphrasing pro-trade Trump adviser Kudlow before his heart attack, imagine the economic growth possible after these countries remove their trade barriers to US products.  Trump tariffs are a tactic to END the trade war, not a permanent, protectionist policy.  I hope they are right and this works. 
------------------
US Canada thread posted a moment ago:  "Canada is highly dependent on its relationship with the United States, especially in economic terms. Last year, 76 percent of Canadian exports went to the United States."

We have a little bit of leverage, understatement, especially with Trump's willingness to say and do anything probably including closing the border until he gets his way and all he is asking for is a fair and reciprocal relationship.  The only place where trade barriers and tariffs are perfectly equal is at zero.  Stop the protectionism.  End the tariffs.  Let's gets past the charade that Canadian tariffs are a national security threat.  Trudeau needs to save face somehow but this needs to be solved before July 1.  The ball is in Canada's court, and Europe's court, is it not?  [The Chinese issue is far more complicated.]
------------------
Famous people reading the forum? I saw that Bill McGurn of the WSJ Editorial Board (Potomac Watch Podcast) picked up on my idea that we should negotiate a true and pure free trade agreement with Brexit Britain and then offer that deal to all.
http://dogbrothers.com/phpBB2/index.php?topic=2563.msg109769#msg109769

Title: WSJ: Trump's China Impulses
Post by: Crafty_Dog on June 17, 2018, 03:57:23 AM
Trump’s China Impulses
ZTE gets a pass but U.S. consumers will pay for new tariffs.
A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China.
A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China. Photo: Stringer/Reuters
By The Editorial Board
June 15, 2018 7:04 p.m. ET
267 COMMENTS

‘Trade wars are good, and easy to win,” Donald Trump tweeted in March, and he likes them so much he has decided to open a third tariff front—this time against China, following his steel and aluminum tariffs against our allies, and his solar-panel and washing machine levies against the world. Don’t you just love the smell of price increases in the morning?

Mr. Trump slapped 25% tariffs on $50 billion of imports from China chosen by U.S. Trade Rep Robert Lighthizer. A trade lawyer for Big Steel by training, Mr. Lighthizer will from his political chair in Washington now pass what could be a profit or loss judgment on thousands of American companies and workers.

The tariff list includes “new pneumatic tires,” parts for internal combustion aircraft engines, “dryers for wood,” and hundreds of other products. Don’t worry if you suddenly find that price increases or supply shortages are hurting business. You can always petition the Commerce Department for relief, when the bureaucrats get around to reading it.

Then there are the American products that China has targeted for retaliatory tariffs of 25%. These include soybeans, corn, sorghum, frozen boneless beef, dried cranberries, SUVs, liquefied propane, and hundreds more. The U.S. companies and their workers who produce all this are the drive-by victims as Mr. Trump and his trade warriors try to do—what exactly?

It isn’t clear what Mr. Trump and the U.S. want from China beyond a reduction in the $375 billion bilateral trade deficit. Economists understand this is a silly measure of a trading relationship, but Mr. Trump views it like a football score. Surplus you win; deficit you’re a loser. Yet the Chinese recently offered to reduce that deficit by buying some $70 billion more goods from the U.S., only to have Mr. Trump say it wasn’t enough.

The U.S. says the new tariffs are a response to Chinese intellectual property theft and “other unfair trade practices,” and these are important to address. But the U.S. tariff threat isn’t making China budge, and they are hurting Americans in the bargain.
***

A trade strategy is also hard to discern given Mr. Trump’s recent decision to let Chinese telecom firm ZTE off with probation for repeatedly violating U.S. sanctions. ZTE was caught in April for selling equipment with U.S. components to Iran and North Korea. After the first offense in 2016, the Obama Administration blocked the company from buying U.S. components, which make up about 60% of its equipment. ZTE escaped this death penalty by paying a $1.2 billion fine and agreeing to punish the responsible employees.

ZTE didn’t punish the employees, lied to the U.S. and set up shell companies to evade sanctions. Commerce in April again prohibited the company from buying U.S. components for seven years, which shut down its manufacturing plants. But in May President Trump tweeted that he was working with Chinese President Xi Jingping to get the company “back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”

Commerce Secretary Wilbur Ross followed orders this month and lifted the ban on U.S. sales to ZTE. In return, the company has agreed to pay a $1 billion fine, give U.S. compliance monitors access to its facilities and replace its management and board. But ZTE officials can always find ways to exclude U.S. agents.

One surmise is that Mr. Trump’s ZTE rescue is a favor to Mr. Xi so Beijing regulators approve Qualcomm ’s acquisition of the Dutch NXP Semiconductors . The U.S. chip firm is struggling amid patent disputes and the semiconductor deal is critical to diversifying and growing its business. Qualcomm also stood to lose half a billion in revenues from sales to ZTE, which would have been painful but not fatal.

But going easy on a repeat sanctions violator sends a terrible signal to other violators and encourages countries to take U.S. companies captive to protect their cheaters. ZTE is also competing with U.S. telecom companies in 5G, which the Trump Administration considers a national security priority.

All of this has caught the attention of Senators from both parties who have added a provision to the defense authorization bill to block Mr. Trump’s ZTE deal. The White House opposes the provision but it is gaining momentum in the House too. This is what comes of impulsive trade policy that seems unmoored to any legal or economic principles.

If Mr. Trump really wants to confront unfair China trade policies, he’ll form a united front with our allies in Europe, North America and East Asia. The alliance would then take on China’s worst practices together, which would be a far bigger political challenge to a Chinese economy that depends on exports for growth and job creation.

The U.S. economy is humming amid tax reform and deregulation, and that growth momentum is so far overwhelming the damage from Mr. Trump’s incipient tariff wars. He’d better hope they are as easy to win as he claims.
Title: Trade Issues: China retaliates, EU retaliates, Canada retaliates on tariffs
Post by: DougMacG on June 18, 2018, 07:16:39 AM
https://www.nbcnews.com/nightly-news/video/china-retaliates-with-tariffs-on-u-s-goods-in-trade-tit-for-tat-1256958019881
https://globalnews.ca/news/4245336/canada-retaliation-us-steel-aluminum-tariffs/
https://www.politico.eu/article/eu-announces-retaliation-against-trump-tariffs/

Surprise, surprise, surprise.  Who could have seen this coming.

Also we had the Canadian foreign minister Chrystia Freeland mocking the Trump's use of Rule 232, Canadian steel and aluminum is a US national security threat?
http://thehill.com/homenews/sunday-talk-shows/390452-canada-foreign-minister-to-us-think-hard-about-message-youre
When other countries attack us verbally, I prefer if we are in the right and they are in the wrong.
-----------------------------------------------
Paul Gigot, WSJ: " What Trump is doing would make more sense if we could see a strategy."
(Potomac watch podcasts do not require subscription)
-----------------------------------------------

In hindsight, it all makes sense AFTER the trade partners surrender and barriers against US goods are dropped.  If there is going to be good news on that front, it mostly needs to happen in the next 10-12 days, before July 1.   

If not, this has the capacity to undo all the economic good Trump and the Republicans have done, blow the mid-terms, lose power to the Left and the destroy the country from within and without.

No pressure.

Title: ZTE
Post by: Crafty_Dog on June 18, 2018, 08:21:31 AM

http://thehill.com/homenews/senate/392571-senate-braces-for-trump-showdown-over-chinese-telecom-giant?userid=188403

edited to add:

http://thehill.com/homenews/senate/392898-senate-votes-to-block-trumps-zte-deal?userid=188403
Title: What Trump gets right about Europe
Post by: Crafty_Dog on June 19, 2018, 09:06:49 PM
The world retains its ability to surprise-- this is from Pravda on the Hudson a.k.a. The NY Times:
What Trump Gets Right About Europe
By Jochen Bittner

Mr. Bittner is a political editor for the weekly newspaper Die Zeit and a contributing opinion writer.
June 19, 2018

Leaders of the Group of 7 countries and European Union officials meeting in Quebec this month.CreditSaul Loeb/Agence France-Presse — Getty Images

HAMBURG, Germany — Most people can agree that international affairs should not be conducted by tweet — especially when the tweeter in question is Donald Trump. Among other reasons, it’s easy to dismiss the president’s mercurial rage and flagrant insults as little more than temper tantrums.

But that’s a mistake. Mr. Trump’s anger at America’s allies embodies, however unpleasantly, a not unreasonable point of view, and one that the rest of the world ignores at its peril: The global world order is unbalanced and inequitable. And unless something is done to correct it soon, it will collapse, with or without the president’s tweets.

While the West happily built the liberal order over the past 70 years, with Europe at its center, the Americans had the continent’s back. In turn, as it unravels, America feels this loss of balance the hardest — it has always spent the most money and manpower to keep the system working.

The Europeans have basically been free riders on the voyage, spending almost nothing on defense, and instead building vast social welfare systems at home and robust, well-protected export industries abroad. Rather than lash back at Mr. Trump, they would do better to ask how we got to this place, and how to get out.

The European Union, as an institution, is one of the prime drivers of this inequity. At the Group of 7, for example, the constituent countries are described as all equals. But in reality, the union puts a thumb on the scales in its members’ favor: It is a highly integrated, well-protected free-trade area that gives a huge leg up to, say, German car manufacturers while essentially punishing American companies who want to trade in the region.

The eurozone offers a similar unfair advantage. If it were not for the euro, Germany would long ago have had to appreciate its currency in line with its enormous export surplus.

Sure, eurozone membership makes imports to Germany more expensive than they would be under the deutschemark; wage restraint has also helped maintain the competitiveness of German machinery. But how can the very same politicians and journalists who defended the euro bailout payments during the financial crisis, arguing that Germany profited disproportionately from the common currency, now go berserk when Mr. Trump makes exactly this point?

German manufacturers also have the advantage of operating in a common market with huge wage gaps. Bulgaria, one of the poorest member states, has a per capita gross domestic product roughly equal to that of Gabon, while even in Slovakia, Poland and Hungary — three relative success stories among the recent entrants to the union — that same measure is still roughly a third of what it is in Germany. Under the European Union, German manufacturers can assemble their cars in low-wage countries and export them without worrying about tariffs or other trade barriers. If your plant sits in Detroit, you might find the president’s anger over this fact persuasive.

Mr. Trump is not the first president to complain about the unfair burden sharing within NATO. He’s merely the first president not just to talk tough, but to get tough.

Indeed, while his actions are shocking, the Europeans cannot say they are surprised. The warnings from the Obama administration that America’s indulgence might eventually cease had been plenty. Yet Europeans didn’t care much. All those German politicians who oppose raising military spending from a meager 1.3 percent of gross domestic product should try to explain to American students why their European peers enjoy free universities and health care, while they leave it up to others to cover for the West’s military infrastructure.

Europe’s unfair trade advantage is not the only challenge to the liberal world order. In retrospect, allowing China into the World Trade Organization — one of that order’s crowning achievements — was a huge mistake.

When the door was opened, in 2001, many in the West believed that a growing Chinese middle class, enriched by and engaged with the world economy, would eventually claim voice and suffrage, thereby democratizing China. The opposite has happened. China, which has grown wealthy in part by stealing intellectual property from the West, is turning into an online-era dictatorship, while still denying reciprocity in investment and trade relations.

Is this how you behave as a privileged member of the world’s business club? China’s unchecked abuse of the global free-trade regime makes a mockery of the very idea that the world can operate according to a rules-based order. Again, while many in the West have talked the talk about taking on China, only Mr. Trump has actually done something about it.

Mr. Trump’s tariffs against Europe are patently illegal, and Europe should retaliate. But simply punishing the makers of motorcycles, blue jeans and bourbon whiskey doesn’t solve any of the problems festering beneath the skin of the liberal world order. Europe needs to understand what is driving Mr. Trump’s anger and cooperate with Washington to fix the imbalances in the system.

That’s easy to say in theory, but can Europe work with Mr. Trump in practice? Maybe not. But there’s no real choice. And there’s a good chance for success if Europe engages Mr. Trump by his New York tycoon soul — he needs to be convinced that he’s getting a good deal. And right now, it’s easy to see why he thinks otherwise.
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on June 21, 2018, 07:09:04 AM
Great post.  Europe should give the US every advantage it gives member states, minus the migration invasion.

NYT today, Trump has the ace in the trade negotiation deck with the strong economy.

Maybe what Europe and Trump critics see as the bumbling idiot is a President doing all the right things in exactly the right order.

Japan had an actual decline in their Q1 GDP.  China has a real issue with a declining (overstated) growth rate.  Europe has half the growth rate of the US and the US growth rate is now doubling regulations and taxes already largely reformed.

The tough negotiations with China, now in a spiraling stalemate, will end based on who flinches first.  Advantage China in so many ways, such as the immediate feedback of the US stock market and the fear of the impending midterm elections.  But if a trade war hits the Chinese economy many times harder and faster than it hits the US, maybe they face their own pressures and flinch first.

Regarding the EU, Trump and Britain should instantly announce unfettered free trade with the US effective the minute they get their sovereignty back.  And EU casting its blame on Trump should look in the mirror and end all barriers and stop fighting with their generous benefactor.  If anyone wants to reform China with pressure from the outside it will most certainly require the US and EU to be on the same page.

Trump can win a trade war with Trudeau in minutes.  When someone accounts for something like 78% of your trade and offers you no trade barriers in exchange for no trade barriers with an implied threat of closing the border if you don't agree, take the deal.
Title: LLL on trade
Post by: ccp on June 25, 2018, 07:30:25 AM
Mark Perry on LLL:

http://www.foxnews.com/shows/life-liberty-levin.html

I am almost convinced by Doug,CD,GM and now this show trade wars not helpful - mostly hurt ourselves more then they help.
Title: Free Trader Economist thinks Trump's trade war is Winnable
Post by: DougMacG on June 27, 2018, 06:05:57 AM
First this,

ccp:  "I am almost convinced by Doug,CD,GM and now this show trade wars not helpful - mostly hurt ourselves more than they help."


A global system of government imposed tariffs sucks and hurts everyone, but Trump's policy is supposed to be a system of tactics to drive these trading partner adversaries back to a free trade system.  He has offered these countries zero tariffs both ways.  The question is, will he succeed and succeed fast in breaking them down or will he fail and fail miserably?  There is not much room in between.

On the negative side for Trump and the US are the Dow and midterm elections.  Will Trump cave first?  You don't get rich in the long run by going broke in the short run.  He cannot let the markets tumble and cannot succeed as President while losing the midterm elections.

On the positive side are points brought up in this piece in the Weekly Standard.  Trump holds a stronger hand than his trading partners.  Canada, Germany and China have a lot more to lose.  Canada is going to have to make concessions.  EU duties on US are four-fold higher.  China is 6 times more reliant on US sales than US is on China.  And Trump has successfully created an image with allies and adversaries of being nuts.  If you are them, take the no duties either way deal.  I am ready to get tired of winning.
-----------------------------------------
http://www.powerlineblog.com/archives/2018/06/thoughts-on-trade.php
https://www.weeklystandard.com/irwin-m-stelzer/trumps-trade-war-really-might-be-easy-to-win

Know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run...  [The outcome of the game depends on the players and the cards they hold.]

Canada:  "steel and aluminum tariffs will cost Canada 6,000 jobs and cut its annual GDP by $8 billion. Two-thirds of Canada’s trade is with the United States, 85 percent of its auto exports go to America, and a considerable number of the industry’s 130,000 workers will be out of work if Trump goes through with his threat to raise U.S. duties on imported autos from 2.5 percent to 20 percent."

[How do you have a 'free trade agreement' and 300% tariffs on dairy?]

“Canada is going to have to make some concessions.”

EU:  "323,000 of them [German vehicles per year exported] to the United States. It is shielded from foreign competition by the E.U.’s 10 percent duty on auto imports.  
[*  4 times higher than US duties! Is that fair?]
Daimler has already issued a profit warning because of the U.S. threat."
“No other country would suffer higher absolute losses from such a tariff as Germany,”  Merkel just doesn’t have enough chips to get into a serious game of raise and re-raise with America.

Which is why the German auto industry is proposing the elimination by the E.U. and the U.S. of all duties on most vehicles, an idea that never entered the heads of German automakers when their tariff was almost five times America’s. Now that Trump is threatening to see their 10 percent and raise it to 20 percent, VW, BMW, Mercedes, et al. are born-again free traders.

[Doesn't Germany run the EU?]

China:  "Trump has put on the table chips representing a 10 percent levy on $200 billion of Chinese goods, doubled to $400 billion if China retaliates. Also coming soon will be bans on exports of U.S. high-tech products to China, unless the regime ends its theft of intellectual property."

[Three advantages to Trump and the Americans over China]:

China’s exports to the United States come to almost 4 percent of its GDP, while U.S. exports to China equal only 0.7 percent of U.S. GDP. A trade war has an impact on China that is six times that on America.”

The U.S. economy is in rude good health, while China is the throes of an effort to reduce the massive debt overhang that is beginning to stifle its growth. That creates “a strain on the top leadership as it tries to fend off a trade war with the U.S.,” Diana Cheyleva, chief economist with London-based Enodo Economics, told the New York Times.

China is having difficulty finding U.S. stuff to penalize. It has exempted LNG from tariffs because it desperately needs imports from the United States to fuel its economy. If it cancels orders now with Boeing, it will have a five-year wait to get on the books of Airbus. Tariffs on U.S. agricultural products drive up food costs in China.

"In short, America can win this game."


*  Currently, vehicles shipped from Europe to the US face a low 2.5% tariff. Meanwhile, cars built in America face a 10% tariff when they're shipped to the European Union.
http://money.cnn.com/2018/05/24/news/car-auto-tariffs-us-germany-japan-toyota-volkswagen/index.html



Title: GPF on measuring trade
Post by: Crafty_Dog on July 02, 2018, 03:42:29 AM
July 2, 2018
By GPF Staff
Toward a New Understanding of World Trade


Precise evaluations of current and future global trade patterns are more important than ever.


The first rule of studying international trade is that no single rule, statistic or equation is capable of adequately explaining either current or future trade patterns. Trade is too intricate and too variable, its shape naturally adjusting to conflict, politics, disruptive technologies and so on. This makes reliable data difficult to collect, and the presentation of trade data, like any statistic, can be manipulated to support almost any argument. Anecdotal evidence can complete the picture, or even paint a different one, and thus is just as important as what the numbers say. Ultimately, even the most elegant system of trade-related econometrics must judge itself not on the cleverness of its equations but on whether it describes reality accurately.

Despite the inherent difficulties of this work, the ability to precisely evaluate current and future global trade patterns is more important than ever. Protectionism is back in the news. In truth, protectionism never went away, and lest we think this is only a U.S.-driven process, we need only remind ourselves that Canada and the U.K. intimated last week that they were considering certain protectionist measures unrelated to U.S. moves. The international trade system since 1945 has been deeply marked by a veneer of free trade, but no one would assert that the progression toward freer trade is linear, an inevitable end of economic history.

In recognition of the need to do this important work and to make our analysis more accessible and transparent, GPF is exploring new quantitative ways to analyze trade relationships. We are beginning with a fairly unambitious goal: We want to establish a way to quantify the relative dependency in a bilateral trade relationship over a single commodity. The basis of our approach comes from a 1991 analysis by GPF founder and chairman George Friedman in relation to Japan’s dependence on imports. This approach is by no means sacrosanct, nor do we think it is a perfect representation of trade dependency. We do, however, think it is a useful tool for starting a more holistic conversation about how trade works – a conversation sorely missing from the present media environment.


 

(click to enlarge)


This approach depends on establishing a relationship between three variables. The first variable is the importance of the commodity or good to the importer. Take, for example, Canadian imports of U.S. steel. We need to know how much steel Canada imports from the U.S. and how much it imports from the world overall. Dividing the Canada-U.S. import relationship by Canada’s total imports gives a sense of Canadian reliance on the U.S. for that commodity. Note that this is measured by physical weight (or in the case of a finished good, number of units), because that is more important to the importer than price.

The second variable is the importance of the trade of the commodity or good to the exporter. For the exporter, the monetary value of the trade is more important than the quantity – after all, the goal of the exporter is to make money, while the goal of the importer is to acquire a commodity or good. The second step, therefore, is to measure the importer’s payment for the import in relation to the total amount the exporter derives from that commodity or good in general. To use the example above, that would mean determining the amount Canada paid the U.S. for steel, and then dividing that figure by total payments for all U.S. steel exports.

Once these two relationships are established, a final variable is determined: whether the importer could easily find another source for the commodity or good in question. For this, we return to weight or unit measurements, and we compare the exporter’s production of the commodity or good (in this example, steel) to the total production of said commodity or good in the world. This last step is in many ways the most crucial. If the total availability of the commodity or good indicates that it would be fairly easy to find alternative sources, what might have looked like a highly dependent relationship for the importer can become a highly dependent relationship for the exporter.
By dividing the ratios established in the first and second variables, and then multiplying that figure by the ratio established in the third variable, we are left with a figure that gives a relative sense of dependency. If the figure is greater than 1, the importer is vulnerable; if it is less than 1, the exporter is vulnerable. The further the figure gets from 1 in either direction, the greater the dependency. For example, the vulnerability coefficient for Japanese imports of Australian coal in 1991 was 13.7, indicating that Japan was extremely dependent on Australian coal. (The figure has since dropped to 3.69, suggesting a trend of decreasing, if stubborn, dependence.) Conversely, Japan’s vulnerability coefficient for oil from the United Arab Emirates was just 0.01 in 1991, suggesting that Japan, which is almost entirely dependent on imports for its oil, nevertheless had the upper hand in the oil trade relationship with the UAE.

This way of looking at dependence comes replete with flaws, as does any mathematical approach. It does not, for instance, account for the ability of the importer to produce for itself the commodity or good in question. It is also less valuable the broader the definition is of the commodity or good. Steel is a commodity, but there are many types of niche steel products. Canada may not exhibit a statistical dependency on U.S. steel imports overall, but perhaps it does depend on American coiled stainless steel wire, which would be very important in determining the direction of a trade negotiation. This means that to grasp the nuances of dependency requires highly focused analysis of specific commodities about which it will often be difficult or impossible to acquire the requisite data to make a calculation.

GPF has always defined itself as an organization whose research is based on both qualitative and quantitative methodologies. For those to whom data is a religious principle, this has at times provoked negative reactions. They believe “qualitative” is a dirty word for lacking rigor. But blind attachment to data is equally lacking in rigor. We have always tried to find a medium between these two poles, both trusting what we see while developing mathematically driven ways to simplify a complex issue like bilateral trade.

We will use the approach above increasingly in the coming months. Indeed, our first analysis on this issue will appear later this afternoon. As always, we welcome your feedback – especially from those who see solutions to the flaws inherent in this approach. One does not need an economics degree to engage in this kind of work; real-world observations can be just as valid as attempts to describe reality through equations. This is not a knock on economists but a testament to our readers, who have a great deal of both to offer. We invite you to join us in better understanding international trade as old patterns begin to transform.




Title: WSJ: Martin Feldstein: The Use and Abuse of Tariffs
Post by: Crafty_Dog on July 06, 2018, 08:04:16 AM
The Use—and Abuse—of Tariffs
If Trump’s goal is to reduce the trade deficit with China, forget it. But the threat could be useful.
By Martin Feldstein
July 5, 2018 6:40 p.m. ET
42 COMMENTS

President Trump’s threatened barrage of tariffs on more than $400 billion of Chinese exports to the U.S. is set to begin Friday. While I am a strong advocate of free trade, the threat of tariffs can be useful in the right context. But the president has never specified his objective. What would the Chinese government have to do to stop Mr. Trump’s tariffs?

One possible objective might be to pressure China to reduce its $376 billion bilateral annual trade surplus, which the president frequently denounces. The Chinese government could accomplish this either by buying large quantities of American products or “voluntarily” reducing the country’s exports to the U.S., as Japan did in the 1980s.

If that’s the president’s goal, it’s deeply misguided. Reducing Chinese exports to the U.S. would deny American consumers the low-cost products they buy from China while doing nothing to reduce the global U.S. trade deficit. That’s because the trade deficit reflects the reality that Americans consume more goods than we produce. To do that we must import the difference from the rest of the world.

Although the U.S. has trade surpluses with some countries and trade deficits with others, the total balance is negative. If the U.S. reduces the trade deficit with one country, it must increase the net trade deficit with others to keep the total unchanged. The U.S. could balance the trade deficit only if Americans increased their saving to make room for more domestic production.


A decline in the U.S. trade deficit with China would mean an equal increase in the trade deficit with other countries. If Beijing agrees to import more American products or to sell fewer goods to the U.S., Americans will sell less to other countries or buy more from other countries. A tariff threat that leads China to reduce its trade surplus with the U.S. would not have accomplished any change in America’s global trade deficit.

A more judicious use of tariffs would give the Chinese government an incentive to stop stealing the intellectual property of U.S. companies. China now requires U.S. firms operating in China to form a “partnership” with a Chinese counterpart and share their technology with it. The Chinese use that stolen technology to compete with American firms in China and around the world. This unfair economic practice undermines American industry.

The Chinese requirement to share technology as a condition for doing business in China is explicitly forbidden by the World Trade Organization rules, which China agreed to when it joined the organization in 2001. The Chinese government says it is not in violation of the WTO rule because American companies “voluntarily” choose to do business in China with the understanding that they must have a Chinese partner. American companies say it isn’t voluntary because they have no choice if they want access to an economy with 1.3 billion people and an economy nearly as large as America’s.

The U.S. government filed a complaint with the WTO in March demanding an end to the Chinese practice, but as a result of U.S. experience with previous WTO complaints, American officials are not optimistic about a favorable decision. The European Union filed a similar complaint in June.

A negotiation with the Chinese under the threat of U.S. tariffs would be a more effective means of changing China’s policy. The threat of punitive tariffs could lead the Chinese government to agree to allow U.S. firms to operate in China without local partners. If China did not live up to the agreement, the tariffs could be reimposed.

Chinese theft of U.S. technology is not a new problem. At their 2013 California summit, President Obama showed Chinese President Xi Jinping evidence gathered by the National Security Agency of Chinese hacking into the computer systems of U.S. companies. The U.S. and China ended that meeting with a communiqué stating that neither government would support cybertheft for commercial purposes.

It is more difficult to confirm whether the Chinese have honored that agreement than it would be to determine whether they were allowing American companies to operate in China without surrendering their intellectual property. But the NSA should review the evidence. Chinese desistance from cybertheft also should be a condition for tariff-free access to U.S. markets.

American policy to block the theft of U.S. technology is legitimate and desirable. But it is not the same as a U.S. policy to try to prevent China from achieving its “Made in China 2025” goal of becoming a global leader in high-tech industries through its own research and investments. If the U.S. wants to retain the lead in technology manufacturing and services, it should support education in the U.S. and provide incentives for American firms to do the necessary investments and research. A trade war won’t get us there.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of the Journal’s board of contributors.

Appeared in the July 6, 2018, print edition.
Title: Re: Trade and Globalization Issues: Martin Feldstewin
Post by: DougMacG on July 06, 2018, 08:52:33 AM
Feldstein is a good voice of wisdom.  Much of the rhetoric on trade is false, such as Trump's victory speech after winning the Indiana primary.  The import of low cost goods from far away is not the problem.  Their  tariffs and illegal practices are what is wrong.  The US tariffs are bad policy UNLESS they are temporary and accomplish the ending of the unfair trade practices against us.  So far, all news is that Canada, Europe and China are digging in, thinking DT will cave.  At this point, I am pulling for Trump.

From the article:  "The Chinese requirement to share technology as a condition for doing business in China is explicitly forbidden by the World Trade Organization rules, which China agreed to when it joined the organization in 2001. The Chinese government says it is not in violation of the WTO rule because American companies “voluntarily” choose to do business in China with the understanding that they must have a Chinese partner. American companies say it isn’t voluntary because they have no choice if they want access to an economy with 1.3 billion people and an economy nearly as large as America’s."

This is the problem.  Trump is calling them out on this.  He needs to do is louder and clearer.  He needs to make clear he is not starting a trade war, he is ending one.  It is their move.  Canada doesn't get to benefit from a hemisphere-wide free trade agreement and have 300% tariff on dairy.  Europe doesn't get to have full access to our market while having tariffs ten times greater on our products than we have on theirs.  China doesn't get to keep stealing our technology (period).  The Bush, Clinton Obama lapdogs are gone.

If Americans stick with Trump, this ends with our trading partners dropping their barriers and everyone wins.
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on July 12, 2018, 08:48:46 AM
Trump needs a win on his trade fight - SOON.  This strategy of attacking all at once has turned all against him and he is losing the war of messaging IMHO. 

It was Obama and the other predecessors who let it come to this, but having to fight a war on all fronts at once is counterproductive.  It puts Canada, Europe and others against us in the fight against China.

Trump Administration Considering 'Tariff Payments' to Farmers
https://www.agweb.com/article/trump-administration-considering-tariff-payments-to-farmers/

Oh good grief, another government program to mitigate the damage of a government program.

US pork and beef out of Chinese market
US Beef in China replaced with Australian beef:
https://www.liveleak.com/view?t=suawv_1531293017

Robert Samuelson: A Trade War could be Devastating
https://www.omaha.com/opinion/robert-j-samuelson-a-trade-war-could-be-devastating/article_141f04c4-3472-594a-8ca6-eaba51c9dffc.html
--------------------------------------
President Trump offered Europe no tariffs.
https://www.politico.com/story/2018/06/08/trumps-g7-tariffs-trade-611888

He should repeat this offer with every step and every message in this trade war.  We don't want tariffs.  We don't want government managed trade.  We want free trade on an equal footing.
Title: Alan Reynolds
Post by: DougMacG on July 13, 2018, 07:47:58 PM
"Bilateral trade deficits are based on gross sales rather than value-added. Much of the content of goods assembled in China and Mexico is from the United States, so a tariff (sales tax) on their exports hurts U.S. producers and is paid by U.S. consumers."

"A rapidly-growing economy imports more and has less spare capacity to use for exports. The Trump-Navarro-Ross idea that trade deficits subtract from GDP is bad economics and accounting."

"The Mexican bracero program, temporary visas for seasonal farm workers, was ended on the theory that keeping immigrants out would raise wages for domestic farm workers.  In reality, the paucity of seasonal help hurt farms but didn't help farm labor."

You might think trade wars would be "inflationary" because tariffs add to prices but that's partial equilibrium logic.  As in 1930-32, sudden surpluses of grains, metals, etc. from an implosion of world trade creates a global "Going out of Business" Sale.

The Trump Administration's bad habit of talking only about bilateral trade deficits in goods ignores the fact that the U.S. surplus in services has been growing very rapidly - doubling from $20 billion to $40 billion in just 5 years in the case of China.

"Services are 69% of GDP, 33% of exports and account for 100% of long-term job growth.  Yet Trump and his Band of grumpy Trade Warriors don't count services in their foolish trade deficit numbers.  Inexcusable ignorance."

If tariffs announced by the United States and foreign jurisdictions thus far were enacted, U.S. GDP would fall by $110 billion in the long run, effectively offsetting one-quarter of the Tax Cuts and Jobs Act...and employment would fall by 342,051.

Tariffs hurt US  (not them) even without retaliation:  They raise U.S. producer costs and U.S. consumer prices.  

With retaliation, the regional pain could prove suicidal for the Trump Republican base in November Congressional election.

 - Alan Reynolds  July/2018

Alan Reynolds, Washington Times 5-4-88: "Getting tough with Korea means getting very tough indeed with Iowa, and also getting tough with the pension funds of Michigan workers that invested in U.S. banks that loaned money to Korea," etc., etc. . . .

(https://pbs.twimg.com/media/DhG3dH7UYAEXVDn.jpg)

Mark Perry:
If you're unfortunate enough to be shopping for a new washing machine, you can thank @RealDonaldTrump's tariffs for the largest six-month price increase (+16.2%) in history.
Title: GPF: 2016 Germany's Invisible Export Crisis
Post by: Crafty_Dog on July 14, 2018, 01:22:30 PM
October 13, 2016

Summary

Germany is the world’s fourth largest economy. It is also Europe’s largest economy, and any European economic recovery depends in large part on Germany’s trajectory. Germany is the third largest exporter in absolute terms in the G20, and is nearly as dependent on exports as Saudi Arabia and South Korea.

Given the enormous size of the German economy, the country must export vast amounts every year to maintain social and political stability. Prosperity for exporters depends on the appetites of their customers and, since 2008, their ability to rely on exports has been diminishing. While other major exporters have been struggling, Germany has actually increased its export levels. Germany has thus created a significant vulnerability for itself and will be the next country to face an export crisis. Given the country’s high dependence on exports, this crisis will likely be extreme and destabilizing, with negative implications for other European countries.

Introduction

Two principles govern much of today’s economic thinking. The first is that free trade is universally beneficial. The second is that high levels of exports indicate economic efficiency and build the economy. These principles are being severely tested in the current geopolitical crisis. Since 2008, the global economic system has been struggling to regain its footing. Free trade and export-based economic growth have both benefits and vulnerabilities, but the ongoing crisis is highlighting the economic imbalances and political instability created by this model.

Major exporting economies like China, Russia and Saudi Arabia are vulnerable because they depend heavily on external demand and exports have declined because of economic problems and severe price competition. Exporters of manufactured goods, like China, and exporters of primary commodities, like Russia and Saudi Arabia, have both been hit. We are seeing a generalized crisis for exporters. This crisis, in turn, is creating political and social instability in these exporting countries.

One country that has not yet experienced the effects of this crisis is Germany. This anomaly is significant because Germany is, in absolute terms, the third largest exporter in the world after China and the United States. Germany’s economy is heavily dependent on exports: Germany derives about 45.7 percent of its GDP from exports, according to the World Bank’s latest available estimates from 2014. In China, on the other hand, exports equal only 22.6 percent of GDP, and in the United States only 13.4 percent. Germany is the fourth largest economy in the world and its export dependence is by far the highest of any G7 economy.

germany-export-goods-services-gdp

Over the past few years, there has been a shift in the export dependency levels of some of the world’s top exporters. China’s exports as a percent of GDP have declined from 33.7 percent in 2005 to 22.6 percent in 2014, with the bulk of the decline coming after 2008. Russian exports have declined from 35.2 percent in 2005 to 30 percent in 2014. Others have held steady. Germany’s trajectory, however, has been the opposite: the German economy’s dependence on exports has only grown. The country’s exports were 37.7 percent of GDP in 2005 and 42.3 percent in 2010. Four years later, it was over 45 percent.

Germany appears, on the surface, to have weathered the crisis well to this point. However, in our view, Germany’s growth model will not help the country avoid a crisis for much longer. The strategies Germany has used to maintain high export rates are unsustainable.

In order to evaluate Germany’s challenges and the prospects for a German economic crisis, we need to understand four things. The first is the ongoing geopolitical crisis that is engulfing the Eastern Hemisphere. Second, the relationship between the Eastern Hemisphere’s crisis and a breakdown of the export system. Third, the condition of the European Union and, fourth, how all this converges in Germany and why the country is likely to experience significant economic disruptions.

The Eurasian Crisis

In 2008, two pivotal events happened within seven weeks of each other. On Aug. 8, 2008, Russia and Georgia went to war. On Sept. 16, 2008, Lehman Brothers collapsed. The first event shifted the strategic dynamic. The second transformed the global economic situation, particularly in Eurasia (understood as Europe and Asia combined). The economic crisis was immediate and painful but it was not, in itself, unusual or significant. Financial crises are built into capitalism and, for the United States, this was the fourth such crisis since World War II: the municipal bond crisis in the 1970s, the Third World debt crisis and the savings and loan crisis in the 1980s preceded it. It was the combination of the strategic and economic crises, however, and the unique difficulties major powers in Eurasia had in dealing with the dual problems, that led to general and interlocking crises throughout the region.

When we look at a map of Eurasia, an extraordinary pattern emerges. Virtually all the components of the region have destabilized. China’s economy is slowing down, and the regime in Beijing is moving to strengthen and further centralize its power, as well as use increased military assertiveness at sea to boost morale and avoid potential social unrest at home. Russia has entered an economic crisis and become more assertive in the Middle East and to its west. The Middle East is experiencing a political crisis that has destroyed two states, Syria and Iraq, while oil-exporting countries are destabilizing as prices decline.

Finally, the European Union has fragmented, with the decline of coherent decision-making and the unwillingness of individual states to adhere to any central authority. Meanwhile, southern Europe remains in a deep depression with more than 20 percent unemployment in Greece. Britain will hold a referendum on whether to leave the EU, while independence movements in places like Catalonia have strengthened. On issues ranging from economic dysfunction to the migration problem, Europe’s central crisis has been political. The EU has been unable to make, implement and enforce effective decisions. As a result, it is facing informal dissolution – a situation where the EU exists, but it is increasingly ignored.

The regional crises are no longer sequestered. They are interacting with each other. Russia is putting pressure on Europe and the Middle East. Europe is reacting to Russia and involved in the Middle East. The Middle East is affecting Europe and drawing in Russian involvement. In the western part of Eurasia, it is as if separate storms are beginning to merge together into a single, much more powerful storm. And that is what makes this important.

Destabilization stretching from the Pacific to the Atlantic and from the Arctic Ocean to the Indian Ocean hasn’t occurred since World War II. Except for India, which has problems but is not undergoing systemic stress, all of the land mass is unstable. That means that 5 billion out of 7 billion people in the world exist in a state of economic and strategic turmoil. This is the heartland of humanity. In World War II, this entire region was drawn into a systemic crisis that manifested as war. Parts of the region are now at war, other parts face the threat of war, while others have problems confined to economics and politics. There is no likelihood of a generalized Eurasian war, but there is the possibility of war coupled with internal instability in all of these countries.

Germany has thus far remained stable, with low unemployment, a strong government (until recently) and an economic system that continues to function. This has been seen as evidence of prudent management. There is much of that, but there is also an anomaly. Germany is following a path that had shattered the expectations of other countries. It is resisting a tide that it should be unable to resist: the general crisis of exporters.

The Crisis of Exporters

There is a crisis of exporters plaguing countries from South Korea to Saudi Arabia, Russia and China. Germany has not yet been affected but is, nevertheless, vulnerable. In order to understand Germany’s dilemma, we must first ask how we got to a global exporters’ crisis in the first place.

The 2008 financial crisis triggered recessions in the United States and Europe, two of the world’s largest consumer markets. The recessions turned into long-term stagnation in Europe and slow growth in the United States. This decreased consumer demand, which was compounded by the process of deleveraging consumer debt. This decreased demand for imported consumer products, while the general economic stagnation also lowered industrial production and, therefore, the need for industrial products.

This had a substantial effect on China, which had been the previous generation’s major low-wage, high-growth economy. Such economies are a particular niche within global capitalism, able to off-load low margin production and focus on more complex, higher margin products. The two previous low-wage, high-growth economies were Japan and Germany. In the late 19th century, it was the United States. These economies are critical, tend to last about a generation, and then rotate out of that role into a more advanced industrial power. Japan began rotating out of this role in the 1980s, reached a transformative financial crisis from 1990 to 1991 and then transformed itself into a mature economy.

China had been moving toward the end of its low-wage, high-growth phase by the time 2008 came. Its position as a low-wage economy was being challenged by multiple other economies, which, for various reasons, were able to undercut Chinese prices while maintaining quality. This put Chinese exports under pressure, both in term of absolute sales volumes and profit margins. China is a much poorer and more diverse country than Japan, so its path will likely be rockier: 2008 hit an already pressured China even harder than others.

China is a victim of its own success as an exporter. The problem with exporters is that they are entirely dependent on their customer’s ability to buy what they have to sell. The 2008 crisis reduced demand in Europe and the United States, China’s two biggest and most essential customers. China could only control exports by finding other markets – none of which could match Europe and United States – or by cutting prices. Given the global crisis, alternative markets and price cuts had limited effect. Both were tried, but in the end export growth was maintained primarily by decreasing profit margins. As with the Japanese, this inevitably generated financial instability, as exporters were unable to service debt. The government intervened, trying to allocate capital to prevent unemployment, and the economy engaged in an economic-political spiral into gridlock.

China was the linchpin of the global industrial commodity system. Its inability to sell made it impossible for China to continue purchasing large volumes of oil, copper, iron ore and so on. Prices for commodities should have fallen dramatically because of this. They didn’t fall immediately because of two things. First, China is a semi-command economy, with key processes in the hands of the state. Purchasing industrial commodities had a dimension of centralized control, which meant that demand for these commodities did not shift in line with falling need. Both bureaucratic inertia and Chinese expectation that its export problems would be handled kept Chinese imports at unrealistic levels.

The second reason is that, in many ways, China was a bubble to which irrational expectations were attached. As with all bubbles, the irrationality endures after the position is untenable, and then, when reality can no longer be escaped, the bubble bursts. The Chinese bubble was particularly strong, as many assumed that China’s growth rate, which had remained at preternatural levels for more than 30 years, was eternal. Therefore, even though China’s growth pattern had been broken in plain sight, the belief was that the problems were minor or temporary. This perception maintained industrial commodity prices at a level higher than they should have been for some time. Given the increase in supply of commodities generated by irrationally high prices and technological advances, the break was more severe for being delayed.

The global economy thus faced a dual crisis: exporters of both manufactured goods and primary commodities saw demand and prices fall. Exporters of all kinds began experiencing significant financial strain.

The European Crisis and Germany

Intertwined with the financial crisis was the condition of the European Union. Crises necessitate action, and 2008 was the first true financial crisis the EU had faced. How the EU dealt with the crisis would affect how all of Europe would feel the crisis. And to understand how the EU reacted, the condition of the EU must be understood.

The crisis revealed both structural problems and fundamental imbalances in the European Union. First, the EU was not configured to deal with financial crises. The sort of formal and informal systems the United States developed in its post-war crises had never been developed in Europe. Part of this problem was a lack of structures and processes. But the deeper issue was political. The EU was supposed to be a transnational structure, but individual states maintained a great deal of sovereignty. The extent to which the EU had the responsibility or the authority to manage the 2008 crisis simply wasn’t clear. If the EU didn’t have the authority, then the states had to, but given that much of the EU shared a single currency, the nations didn’t have control over the critical instrument – monetary policy. Therefore, they couldn’t deal with the problem without some level of cooperation from the EU.

The solution was collaboration, but Europe had expanded to include nations at very different levels of development and, therefore, with very different interests. The policies that might help advanced industrial economies and substantially less developed economies were fundamentally different. A net creditor has one set of interests in this scenario, while a net borrower has very different ones. It was possible to create a single coherent set of solutions in the United States that at least carried the country through the worst of the crisis. The United States had settled the principle of sovereignty in the Civil War. It had settled the principle of common management of a financial crisis in the 1930s. These worked imperfectly, but they created a framework for decision-making and policy implementation that a chaotic European Union lacks. There is no such thing as a common European interest.

At the same time, the crisis highlighted how trade, one of Europe’s building blocks, has contributed to deep imbalances. At root, the EU is a free trade zone. At the center of this is Germany. The free trade zone, then, is built around a massive exporting machine – which is great for Germany but makes it difficult for less developed countries, particularly in southern Europe, to develop. It must be remembered that, in the 1950s, Germany was allowed to protect its economy, controlling access to its market, so that it could develop. Fearing Soviet influence in Europe during the Cold War, the United States supported Germany’s economic growth. The United States had similarly protected its economy during the late 19th century, as had China and Japan, to the benefit of their developing economies.

The European free trade zone stripped all member countries of the right to protect their economies in every sector, with few exceptions. The Germans were massive exporters, who also consistently ran substantial balance of trade surpluses, which meant that many European countries were swimming upstream in the process of development. In addition, prevailing sentiments said that exports were a sign of a growing and healthy economy. Consequently, the EU kept trying to apply Germany’s model of success to countries like Greece.

Inevitably, the 2008 crisis revealed the underlying problem. As the recession took hold, one set of countries immediately began experiencing sovereign debt issues and other debt problems. That was inevitable. The question was how to address the problem. The creditors, led by Germany, wanted debtors to cut government budgets and carry the main burden of repayment. The debtor nations, lacking a single leader, dealt with the problem individually. The central focus was on the health of the banking systems, as isolated countries were pressured to reach agreements on repayment that were built on austerity packages.

There was a contradiction built into Germany’s insistence on austerity. Germany was and is a major creditor, holding paper from throughout Europe. When the southern European economies began to collapse, the Germans faced a dilemma. On the one hand, the European free trade zone absorbed much of Germany’s exports, and therefore it was in Germany’s interest to stimulate Europe’s economy. On the other hand, stimulus would mean that Germany would have to increase the amount of debt from countries near default, betting that the stimulus would turn these economies around. If the economies weren’t stimulated, exports would decline. If they were stimulated, they faced a banking crisis.

All of this was compounded by the exporters’ problem, particularly after the decline of oil prices. Oil exporters reduced imports and manufacturers in competition with Germany slashed prices. The Germans were trapped in an export-oriented market with limited appetite for its goods. It seemed the best the Germans could do was to slide into a significant depression while they restructured their economy and hope that they would not slide into long-term depression. But Germany could not afford to do that, and instead emphasized austerity throughout the European Union.

The purpose of austerity was to stabilize the financial system, but its byproduct was dramatically increased unemployment, particularly in the less developed eurozone countries. In much of Europe, the state is involved in health care, power utilities, transportation and other sectors. Spending cuts, therefore, hit the professional middle class, which depends in part on state-financed sectors. The level of unemployment in many countries surged, but did so most dramatically in the south, where unemployment among the Mediterranean countries soared to over 20 percent and in some cases to 25 percent. These were the same levels reached in the United States during the Great Depression. Countries outside the eurozone weathered the crisis better, but southern European members of the eurozone went into recession, and as their economies suffered, demand for goods – including German exports – declined.

europe-unemployment-march-2016-4x3

Germany staved off feeling the pain by increasing its exports to China, the United States and, to a lesser extent, the United Kingdom. Demand in China, however, has begun to fall. And there is a limit to how much and how long the U.S. and the U.K. can fill the gap in demand for Germany’s exports.

Germany’s Inevitable Crisis

Germany poses the central problem in Europe. It was structured to be an exporter. Germany did not simply become an exporter after World War II, but was an exporter from the beginning. Like Japan, it was a latecomer to the industrial revolution. In order to catch up, it had to rely on exports while limiting its domestic consumption. After World War II, Germany merely returned to this model. In 1989, when the Berlin Wall fell and Germany reunified, it faced the problem of massively uneven development between East Germany and West Germany and the need to finance the integration. The solution was, once again, to increase exports, discourage domestic consumption and increase savings rates. Once an economy is structured in this way, however, it can only be forced into another model by a significant crisis that makes its existing economic model untenable.

Germany’s economic strategy was part of the German DNA. It was a strategy in which a highly educated and disciplined society would excel. Again, compare Germany and Japan. Both had vast human capital from the pre-war period and a devastated economy. Both used the highly trained workforce and management that had survived the war to rebuild and recapitalize their economies through exports. When 2008 struck, Germany was already caught in an exporter model and it continued to emphasize exports while also maintaining its saving strategy.

The one option Germans didn’t have was to accept lower exports, which would have required increased domestic consumption. Given German export dependence, the amount of increased domestic consumption that was needed was unattainable. Moreover, any increase in domestic consumption would slash into the German savings rate, and bring it down to zero. This would upend the German competitive advantage of high investment in advanced production methods.

Eurasia’s interrelated crises, coupled with the ongoing crisis of exporters and Germany’s fraught relationship with the European Union have brought to the fore Germany’s core economic vulnerability. There are three indications that the country is heading toward its own crisis. German trade patterns have shifted, return on capital has diminished, and some German companies have begun cutting prices in an attempt to maintain export levels. The tactics Germany has relied on to weather the storm are ineffective in the long term, and there are already signals that Germany’s economy is slowing down as a result.

First, trade patterns are shifting because demand for German goods has been growing at a slower pace nearly across the board. The economic slowdown in China and the eurozone’s economic malaise led to low export growth rates and in some cases declines in German exports to these areas. Since 2008, German exports to France have grown so slowly that, for the first time since 1961, France is no longer the top destination for German exports, according to U.N. Comtrade data. Exports to China in 2015 declined by 4 percent. German exporters sought to compensate for decreased demand by boosting revenues from other markets, especially the U.S. In 2008, only 7.2 percent of German exports by value went to the U.S. Seven years later, this increased to 9.5. In 2015, German exports to the U.S. rose by 19 percent – enough to supplant France as Germany’s top export destination.

germany-share-exports

The greater dependence on U.S. customers can be seen in the financial results of top German companies. For example, auto manufacturer Daimler’s revenues in the U.S. spiked 26 percent in 2015 compared to the previous year. BMW’s revenues in the Americas as a percent of total revenues also rose in 2015, while the share of revenues coming from Asia and Africa declined.

germany-bmw-revenue

Although the U.S. is an enormous market for Germany, dependency on this market for export growth is not a viable long-term strategy for Germany. First, the U.S. is in a period of slow growth, with its own domestic savings rate rising. Moreover, Germany is a very large exporter and it faces strong competition in the U.S. for customers. Finally, it has been six years since the last recession in the U.S., and the country, generally speaking, tends to dip into recession roughly every seven years. So, if history is any indicator, the U.S. is due for another recession in the near term. There is already the danger that the U.S. market is saturated with German goods, but if a recession were to be added to the mix, it would limit Germany’s exports even further.

germany-export-markets

The second indication that Germany’s model is eroding is declining returns on capital invested. Some German exporters have experienced only slight declines, but several major companies have undergone significant shifts. Volkswagen, Bayer and BASF all saw their rate of return on invested capital decline over the last two years. Volkswagen enjoyed a rate of return on invested capital of over 13 percent in late 2012. By late 2015, the rate was less than 3 percent. Daimler’s rate of return on sales of its Mercedes-Benz cars in the first quarter of 2016 was 7 percent, compared to 9.4 percent the previous year.

The third indication of a coming crisis is that there are growing signals German businesses are sacrificing revenues in order to boost exports in the short term. According to the European Commission, producer prices in the eurozone are declining. In January, producer prices fell 3 percent at an annual rate, and in February prices dropped by 4.2 percent. Some German exporters publicly declared that they are cutting prices. BMW cut prices for spare parts in China, while Volkswagen in 2015 introduced discounts and interest free loans in China to boost sales. One phenomenon that underscores the challenges facing Germany’s exporters is a divergence between the growth in sales and growth in revenues. For example, Daimler’s first quarter sales in 2016 increased by 7 percent compared to the first quarter of 2015, but revenues increased by merely 2 percent. BMW’s automotive segment unit sales grew by 5.9 percent in the first quarter year-on-year, but revenue for car sales declined by 0.4 percent. While exchange rate effects did negatively impact revenues in the first quarter, a divergence is still noticeable when these figures are adjusted for shifts in exchange rates. German exporters, therefore, are facing a significant problem: they are boosting sales but not making much money. This tactic works in the near term, but can be financially unsustainable in the long run.

Germany is not yet in crisis and many German companies are still sporting at least steady returns. But this report is as much a forecast as it is an analysis. We are looking for where the needle will just begin to waver, and the earnings reports of some large German companies produced some of the worrying observations we laid out above. The data, however, is not definitive in this case. We have constructed a model for how the German economy has functioned and is functioning today, and how Germany’s economic situation is going to be affected by the economic, social and political crises that span Eurasia. The proof of the suppositions made in this report will become evident when, in 2017, we begin to look at the 2016 data.

The Analogous Case and the Specter of Banks

The best analogy for the phenomenon we are now witnessing in Germany is Japan in the 1980s. Built on a debt-based economic model, also with a high savings rate, the Japanese economy needed substantial cash flow to service bank debts. They were relatively indifferent to rate of return on capital so long as cash flow was maintained. The Japanese maintained their export surge by cutting profit margins to near zero and on occasion beyond that. Their exports and the economy grew, but underneath it all, the Japanese were hollowing out their economy. The warning came in 1990 when the Bank of International Settlements warned Japan that its banks would be suspended from international transactions because of low reserves.

The Germans went in a similar direction for somewhat different reasons. The Germans fear unemployment. There is a shared memory of the 1920s when the middle class was shattered, and there is perennial fear of a repeat. In the 1990s, the integration of East Germany forced unemployment up. That caused considerable dislocation. The Germans had to maintain employment rates, but they could not consume more and, therefore, they had to expand exports – in the face of a global crisis of exporters.

The Germans adopted the Japanese solution, not as a national policy but as a strategy to assist major corporations. Daimler reported increasing sales and diminishing profit growth rates. That could have several meanings, but the most obvious is that the company was cutting prices and margins in order to increase sales. The Germans appear to be attempting to increase exports by decreasing return on capital.

This is something that can work, but only temporarily. The first signs of problems in Japan were in the banking system, where the decrease in margins became apparent in rising non-performing loans and increasing stress as government policy and banking requirements clashed.

It is noteworthy that the German banking system is already under pressure even before the crisis we are predicting in Germany has begun to fully unfold. The problem German banks have is rooted in the crisis of 2008, which as we noted earlier was made worse in Europe because of the EU’s inability to respond in a way that was conducive for all European economies. Germany was one of the net creditors in the system, and German banks are still exposed to many of the European countries that have not yet recovered in any meaningful way from 2008. Deutsche Bank currently has about $41.9 trillion worth of derivatives on its books, and in January 2016, Moody’s downgraded Deutsche Bank’s long-term debt and assigned a negative outlook to both the bank’s debt and deposit ratings. German banks are grappling with serious problems, especially with interest rates remaining low and Eurasia’s crises intensifying. Commerzbank’s 2016 first quarter net profits fell by 52 percent, while Deutsche Bank’s profits fell by 58 percent.

Compounding this banking problem is Italy. Our 2016 annual forecast predicted a potential crisis in the Italian banking sector this year due to the high rate of non-performing loans in Italian banks. Approximately 17 percent of outstanding loans, most from corporate borrowers, are non-performing. The Italian government, sometimes at odds with European Union regulations, is trying to cope with the country’s banking challenges. This is relevant to German banks because Germany’s exposure to Italian banks is roughly 120 billion euros ($138 billion), which is over 3 percent of its GDP. Also, a failure of the banking system in an economy the size of Italy’s (Europe’s fourth largest) would lead to a crisis in Europe much more serious than Greece.

The problems in Italian banks are not the result of export decline but of lending practices. In Germany, however, it is the export crisis that has the potential to disrupt the banking sector. There is no definitive evidence that German banks have yet begun to feel the ill effects of the export problem. But eventually, as German companies lose profits and can’t pay the banks, this will become a problem. As pressure builds on German banks, the challenges we are outlining in this report will be an added stressor and the banking system, already under intense strain, will face a significant burden.

Conclusion

Germany, one of the world’s largest exporters, is facing a global export crisis. The fact that it has not yet experienced an overall annual export decline is not a comforting thought. With Europe barely recovering from its economic stagnation, and other markets similarly constrained, German exports should decline. The fact that they haven’t, and that German banks are troubled in spite of cash flow, indicates that significant price adjustments are being made that affect the profit margins on these exports.

It appears that the problem of contracting exports is being postponed rather than solved. Germany’s high dependence on exports causes the German state, bankers and corporations to want to avoid export decline for as long as possible. Since exports are over 45 percent of Germany’s GDP, a 5 percent drop would result in a decline in GDP of more than 2 percent, which would have a staggering impact.

Therefore, the Germans are postponing this decline for as long as possible. However, delaying it compounds the problems in the long run, particularly on already weak German banks that may be forced to deal with delayed or restructured debt repayments.

The Germans are facing a profound financial crisis that can be postponed but not avoided. The world’s economy is stagnating, and exporters around the world are seeing declines. Germany has not so far. When it does, which is inevitable, the fourth largest economy in the world will suddenly see massive export contractions, declines in GDP and a significant financial crisis with global implications.
Title: Trade, Trump uses Chinese negotiating tactics against them
Post by: DougMacG on July 17, 2018, 10:12:38 AM
https://www.wsj.com/articles/the-president-turns-the-tables-on-china-1531778651
The Chinese don't know how to handle all of the unpredictability. Important point, the Chinese want this trade dispute settled.
Title: Stratfor: Japan & EU
Post by: Crafty_Dog on July 17, 2018, 03:41:49 PM
See Globalization, Evolved

Amid rising U.S. trade pressure and protectionism, Japan and the European Union have struck a landmark trade agreement. The EU-Japan economic partnership, signed July 17 in Tokyo, will gradually remove protections on 99 percent of Japanese goods exported to the European Union and on 94 percent of EU exports to Japan. Under the deal's terms, the European Union will also zero out its 10 percent tariffs on Japanese automobiles over the next seven years. Japan, in turn, will immediately lift its 15 percent tariff on European wine and dramatically lower barriers to imports of beef, pork and cheese from the bloc.

Though the deal had been in the works for five years, it picked up steam in early 2017 after the election of U.S. President Donald Trump, who vowed to overhaul U.S. trade strategy. Trump's pledge to pull the United States out of the Trans-Pacific Partnership was especially worrisome for Japan because it had hoped the pact would boost its economy and its efforts to counterbalance China's runaway economic growth.

The EU-Japan trade deal reflects the redoubled efforts of both parties to forge partnerships that will help soften the blow of U.S. protectionism — and maybe encourage Washington to return to multilateral trade discussions. The United States' exit from the Trans-Pacific Partnership spurred Japan and the deal's other remaining 10 signatories to forge ahead with negotiations and sign an altered version of the agreement in March. The process required Tokyo to do the unpleasant work of going against Japan's agricultural lobby to lift long-standing protections on the farming industry. (The EU trade deal also could cost Japan's agricultural sector, though the potential losses didn't derail the agreement.)

Similarly, in its quest to sign as many free trade agreements as possible, the European Union has worked to streamline its internal decision-making process to remove obstacles that dogged past trade discussions. The bloc heeded the lessons it learned from ratifying its 2016 trade agreement with Canada to try to smooth out the approval process for the Japan deal and avoid blowback from member states. To that end, the European Union split the agreement with Japan into two parts, opting to negotiate separately the issues, such as investor-state dispute settlement, that would require parliamentary approval in each member state. It used the same approach to negotiate its trade agreement with Singapore, which is now undergoing ratification.

For the United States, these trade deals pose a risk. Though they won't freeze the country out of trade — and though the U.S. market is still attractive — the agreements will increase competition for the United States in the global economy. The European Union and Japan together account for 37 percent of annual trade by value, and the United States now will have to compete against them without the privileged access they have to each other's market
Title: Re: Trade: EU will negotiate with US
Post by: DougMacG on July 19, 2018, 07:01:50 AM
This is maybe too obvious to post, EU wants a trade deal with the US.  Otherwise, what is there downward path when they start at zero growth?

EU President Jean-Claude Juncker is expected to visit Washington next week with a significant offer on trade, White House economic adviser Larry Kudlow says.

https://www.cnbc.com/2018/07/18/kudlow-says-expecting-significant-trade-offer-from-eu-soon.html
Title: Mankiw on Trade balances improving or deteriorating
Post by: DougMacG on July 19, 2018, 07:42:31 AM
http://gregmankiw.blogspot.com/2018/07/a-plea-to-economics-journalists.html?m=1

A plea to economics journalists
I was recently reading an article by Greg Ip (one of best economics journalists around, by the way), and he used the following expression:
"the trade balance improved"
A quick google search finds this expression (and the related "the trade balance deteriorated") used many thousands of times by various writers.

I would like to ask everyone to please stop saying things like this. Write instead:
"the trade balance moved toward surplus"
I know that is wordier, but saying "the trade balance improved" lends credibility to the view that trade surpluses are always good and trade deficits are always bad. That is not true, of course, and I doubt Mr. Ip intended that interpretation. But in light of all the craziness going on lately with regard to trade policy, it is best not to inadvertently give aid and comfort to the crazies.

Doug:  You calculate international trade, a very important part of the economy, by adding imports to exports, not subtracting.
Title: Reagan on trade Wars
Post by: DougMacG on July 19, 2018, 07:54:26 AM
https://youtu.be/vzoP0u7bpKY
Reagan speaks on the principles of a trade war
Title: Trump the mercantilist
Post by: Crafty_Dog on July 24, 2018, 07:13:19 PM
https://worldview.stratfor.com/article/real-target-trumps-trade-war
Title: Re: Trump the mercantilist
Post by: DougMacG on July 25, 2018, 08:40:48 AM
https://worldview.stratfor.com/article/real-target-trumps-trade-war

I agree with the thrust of this article only if you take Trump literally at his words and assume he is stupid with no learning curve.

On the other hand, he has advisors who understand the role of trade, he has constituents who don't want higher taxes which tariffs and he knows his presidency will be judged by the growth of the economy and the Improvement in the standard of living.  Tariffs and trade wars tear down both our economic growth and our standard of living.

I believe the end game is no tariffs and that all these words and policies are a tactic to that end.

Trump said, trade wars are fun and can be easily won. Joking on fun and wrong on easily but right that this war started needs to be won.

Drop the mercantilism and the trade deficit BS and settle for a level playing field where the US can compete with anyone..
Title: Re: Trade, US and EU
Post by: DougMacG on July 26, 2018, 10:01:31 AM
Yesterday was the turning point where this bold and risky move is bringing positive results. The deal with the EU is not done but they solved some issues, made a truce and started saying allowed that no tariffs and no other barriers is the end of game.

We needed the EU on our side to win the fight with China. Done.

Go ahead and put your money back in the market.  )

http://www.realclearpolitics.com/video/2018/07/25/president_trump_makes_trade_announcement_with_ec_president_junker.html
Title: Asia times: China caught off guard by trade War
Post by: DougMacG on August 01, 2018, 06:33:47 AM
 "a strategically calamitous development few in Beijing anticipated"

"while US stocks approach all-time highs and the dollar grows stronger, Chinese stocks are in a bear market, down 25% since January."

“The yuan had its worst single month ever in June and is well on its way to a repeat this month."

"while US stocks approach all-time highs and the dollar grows stronger, Chinese stocks are in a bear market, down 25% since January."

“Cooperation between the US and EU will squeeze China’s protectionist model, and even before this agreement, there’s been evidence that China is already running up the white flag."

http://www.atimes.com/article/china-caught-off-guard-as-us-trade-war-highlights-beijings-dilemma/

The US partnering with the EU against some unnamed protectionist third party, China, wasn't the turning point, it was the breaking point.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on August 01, 2018, 08:49:10 AM
That is a very interesting article.
Title: Re: Asia times: China caught off guard by trade War
Post by: G M on August 01, 2018, 09:33:42 AM
"a strategically calamitous development few in Beijing anticipated"

"while US stocks approach all-time highs and the dollar grows stronger, Chinese stocks are in a bear market, down 25% since January."

“The yuan had its worst single month ever in June and is well on its way to a repeat this month."

"while US stocks approach all-time highs and the dollar grows stronger, Chinese stocks are in a bear market, down 25% since January."

“Cooperation between the US and EU will squeeze China’s protectionist model, and even before this agreement, there’s been evidence that China is already running up the white flag."

http://www.atimes.com/article/china-caught-off-guard-as-us-trade-war-highlights-beijings-dilemma/

The US partnering with the EU against some unnamed protectionist third party, China, wasn't the turning point, it was the breaking point.

So much winning!
Title: GPF: US-Mexico NAFTA negotiations
Post by: Crafty_Dog on August 11, 2018, 09:08:35 AM
Mexico and the U.S. are talking rules of origin in NAFTA. Canada is sitting on the sidelines. The U.S. continues to play hardball, having reportedly refused to budge on its calls for 75 percent local content as a baseline, with 40-45 percent of regional content coming from high-wage zones (the U.S. and Canada). Washington is, moreover, now overtly linking the talks with potential tariffs on automobiles and auto parts. The U.S. proposal now includes a measure to exempt existing Mexican auto plants from the tariffs, which would still apply to any new Mexican auto plants. Mexican media indicate that Mexico is willing to be more flexible on rules of origin for automobiles with the U.S. in exchange for leeway in other areas – eliminating the sunset clause and keeping the dispute resolution mechanism, for example. Still, the current proposal is too steep even for Mexico, so bilateral talks on the issue will continue into next week. Meanwhile, Canada remains in direct contact with its counterparts but is staying out of it until its southern neighbors resolve the questions on automobiles. This doesn’t mean Washington has forgotten about Canada – President Donald Trump recently threatened Ottawa over its high tariffs and trade barriers. The current goal is for an agreement in principle by the end of the month. Meeting that goal will require some major concessions over the next couple of weeks.
Title: Wesbury on Turkey, Trade, Tariffs, and Trump
Post by: Crafty_Dog on August 15, 2018, 03:08:41 PM


https://www.ftportfolios.com/Commentary/EconomicResearch/2018/8/15/turkey,-tariffs,-tax-rates-and-trump
Title: Stratfor: Trump, the Auto Industry, and NAFTA
Post by: Crafty_Dog on August 19, 2018, 10:29:07 PM
How Trump's Tariffs Would Disrupt the North American Auto Industry
Ford Explorers leave a Chicago assembly plant during October 2017.
(SCOTT OLSON/Getty Images)

    The United States could announce tariffs or quotas on imports of finished vehicles and auto parts in the next six months, which could very well raise the price of vehicles in the United States.

    Because of tightly integrated supply chains and extensive reliance on the U.S. market, automakers in Canada and Mexico will suffer as a result of any U.S. trade barriers that are imposed.

    The United States will use the threat of auto tariffs to negotiate stricter rules of origin requirements in the NAFTA talks. But even if Washington gets its way, it may still use tariffs to dissuade future automotive investments in Mexico.

    Tariffs and NAFTA concessions could threaten Canadian Prime Minister Justin Trudeau's 2019 re-election bid and cause Mexico's government to hold off on heavier social spending.

By using tariffs as a weapon in NAFTA negotiations, U.S. President Donald Trump could end up harming automotive networks that have taken decades to build. As home to one of the largest car-importing nations in the world, North America has attracted numerous companies supplying the U.S. market with Canadian and Mexican finished vehicles and parts. The size and complexity of the U.S. market has led to the sprouting of a network of supply chains across the continent — first to capitalize on Canadian manufacturing capacity and later to take advantage of far cheaper Mexican labor.

Now the Trump administration is weighing tariffs or quotas under Section 232 of the Trade Expansion Act of 1962 to curb the import of automobiles and auto parts as a way to reduce the overall U.S. trade deficit and to protect the jobs of U.S. workers. The administration claims that excessive automotive imports are a threat to national security. The proposed tariffs are largely seen as a negotiating tactic for the North American Free Trade Agreement, so the Trump administration may very well back away from them, choosing instead to target South Korea, Japan or the European Union. But if they were implemented, companies across North America could see slowing sales and higher input costs, and the governments in Canada and Mexico could face problems. Furthermore, those automotive networks could face sustained damage as automakers realigned their long-term business strategies.
The Big Picture

As part of its drive to reduce trade deficits and protect domestic manufacturing, the administration of U.S. President Donald Trump is weighing whether to place tariffs or quotas on automotive imports. Such measures would have a heavy impact on the North American trade in vehicles and their components. The region's extensive supply chains and tightly connected automotive businesses would suffer from the barriers, because it would erode U.S. demand for vehicles and parts.

Growing Integration

Over the second half of the 20th century, North America became deeply intertwined with U.S. automotive manufacturing. The postwar U.S. economic boom drove the demand for more automobiles, which in turn opened export opportunities for Japan, Germany and North America. In 1965, Canada took the first steps toward greater integration of its auto industry with that of its southern neighbor by signing the Automotive Products Agreement. The deal led to the steady decline of tariff barriers for finished vehicles and their components, and it closely linked manufacturing plants in Ontario to U.S. auto manufacturing clusters in the Great Lakes states of Michigan and Ohio. Mexico followed nearly two decades later, removing all limits on foreign investment for automotive manufacturing and leveraging its relatively cheap factory labor years before its government signed NAFTA in 1993.

North America now has well-developed automotive manufacturing clusters and supply chains. Just under half of the 8.3 million new vehicles imported by the United States in 2017 came from Canada and Mexico. Most major automakers make vehicles in those two countries, and the overwhelming majority of production of components and finished vehicles in both countries is intended for final sale or integration into vehicles manufactured or sold in the U.S. market. Ninety-five percent of Canadian passenger vehicle export revenue is derived from the U.S. market, while Mexico relies on it for 70 percent of vehicle exports. Mexico is the leading supplier of engines, drive axles, suspension systems and steering wheels to the United States, as well as a major supplier of electrical wiring harnesses, gearboxes, brakes, radiators and seat belts. Canada is the leading supplier of clutches and gasoline engines to its southern neighbor, and it's the second largest supplier of suspension systems and drive axles.

A Monkey Wrench in the Works

In May, the White House directed the Department of Commerce to investigate the national security implications of excessive automotive imports. The investigation has until Feb. 17, 2019, to reach a finding, and the president subsequently has 90 days to decide whether to act. In the meantime, Congress has been moving to boost its power and limit the president's authority under Section 232, but the measure may not reach a vote before the Commerce Department's findings are revealed. If the report finds that auto imports harm national security, it will quickly become a major source of uncertainty for businesses across the region and the globe.

The investigation also introduced a new element into already complicated North American trade negotiations. Since early 2017, the White House has wielded the power of the presidency to attempt to remedy what it perceives as disadvantages that the United States faces in global trade. Until May, the main trade concern for North America's automotive sector was the administration's push to renegotiate NAFTA. For more than a year, the Trump administration has pressed Mexico and Canada to accept significantly higher requirements for rules of origin and higher wage requirements in the treaty.

If Ottawa and Mexico City accepted the U.S. demands, then cars produced in these countries would have to contain 75 percent North American content (as opposed to the current level of 62.5 percent) to qualify for tariff-free entry into the United States. About 40 percent of passenger cars and 45 percent of pickup trucks would have to be built in areas with a minimum factory wage of at least $16 an hour. As this requirement is phased in over a period of several years, it would cut the number of vehicles from Mexico that could enter free of U.S. tariffs. The administration's intent is to steadily reduce vehicle imports from Mexico, where it perceives low wages to be an unfair advantage. In a further complication for Mexico, the White House has signaled in NAFTA negotiations that it may exempt production from existing Mexican plants from Section 232 tariffs. Auto plants built after a yet-to-be-decided date could face tariffs.

A chart shows the sources for various auto parts for the U.S. market.

Auto Industry Collision

Depending on the severity of trade barriers or new NAFTA regulations, automakers operating in Canada and Mexico could be dealing with a major blow to their business plans by next year. The price of vehicles in the United States would rise, eroding sales. According to the Center for Automotive Research, the average vehicle price would increase by about $4,000 if a blanket tariff with no exemptions for either Canada or Mexico is applied. However, the Trump administration could choose to exempt auto parts from tariffs and place fees only on finished vehicles, thereby softening any price hike. The White House could also drop the tariff from the originally threatened 25 percent to a much lower level. Or Mexico and Canada could receive tariff exemptions to soften the negative effects on U.S. manufacturers and consumers. But exemptions are uncertain, and vehicles that do not qualify for tariff-free treatment under new NAFTA rules of origin could still get hit by heavier tariffs.

Other scenarios could also affect Canadian and Mexican exports. For example, if the United States implements a quota system on vehicle components or without country exemptions, the economic impact for Canada and Mexico could be more severe than with hefty tariffs alone. A quota would limit imports at a specific level, whereas a tariff would merely drive up the price of vehicles, but not necessarily erode exports as severely as a quota. Under a blanket quota system that limits imports to a specific level, NAFTA nations would feel a significant economic impact, though the severity would depend on the quota amount.
A chart compares the auto manufacturing wage in Mexico, Canada and the United States.

The Fallout in Mexico and Canada

Slowing or declining vehicle exports will be a fact of life under any scenario in which the United States forbids or limits exemptions for Canadian or Mexican vehicles and their components. But the impact of tariffs or quotas on Ottawa or Mexico City will extend beyond economic losses. In Mexico, the threat of Section 232 action on its auto exports will probably limit the ability of the next president, Andres Manuel Lopez Obrador, to pursue more ambitious social spending. His administration plans to boost youth work programs and pensions to cement its popularity among voters in future elections. But it most likely won't be able to create extensive, permanent social spending mechanisms to address the country's deep poverty without raising taxes. Yet hefty tax hikes that could spook foreign investors or further affect the country's private sector will probably be taken off the table if the Lopez Obrador administration finds itself trying to mitigate the impact of U.S. automotive trade barriers.

In Canada, the consequences could be electoral as well as economic. Even if the Trump administration is mainly using automotive tariffs as a negotiating tactic to get Canada to cave on NAFTA negotiations, the government of Prime Minister Justin Trudeau may be in a no-win situation. Auto tariffs would be catastrophic for Canada's U.S.-dependent automotive manufacturing clusters. But to avoid tariffs, the Canadian government would likely have to accept the U.S. demands allowing it to opt out of the treaty's dispute-settlement mechanisms and calling for Canada to reduce import controls on agricultural products such as dairy and poultry. Even if Trudeau avoids automotive tariffs, he could pay the price at the polls in the 2019 parliamentary elections if he opens sensitive economic sectors to U.S. competition.

Section 232 tariffs will be a major part of the NAFTA trade landscape in 2019, but they are only part of the story. The NAFTA concessions that Washington gets from Ottawa and Mexico City, combined with automotive tariffs, could in the long run dissuade some automotive companies from major investments in either partner nation. This effect won't be universal — after all, there will be companies for which importing vehicles and components, despite heavy tariffs, will be an unavoidable part of doing business in North America. But over the next few months, the United States will likely get Canada and Mexico to agree to stricter rules of origin requirements and could leave some Mexican exports exposed to tariffs — even if they would qualify for tariff-free trade under the current system. The Trump administration is trying to shift the rules of North American automotive trade in its favor as much as possible, and in doing so, it may end up drastically altering investment decisions and trade patterns for years to come.
Title: New US Mexico 'NAFTA'? agreement
Post by: DougMacG on August 28, 2018, 05:47:32 AM
The improvements that favor the US, also favor Canada. It would be crazy for them to not sign on. Doug
---------
"At the rate things are going, this could be the shortest “trade war” on record."  John Hinderaker, Powerline
https://www.powerlineblog.com/archives/2018/08/more-progress-on-trade.php

Under the changes agreed to by Mexico and the United States, car companies would be required to manufacture at least 75 percent of an automobile’s value in North America under the new rules, up from 62.5 percent, to qualify for Nafta’s zero tariffs. They will also be required to use more local steel, aluminum and auto parts, and have 40 to 45 percent of the car made by workers earning at least $16 an hour, a boon to both the United States and Canada and a win for labor unions, which have been among Nafta’s biggest critics.
Title: New North American Trade Agreement strengthens US position with China
Post by: DougMacG on August 29, 2018, 10:30:16 AM
"the trade agreement strengthens the US position to play hardball with China,"
https://www.cnbc.com/2018/08/28/the-us-mexico-trade-deal-may-be-bad-news-for-china-experts-say.html
Title: Re: Trade, Deal with Mexico includes protections against China
Post by: DougMacG on September 01, 2018, 06:24:52 AM
There are new provisions relating to digital content protections, intellectual property (IP) rights, trade secret safeguards and most notably, IP theft by state-sponsored enterprises.

http://thehill.com/opinion/finance/404532-the-hidden-benefits-of-the-us-mexico-trade-deal
Title: Trump fux with the Canadians
Post by: Crafty_Dog on September 01, 2018, 09:21:40 PM
https://www.newyorker.com/news/news-desk/what-does-trump-want-with-canada-and-nafta?mbid=nl_090118%20Daily%20%281%29&CNDID=50142053&utm_source=Silverpop&utm_medium=email&utm_campaign=090118%20Daily%20%281%29&utm_content=&spMailingID=14175227&spUserID=MjAxODUyNTc2OTUwS0&spJobID=1480082478&spReportId=MTQ4MDA4MjQ3OAS2
Title: Re: Trump fux with the Canadians
Post by: G M on September 01, 2018, 09:58:31 PM
https://www.newyorker.com/news/news-desk/what-does-trump-want-with-canada-and-nafta?mbid=nl_090118%20Daily%20%281%29&CNDID=50142053&utm_source=Silverpop&utm_medium=email&utm_campaign=090118%20Daily%20%281%29&utm_content=&spMailingID=14175227&spUserID=MjAxODUyNTc2OTUwS0&spJobID=1480082478&spReportId=MTQ4MDA4MjQ3OAS2

Good.
Title: GPF: US-Mexico NAFTA negotiations (Canada)
Post by: Crafty_Dog on September 07, 2018, 01:36:19 PM

From the Forecast: “NAFTA negotiations are ongoing, but the probability of the trade deal ending and tariffs being restored is extremely low. All parties need the relationship. In the U.S., too many states benefit from trade with Mexico or Canada. Mexico is the top export market for California and Texas, which means the two largest congressional delegations are opposed to ending NAFTA. Regardless of what the president wants, the deadlock holds.”

Update: The agreement reached on Aug. 27 by the U.S. and Mexico was not overly surprising: At the beginning of the year, we expected NAFTA to survive in some form, and the two sides had been telegraphing that they were close to a deal for weeks. But the way the U.S. and Mexico chose to break the news that they had reached an agreement forced us to re-examine the forecast in its entirety. That’s because U.S. President Donald Trump floated the idea that NAFTA would turn into the U.S.-Mexico Free Trade Agreement and exclude Canada if Ottawa could not get its act together by Aug. 31.

At first, this seemed to cut against the grain of our forecast that NAFTA would survive. After all, NAFTA is a trilateral free trade agreement, and the U.S. was suggesting that it would become a bilateral one. Canada might be worked in, or the U.S. might sign a separate bilateral deal with Canada, or the two sides might not reach an agreement at all and the recent tariffs imposed by the U.S. and Canada might just be a prelude to a larger trade conflict. Mexico and the U.S. both made concessions in their agreement, but just by signing a deal, they also took substantial leverage away from Canada. Now, if NAFTA talks fail, the U.S. can blame it on Canada because, after all, U.S. compromises were good enough for Mexico.

As events have developed since the hastily made announcement, it has become clear that all of this was more the melodrama of a negotiation soap opera than a real break between the U.S. and Canada. Aug. 31 was an unrealistic deadline for talks of this scale and complexity. In other words, it was a negotiating tactic to try to force Canada into joining the agreement on the United States’ schedule. It was also a completely arbitrary deadline. Canada and the U.S. have until Oct. 1 to present an agreement to Congress – and Mexico’s economy minister has said a deal might be in place as soon as Sept. 7.

To be sure, both sides continue to talk tough. Canadian Prime Minister Justin Trudeau has said no NAFTA deal would be better than a “bad NAFTA deal.” Canadian negotiators have insisted on a dispute resolution mechanism similar to Chapter 19 in the current agreement and protections for Canadian cultural industries (like broadcast and print media). The U.S., meanwhile, has accused Canada of putting up barriers to protect its dairy industry and being unwilling to offer concessions on the issue. And Trump was quoted in a Canadian newspaper as saying he won’t offer any concessions to Canada – that was the apparent reason that negotiations ended last week without significant progress.

But the two sides are still talking. After breaking from negotiations on Aug. 31, high-level U.S. and Canadian representatives resumed talks this week. For all its bluster, the White House’s notification to Congress of its intention to sign a trade deal mentioned Canada – a notable shift from just a week prior, when the White House seemed poised to exclude Canada completely. The U.S. and Mexico were at an impasse for two months over issues related to the auto industry and a sunset clause, but there was enough political will on both sides to get a deal done. The U.S. and Canada have a tough few weeks of negotiations ahead of them, but all indications suggest that a compromise will be reached by the Oct. 1 deadline
Title: GPF: US-China
Post by: Crafty_Dog on September 15, 2018, 04:07:10 PM
A day after U.S. Treasury Secretary Steven Mnuchin extended an invitation to his Chinese counterpart to hold another round of trade talks aimed at avoiding yet another escalation, the White House has apparently reversed course. According to Bloomberg, U.S. President Donald Trump has ordered his aides to proceed with implementing the next round of tariffs on Chinese exports – 25 percent targeting some $200 billion in goods. An announcement on the new tariffs is reportedly being delayed until the administration can finish a lengthy process of revisions based on objections made during the public comment period, which expired at the beginning of September. Implementation of this round was expected to be delayed until after the next Mnuchin-led talks could be held, which suggested that the White House may have been feeling the heat from U.S. trade and industry ahead of midterm elections, but this may no longer be the case. Regardless, both the U.S. and China are digging in for a protracted fight. The U.S. thinks it has all the leverage. China thinks the stakes are too high to cave.
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on September 16, 2018, 06:19:53 AM
"A day after U.S. Treasury Secretary Steven Mnuchin extended an invitation to his Chinese counterpart to hold another round of trade talks aimed at avoiding yet another escalation, the White House has apparently reversed course."

Offer and acceptance in basic contract law, the offer is open until accepted, rescinded or expired.  Key phrase above is "a day after".  When someone makes you a good offer in your best interest, say yes, not I'll think about it.  Add game theory and Trump theory to theory to that and the idea is to keep the other party off balance, not ever knowing what you will do next until a deal is done.  Trump  could have paid Woodward to write that book telling Un, Putin and Xi that he is nuts.
Title: Re: Trade and Globalization Issues: Mead, USMCA
Post by: DougMacG on October 03, 2018, 02:21:13 AM
https://www.wsj.com/articles/trumps-instincts-triumph-on-trade-1538433226

OPINION  GLOBAL VIEW
Trump’s Instincts Triumph on Trade
His unconventional methods didn’t lead to the catastrophe critics promised.
 
By Walter Russell Mead
Oct. 1, 2018
...
 U.S.-Mexico-Canada Agreement requires that cars be made with 75% North American components to escape tariffs. Forty percent of each car must also be manufactured in facilities where workers earn $16 an hour or more on average. Crucially, Canada has also cracked open the door to its dairy markets for American farmers.
Title: WSJ: Mead on Trump and Trade
Post by: Crafty_Dog on October 03, 2018, 11:03:53 AM
https://www.wsj.com/articles/trumps-instincts-triumph-on-trade-1538433226
Title: WSJ: A Trade War America can't afford to lose
Post by: Crafty_Dog on October 04, 2018, 08:29:20 AM
A Trade War America Can’t Afford to Lose
The stakes are so high, a Nafta-like rewrite would be a disaster.
12 Comments
By Jeff Moon
Oct. 3, 2018 7:00 p.m. ET
A factory worker in Wuxi, China, Sept. 16.
A factory worker in Wuxi, China, Sept. 16. Photo: aleksandar plavevski/epa-efe/rex/EPA/Shutterstock

President Trump has raised the stakes so high in his China trade war that he can’t afford to lose. If he comes away with anything less than a deal guaranteeing significant, verifiable reforms to Beijing’s mercantilist trading practices, he risks imperiling American business prospects in China for years.

A settlement that merely tinkers with the status quo—like the recent reworking of the North American Free Trade Agreement—would spell long-term political and economic disaster. The Chinese know that future U.S. presidents are unlikely to match Mr. Trump’s rhetoric and personal political investment in the trade issue. Beijing would interpret any unfulfilled threat from Mr. Trump as proof that it need never yield to U.S. trade demands, having shown it can withstand maximum American economic pressure. Chinese leaders will conclude that they have survived the Americans’ best effort to pry open their markets. They will then feel free to perpetuate indefinitely their discriminatory trading practices and industrial policies.

History provides a cautionary tale. President Clinton threatened during the post-Tiananmen period to condition China’s most-favored-nation trading status on its progress on human-rights issues. After much wrangling, Mr. Clinton realized he had overplayed his hand. He backed down in 1994, leaving the affair as the high-water mark of American pressure on China over human rights. The issue subsequently receded into the background of the bilateral relationship, to the point that the Trump administration now raises human rights with the Chinese as an afterthought, if at all.

The American business community appears not to appreciate fully that precedent, and they underestimate the danger ahead. Businesses and trade associations overwhelmingly have opposed Mr. Trump’s tariff policy, and they hope to avoid short-term pain by pressuring the president to withdraw the tariffs. But the long-term stakes of the trade war have increased now that Mr. Trump has escalated the conflict beyond the point of no return. If Mr. Trump now settles the fight he has picked with China for little or nothing, he will signal that China can ignore longstanding demands into the indefinite future, along with any threats seeking a level playing field for U.S. businesses in the Chinese market.

Mr. Trump is living out the old maxim that you need to be careful what you ask for because you just might get it. Now that he has the trade war he so vigorously sought, he bears ultimate responsibility for his gamble over America’s trade with China. He better win, or else.

Mr. Moon is a China trade consultant and former assistant U.S. trade representative for China.
Title: Re: WSJ: A Trade War America can't afford to lose
Post by: DougMacG on October 05, 2018, 08:57:24 AM
If I understand him correctly, we need to pull together as a nation and prevail, whatever it takes.  I agree.

Argue all we want about whether Trump should have picked this fight at this time, the fight is on.

The Mexico Canada deal is a victory for Trump. It is not a perfect political or economic document, but he picked a fight, made it better, and got it done
If he can finish resolving the issues with Europe, keep our economy roaring and mostly survive the midterms, then all the pressure is back on China.

The China trade issue and the North Korean nuclear issue can be solved all at once, once China is ready. If America doesn't cave first.
Title: Re: WSJ: A Trade War America can't afford to lose
Post by: G M on October 05, 2018, 02:28:21 PM
If I understand him correctly, we need to pull together as a nation and prevail, whatever it takes.  I agree.

Argue all we want about whether Trump should have picked this fight at this time, the fight is on.

The Mexico Canada deal is a victory for Trump. It is not a perfect political or economic document, but he picked a fight, made it better, and got it done
If he can finish resolving the issues with Europe, keep our economy roaring and mostly survive the midterms, then all the pressure is back on China.

The China trade issue and the North Korean nuclear issue can be solved all at once, once China is ready. If America doesn't cave first.

Exactly!
Title: GPF: USMCA clause against deals with China
Post by: Crafty_Dog on October 13, 2018, 11:42:34 AM
The fallout of NAFTA’s successor continues to spread. Despite a clause in the United States-Mexico-Canada Agreement all but prohibiting members from making future free trade agreements with China, Ottawa and Mexico City are still pursuing stronger economic ties with Beijing. Bloomberg reported that Canada and China are still looking for ways to increase bilateral trade. Earlier this week, their foreign ministers discussed the trade and legal frameworks of the World Trade Organization and the USMCA. And in Mexico, the Zhonghua Business Association said the new North American free trade deal would only encourage further Chinese investment in Mexico. The two countries, in fact, will hold a business forum and expo early next month in Mexico City. It’s unlikely that the U.S. could introduce similar anti-China commerce clauses in other trade agreements, but it may try for less aggressive provisions against China. The stipulation in the USMCA prohibiting currency manipulation, for instance, may become a regular feature of future U.S. trade deals. U.S. Treasury Secretary Steven Mnuchin said including such a clause should be considered a best practice – one that Washington would use in its current trade negotiations with Japan and in other talks with parties such as the EU.
Title: Trade Issues: China is ready to talk
Post by: DougMacG on November 06, 2018, 09:47:56 AM
China ready to resolve trade differences with US now that Trump's midterms are over.
Who could have seen that coming?
https://dogbrothers.com/phpBB2/index.php?topic=2563.msg112919#msg112919
"If [Trump] can...survive the midterms, then all the pressure is back on China."
-------------------------------

China is ready to talk to resolve US trade war, says Vice-President Wang Qishan
The two countries ‘wish to expand cooperation’ and Beijing is prepared to ‘push for a proposal acceptable to both sides’
Tuesday’s speech strikes similar themes to those in Xi Jinping’s address a day earlier

https://www.scmp.com/news/china/diplomacy/article/2171856/china-ready-talk-resolve-us-trade-war-vice-president-wang
------------------------------
China's last chance for a US surrender has passed, at least for the next 6 years of Trump.  They need a deal with Trump.  This won't be easy but needs to be done now.
Title: Re: Trade and Globalization Issues: zero for zero
Post by: DougMacG on November 15, 2018, 07:40:22 PM
https://www.wsj.com/articles/mr-president-its-time-for-zero-tariffs-1539816089?redirect=amp#click=https://t.co/oUCFU1MIuC

The “zero for zero” offer should include three components: zero tariffs, zero subsidies and zero nontariff barriers.
Title: Re: Trade and Globalization Issues:
Post by: G M on November 15, 2018, 07:54:50 PM
The US policy should boil down to: Whatever you give us, we give you.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on November 15, 2018, 08:18:37 PM
A.K.A. "Tit for tat" which is, coincidentally, the best strategy when the "Prisoner's Dilema" game repeats.
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on November 16, 2018, 06:11:36 AM
The US policy should boil down to: Whatever you give us, we give you.

Except that what we give them tor tariffs is a tax that hurts our consumers and businesses.

Imports and exports already compete with the with local goods with the disadvantage of shipping charges, such as selling US made cars in Germany or China where they make cars locally.

The right answer is zero, zero, zero for tariffs, subsidies and non-tariff barriers.  As we match or respond disproportionately or shut off unfair trade altogether, we need to articulate that the right answer for prosperity on both sides is zero.  The trade war either ends at (or very near) zero, or it ends in poverty for all.  Closed economies fail and one-sided US openness is a thing of the past.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on November 16, 2018, 08:27:00 AM
That is the pure economic argument, but is there not more to it than that?
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on November 17, 2018, 07:58:31 PM
That is the pure economic argument, but is there not more to it than that?

Please expand on your thinking here.
Title: US China Trade, SCMP reports the structure of a deal
Post by: DougMacG on November 17, 2018, 08:00:34 PM
https://m.scmp.com/news/china/diplomacy/article/2173738/chinas-truce-deal-includes-offer-buy-more-us-natural-gas
Title: GPF: Trade looks bleak
Post by: Crafty_Dog on November 27, 2018, 10:48:57 AM


Global trade looks bleak. The latest World Trade Organization data shows a drop in activity for all major drivers of global trade. The organization lowered its trade indicator to 98.6. (Anything under 100 shows below-trend growth in trade.) Market analysts have also said the WTO’s estimates for trade growth – 3.9 percent this year and 3.7 percent next year – are too optimistic. Shipping industry data corroborates these numbers. The Netherlands Central Planning Bureau noted that rates for containers carrying finished goods fell by 26.4 percent, and rates for dry-bulk vessels carrying raw materials fell 38.4 percent, from highs posted earlier this year. Much of this has been attributed to the U.S. trade wars, which show no sign of abating. U.S. President Donald Trump said he is ready to make good on his threat to raise tariffs on $267 billion worth of Chinese goods. And yesterday, he warned the United Kingdom that the current Brexit deal too strongly favors the European Union and may affect the U.K.’s ability to trade with the U.S. in the future.
Title: SOGI in the USMCA?
Post by: Crafty_Dog on November 29, 2018, 03:26:35 PM
https://www.nationalreview.com/2018/11/trade-agreements-are-not-the-place-to-make-laws-on-gender-identity/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202018-11-29&utm_term=NR5PM%20Actives
Title: Wesbury: Total Trade up strongly
Post by: Crafty_Dog on December 06, 2018, 10:56:06 AM
Data Watch
________________________________________
The Trade Deficit in Goods and Services Came in at $55.5 Billion in October To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 12/6/2018

The trade deficit in goods and services came in at $55.5 billion in October, slightly larger than the consensus expected $55.0 billion.

Exports declined $0.3 billion, led by nonmonetary gold and soybeans. Imports rose $0.6 billion, led by pharmaceuticals, other goods, and passenger cars.

In the last year, exports are up 6.3% while imports are up 8.5%.

Compared to a year ago, the monthly trade deficit is $8.5 billion larger; after adjusting for inflation, the "real" trade deficit in goods is $8.2 billion larger than a year ago. The "real" change is the trade indicator most important for measuring real GDP.

Implications: Trade data have received extra attention of late from pundits looking to play up trade war impacts, but too often they end up missing the forest for the trees. Yes, the trade deficit widened in October to $55.5 billion as imports rose, while exports declined slightly. But what matters more than the headline trade deficit number - and which you will not hear about as much - is the total volume of trade – imports plus exports – which signals how much businesses and consumers interact across borders. Looking at that data, US trade hit a new record all-time high in October – the opposite of what we would expect in a trade war. In terms of the trade deficit in October, exports fell by $0.3 billion, while imports rose by $0.6 billion. Overall, in the past year exports are up 6.3%, while imports are up 8.5%, signaling very healthy gains in the overall volume of international trade and easily outstripping the pace of nominal GDP growth. While many are worried about protectionism from Washington, especially regarding China, we continue to think this is a trade skirmish, and the odds of an all-out trade war that noticeably hurts the US economy are slim. We believe better trade agreements for the United States and world are on the way. We have already seen it happen with several countries, and now China looks to be extending a bit of an olive branch, too. Average tariffs in China will be cut from 9.8% last year to 7.5% this year and on Tuesday, China released a 58-page document showing an array of punishments for IP theft moving forward. We see this as real progress, and just the start. The US's negotiating position simply continues to strengthen, in no small part due to the rise of the US as an energy powerhouse. As recently as 2005, the US was importing more than ten times the petroleum products that we were exporting. As of October, imports are down to 1.2 times exports and this trend should continue. Not only does this reduce US reliance on foreign trade partners and lower their bargaining power, it has served to shift power dynamics on a global scale (witness the political turmoil in Saudi Arabia). So at the end of the day, we will continue to watch trade policy as it develops, but don't see any reason to sound alarm bells. In other news this morning, initial jobless claims declined 4,000 last week to 231,000. Meanwhile, continuing claims fell 74,000 to 1.63 million. Also this morning, the ADP index reported private payrolls rose 179,000 in November. Plugging all of these labor market data into our model suggests Friday's employment report will show nonfarm payrolls rose a healthy 193,000 in November
Title: WSJ: No USMCA until tariffs have been lifted
Post by: Crafty_Dog on December 10, 2018, 06:41:40 AM
No New Nafta Until Tariffs Have Been Lifted
Trump made a promise, and Congress should hold him accountable for it.
12 Comments
By David McIntosh
Dec. 9, 2018 5:51 p.m. ET

Economists across the political spectrum have cautioned President Trump against tariffs for the harms they inflict on the U.S. economy. That hasn’t stopped the president from imposing them on imports from allies and adversaries alike. Fortunately, with the signing of the United States-Mexico-Canada Agreement, or USMCA, at least some of the tariffs the administration has imposed can be lifted.

That’s what Mr. Trump said he would do. In March he tweeted: “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.” Senior Trump administration officials such as Larry Kudlow and Steven Mnuchin echoed that tariffs were a negotiating tactic to get to a better deal. Well, now we have that deal—“the most modern, up-to-date, and balanced trade agreement in the history of our country,” according to the president. Lifting tariffs on steel and aluminum would show the markets Mr. Trump is following through on his promise and genuinely pursuing his stated goal of zeroing out tariffs.

But for some reason the Trump administration is dithering. Perhaps it misguidedly hopes that Midwestern steel-producing states will reward Mr. Trump in 2020 for keeping the tariffs.

The ball is now in Congress’s court. Congress need not be limited by the president’s take-it-or-leave-it ultimatum on USMCA. Instead, the House speaker and Senate majority leader should refuse to bring the USMCA implementing legislation up for a vote until after Mr. Trump lifts the tariffs, at least with respect to Canada and Mexico.

These tariffs have already wreaked havoc on American businesses that use aluminum and steel to produce everything from automobiles to beer kegs and baseball bats. Twenty-six percent of American steel imports come from Canada and Mexico. Most other countries have only a marginal impact on the market. China, even with its much-trumpeted steel dumping, accounts for only 3% of U.S. steel imports.

By increasing the cost of raw materials, the tariffs are essentially taxes on U.S. companies. They make American-made products more expensive for U.S. consumers and less competitive abroad. They raise the price Americans pay for cars by around $300, according to Morningstar analysts. A study from the Trade Partnership estimates that U.S. steel and aluminum tariffs, in combination with the countermeasures they have provoked, will eliminate around 400,000 U.S. jobs on net in affected sectors.

Now that the USMCA has been signed, there is no reason for the tariffs on steel and aluminum to remain in place. U.S. consumers and businesses have endured them long enough. Congress should not consider the USMCA legislation until after the tariffs have been removed. There should be no question that President Trump will keep his word about ending the tariffs once a “new & fair NAFTA agreement is signed.” The signing happened Nov. 30; the tariffs should be removed today.

Mr. McIntosh, a former U.S. representative from Indiana, is president of the Club for Growth.
Title: GPF: Manufacturers in China feeling the heat
Post by: Crafty_Dog on December 27, 2018, 10:48:05 PM
   

In China, Manufacturers Feel the Heat of the Trade War
Dec 27, 2018
By Phillip Orchard

Summary

The United States and China remain locked in a scrum over trade, present truce notwithstanding. Beijing is grappling for leverage while struggling to keep its own side intact. One of its greatest risks: Some of the biggest exporters in China could simply decide they want no part of this game, take their ball and go, if not home, to some other low-cost manufacturing hub.

According to a Peterson Institute for International Economics study, the first two rounds of U.S. tariffs disproportionately affected U.S. imports from China-based affiliates of multinational firms, rather than Chinese-owned firms. According to an October study conducted by the American Chamber of Commerce in South China – China’s most export-heavy region – around 85 percent of U.S. companies in the region said they were suffering from the new tariffs, compared to around 70 percent of their Chinese counterparts. In other words, the firms in China hurt most by the trade war are the ones most capable of leaving. More than 70 percent of U.S. firms with operations in China surveyed said they were mulling whether to delay or cancel new investments in China or considering leaving for greener, cheaper pastures altogether. (Just 1 percent of the firms said they were planning on moving operations back to the U.S.)

There have been growing hints that a nascent exodus is underway. Samsung, the world’s largest smartphone maker, which has been increasingly relying on factories in Vietnam and India, announced last week it would end production at its factory in Tianjin. On Dec. 5, Pegatron, a key supplier of components for Apple products, announced it’s moving some production to a new factory in Indonesia. Over the past year, Japan’s Panasonic, Suzuki and Nikon all announced closures in China in favor of Southeast Asian hotspots, including Thailand and Singapore, as well as Mexico. Even Foxconn – the paragon of efficient manufacturing at a staggering scale in China – is reportedly eyeing a move to Vietnam.

But there’s a big difference between “considering relocation” and packing up the moving vans, and that difference will define how bad things get for China. This Deep Dive examines China’s vulnerability as the trade war accelerates the rerouting of global supply chains. It looks at what advantages China’s neighbors can dangle in front of firms eager to avoid U.S. tariffs and rising labor and land costs in China, but also considers the reasons why many firms will opt to keep some of their operations in the Middle Kingdom.

Why Firms Are Souring on China

Multinational firms were eyeing the exits in China long before the election of U.S. President Donald Trump, who rode to office threatening a trade war with Beijing. This happens when a country starts to get rich. As China has become wealthier, the increase in living standards has pushed labor and land costs ever higher and driven political demand for costly environmental regulations. And so Chinese exports have become less competitive, giving foreign firms cause to look to more affordable alternatives. The challenge for China intensified as its neighbors in South and Southeast Asia, in particular, began investing heavily in manufacturing and export infrastructure (particularly since they put the regionwide Cold War chaos largely behind them). In northern Vietnam, for example, wages are little more than half those in the manufacturing heartland of southeastern China. As a result, foreign investment has surged in Vietnam, rising nearly 8.5 percent in the first half of 2018 over the same period in 2017 – itself a record year. Across Southeast Asia, net foreign direct investment inflows jumped 18 percent year on year during the first half of 2018 to $73 billion, according to United Nations figures.
 
(click to enlarge)

This ordinarily wouldn’t be all bad news for a country like China. Rising wages generally lead to a more upwardly mobile and less restive populace, and greater consumer power makes a country less vulnerable to a sharp downturn in exports. But the trade war threatens to magnify at least three problems particular to China.

First, the Communist Party of China deeply fears social unrest and thus cannot tolerate the kind of spike in unemployment that would accompany short-term periods of economic disruption. More than 200 million Chinese people work in manufacturing. It’s bad for China if firms hit by tariffs have to start downsizing. It’s a whole lot worse if firms begin abandoning the country altogether and new foreign investment simply dries up.

Second, there are effectively two Chinas. Though the coasts have become wealthy and are scrambling up the manufacturing value chain, like Japan and South Korea did before them, vast swaths of the country – home to hundreds of millions of people – have been left behind, meaning low-skill, labor-intensive manufacturing sectors like apparel are necessary to meet China’s employment needs. (China accounted for just over 30 percent of global apparel exports last year, but this is down from 40 percent eight years ago.) Most of these industries have thus far been spared from U.S. tariffs, but if Trump ever follows through on his repeated threats to effectively tax all imports from China, such operations would be the easiest to move to countries like Bangladesh, Vietnam and Cambodia.

Third, high-value exports like electronics, metals and auto parts – sectors critical to China’s efforts to escape the middle-income trap – are the main focus of the U.S. trade offensive. Exporters in China facing 10 percent tariffs have largely been able to weather the added costs due to a weaker yuan, tax and regulatory changes and the fact that U.S. consumers are absorbing some of the costs. But the tariffs will jump to 25 percent on March 2 if the two countries are, as we expect, unable to reach a comprehensive deal. A 25 percent tax can’t be shrugged off so easily.

These new costs aren’t the only factors making multinational firms uneasy. Businesses are worried about running afoul of forthcoming U.S. rules banning U.S. government agencies from purchasing any products made in factories containing communications or surveillance equipment produced by five Chinese tech giants – tech that’s hard to avoid inside China. There is widespread suspicion that doing business in China means handing over proprietary intellectual property and technology to local competitors.

There’s also concern that China will retaliate against the U.S. tariffs by boosting informal barriers to trade. (More than half the firms polled in the October American Chamber of Commerce survey reported an increase in non-tariff barriers such as stricter regulatory scrutiny and slower customs clearance times.) And now, the U.S.-China trade war appears at risk of devolving to tactics like hostage-taking following the U.S.-requested arrest of the CFO of Chinese firm Huawei in Canada and China’s subsequent detainment of three Canadians.
 
(click to enlarge)

In short, the trade war has created a confluence of pressures on exporters in China. And the siren song of nearby manufacturing hubs – on both ends of the manufacturing value chain – is sounding ever sweeter.

Reasons to Stay Put

Still, there are ample reasons for firms in China to stay put. Less than 19 percent of Chinese exports in 2017 went to the U.S., and other major consumer markets have yet to follow the U.S. lead in imposing tariffs on China. So many of the biggest manufacturers in the country – ones that serve consumer markets across the globe – will be reasonably well-equipped to absorb the tariff costs and keep at least some of their Asian and European Union-focused operations in place.

For firms dependent on the U.S. market, relocating is neither quick nor cheap. Relocation requires new facilities, new workforces to recruit and train, new regulations to navigate, new bribes to pay and new hiccups that can cause catastrophic disruptions. Deep-pocketed multinational firms may be able to swing this, but the small and medium-sized enterprises that China relies on most for employment operate on thinner margins and generally can’t afford missteps.

All told, relocation is generally a three- to five-year process, according to the Economist Intelligence Unit. U.S.-China trade tensions aren’t going anywhere, but that doesn’t mean the current U.S. tariffs will last forever. Companies will be loath to take on the costs of moving unless it becomes clear exactly how the trade war will shake out.

Moreover, if the Trump administration is truly bent on restoring lost U.S. jobs and bringing the broader U.S. trade deficit down, it will need to apply tariffs to other low-cost manufacturers, too. We don’t think this will be the case outside of a few sectors; the broader geopolitical concerns that have bred support for the White House offensive against China do not apply to policies targeting U.S. friends and allies. But the risk of firms finding themselves in the same situation elsewhere is still high enough to give them ample reason to move slowly.

Indeed, even with U.S. tariffs, China is likely to remain competitive as a manufacturing hub. Rising labor and land costs in China are offset (to some degree) by the efficiency of locating operations there. China’s coastal export cities are well-oiled machines: Home to 13 of the world’s 50 largest ports, China’s superb infrastructure reduces time to market. And a massive, well-trained workforce – at more than 630 million strong, twice the size of all of the Association of Southeast Nations members combined – allows companies to scale up quickly and respond to rapid shifts in consumer demand. Perhaps most important, the dense clustering of industries in different parts of China allows for tightly integrated supply chains and the “just-in-time manufacturing” that companies have come to rely on to stay nimble, responsive to market changes and profitable.
Some of these advantages would inevitably be lost outside of China, even though South and Southeast Asia are dotted with advanced manufacturing hubs. Some, like Penang and Port Klang in Malaysia and Thailand’s eastern seaboard, have excellent infrastructure and deep experience in high-tech industries. Some, in countries like Bangladesh, Indonesia and India, have large, low-cost labor pools. Given its proximity to Guangdong, Vietnam offers firms the rare advantage of being able to maintain cross-border supply chains.

But few neighboring manufacturing hubs offer all the advantages China does, and those that do are quickly getting crowded, pushing up labor and land prices and eroding their cost advantage. In Vietnam, for example, land costs in key industrial zones near major deep-water ports have reportedly increased more than 25 percent over the past year alone. As a whole, ASEAN has the world’s third-largest labor force at more than 350 million workers. The bloc is trying to ease the movement of capital and goods and harmonize regulations among its member states through the establishment of the ASEAN Economic Community. But implementation has been very slow, and the group remains rife with both formal and informal trade barriers. ASEAN integration is further hindered by extraordinary geographic fragmentation in Southeast Asia, which is not only home to sprawling archipelagos and unforgiving tropical terrain, but also highly vulnerable to natural disasters. According to the Asian Development Bank, ASEAN states together will need to invest more than $60 billion annually in infrastructure, particularly in energy and transport, over the next 12 years to sustain the bloc’s economic growth. The more a firm’s supply chain is dispersed in multiple countries and the more it has to rely on clogged ports or an untrained labor force, the more likely there are to be delays, hidden costs and so forth.

India perhaps comes closest to matching China’s competitive advantages. Last year, India’s labor force clocked in at a hefty 520 million people, and because of extreme class disparities, it can meet the labor cost needs of firms up and down the value chain. It’s particularly competitive in the garment industry, thanks in part to robust local cotton production. But in 2017, India accounted for 1.7 percent of global merchandise exports compared to China’s 12.8 percent – in part because India’s strengths are mainly in services and low-end manufacturing as it still lacks the infrastructure needed for high-end manufacturing. Due to factors like the convoluted regulatory environment, in 2017, India ranked just 77th on the World Bank’s ease of doing business index (a jump of 23 spots over 2016), compared to 46th for China, 27th for Thailand and 15th for Malaysia. So, despite India’s draws, only 6.5 percent of U.S. firms in China surveyed in a September report by the American Chamber of Commerce said they were considering relocating to India, compared to 18.5 percent for Southeast Asia.

There’s another huge (and growing) incentive to stay in China: It is now home to the second-largest consumer market in the world. According to Bain, if current trends hold, household consumption in China is expected to grow around 5-6 percent annually over the next decade, as some 180 million more people move into the middle class. General Motors sold more than 4 million cars in China in 2017 – over 1 million more than it sold in the U.S.

Even as Chinese economic growth slows – and even if things get really rough for China in the coming years – there are massive consumption gains still to be made as rapid urbanization and technological proliferation boost living standards. Rising competition from Chinese firms to meet this demand is already putting multinational companies at a disadvantage. Many cannot afford the loss of tariff-free access – and, potentially, the political favor often necessary to avoid unexpected hiccups in China – that would come with abandoning the country altogether. ASEAN alternatives, though growing in their own right (the bloc is expected to have the world’s fourth-largest consumer market by 2050), just don’t have the same allure. That’s especially true since the U.S. withdrawal from the Trans-Pacific Partnership. Signatories like Malaysia and Vietnam won’t be able to dangle tariff-free access to the U.S. market unless the United States re-embraces global trade. We expect this to happen eventually, but it could take decades.

The Bottom Line

Nonetheless, firms are increasingly routing their supply chains around China, and the trade war will inevitably accelerate this shift. Well-resourced multinational firms are already well-practiced in building out sprawling global supply chains and have no loyalty to China. They rely too heavily on seizing even minor cost and efficiency advantages, and are too concerned about the political and investment climate in China and enduring tension with the U.S., to stand pat. Infrastructure buildups in low-cost manufacturers in Southeast Asia and Latin America, along with the proliferation of bilateral and multilateral free trade agreements promising preferential trade access to major consumer markets like the EU and Japan, will further narrow China’s long-held advantages. (Ironically, China’s Belt and Road Initiative may work against Chinese interests as its projects help improve rival manufacturers’ competitiveness.)

Even Chinese firms have been increasingly keen to get in on the action, opening large manufacturing operations staffed by local labor in countries like Vietnam, Malaysia and Ethiopia. (Since 2000, in fact, Chinese firms have spent more than $9 billion on 869 greenfield investments in the U.S. alone, according to the Rhodium Group.) After all, Japan sidestepped the middle-income trap by evolving from export powerhouse to investment powerhouse over the past two decades, in large part by becoming one of the first advanced economies to move much of its manufacturing abroad. Chinese firms seeking to dodge tariffs will naturally want to follow suit. The question is whether the employment-obsessed CPC, which would rather see its firms move to lower-cost regions in inland China, will let them.

On the whole, the shift away from China will happen more gradually and haltingly than the headlines may suggest – absent a catastrophic deterioration in China’s domestic political situation or escalation in tensions with the U.S. Given the costs of moving and risks of leaving, perhaps the biggest shift will be that new investments increasingly go elsewhere. And among foreign firms that are motivated by U.S. tariffs to leave, the relocation will generally be partial, confined to operations (like final assembly) that minimize supply chain disruption while satisfying U.S. rules of origin requirements. In other words, they’ll be looking to manufacture just enough of a product elsewhere to stamp it with: “Made anywhere but China.”

The post In China, Manufacturers Feel the Heat of the Trade War appeared first on Geopolitical Futures
Title: Three possible Trump Trade outcomes, Greg Mankiw
Post by: DougMacG on January 18, 2019, 06:02:49 AM
I don't like the term never-Trump but Prof Mankiw of Harvard, chief economist for Pres. George W Bush
qualifies as an establishment Republican economist not fully on board with this President.  That said, here are the three outcomes of Trump's trade war that we all know but in his words.
-------------------------
President Trump’s belligerent approach to our trading partners worries most economists, including his former economic advisers Stephen Moore and Arthur Laffer. Their recent book, “Trumponomics,” is mostly a hagiography of Mr. Trump and his economic policies. But even Mr. Moore and Mr. Laffer part ways with the president on international trade. They write that he is playing a “high-stakes game of poker” and “if it doesn’t work, the ramifications scare us to death.”

I can imagine three possible endgames in Mr. Trump’s trade skirmishes.

"The best outcome is for the president to get some serious concessions from bad actors. For example, fearing worse outcomes like punitive tariffs, China might agree to start respecting American intellectual property.  [THIS is the goal.  - Doug]

A second, more likely outcome is that our trading partners accept some minor concessions, and Mr. Trump promotes the new agreements as magnificent deals and giant steps forward. This is what happened with the slightly updated Nafta, now rebranded as the United States-Mexico-Canada Agreement.

The third and most worrisome possible outcome is an escalation of global tensions and a retreat from the principles of open trade that have promoted growth in the United States and abroad over the past half-century.

In other words, the open question about trade policy is whether Mr. Trump is crazy like a fox or just plain crazy."    - Greg Mankiw

[Isn't it possible the truth is somewhere in between?  - Doug]
Title: China Is Losing The Trade War In Nearly Every Way
Post by: G M on January 20, 2019, 12:20:06 PM
https://www.forbes.com/sites/kenrapoza/2019/01/14/china-is-losing-the-trade-war-in-nearly-every-way/

China Is Losing The Trade War In Nearly Every Way

Kenneth Rapoza
Senior Contributor
Markets
I write about business and investing in emerging markets.
TWEET THIS
Exports to the U.S. fell 3.7%, the first nonseasonal decline since October 2016.
China can win if the U.S. stock market sells off and ices Trump’s hawkishness on trade.




China exports fell more than expected in December, signaling more pain ahead as the trade-war fallout starts getting measured by the markets. Photographer: Qilai Shen/Bloomberg © 2018 Bloomberg Finance LP© 2018 BLOOMBERG FINANCE LP

China is still the world’s No. 2 economy and is still the monster of emerging markets, but regardless of those bonafides, Xi Jinping’s country is losing the trade war in nearly every way imaginable.

The arrest of Huawei CFO Meng Wanzhou in Canada last month for breaking U.S. sanctions law, followed by the firing of Huawei sales executive Wang Weijing in Poland last week shows China can be a bad actor, exactly as Washington believes. The Poland story centers around spying allegations, where Wang allegedly sought trade secrets from the government. Huawei’s latest bad headlines show how China tech companies may have risen to prominence by copying foreign technologies in joint venture deals or through white-collar criminal actions such as intellectual property theft and corporate espionage. Huawei is one of China’s most important, private tech firms. It rivals Cisco Systems worldwide.

Thanks in part to Huawei, China is getting beat on the public relations front in the trade war.

Early in the trade war, China thought it get the Europeans as allies. They hate Trump, too. China failed to woo the EU.


The Shanghai Composite is down around 30% in the last 12 months. Only Turkey is doing worse.


China is losing the PR battle. For years, U.S. companies have been complaining that China does not honor intellectual property rights. Washington believes tech powerhouses like Huawei owe much of their growth to IP theft. Photographer: Krisztian Bocsi/Bloomberg © 2018 Bloomberg Finance LP© 2018 BLOOMBERG FINANCE LP

The stock market is a terrible way to measure China growth. Investors know it. So they look to the economic data. Industrial production is still positive but in decline. Quarterly GDP growth is in decline. On Monday, China released weak exports data for the month of December.

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China Trade Data in USD (YoY)

Exports:  -4.4% versus estimate 2% and November’s 5.4%

Imports: -7.6% versus estimate 4.5% and November’s 3%

Trade Balance: $57 billion versus estimate $51 billion and November’s $44 billion

Exports to the U.S. fell 3.7%, the first nonseasonal decline since October 2016. That would indicate an end to the pre-tariff purchasing rush by U.S. companies in the third quarter and into the fourth. Exports to the U.S. had previously climbed over 12% for three consecutive months.

“The Chinese trade numbers released today got all the alarm bells ringing,” says Naeem Aslam, chief market strategist for Think Markets in London and a Forbes contributor. “If you need any evidence how the trade spat is impacting a country’s economic health then look no further than China trade. The lower export number means lower jobs, which means another direct impact on the (Chinese) economy. Donald Trump can be pleased. His policies have brought China to its knees.”

See: Cold War Reboot Pits Chinese Communism Versus American Capitalism — Forbes

 
China down. An investor covers his face in front of a stock board in Shanghai as the A-shares continue to be one of the worst places to invest over the last 12 months. Photograph by On Man Kevin Lee — Getty ImagesGETTY IMAGES

Today’s export growth data also suggest that the recent strength of the Chinese renminbi might be short-lived. Xi may be more eager to strike a trade deal with the U.S. if the economy worsens beyond expectations. Markets expect Xi will have to let real estate and banks loose at the provincial level, something he considers economically unsustainable.

“China needs to take more aggressive measures to stabilize growth,” Nomura economists led by Ting Lu in Hong Kong wrote in a note this morning. Nomura expects China growth to worsen over the next six months.

Recent reports suggest that Beijing will reduce their official GDP growth target to as low as 6% from the current 6.5%. The trade war, a shift in some global business cycles like technology and tighter regulations from Xi’s government are reversing the China growth trend.

Of course, every China bear out there believes the true GDP figure is closer to 2%. Last week’s latest update of China’s inflation showed a drop in prices across the board, not just in oil. Demand is in decline. This is an economy hitting the pause button.

How China Wins


China’s President Xi Jinping plays the long game. He can wait out Trump’s presidency. (Fred Dufour/Pool Photo via AP) photo credit: ASSOCIATED PRESS

China plays the long game. There are no elections on the calendar that threaten to upend Xi’s rule. Unless his economy tanks and unemployment gets out of control, Xi can take a little bit of pain. He’ll be around longer than Trump, who has less than two years left in his first term. Current polls, while early, suggest Trump loses to most Democratic challengers in November 2020. The two biggest China hawks in the Democratic Party—Nancy Pelosi and Chuck Schumer—are not running for president. Xi may be able to assume things return to the status quo, even if current tariffs remain. The previous Democratic administration of Barack Obama preferred only to complain about intellectual property and only used tariffs to target a handful of products, like Chinese tires, under World Trade Organization rules. Trump can care less about the WTO, so China wins if a new Democratic president leaves the trade dispute up to those guys instead of the President. Xi would love that.

Perhaps China's biggest “win” on the trade front is Vietnam’s membership in the Comprehensive and Progressive Transpacific Partnership. For those who have forgotten, Vietnam is an authoritarian country run by Communist Party chief Nguyễn Phú Trọng. Vietnam has become an outpost of Chinese businesses, especially manufacturing and exporters looking for cheaper labor and less regulations. The trade deal is essentially the old TPP, which Trump killed upon entering the White House in 2017.

Like U.S. companies in the past, Chinese manufacturers are shifting some of their supply chains to southeast Asia. This is good for some Chinese companies, but unless they bring Chinese workers with them, it is a headwind for blue-collar workers in China and therefore a brewing problem for Beijing.

China knows the U.S. is slowing, too. U.S. companies like Apple are losing money. Today’s trade data points to evidence that more companies trading with China brought in much less money in December.

Trade analysts from Panjiva research, part of the S&P Global Market Intelligence group, believes the U.S is a net loser from the tariffs because of this. Chinese imports from the U.S. declined 35.8% in December from 10.3% gains in the prior three months. As a result, Chinese imports brought in around $5.8 billion less in December while exports lost $1.53 billion, for a net balance of $4.28 billion of trade value lost, based on Panjiva’s analysis.

China exports account for only 14% of the industrial sector’s revenues, notes Brendan Ahern, CIO of KraneShares, a China-centric ETF firm in New York. That means China is not as export-dependent as the market thinks. “It will be interesting if analysts, who got scorched on the trade data, dial down their expectations for next week’s data dump on retail sales, GDP, industrial production and fixed asset investment,” Ahern says.

They might lower their expectations. China bulls are a dying breed.

“The (trade) numbers suggest that we’re starting to see the impact of the trade war finally feeding into China’s macro-economic data,” says Nick Marro, China analyst for The Economist Intelligence Unit.


The stock market means everything to Trump. If companies report weaker than expected fourth-quarter earnings and blame tariffs, the stock market will fall. Trump may be forced to go easier on China. Xi Jinping would love to keep the status quo, in hopes he can wait out the Trump presidency, now halfway through the first term.

China can win if the U.S. stock market sells off and ices Trump’s hawkishness on trade.

If fourth-quarter earnings show companies getting squeezed because of tariffs and issuing warnings about lower profit margins in the first quarter because of it, then a weaker stock market could put Trump over the edge.

Should the U.S. economy buckle further, and the stock market is taken down with it, Trump might be more inclined to do end the trade war despite his team’s long-term goals to lessen China’s role in the U.S. corporate supply chain. If that happens, Xi will get more time to adjust and ultimately keep things as they were pre-Trump.
Title: Re: China Is Losing The Trade War In Nearly Every Way
Post by: DougMacG on January 20, 2019, 01:22:23 PM
Good article with balance but I think things are even worse for China than they suggest.  World Bank, I think it was, estimated China's reported 6% pre-tariff GDP growth was closer to 1% which means that decline from there is recession territory already.  This is uncharted territory for this totalitarian regime.  At the start of the trade war, I estimated from published data that they are 6 times more reliant on sales to the US as we are on sales to them.  The economic time line works against China.  If the US is forced to source elsewhere in Southeast Asia or elsewhere, those new sources don't just go away when this is settled. Time works against China (6 times) more so than against the US in my judgment.

From the article:  "The stock market means everything to Trump. ...  China can win if the U.S. stock market sells off and ices Trump’s hawkishness on trade."

The Fed already announced it is pausing the previously scheduled interest rate hikes and may roll back the last increase.  The stock market here is FAR more sensitive to the Fed and interest rate fears than it is to the alleged trade war as all can see from last years' market calendar.

"Should the U.S. economy buckle further, and the stock market is taken down with it, Trump might be more inclined to do end the trade war despite his team’s long-term goals to lessen China’s role in the U.S. corporate supply chain. If that happens, Xi will get more time to adjust and ultimately keep things as they were pre-Trump."

Buckle further?  We doubled our growth rate.  Look at it the other way around.  If Trump caves with Democrats over the shutdown and the wall, China will see weakness - and so he won't cave to Democrats.  If Trump caves with China over stock market jitters, Democrats will see that - and so he won't cave to China.  In what scenario does he see himself better off as a weak leader who caved in difficult negotiations?  Absolutely none.

Trump faces no election for almost two years and already weathered through tough midterms without flinching.  He needs both of these negotiation wins to tell his story in reelection, or keep the issue alive and argue we stay the course.  Going weak now loses his base and gains him nothing!  Plus he doesn't need the job!  Both of these negotiating adversaries need to strike deals that allow Trump to declare victory in order to get a deal - and they need a deal.  What more does Trump have to lose?  Fear of losing reelection will cause him to break campaign promises and appear weak to get reelected??  That makes no sense and China knows it.  They face the very real possibility that he is either a two term President or is followed by someone else committed to his tough China policy - from EITHER party.  In that scenario they wait it out 6 years, 10 years?  What rip does the Kamala-Beto wing of the Dem party give about the stock market, and the Pelosi-Scxhumer wing as mentioned in the article are already anti-China.  By the end of this campaign, no one is going to be arguing that we cave to China's technology theft - to help American businesses.  If they promise that, he will eat their lunch and run the electoral map.
Title: Davos - what the hell is it anyway?
Post by: ccp on January 22, 2019, 08:31:10 AM
https://en.wikipedia.org/wiki/World_Economic_Forum

So many fat cats get together and decide what is best for the other 7 billion people

Here is CNNs list of people to watch:

https://www.cnbc.com/2018/01/16/wef-18-most-influential-people-to-watch-out-for-at-davos.html

https://www.youtube.com/watch?v=syilW4nPGZ0

More of the worlds greats (and most virtuous ) who humble each other with their presence:

https://www.verdict.co.uk/world-economic-forum-2017-davos-celebrity-spotter/

Shakira must help bring in the rich and powerful to watch her ass in action
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on January 25, 2019, 01:01:42 PM
And a truly stellar ass it is!
Title: Trade, China reforming intellectual property rights and forced tech transfers?
Post by: DougMacG on January 26, 2019, 07:15:07 PM
Chinese lawmakers have been rushing through a new law designed to alleviate American concerns about intellectual property rights and forced technology transfers, something that President Trump has made a top priority.

https://www.foxnews.com/opinion/thanks-to-trump-chinas-economy-is-rapidly-decelerating-heres-what-could-happen-next
Title: Trade, The Trump policy is NOT 'Mercantilist'
Post by: DougMacG on February 08, 2019, 04:08:38 PM
From a post at Software Times written by our own Denny S:

"... Listen carefully to Trump’s UN speech where he states unequivocally the goals of his administration, "we will defend America to the hilt and every country on Earth should likewise defend theirs." Elsewhere he has said that he wants free trade with minimal tariffs. Lastly read The Art of the Deal. The point of the exercise is to bring America’s trading partners to the bargaining table, not to Beggar Thy Neighbour.

China is playing harder but lots of others have already understood the policy and have come to terms with America. Letting up on China now is a big mistake, specially since the current Chinese president is becoming more autocratic. "Don’t give in, don’t give in, don’t give in…" Churchill’s famous speech. "

https://softwaretimes.com/files/trade+wars+letter+to+john+.html

Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on February 08, 2019, 05:03:16 PM
How very nice to see Denny is still in the fight!

How is it that you ran across this?
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on February 09, 2019, 07:26:40 PM
How very nice to see Denny is still in the fight!

How is it that you ran across this?

I'm concerned for him (and everyone there) so I looked at his website.  That post was from September of last year. Nothing much more recent posted.  The events in Ven. are unraveling very much like one of the scenarios that he posted. Would always love to hear his take.

He is spot on with this Trump trade post.
Title: GPF: How the Trade War won't end
Post by: Crafty_Dog on March 20, 2019, 07:25:37 AM
March 20, 2019



By Phillip Orchard


How the Trade War Won’t End


Washington wants to cut a deal now, but Beijing is playing the long game.


The U.S. and China are circling ever closer to a trade deal. They just need to agree on how to make it mean something a year or two from now. In the weeks since U.S. President Donald Trump agreed to postpone the March 1 spike in tariffs on $200 billion in Chinese goods, enough progress has apparently been made that both sides are eyeing a “signing summit” between Trump and Chinese President Xi Jinping by June. This cautious optimism is fueled by several factors, from Beijing’s offer to nudge down the trade deficit by binging on U.S. energy and agriculture products, to new laws set to be approved this week that include expanded protections for foreign investors. Trump’s barely concealed urgency to give markets a boost by calling off the dogs is probably furthering hopes in Beijing.

But “ending” the trade war still appears to mean something quite different to each side. China, naturally, wants to put this whole unpleasantness behind it and to turn its full focus to its staggering domestic headaches, and is reportedly demanding that all tariffs be lifted immediately. The U.S., naturally, is wary of China’s history of backsliding on rigorously negotiated deals, and presumably aware that it would take Beijing years to implement some of the structural reforms Washington is demanding. Washington needs to hold on to at least some leverage to ensure that the Chinese follow through. As a result, the U.S. is reportedly offering only to lift tariffs incrementally (while Chinese counter-tariffs would be lifted immediately). What’s more, the U.S also wants snapback mechanisms in place to further discourage Beijing from backsliding.

In other words, the focus of the talks has evidently moved to the thorny issues of implementation and enforcement. This speaks to a core problem bedeviling U.S. aims in the matter: Given that U.S. tariffs are only one of many problems weighing on Beijing, can the U.S.-China trade dispute really be negotiated away?

Keeping to a Deal

Whether the U.S. has any real urgency beyond political interests to wrap up a deal depends on whether it believes its broader strategic aims merit the costs of the trade war. The U.S. economy is at the peak of the business cycle and will eventually come back to earth. And the diminishing returns of a tool as blunt as tariffs for forcing China to make systemic changes are starting to become clear. Already, according to the Institute of International Finance, Chinese counter-tariffs are costing U.S. exporters more than $3 billion per month. The higher cost of imports is falling primarily on U.S. consumers, with losses expected to approach $70 billion this year, according to two new authoritative studies. None of this is devastating to the U.S., but Washington can’t ignore the ghost of the Smoot-Hawley Tariff – which raised duties on 20,000 imported items and contributed to the severe economic deterioration of the Great Depression. Meanwhile, there’s no evidence suggesting Beijing is preparing to make the sweeping structural changes demanded by the U.S. To get everything it wants from Beijing, the U.S. would have to keep up the pressure for years – likely well into an economic downturn, and certainly during a key election year. Moreover, even if annual Chinese growth plummets to 3-4 percent, it will still be adding hundreds of billions of dollars in new consumption. The opportunity cost to U.S. exporters is steep.

If the U.S. deems the costs necessary to stunt China’s rise, then no deal is imminent. Otherwise, the U.S. has an interest in settling for quite a bit less up front. By agreeing to a limited deal, pairing relief from specific tariffs with implementation of select concessions by Beijing, Washington can gradually ease the burden on the U.S. entities hurting most – exporters, firms with supply chains routed through China, firms dependent on lower-cost Chinese inputs, and consumers. And it will still have other tools like export controls, investment restrictions and the embattled but still potent World Trade Organization dispute settlement courts with which to protect U.S. firms and target Chinese practices that pose the biggest long-term threat, particularly in the race for technological supremacy. Whether or not the current negotiations produce a substantive deal, U.S. pressure in these areas isn’t going away.

But to trade hawks in the Trump administration, the sense of urgency to get a deal risks undermining efforts to address the very real problem of post-deal implementation – and giving Beijing incentive to try to run out the clock on what it sees as an impatient president. (Beijing would be foolish to think the next U.S. administration will be fundamentally more dovish, but it’s reasonable to think political and economic complications in the coming years will weaken U.S. appetite for a sustained offensive.) China has a mixed history, at best, of implementing deals. If it had fulfilled all of its WTO obligations, after all, it wouldn’t be in this position in the first place.

Beijing is trapped between oft-conflicting imperatives: economic dynamism and social stability. Under Xi, it has routinely prioritized the latter, deepening state domination of the economy in ways that have provoked the U.S., but that also helped maintain steady employment and manage China’s immense internal financial risks. Tariffs are a far smaller problem for China than internal dysfunction. But the duties are making Beijing’s tightrope walk of internal reform ever more precarious. In all likelihood, China will agree to whatever it deems necessary to make the tariffs go away. But if keeping order necessitates cheating on its commitments and risking a backlash, Beijing won’t hesitate.

What the U.S. Can Do

U.S. Trade Representative Robert Lighthizer is trying to make it harder for Beijing to backslide in a couple ways. The U.S. is insisting that concessions from Beijing be as explicit and quantifiable as possible. (Lighthizer says the agreement will exceed 110 pages.) The easier it is to identify cheating, the greater the reputational costs for Beijing and the easier it will be for Washington to make the case to the U.S. public and allies that pressure be revived. There are two main problems here: One, the Chinese system is exceedingly opaque, especially given the dominance of state-owned enterprises. Two, implementation progress on the biggest issues – forced technological transfers and cyber theft, for example – can’t easily be quantified or monitored. Thus, the U.S. is also demanding the right to independently assess whether China is living up to what it considers the spirit of the deal – and to unilaterally reimpose tariffs, without retaliation, if it concludes Beijing is falling short.

Still, these sorts of measures can do only so much. Trade deals, like most international agreements, last only as long as each side is willing to comply, which is why they tend to work only when they are truly in both sides’ interests. Either way, it’s really hard to make them binding. There won’t be any trade cops to make arrests when there’s a violation. The U.S. isn’t going to threaten war to enforce this sort of deal. Nor can the U.S. really take too much reassurance from measures like China’s new foreign ownership law, which would ostensibly help address the issue of forced technology transfers. The new law is vague, and Beijing has only so much ability and interest to enforce it at a granular level. (Trade lawyers say tech transfer typically happens willingly, often by foreign firms that are desperate for funding or that simply failed to adequately protect themselves under existing Chinese laws.) And when it comes to core technologies Beijing deems critical for initiatives like next-generation military applications, all bets are off. Law in China is applied only to the extent that it serves the Communist Party’s interests.
This isn’t to say China won’t have reasons beyond the lure of tariff relief to continue to comply. A lot of what Beijing will likely concede is fairly low-hanging fruit. For example, it’s expected to pledge to refrain from artificially weakening its currency (currently, it’s trying to keep the yuan from collapsing) and to buy more U.S. goods (items it needs to import anyway). Its measures to improve intellectual property protections, meanwhile, are needed to reassure spooked foreign investors, ease discontent among domestic private firms fed up with their state-owned counterparts, and further erode the U.S. business community’s support for the trade war. Countries often use trade agreements to bring recalcitrant domestic players obstructing needed reforms into line. And Beijing has a real need to repair its image abroad. The trade war has triggered a slow-motion stampede to the exits by foreign firms in the country, while also intensifying the spotlight on internal practices, deterring new investment. It’ll be dealing with the fallout of this for years and has ample reason to let the U.S. lose interest.

But structural reforms like ending industrial subsidies and scaling back the state’s role in the economy would be an order of magnitude trickier for Beijing to implement. These issues also happen to be at the heart of U.S. grievances. Even if the U.S. can pressure China into including concessions in these areas in the deal, it will be an exceedingly wobbly deal, however many pages it runs.



Title: Stratfor: Asia Free Trade Proposal
Post by: Crafty_Dog on March 25, 2019, 08:19:14 AM
Asian Free Trade Proposal Is Broad in Scope, Narrow in Focus
Leaders of the 16 countries negotiating the Regional Comprehensive Economic Partnership assemble for a group photo on Nov. 14, 2018, in Singapore.
(ROSLAN RAHMAN/AFP/Getty Images)


    The proposed Regional Comprehensive Economic Partnership (RCEP)'s comparatively narrow focus on tariffs to the exclusion of nontariff barriers would limit the agreement's boost to Asian trade.
    The 16 countries negotiating RCEP likely will not reach consensus on a final deal until after the conclusion of 2019 elections in India, Australia and Indonesia.
    Because India views free trade as a vehicle for economic growth in an era of rising protectionism, it will remain committed to negotiating an RCEP agreement, though its demands are likely to further delay a conclusive deal.
    Despite its limitations, RCEP offers the Association of Southeast Asian Nations a chance to help promote intraregional trade.
    China will demand a rapid resolution to negotiations so it can seek enhanced market access to offset a cooling economy against the backdrop of its trade war with the United States.

A long-running proposal to create the world's largest free trade zone has stagnated under the weight of its members' disagreements. The Regional Comprehensive Economic Partnership (RCEP) is a trade initiative between the Association of Southeast Asian Nations (ASEAN) and its six free trade partners: India, China, Australia, Japan, South Korea and New Zealand. Ambitious in scope, RCEP would encompass 3.6 billion people and account for a third of the world's total economic output. But 25 rounds of talks spanning six years have failed to produce a consensus. Now, lingering obstacles threaten to dash the prospects of sealing a final agreement by the time a high-level ASEAN summit is held in Thailand in November.

The Big Picture

The Regional Comprehensive Economic Partnership (RCEP) is a mega trade deal covering 16 countries in South Asia and the Asia Pacific. Although the proposal is aimed at integrating major regional economies with Southeast Asia, India's concerns over safeguarding its market from Chinese imports have proved a stumbling block. Yet even if all parties reach a consensus on RCEP, the deal's narrow focus on tariffs means regional trade growth will be modest until members address the nontariff barriers impeding trade flows.

See Asia-Pacific: Among Great PowersSee Southeast Asia: Burdened by Consensus

India, in particular, is the main outlier in RCEP negotiations. Wary that the deal could worsen its politically sensitive trade deficit with China, India is drawing hard lines on the percentage of tariffs it will reduce. New Delhi is taking this position to forestall a surge in Chinese imports, which could hinder its attempts to build a competitive manufacturing base under Prime Minister Narendra Modi's "Make in India" campaign. Yet India also sees a glass half full: New Delhi hopes a well-negotiated agreement will enable it to tap into the burgeoning markets of Southeast Asia as a growing destination for its services exports, its strong suit in trade.

For ASEAN members — Indonesia, Malaysia, Thailand, Vietnam, Brunei, Cambodia, Myanmar, Laos, Singapore and the Philippines — RCEP offers a chance to boost low intraregional trade by easing tariff barriers. This task will grow all the more urgent in the face of rising protectionism and unilateralism at a time when the U.S.-China trade war is affecting ASEAN. And for China, the biggest economy involved in the trade negotiations, RCEP would enable it to tighten regional trade links, helping buffer Beijing against Washington while fostering greater economic interdependence with regional powers, which include Australia, South Korea, India and Japan.

A map showing the 16 nations of the proposed Regional Comprehensive Economic Partnership trade agreement.

Clinching an RCEP agreement is unlikely until after this year's elections in India, Australia and Indonesia. Nevertheless, India, which views free trade as a vehicle for economic growth in an increasingly protectionist era, will remain committed to negotiating an RCEP agreement, though its demands — especially in gaining services access — are likely to further delay a conclusive agreement. ASEAN and China, which share India's anxieties over rising protectionism, have stressed the urgency of finalizing a deal this year, suggesting they will smooth over their mutual concerns in order to sign a deal at the ASEAN summit in Thailand. But all these issues aside, as long as RCEP does not address the nontariff barriers that impede supply chain integration, the agreement will be modest in its impact, even if it comes through.

RCEP: A Response to the Asia Pivot

When informal discussions for RCEP began in 2012, the geopolitical currents in the Asia-Pacific were shifting. Then-U.S. President Barack Obama was pushing for the Trans-Pacific Partnership (TPP). The regional trade bloc — which excluded China — fit into Obama's "Asia pivot" of redirecting U.S. strategic attention from the wars in Iraq and Afghanistan to the Asia-Pacific. For the United States, this shift toward China was informed by a core tenet of its grand strategy: containing the rise of a rival power on the Eurasian landmass.

For China, the natural response to the TPP was to support another regional trade bloc, hence RCEP. India, also excluded from the TPP, threw its support behind RCEP, too. And for ASEAN, the initiative offered a new and more expansive trade proposal that would allow it to consolidate its bilateral free trade agreements with various Asian economies.

RCEP garnered widespread support as the first round of official talks began in 2013. More than two dozen rounds later, India has positioned itself as an outlier in the negotiations.

To Right the Wrongs: India's Approach

From India's point of view, RCEP is an opportunity to improve upon its existing free trade agreement with ASEAN. The 2010 India-ASEAN deal was meant to boost India's exports while deepening trade links with Southeast Asia — especially through India's stagnant northeastern wing — as part of New Delhi's "Act East" policy. While exports have grown, a parliamentary report found that India's trade deficit with ASEAN has doubled, jumping from $5 billion in 2010 to nearly $10 billion in 2017.

A chart showing India's trade deficit with China.

The report also highlighted concerns over the laggardly pace of services liberalization, a core concern given India's competitive advantage in this sector: Last year, India's booming information technology (IT) services industry earned $126 billion in export revenues. India will face an uphill battle in extracting concessions, though. Because the India-ASEAN free trade agreement has benefitted ASEAN, the bloc has few incentives to change its terms with India, placing the burden on New Delhi to demonstrate why services liberalization will benefit ASEAN. And in the past, Singapore — one of India's most important trade partners within ASEAN — has expressed concern that a liberal visa regime that enables Indian tech professionals to move about more freely could displace Singaporeans from local jobs.

For India, its trade concerns with ASEAN are all the more relevant to China. While India views China as its principal strategic rival, trade between the two countries is growing. In 2017, bilateral trade amounted to $84 billion in goods. Chinese exports to India — led by electronics, machinery and chemicals — amounted to $72 billion, yielding a $59 billion deficit (a decade ago, India's trade deficit with China was only $15 billion). For Indian politicians, a growing trade deficit matters because of its implications for jobs under Modi's Make in India campaign, which aims to boost manufacturing's share of the economy to 25 percent by 2025. Given these concerns, India is unlikely to offer further concessions on tariff liberalization unless it receives reciprocal access in services.

A Three-Layered Cake? India's Elaborate Proposal

RCEP is focused on eight areas of cooperation: goods, services, investment, economic and technical cooperation, intellectual property rights, competition, dispute settlement, and a final category for other issues. In practice, trade in goods is the dominant issue. India was enticed by the so-called flexibility clause of RCEP, which allows for varying rules for countries according to their circumstances. New Delhi initially proposed a three-tiered tariff structure.

For ASEAN countries, India would reduce tariffs on 80 percent of its goods; 65 percent would be reduced immediately while the remaining 15 percent would be phased in over a decade. For Japan and South Korea, India would reduce tariffs on 65 percent of imports in exchange for an 80 percent reduction on Indian exports. And for China, Australia and New Zealand, India would offer a 42.5 percent liberalization phased in over two decades in exchange for 42.5 percent liberalization from China, 65 percent from New Zealand and 80 percent from Australia. Even so, India would exclude certain sectors from tariff liberalization akin to its free trade agreement with ASEAN, in which it shielded several goods, including potatoes, onions, rice, ginger, mustard, cardamom, sugar and wheat.

For India, the surest way to compensate for a continuing deficit in goods is to boost the export of its services.

Facing a backlash from China in a 2016 round of talks, India eventually moderated its tariff proposals. Today, New Delhi is willing to reduce tariffs on a range from 74 percent to 86 percent of goods for all RCEP members, though disagreements with China persist. The two sides have locked horns over a variety of issues, including the length of time during which India would phase in a tariff liberalization — with New Delhi seeking a longer timeline so it can bolster its competitiveness — and the number of tariffs. The remaining RCEP members are seeking a reduction on 92 percent of goods, while India isn't budging from 86 percent.

Then there are services. For India, the surest way to compensate for a continuing deficit in goods is to boost the export of its services. New Delhi will drive a hard bargain to achieve services liberalization, including the free movement of its IT professionals into RCEP nations. (While India earned a pledge from RCEP nations on services liberalization in September 2018, the actual details remain scant.)

Strength in Numbers: Why RCEP Matters for ASEAN

Though ASEAN is riven by internal bickering, its members broadly agree on the benefits of RCEP. For starters, unlike the TPP, RCEP includes all 10 ASEAN members. Its emphasis on tariff reduction appeals to the bloc's lesser-developed economies seeking to boost trade and attract investment. RCEP can also act as a hammer against high tariff barriers, one of the reasons only a quarter of ASEAN's total trade takes place within the bloc. Most ASEAN countries maintain relatively high tariff barriers on selective defensive interests. For instance, Thailand, Vietnam, Cambodia and Laos have high tariffs on agricultural goods, and countries such as Malaysia and Indonesia impose high tariffs on selective areas to insulate domestic industries.

RCEP would allow ASEAN to draw its six regional free trade agreements under a single tent. This would strengthen the bloc's bargaining power and enable greater trade and investments from China and Japan, Asia's largest economies. And while elections in Indonesia, Australia and Thailand may add a wrinkle to negotiations, these short-term political dynamics are unlikely to alter the deep-seated interest ASEAN nations collectively see in joining a vast free trade zone encompassing East Asia and South Asia, the world's two most populous regions.

China's Interests

For China, the importance of a regional free trade bloc like RCEP has only grown because of its ongoing trade war with the United States. Although Beijing's dominance in regional trade is undeniable — China is the largest trading partner of all RCEP members — expanded market access would help revive a cooling economy. RCEP is also rife with strategic implications for China as it tries to deflect World Trade Organization pressure from the European Union and the United States. Beijing also hopes to use the free flow of goods to improve its sometimes-frosty relations with neighboring powers.

And though China may be the economic giant in RCEP, its focus on rapidly reaching an agreement that emphasizes tariff reduction, while showing flexibility on some contested provisions, is squarely in line with most ASEAN economies — unlike the lobbies from more developed economies such as Australia, New Zealand and Japan. Beyond Southeast Asia, RCEP could pave the path for a de facto trade negotiation with Japan, as China looks to expand market access to Japan, with the two sharing concerns against U.S. protectionism policy.

Constraints on the Road Ahead

For all of its ambition, RCEP won't be a game changer, even if all 16 countries reach a consensus in November. With its laser focus on tariffs, RCEP overlooks the nontariff barriers that impede greater regional trade flows and supply chain integration. Its limited depth of coverage is another issue, with several of the tariff lines not dropping to zero even after liberalization. And unlike the TPP, RCEP is focused at a government-to-government level instead of penetrating deeper to the industry level, where market impulses that may be minimally affected by a free trade agreement's framework dictate key trends shaping trade demand. And in ASEAN, while lowering tariffs will stimulate trade, the redundancy of exports among several of the economies means that until more specialization takes place, the demand for ASEAN exports will remain greatest outside of Southeast Asia. And the limited inclusion of services and provisions for the free movement of labor also narrows the scope of what RCEP can accomplish in a region where all 16 economies are dominated by the services sector.

However, lower tariffs will still produce some benefits — at least enough to justify a continuous push from all countries to reach an agreement as they struggle to reconcile the realities of economic division with the hopes of a mutually beneficial trade zone.
Title: FRom 2018, but worth noting
Post by: Crafty_Dog on May 08, 2019, 10:53:23 AM
I am told by a China hand that the trend continues.

https://www.nbcnews.com/business/business-news/gopro-moving-production-out-china-citing-tariff-worries-n946101?fbclid=IwAR2n4-1Yex4oJDzh8LVC8XDUsgePxBTFO1tQ7eBBVAcvjsI0gdnhNVCAJhU
Title: Re: FRom 2018, but worth noting
Post by: G M on May 09, 2019, 08:56:15 PM
I am told by a China hand that the trend continues.

https://www.nbcnews.com/business/business-news/gopro-moving-production-out-china-citing-tariff-worries-n946101?fbclid=IwAR2n4-1Yex4oJDzh8LVC8XDUsgePxBTFO1tQ7eBBVAcvjsI0gdnhNVCAJhU

It's my understanding that lots of westerners, some who have been doing business in China since the 90's are pulling the plug and getting out.

Title: Wesbury: On Trade War Hysterics
Post by: Crafty_Dog on May 13, 2019, 11:35:44 AM
Monday Morning Outlook
________________________________________
Trade War Hysterics To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 5/13/2019

Since hitting new all-time highs two weeks ago, the S&P 500 has fallen about 2.2% as trade negotiations with China hit a snag. Last week, the US announced new tariffs on Chinese imports. This morning, China announced new tariffs on some US goods. Many fear a widening trade war.

Don't get us wrong. We want free trade, and we understand the dangers of trade wars and tariffs (which are just taxes on consumers). At the same time, we think trade deficits themselves are not a reason for trade wars. We all run personal trade deficits with the local grocery store and benefit from that. Even if the entire world went to zero tariffs, the US would almost certainly still run trade deficits, even with China.

But today, the trade deficit with China is partly due to the fact that China has higher tariffs on imports than the US does – working to eliminate these lopsided tariffs is worthwhile.

In 1980, China was an impoverished nation. Then it began adopting tools of capitalism – property rights, markets, free prices and wages. Chinese businesses started to import the West's technology, and growth accelerated.

Initially, China didn't have to worry about intellectual property. When you replace oxen with a tractor, all you have to do is buy the tractor, not reinvent the internal combustion engine. But China has now picked, and benefited from, the lowest hanging fruit. So, China decided to steal the R&D of firms located abroad. Some estimates of this collective theft run into the hundreds of billions of dollars.

That's why normal free market and free trade principles don't neatly apply to China.

Remember President Reagan's old story supporting free trade? "We're in the same boat with our trading partners," Reagan said. "If one partner shoots a hole in the boat, does it make sense for the other one to shoot another hole in the boat?" The obvious answer is that it doesn't, and so our own protectionism would hurt us.

But China hasn't just shot a hole in the boat, they've become pirates. If Tony Soprano and his cronies robbed your house, would free market principles require you to trade with them to buy those items back? Of course not!

It's true tariff increases will not help the US economy. But $100 billion of tariffs spread over $14 trillion of consumer spending is not a recession inducing drag. It's true some business, like soybean farmers, are hurt. But the status quo means accepting hundreds of billions in theft from companies that are at the leading edge of future growth.

Either way, if tariffs nick our economy, China's gets hammered. Last year we exported $180 billion in goods and services to China, which is 0.9% of our GDP. Meanwhile, China exported $559 billion to the US, which is 4.6% of their economy. We have enormous economic leverage that they simply can't match.

An extended US-China trade battle means US companies will shift supply chains out of China and toward places like Singapore, Vietnam, Mexico, or "Made in the USA." If that happens, the Chinese economy is hurt for decades.

Anyone can invent a scenario where some sort of Smoot-Hawley-like global trade war happens. Realistically, though, that appears very unlikely. We're not the only advanced country China's piracy has victimized, and China may realize it's more isolated than it thought. In the end, China wants to trade with the West, not North Korea, Russia, and Venezuela. China needs the West. And all these trade war hysterics just aren't warranted.
Title: Re: Wesbury: On Trade War Hysterics
Post by: G M on May 13, 2019, 12:53:32 PM
Wesbury is correct.


Monday Morning Outlook
________________________________________
Trade War Hysterics To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 5/13/2019

Since hitting new all-time highs two weeks ago, the S&P 500 has fallen about 2.2% as trade negotiations with China hit a snag. Last week, the US announced new tariffs on Chinese imports. This morning, China announced new tariffs on some US goods. Many fear a widening trade war.

Don't get us wrong. We want free trade, and we understand the dangers of trade wars and tariffs (which are just taxes on consumers). At the same time, we think trade deficits themselves are not a reason for trade wars. We all run personal trade deficits with the local grocery store and benefit from that. Even if the entire world went to zero tariffs, the US would almost certainly still run trade deficits, even with China.

But today, the trade deficit with China is partly due to the fact that China has higher tariffs on imports than the US does – working to eliminate these lopsided tariffs is worthwhile.

In 1980, China was an impoverished nation. Then it began adopting tools of capitalism – property rights, markets, free prices and wages. Chinese businesses started to import the West's technology, and growth accelerated.

Initially, China didn't have to worry about intellectual property. When you replace oxen with a tractor, all you have to do is buy the tractor, not reinvent the internal combustion engine. But China has now picked, and benefited from, the lowest hanging fruit. So, China decided to steal the R&D of firms located abroad. Some estimates of this collective theft run into the hundreds of billions of dollars.

That's why normal free market and free trade principles don't neatly apply to China.

Remember President Reagan's old story supporting free trade? "We're in the same boat with our trading partners," Reagan said. "If one partner shoots a hole in the boat, does it make sense for the other one to shoot another hole in the boat?" The obvious answer is that it doesn't, and so our own protectionism would hurt us.

But China hasn't just shot a hole in the boat, they've become pirates. If Tony Soprano and his cronies robbed your house, would free market principles require you to trade with them to buy those items back? Of course not!

It's true tariff increases will not help the US economy. But $100 billion of tariffs spread over $14 trillion of consumer spending is not a recession inducing drag. It's true some business, like soybean farmers, are hurt. But the status quo means accepting hundreds of billions in theft from companies that are at the leading edge of future growth.

Either way, if tariffs nick our economy, China's gets hammered. Last year we exported $180 billion in goods and services to China, which is 0.9% of our GDP. Meanwhile, China exported $559 billion to the US, which is 4.6% of their economy. We have enormous economic leverage that they simply can't match.

An extended US-China trade battle means US companies will shift supply chains out of China and toward places like Singapore, Vietnam, Mexico, or "Made in the USA." If that happens, the Chinese economy is hurt for decades.

Anyone can invent a scenario where some sort of Smoot-Hawley-like global trade war happens. Realistically, though, that appears very unlikely. We're not the only advanced country China's piracy has victimized, and China may realize it's more isolated than it thought. In the end, China wants to trade with the West, not North Korea, Russia, and Venezuela. China needs the West. And all these trade war hysterics just aren't warranted.
Title: Pat Buchanan : tariffs made us great!
Post by: ccp on May 14, 2019, 09:29:37 AM
https://townhall.com/columnists/patbuchanan/2019/05/14/tariffs-the-taxes-that-made-america-great-n2546272
Title: China appeals to Nationalism
Post by: Crafty_Dog on May 17, 2019, 05:17:50 PM


China, U.S.: With the Trade War Raging, Beijing Makes a Risky Appeal to Nationalism
(Stratfor)

The Big Picture

The intensified U.S. economic offensive against China is weighing heavily on China's leadership. Instead of offering concessions, Beijing is hardening its position and stoking nationalism. Though the strategy will help Beijing build public support in the short term, it could backfire in the longer term.

What Happened

With Washington's targeting of Huawei raising tensions to new heights, the U.S.-China trade conflict shows no signs of abating. Now, the Chinese government has hardened its position on trade and is seeking to fan the flames of nationalist sentiment.

Five days after Washington increased tariffs on $200 billion of Chinese goods, state broadcaster CCTV on May 13 used its most popular news program to issue a strongly worded statement exuding confidence in China's ability to stand up to the United States. The tone stood in marked contrast to Beijing's relatively muted attitude in the preceding months as trade talks dragged on.

The statement coincided with Beijing's announcement of retaliatory tariffs and a high-level Politburo meeting, suggesting a degree of consensus among China's top leadership. In the following days, a series of commentaries and editorials from the state media and affiliated social media accounts continued to whip up nationalist sentiment in the face of U.S. pressure.

Why It Matters

The shift toward a nationalist tone coincides with Beijing's hardened trade negotiating position, which includes its rejection of U.S. demands for changes to Chinese law. Now, China is sticking to its line that any deal must involve the removal of all tariffs, respect China's dignity and steer clear of expecting the country to purchase an unreasonable amount of U.S. goods. If Washington does not rethink its demands and the sides fail to reach a deal within the United States' four-week deadline, China is implying that it is willing to accept an escalation of the trade war. These developments, accordingly, mean Chinese-U.S. trade tensions are less likely to diminish any time soon.

If Beijing sees little prospect of a U.S. de-escalation, it could impose restrictions on U.S. businesses and individuals in China and even refuse to sell strategic commodities like rare-earth elements to Americans.

Beyond select regulatory obstacles, Beijing has yet to erect major official obstacles against U.S. businesses and individuals. This stands in contrast to Beijing's tougher approach to Canada, whose citizens and exports it has targeted. If Beijing sees little prospect of a U.S. de-escalation, it might impose restrictions on U.S. businesses and individuals in China and even refuse to sell strategic commodities like rare-earth elements to Americans. Increased nationalism could also lead to public boycotts, protests or even attacks on U.S. assets and individuals beyond the state's control.

An intensified conflict over trade and nationalism that results in harm to U.S. interests will make China less appealing to foreign investors, something Beijing can ill afford at a time when its economy is already slowing. Moreover, previous protests have shown that promoting nationalism can boomerang on the Chinese state and lead to unwanted social disruptions.

Background

Given widespread and powerful resentment over China's "Century of Humiliation," nationalism can always be a powerful instrument to forge national cohesion during challenging times, allowing the Communist Party to muster popular support. Chinese President Xi Jinping has harnessed this force to manage the country's socio-economic transition. But despite increasing tensions with the United States since early 2018, Beijing had until now refrained from deliberate appeals to nationalism in the trade war, leaving more space for de-escalation and continued trade negotiations.
Title: Moving from China to Thailand?
Post by: Crafty_Dog on May 23, 2019, 10:23:14 PM
https://asia.nikkei.com/Economy/Trade-war/Exclusive-Sharp-eyes-moving-printer-output-from-China-to-Thailand?fbclid=IwAR2nlmN4g2-acK7GzRzcBB8Xwny1rzgZNykk1F-xnKWEfd620QIerDzX90w
Title: Mexico approves USMCA
Post by: Crafty_Dog on June 22, 2019, 06:27:32 PM
https://www.cnbc.com/2019/06/19/mexico-ratifies-usmca-trade-deal-via-senate-vote.html?fbclid=IwAR0bRsCpnzRuhE9WNKdBJasAzzw7stRnMH0K4VwNkm_5ptgYRZp3MCk0e3w
Title: GPF: Geprge Friedman: China, Mexico, and US Trade
Post by: Crafty_Dog on August 17, 2019, 01:21:50 PM


By George Friedman


China, Mexico and US Trade


China is no longer the United States’ top trade partner. What does this mean for Mexico?


Last week, it was widely reported that in the first half of 2019 Mexico replaced China as the United States’ top trade partner. China is now in third place, while Canada is in second. There has been a great deal of discussion in the media about what this means for U.S.-China economic relations. Much less attention has been devoted to what this new alignment means for economic relations within North America.

A Third World Country?

The importance of U.S.-Mexico trade may surprise some. In the minds of many Americans, Mexico is still a Third World country whose largest export is poor people looking for jobs. Truth is, Mexico has the 15th largest economy in the world measured in U.S. dollars. Australia ranks just one spot above Mexico, and countries like Spain, South Korea and Canada are not too far ahead either.

Measured in purchasing power parity, however, Mexico ranks as the 11th largest economy in the world. PPP measures economic activity against the ability of a country’s currency to buy goods. Both PPP and nominal gross domestic product measurements have their flaws. Measuring purchasing power in a country as diverse as Mexico is tough, to say the least. Measuring it against the dollar is also difficult, as currencies fluctuate against the dollar all the time, thereby changing their GDP totals and rankings even though the economy itself hasn’t grown or declined. (Those who already knew this – and those who didn’t want to know this – please forgive me for explaining this in detail.)

The important point here is that Mexico’s economy, whether it’s ranked 11th or 15th, isn't a developing economy. It is a major economy and a major target for investment. Some parts of Mexico, particularly those in the south and some areas of major cities, resemble the Third World. But most countries have major regional inequalities. Mexico’s are somewhat larger than the average, but its economy is nonetheless substantial. The U.S. and Chinese economies are highly intertwined, but so too are the U.S. and Mexican economies – Mexican auto parts, for example, are indispensable to U.S. car makers. Mexico is also an aeronautical hub, housing Airbus and Bombardier manufacturing plants.

We’re presented, then, with two geopolitical realities. First, North America’s trading bloc is now larger than the European Union in terms of both population and GDP. Many believe that the alternative to globalism is insular nationalism. Many also believe that the only path to regional integration is a high degree of political integration. The European Union demonstrates that excessive politicization of a trade block can breed potentially uncontainable tension. The North American trade system has no significant joint political structure. The U.S., Canada and Mexico have not compromised their sovereignty, yet they are part of a successful trade system that was renegotiated in such a way that maintained the level of interdependence between the three major trade partners, despite expectations that renegotiation would lead to a decline in trade.


 

(click to enlarge)


The second geopolitical reality is that increased trade creates increased vulnerability. China learned that excessive dependence on exports to the U.S. gives Washington leverage. Exports are essential to economic development but pose political risks. Interdependence – particularly in economic terms – seems an innocuous concept. But it also means vulnerability to forces in other countries that are less reliant on the trade relationship.

In Mexico’s case, the sense of vulnerability goes back to the 19th century, when the United States defeated Mexico in the Mexican-American War and seized much of what is today the American southwest. Mexico remained in a subordinate position to the United States for more than a century. In emerging from its past and becoming an increasingly potent economic player, Mexico can neither avoid the relationship nor feel comfortable with it. The size of the U.S. economy makes it less dependent on Mexico than the Mexican economy is on the United States. And that leads to political friction.

Political friction between nations is inevitable. It also exists between Canada and the U.S. The U.S. has the same economic advantage over Canada that it has over Mexico. But having economic advantage doesn’t necessarily mean a country will use it – at least, not without political cause, as the U.S. had with China. Even in unequal relationships, the less powerful party can still have an economic impact on the more powerful party.

The Migration Issue

The problem is that there are both historic and contemporary political issues with Mexico, primarily over migration. Mexican migration to the U.S. has declined significantly. Mexicans used to migrate north for economic reasons, but economic conditions in Mexico over the past few years make it more attractive to remain in Mexico than to go north. The current wave of migrants crossing the U.S. southern border comes from Central America. In an ironic twist, Mexico doesn’t want Central American migrants to enter Mexico, but like the U.S., it can’t seal its southern border to stop them from crossing into its territory. Until recently, Mexico did not want to give them asylum, and those it could not block or expel were permitted to move north to the U.S. border.

Migrants are often the cause of tensions between and within countries. Historically, the U.S. metabolized Mexican immigrants. Mexico has had more difficulty metabolizing Central American migrants because the regions they entered in the south were among the poorest in Mexico, Mexican institutions are not well-equipped to handle the influx, and some Mexicans have objected to the influx. Mexico, therefore, sought to shift the burden north, triggering a political confrontation with the U.S.
Mexico knows that it cannot press the U.S. too hard. Mexican politicians threaten impractical retaliations, but they know the U.S. can absorb an economic rupture with Mexico more than Mexico could bear one with the United States. The U.S. can’t press Mexico too far, either. Imposing a heavy economic penalty on Mexico would not only disrupt access to the agriculture and manufacturing supplies on which the U.S. economy depends and hurt the economies of border states like Texas and California, but it would also threaten to energize 130 million people with a historic grievance and an economy that is now world-class.
Mexico has come a long way and is now the United States’ leading trade partner. But that position makes it vulnerable and limits its political options against the U.S. China has discovered what that vulnerability can lead to if it engages in political actions unwelcomed by its biggest trade partner. Mexico understands the U.S. far better than China did. But what will happen if Mexico moves from the 11th-largest economy to the fifth-largest? At a certain point, the risk-reward ratio shifts.

A final point on what Mexico becoming the United States’ largest trade partner means for China. China is following Japan’s path. Japan was the leading exporter to the United States in the 1980s, but it was increasingly squeezed by higher costs, falling profit margins and competition from other countries. There was also significant political tension between the United States and Japan over informally closed Japanese markets. It did not lead to massive tariffs because Japan buckled under the weight of its own economic weakness and became a less-important trade partner for the U.S.

China was doing the same before the U.S. imposed tariffs. Its products were facing stiff competition, inflation was pushing its own costs higher, and profit margins in key sectors were falling. As with Japan, China faced serious problems with its banking system. U.S. tariffs compounded China’s problems and perhaps accelerated the process, but the path it is following is not new.




Title: GPF:China, currency manipulator?
Post by: Crafty_Dog on August 17, 2019, 01:41:29 PM
Aug. 14, 2019
By Phillip Orchard


In the Yuan, Washington Finds Its Latest Trade War Target


The U.S. is running out of ways to escalate the trade war with China.


Last week, after nearly two decades of threats from U.S. President Donald Trump and his predecessors, the U.S. Treasury formally labeled China a currency manipulator. This followed Trump’s announcement that new 10 percent tariffs on some $300 billion in Chinese goods would kick in on Sept. 1, which sent the Chinese currency crashing to less than 7 yuan to the dollar for the first time since 2008.

The move has been widely characterized as a dramatic escalation in the trade war, expanding the U.S. offensive from tariffs, tech controls and investment to asset prices. But by the United States’ own definition, China hasn’t actually been intentionally weakening its currency. Quite the opposite, in fact. And the label itself won’t do anything to pressure China into major concessions. What it really suggests is that the U.S.-China trade war has entered a new phase – one marked by waiting around for a change in conditions that forces one side or the other to blink.

How China Manages the Yuan

For more than a decade beginning in the early 2000s, Beijing was indeed quite transparently keeping the yuan artificially weak, buying up some $4 trillion in U.S. treasuries in the process to maintain a peg of around 8.2 yuan to the dollar. Given China’s large balance of payments surplus and large net investment inflows, had the yuan been allowed to float relatively freely like the dollar, yen or euro, it’s estimated to have been less than 6 yuan to the dollar. China kept its currency weak to offset some of the stiffening headwinds facing its export sector, which had begun grappling with factors like rising wages that threatened its low-cost export growth model. This accelerated the exodus of U.S. manufacturing jobs while suppressing demand for U.S. goods among Chinese consumers. Naturally, this generated no small amount of political backlash in the U.S., sowing the seeds for the political consensus in the U.S. today that China’s rise has been aided by an unlevel playing field.
Around 2014, however, China switched course and began allowing the yuan to move more in line with market forces. Narrowly speaking, China has continued to “manipulate” the yuan; to avoid wild swings in value, it sets a daily trading band allowing just 2 percent change in either direction. But this doesn’t meet the U.S.’ own criteria for currency manipulation. In fact, by and large, whenever the People’s Bank of China has been forced to intervene to keep the value within the daily trading band, it’s been to strengthen the yuan. The U.S. Treasury has consistently admitted as much, including in its most recent report on the yuan published in May. Between 2014 and 2015 alone, China spent more than $1 trillion of its foreign exchange reserves defending the yuan.

China switched gears for several reasons. For one, it’s been keen to reduce its dependence on exports by boosting domestic consumption (which generally benefits from a stronger yuan) and the private sector (much of which relies on dollar-denominated bonds, which get more expensive to repay when the yuan weakens). For another, a strong, stable yuan is critical to its sweeping reform and financial de-risking efforts. Most important, a range of macroeconomic factors began placing downward pressure on the yuan and raising fears of capital flight. This was underscored in the August 2015 stock market crisis, which was triggered by China’s decision to allow the yuan to fall more than 4 percent – in line with market forces – in two days.

Defending the yuan has become considerably harder – and more expensive – since Trump launched the trade war 18 months ago. In the year before tariffs kicked in, the yuan had strengthened more than 9 percent. Since then, it has dropped around 5.4 percent. This is not artificial.


 

(click to enlarge)


To be sure, the weak yuan has taken much of the sting out of U.S. tariffs. But China fears an uncontrollable cycle of depreciation (akin to what it experienced in 2015 and what Turkey faced earlier this year) and the risk of a cascading wave of defaults far more than it fears the tariffs. The numbers make this plain: In 2018, China exported some $550 billion in goods to the U.S. By comparison, it’s estimated to now have more than $3 trillion in external debt. If the yuan weakens, the cost of servicing this debt goes up – as does the risk of lenders refusing to roll over loans, putting Chinese firms in a major fix. This dynamic is what sparked the 1997 Asian financial crisis. Moreover, China’s ongoing liquidity crunch is already biting; bond defaults between 2017 and 2018 quadrupled and are on pace to triple yet again this year, according to Bloomberg figures.
Rather, the yuan’s devaluation is a natural result of the tariffs, which have pushed the dollar up against nearly all currencies largely in tandem while reducing dollar flows into China. For most of the past two years, to improve the prospects of a trade deal and guard against capital flight, Beijing has continued defending the yuan. But this is expensive; China’s foreign exchange reserves have dropped to around $3.1 trillion. On Monday, in response to Trump’s announcement of a dramatic expansion of tariffs, China didn’t intervene to weaken the yuan in retaliation. Rather, it merely took a break from propping it up. What the U.S. is demanding now, in other words, is that China manipulate it more forcefully.

So, What’s the Point?

The Trump administration’s goal in slapping China with the manipulator label isn’t exactly clear. To be sure, the U.S. has ample economic reason to want to narrow the gap between the two currencies; it’s hard to imagine the bilateral trade deficit ever disappearing if the yuan remains so much weaker than the dollar. And there’s some support on both sides of the aisle for dramatic efforts to weaken the dollar.

But the label won’t do much to move either currency in the direction the Trump administration wants. The next step outlined by U.S. law doesn’t involve any sanctions – it’s merely a consultation with the International Monetary Fund, which is unlikely to agree with the Trump administration. (Like the U.S. Treasury, the IMF has consistently concluded that China doesn’t meet its criteria for currency manipulation.) This may dash U.S. hopes to build a multinational consortium to force China to strengthen the yuan. International support has proved invaluable to the U.S. in the past, particularly in the 1985 Plaza Accord, when the U.S. persuaded France, Germany, the United Kingdom and Japan to manipulate exchange rates and bring the dollar down as much as 50 percent against the yen and Deutschmark. This time around, with the U.S. lacking a valid case against China and launching trade disputes with most of the allies it would otherwise court on currencies, such a consortium seems far-fetched.
It’s possible the U.S. is just building a case for greater unilateral escalation. Even when Beijing was flagrantly inflating the yuan from 2002 to 2014, past U.S. administrations repeatedly declined to do anything more than threaten the manipulator label, primarily because none were prepared to follow up with punitive measures like tariffs that may not have survived a World Trade Organization challenge. Trump has no such qualms about wielding tariffs or ignoring the WTO. Still, there’s only so much further Trump can go without tanking the U.S. economy once the next round of tariffs starts to kick in in September (to avoid sticker shock during the holiday shopping season, several big-ticket consumer items will be exempted until mid-December) – effectively taxing nearly every Chinese product exported to the U.S. And the White House can continue its economic offensive without the manipulator label, anyway.

Ultimately, for the move to have any teeth, the U.S. would have to make the leap into direct intervention in currency markets, using tools like the Exchange Stabilization Fund to essentially buy up the yuan as it claims China should be. But intervening against the yuan won’t be easy. Unlike the yen and euro, the supply of yuan available to offshore buyers just isn’t very high, meaning the impact of such a move would likely be limited – and, in some ways, it could weaken U.S. leverage by essentially funding China’s development. The U.S. has more capacity to try to weaken the dollar by buying up a range of foreign currencies. But this is expensive and would have an unpredictable impact on already-spooked markets and potentially undermine the U.S. dollar’s invaluable role as the global reserve currency. It would also further expose U.S. consumers to sticker shock after implementation of the next round of tariffs, which cover consumer goods that had thus far been spared, raising the risk of a political backlash that makes waging a trade war of attrition untenable. (After the last round of tariffs kicked in, the U.S. Federal Reserve estimated that the trade war will cost the average U.S. household $831 per year.) On Friday, Trump backtracked on earlier statements and ruled out the possibility of direct intervention against the dollar – for now.
All this illustrates a critical point: The U.S. is running out of ways to pressure Beijing into major trade concessions, and the tools it has left in its arsenal all have major costs attached. Tariffs are approaching the point of diminishing returns, and trade negotiations have stalled. China has proved more resilient to tariffs than many expected, in part because the yuan’s depreciation and tools like tax cuts, diversion of exports to other markets, and transshipments have offset some of the pain, but also because U.S. consumers and firms have eaten much of the costs. Beijing can’t stomach most of the major structural concessions the U.S. is demanding, and it thinks its economy has stabilized enough to hold steady and wait to see if the political and economic risks of sustaining the trade war in an election year – one that may very well coincide with the start of a recession – force the U.S. to back down.

In these conditions, the White House loses leverage if Beijing thinks it can simply run out the clock, so it needs to counter the expectation that it’ll be desperate to strike a deal before November 2020 – and persuade Beijing that the U.S. is the one better positioned to hold the line until China’s immense structural economic and political vulnerabilities force Beijing to back down. (Trump has pointedly begun lowering expectations that a deal will be reached anytime soon.) Blaming yuan manipulation (and, for that matter, the Fed) for the lack of success of Trump’s tariff-centric trade strategy in bringing down the trade deficit, however disingenuous the case, is one way for the White House to try to prevent domestic political constraints from forcing it to bow out of the trade war prematurely. Meanwhile, raising the possibility of a direct U.S. intervention in currency markets, however steep the costs, may give the U.S. some leverage; Beijing would rather not find out if the White House is serious, and it’s reportedly willing to at least agree to a non-depreciation pact. In other words, there’s negotiating leverage to be had from stoking uncertainty – market jitters and conventional economic wisdom be damned.


Title: WSJ Trump losing trade war
Post by: Crafty_Dog on August 20, 2019, 12:35:31 PM
rump Is Losing the Trade War With China
The markets doubt tariffs will bring about any major concessions. The U.S. needs a multilateral approach.
By Jason Furman
Aug. 19, 2019 7:00 pm ET
Chinese President Xi Jinping speaks alongside President Trump in Beijing, Nov. 9, 2017. Photo: ANDY WONG/ASSOCIATED PRESS

President Trump’s China strategy is failing. His tougher approach has yielded no meaningful Chinese concessions but is increasingly damaging the U.S. economy. Today China is more integrated with the rest of the world while the U.S. is more isolated. To combat China’s unfair, statist economic practices effectively, the U.S. must change its approach, enlisting allies and international institutions to advance a more focused set of demands.

Tariffs on China have caused clear harm to the U.S. economy in the short run. In the second quarter of this year they contributed to the decline in business fixed investment, and they’re likely subtracting about half a percentage point from growth in gross domestic product this year. This isn’t necessarily an indictment of Mr. Trump’s policy. When workers go on strike, they do so knowing they will lose wages in the short run, but they expect to recoup those losses through larger long-run wage increases.

Yet equity markets have made clear that investors don’t expect potential concessions from China to make up for the short-run losses. The decline after the president announced a new round of tariffs Aug. 1 indicates that, in present value, the strategy is a negative.

China’s growth has also slowed, but much of the downturn can’t be credited to U.S. trade actions. Instead, the slowdown largely reflects the limits of Beijing’s tendency to prop up growth through short-term investment and state-owned enterprises, even as its demography worsens and productivity growth slows.

Market movements have also blunted some of the impact that tariffs might have had, reducing U.S. leverage in the trade war. The yuan has weakened, which offsets the tariffs by making Chinese exports cheaper. This is the inevitable result of Mr. Trump’s de facto strong-dollar policy, driven by larger budget deficits that have increased foreign demand for U.S. dollars as well as tariffs on China that have reduced U.S. demand for the yuan. Before the latest round of the tariff war, China was helping bring about Mr. Trump’s desired weak dollar by intervening in currency markets to keep the yuan strong. Yet when Beijing gave markets more latitude, the administration branded China a currency manipulator.

In January 2018 China had average tariffs of 8% on imports from the U.S. and the rest of the world. In response to U.S. actions it raised its average tariffs on the U.S. to 20.7% by this June while cutting its tariffs on the rest of the world to 6.7%, according to Chad Bown at the Peterson Institute for International Economics. China has cut its imports from the U.S. but increased its imports from elsewhere. China’s exports to the rest of the world are also growing.

No wonder China isn’t in a hurry to make the major concessions Mr. Trump has demanded. It isn’t even clear what concessions would get the U.S. to settle. One set of Trump administration demands is the “shopping list,” insisting that China purchase more U.S. products like soybeans and Boeing jets. Another set is that China change its economic model, relying less on state-owned enterprises, opening more to foreign direct investment, and honoring intellectual property. A third set, regarding alleged national-security threats from companies like Huawei, has moved in and out of negotiations as the administration has sought bans on Chinese technology.

The administration needs to change its strategy radically. The first step should be to work with, rather than against, U.S. allies. That means shelving Mr. Trump’s threatened trade wars against close partners, such as across-the-board tariffs on Mexico or tariffs on car imports from Europe. The U.S. should deepen ties with partners, including by re-entering the Trans-Pacific Partnership, which doesn’t include China.

The U.S. should also use multilateral organizations and international rules, bringing cases against China at the World Trade Organization, where past U.S. administrations have had a remarkable success rate. The Trump administration instead has chosen to undermine the WTO by blocking the appointment of appellate judges who likely would rule in America’s favor.

Another positive step would be to drop the shopping list. Demanding that China buy more Boeing jets isn’t a way to get Europe on our side in the trade dispute. Such a demand could also further entrench China’s statist economic model while doing little for the U.S. economy in the medium and long run.

The final change would be to adopt a consistent protocol for responding to Beijing’s national-security threats. If state-directed espionage through telecommunications equipment is a serious threat, the U.S. should address it as such and not signal that it’s willing to trade security for slightly more purchases of U.S. products. The notion that national-security concerns are merely another trade bargaining chip suggests that the U.S. is negotiating in bad faith, again making it more difficult to gain allies’ support.

These three changes would allow the U.S. to focus on combating China’s forced technology transfers, weak intellectual-property laws, biased treatment of foreign companies in antitrust law, unfair preference for domestic companies through state-owned enterprises, and many other practices about which the U.S. has legitimate grievances.

Such an approach could also win the support of reformers inside China, who understand that most of the practices America wants it to end are impeding China’s ability to shift to a new phase of innovation-led growth. But can it win over President Trump?

Mr. Furman, a professor of practice at the Harvard Kennedy School, was chairman of the White House Council of Economic Advisers, 2013-17.
Title: Re: WSJ Trump losing trade war
Post by: DougMacG on August 20, 2019, 06:28:40 PM
Not too surprising that Obama's chief economic advisor doesn't fully agree with Trump's policies. I would like to come back and answer this in detail.

In the first place, he evaluates the challenge to China ask if this is the end of the game. This might be the second inning and it might be the 7th inning but of course it's not worth it if where we are today is the end result.
Title: Re: WSJ Trump losing trade war
Post by: G M on August 20, 2019, 07:25:15 PM
Not too surprising that Obama's chief economic advisor doesn't fully agree with Trump's policies. I would like to come back and answer this in detail.

In the first place, he evaluates the challenge to China ask if this is the end of the game. This might be the second inning and it might be the 7th inning but of course it's not worth it if where we are today is the end result.

Hard to argue his success as Obama's economic advisor!
Title: Re: WSJ Trump losing trade war
Post by: DougMacG on August 21, 2019, 06:59:23 AM
"Hard to argue his success as Obama's economic advisor!"

Yes, the people who sent a planeload of cash to the world's indisputable leading state sponsor of terror.  Did they run that one past their chief economic adviser?  What could possibly go wrong?  The people who watched 4600 major companies leave our country while our business taxes were the highest in the world and opposed any reform on the basis of "fairness"?  The people who thought Solyndra, cash for clunkers and shovel ready government jobs were the keys to long term prosperity? 

One question for Prof. Fuhrman, what US patented technologies went to China under your watch with absolutely no objection and what is the price we are paying for it now?  We had zero enforcement and zero help from these international bodies he cites.  Only Hunter Biden profited from the policies of that period.

To those on the Left who hate Trump personally and politically, keep in mind it was the failed economic policies of his predecessor that led to his election, more than all the flaws of candidate Hillary.
Title: Re: Trade and Globalization Issues:
Post by: ccp on August 21, 2019, 07:11:51 AM
" ."Hard to argue his success as Obama's economic advisor!"

If anyone has heard otherwise ,

I have not heard any other way to deal with China other then with the tariffs
other then the same old tired nonsense:
more diplomacy  go to organizations that couldn't give two shits for the US for "help"
etc.

Obama and his mob
appeared to have  decided it was not worth taking on China, Iran nucs, Korean nuks
that the US is destined to go into a decline and we should just accept it , while at the same time push for a one world nation etc . blah blah blah
Title: Wesbury cuts to the essence
Post by: Crafty_Dog on August 30, 2019, 04:11:14 PM


https://www.ftportfolios.com/Commentary/EconomicResearch/2019/8/30/the-so-called-trade-war?fbclid=IwAR1-4EWVtALpPjTsFS_rdgpaC3nZuMt4xSHdXsf5GKNA4isQbTTq5F6YphY
Title: Re: Wesbury cuts to the essence
Post by: G M on August 30, 2019, 09:31:18 PM


https://www.ftportfolios.com/Commentary/EconomicResearch/2019/8/30/the-so-called-trade-war?fbclid=IwAR1-4EWVtALpPjTsFS_rdgpaC3nZuMt4xSHdXsf5GKNA4isQbTTq5F6YphY

Wesbury is making sense. Waiting for the walls to start bleeding.
Title: Team Trump counters Chinese play against US farmers
Post by: Crafty_Dog on November 26, 2019, 09:45:21 AM
https://www.theepochtimes.com/us-farm-deals-with-south-korea-and-japan-to-limit-china-trade-war-retaliation_3156340.html?utm_source=Epoch+Times+Newsletters&utm_campaign=71f100df26-EMAIL_CAMPAIGN_2019_11_26_01_01&utm_medium=email&utm_term=0_4fba358ecf-71f100df26-239065853
Title: US-Japan Trade deal passes parliament
Post by: Crafty_Dog on December 11, 2019, 03:20:08 PM
https://m.thebl.com/video/us-trade-deal-passes-japan-parliament-trumps-victory-for-american-farmers/
Title: US china trade deal - a bust?
Post by: ccp on December 15, 2019, 04:35:37 AM
https://news.yahoo.com/us-china-trade-deal-gets-tepid-reception-015910263--finance.html

rushing deals no matter what to look good against impeachment?

Title: Re: US china trade deal - a bust?
Post by: DougMacG on December 15, 2019, 07:12:13 AM
https://news.yahoo.com/us-china-trade-deal-gets-tepid-reception-015910263--finance.html
rushing deals no matter what to look good against impeachment?

I don't like the idea of a partial deal; it partly lets the Chinese off the hook on larger issues. 

OTOH, removing agriculture in particular from the argument strengthens the President in his reelection. 

It also signals that the end game is free trade, not tariff-based relationships.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on December 15, 2019, 09:33:07 AM
Arguably sets up an empirical experiment as to whether the Chinese will enforce the new rules.  If not, then Trump is inoculated against certain attacks/accusations when he takes a hard line down the road.
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on December 15, 2019, 11:43:19 AM
Arguably sets up an empirical experiment as to whether the Chinese will enforce the new rules.  If not, then Trump is inoculated against certain attacks/accusations when he takes a hard line down the road.

Good points.
Title: Re: Trade and Globalization Issues:
Post by: G M on December 15, 2019, 12:23:09 PM
Arguably sets up an empirical experiment as to whether the Chinese will enforce the new rules.  If not, then Trump is inoculated against certain attacks/accusations when he takes a hard line down the road.

Good points.

Yes.
Title: Not much difference in NAFTA and MUSCA ?
Post by: ccp on December 15, 2019, 03:14:56 PM
https://markets.businessinsider.com/news/stocks/us-canada-mexico-trade-deal-usmca-nafta-details-dairy-auto-dispute-resolution-2018-10-1027579947

I guess it is ok
don't know who to believe on what I read

Title: China Trade Agreement Hole
Post by: Crafty_Dog on December 17, 2019, 11:32:55 AM
https://www.gatestoneinstitute.org/15305/china-trade-agreement-hole
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on December 18, 2019, 03:45:15 AM
https://www.theepochtimes.com/why-the-us-china-phase-one-trade-deal-has-the-ccp-in-a-stranglehold_3176283.html?utm_source=Epoch+Times+Newsletters&utm_campaign=1ef0d2e611-EMAIL_CAMPAIGN_2019_12_18_12_22&utm_medium=email&utm_term=0_4fba358ecf-1ef0d2e611-239065853
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on December 18, 2019, 06:18:34 AM
https://www.theepochtimes.com/why-the-us-china-phase-one-trade-deal-has-the-ccp-in-a-stranglehold_3176283.html?utm_source=Epoch+Times+Newsletters&utm_campaign=1ef0d2e611-EMAIL_CAMPAIGN_2019_12_18_12_22&utm_medium=email&utm_term=0_4fba358ecf-1ef0d2e611-239065853

"The agreement requires the Chinese regime to carry out structural reforms to protect intellectual property, stop coercive technology transfers, and open its market for agricultural products and financial services. China also promised to buy more U.S. goods and services in the coming years.  In particular, the U.S. statement emphasized that the agreement has an enforceable mechanism."

The items in bold I did not know were in there.  If true, this is a BIG deal.  I have to hold off judgment on it as different facts and opinions keep coming out.

Even if they cheat on it and this goes on for years in contention, this, if true, is a big step forward.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on December 19, 2019, 07:53:31 AM
https://www.theepochtimes.com/the-us-china-phase-one-fake-out_3178016.html?utm_source=Epoch+Times+Newsletters&utm_campaign=897272427f-EMAIL_CAMPAIGN_2019_12_18_10_20&utm_medium=email&utm_term=0_4fba358ecf-897272427f-239065853
Title: GPF on Phase One
Post by: Crafty_Dog on January 14, 2020, 10:50:53 AM
    Daily Memo: Cease-Fires on Battlefields and Trade Wars
By: GPF Staff

Trade deal details leaked. The details of the “phase one” trade deal expected to be inked this week by Chinese and U.S. trade delegations in D.C. are starting to leak. According to Reuters, the South China Morning Post and others, China will agree to purchase some $200 billion in U.S. goods per year, including $75 billion worth of manufactured goods, $50 billion in energy, $40 billion of farm products, and between $35 billion and $40 billion worth of services. The U.S., in exchange, is expected to lower the 15 percent tariffs it imposed earlier this year on $120 billion in Chinese goods to 7.5 percent and continue to hold off on staggering new 25 percent tariffs it had threatened to impose in December. All other existing U.S. tariffs will remain in place, and the deal is not expected to touch on the biggest sources of bilateral tension, particularly state support for Chinese firms.

As always, the devil will be in the details, and there are two things to watch for in the final text. One is the language on enforcement. The U.S. has struggled to come up with ways acceptable to Beijing to ensure that China makes good on its pledges. The other is the doubt over whether China can really absorb such a large spike in imports of U.S. goods; language allowing it to make up any shortfalls by increasing services imports may be more feasible.

Meanwhile, the Trump administration formally lifted its designation of China as a currency manipulator. China hasn’t artificially weakened its currency in years, so the tag was always a hollow gesture; its main significance was to demonstrate just how much trouble the U.S. was having pressuring Beijing into major trade concessions. It won’t get easier from here as the two sides shift focus to negotiating a more substantive “phase two” agreement.
Europe steps up pressure on Iran. France, Germany and the U.K. have triggered a dispute resolution mechanism in the 2015 Joint Comprehensive Plan of Action over Iran’s continued violation of the agreement’s terms. European leaders now have 15 days to resolve their “differences” with the deal’s other signatories. According to one European diplomat, the move is an attempt to restore Europe’s credibility. British Prime Minister Boris Johnson suggested it could pave the way to signing a new deal with Tehran, though it’s also possible it could lead to the imposition of new sanctions against Iran for violating the JCPOA by, for example, activating centrifuges in nuclear facilities and increasing uranium enrichment. The move also suggests that the EU is adopting a stance on Iran more in line with that of the U.S., a departure from previous efforts to establish a financial mechanism to help circumvent sanctions while still doing business with Iran.
Title: Commerce Dept new rules on currency manipulation
Post by: Crafty_Dog on February 04, 2020, 10:58:56 AM
GPF:

Currency war? The U.S. Commerce Department is set to unveil new rules effectively granting the administration broad powers to unilaterally impose countervailing duties on countries Washington suspects of undervaluing their currencies. This could mark a significant tactical shift in U.S. policy on trade – and on any number of other issues. While the rules are ostensibly about currency manipulation, the way they are constructed makes clear that the move is mainly aimed at making it easier to use tariffs as a tool whenever a U.S. administration deems them politically or strategically useful. (For example, tariffs can be imposed even if the Treasury Department exonerates suspected manipulators in its biannual report to Congress.)
Title: Stratfror: US, Kenya, Africa
Post by: Crafty_Dog on February 07, 2020, 01:27:40 PM
Stratfor Worldview

SNAPSHOTS
Breaking Ranks, Kenya Enters Bilateral Trade Talks With Washington
4 MINS READ
Feb 7, 2020 | 20:54 GMT

HIGHLIGHTS
As the U.S. moves away from multilateral deals, the White House will use any agreement with Kenya to coax African countries that have hesitated to talk trade directly with Washington....

The Big Picture

The United States and Europe have historically given developing and low-income countries preferential trade access to their markets as a form of development aid. But those agreements are becoming outdated, and the idea of a one-sided agreement for those countries is losing political support in the West. With the White House trade strategy shifting toward bilateral agreements instead of large plurilateral or multilateral deals, it's unsurprising that the United States is trying to negotiate with these countries individually. Kenya is now the first to take Washington up on its offer of talks.

See The Suitors of Sub-Saharan Africa

The United States continues to try to break down plurilateral trade agreements into bilateral agreements, and Kenya appears to be the first sub-Saharan African country on its list. During his visit with Kenyan President Uhuru Kenyatta, U.S. President Donald Trump announced that the United States intends to open formal trade negotiations with the East African nation. Afterward, the Office of the United States Trade Representative published a press release saying that, at the direction of the president, U.S. Trade Representative Robert Lighthizer would officially notify Congress of the U.S. intent to start negotiations as stipulated under the administration's trade promotion authority (TPA) given by Congress.

Many Trade Deals vs. Relying on One Trade Act

The United States wants to end the Generalized System of Preferences (GSP), a program that gives nonreciprocal, duty-free tariff treatment to some products imported from various developing countries. Even more, the administration seeks to replace the African Growth and Opportunity Act, a measure that goes beyond the GSP to significantly enhance tariff-free access for several thousand more goods to the United States for qualifying sub-Saharan African countries. Both moves are part of a broader U.S. trade strategy of shifting toward bilateral trade deals.

The African Union and most African countries would prefer to have a new plurilateral agreement to replace the African Growth and Opportunity Act, which is set to expire in 2025. But Kenya appears to have broken ranks with other African countries as it looks for a more stable trade relationship with the United States. The Trump administration will meanwhile try to use the agreement signed with Kenya as a model for talks with other African countries, although this may not prove easy. Kenyatta, for example, has said that the bilateral negotiations with the United States do not mean it does not support the African Continental Free Trade Area, which comprises 55 African Union member states, forming a market of more than 1.2 billion people. Kenyatta also said that a bilateral agreement with the United States would create a sounder footing for its trade relationship with Washington than does the African Growth and Opportunity Act, which he compared to "training wheels."

The Trump administration will try to use the agreement signed with Kenya as a model for talks with other African countries.

Once the Trump administration formally notifies the U.S. Congress of its intent to enter negotiations, the TPA requires that the Trump administration wait at least 90 days before entering talks. At least 30 days before negotiations begin, the Trump administration must publish its negotiating objectives. These will be the Trump administration's first official trade negotiations with a developing country under the TPA, and the first formal trade talks by any administration with a sub-Saharan African country. It will be important to track U.S. negotiating objectives.

Trade negotiations and a trade deal with Kenya are highly unlikely before the U.S. presidential election in November and official talks cannot begin until early May. Moreover, the Trump administration must notify Congress 180 days before signing an agreement of any potential changes to U.S. trade remedy laws, which the United States uses to enforce trade rules; this could push a signing date to after the November election.

Background

The United States ran a small trade deficit with African Growth and Opportunity Act countries in 2019, importing $20.2 billion worth of products and exporting $14.9 billion, but in years past, the U.S. trade deficit with those countries has been much higher. The deficit peaked at $66 billion in 2008, just eight years after the African Growth and Opportunity Act entered into force. It has fallen since, bottoming out at just $865 million in 2015. U.S. purchases of oil and natural gas from oil-producing countries like Nigeria, Angola, the Republic of the Congo, Gabon and Chad have always comprised the bulk of trade between the United States and African Growth and Opportunity Act countries. Trade between Kenya and the United States, meanwhile, is not particularly extensive. The United States had a trade deficit of just $294 million in 2019 with Kenya, almost entirely due to the textile trade — which the African Growth and Opportunity Act covers. The United States has had a trade surplus with Kenya as recently as 2015.
Title: WSJ: House votes to remove country of origin labels on meat sold in US
Post by: Crafty_Dog on February 21, 2020, 04:05:22 PM
House Votes to Remove Country-of-Origin Labels on Meat Sold in U.S.
Washington seeks to prevent a long battle over the labels with Canada and Mexico

Country-of-origin labels were mandated by Congress in the 2002 and 2008 farm bills. They require meatpackers to identify where animals are born, raised and slaughtered.
PHOTO: REUTERS
By Tennille Tracy
Updated June 10, 2015 11:31 pm ET

The House voted late Wednesday to remove country-of-origin labels on beef, pork and chicken sold in the U.S., hoping to prevent a protracted battle over the labels with Canada and Mexico.

Wednesday’s 300-131 vote repealing the country-of-origin labels for meat follows a series of rulings by the World Trade Organization finding the labeling discriminates against animals imported from Canada and Mexico.

Canada and Mexico won a final WTO ruling in May, and are now seeking retaliatory actions valued at a combined $3.7 billion a year. Canada has threatened trade restrictions on a range of U.S. products, including meat, wine, chocolate, jewelry and furniture.

Supporters of the House bill said a repeal of the labeling law is the only way to prevent retaliatory measures that could affect several U.S. industries.

“If COOL worked, perhaps there would be a response other than repeal,” said House Agriculture Committee Chairman Mike Conaway (R., Texas), the sponsor of the bill. “But the fact is COOL has been a marketing failure.”

Country-of-origin labels, known as COOL, were mandated by Congress in the 2002 and 2008 farm bills, and require meatpackers to identify where animals are born, raised and slaughtered. The information is then printed on meat packages sold in grocery stores. The labels aren’t required on meat sold in restaurants.

In 2014, the U.S. imported more than 2 million head of cattle from Canada and Mexico and brought in nearly 5 million hogs from Canada.

The House’s vote in favor of repeal moves the fight about origin labels to the Senate, where key members remain divided on the issue.

Senate Agriculture Chairman Pat Roberts (R., Kan.) has showed a strong interest in a repeal, but the top Democrat, Sen. Debbie Stabenow of Michigan, said Wednesday that she will oppose efforts to get rid of them altogether.

“I plan on working with my Senate colleagues to develop legislation that ensures consumers have information about where their food comes from while also meeting our international trade obligations,” Ms. Stabenow said.

Canada and Mexico contend that labeling requirements put their cows and pigs at a disadvantage—not because consumers snub their products but because U.S. meatpackers don’t want to go through the hassle and expense of tracking imported animals. As a result, meatpackers offer lower prices for hogs and cattle from Canada and Mexico.

Consumer advocates, among the biggest supporters of the labels, say international trade deals should not trump consumers’ access to information about their food.

“If Congress repeals [the labels], then the next time consumers go shopping for a steak or chicken for their families, they won’t be able to tell where that product came from,” said Chris Waldrop, director of the Food Policy Institute at Consumer Federation of America. “That’s completely unacceptable. Consumers want more information about their food, not less.”

In a report to Congress in April, the Agriculture Department said the costs of putting country-of-origin labels on meat outweighed the benefits. It found little evidence to suggest consumers would buy more products with a U.S. label.

Andrew Bates, a spokesman for the Trade Representative office, said the U.S. plans to object to Canada and Mexico’s request for retaliatory action in the WTO. The trade organization is scheduled to consider the countries’ request on June 17.

“Canada and Mexico did not provide any justification for their requests, but we would note that the annual values appear to be substantially inflated,” Mr. Bates said.

Write to Tennille Tracy at tennille.tracy@wsj.com
Title: Mexico to benefit from China being fuct?
Post by: Crafty_Dog on March 09, 2020, 01:08:11 PM
https://www.forbes.com/sites/kenrapoza/2020/03/01/coronavirus-could-be-the-end-of-china-as-global-manufacturing-hub/?utm_campaign=forbes&utm_source=facebook&utm_medium=social&utm_term=Valerie%2F
Title: WSJ: US to stop collecting tariffs for three months
Post by: Crafty_Dog on March 27, 2020, 11:37:47 PM
U.S. Plans to Stop Collecting Import Tariffs for Three Months, Officials Say
Move aimed at helping U.S. businesses

President Trump could still overrule the plans to suspend the tariffs.
PHOTO: ALEX BRANDON/ASSOCIATED PRESS
By Alex Leary and William Mauldin
Updated March 27, 2020 7:04 pm ET

WASHINGTON—The Trump administration is preparing to suspend collection of import tariffs for three months to give U.S. companies financial relief amid the coronavirus pandemic, according to administration officials.

“Customs duties will be suspended for three months,” a senior administration official said Friday.

Companies would still be liable for the tariffs at a later date, which hasn’t been determined, another official said. There would be no formal changes to tariff policy, officials said.

Asked about The Wall Street Journal’s report at a news briefing late Friday, Mr. Trump called the report “fake news.”

Mr. Trump signed a roughly $2 trillion economic-stimulus bill Friday as the economy has been brought to a standstill by the coronavirus pandemic.

Business groups have called for tariff relief. They have faced resistance from trade hawks and domestic industries such as steel calling for protection from what they see as unfairly traded imports.

U.S. Customs and Border Protection in recent days sent out a formal notice saying it would provide temporary delays for customs duties on a case-by-case-basis, only to rescind the offer on Thursday.

Even so, the administration officials said the White House was now moving to stop the collection of tariffs, while leaving the tariffs in place.

A spokesman for Robert Lighthizer, the U.S. trade representative, didn’t immediately reply to a request for comment.

The plans for tariff-payment delays doesn’t by itself mean the administration is backing away from the use of trade barriers to defend domestic industry. Trade experts say the combination of the 2020 presidential election and a possible recession suggests the administration would face a political backlash if it removed the tariffs, including in manufacturing-heavy states of the Midwest.

“This whole crisis is a vindication of President Trump’s tariff policies, which over the last three years have already begun to bring some of our supply chains and jobs home,” White House trade and manufacturing adviser Peter Navarro told the Journal last week.

On Friday, Mr. Navarro was appointed by Mr. Trump to oversee government efforts to arrange private production of essential items during the pandemic. Mr. Navarro couldn’t immediately be reached by phone Friday.

Mr. Trump has imposed global tariffs on steel and aluminum imports, as well as tariffs on hundreds of billions of dollars of Chinese products in a trade war sparked off by China’s treatment of American intellectual property and trade secrets.

Other imports also face duties based on findings of foreign “dumping” or subsidies, and the U.S. maintains usually low tariffs on a host of products from most countries under international agreements.

Washington and Beijing in January signed a “phase one” agreement that serves as a truce in the trade war. The U.S. didn’t remove tariffs on any Chinese products under that pact, they only reduced the rates of some tariffs.

The pact requires China to buy $200 billion more in U.S. exports than it previously did, and Mr. Trump has said he expects the pact to be upheld.

The two countries have recently seen tensions grow over the virus, which spread from China, as well as a spat that has seen both nations reduce the number of foreign correspondents permitted from the other country.

Title: The trade protectionists had it at least partly right
Post by: DougMacG on March 29, 2020, 10:42:36 AM
And I was at least partly wrong.  Countries need to maintain strategic production capabilities at home.
--------------------------------------------------------------------------------------

Coronavirus India: India bans export of wonder drug - Hydroxychloroquine

https://www.msn.com/en-in/news/other/coronavirus-india-india-bans-export-of-wonder-drug-hydroxychloroquine/ar-BB11FcsI
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on March 29, 2020, 12:09:10 PM
"Countries need to maintain strategic production capabilities at home."

Exactly so!
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on March 29, 2020, 12:20:52 PM
Comparative advantage, the philosophical basis of free trade, works, if by "works" you mean "maximizes efficiency at the expense of redundancy and anti-fragility."

https://twitter.com/amconmag/status/1244300786751823872

https://www.theamericanconservative.com/articles/why-didnt-we-test-our-trades-antifragility-before-covid-19/
---------------------------------------------
Best choices typically involve trade-offs.
Title: Trade and Globalization Issues: Why didn't we test our anti-fragility
Post by: DougMacG on April 01, 2020, 08:39:50 AM
Referred to at US economy, here is the text of the article:

https://www.theamericanconservative.com/articles/why-didnt-we-test-our-trades-antifragility-before-covid-19/

Why Didn’t We Test Our Trade’s ‘Antifragility’ Before COVID-19?
Deliberately shocking the system under normal conditions would have been key to surviving the crisis. Here's how.


( By Travel mania/shutterstock)
MARCH 28, 2020|12:01 AM
GENE CALLAHAN AND JOE NORMAN
On April 21, 2011, the region of Amazon Web Services covering eastern North America crashed. The crash brought down the sites of large customers such as Quora, Foursquare, and Reddit. It took Amazon over a week to bring its system fully back online, and some customer data was lost permanently.

But one company whose site did not crash was Netflix. It turns out that Netflix had made themselves “antifragile” by employing software they called “Chaos Monkey,” which regularly and randomly brought down Netflix servers. By continually crashing their own servers, Netflix learned how to nevertheless keep other portions of their network running. And so when Amazon US-East crashed, Netflix ran on, unfazed.

This phenomenon is discussed by Nassim Taleb in his book Antifragile: a system that depends on the absence of change is fragile. The companies that focused on keeping all of their servers up and running all the time went completely offline when Amazon crashed from under them. But the company that had exposed itself to lots of little crashes could handle the big crash. That is because the minor, “undesirable” changes stress the system in a way that can make it stronger.

The idea of antifragility does not apply only to computer networks. For instance, by trying to eliminate minor downturns in the economy, central bank policy can make that economy extremely vulnerable to a major recession. Running only on treadmills or tracks makes the joints extremely vulnerable when, say, one steps in a pothole in the sidewalk.

What does this have to do with trade policy? For many reasons, such as the recent coronavirus outbreak, flows of goods are subject to unexpected shocks.

Both a regime of “unfettered” free trade, and its opposite, that of complete autarchy, are fragile in the face of such shocks. A trade policy aimed not at complete free trade or protectionism, but at making an economy better at absorbing and adapting to rapid change, is more sane and salutary than either extreme. Furthermore, we suggest practicing for shocks can help make an economy antifragile.

Amongst academic economists, the pure free-trade position is more popular. The case for international trade, absent the artificial interference of government trade policy, is generally based upon the “principle of comparative advantage,” first formulated by the English economist David Ricardo in the early 19th century. Ricardo pointed out, quite correctly, that even if, among two potential trading partners looking to trade a pair of goods, one of them is better at producing both of them, there still exist potential gains from trade—so long as one of them is relatively better at producing one of the goods, and the other (as a consequence of this condition) relatively better at producing the other. For example, Lebron James may be better than his local house painter at playing basketball, and at painting houses, given his extreme athleticism and long reach. But he is so much more “better” at basketball that it can still make sense for him to concentrate on basketball and pay the painter to paint his house.

And so, per Ricardo, it is among nations: even if, say, Sweden can produce both cars and wool sweaters more efficiently than Scotland, if Scotland is relatively less bad at producing sweaters than cars, it still makes sense for Scotland to produce only wool sweaters, and trade with Sweden for the cars it needs.

When we take comparative advantage to its logical conclusion at the global scale, it suggests that each agent (say, nation) should focus on one major industry domestically and that no two agents should specialize in the same industry. To do so would be to sacrifice the supposed advantage of sourcing from the agent who is best positioned to produce a particular good, with no gain for anyone.

Good so far, but Ricardo’s case contains two critical hidden assumptions: first, that the prices of the goods in question will remain more or less stable in the global marketplace, and second that the availability of imported goods from specialized producers will remain uninterrupted, such that sacrificing local capabilities for cheaper foreign alternatives.

So what happens in Scotland if the Swedes suddenly go crazy for yak hair sweaters (produced in Tibet) and are no longer interested in Scottish sweaters at all? The price of those sweaters crashes, and Scotland now finds itself with most of its productive capacity specialized in making a product that can only be sold at a loss.

Or what transpires if Scotland is no longer able, for whatever reason, to produce sweaters, but the Swedes need sweaters to keep warm? Swedes were perhaps once able to make their own sweaters, but have since funneled all their resources into making cars, and have even lost the knowledge of sweater-making. Now to keep warm, the Swedes have to rapidly build the infrastructure and workforce needed to make sweaters, and regain the knowledge of how to do so, as the Scots had not only been their sweater supplier, but the only global sweater supplier.

So we see that the case for extreme specialization, based on a first-order understanding of comparative advantage, collapses when faced with a second-order effect of a dramatic change in relative prices or conditions of supply.

That all may sound very theoretical, but collapses due to over-specialization, prompted by international agencies advising developing economies based on naive comparative-advantage analysis, have happened all too often. For instance, a number of African economies, persuaded to base their entire economy on a single good in which they had a comparative advantage (e.g, gold, cocoa, oil, or bauxite), saw their economies crash when the price of that commodity fell. People who had formerly been largely self-sufficient found themselves wage laborers for multinationals in good times, and dependents on foreign charity during bad times.

While the case for extreme specialization in production collapses merely by letting prices vary, it gets even worse for the “just specialize in the single thing you do best” folks once we add in considerations of pandemics, wars, extreme climate change, and other such shocks. We have just witnessed how relying on China for such a high percentage of our medical supplies and manufacturing has proven unwise when faced with an epidemic originating in China.

On a smaller scale, the great urban theorist Jane Jacobs stressed the need for economic diversity in a city if it is to flourish. Detroit’s over-reliance on the automobile industry, and its subsequent collapse when that industry largely deserted it, is a prominent example of Jacobs’ point. And while Detroit is perhaps the most famous example of a city collapsing due to over-specialization, it is far from the only one.

All of this suggests that trade policy, at any level, should have, as its primary goal, the encouragement of diversity in that level’s economic activity. To embrace the extremes of “pure free trade” or “total self-sufficiency” is to become more susceptible to catastrophe from changing conditions. A region that can produce only a few goods is fragile in the face of an event, like the coronavirus, that disrupts the flow of outside goods. On the other hand, turning completely inward, and cutting the region off from the outside, leaves it without outside help when confronting a local disaster, like an extreme drought.

To be resilient as a social entity, whether a nation, region, city, or family, will have a diverse mix of internal and external resources it can draw upon for sustenance. Even for an individual, total specialization and complete autarchy are both bad bets. If your only skill is repairing Sony Walkmen, you were probably pretty busy in 2000, but by today you likely don’t have much work. Complete individual autarchy isn’t ever really even attempted: if you watch YouTube videos of supposedly “self-reliant” people in the wilderness, you will find them using axes, radios, saws, solar panels, pots and pans, shirts, shoes, tents, and many more goods produced by others.

In the technical literature, having such diversity at multiple scales is referred to as “multiscale variety.” In a system that displays multiscale variety, no single scale accounts for all of the diversity of behavior in the system. The practical importance of this is related to the fact that shocks themselves come at different scales. Some shocks might be limited to a town or a region, for instance local weather events, while others can be much more widespread, such as the coronavirus pandemic we are currently facing.

A system with multiscale variety is able to respond to shocks at the scale at which they occur: if one region experiences a drought while a neighboring region does not, agricultural supplementation from the currently abundant region can be leveraged. At a smaller scale, if one field of potatoes becomes infested with a pest, while the adjacent cows in pasture are spared, the family who owns the farm will still be able to feed themselves and supply products to the market.

Understanding this, the question becomes how can trade policy, conceived broadly, promote the necessary variety and resiliency to mitigate and thrive in the face of the unexpected? Crucially, we should learn from the tech companies: practice disconnecting, and do it randomly. In our view there are two important components to the intentional disruption: (1) it is regular enough to generate “muscle memory” type responses; and (2) it is random enough that responses are not “overfit” to particular scenarios.

For an individual or family, implementing such a policy might create some hardships, but there are few institutional barriers to doing so. One week, simply declare, “Let’s pretend all of the grocery stores are empty, and try getting by only on what we can produce in the yard or have stockpiled in our house!” On another occasion, perhaps, see if you can keep your house warm for a few days without input from utility companies.

Businesses are also largely free of institutional barriers to practicing disconnecting. A company can simply say, “We are awfully dependent on supplier X: this week, we are not going to order from them, and let’s see what we can do instead!” A business can also seek out external alternatives to over-reliance on crucial internal resources: for instance, if your top tech guy can hold your business hostage, it is a good idea to find an outside consulting firm that could potentially fill his role.

When we get up to the scale of the nation, things become (at least institutionally) trickier. If Freedonia suddenly bans the import of goods from Ruritania, even for a week, Ruritania is likely to regard this as a “trade war,” and may very well go to the WTO and seek relief. However, the point of this reorientation of trade policy is not to promote hostility to other countries, but to make one’s own country more resilient. A possible solution to this problem is that a national government could periodically, at random times, buy all of the imports of some good from some other country, and stockpile them. Then the foreign supplier would have no cause for complaint: its goods are still being purchased! But domestic manufacturers would have to learn to adjust to a disappearance of the supply of palm oil from Indonesia, or tin from China, or oil from Norway.

Critics will complain that such government management of trade flows, even with the noble aim of rendering an economy antifragile, will inevitably be turned to less pure purposes, like protecting politically powerful industrialists. But so what? It is not as though the pursuit of free trade hasn’t itself yielded perverse outcomes, such as the NAFTA trade agreement that ran to over one thousand pages. Any good aim is likely to suffer diversion as it passes through the rough-and-tumble of political reality. Thus, we might as well set our sites on an ideal policy, even though it won’t be perfectly realized.

We must learn to deal with disruptions when success is not critical to survival. The better we become at responding to unexpected shocks, the lower the cost will be each time we face an event beyond our control that demands an adaptive response. To wait until adaptation is necessary makes us fragile when a real crisis appears. We should begin to develop an antifragile economy today, by causing our own disruptions and learning to overcome them. Deliberately disrupting our own economy may sound crazy. But then, so did deliberately crashing one’s own servers, until Chaos Monkey proved that it works.

Gene Callahan teaches at the Tandon School of Engineering at New York University. Joe Norman is a data scientist and researcher at the New England Complex Systems Institute.
Title: Re: Trade and Globalization Issues: Why didn't we test our anti-fragility
Post by: G M on April 01, 2020, 01:14:05 PM
Antifragility is a vital concept.


Referred to at US economy, here is the text of the article:

https://www.theamericanconservative.com/articles/why-didnt-we-test-our-trades-antifragility-before-covid-19/

Why Didn’t We Test Our Trade’s ‘Antifragility’ Before COVID-19?
Deliberately shocking the system under normal conditions would have been key to surviving the crisis. Here's how.


( By Travel mania/shutterstock)
MARCH 28, 2020|12:01 AM
GENE CALLAHAN AND JOE NORMAN
On April 21, 2011, the region of Amazon Web Services covering eastern North America crashed. The crash brought down the sites of large customers such as Quora, Foursquare, and Reddit. It took Amazon over a week to bring its system fully back online, and some customer data was lost permanently.

But one company whose site did not crash was Netflix. It turns out that Netflix had made themselves “antifragile” by employing software they called “Chaos Monkey,” which regularly and randomly brought down Netflix servers. By continually crashing their own servers, Netflix learned how to nevertheless keep other portions of their network running. And so when Amazon US-East crashed, Netflix ran on, unfazed.

This phenomenon is discussed by Nassim Taleb in his book Antifragile: a system that depends on the absence of change is fragile. The companies that focused on keeping all of their servers up and running all the time went completely offline when Amazon crashed from under them. But the company that had exposed itself to lots of little crashes could handle the big crash. That is because the minor, “undesirable” changes stress the system in a way that can make it stronger.

The idea of antifragility does not apply only to computer networks. For instance, by trying to eliminate minor downturns in the economy, central bank policy can make that economy extremely vulnerable to a major recession. Running only on treadmills or tracks makes the joints extremely vulnerable when, say, one steps in a pothole in the sidewalk.

What does this have to do with trade policy? For many reasons, such as the recent coronavirus outbreak, flows of goods are subject to unexpected shocks.

Both a regime of “unfettered” free trade, and its opposite, that of complete autarchy, are fragile in the face of such shocks. A trade policy aimed not at complete free trade or protectionism, but at making an economy better at absorbing and adapting to rapid change, is more sane and salutary than either extreme. Furthermore, we suggest practicing for shocks can help make an economy antifragile.

Amongst academic economists, the pure free-trade position is more popular. The case for international trade, absent the artificial interference of government trade policy, is generally based upon the “principle of comparative advantage,” first formulated by the English economist David Ricardo in the early 19th century. Ricardo pointed out, quite correctly, that even if, among two potential trading partners looking to trade a pair of goods, one of them is better at producing both of them, there still exist potential gains from trade—so long as one of them is relatively better at producing one of the goods, and the other (as a consequence of this condition) relatively better at producing the other. For example, Lebron James may be better than his local house painter at playing basketball, and at painting houses, given his extreme athleticism and long reach. But he is so much more “better” at basketball that it can still make sense for him to concentrate on basketball and pay the painter to paint his house.

And so, per Ricardo, it is among nations: even if, say, Sweden can produce both cars and wool sweaters more efficiently than Scotland, if Scotland is relatively less bad at producing sweaters than cars, it still makes sense for Scotland to produce only wool sweaters, and trade with Sweden for the cars it needs.

When we take comparative advantage to its logical conclusion at the global scale, it suggests that each agent (say, nation) should focus on one major industry domestically and that no two agents should specialize in the same industry. To do so would be to sacrifice the supposed advantage of sourcing from the agent who is best positioned to produce a particular good, with no gain for anyone.

Good so far, but Ricardo’s case contains two critical hidden assumptions: first, that the prices of the goods in question will remain more or less stable in the global marketplace, and second that the availability of imported goods from specialized producers will remain uninterrupted, such that sacrificing local capabilities for cheaper foreign alternatives.

So what happens in Scotland if the Swedes suddenly go crazy for yak hair sweaters (produced in Tibet) and are no longer interested in Scottish sweaters at all? The price of those sweaters crashes, and Scotland now finds itself with most of its productive capacity specialized in making a product that can only be sold at a loss.

Or what transpires if Scotland is no longer able, for whatever reason, to produce sweaters, but the Swedes need sweaters to keep warm? Swedes were perhaps once able to make their own sweaters, but have since funneled all their resources into making cars, and have even lost the knowledge of sweater-making. Now to keep warm, the Swedes have to rapidly build the infrastructure and workforce needed to make sweaters, and regain the knowledge of how to do so, as the Scots had not only been their sweater supplier, but the only global sweater supplier.

So we see that the case for extreme specialization, based on a first-order understanding of comparative advantage, collapses when faced with a second-order effect of a dramatic change in relative prices or conditions of supply.

That all may sound very theoretical, but collapses due to over-specialization, prompted by international agencies advising developing economies based on naive comparative-advantage analysis, have happened all too often. For instance, a number of African economies, persuaded to base their entire economy on a single good in which they had a comparative advantage (e.g, gold, cocoa, oil, or bauxite), saw their economies crash when the price of that commodity fell. People who had formerly been largely self-sufficient found themselves wage laborers for multinationals in good times, and dependents on foreign charity during bad times.

While the case for extreme specialization in production collapses merely by letting prices vary, it gets even worse for the “just specialize in the single thing you do best” folks once we add in considerations of pandemics, wars, extreme climate change, and other such shocks. We have just witnessed how relying on China for such a high percentage of our medical supplies and manufacturing has proven unwise when faced with an epidemic originating in China.

On a smaller scale, the great urban theorist Jane Jacobs stressed the need for economic diversity in a city if it is to flourish. Detroit’s over-reliance on the automobile industry, and its subsequent collapse when that industry largely deserted it, is a prominent example of Jacobs’ point. And while Detroit is perhaps the most famous example of a city collapsing due to over-specialization, it is far from the only one.

All of this suggests that trade policy, at any level, should have, as its primary goal, the encouragement of diversity in that level’s economic activity. To embrace the extremes of “pure free trade” or “total self-sufficiency” is to become more susceptible to catastrophe from changing conditions. A region that can produce only a few goods is fragile in the face of an event, like the coronavirus, that disrupts the flow of outside goods. On the other hand, turning completely inward, and cutting the region off from the outside, leaves it without outside help when confronting a local disaster, like an extreme drought.

To be resilient as a social entity, whether a nation, region, city, or family, will have a diverse mix of internal and external resources it can draw upon for sustenance. Even for an individual, total specialization and complete autarchy are both bad bets. If your only skill is repairing Sony Walkmen, you were probably pretty busy in 2000, but by today you likely don’t have much work. Complete individual autarchy isn’t ever really even attempted: if you watch YouTube videos of supposedly “self-reliant” people in the wilderness, you will find them using axes, radios, saws, solar panels, pots and pans, shirts, shoes, tents, and many more goods produced by others.

In the technical literature, having such diversity at multiple scales is referred to as “multiscale variety.” In a system that displays multiscale variety, no single scale accounts for all of the diversity of behavior in the system. The practical importance of this is related to the fact that shocks themselves come at different scales. Some shocks might be limited to a town or a region, for instance local weather events, while others can be much more widespread, such as the coronavirus pandemic we are currently facing.

A system with multiscale variety is able to respond to shocks at the scale at which they occur: if one region experiences a drought while a neighboring region does not, agricultural supplementation from the currently abundant region can be leveraged. At a smaller scale, if one field of potatoes becomes infested with a pest, while the adjacent cows in pasture are spared, the family who owns the farm will still be able to feed themselves and supply products to the market.

Understanding this, the question becomes how can trade policy, conceived broadly, promote the necessary variety and resiliency to mitigate and thrive in the face of the unexpected? Crucially, we should learn from the tech companies: practice disconnecting, and do it randomly. In our view there are two important components to the intentional disruption: (1) it is regular enough to generate “muscle memory” type responses; and (2) it is random enough that responses are not “overfit” to particular scenarios.

For an individual or family, implementing such a policy might create some hardships, but there are few institutional barriers to doing so. One week, simply declare, “Let’s pretend all of the grocery stores are empty, and try getting by only on what we can produce in the yard or have stockpiled in our house!” On another occasion, perhaps, see if you can keep your house warm for a few days without input from utility companies.

Businesses are also largely free of institutional barriers to practicing disconnecting. A company can simply say, “We are awfully dependent on supplier X: this week, we are not going to order from them, and let’s see what we can do instead!” A business can also seek out external alternatives to over-reliance on crucial internal resources: for instance, if your top tech guy can hold your business hostage, it is a good idea to find an outside consulting firm that could potentially fill his role.

When we get up to the scale of the nation, things become (at least institutionally) trickier. If Freedonia suddenly bans the import of goods from Ruritania, even for a week, Ruritania is likely to regard this as a “trade war,” and may very well go to the WTO and seek relief. However, the point of this reorientation of trade policy is not to promote hostility to other countries, but to make one’s own country more resilient. A possible solution to this problem is that a national government could periodically, at random times, buy all of the imports of some good from some other country, and stockpile them. Then the foreign supplier would have no cause for complaint: its goods are still being purchased! But domestic manufacturers would have to learn to adjust to a disappearance of the supply of palm oil from Indonesia, or tin from China, or oil from Norway.

Critics will complain that such government management of trade flows, even with the noble aim of rendering an economy antifragile, will inevitably be turned to less pure purposes, like protecting politically powerful industrialists. But so what? It is not as though the pursuit of free trade hasn’t itself yielded perverse outcomes, such as the NAFTA trade agreement that ran to over one thousand pages. Any good aim is likely to suffer diversion as it passes through the rough-and-tumble of political reality. Thus, we might as well set our sites on an ideal policy, even though it won’t be perfectly realized.

We must learn to deal with disruptions when success is not critical to survival. The better we become at responding to unexpected shocks, the lower the cost will be each time we face an event beyond our control that demands an adaptive response. To wait until adaptation is necessary makes us fragile when a real crisis appears. We should begin to develop an antifragile economy today, by causing our own disruptions and learning to overcome them. Deliberately disrupting our own economy may sound crazy. But then, so did deliberately crashing one’s own servers, until Chaos Monkey proved that it works.

Gene Callahan teaches at the Tandon School of Engineering at New York University. Joe Norman is a data scientist and researcher at the New England Complex Systems Institute.
Title: 2000: On China's entry into WTO
Post by: Crafty_Dog on April 26, 2020, 05:20:09 PM
https://www.epi.org/publication/issuebriefs_ib137/
Title: Re: Trade and Globalization Issues:
Post by: DougMacG on November 15, 2020, 07:49:05 AM
Any comments on the Asian trade agreement announced.  China and Japan in.  US out.  Did Trump make a mistake staying out or are allies making a mistake jumping in with China?  Is this tied to Trump losing the election or timed to not interfere with it?

https://www.scmp.com/news/china/diplomacy/article/3109939/china-declares-victory-15-asian-nations-sign-worlds-biggest
Title: GPF: The World's Largest Trade Pact
Post by: Crafty_Dog on November 21, 2020, 08:42:38 PM
The World's Largest Trade Pact
The headline-grabbing deal isn’t particularly emblematic of a shifting balance of power in East Asia.
By: Geopolitical Futures
Regional Comprehensive Economic Partnership
(click to enlarge)

Judging solely by its headline figures, the newly inked 15-member Regional Comprehensive Economic Partnership (RCEP) – by most metrics the world’s largest trade pact short of the World Trade Organization – is impressive in its size and scope. Its members account for around 29 percent of global economic output, similar levels of global trade value and nearly a third of global investment. If implemented, it will dramatically reduce tariffs on a wide range of goods and make some headway on untangling a morass of regulatory complications currently impeding trade. And reaching agreement on the pact is indeed no small feat, considering the extreme range of differences in the economies involved, along with deep strategic and economic concerns held by many members about China’s inclusion.

This is why you’re seeing a lot of headlines about how RCEP is a "China-led alternative" to the higher-standard Trans-Pacific Partnership (TPP) – and something that highlights waning U.S. influence over the trade-obsessed region to Beijing. To be sure, America's withdrawal from the TPP in 2017 disappointed regional allies like Japan, Australia and Singapore and deepened suspicion about U.S. interest in the region. U.S. trade moves targeting allies or potential strategic partners like Thailand and Vietnam had a similar effect. But RCEP itself isn’t particularly emblematic of a shifting balance of power in East Asia. This is, in part, because the details of the agreement don't quite live up to its billing. Its main effect will be in harmonizing a number of existing trade agreements among its member states; it doesn’t really attempt to write the rules for trade in services, intellectual property or investment – aspects of regional economies that will matter more and more going forward. There are also serious doubts about how much of it will actually be implemented, as it leaves ample room for countries to continue imposing non-tariff barriers on trade. And, ultimately, the opportunity for the U.S. to reengage with regional trade will remain wide open; the CPTPP (the TPP’s successor) was designed to make it as easy as possible for the U.S. to rejoin if and when domestic politics make it feasible.
Title: lumber tariffs
Post by: Crafty_Dog on May 26, 2021, 04:28:03 PM
https://www.zerohedge.com/markets/lumber-firms-applaud-home-builders-angry-us-moves-double-canadian-lumber-tariffs?utm_campaign=&utm_content=Zerohedge%3A+The+Durden+Dispatch&utm_medium=email&utm_source=zh_newsletter
Title: GPF: Trade Snarls
Post by: Crafty_Dog on August 06, 2021, 05:45:01 PM
   
Grinding Gears of Global Shipping
There are too many points of failure for things to snap back to working order quickly.
By: Geopolitical Futures
Shipping Demand and Pricing Continues to Soar
(click to enlarge)

The epochal global supply chain snarl isn’t going away. The COVID-19 pandemic exposed widespread structural fragilities in the global trading system, first through production slowdowns and then, almost as quickly, a slingshot recovery in demand. This, along with labor shortages, left finely tuned logistics networks overwhelmed and off-balance. This is illustrated through unprecedented congestion at Western ports, where ships and (just as important) shipping containers have been stuck in pileups. Ships are waiting for berths. Shipping containers are waiting for truckers (facing a deep labor shortage) or space on railways (which are at capacity). Major exporters like China, then, have been stuck waiting unusually long times for ships and shipping containers to return. Countless other hiccups in supply chains near and far are further complicating the situation. The disruptions in supply, along with record shipping costs, are perhaps the foremost driver of inflation in many countries.

It’s anyone’s guess how long it will take to untangle this mess. There are simply too many single points of failure – each of which can affect a dozen more – for things to snap back to working order quickly. However the immediate situation plays out, though, there’s likely to be immense long-term implications as countries across the globe scramble to try to rewire the global trading system around their needs.
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on August 13, 2021, 08:20:28 PM
Outbreak fallout. China’s latest COVID-19 outbreak is starting to hit major global supply chain networks. A terminal at China’s Ningbo-Zhoushan port – the world’s busiest shipping port by cargo tonnage – reportedly remains closed after shutting down Wednesday, apparently due to a positive test. In response, container shipping rates between China and the U.S. reached record highs yet again. The number of container ships waiting at anchor to enter the ports of Los Angeles and Long Beach has tripled since June.
Title: GPF
Post by: Crafty_Dog on August 20, 2021, 12:15:03 PM
Supply chain snarls intensifying. China's Ningbo port, the world's busiest by cargo volume, is expected to remain partially shut down for several more weeks following a modest COVID-19 outbreak earlier this month. Several carmakers in China, meanwhile, are scaling back production due to the interminable chip shortage. Toyota, which was among the best-prepared automakers for the disruptions, said earlier this week that it will have to slash production by as much as 40 percent in September.
Title: Deep Ship Deep Dive Supply Chain Crisis
Post by: Crafty_Dog on October 04, 2021, 04:43:19 PM
https://www.zerohedge.com/markets/deep-ship-deep-dive-supply-chain-crisis
Title: Trade Issues: We're running out of everything
Post by: DougMacG on October 10, 2021, 02:56:50 PM
One data point:  "shipping a parcel from Shanghai to Los Angeles is currently six times more expensive than shipping one from L.A. to Shanghai. "

https://www.msn.com/en-us/money/news/america-is-choking-under-an-e2-80-98everything-shortage-e2-80-99/ar-AAPeokg

   - Is that what they call trade balance?  We sell and ship NOTHING, in relative terms, to China.  We are sending EMPTY ships back to China for them to re-fill. 

Biden kicked out the guy that played chicken with the Chinese and almost got them, and he has done nothing to follow up on the progress that was made.

The Biden policy is put more taxes, regulations and assorted brakes on our producers to make what is wrong, exponentially worse.
Title: While Wife Pete breast feeds
Post by: Crafty_Dog on October 16, 2021, 01:42:55 AM
https://www.nationalreview.com/2021/10/the-idiocies-of-the-u-s-supply-chain/#slide-1
Title: How China became the single point of failure
Post by: Crafty_Dog on October 25, 2021, 07:16:43 AM
How China became the single point of failure

China now accounts for the largest share of manufacturing output.

The trend began in 1980 and accelerated beginning in the early 1990's. This was a synergistic process with several benefits to Western companies who offshored to China.

During the period of turmoil following the death of Mao in 1976, political titan Deng Xiaoping survived a series of palace schemes by Mao loyalists and other powerful interests.

The concern was that Deng would undermine the Cultural Revolution and press for reform.

After consolidating power at the Third Plenary Session of the CCP in 1978, Deng did exactly that.

He instituted a series of initiatives designed to gradually elevate China to a position of power in the world, centered on four domains:

Agriculture
Economy
Science
Defense

The reforms began a period of phenomenal growth, and stands as one of the more remarkable economic revolutions in human history.

Note well, this is not intended to valorize Deng, as he was behind a great many terrible human rights abuses and violations of decency.

In 1980, Deng began to rapidly force modernization of the manufacturing and economic base of China, with the key goals of: moving from light to heavy industrial manufacturing, controlling many key raw materials, and creating a consumeristic society with larger spending power.

Essential to this approach was hybridizing Mao's hardline Communism with capitalism and global trade.

Private ownership (technically) of companies, farmland, and productive assets increased, so long as the CCP/PLA retained primary benefit.

The combination of an aggressive subsidy model, cheap labor, export-focused manufacturing base, and expanding containerized shipping industry was too much for Western companies to resist.

Offshoring exploded in the 1990's as the preferred business model of MBA's everywhere.

Fueled by China's importance as the ascendant manufacturing hub of the world - from steel to electronics to consumer goods - the ocean shipping industry began realigning global routes.

Further, China established its own shipping companies and shipbuilding capacity.

Now, one thing to understand about containerized ocean freight is that it follows a hub-and-spoke model.

Super busy deepwater ocean ports see the largest vessels and throughput of containers, with cargo going to smaller-volume ports on smaller ships via the mega-ports.

This process is called "transshipment".

Larger containerships are more efficient per TEU (twenty foot container-equivalent, the standard unit of measure for the industry), but are limited by how deep they travel in the water ("draft").

Transshipping means efficiency

As of 2016, 7 of the 10 busiest ports in the world by throughput of containers were Chinese thank to its massive exports and transshipment activity.

South Korea, once the heavy shipbuilding leader, was overtaken by China in 2012, with the gap widening again in 2017.
Part of Deng's plan, set down all the way back in 1978-1980, was to establish control of both manufacturing AND transport.
With the world's economy incrementally more and more reliant on Chinese labor, Chinese subsidies, and Chinese ports, the die was cast.

By 2013, China was ready to enact the next phase of this program, and announced the Belt and Road Initiative.
Thanks to the consolidation of the ocean shipping industry since the 1990's, fewer and fewer carriers are operating ships, crews, and infrastructure such as port terminals.

Most of these carriers are state-owned, or at least heavily subsidized by govt's and banks.

With China dominating such a large percentage of global port capacity via its domestic capacity, BRI, or carriers relying on Chinese ports to streamline operations, any economic contagion that affects China will have myriad knock-on effects for the global economy.

Companies worldwide rely on Chinese manufacturing - 94% of F1000 corps have significant exposure to disruptions there.
All ocean carriers depend on higher-margin freight from China to help offset losses in every other country, and build huge alliances around Chinese demand.

Further, with the COVID-19 outbreak coming during Lunar New Year when Chinese ex-pats return home, a number of workers may or may not be returning to their foreign jobs or schooling.

Freight forwarders are feeling the sting, as most of these middlemen rely on China freight.

As COVID-19 spreads from Wuhan, the China's major coastal cities - manufacturing and logistics hubs all - have slowed to a crawl.

Major ocean carriers have begun skipping port calls, which means less capacity for US and Euro exporters
Cargo airlines, also dependent on the transshipment model via major air routes and hubs, are in as much of a pickle.

Draymen (container trucking), customs brokers, warehousemen, and delivery companies are struggling with less freight in circulation.

Logistics and transportation - globally a $4 trillion industry - has been completely upended by the sudden and dramatic slowdown of China.

The companies who rely on their Chinese factories, labor, and shipping services - from Amazon to tiny mom and pop firms - are crippled.

While the trade war has had a significant impact on manufacturing, retail sales, and logistics between China and the West, COVID-19's impact seems to be likely to have a more sustained and durable effect.

Uncertainty is the capital killer.

NO ONE really knows for sure what will happen next.

Sourcing and manufacturing that relocated from China during the trade war can't hide from a bioweapon.
Port and logistics providers can only reorient so fast.

What is our next and possibly only move begins with
Reshoring

Title: LA harbor back up has gotten worse since Biden-Buttgig started helping
Post by: Crafty_Dog on November 16, 2021, 04:41:07 AM
https://www.washingtontimes.com/news/2021/nov/15/cargo-ship-backup-worsens-after-biden-attempts-unt/?utm_source=Boomtrain&utm_medium=subscriber&utm_campaign=morning&utm_term=newsletter&utm_content=morning&bt_ee=yQxVGKeBLkdYBAqS%2FWn6Pp%2BSneSU4nBYIgmuEWKHWqCAqKDt0V1Gp09Lorno3XG3&bt_ts=1637059528040
Title: Re: LA harbor back up has gotten worse since Biden-Buttgig started helping
Post by: G M on November 16, 2021, 06:29:12 AM
https://www.washingtontimes.com/news/2021/nov/15/cargo-ship-backup-worsens-after-biden-attempts-unt/?utm_source=Boomtrain&utm_medium=subscriber&utm_campaign=morning&utm_term=newsletter&utm_content=morning&bt_ee=yQxVGKeBLkdYBAqS%2FWn6Pp%2BSneSU4nBYIgmuEWKHWqCAqKDt0V1Gp09Lorno3XG3&bt_ts=1637059528040

Did anyone expect anything else?
Title: GPF: Globalization After the Pandemic:
Post by: Crafty_Dog on January 03, 2022, 03:42:20 AM

    
Globalization After the Pandemic

Two global economic crises in less than two decades have shattered confidence in the structure of the global economy.
By: Antonia Colibasanu

We enter 2022 with the same hope that we had as we entered 2021: that the pandemic will end soon. This time, we will have even more vaccines and treatments for COVID-19. But we also have a new variant of the virus and the near certainty that there will be more. However this plays out, something profound has happened to humanity since the pandemic began. Disease is always a threat to mankind, but it’s a threat we ignore most of the time. Now that that’s not possible, we are stricken with uncertainty, which on a societal level translates into a general lack of confidence about the future.

In geopolitics, confidence matters. Leaders act on what they know or, more precisely, what they believe they know. Diminished confidence in the economy, for example, could shift an entire national strategy. And there are many reasons for low confidence in the economy. The pandemic triggered a supply chain and energy crisis, labor shortages and, ultimately, inflation, disrupting economic and social life and exacerbating inequality within and between countries. Most important, it accelerated the decline of globalization at a time when global cooperation is more important than ever.

Gallup World Poll | Economic Confidence Index
(click to enlarge)

From 2008 to 2022

Deglobalization started in 2008 with the global financial crisis and slowly unfolded over the next decade-plus, until COVID-19 threw it into overdrive. Deglobalization is an economic process, but more than that it’s driven by the growing lack of confidence in the global economic system and its supporting beliefs. After 2008, people doubted the belief that globalization could only bring positive change to people’s lives, and that interconnectivity and interdependence were forces of stability. It marked the end of the post-Cold War world and the beginning of a new age in which the nation-state was called on to protect society from the negative forces of globalization. The rise of nationalist and populist movements heralded this change, along with indications of increased protectionism worldwide. Brexit and the U.S.-Chinese trade war were the most visible signs of deglobalization, but there’s also the decline in global capital flows (even as capital stocks grew) since 2008, as well as a general decline in international trade.

International Trade and Investment
(click to enlarge)

2021 witnessed a stunning economic recovery after the collapse of 2020, but the unexpectedly large surge in global consumption set off a supply chain crisis and was the main cause of the energy crisis. Restrictions on travel deprived the shipping industry of low-wage workers at the same time that existing workers in the sector – already under intense strain – left their jobs in huge numbers. Already high shipping costs increased nearly tenfold compared with 2020. These disruptions produced scarcity, which drove up prices for nearly everything.

Inflation Trends
(click to enlarge)

Sectoral Inflation
(click to enlarge)

Pandemic-related disruptions also caused businesses to reassess their priorities and vulnerabilities. In Germany, Europe’s export powerhouse, 19 percent of manufacturing firms said in a recent survey by the Munich-based Ifo Institute that they plan to reshore production. Nearly two-thirds of these firms said they will look for German suppliers, while the rest said they will try to meet their needs in-house. This is an important shift for such a trade-dependent economy. About 12 percent of total inputs used in Germany’s export sectors (e.g., automobiles, machinery, electrical equipment, electronics) are imported from low-wage countries like China, other parts of Asia or the Balkans. The picture is similar in other countries. And while this development is being led by businesses, governments are sure to adjust their policies as well, considering the potential impact on society and growing calls for protectionism.

Inflation, Automation and Implications

These production shifts are accelerating the process of deglobalization. The pressure they add to the global economy will be felt in 2022.

Since the late 1980s, pro-globalization trends have helped to keep inflation at bay, as lower-cost producers provided inputs for advanced economies. If deglobalization is sustained, it may lead to a supply-side shock that will increase already high inflationary pressures. Coupled with slowing innovation and a limited labor force in developed economies’ manufacturing sector, this could create more shortages and even, eventually, a depression.

A potential salve would be the accelerated adoption of automation. In the low interest rate environment that followed the 2008 financial crisis, the cost of investing in robots fell, encouraging firms in rich countries to automate where they could and to reshore some production. Germany is a world leader in robot adoption, with 7.6 robots per 1,000 workers, compared with South Korea’s six and just over four in Japan. The United States, on the other hand, has just 1.5 robots per 1,000 workers. It’s unclear whether these developed economies currently have high enough levels of automation to decouple from low-wage countries. What’s more, the slow rate of adoption since 2011 and the unequal adoption between the developed and developing economies is cause for skepticism. Over the long term, however, automation will likely play an important role in developed economies.

Another effect of deglobalization is that national markets will become less vulnerable to external shocks. Instead, they will be more susceptible to domestic shocks. And as firms shorten their supply chains, their exposure to regional disruptions will increase.

The New Paradigm

Since the end of World War II, and especially since the Soviet Union’s collapse, the U.S. has shepherded the rise of globalization. Integration translated into cheaper goods for Americans and for the world. Outsourcing was seen as a boon, not a threat, to domestic prosperity. But 2008 shattered the public’s confidence in those ideas, and economic security returned as a top priority of policymakers. The pandemic further reinforced this trend, a bitter reminder that profit is nothing without resilience and robustness.

In the new paradigm, bilateral alliances will supplant multilateral ones, even if the latter endures. The European Union, for instance, will maintain its core advantage of hosting the largest common market in the world. It will continue developing strategic trade deals with countries like Japan and, most recently, Vietnam. In the face of perceived Chinese aggression, the U.S. and EU will continue to work on establishing trade and investment deals in strategic industries like semiconductors and steel. At the same time, evolving alliance structures like the U.S.-U.K.-Australia pact known as AUKUS (built on the Five Eyes intelligence-sharing structure that has existed since the end of World War II) will complement trade agreements like the Trans-Pacific Partnership, which the U.K. (and China) are attempting to join.

The pandemic created distortions (like inflation) that highlight the need for global collective action. Climate change is pushing leaders of advanced economies to put forth ambitious plans to “green” global finance. Domestic pressure to rein in multinational firms, especially big tech, paved the way for a groundbreaking global minimum corporate tax agreement late last year. At the same time, developed economies are growing further apart from the rest of the world, and there are growing aspirations to rebuild political and economic communities behind national borders. One thing is clear: 2022 will be a year of tension in the global economy.
Title: Globalism's Achilles heel
Post by: Crafty_Dog on January 09, 2022, 06:40:28 AM
https://www.zerohedge.com/geopolitical/rickards-exposes-globalisms-achilles-heel?utm_source=&utm_medium=email&utm_campaign=406

Rickards Exposes Globalism's Achilles' Heel
Tyler Durden's Photo
BY TYLER DURDEN
SATURDAY, JAN 08, 2022 - 09:20 AM
Authored by James Rickards via DailyReckoning.com,

Supply chain disruptions have not been resolved, and it’s not clear when they will be. You’re seeing the effects of these disruptions at the store in the forms of shortages and higher prices.

Yet the supply chain is a subject that very few are familiar with beyond a superficial acquaintance.

Most people think the supply chain is just part of the global economy. That’s not entirely true. The supply chain is the global economy.

There isn’t a single good or service of any kind that does not arrive through a supply chain. Not one.

If the global supply chain is broken, then the global economy is broken. That increasingly appears to be the case.



The supply chain difficulties will grow worse. Even more troubling is the fact that the remedies will take years and sometimes decades to implement.

The reasons for this have to do with long lead times in implementing onshoring. For example, the U.S. can cut its dependence on Asian semiconductor imports by building its own semiconductor fabrication plans (fabs).

The problem is that these plants take from three–five years to build, and the scale needed is enormous.

There are impediments to supply chain recovery that are not directly related to particular supply chains that nonetheless hurt the process of adaptation and substitution.

For example, there’s already a labor shortage in America. The causes are complicated.

There’s no literal shortage of potential workers, but many workers prefer to stay home because of some combination of government benefits, child-care responsibilities or inadequate pay offered by employers (who can’t afford to pay more themselves because they’ll go out of business).

A lot of this labor shortage centers on lower-wage jobs such as waiters, store clerks, fast-food staff and office assistants. But there will be a labor shortage coming soon in more high-skilled areas such as engineers, pilots, machinists and medical personnel.

This shortage will not be due to low pay, but to vaccine mandates.

President Biden has ordered that all federal contractors must be fully vaccinated by Jan. 18, 2022. (That’s in addition to federal workers and the military who are already subject to vaccine mandates and have no choice).

The vaccinated rate among federal contractors is actually lower than the country as a whole. The national vaccination rate is approaching 70%, while the federal contractor rate is closer to 60%.

It’s even lower in some specialties such as avionics.

These workers know the vaccine is available, understand the risks (both ways because of side effects) and have chosen not to be vaccinated. It’s almost impossible to change their minds at this point.

Though the courts have blocked the mandate, the Biden administration is not backing off. The federal contractor workforce is huge, in the millions. We expect a massive wave of resignations and terminations among highly skilled workers if the administration gets its way.

Professionals and high-value-added blue-collar workers from Boeing to Textron and hundreds of thousands of other firms will be fired or will quit.

The U.S. economy is already weak. The supply chain is already in disarray. This mass termination of skilled contractors could put the economy into a recession.

Some analysts have even suggested that the global supply chain is being sabotaged by major participants such as China to hurt Western economies for geopolitical reasons.

It’s difficult to tell if the supply chain is being intentionally sabotaged or whether it’s just collapsing under its own weight. Possibly both.

In a way, it doesn’t matter because anything as complex and as highly scaled as the global supply chain will always collapse; it’s just a question of when.

For 30 years, the goal of supply chain management has been efficiency, usually defined as the elimination of redundancy, inventory and latency (more on that below). That’s fine in the short run but it results in a system that is brittle and has no tolerance for even small disruptions.

The nature of complex systems is that small causes have tremendous impacts to the point of total collapse.

It is possible that one or more parties chose to disrupt the system intentionally without realizing how vulnerable the entire system really was. This combination of intentional acts and unintended consequences is a staple of history, including the outbreak of World War I.

Once the implosion begins, it’s very difficult to stop.

Title: GPF: Checking in on the Global Economy
Post by: Crafty_Dog on June 15, 2022, 12:22:41 PM
June 15, 2022
View On Website
Open as PDF

    
Checking in on the Global Economy
There are disruptions in energy, finance and trade underway that could alter the global order.
By: Antonia Colibasanu

Let’s check in on the global economy. The world is struggling with inflation, even as it continues to mend broken supply chains. The Japanese yen, the Indian rupee, the Chinese yuan and the euro have all slid against the dollar, prompting expectations that the Federal Reserve will raise interest rates again this week.

Energy prices are particularly worrisome. Gasoline prices have been on an upward trend ever since the COVID-19 pandemic fundamentally changed consumption patterns, but the Russian invasion of Ukraine, and the sanctions that followed, sent prices through the roof. The European economy is especially beholden to Russian energy. Natural gas imports keep households heated and industries humming. The longer the war goes on, the more volatile the energy environment in Europe will be. (This has prompted many European states to look for other suppliers, which could create new opportunities for oil-rich states that are looking for investments in their energy sectors.)

Meanwhile, Western sanctions against Russia have prevented producers there from accessing certain technologies to extract energy resources in places such as western Siberia and to refine the extracted products. For now, Russia is supplying most of its clients, but as the fallout from the war and sanctions continues, its ability to do so will likely diminish. Less Russian oil and gas on the global market would hurt both Russia and the global economy. Insufficient investment worldwide in projects over the past several years has only compounded the problem.

Meanwhile, the dollar, which most of the world uses to buy oil, is growing stronger in global financial markets. Risk-averse investors are less interested in betting on potentially high-reward projects than they are in investing in reliable, if low-return, opportunities. This means less money is going into new technologies and more is being invested in consumer products. It also means less money is being spent on developing economies than developed economies, of which the U.S. is the safest – hence why the value of the dollar has increased by more than 10 percent since the beginning of the year compared to most world currencies.

This comes at a time when the financial system was already under pressure. The retirement of the baby boomers was already driving a major restructuring, with a notable shift from saving to consumption of leisure goods and health care services. This transition will mean lower overall spending on high-tech, innovative sectors that have driven economic growth in recent years.

At the same time, the pandemic generated mass relocations in developed countries, adding pressure on the global credit market. This includes not only the baby boomers but also their children, the millennials, the second-largest generation in most developed countries. While the boomers are looking for cheaper housing in warmer climates, millennials want affordable single-family homes for raising families. This is causing demand pressures on credit markets and beyond. The demand for dollars is only growing.

A major trade dislocation is also in progress. The pandemic demonstrated the negative effects of interdependence. Most countries have experienced supply chain problems in essential goods, such as pharmaceuticals, or temporary food supply disruptions. In response, most countries are looking at ways to diminish their dependencies on other countries and better integrate production chains internally. In short, protectionism has grown.

The U.S. is no exception. Presidents Donald Trump and Joe Biden followed the same script on trade, making support for American production a priority. The war in Ukraine further bolsters the case for protectionism, as it exposes even more vulnerabilities. This week, the U.S. Congress will vote on the 2022 Ocean Shipping Reform Act, the largest overhaul of shipping regulations since 1998. In light of the government’s desire to promote U.S. exports while reining in ocean carriers’ market power, the bill would broaden the regulatory powers of the Federal Maritime Commission and set up a legal framework for the creation of vessel alliances. The goal is to secure the U.S. as the primary power controlling the ocean shipping industry.

At the same time, a decades-old trend is reversing. Since the 1980s, firms have expanded their production abroad and developed global supply chains. But in response to the pandemic and Ukraine, which affected perceptions of the costs (resilience) and benefits (efficiency) of globalization, companies have started discussing reshoring or “friend-shoring.” Reshoring means companies relocating supply chains within their national borders, something that’s possible only for countries like the U.S. where there’s enough resource diversity to cover most needs, albeit at higher prices. Friend-shoring – setting up production in nearby friendly countries – is more likely, since it still promises shorter supply chains.

All these firms’ adaptation strategies involve adjustment costs and new investments. All will put pressure on governments to adjust and establish the necessary regulatory environments to protect their interests. This is one of the reasons the U.S. is revising the ocean shipping act. It’s why pretty much all developed states are looking to secure supplies of food, key commodities and microchips.

But more important, this means some of the globalization of the past four decades will be cut back. Some of these processes were already underway, and the pandemic accelerated many others. The war in Ukraine only amplifies the trend. Energy dislocation, financial dislocation, and trade and investment dislocation will alter the global economic order. These changes won’t happen overnight, and the actions governments will take are unclear. However, all this makes it more urgent for leaders to start rethinking economic models now, which in the end will affect their strategy and the global geopolitical model
Title: GPF
Post by: Crafty_Dog on August 11, 2022, 05:00:27 PM
August 11, 2022
View On Website
Open as PDF

    
Daily Memo: Infrastructure Pacts and Defense Cooperation
Countries are diversifying connections to shore up supply chains and relationships.
By: Geopolitical Futures
Trans-Himalayan network. Chinese Foreign Minister Wang Yi and his Nepali counterpart, Narayan Khadka, agreed to build the Trans-Himalayan Multi-Dimensional Connectivity Network, involving railways and communication networks, under the umbrella of the Belt and Road Initiative. Khadka also reaffirmed that Nepal firmly adheres to the “One China” policy.

Transit routes. A meeting of officials from Azerbaijan, Iran and Russia will be held soon to discuss diversifying the routes of the International North-South Transport Corridor, according to Iran’s ambassador to Azerbaijan. The corridor runs from Mumbai to Moscow. The three parties will also discuss joint projects, transit and customs issues.

Mongolia in the middle. To facilitate China’s trade with Russia, China and Mongolia signed cooperation agreements on railway infrastructure improvements. They agreed to connect railways and highways, as well as to reopen border crossings.

Turkey-Pakistan trade. Turkey and Pakistan are expected on Friday to sign a preferential trade agreement that will create duty exemptions on hundreds of products between them. However, Pakistani business groups complain that they have not been consulted on the deal, which may worsen Pakistan’s balance of payments.
Title: Global Economic Forum - the "elites" shaping our lives
Post by: ccp on October 23, 2022, 10:16:33 AM
global economic forum participants 2022:
https://www3.weforum.org/docs/WEF_AM22_Official_List_of_Participants.pdf

celebrities also go :
bill clinton.
bill gates.
davos.
greta thunberg.
King Charles III.
matt damon.
john kerry
loretta lynch
eric cantor
mick jagger.
leonard decaprio
spike lee
of course, George clooney
katy perry
Shakira's ass to be honored : 
https://www.un.org/es/desa/sdg-advocates-forest-whitaker-and-shakira-be-honored-world-economic-forum-davos.    :roll:

fees to attend:

In order to attend the World Economic Forum, you must first be offered a membership. Annual memberships cost anywhere between $62,000 and $620,000 each year, according to the New York Post. Those who pay their membership dues can purchase an event ticket for a reported $29,000.

Wide variety of Themes :

https://www.weforum.org/events/world-economic-forum-annual-meeting-2022/themes
https://www.weforum.org/agenda/
Title: MY: Death of Dutch Democracy
Post by: Crafty_Dog on March 15, 2023, 02:45:21 PM
https://michaelyon.locals.com/upost/3682225/netherlands-voting-results-in-bloodbath

https://michaelyon.locals.com/upost/3679249/death-of-dutch-democracy
Title: Re: MY: Death of Dutch Democracy
Post by: G M on March 15, 2023, 10:30:30 PM
https://michaelyon.locals.com/upost/3682225/netherlands-voting-results-in-bloodbath

https://michaelyon.locals.com/upost/3679249/death-of-dutch-democracy

Moet harder stemmen!
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on March 16, 2023, 06:25:24 AM
OK, that was kind of funny  :-D
Title: BBC: WTF is MY talking about?
Post by: Crafty_Dog on March 16, 2023, 07:51:49 PM
https://www.bbc.com/news/world-europe-64967513?fbclid=IwAR3EBGXVPvjnYlhiTG2piWCPRBHobEYikqOM1NVa9p1tvbZ6m55Bzr09_hg
Title: Globalization - the big fail
Post by: ccp on June 18, 2023, 11:28:10 AM
who could have seen this coming?

 :roll: :roll:

https://dnyuz.com/2023/06/18/why-it-seems-everything-we-knew-about-the-global-economy-is-no-longer-true/


Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on June 18, 2023, 03:33:10 PM
Jude Wanniski saw the economic fragmentation of the world economy (e.g. Smoot Hawley Tariff Act and its reciprocals) as the driving force behind the Great Depression and WW2.
Title: FA: The Price of Fragmentation
Post by: Crafty_Dog on August 27, 2023, 06:27:31 AM
Some of us may remember how I have often pounded the table on behalf of Jude Wanniski's "The Way the World Works" and its hypothesis that the Great Depression was not the result of Wall Street speculation (Dem theory) nor even unsound monetary contraction (Milton Friedman) but rather the fragmentation of the world economy due to tariffs and competitive devaluations.

Some 50 years later, Foreign Affairs begins to catch up.
===========================================

The Price of Fragmentation
Why the Global Economy Isn’t Ready for the Shocks Ahead
By Kristalina Georgieva
September/October 2023
Published on August 22, 2023
https://www.foreignaffairs.com/world/price-fragmentation-global-economy-shock

We are living through turbulent times, in a world that has become richer but also more fragile. Russia’s war in Ukraine has painfully demonstrated that we cannot take peace for granted. A deadly pandemic and climate disasters remind us how brittle life is against the force of nature. Major technological transformations such as artificial intelligence hold promise for future growth but also carry significant risks.

Collaboration among nations is critical in a more uncertain and shock-prone world. Yet international cooperation is in retreat. In its place, the world is witnessing the rise of fragmentation: a process that begins with increasing barriers to trade and investment and, in its extreme form, ends with countries’ breaking into rival economic blocs—an outcome that risks reversing the transformative gains that global economic integration has produced.

A number of powerful forces are driving fragmentation. With deepening geopolitical tensions, national security considerations loom large for policymakers and companies, which tends to make them wary of sharing technology or integrating supply chains. Meanwhile, although the global economic integration that has taken place in the past three decades has helped billions of people become wealthier, healthier, and more productive, it has also led to job losses in some sectors and contributed to rising inequality. That in turn has fueled social tensions, creating fertile ground for protectionism and adding to pressures to shift production back home.

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Fragmentation is costly even in normal times and makes it nearly impossible to manage the tremendous global challenges that the world now faces: war, climate change, pandemics. But policymakers everywhere are nevertheless pursuing measures that lead to further fragmentation. Although some of these policies can be justified by the need to ensure the resilience of supply chains, other measures are driven more by self-interest and protectionism, which in the long term will put the world economy in a precarious position.

The costs of fragmentation could not be clearer: as trade falls and barriers rise, global growth will take a severe hit. According to the latest International Monetary Fund projections, annual global GDP growth in 2028 will be only three percent—the IMF’s lowest five-year-ahead forecast in the past three decades, which spells trouble for poverty reduction and for creating jobs among burgeoning populations of young people in developing countries. Fragmentation risks making this already weak economic picture even worse. As growth falls, opportunities vanish, and tension builds, the world—already divided by geopolitical rivalries—could splinter further into competing economic blocs.

Policymakers everywhere recognize that protectionism and decoupling come at a cost. And high-level engagements between the world’s two largest economies, the United States and China, aim to reduce the risks of further disintegration. But broadly speaking, when it comes to trying to turn back the tide of fragmentation, there is a troubling lack of urgency. Another pandemic could once again push the world into global economic crisis. Military conflict, whether in Ukraine or elsewhere, could again exacerbate food insecurity, disrupt energy and commodity markets, and rupture supply chains. Another severe drought or flood could turn millions more people into climate refugees. Nonetheless, despite widespread recognition of these risks, governments and the private sector alike have been unable or unwilling to act.

A more shock-prone world means that economies will need to become much more resilient—not just individually but also collectively. Getting there will require a deliberate approach to cooperation. The international community, supported by institutions such as the IMF, should work together in a systematic and pragmatic manner, pursuing targeted progress where common ground exists and maintaining collaboration in areas where inaction would be devastating. Policymakers need to focus on the issues that matter most not only to the wealth of nations but also to the economic well-being of ordinary people. They must nurture the bonds of trust among countries wherever possible so they can quickly step up cooperation when the next major shock comes. That would benefit poorer and richer economies alike by supporting global growth and reducing the risk that instability will spread across borders. Even for the richest and most powerful countries, a fragmented world will be difficult to navigate, and cooperation will become not only a matter of solidarity but of self-interest, as well.

A FRAGILE WORLD
Two world wars in the twentieth century revealed that international cooperation is critical for peace and prosperity and that it requires a sound institutional foundation. Even as World War II was still raging, the Allies came together to create a multilateral architecture that would include the United Nations and the Bretton Woods institutions—the IMF and the World Bank—together with the precursor to the World Trade Organization. Each organization was entrusted with a special mandate to address the problems of the day requiring collective action.

What ultimately followed was an explosion of trade and integration that transformed the world, culminating in what came to be known as globalization. Integration had accelerated in previous historical eras, especially in the wake of the Industrial Revolution. But during the world wars and the interwar period, it had sharply retreated, and in the immediate postwar era, the fragmentation of the Cold War threatened to prevent it from recovering. The international security and financial architecture the Allies built, however, allowed integration to come roaring back. Since then, that architecture has adapted to massive changes. The number of countries in the world has grown from 99 in 1944 to nearly 200 today. In the same period, the earth’s population has more than tripled, from around 2.3 billion to around 8.0 billion, and global GDP has increased more than tenfold. All the while, the expansion of trade in an increasingly integrated global economy has delivered substantial benefits in terms of growth and poverty reduction.



These gains are now at risk. After the 2008 global financial crisis, a period of “slowbalization” began, as growth became uneven and countries began imposing barriers to trade. Convergence in living standards within and across countries has stalled. And since the pandemic began, low-income countries have seen a collapse in their per capita GDP growth rates, which have fallen by more than half, from an average of 3.1 percent annually in the 15 years before the pandemic to 1.4 percent since 2020. The decline has been much more modest in rich countries, where per capita GDP growth rates have fallen from 1.2 percent in the 15 pre-pandemic years to 1.0 percent since 2020. Rising inequality is fostering political instability and undermining the prospects for future growth, especially for vulnerable economies and poorer people. The existential threat of climate change is aggravating existing vulnerabilities and introducing new shocks. Vulnerable countries are running out of buffers, and rising indebtedness is putting economic sustainability at risk.



In a more fragile world, countries (or blocs of countries) may be tempted to define their interests narrowly and retreat from cooperation. But many countries lack the technology, financial resources, and capacity to successfully contend with economic shocks on their own—and their failure to do so will harm not only the well-being of their own citizens but also that of people elsewhere. And in a less secure world with weaker growth prospects, the risk of fragmentation only grows, potentially creating a vicious downward spiral.

Should this happen, the costs will be prohibitively high. Over the long term, trade fragmentation—that is, increasing restrictions on the trade in goods and services across countries—could reduce global GDP by up to seven percent, or $7.4 trillion in today’s dollars, the equivalent of the combined GDPs of France and Germany and more than three times the size of the entire sub-Saharan African economy. That is why policymakers should reconsider their newfound embrace of trade barriers, which have proliferated at a rapid clip in recent years: in 2019, countries imposed fewer than 1,000 restrictions on trade; in 2022, that number skyrocketed to almost 3,000.

As protectionism spreads, the costs of technological decoupling—that is, restrictions on the flow of high-tech goods, services, and knowledge across countries—would only add to the misery, reducing the GDPs of some countries by up to 12 percent over the long term. Fragmentation can also lead to severe disruption in commodity markets and create food and energy insecurity: for example, Russia’s blockade of Ukrainian wheat exports was a key driver behind the sudden 37 percent increase in global wheat prices in the spring of 2022. This drove inflation in the prices of other food items and exacerbated food insecurity, notably in low-income countries in North Africa, the Middle East, and South Asia. Finally, the fragmentation of capital flows, which would see investors and countries diverting investments and financial transactions to like-minded countries, would constitute another blow to global growth. The combined losses from all facets of fragmentation may be hard to quantify, but it is clear that they all point to lower growth in productivity and in turn to lower living standards, more poverty, and less investment in health, education, and infrastructure. Global economic resilience and prosperity will depend on the survival of economic integration.

A GLOBAL SAFETY NET
In a world with more frequent and severe shocks, countries have to find ways to cushion the adverse impacts on their economies and people. That will require building economic buffers in good times that can then be deployed in bad times. One such buffer is a country’s international reserves—that is, the foreign currency holdings of its central bank, which provide a readily available source of financing for countries when hit by shocks. In the aggregate, reserves have grown tremendously over the past two decades, on par with the expansion of the world economy and in response to financial crises. But those reserves are heavily concentrated in a relatively small group of economically stronger advanced and emerging market economies: just ten countries hold two-thirds of global reserves. In contrast, reserve holdings in most other countries remain modest, especially in sub-Saharan Africa, parts of Latin America, oil-importing states in the Middle East, and small island states—which, taken together, account for less than one percent of global reserves. This uneven distribution of reserves means that many countries remain highly vulnerable.

No country should rely on its reserves alone, of course. Consider how a household, which cannot save enough money for every conceivable shock, purchases insurance for a home, a car, and health care. Similarly, countries are better off if they can complement their own reserves with access to various international insurance mechanisms that are collectively known as “the global financial safety net.” At the center of the net is the IMF, which pools the resources of its membership and acts as a cooperative global lender of last resort. The net is buttressed by currency swap lines, through which central banks provide one another with liquidity backstops (typically to reduce financial stability risks), and by financing arrangements that allow countries within specific regions to pool resources that can be deployed if a crisis hits.

Protecting countries and their people against shocks contributes to stability beyond their borders: such protection is a global public good. A global safety net that pools international resources to provide liquidity to individual countries when they are struck by calamities is thus in the interest of individual countries and the world. The COVID-19 crisis provides a good example. With the pooled resources of the IMF, member countries received liquidity injections at an unprecedented speed and scale, helping them finance essential imports such as medicines, food, and energy. Since the pandemic, the IMF has approved over $300 billion in new financing for 96 countries, the broadest support ever over such a short period. Of this, over $140 billion has been provided since Russia’s invasion of Ukraine to help the fund’s members address financing pressures, including those resulting from the war.

Although the global financial safety net helped manage the fallout from COVID and the effects of Russia’s invasion, it is sure to be tested again by the next big shock. With reserves unevenly distributed, there is a pressing need to expand the world’s pooled resources to insure vulnerable countries against severe shocks. The IMF’s nearly $1 trillion in lending capacity is now only a small part of the overall safety net. Although self-insurance through international reserves has sharply increased for some countries, pooled resources centered on the IMF have increased far less than self-insurance and have shrunk markedly relative to measures of global financial integration. That is why the international community must strengthen the global financial safety net, including by expanding the availability of pooled resources in the IMF.

DEALING WITH DEBT
Even if the global financial safety net is strengthened, some countries might exhaust their buffers in the face of global economic shocks and accumulate economic imbalances over time—notably, higher fiscal deficits and rising debt levels. Although debt is up everywhere, the problem is particularly acute for many vulnerable emerging-market and low-income countries as a result of recent economic jolts, rising interest rates, and, in some cases, policy errors on the part of governments. By the end of 2022, average debt levels in emerging-market countries had reached 58 percent of GDP, a significant increase from a decade earlier, when that figure stood at 42 percent. Average debt levels in low-income countries had increased even more sharply over that period, from 38 percent of GDP to 60 percent. About one-quarter of emerging-market countries’ bonds are now trading at spreads indicative of distress. And 25 years after the launch of a broad-based international debt relief initiative for poor countries, about 15 percent of low-income countries are now considered to be in debt distress, with another 40 percent at risk of ending up in that situation.

The costs of a full-blown debt crisis are most keenly felt by people in debtor countries. According to one analysis by the World Bank, on average, poverty levels spike by 30 percent after a country defaults on its external obligations and remain elevated for a decade, during which infant mortality rates rise on average by 13 percent and children face shorter life expectancies. Other countries are affected as well. Savers lose their wealth. Borrowers’ access to credit can become more limited.

To ensure debt sustainability in a world of more frequent climate and health calamities, individual countries and international organizations must do everything they can to prevent the unsustainable accumulation of debt in the first place—and failing that, to support the orderly restructuring of debt if it becomes necessary. If debt crises multiply, the gains that low-income countries have made in recent decades could quickly evaporate. To prevent that from happening, international institutions can help countries focus on economic reforms that would spur growth, improve the effectiveness of budgetary spending, enhance tax collection, and strengthen debt management.

Reducing the costs of debt crises means resolving them quickly. Doing so is not easy. The creditor landscape has changed significantly over the past several decades, with new official creditors such as China, India, and Saudi Arabia entering the scene and the variety of private creditors expanding dramatically. Quick and coordinated action by creditors requires mutual trust and understanding, but the increase in the number and type of creditors has made that more challenging, especially since some key creditors are divided along geopolitical lines.

The IMF’s financial model and policies need a refresh.
Consider the case of Zambia, Africa’s second-biggest copper producer. Over the past decade, it ramped up spending on public investment financed by debt, but economic growth failed to follow, and the country ran out of resources to meet its debt repayments, defaulting in 2020. Its official creditors took almost a year to agree to a deal to restructure billions of dollars of loans. This milestone required the mostly high-income group of creditors known as the Paris Club to cooperate with the new creditor countries. But the job will be fully complete only when private creditors also come forward and agree to a comparable deal with Zambia—work that is already underway.

Although reaching an agreement for Zambia took time, official creditors have been learning how to work together, in this case under a Common Framework established by the G-20. The technical discussions taking place through the new Global Sovereign Debt Roundtable—initiated in February 2023 by the IMF, the World Bank, and the G-20 under India’s presidency—are also helping build a deeper common understanding across a broader set of stakeholders, including the private sector and debtor countries. This development holds promise for highly indebted countries, such as Sri Lanka and Ghana, that still need the international community to decisively follow through on commitments to provide critical debt relief.

But creditors and international financial institutions must do more. Debtors should receive a clearer road map of what they can expect from creditors in the timing of key decisions. Creditors also need to find ways to more quickly clear hurdles to reaching consensus. For instance, earlier information sharing can help creditors and debtors resolve debt crises in a more cooperative fashion, with help from institutions such as the IMF. And if private creditors demonstrate that they can do their part and provide debt relief on terms comparable to those offered by official creditors, it will reassure the official creditors and give them the confidence to move faster.

International financial institutions and lenders must also develop mechanisms to insure countries against debt crises in the event of major shocks. Such mechanisms play a crucial role in ensuring that a liquidity crunch does not tip countries into more costly debt distress. One promising idea would be to take a contractual approach to commercial debt. This could involve including clauses in debt contracts that would automatically trigger a deferral of debt repayments if a country experienced a natural disaster such as a flood, drought, or earthquake.

Debtors must do their part, too, starting by being more proactive when it comes to risk mitigation, and better coordinating their debt management strategy with fiscal policy. Governments must also show a willingness to tackle the underlying policy mistakes at the heart of more fundamental debt challenges. For instance, Zambia’s strong commitment to undertaking necessary economic reforms, such as removing fuel subsidies that mostly benefited wealthier households, meant that the IMF could move forward with its own financial support and that official creditors were more willing to provide debt relief.

THE FIGHT AGAINST FRAGMENTATION
The IMF has long played a central role in the global economy. It is the only institution empowered by its 190 members to carry out regular and thorough “health checks” of their economies. It is a steward of macroeconomic and financial stability, a source of essential policy advice, and a lender of last resort, poised to help protect countries against crises and instability. In a world of more shocks and divisions, the fund’s universal membership and oversight are a tremendous asset.

But the IMF is just one actor in the global economy and just one among many important international financial institutions. And to keep up with the pace of change in a fragmenting world, the fund’s financial model and policies need a refresh. An important first step would be completing the 16th General Review of Quotas. The IMF’s quota resources—the financial contributions paid by each member—are the primary building blocks of the fund’s financial structure, which pools the resources of all its members. Each member of the IMF is assigned a quota based broadly on its relative position in the world economy, and the IMF regularly reviews its quota resources to make sure they are adequate to help its members cope with shocks. An increase in quotas would provide more permanent resources to support emerging and developing economies and reduce the fund’s reliance on temporary credit lines. It is essential that the IMF’s membership come together to bolster the institution’s quota resources by completing the review by the December 2023 deadline.

The IMF’s better-off members need to make a concerted effort to urgently replenish the financial resources of the Poverty Reduction and Growth Trust. The trust, which is administered by the IMF, has provided almost $30 billion in interest-free financing to 56 low-income countries since the onset of the pandemic, more than quadruple its historical levels. This funding is critical to ensure that the IMF can continue meeting the record demand for support from its poorest member countries. And to address the economic risks created by climate change and pandemics, the fund’s better-off members should also scale up their channeling of Special Drawing Rights (an IMF reserve asset, which it allocates to all its members) to more vulnerable countries through the fund’s newly created Resilience and Sustainability Trust.

The IMF must also continue working to enhance representation inside the organization. It is important that the fund reflect the economic realities of today’s world, not that of the last century. Decision-making at the fund requires a highly collaborative approach and inclusive governance. This would support more agility and adaptability in the IMF’s policies and financing instruments to better serve the needs of its members.


Reducing the costs of debt crises means resolving them quickly.
Finally, the IMF cannot be truly effective in today’s fragmented world unless it continues to deepen its ties with other international organizations, including the World Bank, other multilateral development banks such as the African Development Bank, and institutions such as the Bank for International Settlements and the World Trade Organization. All those international financial institutions must join forces to foster international cooperation on the most pressing challenges facing the world.

In 1944, the 44 men (and zero women) who signed the Bretton Woods agreement sat at one table in a modestly sized room. The small number of players was an advantage, as was the fact that most of the countries represented were allies fighting together in World War II. Today, finding consensus among 190 members is much more difficult, especially as trust among different groups of countries is eroding and faith in the ability to pursue the common good is at an all-time low. Yet the world’s people deserve a chance at pursuing peace, prosperity, and life on a livable planet.

For nearly 80 years, the world has responded to major economic challenges through a system of rules, shared principles, and institutions, including those rooted in the Bretton Woods system. Now that the world has entered a new era of increasing fragmentation, international institutions are even more vital for bringing countries together and solving the big global challenges of today. But without enhanced support from higher-income countries and a renewed commitment to collaboration, the IMF and other international institutions will struggle.

The period of rapid globalization and integration has come to an end, and the forces of protectionism are on the rise. Perhaps the only thing certain about this fragile, fragmented new global economy is that it will face shocks. The IMF, other international institutions, creditors, and borrowers must all adapt and prepare. It’s going to be a bumpy ride; the international financial system needs to buckle up
Title: RANE on G-20
Post by: Crafty_Dog on September 11, 2023, 06:27:28 AM
Forged Twice in Crisis, the G20 May Not Be Ready To Keep Up With a Changing Global Order
Sep 8, 2023 | 15:53 GMT





A worker decorates a G20 installation on the eve of the two-day G20 summit in New Delhi on September 8, 2023.
A worker decorates a G20 installation on the eve of the two-day G20 summit in New Delhi on September 8, 2023.
(Photo by Ludovic MARIN / AFP)

As the annual G20 summit takes place in New Dehli, India, from Sept. 9 to 11, geopolitical processes, a shifting world order and a disoriented G20 call into question the viability of the initiative's future. The G20 can trace its origins to two major crises. The 1997 Asian Financial Crisis compelled the G7 developed countries to recognize the growing importance of developing economies and led to the formation of the G20 as a meeting ground for finance ministers and central bankers. A decade later, the global financial crisis of 2007-2009 reshaped the G20 into a summit of national leaders, expanding its role and remit. In both cases, the interconnectedness of the global financial architecture and the rapid spread of economic challenges from one region to another provided the momentum for collaboration and collective action. However, the global economic disruptions triggered by the COVID-19 pandemic have not driven a similar reinvigoration of the G20. Although the group is considering expanding to include the African Union (AU) as a permanent member, the G20 is feeling the strains of a shifting global order.

Perhaps the most significant aspect of the G20 format was that it represented a recognition by the developed (in particular Euro-Atlantic) world that the global concentration of economic heft was diffusing and shifting. Global trade was shifting to the Pacific from the Atlantic, long the center of the global economic and financial architecture. The end of the Cold War, less than a decade before the Asian financial crisis, reinforced the belief in the West that the global financial architecture founded in the aftermath of World War II was not only victorious but universal. The Asian financial crisis didn't shake this belief but rather reinforced it, despite Western-inspired or directed reforms in part triggering the crisis and Western investor activities accelerating it. However, the developed West did take note that the growing diffusion of economic activity meant that distant crises could ripple back into Western systems. The G20 was one small step to mitigate that risk.

Despite serving as a forum for communication and cooperation among central banks and finance ministers, the G20 largely failed to anticipate or stave off the global financial crisis. What came out of that crisis (one that started in the developed West, not the developing East) was the establishment of a leaders summit as part of the G20 mechanism. The global financial crisis of 2007-2009 reinforced perceptions of the interconnectedness of the global economy and reawakened ideas of nationalism and protectionism, reviving talk of "geopolitics" as a driving force in a world that had been characterized as "flat." The leaders' summit reflected a reluctant re-acceptance of the political nature of economics and the role of international relations in international trade. It also showcased the rise of China and Beijing's alternative to the Western liberal order. As the G20 shifted its structure to include national leaders, China was showcasing its initial resilience to the crisis, thus challenging Western assertions of the necessary link between democratic freedoms, separation of government and business, and economic success. In short, China's economic success appeared to belie the universalist assertions of the Western liberal order.

As China shifted from its more passive "bide your time" model of global political relations to a more assertive proponent of the China model, the Western members of the G20 doubled down on the traditional Western liberal model — at least in rhetoric. At home, however, protectionist measures and national interests were finding increasing acceptance, not only as last-resorts in times of crisis but as policies to keep around well after a shock had passed. Whereas the G20 had been a case of the developing world recognizing the importance of the developed world and all parties seeing the risks inherent in a closed global economic system, the G20 did not really adapt to take into account the growing discomfort in the developing world with the extremes of Western liberalism, and the greater willingness of the developing world to challenge these norms. The G20 included developing nations, but it did so on G7 terms. Though the G20 recognized the developing world, it did not necessarily adjust its thinking to accept other ideas from the developing world.


The divisions in the G20 due to competing philosophies — China's economic success and the universalist assertions of the Western liberal order — are complicated even further by an inflating agenda, particularly since the inception of the leaders' summits. When it was founded, the G20 had a fairly narrow remit, but as time went on, it became a forum for numerous issues ranging from health to climate to local wars. The leadership summit becomes a convenient and enticing place to put political issues on the agenda and bring national or regional interests to leaders of more than three-quarters of the global economy. But in doing so, it becomes just another forum with a bloated agenda, in which common accord is growing more and more difficult to come by. The intended expansion of the G20 to include the African Union — understandable perhaps in the sense of expanding representation from Africa — may only add to the dilution of the G20's initial purpose, particularly as the AU has no central financial authority as compared to the European Union.

Yet it is not merely structural issues that impact the efficacy of the G20 — it is a shift in the global balance of power over the past quarter century and much of the organization's existence. The Asian financial crisis was an early sign of the interlinkages of the post-Cold War global economy. Still, it also should have been a reminder that geopolitical forces had not been erased by the West's "victory" over the Soviet Union. Instead, they became more pronounced as the semi-stability of the Cold War confrontation was shattered, and national and sub-national identities and competition broke out along the old seams between East and West. The shift in global trade and economic heft from the Atlantic to the Pacific was already underway when the G20 was founded, but that shift accelerated after the Asian financial crisis. The rise of China and the further diffusion of economic activity to the global south, as noted above, brought on a new wave of political, social and economic challenges to Western liberal universalism. Russia recovered but resorted to 19th century modes of action, invading its neighbors to stem any further slide of its peripheral states to the West. In short, the world changed and evolved, the brief moment of U.S. "unipolarism" faded, and national self-interest re-emerged. The world may have already passed the limits of extreme globalization; in the return to a more historically normal multi-polar world order, national interests are subsuming the incentives for global collaboration.

The G20 is not alone in feeling these stresses. Many of the institutions established after World War II are increasingly challenged by bloat, mission creep and the resurgence of nationalism and protectionism. These are slowly being supplemented or replaced by smaller, more focused or larger but more flexible arrangements, whether in opt-in trade arrangements like IPEF (Indo-Pacific Economic Framework for Prosperity) or restricted security collaboration like AUKUS, the trilateral security pact between Australia, the United Kingdom and the United States. And it is not only Western-inspired institutions that are starting to fray: expansions of the Shanghai Cooperation Organization or the BRICS both risk weakening entities that already had either radically evolved or poorly articulated purposes. Traditional geographic groupings, like ASEAN (Association of Southeast Asian Nations), the European Union, or Mercosur, also face internal frictions that challenge their ability to effectively coordinate and adapt to the shifting global balance of power. As countries and multilateral organizations adjust to multipolarity (or fail to do so), ideology may remain a strong talking point, but national self-interest will play a bigger role, making large-scale cooperation difficult.

The upcoming G20 summit in India highlights many of these growing problems for the organization. Chinese President Xi Jinping isn't attending, perhaps reflecting the strains between Beijing and New Delhi, between Beijing and Washington or reflecting the economic challenges China now faces (ones that will inevitably have global implications and thus would seem to be critical for a G20 discussion). The Russian President can't attend without threat of arrest, and the G20 is split internally on maintaining economic ties with Russia since the re-invasion of Ukraine, while the media is focused on what name New Delhi calls its country on the dinner invitations (India or Bharat). The AU is up for membership, and other countries are proposing joining the G20 (perhaps mirroring the rise in applications to join the BRICS), likely further diluting focus and the ability to reach consensus. If the lack of a G-20 collective response to the COVID-19 pandemic's economic impact is any indication, the organization may well be reaching its limits of effectiveness. Rather than being known for its international impact, it may be seen as little more than another international forum most valuable for its side-line meeting opportunities.
 
Title: WSJ: Trump's Trade War was a loser
Post by: Crafty_Dog on September 12, 2023, 10:52:17 AM
IIRC former Senator Gramm has an Econ PhD.  He is not a stupid guy at all and there are good points here, but IMHO he misses the national security dimension to all this:

==============================


Trump’s Trade War Was a Loser
Tariffs destroyed jobs in Michigan, Pennsylvania and Wisconsin and made all Americans worse off.
By Phil Gramm and Donald J. Boudreaux
Sept. 11, 2023 5:29 pm ET


Donald Trump boasts that his protectionist policies were “historically successful,” which suggests that he thinks he’s exempt from the old dictum that we are entitled to our own opinions but not our own facts. While Mr. Trump’s tax cuts and regulatory relief rejuvenated an anemic recovery, his protectionist policies stunted the ensuing expansion. Growth accelerated from 1.7% in 2016 to 2.2% in 2017 and then to almost 3% in 2018, a 13-year high. But in 2019—the first full year in which Mr. Trump’s tariffs were in effect—the growth rate fell to 2.3%. That decline was in line with Congressional Budget Office and Federal Reserve estimates of the potential negative effects of Mr. Trump’s protectionist policies.

Mr. Trump’s trade war began in July 2018, when he imposed tariffs on steel and aluminum. While these tariffs raised the prices of those metals, the numbers of additional jobs created in steel and aluminum production were a trifling 1,000 and 1,300, respectively. Decades of technological innovation ensured that any increases in output would produce few jobs, since the production of a ton of steel, which had taken 10.1 man-hours in 1980, had fallen to only 1.5 man-hours by 2017.

For every American employed making steel or aluminum in 2018, 36 were employed by firms that used steel or aluminum as inputs. By raising the prices of these metals, Mr. Trump’s tariffs destroyed far more manufacturing jobs than they created. Overall manufacturing employment fell in each of the four quarters of 2019 and in the first quarter of 2020, leaving the pre-pandemic level of manufacturing employment lower than when Mr. Trump took office.

The higher cost for steel and aluminum and Chinese component parts produced by Mr. Trump’s tariffs, combined with foreign retaliation, reduced the demand for American exports. As a result, the annual rate of growth in manufacturing output fell, turning negative in the fourth quarter of 2018. By the first quarter of 2019 it reached a post-Great Recession low of negative 5.3%. Manufacturing output growth continued to fall until its post-lockdown bump in the second half of 2020. Under Mr. Trump’s protectionist policy, total manufacturing output was 2% lower by the start of the pandemic than it was when he raised tariffs.

Protectionism even hurt manufacturing in the states it was supposed to help. According to the Bureau of Labor Statistics, manufacturing employment in Michigan, Pennsylvania and Wisconsin, which increased in 2017 and 2018, started to fall in 2019 as the trade war intensified. Mr. Trump lost all those states in 2020.

Protectionist policies also failed to deliver promised reductions in the trade deficit. When the tariffs went into effect, goods that the U.S. imported became more expensive and Americans instead bought domestic substitutes, which the U.S. produced less efficiently than the world market. By reducing demand for foreign goods, tariffs and quotas reduced the supply of U.S. dollars in the world currency market, raised the value of the dollar, and made American exports less attractive. The result was lower employment in the industries where the U.S. was most efficient and most competitive and higher employment in industries where the U.S. was less efficient. Protectionism didn’t create jobs. The nation was made poorer as prices rose and the American economy became less efficient. Jobs were simply transferred from our most efficient, most competitive sectors to industries where we were less efficient and competitive. As a result, economic growth declined.

Fortunately, and contrary to Mr. Trump’s insistence, trade deficits aren’t signs of the “hemorrhaging of America’s lifeblood.” Trade deficits, under international accounting rules, simply mean foreigners are investing more in the U.S. than Americans are investing abroad. Japan, Germany, Canada and the U.K. provided over half of all foreign investment coming into the U.S. last year. Foreigners invest in America because of their confidence in the U.S. economy and the returns that they can earn by investing in our future. Foreign investment enhances America’s economic strength and fosters entrepreneurship by funding new businesses. It finances the expansion of existing businesses, research-and-development projects and worker training. Even when foreigners invest their dollars in U.S. government bonds, they help the American economy by preventing profligate government spending from crowding out private investment as Washington’s borrowing drives up interest rates.

History supplies ample proof that trade deficits don’t harm the economy. From the settlement of Jamestown in 1607 until World War I, the U.S. ran chronic trade deficits. Foreign capital, principally from Britain, and labor from all over the world came together in America and gave birth to the most prosperous nation in history. Today our per capita gross domestic product is 51% higher than the U.K.’s. Only in Trumponomics does that constitute “being plundered.”

The U.S. ran trade surpluses in 102 of the 120 months of the 1930s, when the Smoot-Hawley tariff dictated trade policy. The result of that protectionist regime was a collapse in the world’s trading system, which was a major cause of the Great Depression. In the postwar period, with the rest of the developed world in ruins, the U.S. had a virtual monopoly in heavy manufacturing. We ran large trade surpluses, and American foreign investment rebuilt the world economy, enriching both the U.S. and our trading partners. Annual trade deficits returned with the end of the postwar period in 1976, and the U.S. has run trade deficits for the last half a century. Trade deficits soared during the Reagan and Clinton booms, as foreign investors rushed to invest in America’s dynamic economy. Those foreign investments earned high returns by funding a new American boom. That boom sent real U.S. per capita GDP soaring to 2.3 times its level in 1975.

Trade wars, like all wars, empower government as plowshares are beaten into swords. The first casualty of a trade war is economic freedom; the second is prosperity.

Mr. Gramm, a former chairman of the Senate Banking Committee, is a nonresident senior fellow at the American Enterprise Institute. Mr. Boudreaux is a professor of economics at George Mason University. Mike Solon contributed to this article.
Title: The Decadent West have come fae to face with its future
Post by: Crafty_Dog on November 18, 2023, 02:23:12 PM
HT to CCP for this on the Western Civilization thread and bringing it here:

https://www.msn.com/en-us/news/world/the-decadent-west-has-come-face-to-face-with-the-future-and-the-end-of-its-dominance/ar-AA1k9mrA?ocid=msedgntp&pc=DCTS&cvid=d9e18810c3854fbbb576f90a4654a65e&ei=9

=====================

The article begins with some intelligent observations.   IMHO it misses the importance of the moral power of the American Creed back when we were a country that believed in it and lived it in a realpolitic world to an amazing extent.

Now our government flies the Prog flag of LGBQT instead of the American flag and has taught our own youth that our Creed is a lie even as millions flood our borders in search of that Creed, only to discover an America that no longer lives it.

Much of what the article says about the benefits of trade is true.

What it misses is that it when one side is centrally directed to purpose and the other is not that the directed side might elect to act by mercantilist or nationalist or fascist criteria.  For short hand we might say it operates by Zero Sum instead of Win-Win.  If those of Win-Win mind continue to operate that way they may well find themselves dependent on a Zero Sum adversary for its anti-biotics, while its elites bend their collective knee in search of profit.

The benefits of the free market have as a condition that no one buyer or seller can affect the market.  With the Chinese market as a whole being centrally directed, this is quite absent here.








































qt
Title: GPF: India-Russia via Iran
Post by: Crafty_Dog on November 20, 2023, 05:39:56 PM
Hurdles. Development of the International North-South Transport Corridor, which facilitates trade from India to Russia via Iran, is reportedly experiencing a number of complications. According to the development director of logistics operator TransAsia Logistics Group, obstacles include problems with settling payments in Iran, a lack of infrastructure and declining water levels at Caspian Sea ports, and the lack of a single operator for the route. The low cost of diesel fuel in Iran is also discouraging development of railway projects.
Title: GPF: The high cost of intl shipping
Post by: Crafty_Dog on November 27, 2023, 05:41:43 AM

November 27, 2023
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The High Cost of International Shipping
Shipping operators have had to adapt to evolving physical and legal security in international waters.
By: Antonia Colibasanu

Though the cease-fire in Gaza has eased tensions in the Middle East, the prospects of a wider conflict still remain, and energy markets expect a new hike in oil prices accordingly. A new hike would make Russian oil all the more attractive to traders, especially since price caps prevent it from being sold for more than $60 per barrel.

This explains why, as European and American officials admitted, “almost none” of the shipments of seaborne crude in October were traded below the $60-per-barrel limit. Apparently, no actions were taken against shippers who moved oil above the price cap until last month. To address the matter, the U.S. Office of Foreign Assets Control started to implement sanctions on offending operators, blocking tankers from Turkey and the United Arab Emirates that allegedly disregarded the price limits. Three Greek shippers that had been delivering Russian oil for decades (and continued to do so after Western businesses abandoned routes to avoid running afoul of sanctions) have since announced they would finally cease operations.

Meanwhile, EU officials are discussing new measures that could better enforce the cap, by adding to existing mechanisms, requiring more documentation, or introducing a requirement for attestations to include itemized ancillary costs such as freight and insurance. The European Commission is also considering restricting Russia's access to the used oil tanker industry.

These developments have added more risk and uncertainty for operators in the shipping industry who now have to adapt to evolving physical and legal security in international waters. The war in Ukraine had already made the Black Sea a high war-risk area, and after Moscow withdrew from a U.N.-brokered grain deal, Ukraine had to negotiate a public-private partnership with global insurers, an agreement reached on Nov. 15 to affordably cover ships carrying grain and critical food supplies. Even so, merchant vessels still need to exercise caution; a ship transporting grain was damaged by a mine in the Black Sea just a week ago.

Meanwhile, in the Eastern Mediterranean, ships bound for Israel face a 10-fold increase in war-risk premiums as the conflict in Gaza continues, prompting private operators to ask for government assistance. On Nov. 17, fearing strikes from both state and non-state actors active in the area, the International Maritime Security Construct and the Coalition Task Force Sentinel recommended that vessels make their voyages at night. They also recommended that vessels communicate to either the United Kingdom Marine Trade Operations or U.S. Naval Forces Central Command their movements ahead of time – or whenever there is reason for elevated concern. Owners and management have been additionally advised to make sure that sailors headed to Israel are informed of any potential security issues, and that shore leave is taken with local security in mind.

One of the most immediate challenges after the Ukraine war was a shortage of workers; Ukraine was a major source of seafaring laborers, many of whom were displaced by the conflict. Though the International Maritime Organization highlighted labor risks in 2022, it has yet to update them for 2023, so it’s unclear just how bad the shortages are. (Some estimates believe the number could reach 40,000 by 2025.) The situation in the Middle East is likely to make things worse. The Israel-Hamas war has generated a great deal of uncertainty for mariners, who are concerned with their own safety, and for shipping companies, which have to pay a premium for experienced workers. With a higher risk of damage in two important bodies of water, the price of insurance has soared, making overall operating costs all the more expensive. Coupled with the disruption in maritime trade routes, this means that cargo has had to travel longer distances to reach markets, which has already contributed to a volatile operating environment.

More, Western sanctions have given rise to Russia’s “shadow fleet,” boosting sales and transactions and raising the value of older vessels, particularly tankers. This has slowed the process by which ships are recycled and has spurred growth in new ship-owning corporations in China, the United Arab Emirates and India, with the goal of capitalizing on the large premiums connected with the new trade routes. In 2022, 864 new enterprises in the maritime industry were created with a link to or relationship with Russia. Of these, 87 maritime firms sport vessels that were previously Russian-owned or Russian-flagged. And 23 of them are UAE-based, while Turkey, Singapore and the Seychelles account for much of the remainder.

Before 2022, the International Maritime Organization had described the shadow fleet as a collection of gaining, high-polluting vessels with opaque ownership and sometimes unknown identification. While that definition still stands, and while vessels avoiding sanctions are mostly old and may frequently turn off their signals – ships may now be less confidential about their owners and IDs.

Also before 2022, tax policies, especially those associated with climate change, made shipowners flag their vessels under foreign countries, often under open registries. (This mostly affected developed countries.) The growth of open registries is associated with beneficial tax regimes and the ability to hire international crewmembers, allowing owners to reduce costs. In 2022, more than 70 percent of global ship capacity in dead weight tons was registered under foreign flags. Added to the growth of the global shadow fleet associated with Russia, this phenomenon has become only more pronounced.

Gabon is an interesting case study. According to maritime news outlets, Gabon's ship register has doubled since the start of the war in Ukraine. In May 2023, data from S&P Global showed that 98 percent of Gabon-flagged tankers above 10,000 dwt fell under Russian trade and shipping sanctions as high-risk vessels, or had no identifiable ultimate group owner. Little is known about Gabon’s ship registry since the coup in August this year, but there is no indication that Russia or other sanctioned countries like Iran and Venezuela have stopped using it – on the contrary. At the same time, Russia has reportedly used Mongolia’s ship registry to cover its oil trade from sanctions.

All of this points to an increasingly complex environment in which the demand for the shadow fleet creates little incentive for recycling but encourages the creative circumvention of legal restrictions. Second-hand vessels may be in demand, but flagging them under open registries means there is little accountability for their operations or safety. The more they are used, the more dangerous they are to the rest of the world fleet and, generally, to the environment.

In addition to flag registry, insurance is a key element in what makes the current shadow fleet tick. Two-thirds of Russian crude tankers are now insured by unknown or no-name companies, most of the time virtually lacking any insurance. Because they lack insurance and conceal their ownership, these tankers do not abide by international maritime norms. As they go offline and carry out shady ship-to-ship transfers – sometimes even in crowded areas like the Bosporus – they not only pose a danger to other vessels in the area but also accentuate just how little political will there is to act on this issue both in the industry and in the Western coalition.

All the while, pressure is growing on worldwide shipping. People still expect to receive their goods quickly despite the fact that the sheer distance of trade routes has fundamentally changed, and despite the fact that consumption patterns and energy markets frequently stymie efficient transportation.

It’s a particularly difficult set of interconnected problems to solve, especially since trade policies (including sanctions) require more cumbersome checks, create new risks and complicate shipping routes. Taken together, these dynamics increase the complexity, volatility and uncertainty in the industry's operational and market landscape. The question of how shipping can adapt to these changes while maintaining the necessary capacity to efficiently ensure global trade and stable and predictable rates is a key concern for international businesses. The answer will determine how the global economy will evolve in the years to come, with major implications for global stability and the global geopolitical balance.
Title: WSJ: Japs buy US Steel
Post by: Crafty_Dog on December 20, 2023, 08:48:03 AM
U.S. Steel’s Sale Is Industrial Policy Boomerang
Protectionists paved the way for Nippon’s takeover of U.S. Steel.
By
The Editorial Board
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Dec. 19, 2023 6:34 pm ET


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WSJ Opinion: Biden’s March to State Capitalism
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WSJ Opinion: Biden’s March to State Capitalism
Wonder Land: Inspired by China and Saudi Arabia, Team Biden's vision for U.S. industrial policy is one in which the government explicitly leads; everyone else follows. (06/14/23) Images: AP/AFP/Getty Images Composite: Mark Kelly
We have to admit to a smile as Washington’s protectionists howl about Japanese steel manufacturer Nippon Steel’s $14.1 billion deal to buy U.S. Steel. They apparently miss the irony that their tariffs and industrial policy have resulted in the foreign takeover of an iconic U.S. manufacturer.


U.S. Steel put itself on the auction block this summer and sought to strike a deal while the irony is hot. Trillions of dollars in Washington spending on public works and green energy are goosing domestic demand for steel while tariffs protect U.S. manufacturers against foreign competition. U.S. Steel’s best assets are political creations.

President Trump in 2018 slapped 25% tariffs on foreign steel under the pretense of protecting national security. Domestic steel producers lobbied for the tariffs, which they said would protect American workers from cheap foreign imports. Yet U.S. Steel’s workforce had shrunk to 22,740 at the end of 2022 from 29,000 in 2018.

The evidence shows that the tariffs have resulted in fewer downstream manufacturing jobs and raised prices for consumers, all while padding the bottom line of domestic steel makers. Washington’s industrial policy is also helping to boost demand for domestic steel and U.S. manufacturers’ profits.

Federal spending in the 2021 infrastructure bill includes conditions requiring contractors to use U.S.-made steel. The Inflation Reduction Act provides additional tax credits for wind producers that use domestic steel. Both laws are also spurring construction of new factories, at least for a time.

The U.S. iron-and-steel-mill order backlog is currently at a 15-year high. Because U.S. steel makers can’t meet demand, projects will be delayed or contractors will have to pay higher prices for foreign steel. That’s bad for consumers. But the cosseted U.S. steel makers will benefit from higher prices and profits.

You can understand why Nippon wanted to get in on the Washington spending action, especially as manufacturing flags in Europe and much of the world. Nippon’s $14.1 billion bid is roughly double what Cleveland-Cliffs offered to pay for U.S. Steel this summer, which underscores the economic value of tariff avoidance.

The U.S. Steel Workers supported Cleveland-Cliffs’ courtship, but it was opposed by auto makers worried about the potential behemoth’s pricing power. The combined company would have controlled 100% of blast furnace production in the U.S. and 65% to 90% of domestic steel used in vehicles.

U.S. Steel rejected Cleveland-Cliffs’ offer, and it may have been smart to hold out for a better deal. Nippon’s offer doesn’t appear to present antitrust concerns. Although the acquisition would make Nippon the world’s second largest steel maker after China’s Baowu, it has a relatively small footprint in the U.S.

The deal could even provide an American-Japanese counterweight to China’s steel powerhouse. Yet the same politicians who support higher tariffs and industrial policy to counter China now are raising doubts about the deal for purported national security reasons.

“Steel is always about security,” Pennsylvania Democratic Sen. John Fetterman declared. Ohio Sen. J.D. Vance chimed in: “Rest assured that I will interrogate the long-term implications for the American people, and I will do everything in my power to protect the future of our nation’s security, industry, and workers.” Do they think the Japanese are going to bomb Pearl Harbor?

U.S. steel making has been declining for decades owing to the higher labor costs of unionized production. American human and financial capital have been put to better work elsewhere such as advanced manufacturing. There are nearly one million more U.S. manufacturing jobs than a decade ago, and there probably would be more if not for Mr. Trump’s tariffs.

Some politicians, including presidential front-runners from both parties, want to take the U.S. back to the days of 1930s protectionism and industrial policy. But if the Japanese want to invest in the U.S., shouldn’t Washington welcome them with open arms?
Title: Argentina refuses trading block
Post by: Crafty_Dog on December 31, 2023, 06:27:37 AM


https://www.msn.com/en-us/money/companies/china-russia-suffer-setback-to-global-ambitions-with-major-player-refusing-to-join-trading-bloc/ar-AA1mfskX?ocid=msedgntp&pc=DCTS&cvid=1e0dee127a9f428bb0982c120904af13&ei=3
Title: WSJ: Milei takes on the Globalists
Post by: Crafty_Dog on January 18, 2024, 02:46:50 PM
Argentina’s Milei Gives the Davos Crowd a Spine Transplant
He warns the elites what can happen if the West stays on today’s socialist ‘path of servitude.’
Jan. 18, 2024 4:54 pm ET

Editor’s note: This is an excerpt from Argentine President Javier Milei’s Wednesday speech to the World Economic Forum in Davos, Switzerland.

The Western world is in danger, and it is in danger because those who are supposed to have to defend the values of the West are co-opted by a vision of the world that inexorably leads to socialism, and thereby to poverty. Unfortunately, in recent decades, motivated by some well-meaning individuals willing to help others, and others motivated by the wish to belong to a privileged caste, the main leaders of the Western world have abandoned the model of freedom for different versions of what we call collectivism. We are here to tell you that collectivist experiments are never the solution to the problems that afflict the citizens of the world. Rather, they are the root cause. Do believe me, no one better placed than us, Argentines, to testify to these two points.

When we adopted the model of freedom back in 1860, in 35 years we became a leading world power. And when we embraced collectivism over the course of the last 100 years, we saw how our citizens started to become systematically impoverished, and we dropped to spot No. 140 globally. . . .

Since there is no doubt that free-enterprise capitalism is superior in productive terms, the left-wing doxa [public opinion] has attacked capitalism alleging matters of morality. . . . They say that capitalism is evil because it’s individualistic and that collectivism is good because it’s altruistic—of course with the money of others—so they therefore advocate for social justice.

But this concept, which in the developed world became fashionable in recent times, in my country has been a constant in political discourse for over 80 years. The problem is that social justice is not just, and it doesn’t contribute either to the general well-being. Quite on the contrary, it’s an intrinsically unfair idea because it’s violent. It’s unjust because the state is financed through tax, and taxes are collected coercively—or can any one of us say that they voluntarily pay taxes? Which means that the state is financed through coercion, and that the higher the tax burden, the higher the coercion and the lower the freedom. . . .

Unfortunately, these harmful ideas have taken a stronghold in our society. Neo-Marxists have managed to co-opt the common sense of the Western world, and this they have achieved by appropriating the media, culture, universities—and also international organizations. The latter case is the most serious one probably, because these are institutions that have enormous influence on political and economic decisions of the countries that make up the multilateral organizations.

Fortunately, there are more and more of us who are daring to make our voices heard, because we see that if we don’t truly and decisively fight against these ideas, the only possible fate is for us to have increasing levels of state regulation, socialism, poverty and less freedom, and therefore will be having worse standards of living. The West has unfortunately already started to go along this path. I know to many it may sound ridiculous to suggest that the West has turned to socialism, but it’s only ridiculous if you only limit yourself to the traditional economic definition of socialism, which says that it’s an economic system where the state owns the means of production.

This definition, in my view, should be updated in the light of current circumstances. Today, states don’t need to directly control the means of production to control every aspect of the lives of individuals. With tools such as printing money, debt, subsidies, controlling the interest rate, price controls and regulations to correct the so-called market failures, they can control the lives and fates of millions of individuals. This is how we come to the point where, by using different names or guises, a good deal of the generally accepted political offers in most Western countries are collectivist variants, whether they proclaim to be openly communist, fascist, Nazis, socialists, social Democrats, socialists, Democrat Christians or Christian Democrats, neo-Keynesians, progressive, populists, nationalists or globalists.

At bottom, there are no major differences. They all say that the state should steer all aspects of the lives of individuals. They all defend a model contrary to that one which led humanity to the most spectacular progress in its history. We have come here today to invite the rest of the countries in the Western world to get back on the path of prosperity, economic freedom, limited government and unlimited respect for private property—essential elements for economic growth. And the impoverishment produced by collectivism is no fantasy, nor is it an inescapable fate.

But it’s a reality that we Argentines know very well. We have lived through this, we have been through this, because as I said earlier, ever since we decided to abandon the model of freedom that had made us rich, we have been caught up in a downward spiral as part of which we are poorer and poorer, day by day. So, this is something we have lived through and we are here to warn you about what can happen if the countries in the Western world that became rich through the model of freedom stay on this path of servitude. The case of Argentina is an empirical demonstration that no matter how rich you may be or how much you may have in terms of natural resources or how skilled your population may be, or educated, or how many bars of gold you may have in the central bank, if measures are adopted that hinder the free functioning of markets, free competition, free price systems, if you hinder trade, if you attack private property, the only possible fate is poverty.
Title: Does Argentina’s Milei deserve his own thread?
Post by: ccp on January 19, 2024, 06:42:05 AM
This guy is someone to watch.

Title: Houthi Strike on a Red Sea Russian Tanker a Game Changer?
Post by: Body-by-Guinness on January 29, 2024, 06:55:13 AM
Piece states various cascades ensuing as Russian tankers were thought safe from Red Sea attacks. Energy markets rethinking viability of Russian oil, with markets rising 2% so far today:

https://finance.yahoo.com/news/houthi-hit-russian-fuel-oil-093000321.html

I assume these tankers are being filled in Black Sea ports. If so an interesting tidbit in view of Russia’s war with Ukraine. 
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on January 29, 2024, 07:08:10 AM
Not bad, :-D but this thread would be more specific to your point:

https://firehydrantoffreedom.com/index.php?topic=2811.msg144445#msg144445

Also, the Yemen thread would be a valid dual post.


Title: Re: Trade and Globalization Issues:
Post by: Body-by-Guinness on January 29, 2024, 08:09:06 AM
Not bad, :-D but this thread would be more specific to your point:

https://firehydrantoffreedom.com/index.php?topic=2811.msg144445#msg144445

Also, the Yemen thread would be a valid dual post.

Okay, but what’s a “PanFa?” DuckDuckGo returns “Panda Express” and “pandas.”
Title: Re: Trade and Globalization Issues:
Post by: Crafty_Dog on January 29, 2024, 04:55:28 PM
 :-D :-D :-Dw

A term Michael Yon created for his hypothesis that when there is PAndemic and FAmine, there will be Mass Migration and the interface of the three means there will be war.

In this mix is the idea that Supply Chain disruptions can lead to FAmine.

PS:  DuckDuck is not bad on privacy but its CEO has bragged of applying Woke criteria to the order in which it answers queries.  I use Qwant.