Author Topic: Trade and Globalization Issues:  (Read 71320 times)

Crafty_Dog

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Stratfror: US, Kenya, Africa
« Reply #300 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 But those agreements are becoming outdated, and the idea of a one-sided agreement for those countries is losing political support in the West.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.

Crafty_Dog

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WSJ: House votes to remove country of origin labels on meat sold in US
« Reply #301 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


Crafty_Dog

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WSJ: US to stop collecting tariffs for three months
« Reply #303 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.


DougMacG

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The trade protectionists had it at least partly right
« Reply #304 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

Crafty_Dog

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Re: Trade and Globalization Issues:
« Reply #305 on: March 29, 2020, 12:09:10 PM »
"Countries need to maintain strategic production capabilities at home."

Exactly so!

DougMacG

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Re: Trade and Globalization Issues:
« Reply #306 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.
« Last Edit: March 29, 2020, 12:26:45 PM by DougMacG »

DougMacG

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Trade and Globalization Issues: Why didn't we test our anti-fragility
« Reply #307 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.

G M

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Re: Trade and Globalization Issues: Why didn't we test our anti-fragility
« Reply #308 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.

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Re: Trade and Globalization Issues:
« Reply #310 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

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GPF: The World's Largest Trade Pact
« Reply #311 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.


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GPF: Trade Snarls
« Reply #313 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.

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Re: Trade and Globalization Issues:
« Reply #314 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.

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GPF
« Reply #315 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.

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Trade Issues: We're running out of everything
« Reply #317 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.

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How China became the single point of failure
« Reply #319 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




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GPF: Globalization After the Pandemic:
« Reply #322 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.

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Globalism's Achilles heel
« Reply #323 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.


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GPF: Checking in on the Global Economy
« Reply #324 on: June 15, 2022, 12:22:41 PM »
June 15, 2022
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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

Crafty_Dog

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GPF
« Reply #325 on: August 11, 2022, 05:00:27 PM »
August 11, 2022
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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.

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Global Economic Forum - the "elites" shaping our lives
« Reply #326 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/

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« Last Edit: March 15, 2023, 05:11:36 PM by Crafty_Dog »


Crafty_Dog

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Re: Trade and Globalization Issues:
« Reply #329 on: March 16, 2023, 06:25:24 AM »
OK, that was kind of funny  :-D


ccp

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Re: Trade and Globalization Issues:
« Reply #332 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.

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FA: The Price of Fragmentation
« Reply #333 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

Crafty_Dog

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RANE on G-20
« Reply #334 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.
 

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WSJ: Trump's Trade War was a loser
« Reply #335 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.

Crafty_Dog

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The Decadent West have come fae to face with its future
« Reply #336 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

Crafty_Dog

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GPF: India-Russia via Iran
« Reply #337 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.

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GPF: The high cost of intl shipping
« Reply #338 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.

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WSJ: Japs buy US Steel
« Reply #339 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.
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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?


Crafty_Dog

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WSJ: Milei takes on the Globalists
« Reply #341 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.
« Last Edit: January 19, 2024, 10:07:23 AM by Crafty_Dog »

ccp

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Does Argentina’s Milei deserve his own thread?
« Reply #342 on: January 19, 2024, 06:42:05 AM »
This guy is someone to watch.


Body-by-Guinness

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Houthi Strike on a Red Sea Russian Tanker a Game Changer?
« Reply #343 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. 

Crafty_Dog

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Re: Trade and Globalization Issues:
« Reply #344 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.


« Last Edit: January 29, 2024, 07:10:54 AM by Crafty_Dog »

Body-by-Guinness

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Re: Trade and Globalization Issues:
« Reply #345 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.”

Crafty_Dog

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Re: Trade and Globalization Issues:
« Reply #346 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.