Monthly Archives: June 2018

Harley-Davidson’s Announcement Shows the Folly of Trump’s Trade War

On Monday, Harley-Davidson announced that, because of Trump’s trade war with Europe and other parts of the world, it may have to move its production outside of the U.S.

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In February, 2017, just a couple of weeks after Donald Trump’s Inauguration, a group of executives and employees from Harley-Davidson rode their motorcycles to the South Lawn of the White House, took off their helmets, and greeted the new President. “Harley-Davidson, made in America,” Trump said, eying the gleaming hogs admiringly, before lapsing into his trademarksolipsism. “The bikers for Trump were, like, unbelievable. They were with me all the way, right? And they love your bikes. . . . We had thousands of them.”

At the time, Harley-Davidson, which has factories in Missouri, Pennsylvania, and its home state of Wisconsin, seemed eager to embrace Trump and his “Make America Great Again” agenda of economic nationalism. But on Monday it announced in a filing with the Securities and Exchange Commission that, because of Trump’s trade war with Europe and other parts of the world, it may well have to shift production from the United States to factories in other countries where it has plants, such as Brazil, India, and Thailand.

As it explained in its filing, the company doesn’t have much choice. Europe is its second-largest market: last year, it sold almost forty thousand bikes there. Last week, the European Union responded to the Trump Administration’s imposition of hefty import duties on European steel and aluminum products by slapping tariffs of twenty-five per cent on a range of U.S.-made products, including Harley-Davidson motorcycles.

In the filing, the company said that it “expects these tariffs will result in an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU.” Rather than passing this cost increase to its dealers and customers, which could well hurt sales, the company said that it would initially bear the burden itself, which it estimated to be “approximately $90 to $100 million” on an annualized basis. “To address the substantial long-term cost of this tariff burden, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden. Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least 9 to 18 months to be fully complete,” the announcement said.

Trump, of course, reacted furiously. “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” he said in a tweet. “I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion.” On Tuesday morning, Trump returned to the attack, tweeting, “Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end—they surrendered, they quit!”

But the President’s bluster couldn’t disguise the fact that his trade war, which some Wall Street analysts initially wrote off as a quixotic diversion, is getting serious—and that it is already hurting many American companies. The makers of Levi’s, Jack Daniel’s whiskey, and Tropicana orange juice are among the other businesses whose products have been hit by sizeable E.U. tariffs.

Next week, American farmers could join the list of victims. These days, China is a major market for American food producers, and, on July 6th, the Trump Administration is set to levy tariffs on a range of Chinese manufacturers. The government in Beijing has said that it will retaliate by imposing duties of fifteen per cent on a wide range of American food products, including soybeans, cashews, almonds, apricots, strawberries, and other fruits. Pork products, which are very popular in China, would be hit with a tariff of twenty-five per cent.

Just as Trump is personally driving the U.S. protectionist agenda, Xi Jinping, the Chinese President, is directing the Chinese response—and he seems to be in no mood to back down. “In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek. In our culture we punch back,” he told a group of Western C.E.O.s last week, according to a report in the Wall Street Journal.

As these tit-for-tat measures go into effect, and the prospect of a negotiated settlement diminishes, investors are starting to get spooked. On Monday, the Dow fell by almost five hundred points, before recovering slightly, closing down three hundred and twenty-eight points, or about 1.3 per cent, at 24,253. The selloff was worldwide, with stocks also falling sharply in Europe and Asia.

Analysts are divided about what impact the protectionist measures will have on the broader economy. If you add up all the products and industries that are caught up in Trump’s hostilities, it is still pretty small relative to the gross domestic product—the broadest measure of over-all production—which is about to pass twenty trillion dollars. For this reason, many economists have argued that the trade war doesn’t have major macroeconomic implications.

But as Trump continues to issue threats, and other countries prepare to respond, some analysts are warning that things could spiral out of control. “The good news is that we are still many steps away from a full blown global trade war,” Michelle Meyer, an economist at Bank of America Merrill Lynch, wrote in a note to the bank’s clients, at the end of last week. “The bad news is that the tail risks are rising and our work and the literature suggest a major global trade confrontation would likely push the US and the rest of the world to the brink of a recession.”

A few days ago, Trump threatened to impose tariffs of twenty per cent on European-built cars. On Sunday night, the Journal reported that this week the Treasury Department would block any firms with at least twenty-five-per-cent Chinese ownership from buying U.S. companies involved in what the White House calls “industrially significant technology.” Taken together with a proposal to block some key technology exports to China, this appeared to represent another significant escalation.

On Monday afternoon, the White House dispatched Peter Navarro, Trump’s hawkish trade adviser, to calm the markets. “All we’re doing here with the President’s trade policy is trying to defend our technology when it may be threatened,” Navarro said on CNBC. He added that the President is “going to get good information this week on where the chess board stands and make decisions accordingly.”

That was hardly reassuring. Navarro said pretty much the same thing when Trump imposed the steel and aluminum tariffs on the European Union, which, thanks to European retaliation, are now hurting the very people whom Trump welcomed to the White House sixteen months ago. “Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” Harley-Davidson said, in explaining its decision.

Back in March, Trump claimed that trade wars are “good and easy to win.” The American employees of Harley-Davidson have already discovered that isn’t true. How long will it take the President to learn?

 

Taken From:  https://www.newyorker.com/news/our-columnists/harley-davidson-announcement-shows-the-folly-of-trumps-trade-war

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Lopez Obrador’s Nafta Negotiator Hopes for Deal in Next ‘Couple of Months’

The economist tapped by Mexico’s leftist presidential front-runner to lead Nafta talks if he wins Sunday’s election hopes that a deal can be reached within a couple of months and said the candidate’s team fundamentally agrees with the nation’s current negotiating positions.

Presidential candidate Andres Manuel Lopez Obrador waves as he addresses supporters after polls closed in the presidential election, in Mexico City

 

Jesus Seade, an academic and former top official at the World Trade Organization, said Economy Minister Ildefonso Guajardo and his team have done a good job advocating for the country’s interests. Seade, who spoke Tuesday in an interview in Mexico City, said he met with Lopez Obrador for more than two hours last Thursday at a campaign event in Aguascalientes and on a flight returning to the capital, discussing the candidate’s Nafta views, economics and development.

 

The U.S. proposal for a $16 an hour wage for the automotive industry isn’t feasible and would cause distortions to the nation’s economy and labor market, Seade said. Lopez Obrador, who has said that he wants to see Mexicans earn more, is focused on raising Mexico’s minimum wage of 88.36 pesos ($4.44) a day to the entire nation and not only for one specific industry, Seade said.

Fundamentally we are in complete agreement” with the publicly-known positions taken by the negotiating team of President Enrique Pena Nieto, Seade said. “What I have seen of the Mexican position is what it has to be. I don’t think these are partisan questions.”

Poll Numbers

Lopez Obrador, who has lost two previous presidential elections, has 46 percent support in Bloomberg’s Poll Tracker, compared with 27 percent for Ricardo Anaya from an alliance of conservative and social democratic parties. Former finance minister Jose Antonio Meade of the ruling party has 24 percent backing. Guajardo has said that advisers from whoever becomes president-elect should be brought into Nafta negotiations, and that cabinet-level talks will probably pick up again next month. Pena Nieto isn’t eligible for re-election, and the new president will take office Dec. 1.

 

Seade lives in Hong Kong, where he is associate vice president for global affairs at the Chinese University of Hong Kong. He also spent a decade in Washington, where he was a senior adviser to the International Monetary Fund. He previously served as Mexico’s chief trade negotiator for the founding of the WTO and as the institution’s first deputy director-general in the early and mid 1990s, when Nafta was being negotiated and coming into force.

Agreement in Principle

Mexico, the U.S. and Canada began renegotiating Nafta last August at the demand of President Donald Trump, who says the deal drew factories south of the border, resulting in hundreds of thousands of lost American jobs. He’s promised to negotiate a better agreement or withdraw.

 

“I would hope to be right in thinking that one can have an agreement within a couple of months, or an agreement on the main issues, an agreement in principle,” Seade said.

U.S. Trade Representative Robert Lighthizer’s proposals have been focused on increasing Mexican labor costs and providing incentives for auto manufacturers to either move production back to America or at least stop investing so much south of the border. Other thorny topics include dispute resolution, access to U.S. procurement deals, seasonal barriers to agriculture trade and a clause that would terminate Nafta after five years unless the nations agree to continue.

 

On cars, Seade said raising the regional content minimum from the current 62.5 percent “is appropriate.” He said wages shouldn’t be part of those rules.

Witty,’ Even

Seade said he couldn’t speak about specifics of how the countries can get to a deal until he sits down with his partners from the two other countries and meets with the current Mexican negotiating team. The time between the Mexican election and the U.S. mid-term Congressional vote in November presents a good window to try to get a Nafta deal, he said, adding “there has to be a way to break the impasse and bring this to a resolution.”

 

Seade says he’s known Lighthizer for more than two decades and likes him. “He’s somebody for whom I’ve always kept a very fond recollection as being clever and fair, and even witty,” Seade said.

Currently in Mexico City, Seade is teaching a summer course on international trade at Mexico’s Autonomous Institute of Technology, or ITAM, a private university.

Taken From: https://www.bloombergquint.com/onweb/2018/06/26/amlo-nafta-negotiator-hopes-for-deal-in-next-couple-of-months-jiw4wr9r

EU to begin counter trade tariffs against US on Friday

EU retaliatory tariffs will initially target a list of US goods worth $3.24bn.

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Retaliatory trade tariffs by European Union countries on a list of US products – agreed in response to US tariff hikes on steel and aluminium imports from Canada, the EU, and Mexico – will come into force on Friday, the European Commission announced on Wednesday.

From the start of June, the EU was hit by tariffs of 25 percent on steel and 10 percent on aluminium imports imposed by US President Donald Trump, who justified the move on the grounds of national security.

“We did not want to be in this position. However, the unilateral and unjustified decision of the United States to impose steel and aluminium tariffs on the EU means that we are left with no other choice,” EU Trade Commissioner Cecilia Malmstrom said.

The EU retaliatory tariffs will initially target a list of US goods worth 2.8bn euros ($3.24bn), most of which will be hit with import duties of 25 percent.

They range from agricultural products such as rice and orange juice to jeans, whiskey, motorbikes and various steel products.

The commission formally adopted the new tariffs, allowing them to come into effect on June 22.

It had previously registered the move with the World Trade Organization (WTO).

“The rules of international trade, which we have developed over the years hand in hand with our American partners, cannot be violated without a reaction from our side,” Malmstrom added, calling the EU response “measured, proportionate and fully in line with WTO rules.”

‘Trade war’

Other countries hit by the US tariffs have also retaliated, raising fears of a global trade war.

Brussels first drew up the list in March when US President Donald Trump initially floated the idea of tariffs on steel and aluminium imports.

Mexico has also announced it will impose tariffs on US imports, including pork bellies, apples, grapes, cheeses and flat steel, among other products.

Canada promised retaliatory tariffs worth $12.8bn on US products including steel, aluminium, whiskey and orange juice.

Beijing says they will impose measures ‘of the same scale and strength’ after Washington announced a 25 percent tariff on $50bn worth of Chinese goods over “unfair trade practices”.

Taken From: https://www.aljazeera.com/news/2018/06/eu-counter-trade-tariffs-friday-180620173317443.html

There’s no panic yet: but Trump’s trade war could get out of hand

The president’s tough tweets about EU car imports on Friday create another unstable element in a widening confrontation

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It’s a skirmish, no more than that. The trade tariffs going up around the world might be adding millions to the cost of importing goods, but it’s not a war and it won’t mean the end of global growth. Or at least that seems to be the general view. The International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD), and the majority of investment banks and thinktanks do worry about the latest round of niggly tit-for-tat tariff battles. They have condemned them, and some – including the IMF’s boss, Christine Lagarde – have rounded on the main protagonist: President Donald Trump. But have they begun to panic? Not yet.

The European Union’s retaliation against steel and aluminium tariffs imposed by Trump were announced last week and amounted to $3.4bn on US products including bourbon, peanut butter and orange juice.

It’s virtually the same targets the EU picked in 2002 when George W Bush thought it might profit him to slap steel and aluminium tariffs on European suppliers.

The sum of money involved is small and, compared to the trillions of dollars traded each year, almost a rounding error. But in 2002 it worked and Bush backed down.

It was humiliating, yet not as bad as angering dozens of Republican senators from swing states that rely on donations from bourbon makers and the votes of peanut farmers. Worse, Bush’s brother Jeb, then governor of Florida, was feeling the squeeze from EU tariffs on oranges.

However, Trump’s target is not only Europe: it’s China as well. And in two weeks, the US will start taxing $34bn of Chinese goods. Beijing has vowed to immediately retaliate with its own tariffs on American soybeans and other farm products.

An escalation of tariffs between the world’s two largest economies should not be downplayed. A civilised argument with the EU is one thing: a determined effort to punish China for a long list of trade-related misdemeanours is another.

The battle seemingly has no end and the fallout might not just cost consumers money: it might also destabilise decades-old global trading arrangements.

Trump’s comment that he wanted to banish the sight of Mercedes cars in New York followed his administration opening a trade investigation into vehicle imports, which he tweeted on Friday would result in 20% tariff on cars unless action was taken by the EU. “Build them here,” he told carmakers, even though many do boast large or expanding plants in the US.

A 20% tariff, up from 2.5%, on the cost of a foreign car could lower eurozone GDP by 0.3% at least, says Bank of America Merrill Lynch. It would take a 7.5% appreciation in the value of the dollar, and a concomitant rise in the purchasing power of prospective American customers, to offset such an increase.

“If the US raised tariffs to European cars to 25% and 10% on all other products, 0.7% of euro area GDP could be at risk,” the bank said last week. To protect eurozone exporters from any losses, the dollar would need to rise to parity with the euro (something that Trump might perhaps even like, as a symbol of macho success).

So tariffs such as those in prospect would hurt the car industry – and none more so than the UK’s: Jaguar Land Rover is a huge exporter to the States.

In April, Lagarde warned of “darker clouds looming” for the global economy amid simmering trade tensions. She warned governments around the world to steer clear of protectionism or face negative consequences.

Yet her call to “resolve disagreements without using exceptional measures” looks like being ignored by a White House packed with evangelists who see protectionism as a source of hard power.

Taken from: https://www.theguardian.com/business/2018/jun/24/trump-trade-war-no-panic-things-get-out-of-hand

RUSSIA WILL TAKE CHINA’S SIDE AGAINST U.S. IN WORLD TRADE WAR

Russia’s economic development minister revealed Tuesday that his government was prepared to side with China in a burgeoning global trade war with the U.S.

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President Donald Trump’s protectionist trade policies have led China and the European Union to hit back at new U.S. tariffs intended to discourage foreign purchases of steel and aluminum. As a result, the Russian minister, Maxim Oreshkin, said Moscow would assert its rights as guaranteed by the World Trade Organization (WTO) to retaliate with duties against U.S. imports.

“Due to the fact that the U.S. continues to apply protective measures in the form of additional import duties on steel and aluminum and refuses to provide compensation for Russia’s losses, Russia is using its WTO rights and introducing balancing measures with respect to imports from the United States,” Oreshkin said, according to Russian newspaper Kommersant.

Oreshkin noted that such measures will affect only products that “have alternatives within the Russian Federation” and that the final list would be announced by his ministry in the coming days. While declining to go into specifics, he said the duties would not include medicines but may include construction products.

In a bid to protect local manufacturing and “fair” global trade, Trump signed executive orders in March that imposed a 25 percent tariff on steel imports and a 10 percent one on aluminum imports. The move, which went into effect March 23, was seen as targeting China particularly and included temporary exemptions that shielded U.S. allies Canada, the EU and Mexico. But with these exemptions expiring at the beginning of the month, nations have been hitting back at the U.S.

The EU and India have already joined China and Russia in bringing cases against the U.S. at the WTO. Russia has calculated the damage of its proposed tariffs to be about $537.6 million, while Oreshkin said Tuesday that the first stage of tariffs against the U.S. would amount to about $93 million.

Meanwhile, China has already opened a $3 billion WTO suit against the U.S. after Trump vowed to impose tariffs on $200 billion worth of Chinese products. The EU has announced about $3.4 billion in tariffs to begin immediately, with the potential for billions more, depending on the outcome of the WTO case. Neighboring Canada and Mexico have announced their own tariffs that amount to about $12.8 billion and $3 billion, respectively.

The collapse of traditional U.S. North American and trans-Atlantic alliances amid a looming trade war has come as Russia and China bolster their own bilateral ties and seek to enhance their standing on the world stage.

In addition to being targeted by Trump’s tariffs, Russia’s and China’s political and military activities were singled out in the same “America First” national security strategy that called for “fair trade enforcement actions when necessary.” Russia and China have dismissed U.S. criticism, accusing Washington of being stuck in the Cold War as they move to improve their global clout.

Russia’s stance in the ongoing trade conflict is only the latest sign that the U.S.’s two top rivals were increasingly allying. In April, Chinese Defense Minister Wei Feng told his Russian counterpart that his delegation to Moscow had “come to support” Russia and “show Americans the close ties between the armed forces of China and Russia” amid a series of high-level meetings that culminated in Russian President Vladimir Putin’s visit to meet President Xi Jinping in China.

Both countries have also pursued joint defense drills with greater frequency. In August, they will join other regional powers for a massive multilateral exercise utilizing 3,000 troops and 500 weapons systems in Russia’s Ural Mountains.

Taken From: http://www.newsweek.com/russia-will-take-china-side-against-us-world-trade-war-986417?utm_source=Twitter&utm_campaign=NewsweekTwitter&utm_medium=Social

US’s olive tariffs already hurting Spanish producers, says EU

European commission says ‘unacceptable’ Spanish olive tariffs are having major impact

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The European commission has said the “simply unacceptable” imposition of high tariffs by the US on Spanish olives is already having a major effect on producers in southern Spain.

This week the US Department of Commerce announced that tariffs ranging from 7.52% to 27.02% would be needed to counteract Spanish olive prices, arguing that the fruits were being sold for 16.88% to 25.5% less than their real value.

On Wednesday, a commission spokesman told reporters in Brussels that the preliminary duties were already hitting producers in Andalusia, where olive production “has a very significant economic and social impact”.

He said: “We are also well aware of the possible wider implications of this process and that is why the commission got involved so actively in these proceedings and will continue to do so.”

The US has said its move covers Spanish olives of all colours, shapes, size, pitted and non-pitted, whole, sliced, minced, wedged or broken. Exports to the US were worth £50.3m in 2017.

Exports of black olives to the US fell 42.4% in the first quarter of this year compared with the same period in 2017, dropping from 6.9m kgs to 4m kgs, according to Spain’s association of table olive producers and exporters (Asemesa).

“The decision by the US Department of Commerce to impose unreasonably high and prohibitive anti-subsidy and anti-dumping duties on Spanish olives is simply unacceptable,” said the commission spokesman. “This is a protectionist measure targeting a high-quality and successful EU product popular with US consumers.”

Spain’s agriculture minister, Luis Planas, called the tariffs unjust and said he would raise the matter at a meeting of EU agriculture ministers in Luxembourg on Monday.

“It’s an unfair measure because it has no economic or technical basis and it’s worrying as it could call into question the rules governing international trade,” Planas said on Wednesday.

He said the tariffs not only affected Spanish producers but could also challenge the common agricultural policy (CAP).

“A unilateral action of this nature cannot go unanswered,” said Planas, adding that Spain’s trade, industry and tourism minister would also be raising the issue with the EU trade commission.

Antonio de Mora, the secretary general of Asemesa, recently called on the EU commission to “defend the sector on the political stage as forcefully as it has defended steel and aluminium”, saying CAP rules were at stake.

He added: “This precedent could mean that any agricultural sector in any country that competes with EU products that receive CAP assistance could ask its government to act like the US is.”

The issue of US tariffs has been a cause of concern in Brussels for months, with the commissioners for both trade and agriculture, Cecilia Malmström and Phil Hogan, working behind the scenes to protect the Spanish industry.

Brussels claims that Spain’s support for producers is consistent with World Trade Organisation rules because they do not target a single industry or product.

The final US decision on the imposition of the tariffs is expected to be made on 24 July.

The Threat of a Trade War Is Overblown―Real War Is Far More Likely

America’s trading partners will probably just wait for Trump to move on to his next distraction—which could be a shooting war.

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On Tuesday the White House stated that US negotiators had secured some changes in its existing trade agreement with South Korea, with more specifics forthcoming; this was hailed by Trump supporters as a significant victory. The biggest reported gain was that the quota on US auto-company exports to South Korea will be expanded from 25,000 to 50,000—however, since no US manufacturer sold more than 11,000 cars in South Korea in the past year, it’s not clear that this would do anything to create US jobs, especially since the cars in question could be manufactured by US companies anywhere in the world.

On the positive side, it doesn’t look like the United States will have a trade war with South Korea any time soon. Especially since South Korea is probably a lot more worried about Trump’s starting a devastating real (and potentially nuclear) war with North Korea.

Talk of trade wars and falling skies has taken up much space in the media since Donald Trump first announced tariffs on imported steel and aluminum on March 1. But such fears are highly exaggerated, which should not be surprising in a country where the benefits of a succession of misnamed “free trade” agreements have been grossly exaggerated for decades.

Within weeks of announcing the tariffs, the administration had already exempted most of the major suppliers of steel and aluminum to the United States—including the European Union, Brazil, Argentina, South Korea, and Australia, along with Canada and Mexico.

China’s retaliation was minuscule: It announced tariffs on just $3 billion in US goods, or 0.13 percent of American exports. The Chinese, like most of the world, know that Trump’s recent actions don’t really represent the long-term trade policy of the United States. That policy is generally made by corporations, working through the best Congress that money can buy. It’s true that Trump contributed to the collapse of the proposed Trans-Pacific Partnership agreement. But its defeat was more the result of a quarter-century of organizing and public education, including by environmental, labor, public-health, and other public-interest groups—not to mention the strong public opposition to it expressed in the fact that TPP opponent Bernie Sanders took 46 percent of the Democratic primary vote. America had reached the point where even longtime supporters of the agreement such as Hillary Clinton were forced to renounce it. (And speaking of long-term US trade policy, it’s worth noting that Trump has since talked about possibly joining the TPP after all, once again displaying the shallowness of his convictions.)

 

The collapse of the TPP was a remarkable democratic achievement—and rare as a unicorn in US political history: An agreement that every powerful corporate interest as well as the “national-security state” wanted very badly was defeated by mass pressure on US legislators and political candidates. But the prospect of a “trade war” is another story.

As far as foreign governments and corporations are concerned, it doesn’t make sense to get into a trade war, or any kind of fight that could cause economic damage, with someone like Trump, who is isolated from his own country’s elite. The leaders of America’s biggest trading partners, including Europe and China, are likely smart enough to wait for Trump to finish his stay in the White House or move on to his next distraction, whichever comes first.

On March 22, Trump threatened China with tariffs on $60 billion of its high-technology exports to the United States. China can certainly afford to wait for Trump’s blustering to subside, even if he follows through on this latest announcement. The goods that Trump has threatened with tariffs represent about 3.6 percent of China’s exports, and the tariffs would only cost the country a fraction of that. In the world recession of 2009, China’s exports fell by 11.3 percent, but its economy still grew by 9.2 percent.

If Trump were proposing tariffs as part of a comprehensive set of economic policies intended to create decent-paying jobs and revitalize the US economy, one could at least begin to imagine such tariffs as part of a new trade policy that could stick—and maybe even get Trump reelected. But his proposed infrastructure spending is pitiful—a tiny 0.08 percent of GDP from the federal government. There is no industrial policy in Trump’s proposals, with cuts to nonmilitary federal funding for research and development. It’s all just posturing—more smoke and mirrors.

At the same time, Trump-administration officials are negotiating with China about the new tariffs; this is another place where we will need to look at the details. What are they negotiating for? It seems that two of the most important issues are intellectual-property rights and access of US financial firms to Chinese markets. Here we can see that Trump’s “trade” policy—if we look at the main goals and not the erratic tactics—is not so much about trade, and not so different as advertised from the policy of his predecessors.

Increasing patent protection for branded pharmaceuticals exported to China might boost profits for Big Pharma, but it is not going to reduce our trade deficit or create jobs in the United States. This is one of the most costly forms of protectionism, increasing prices by hundreds or even thousands of times more than would the Trump tariffs on steel or aluminum. And making it easier for Wall Street firms to sell financial services in China is of little value to all but some of the richest Americans.

Trump has been all about weapons of mass distraction; the real danger now is that he will switch to the distraction of weapons as his presidency crumbles—with a real war, not a trade war. His appointment as national security adviser of the extremist John Bolton, who still defends the Iraq invasion and wants to bomb both North Korea and Iran, is an ugly premonition. The same goes for scrapping Secretary of State Rex Tillerson for Mike Pompeo, another advocate of bombing Iran.

On Fox News Sunday, Treasury Secretary Steven Mnuchin defended Trump’s acceptance of the omnibus spending bill by saying that “in Iran, in North Korea, in Venezuela, and Russia, all around the world where we’re using sanctions, we need to make sure we have a military that has the necessary resources.” At the same time, Mnuchin offered some soothing comments about trade negotiations with China, which calmed stock markets on Monday.

While most of the major media have expressed consternation at Trump’s new “war cabinet,” in the past such sentiments dissipated rapidly once the bombs started falling, as pundits and politicians rallied around the flag.

Perhaps the only action that Trump has taken that won him widespread media approval and glory was his bombing of Syria in April of last year. Don’t think he didn’t notice that.

Taken From: https://www.thenation.com/article/the-threat-of-a-trade-war-is-overblown%E2%80%95real-war-is-far-more-likely/

A Trumped-up charge against Canadian dairy tariffs

President Trump and his Administration have based their public spat—and that is putting the term mildly—with Canada on that country’s “270 percent” tariffs on U.S. dairy imports. Some facts would help to put this claim in perspective.

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First, Canada’s props up its dairy industry by using both import quotas and domestic production quotas. As part of this system, Canada has negotiated import quotas with each of its major trading partners.  The U.S. has obtained a favorable quota and, as a result, exports more dairy products to Canada than it imports from Canada. In 2017, Americans sold $792 million in dairy products to Canada, while Canadians sold $149 million in dairy products to the U.S., creating a tidy trade surplus for the U.S. of nearly $650 million.

Second, Canada only imposes high tariffs on imports above the quota, not on all the dairy products U.S. producers sell to them. For example, Canadian tariffs on dairy products within the quota are often zero and never more than a few percent. Above the quota, tariffs on dairy products range from 200 percent to over 300 percent. As a practical matter, no dairy products are sold to Canada outside the quota, so no U.S. exports really pay a high tariff.

Third, in addition to subsidizing domestic dairy production, the U.S. also uses a quota system to elevate prices for many farm products, including dairy. U.S. import quotas for dairy products are so low, and tariffs for imports above quota are so high, that, except for cheese, imports of dairy products account for less than one percent of domestic U.S. sales. Canada’s tariffs on U.S. dairy products are based in part on the value of U.S. quotas and tariffs. This practice is the kind of reciprocity that the President claims he wants in all U.S. trade deals—but on dairy trade between the U.S. and Canada, it’s already happening.

Taken From: https://www.brookings.edu/blog/up-front/2018/06/13/a-trumped-up-charge-against-canadian-dairy-tariffs/?utm_campaign=Brookings%20Brief&utm_source=hs_email&utm_medium=email&utm_content=63779231

Donald Trump was right. The rest of the G7 were wrong

In arguing for a sunset clause to the Nafta trade agreement, this odious man is exposing the corruption of liberal democracy

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He gets almost everything wrong. But last weekend Donald Trump got something right. To the horror of the other leaders of the rich world, he defended democracy against its detractors. Perhaps predictably, he has been universally condemned for it.

His crime was to insist that the North American Free Trade Agreement (Nafta) should have a sunset clause. In other words, it should not remain valid indefinitely, but expire after five years, allowing its members either to renegotiate it or to walk away. To howls of execration from the world’s media, his insistence has torpedoed efforts to update the treaty.

In Rights of Man, published in 1791, Thomas Paine argued that: “Every age and generation must be as free to act for itself, in all cases, as the ages and generations which preceded it. The vanity and presumption of governing beyond the grave is the most ridiculous and insolent of all tyrannies.” This is widely accepted – in theory if not in practice – as a basic democratic principle.

Even if the people of the US, Canada and Mexico had explicitly consented to Nafta in 1994, the idea that a decision made then should bind everyone in North America for all time is repulsive. So is the notion, championed by the Canadian and Mexican governments, that any slightly modified version of the deal agreed now should bind all future governments.

But the people of North America did not explicitly consent to Nafta. They were never asked to vote on the deal, and its bipartisan support ensured that there was little scope for dissent. The huge grassroots resistance in all three nations was ignored or maligned. The deal was fixed between political and commercial elites, and granted immortality.

In seeking to update the treaty, governments in the three countries have candidly sought to thwart the will of the people. Their stated intention was to finish the job before Mexico’s presidential election in July. The leading candidate, Andrés Lopez Obrador, has expressed hostility to Nafta, so it had to be done before the people cast their vote. They might wonder why so many have lost faith in democracy.

Nafta provides a perfect illustration of why all trade treaties should contain a sunset clause. Provisions that made sense to the negotiators in the early 1990s make no sense to anyone today, except fossil fuel companies and greedy lawyers. The most obvious example is the way its rules for investor-state dispute settlement have been interpreted. These clauses (chapter 11 of the treaty) were supposed to prevent states from unfairly expropriating the assets of foreign companies. But they have spawned a new industry, in which aggressive lawyers discover ever more lucrative means of overriding democracy.

The rules grant opaque panels of corporate lawyers, meeting behind closed doors, supreme authority over the courts and parliaments of its member states. A BuzzFeed investigation revealed they had been used to halt criminal cases, overturn penalties incurred by convicted fraudsters, allow companies to get away with trashing rainforests and poisoning villages, and, by placing foreign businesses above the law, intimidate governments into abandoning public protections.

Under Nafta, these provisions have become, metaphorically and literally, toxic. When Canada tried to ban a fuel additive called MMT as a potentially dangerous neurotoxin, the US manufacturer used Nafta rules to sue the government. Canada was forced to lift the ban, and award the company $13m (£10m) in compensation. After Mexican authorities refused a US corporation permission to build a hazardous waste facility, the company sued before a Nafta panel, and extracted $16.7m in compensation. Another US firm, Lone Pine Resources, is suing Canada for $119m because the government of Quebec has banned fracking under the St Lawrence River.

As the US justice department woke up to the implications of these rules in the 1990s, it began to panic: one official wrote that it “could severely undermine our system of justice” and grant foreign companies “more rights than Americans have”. Another noted: “No one thought about this when Nafta implementing law passed.”

Nor did they think about climate breakdown. Nafta obliges Canada not only to export most of its oil and half its natural gas to the US, but also to ensure that the proportion of these fuels produced from tar sands and fracking does not change. As a result, the Canadian government cannot adhere to both its commitments under the Paris agreement on climate change and its commitments under Nafta. While the Paris commitments are voluntary, Nafta’s are compulsory.

Were such disasters foreseen by the negotiators? If so, the trade agreement was a plot against the people. If not – as the evidence strongly suggests – its unanticipated outcomes are a powerful argument for a sunset clause. The update the US wanted was also a formula for calamity, that future governments might wish to reverse. But this is likely to be difficult, even impossible, without the threat of walking out.

Those who defend the immortality of trade agreements argue that it provides certainty for business. It’s true that there is a conflict between business confidence and democratic freedom. This conflict is repeatedly resolved in favour of business. That the only defender of popular sovereignty in this case is an odious demagogue illustrates the corruption of 21st-century liberal democracy.

There was much rejoicing this week over the photo of Trump being harangued by the other G7 leaders. But when I saw it, I thought: “The stitch-ups engineered by people like you produce people like him.” The machinations of remote elites in forums such as the G7, the IMF and the European Central Bank, and the opaque negotiation of unpopular treaties, destroy both trust and democratic agency, fuelling the frustration that demagogues exploit.

Trump was right to spike the Trans-Pacific Partnership. He is right to demand a sunset clause for Nafta. When this devious, hollow, self-interested man offers a better approximation of the people’s champion than any other leader, you know democracy is in trouble.

Taken From: https://www.theguardian.com/commentisfree/2018/jun/13/trump-nafta-g7-sunset-clause-trade-agreement

What Trump Gets Wrong About Trade

Pick up a newspaper, turn on cable news — heck, even check out your Facebook feed — and you’re likely to hear dire warnings that Donald Trump is ruining the global economy.

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Trump’s “Trade Heresies” are “repeating the mistakes of the Great Depression” and “Threaten Millions of Jobs,” scream headline after headline.

These apocalyptic stories, repeated hourly on CNN, seem to have convinced many liberals to start defending status quo trade policies that should rightly disgust them.

In the absence of any voices critiquing Trump’s trade practices from the left, liberal outrage about the president’s vulgar impropriety on the world stage is easily stoked. And to many, it’s obvious that someone who throws school-yard taunts at Canadian Prime Minister Justin Trudeau is not to be trusted on questions of international trade policy.

But, for Trump voters all this liberal anger is just more evidence that Trump is their guy.

It drowns out the reality that strong majorities of Congressional Democrats are the ones who have fought against job-killing Free Trade Agreements for a quarter century now — under Clinton, under Bush, under Obama and under Trump. In the current media narrative about trade, Donald Trump is the one-and-only politician willing to stand up to global elites and defend American jobs.

To set the policy record straight here: the North American Free Trade Agreement (NAFTA) has been awful for most Americans.

The U.S. Labor Department has certified almost a million individual U.S. jobs as lost to NAFTA under just one narrow government program. Millions more livelihoods have been destroyed thanks to the 2000 U.S.-China trade deal that paved the way for China’s entry into the World Trade Organization and subsequent NAFTA-style policies, with more-and-more jobs outsourced every week.

Even for those in professions that can’t easily be outsourced, all this trade-related job loss is driving down the wages in the jobs that are left. One study estimates the net cost in lost income for the majority American workers at $3,300 each year — roughly 12% of their income — even after taking into account the savings from cheaper imported goods.

In addition to being a major driver of income inequality (more than technology), all this outsourcing and wage suppression also erodes the tax base that supports our schools, infrastructure and other public services. To cite one example, Flint, Michigan is still without clean drinking water.

Trump obviously couldn’t give two gold-plated-toilet craps about the people of Flint. But he got into the White House in no small part by being the one major presidential candidate, other than Bernie Sanders, who consistently and credibly spoke to the suffering caused by trade-policy-fueled outsourcing and who promised to do something about it.

What Donald Trump has always gotten wrong about U.S. trade policy and the damage it has caused Americans is that he blames foreigners for it.

Sure, Trump often argues that foreign leaders were smart to look out for their own interests and that past U.S. leaders were stupid. But Trump’s notion that Mexico and Canada pulled a fast one on the United States with NAFTA and that they “won” and we “lost” is absurd.

No doubt, NAFTA is a deal rigged against U.S. workers. Equally so against Mexican and Canadian workers, though. And small farmers throughout North America. And against the environment.

That should be no surprise given that the deal was negotiated behind closed doors with hundreds of official U.S. trade advisors representing corporate interests, and an oversized role for Mexico and Canada’s largest business interests as well.

NAFTA has never been an issue of the United States versus Mexico and Canada. Rather, NAFTA is a stark example of rigged trade rules of, by and for greedy corporations and against the rest of us.

It’s not Mexican maquiladora workers or Canadian dairy farmers who fought for the passage of NAFTA and similar trade agreements. Neither they nor American workers or family farmers have raked in billions from these trade deals. Instead, it’s mainly been American CEOs and other corporate elites, along with Mexico City’s oligarchs and Canada’s mining multinationals, who have pushed for and profited from NAFTA.

The experience of Canadian workers under NAFTA is not dissimilar from the experience of American workers. And, to date, Canadians have seen hundreds of millions of their tax dollars forked over to U.S. corporations who used NAFTA’s infamous Investor State Dispute Settlement (ISDS) tribunals to successfully attack Canadian water, timber and toxic policies.

The experience for poor and working-class Mexicans has been even worse.

Millions of rural Mexicans were forced off their land when cheap, taxpayer-subsidized corn and other agricultural products flooded into Mexico tariff-free after NAFTA was enacted. Approximately 28,000 small- and medium-sized Mexican employers also went under as companies like Walmart moved into the country. Couple all this displacement with the ongoing suppression of labor rights and the average real wage for manufacturing workers in Mexico today is almost ten percent lower than it was the year before NAFTA took effect.

Instead of NAFTA bringing Mexicans’ standards of living closer to ours, as was promised, Mexican manufacturing wages are now down to the levels paid in China. Little surprise that Mexican migration to the United States doubled during NAFTA’s first decade. With NAFTA devastating livelihoods across Mexico, many were forced to risk the dangerous journey north to support their families.

In the current NAFTA renegotiation, U.S. negotiators have proposed some vital changes that could benefit working people, such as eliminating the ISDS system that undermines public interest laws while making outsourcing safer and ending restrictions on “Buy Local” government purchasing preferences.

U.S. proposals to strengthen NAFTA’s Rules of Origin by adding wage standards and to add a sunset clause to force accountability over the pact’s outcomes are also very important.

These changes are necessary parts of stopping NAFTA’s ongoing damage. But they are by no means sufficient.

Thus far, U.S. trade officials have not been nearly as outspoken about the single most important long-term solution to preventing corporations from shipping jobs around the globe to wherever workers are the most exploited and environmental regulations are the weakest — namely, the need for strong labor and environmental standards with swift and certain enforcement.

You wouldn’t know it from the media, but nearly every Democrat in the U.S. House of Representatives gets this and has called for these type of changes.

The simple truth is that so long as large employers can continue taking advantage of sweatshop working conditions and the ability to dump toxins abroad, they will seek out opportunities to do so, padding their profits at the expense of working people everywhere. Pegging access to the U.S. market to real, on-the-ground improvements for workers and the environment within our trade partner countries is an absolute necessity for protecting American workers in the global economy.

For all his talk about stopping job outsourcing, Donald Trump still doesn’t seem to fully grasp that this is the way to do it.

Of course, understanding and prioritizing the need for strong, powerfully-enforced labor and environmental rights would probably be much easier if one possessed a worldview centered on respect for human rights and cross-border cooperation rather than an authoritarian worldview centered on xenophobia and racism.

It’s up to those with global justice at heart to build demand for alternatives to both business-as-usual trade policy and Trump’s ugly economic nationalism. The stakes are far too high to let the range of debate over trade policy remain just what we see on TV.

Taken From: https://medium.com/@citizenstrade/what-trump-gets-wrong-about-trade-1a2730808fa6