Monthly Archives: December 2018

Aluminum tariffs have led to a strong recovery in employment, production, and investment in primary aluminum and downstream industries

One and a half years ago, the U.S. primary aluminum industry was hanging on by a thread. Between 2010 and 2017, 18 of 23 domestic aluminum smelters shut down, eliminating roughly 13,000 good domestic jobs. In 2016, there were three alumina refineries supplying U.S. smelters; by 2017, only one remained in operation.1 In 2017 the Commerce Department launched Section 232 investigations to determine whether aluminum (and steel) imports were a threat to national security.

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This report demonstrates that after the Section 232 tariffs were imposed on aluminum (and steel) on March 8, 2018, the domestic producers of both primary aluminum and downstream aluminum products have made commitments to create thousands of jobs, invest billions of dollars in aluminum production, and substantially increase domestic production. Specifically:

  • U.S. primary aluminum production is projected to increase by 67 percent (500,000 tons per year) between 2017 and the end of 2018. Three smelters are being restarted, and another has announced a capacity expansion. Seven smelters in total will be in operation by the end of 2018. These restart and expansion projects will create over 1,000 new jobs and generate over $100 million in new investment.
  • Since Section 232 tariffs were imposed, 22 new and expansion projects have been announced in downstream aluminum industries producing extruded (rod and bar, pipe and tube, and extruded shapes) and rolled (sheet and plate) products. These new and expanded facilities will employ over 2,000 additional workers, generate $3.3 billion in new investments, and add nearly 1,000,000 tons of annual rolling and extrusion capacity to the downstream, domestic aluminum industry.
  • In the year-to-date period of January through October 2018 (compared with the same period in 2017), shipments of all extruded products are up 6.3 percent (279.8 million pounds), and total sheet and plate shipments have increased by 4.6 percent (336.4 million pounds). Those figures are for total North American shipments (including the United States and Canada). Industrial production data show that these trends are even stronger in the United States.
  • The Federal Reserve’s industrial production data provide estimates of real output, based on measures of physical output, or (where output data are not available), total production-worker hours, by industry. U.S. output of raw alumina and refined & processed aluminum increased 9.8 percent between February 2018 (before tariffs were imposed) and October 2018 (data are for the four-digit North American Industry Classification—NAICS—code 3313). Output of rolled and extruded aluminum products increased 9.1 percent from February to September 2018. Therefore, domestic (U.S.) producers appeared to outperform continental production for the U.S. and Canada, referred to above.
  • To date (February through October 2018), U.S. employment in the aluminum industries (primary and downstream) has increased slightly (by 300 jobs) since the tariffs were imposed. Aluminum production is highly capital-intensive, and restarting closed facilities is a costly and time-consuming process. Planned restarts and capacity expansions in both primary aluminum and downstream rolling and extruding mills will create more than 3,000 jobs, as shown below.

When the tariffs on steel and aluminum imports were imposed, critics claimed that while they would save thousands of jobs in primary metals industries, hundreds of thousands of jobs would be eliminated in the rest of the economy. These critics referenced a 2018 study by the Trade Partnership.3 I said at the time that the Trade Partnership forecast was wildly exaggerated and that the impacts of the tariffs would be quite minor.4 This report demonstrates that, to date, there is no evidence of the negative downstream effects claimed in the Trade Partnership study to be found anywhere in the U.S. economy. In total, the U.S. manufacturing sector has added approximately 176,000 jobs (including 2,700 in iron and steel production) since February 2018, the month before the tariffs took effect.5 In the rest of the economy, approximately 1.4 million jobs have been created in this same period. Looking more specifically at the industries aluminum producers supply, there remains no evidence that the imposition of tariffs on aluminum (or steel) have had the kinds of negative employment impacts—in downstream manufacturing or other parts of the economy—that were predicted by critics of aluminum tariffs.

Background

In the spring of 2017, when the U.S. Department of Commerce and the president were considering action in a Section 232 National Security Investigation into the threats posed by steel and aluminum imports, the entire domestic aluminum industry was hanging on by a thread. The threat was, and continues to be, principally driven by the growth of excess capacity and overproduction in China and elsewhere. Chinese primary aluminum production capacity increased nearly 1,500 percent from 2000 to 2017, and China is responsible for 82 percent of the total increase in global aluminum production capacity between 2000 and 2017.6 This growth has been fueled by massive Chinese government subsidies and other market-distorting practices. As the Chinese expansion exploded, primary aluminum production in other regions, such as India and the Persian Gulf States, also increased through similar types of subsidization at a time when smelters in the United States were being idled.

The continued expansion and maintenance of excess capacity both inside and outside of China has suppressed global aluminum prices, transmitting injury directly to domestic aluminum producers in the United States. Aluminum is a global commodity, and prices are primarily driven by total global supply and demand, regardless of where the aluminum is produced, sold, or stored. The U.S. aluminum market effectively imports the adverse price and volume effects of China and others’ excess capacity and production via changes in London Metal Exchange (LME) prices.

Collapsing prices have decimated U.S. primary aluminum production, capacity, and employment. The LME market price of aluminum fell 39 percent between 2007 and 2016. In an industry with high fixed costs, most domestic producers have not survived this prolonged, steady price collapse. Between 2000 and 2017, 18 of 23 domestic smelters shut down and more than 13,000 good domestic production jobs disappeared.7

Today, after the imposition of tariffs of only 10 percent, domestic production in both the primary aluminum (including both alumina refining and secondary smelting and alloying of aluminum) and downstream aluminum rolling and extruding industries is up; these producers are hiring and expanding, adding capacity, making large investments, and increasing production, as is shown in this report.

These outcomes belie claims by critics, including widely quoted economists from the Trade Partnership firm,8 along with a wide array of pundits, journalists, and representatives of many firms in downstream industries, who argued that the Section 232 tariffs would have a devastating negative impact on wide range of domestic industries. For example, according to Bloomberg, Ford Motor Co. “began the year by warning that rising costs for raw materials like steel and aluminum, coupled with unfavorable exchange rates, would add $1.6 billion to its costs this year.9 Of course, increases in the real value of the dollar, which has gained 5.4 percent this year, raise the cost of everything that domestic automobile manufacturers import from the rest of the world (including finished vehicles and parts), and changes in the cost of metals is a tiny fraction of their overall costs.10 Nonetheless, data reviewed here demonstrate that the steel and aluminum tariffs have had no significant, industry-specific or economywide negative impacts on employment or output in U.S. manufacturing or other domestic industries.

Positive impacts of the aluminum tariffs on the aluminum industries

U.S. primary aluminum production will increase by 67 percent (500,000 tons per year) between 2017 and the end of 2018.11 Research conducted for this report reveals that three smelters are being restarted and another has announced a capacity expansion. Seven smelters in total will be in operation by the end of 2018.12 These restart and expansion projects will create over 1,000 new jobs and generate over $100 million in new investment, as shown below.

Table 1 summarizes the specific data on the four significant U.S. projects (the one expansion and three restarts of aluminum smelting and casting operations). It shows that these investments will increase domestic capacity by 663,000 tons, at a cost of at least $137 million, and they will ultimately create at least 1,075 new jobs.

Taken From: https://www.epi.org/publication/aluminum-tariffs-have-led-to-a-strong-recovery-in-employment-production-and-investment-in-primary-aluminum-and-downstream-industries/

AP Interview: Jones says farmers scared by Trump’s tariffs By LISA MASCARO December 12, 2018

Sen. Doug Jones said Alabama’s soybean farmers and automobile manufacturers are “scared to death” over President Donald Trump’s tariff wars, but he cautioned Democrats from spending too much time attacking the president as the party tries to win back heartland voters ahead of the 2020 presidential election.

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Sen. Doug Jones said Alabama’s soybean farmers and automobile manufacturers are “scared to death” over President Donald Trump’s tariff wars, but he cautioned Democrats from spending too much time attacking the president as the party tries to win back heartland voters ahead of the 2020 presidential election.

In an Associated Press interview, the Democrat who won a stunning victory from the Deep South a year ago Wednesday said he doesn’t think there’s enough evidence to impeach the president, even as prosecutors allege Trump directed his lawyer to make illegal hush money payments. Democrats’ time would be better spent conducting oversight of the administration, he said, and working with the president to improve trade policies, the Affordable Care Act and other issues.

“I don’t think you have to just jump into that right now because it can not only politically backfire,” he said about impeachment. “There would be backlash. Our country is divided enough as it is. Democrats right now have an opportunity to try to get some things done.”

Thanks to Republican victories in midterm elections last month, Jones will soon be one of the few remaining Democratic senators from a deeply conservative state. That status has made him something of a guide for his party on how to win back Democrats who voted for Trump 2016.

As longtime friend of Joe Biden, Jones said he hopes the former vice president makes a run as the party’s pick for 2020.

“Democrats need to do a better job at reaching the heartland of America,” he said. Biden is “probably the best one qualified to do that. He’s been doing it for a long, long time, and I’m hoping to see that. I am sure, I feel confident, that there are others as well. We may not know who they are just yet.”

Trump remains popular in Alabama, but that’s shifting, Jones claimed, as voters in the middle “don’t like a lot of the hateful rhetoric.” And while partisans on both sides will remain dug in, for or against the president, others “really can’t point to a lot of things” that are better now, other than tax cuts, after the president’s first two years in office.

“They’re beginning to question,” he said.

Jones says the path for Democrats is to stay focused on the “kitchen table” issues that helped him defeat conservative Republican Roy Moore, who faced decades-old allegations of improper sexual relations with young women, to become the first Democrat to the Senate from Alabama in a generation.

The senator said that even in Alabama people are starting to question whether Trump’s “nationalistic approach” on tariffs is a threat to their financial well-being.

Soybean farmers are watching their crops rot and automobile manufactures, which he says have played a leading role in boosting the economy after other industries declined, face high costs of steel and aluminum tariffs.

“They’re beginning to say, Ok, we put you in here to try to get us a better deal, but there’s got to be an end game. Tell us what the end game is and how long this is going to last.”

Facing his own re-election in 2020, Jones acknowledged having taken some tough votes in the Senate, including against the confirmation of Brett Kavanaugh to the Supreme Court.

“It’s a mixed bag,” he said.

But he said Democratic gains being made in the Deep South — as evidenced by his own election and the closer than expected race for a Senate seat in neighboring Mississippi won by the Republican — shows that the shift.

“Things are changing,” he said.

Taken From: https://www.apnews.com/59dd7d9141fe471c9ffeb80b7b81f9e5

Democrats use Trump’s own words against him in border wall debate

President Trump on Thursday repeated his claim that Mexico will pay for his border wall — and Democrats gleefully welcomed the news, saying that if that were the case, the US wouldn’t have to.

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“Well, Mr. President, if you say Mexico is going to pay for the wall through NAFTA, which it certainly won’t, then I guess we don’t have to. Let’s fund the government,” Sen. Chuck Schumer cracked Thursday on the Senate floor.

Trump had tweeted that the revised version of NAFTA, which he calls the USMCA, would generate so much cash for the US that the $25 billion wall would be paid for in full.

“Honestly, if the president really believed what he tweeted this morning that his new NAFTA would pay for the wall, he wouldn’t be threatening to shut down the government unless American taxpayers fund his wall. You can’t have it both ways,” Schumer continued.

“The president’s position on the wall is totally contradictory, ill-informed, and frankly irresponsible. It’s not a serious proposal, it’s a throwaway idea the president used in the campaign and still uses to fire up his base. A Trump temper tantrum and shutdown threat isn’t going to change any minds here in Congress.”

House Minority Leader Nancy Pelosi also looked askance at the president’s claim.

“The money the businesses make? What money is he talking about that’s going to go pay for the wall? It just doesn’t measure up,” she told reporters Thursday.

Pelosi said “the American people are still paying the price” if new revenue from Trump’s trade deal went to the wall.

Earlier Thursday, Trump, as part of his latest tweetstorm — he also went after his former lawyer Michael Cohen and ex-national security adviser Mike Flynn for cooperating with the feds’ Russia probe — repeated his claim that Mexico would pay for the wall but with a twist.

“I often stated, ‘One way or the other, Mexico is going to pay for the Wall.’ This has never changed,” the president said in a tweet.

“Our new deal with Mexico (and Canada), the USMCA, is so much better than the old, very costly & anti-USA NAFTA deal, that just by the money we save, MEXICO IS PAYING FOR THE WALL!”

Trump on Tuesday told Pelosi and Schumer in a contentious Oval Office sitdown that he would be “proud” to shut down the federal government if Congress doesn’t give him the $5 billion he wants for the wall.

Democrats have offered no more than $1.6 billion for his project.

Mexico has repeatedly rejected Trump’s demand that it pay for the wall.

On Thursday, Mexican President Andres Manuel Lopez Obrador said he did not discuss the wall when he spoke with Trump on Wednesday to talk about the issue of migration.

“We have not discussed that issue, in any conversation … It was a respectful and friendly conversation,” Lopez Obrador told Reuters.

Taken From: https://nypost.com/2018/12/13/democrats-use-trumps-own-words-against-him-in-border-wall-debate/

AMLO GOES FULL THROTTLE AGAINST NEOLIBERALISM — BUT WHAT ABOUT NAFTA?

Mexico’s first left-wing president gave a fiery inaugural speech against neoliberalism in Mexico. But he barely mentioned NAFTA.

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

I had the great fortune to attend the inauguration of Andres Manuel Lopez Obrador (or AMLO, as he is known) as the 58th Mexican president on December 1. The atmosphere at the Legislative Palace was electric with the knowledge that Mexico would be beginning its “Fourth Transformation” — following its 1810 independence, the 1855 reformation, and the 1910 revolution — with the first left-wing presidency in its history.

It was AMLO’s third attempt at the office. In 2006 Felipe Calderón orchestrated a cyber fraud that gave him a slim advantage over AMLO. And in order to win in 2012, outgoing president Enrique Peña Nieto engaged in tricks like giving away cash-loaded bank cards.

When AMLO arrives following his 2018 victory, his supporters chanted Si se pudo: “Yes we could!”

AMLO started his speech off by going full throttle against neoliberalism and corruption in Mexico, both of which he’s fought for decades. He said the crisis in Mexico originated not only because of the failure of the neoliberal economic model, but also because of the “deep predominance during this period of the dirtiest display of public and private corruption.”

Outgoing President Peña Nieto sat stoically, looking uncomfortable at times.

The new president explained how Mexico’s economy grew from the end of the revolution in 1917 to the end of the 1970s at rates of 5 to 6 percent a year. With the neoliberal period starting in the 1980s came the debacle. It was marked by low growth, inflation, and indebtedness. Even after endless privatization schemes, the national debt reached 10 trillion pesos — the equivalent of over $500 billion, more than 42 percent of Mexico’s GDP — under Peña Nieto who sank down further in his chair when the subject came up.

AMLO rambled on against neoliberalism for quite a while. He said that another “pearl” of this model is the “privatizations and the corruption, the former being synonymous with the latter.” He explained how neoliberal policies have made Mexico a net importer of basic food staples like corn, how Mexican salaries have lost 60 percent of their purchasing power, and how Mexico became the one of the leading sources of out-migration in the world — such that 24 million Mexicans live in the United States, according to him.

“Political and economic power have fed and nurtured each other,” he concluded, “which has led to the robbery of the people’s property as well as the wealth of the nation.” Peña Nieto undoubtedly felt that at that moment all eyes were on him.

A Long Career

This was AMLO at his best. The script was completely his. Despite having created a mixed cabinet — one that includes pro-business people such as cabinet chief Alfonso Romo — for the purpose of helping him keep the trust of “the markets” during the exceedingly long six-month transition period, AMLO took the bull by its horns and made it clear what he has stood for all his political life.

As far back as 1991, he led rallies in his home state of Tabasco denouncing electoral fraud by the ruling party. Later he fought the privatization of Mexico’s oil state company PEMEX, denounced the Savings Protection Banking Fund (FOBAPROA) scheme that bailed out bankers at the expense of the Mexican people, and left the Institutional Revolution Party (that monopolized political power for decades) to form with Cuauhtémoc Cardenas the Democratic Revolution Party (that has now almost disappeared).

As mayor of Mexico City from 2000 to 2005, he initiated social programs to help the elderly and the handicapped, improved access to free medicines and schools, and ensured the construction of new preparatory schools — and even a new university — for Mexico City’s most disadvantaged sectors of society. He even had a new hospital built after decades of inaction from previous governments.

Eventually AMLO’s own PRD became corrupted, complicit with privatization schemes and anti-union reforms. So AMLO left it and formed the MORENA (Movement of National Regeneration) party, which now has a majority in both houses of the national legislature.

Moreover, MORENA won four states (out of eight that had elections this year), and several municipalities and big cities — including the biggest local prize, Mexico City, which elected a woman for the first time: Claudia Sheinbaum. MORENA offers the most gender-balanced governments and legislatures, and AMLO’s cabinet does as well.

But What About NAFTA?

With such political favorable scenario, I have no doubt that AMLO can deliver on promises to help Mexico overcome decades of increasing inequality, rampant poverty, and forced migration.

But one thing gives me pause.

In his acceptance speech against neoliberalism, he mentioned NAFTA only once. He said he, president Trump, and Canadian prime minister Justin Trudeau were talking about how to go beyond NAFTA and “reach an investment agreement among companies and governments of the three countries to foster development of Central American countries and also ours,” which he pitched as a “non-forcible” way to address “the migratory phenomenon.”

However, AMLO didn’t mention the recently concluded U.S.-Mexico-Canada Agreement (USMCA), aka NAFTA 2.0. Why would AMLO not tackle NAFTA more forcefully when this agreement has been the backbone of neoliberalism, and the cause of migration of millions of Mexicans to the United States?

Now that President Trump threatens to cancel NAFTA if legislators in the United States don’t immediately ratify the “new” version, AMLO and his MORENA party have a golden opportunity to get rid of it once and for all.

That’s exactly what Mexican civil society coalitions like Mexico Better off Without FTAs have been calling for.

It wouldn’t be a disaster for Mexico. Our trade with the United States would revert to WTO rules, which are similar to NAFTA’s. But withdrawing would effectively eliminate many other rules found in NAFTA (and apparently in the USCMA) that go well beyond trade. Those rules have handcuffed the Mexican government’s capacity to promote the Mexican economy, particularly in the countryside; support the livelihoods of indigenous people; expand the provision of affordable medicines; and protect the environment.

The MORENA party and AMLO should be very vigilant. They must wait until the Mexican Senate receives the official text of the USMCA in Spanish (Peña Nieto’s government pretended to “inform” the public with a propagandistic summary while the unfinished text remained only in English), and then should carry out an official consultation with all social and economic sectors.

AMLO has promised a series of consultations for development and infrastructure projects in Mexico. Good. He also consulted about the name of the new NAFTA — Trump’s “USMCA,” rebranding that consciously put the United States first — and rechristened it T-MEC (Tratado Mexico, Estados Unidos, Canada). Not so good, because it looks more like Trump-MEC. And it was Trump who pushed this new agreement on everyone.

More importantly, consulting people merely about the name of the renewed NAFTA is a serious shortcoming. What’s needed is a much broader consultation about all aspects of Mexico’s economy and society that have been, and will be, impacted by such an agreement.

In sum, there should be no ratification of the USMCA until the public has had an opportunity to read and discuss the official text already signed by Trump, Peña Nieto, and Trudeau — on Peña Nieto’s last day in office.

AMLO and MORENA represent a great hope for Mexicans. Opening the new NAFTA, before it’s ratified, to broad and binding consultation with the Mexican people would be a bold first step. Not doing so — and ratifying with haste — would be giving in to neoliberalism and its corrupt practice of passing these agreements behind peoples’ backs.

Taken From: https://popularresistance.org/amlo-goes-full-throttle-against-neoliberalism-but-what-about-nafta/

How Trump the ‘Tariff Man’ could lose to ‘Dow Man’ Trump

The president’s continuing obsession with the stock market could force him to cut a trade deal with China.

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President Donald Trump loves two things very much: tariffs and a rising stock market. It’s becoming increasingly clear he can’t have both.

Free-traders inside and outside the White House are now hoping that Trump’s love for new highs on Wall Street will temper his commitment to trade battles and help bring the current fight with China to a soft landing rather than total war next year.

“I think Trump the Dow Jones Man is ultimately going to eat Trump the Tariff Man,” said one former senior administration official intimately familiar with the president’s stock market obsession, citing Trump’s touting of a recent agreement to hold off on increased tariffs after a dinner with Chinese President Xi Jinping. “What he agreed to after that dinner had basically been on the table for two years. He knew

he had to give Wall Street something.”

Both markets and Trump are fixated on the Federal Reserve this week, with the central bank expected to raise rates by another quarter point on Wednesday. But no matter what the Fed does, investors early next year will pivot to the showdown between Trump and the Chinese. And pressure from Wall Street could push Trump to cut a deal.

“The question is, what is Trump’s pain threshold? And what is China’s pain threshold? It’s almost like two cars zooming toward each other. Which one is going to turn first?” asked Stephen Moore, visiting fellow at the Heritage Foundation and an outside Trump adviser. “If the stock market fell another 1,000 points it would give him pause. He does love a bull market and hate a bear market. But he also feels this is the fight of our lifetime.”

The tensions between Trump’s commitment to tariffs and his love for a soaring stock market are at the highest of his presidency. After markets soared in 2017, Wall Street hit a wall, with stocks dropping in recent weeks in part on fears that China and the U.S. will not reach an agreement by a March 1 deadline and Trump will slap tariffs as high as 25 percent on everything China exports to the U.S., inviting significant retaliation.

The Dow Jones is now down around 1,000 points, or close to 5 percent, for 2018. The Standard & Poor’s 500 is also lower for the year, as is the Nasdaq, home to tech stocks like Apple that are highly sensitive to tensions with China and potential tariffs. All three indices are now in “correction” territory, meaning a drop of 10 percent from their recent highs. And investors blame trade tension for much of the declines.

“It’s really all about the global economy slowing down, and that’s directly linked to the trade dispute between the world’s largest economy and the world’s second-largest economy,” said Jack Ablin, chief investment officer at Cresset Capital Management. “What market participants thought was just tactics from Trump on China could turn into policy, and if that’s the case then investors are going to be held hostage.”

Trump and other senior administration officials, including Treasury Secretary Steven Mnuchin, have long considered the stock market a scorecard on White House performance. Trump has touted a rising market over 30 times on Twitter since taking office. And senior aides say he watches market moves throughout the day on cable news and regularly asks how his potential decisions will impact Wall Street.

“You walk in the Oval and he wants a stock market quote, I give him that,” Larry Kudlow, Trump’s top economic adviser, said in a recent interview. When the market is falling, Trump wants to know precisely why, Kudlow said.

The recent standoff with China has highlighted the tension between Trump’s love for tariffs and his fixation on higher stock prices as a measure of his success. Immediately after the meeting with Xi in Buenos Aires, markets shot higher.

When it became clear that the two sides remained far apart on key issues, and that the White House itself was divided on the path forward, the rally fizzled.

Trump tried to reassure investors on Dec. 3. “President Xi and I have a very strong and personal relationship. He and I are the only two people that can bring about massive and very positive change, on trade and far beyond, between our two great Nations,” he tweeted.

Just a day later, Trump issued one of the biggest market-moving tweets of his presidency, killing much of the post-China meeting rally. “I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so,” Trump tweeted the morning of Dec. 4. “It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN.” The Dow closed the day down nearly 300 points.

Taken From: https://www.politico.com/story/2018/12/19/trump-stock-market-tariffs-1038383

The impact of artificial intelligence on international trade

Artificial intelligence (AI) stands to have a transformative impact on international trade. Already, specific applications in areas such as data analytics and translation services are reducing barriers to trade.

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At the same time, there are challenges in the development of AI that international trade rules could address, such as improving global access to data to train AI systems. The following provides an overview of some of the key AI opportunities for trade as well as those areas where trade rules can help support AI development.

WHAT DO WE MEAN BY ARTIFICIAL INTELLIGENCE?

Before proceeding to the impact of AI on trade, it is important to clarify what is meant by AI. More specifically, that there is a key difference between narrow AI such as translation services, chatbots, and autonomous vehicles and general AI—“self-learning systems that can learn from experience with humanlike breadth and surpass human performance on all tasks.” General AI raises broader existential concerns, such as how to align the goals of such a system with our own to prevent catastrophic outcomes,[1] but general AI remains a technology still to be developed in the distant future.

To understand the potential significance of narrow AI for trade, it is also important to briefly consider its core parts. In particular, narrow AI is based on machine learning, which uses large amounts of data and powerful algorithms to develop increasingly robust predictions about the future.[2]The data used for machine learning can be either supervised—data with associated facts, such as labels—or unsupervised—raw data that requires the identification of patterns without prior prompting.[3] This includes reinforcement learning—where machine-learning algorithms actively choose and even generate their own training data.

Taken From: https://www.brookings.edu/research/the-impact-of-artificial-intelligence-on-international-trade/

A US-CHINA TRADE WAR ‘ARMISTICE’?

Trump Blinks and Retreats at the G20 Meeting with Xi

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The first reports emerging from the G20 meeting in Buenos Aires today, December 2, 2018, are that Trump and Xi have agreed to put their trade war on hold, a kind of ‘trade war armistice’, at least for the next 90 days.

Trump entered into his meeting this past weekend with China’s president, Xi, having imposed $50 billion in tariffs at 25% on China goods imports last July, to which another $200 billion was added thereafter. Tariffs on the $200 billion were set at 10%, but were scheduled to rise to 25% on January 1, 2019. Before the US November elections, Trump further threatened to add a further $267 billion if China continued to refuse to meet with the US.  But China didn’t take the bait. Trump’s strategy was transparent. His plan was to lure China into negotiations before the US elections so he could act tough for his political base before the US elections.  China refused to be sucked in and refused to come to Washington to be played by Trump.  Instead, it agreed to meet at the G20 gathering this weekend, at a more neutral setting and after the US elections.

In the lead up to this weekend’s G20 US-China meeting, Trump sent conflicting signals to the Chinese.  On the one hand, Trump praised China’s president Xi personally, while announcing the existing 10% tariff hikes on the $200 billion would rise to 25% next January 2019 and that another $267 billion would follow if China did not meet with him.  Meanwhile, China’s counter tariffs on US imports were levied at 25% for its first $50 billion tariffs and set at only 10% on the additional $60 billion on US goods.

However, to date the US-China trade dispute is more like a trade skirmish than a trade war. The initial first $50 billion in tariffs levied by both US and China this past July have been selective. Most have not yet had a significant impact on their respective economies thus far after only four months in 2018. But in 2019 that $50 billion would start to have an impact. Moreover, the $200 billion additional US tariffs, levied at only 10%, have been largely offset by a roughly equivalent 10% decline in the value of China’s currency, the Yuan.

A rise in $200 billion US tariffs, from 10% to 25%, in 2019 would have an impact, however, in 2019. The likely response by China would be to raise its second $60 billion tariffs on US imports by an equal amount, from current 10% to 25%. That could very well mark the start of a true US-China trade war.

China could also add more non-tariff barriers, or slow its purchase of US Treasury bonds, or block approval of mergers of US companies globally with operations in China, or encourage boycotts of US goods in China, or allow its currency to devalue well below the current 10% decline.  These are measures that are typical of true trade wars, but which have not been employed as yet by China or the US.  Sparring with tariffs are just initial moves, especially when tariff rates are relatively low, selectively applied, and not fully implemented yet.

While the US and China were clearly on the brink of a bona fide trade war, but until the G20 meeting they had not quite taken that last step. Nor is it likely now that they will. The Trump-Xi meeting at the G20 represents a kind of a trade policy ‘rubicon’ which neither has crossed as yet. If the initial reports coming out of the G20 meeting are accurate, then Trump and Xi have so far continued to decide not to cross the river of no return with regard to a war over trade.

The question is why now the apparent ‘armistice’ in the trade war? Why, after months of threats and warnings aimed at China, has Trump decided to back down?  For that’s exactly what the agreements with China at the G20 represent: Trump has backed off, making concessions, while the Chinese have only reiterated proposals they publicly offered over the course of the last six months.

The reasons for the Trump retreat lay in the significant changes in economic conditions since last spring.  At the time Trump launched his ‘trade war’ last March 2018 the US economy was accelerating due to multi-trillion dollar tax cuts for investors and corporations; the global economy still appeared to be growing nicely; US profits were rising 20%-25% and stock markets booming; and the Fed, the central bank, was still relatively early in its scheduled interest rate hikes. But that’s all changed as of year end 2018.

With growing indications that the global economy is slowing—with another recession in Japan and German and Europe economies contracting and weakening facing the UK Brexit and Italian bank problems—the US and global stock markets in recent months had begun to retreat noticeably.  Early signs since October of US economic slowdown in 2019 have begun to emerge, especially in construction and autos. Japan is in recession. Germany’s economy is contracting, with Europe not far behind facing imminent crises as well in the UK’s Brexit next March and growing debt refinancing problems in Italian, Greek and other Euro banks. And more emerging market economies continue to slip into recession.

Faced with these looming economic realities, as well as growing political pressure at home, Trump eagerly sought the meeting with Xi at the G20 gathering despite continued and intensifying in-fighting between the factions on his US trade negotiating team.

Those factions and divisions among the US elite concerning trade center around three issues: first, access by US bankers and multinational corporations to China markets, especially getting China to allow a 51% or more ownership of US corporate operations in China; second, China increasing its purchases of US exports, especially agricultural and energy products; and third, most important, China agreeing to slow its development of nextgen technologies like cybersecurity, artificial intelligence, and 5G wireless—which has assumed the codename in the US of ‘intellectual property’.

Anti-China hardliners—Robert LIghthizer, US office of trade director, Peter Navarro, special advisor on trade, and John Bolton, long time anti-China hawk and national security adviser to Trump—all of whom are closely allied with the Pentagon, military industrial US corporations, and intelligence agencies—have all preferred a trade war with China to achieve US technology objectives.  They have been engaged in an internal US faction fight since last April with the two other US factions—i.e. the bankers and multinational corporations whose priority objectives have been to get open markets and majority ownership rights for US businesses, especially banks, in China; and US heartland agricultural and manufacturing exporters, who represent Trump’s red state political base, who want a return and an expansion of China purchases of US exports.

Since this past summer, the Lighthizer-Navarro-Bolton faction have clearly had Trump’s ear and have prevailed ensuring technology transfer is at the top of the list of US trade negotiations priorities.  However, with the recent weakening of the US stock markets, indications of economic slowdown coming, and growing US business concerns of a bona fide US-China trade war deepening in 2019, Trump has shifted his position toward a softer line in trade negotiations with China, apparently retreating closer to positions of the other two factions in US-China trade negotiations. That softer line is evident in the G20 meeting tentative agreements announced by Trump and Xi.

Put another way, facing the shift to a bona fide trade war in 2019—in the midst of a slowing global and US economy and a likely steeper correction in US stocks and financial markets—Trump met Xi at the G20 and ‘blinked’, as they say.

That Trump clearly retreated is undeniable in the content of the G20 announcement following his meeting with Xi. Of course a Trump retreat is not the likely ‘spin’ it will be given in the US corporate media this coming week. The agreements will be characterized as a mutual ‘pause’ of some sort in what appeared as an inevitable trade war commencing January 2019.

But a consideration of the substance of the verbal agreement between Trump and Xi released this past weekend shows that Trump clearly backed off while Xi simply reiterated what the China team has already offered Trump and had already put on the table the last several months.

Here’s what was agreed in broad principle, at least according to early reports:

  • Trump agreed not to allow the scheduled January 1, 2019 increase in US tariffs on $200 billion of imports from China to rise, from the current 10% tariff rate to the 25%.
  • Trump agreed not to move forward with his threat of another $267 billion tariffs on.

These represent two clear concessions by Trump and amount to reversals of prior US positions. What about China’s response? Unlike Trump, there was no clear retreat from previous positions, i.e. concessions.

  • China agreed to increase US purchases of agriculture goods (actually a restoration of prior levels) “immediately”, in order to ease the US trade deficit with China and boost US farmers and agribusiness. But China had already publicly offered to buy a further $100 billion in previous months. The joint communique coming out of the meeting only indicates to increase US purchases ‘in accordance with the needs of its domestic market’. The $100 billion is thus more a restoration of previous levels of China purchases of US agricultural and manufacturing exports.
  • China agreed to open its markets to US banks and businesses further. But it had already also announced earlier this year it would allow 51% foreign ownership, and suggested it could even go to 100% in coming years. So this too was an ‘offer’ it had already made to the US this past summer.

What about the key tech transfer issue that has split the US elite and the US trade team? That primary demand of the US hard liners, which seemed paramount in preceding months, has been tabled for future discussion. Both US and China have only agreed to discussions for the next 90 days “with respect to forced technology transfers” and related issues. (Reuters report by Roberta Rampton and Michael Martina, 12/2/18, 1:23pm ET). So no agreement on technology. Just a mutual face-saver to meet again and agree “to further exchanges at appropriate times”.

Meanwhile, Trump retreats from raising tariff rates from 10% to 25% and agrees to drop threatening another $267 billion, while Xi simply restates prior offers about more purchases agricultural goods and more US banker access to China markets.

If China’s objective of the Buenos Aires meeting was to get Trump to halt imposing higher and more tariffs—while conceding nothing except further talks on the technology issue—in that objective China has clearly succeeded.  Trump will no doubt spin the additional agricultural purchases and more market access as China ‘concessions’. But these were already conceded before the parties met in Buenos Aires.

In contrast, if Trump’s primary objective, driven by his anti-China hard line US faction, was to get China to slow nextgen technology development and tech transfer, and concede on intellectual property issues, then Trump has clearly retreated at the G20.

Nor is it likely, at the end of the 90 day hiatus early next March 2019, that Trump and the hard-liners faction bargaining position will be any stronger.  The 90 day ‘armistice’ in the emerging US-China trade war might even result in Trump back-peddling further should economic and political conditions worsen appreciably in the interim.

If the global and US economies continue to weaken and slow, which is highly likely, pressure by the other two US trade factions—the one demanding an agreement with China based on more access to China markets and the other demanding settlement so long as China agrees to more purchase of US goods—will only be stronger.

Political developments related to Trump’s business relations in the US and with Russian Oligarchs eventually forthcoming by the Mueller investigation will also likely weaken Trump’s position with regard to resuming a hard line on further tariffs on China. Japan’s recession may also have deepened further by then. Germany’s current economic contraction may have spread to the rest of Europe, which is also facing a confluence of additional problems involving the UK Brexit and the Italian bank problems next spring 2019.

Since 2008 US economic GDP growth has typically slowed dramatically in the winter quarter, and the first quarter 2019 US GDP is likely to again slow significantly from 2018 GDP growth rates. That will be especially the case if the US central bank, the Fed, continues its interest rate hikes into 2019, which appears likely to do at least through next spring.  Trump may also have to focus more on saving his recent US-Mexico-Canada trade deal in Congress. All the above will almost certainly provoke a further decline in US stock and other financial markets as investors grow even more uneasy with Trump policies and increase pressure on Trump to postpone further tariffs on China trade.

More US banker-multinational corporate access to China and more China purchase of US farm goods could supersede US hardline anti-China faction demands for China concessions on tech transfer and nextgen military technology development.

More market access and more China purchases would be easy to ‘spin’ as huge gains by the Trump administration. They’ll just keep talking about technology, while cutting off China companies’ access to mergers, acquisitions and joint ventures in the US and in other US allies’ economies.

Should that occur, the US-China so-called ‘trade war’ will prove as phony as have prior Trump threats to tear up NAFTA, or to fundamentally remake the South Korean-US free trade treaty, or to impose 25% tariffs on German autos and European imports, or Trump’s steel tariffs which are riddled with more than 3000 tariff. While Trump talked tough, all have turned out to be ‘softball’ trade deals granted by the US.

Having ‘blinked’ after meeting with the Xi meeting at the G20 strongly suggests Trump’s potential trade war with China has peaked and will now deflate over time. And should the more serious economic and political developments noted above also materialize in 2019, the deflation and slow retreat may look more like an implosion and a rout.

Trump’s incessant bragging about his great skills and acumen in negotiating ‘deals’ will be revealed as so much egoistic bombast and exaggeration. And forthcoming economic developments and political events in 2019 may unravel more than just Trump’s phony trade offensive launched last spring.

Taken From: https://popularresistance.org/a-us-china-trade-war-armistice/?fbclid=IwAR3-XOzweNPMlXpudcq_kOJuNpdUgdHbqlW8VgkmmFyR7jVTBQnnYf2TeqM

Chuck Grassley wants to limit Trump’s trade authority

A fresh example of the political hurricane about to hit Trump’s hardline trade agenda: Incoming Senate Finance Chairman Chuck Grassley (R-Iowa) told Axios he may try to make it harder for the president to impose new tariffs.

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What he’s saying: Grassley said he would take a favorable view of legislation limiting the administration’s power to impose tariffs to protect national security (known as Section 232 authority). “Maybe the definition of national security or maybe the conditions under which national security could be used as an excuse is a little wide,” he told Axios.

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Why it matters: Grassley’s frankness about supporting this type of effort will cheer free traders. The concept of constraining Section 232 power isn’t new, but Republicans thus far have been loath to defy Trump.

  • That could be changing. Members of Congress sound increasingly worried they’ll need to block the president from putting massive new tariffs on auto imports. Trump already used Section 232 to tax steel and aluminum, and he is now looking to use it to impose tariffs of more than 20% on foreign cars.

Between the lines: Grassley, a farmer himself, is among farm country’s staunchest congressional advocates. The Chinese and other countries have targeted American farmers with penalties in retaliation for Trump’s tariffs.

  • Grassley only has two years left to chair Finance (this will be his second round in the position), so he will need to quickly cement his legacy.
  • One bill to watch is Republican Ohio Sen. Rob Portman’s 232 reform, co-sponsored by Sen. Joni Ernst (R-Iowa).

Defying Trump will never be easy for Republicans, especially as Trump will likely say any congressional push to limit his trade agenda favors the Chinese over Americans.

  • But Grassley will likely fire back with his own populist defense of American farmers.

The bottom line: While the administration has eased some Republican members’ concerns by reaching an updated trade deal with Mexico and China, many farm-state members say they still worry about how the rest of Trump’s trade disputes will play out.

  • “The interest in solving this problem is increasing,” said Sen. Jerry Moran (R-Kan.).
  • Having Grassley chair Senate Finance is “beneficial,” he added, since his constituents are “significantly challenged by lack of trade with China.”

Taken From: https://www.axios.com/chuck-grassley-trump-tariffs-section-232-national-security-613bb759-acac-4a36-9703-9a2ee1958f28.html

Pelosi casts doubt on passage of Trump’s new NAFTA without changes

House Democratic Leader Nancy Pelosi cast doubt Thursday on the likelihood that the new North American trade pact could win congressional approval without changes to bolster its labor and environmental protections.

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President Donald Trump’s top trade negotiator, Robert Lighthizer, met with Pelosi for just over 30 minutes Thursday to discuss the new agreement, which will need Democratic support to give Trump a chance to sign it into law. The pact is already expected to face a fiery debate as some Democrats are already coming out in opposition to its labor and environmental provisions.

“While there are positive things in this proposed trade agreement, it is just a list without real enforcement of the labor and environmental protections,” Pelosi, who is expected to become House speaker in the next Congress, said in a statement after the meeting.

The Pelosi-Lighthizer session comes as Trump has stepped up his pressure to get the new agreement turned into law, telling reporters on Saturday that he would formally notify Mexico and Canada of his intention to withdraw from the existing North American Free Trade Agreement in six months. There is debate as to whether Trump has the legal authority to take such a step, but the move could force lawmakers to act on the new deal, which Trump is calling the U.S.-Mexico-Canada Agreement, or USMCA.

A spokesperson for Pelosi said it was “disappointing but not surprising” that Trump would try to force Congress’ hand “instead of working constructively with Congress to improve his proposed agreement to actually protect and strengthen American workers.”

U.S. Trade Representative Lighthizer declined to offer details following the meeting. He has previously indicated that the administration could make certain changes to the agreement’s text through implementing legislation that would address lawmakers’ concerns and win their support.

“I’ve been in discussions with a variety of Democratic leaders on those points and they’ll be very much involved in the process moving forward and will have an influence, a strong influence,” Lighthizer told reporters at the USMCA signing ceremony last week. “I want them not only to vote for it, I want them to be happy with the agreement.”

Lawmakers are also waiting “for Mexico to pass its promised law on the wages and working conditions of Mexican workers competing with American workers,” Pelosi said in the statement.

It remains far from certain that the agreement in its current form could pass both chambers. House Republicans have also criticized the deal for its inclusion of new provisions that aim to prevent discrimination on the basis of sex.

If the agreement remains on track, it will go to Congress next year for a simple up or down vote, with no amendments allowed under the fast-track law governing trade deals.

But House Democrats could also forgo fast-track rules to force changes to the deal. In 2008, House Democrats led by Pelosi voted to suspend the fast-track timeline on the U.S. trade deal with Colombia over lingering concerns about labor standards and violence in the South American country.

Taken From: https://www.politico.com/story/2018/12/06/pelosi-casts-doubt-on-trumps-usmca-passage-without-changes-1014361

Trump’s new NAFTA faces skeptics in now- Democrat-led House

WASHINGTON (AP) — President Donald Trump spent more than a year browbeating the leaders of Canada and Mexico into agreeing to a rewrite of North American trade rules. And on Friday, leaders of those two nations are set to sign the pact at the Group of 20 summit in Buenos Aires, Argentina.

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Now, Trump faces what could prove a more formidable foe: His own Congress.

Emboldened by their takeover of the House starting next year, many Democrats say they want the new agreement to strengthen its protections for American workers from low-wage Mexican competition. Yet any such changes could raise new objections from Republican free traders who want to limit the ways the pact could restrict corporate practices in North America.

What Trump had hailed as a triumph for his administration — a newly named U.S.-Mexico-Canada Agreement to replace the 24-year-old North American Free Trade Agreement, which he’d long condemned as a job-killer for Americans — now faces a hazier future.

“It’s going to be a very tough sell,” said Democratic Rep. Bill Pascrell of New Jersey, top Democrat on the House subcommittee that oversees trade issues.

Leaders of the three countries agreed to the USMCA just hours before a U.S.-imposed Sept. 30 deadline. Yet the legislatures of the three countries must still ratify it. Many trade analysts say the new NAFTA isn’t very different from the old one despite Trump’s claim that it would “transform North America back into a manufacturing powerhouse.”

“It’s really the original NAFTA,” said Mickey Kantor, a partner at the law firm of Mayer Brown and U.S. trade representative in the Clinton administration.

For years, it was the Democrats who complained about NAFTA, which tore down most trade barriers between the U.S., Canada and Mexico. They argued that it encouraged U.S. companies to close factories, lay off American workers and move to Mexico to capitalize on cheap labor. By contrast, pro-business Republicans defended the deal, which they said encouraged an explosion in trade among the three North American countries that benefited all three.

But Trump campaigned as a different kind of Republican. He called NAFTA a “disaster” and dispatched U.S. Trade Rep. Robert Lighthizer to negotiate a new version, threatening to abandon the regional trade bloc entirely if he couldn’t get what he wanted.

Lighthizer worked to win Democratic support. And the USMCA includes provisions meant to address criticisms of the deal it replaces. For example, it requires that 40 percent of cars eventually be made countries that pay autoworkers at least $16 an hour — that is, in the United States and Canada and not in Mexico — to qualify for duty-free treatment. It also requires Mexico to pursue reforms of labor law to encourage independent unions that will bargain for higher wages and better working conditions for Mexicans.

And when the NAFTA replacement was announced, Senate Democratic leader Chuck Schumer of New York said that Trump “deserves praise for taking large steps to improve” on NAFTA.

John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, which supports the new trade deal, argued that it includes features that were intended to address Democratic concerns about how American workers would be affected.

“The possibility of building a bipartisan coalition for this agreement is there,” he said.

But with Democrats in charge of the House and exerting more influence in Congress, a coalition might be harder to assemble.

“This deal hasn’t met the mark,” said Celeste Drake, trade policy specialist at the AFL-CIO. “We’re not really done here.”

Drake and other critics say the requirement for labor reforms in Mexico isn’t enforceable and needs to be given more teeth. And they oppose a provision that gives manufacturers of biologics — ultra-expensive drugs produced in living cells — 10 years of protection from generic competition. Without competition, critics say, pharmaceutical companies could drive up prices and make health care even costlier for Americans.

“NAFTA 2.0 is also stuffed with handouts that will let big drug companies lock in the high prices they charge for many drugs,” Democratic Sen. Elizabeth Warren of Massachusetts said in a speech Thursday announcing her opposition to USMCA. “The new rules will make it harder to bring down drug prices for seniors and anyone else who needs access to life-saving medicine.”

U.S. trade rules are supposed to force Congress to give trade agreements an up-or-down vote — no nitpicking allowed. But there are ways to bypass those restrictions. Congress could, for example, pressure the Trump administration into negotiating a so-called side letter with Mexico to toughen protections for union organizers.

Robert Martinez Jr., president of the International Association of Machinists and Aerospace Workers, for example, called Thursday for new language to ensure that any Mexican labor reforms “will be effectively enforced.” He also wants provisions in the pact that would discourage the outsourcing of U.S. jobs to Mexico to include not only automakers but also such industries as textiles, electronics and call centers.

President Bill Clinton negotiated such a side letter to win congressional approval for the original NAFTA, which was largely negotiated by his Republican predecessor, President George H.W. Bush.

Republicans are sounding objections, too. Two weeks ago, 46 Republican lawmakers sent a letter to Trump opposing a USMCA provision, included at Canada’s insistence, that requires the three countries to protect LGBT employees from discrimination in the workplace.

The old NAFTA remains in place until USMCA takes effect. But Trump could tighten the pressure on Congress by threatening to withdraw from NAFTA if lawmakers balk at the new version. That “New NAFTA or No NAFTA” approach would disrupt the operations of companies that have built regional supply chains on the assumption that goods can cross borders within the trade bloc duty-free. It could also rattle financial markets.

Philip Levy, senior fellow at the Chicago Council on Global Affairs and a trade official in President George W. Bush’s White House, said it might actually work to Trump’s benefit if Democrats kill the deal or leave it in limbo.

“President Trump has seriously overhyped this agreement,” Levy said. “It won’t deliver” the job gains he’s promised.

“If you kill it, you leave him with the myth: ’I would have delivered all these wonderful things if only those swampland Democrats hadn’t blocked it,” Levy said.

There is precedent for Democratic obstruction of trade agreements: When Democrats last controlled the House, for instance, Speaker Nancy Pelosi managed to delay for years a U.S. trade agreement with Colombia, a priority of President George W. Bush.

What’s more, Levy said, Democrats may well be reluctant to hand Trump a victory a year before the 2020 presidential election — and lose an issue that “has been a rallying cry for them for more than 20 years.”

Taken From: https://www.apnews.com/7aa1a218a152482594dcdb420691646b?fbclid=IwAR0VLkX2Hp62Ve19li1RdjZNds_Y2_ijlCqleijMEuW-lU0knDCW9D5pcGM