Tag Archives: Trade

Why free trade is officially dead, by Alasdair Macleod

Free trade allows people to trade with each other regardless of their nationalities. Alasdair Macleod explains, brilliantly, the pitfalls of restricting free trade. From Macleod at news.goldseek.com, with a hat tip to SLL reader ikdr for the article:

G20 Finance ministers meeting in Baden Baden last weekend agreed, on America’s insistence, to drop the long-standing commitment to free trade from the final communiqué.

It is hard to know to what extent America’s position is driven by her autarkic view on world trade, or to what extent it is an acknowledgement of the fruitlessness of paying lip-service to an ideal which is never delivered. Doubtless, it’s a bit of both.

It is certainly true that finance ministers in the advanced nations have always shown a protectionist attitude towards international trade, protectionism that has intensified through attacks on American international corporations, which to a large extent can choose where to pay their taxes. The thrust of research by international NGOs, particularly the Paris-based OECD, has been to decry tax competition; however, even though it has bullied tax-havens to supply tax-related information to revenue-hungry states, it has failed to stop multinationals, armed with teams of tax lawyers, from complying with their statist demands.

Therefore, the reasons for anti-globalisation in high-spending governments so far have been based on job protection and maximising taxes. But with President Trump, it’s different. He wants to tilt the odds firmly in favour of American business, and he appears to believe that the World Trade Organisation is little more than an obstructive repository for anti-business bureaucrats. This view is misinformed, because over the years WTO officials have successfully managed to get their members to reduce tariffs to historically low levels.

The threat to this progress is not new. America has in the past often ignored WTO rules, banning or imposing tariffs on imports on overtly protectionist grounds. As always, vested interests and protectionism prove difficult for politicians to resist. However, Trump is different in one respect: he appears to be an old-fashioned mercantilist, seeing America as one gigantic commercial enterprise needing direction. It should, he doubtless reasons, secure and use its monopolistic power. You don’t do that by working to non-American regulations. For this reason, America is becoming more autarkic.

To continue reading: Why free trade is officially dead

 

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Renegotiating NAFTA Is A Good Idea – For Mexico, by Frances Cuppola

Notwithstanding President Trump’s rhetoric, NAFTA has not been that good a deal for Mexico. Frances Coppula asks some good questions. From Coppula at forbes.com:

President Trump is not happy with the North American Free Trade Association (NAFTA). During the Presidential campaign, he described it as the ‘worst trade agreement the U.S. ever signed’. He blames it for the loss of large numbers of manufacturing jobs across the border to Mexico, where wages are lower. According to the White House website’s new page on trade, ‘blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.’

At the same time, President Trump complains about the flow of migrants across the border from Mexico to the US. They take American jobs and American money, apparently. So, he plans to build a wall to stem the flow, and make Mexico pay for it. Exactly how he plans to make Mexico pay for it is as yet unclear: suggestions range from a 20% tax on American imports from Mexico (which my colleague Tim Worstall was quick to point out would in practice be paid by American businesses and consumers), to a withholding tax on remittances from Mexicans working in the U.S.

I sympathise hugely with the Americans who feel that they are losing out. Well-paid manufacturing jobs have indeed declined in the last decade or two, partly replaced by poorer-paying service jobs. But something is not right here. If all the good jobs have gone across the border, how come so many Mexicans have come to the U.S. to work? We should not kid ourselves that this is an easy option. The Mexican border is already heavily policed, and just about the only open route is a long and dangerous desert crossing in which many migrants lose their lives. Why would so many people risk that crossing, if all they had to do was wait for the good jobs to come to them?

To continue reading: Renegotiating NAFTA Is A Good Idea – For Mexico

Germany Slams Trump Criticism: Urges US To “Build Better Cars”, Accuses Washington Of Causing Refugee Crisis, by Tyler Durden

Hard to argue that America makes better cars than Germany, and impossible not to acknowledge that America’s disastrous forays into the Middle East and Northern Africa aren’t at least partially responsible for the European refugee crisis. From Tyler Durden at zerohedge.com:

An angry Berlin has responded with a staunch defense of its policies after President-elect Donald Trump criticized German Chancellor Angela Merkel in two separate Sunday interviews, one with Germany’s Bild and one with the Sunday Times, for her stance during the refugee crisis while threatening a 35% tariff on BMW cars imported into the US.

Germany’s deputy chancellor and minister for the economy, Sigmar Gabriel, said on Monday morning that a tax on German imports would lead to a “bad awakening” among US carmakers since they were reliant on transatlantic supply chains. “I believe BMW’s biggest factory is already in the US, in Spartanburg [South Carolina],” Gabriel, leader of the centre-left Social Democratic party, told the Bild newspaper in a video interview.

“The US car industry would have a bad awakening if all the supply parts that aren’t being built in the US were to suddenly come with a 35% tariff. I believe it would make the US car industry weaker, worse and above all more expensive.” Playing Trump’s threat off Congress, Gabriel added that he “would wait and see what the Congress has to say about that, which is mostly full of people who want the opposite of Trump” as quoted by The Guardian.

In his interviews with Bild and the Times, the US president-elect had indicated that he would aim to realign the “out of balance” car trade between Germany and the US. “If you go down Fifth Avenue everyone has a Mercedes Benz in front of his house, isn’t that the case?” he said. “How many Chevrolets do you see in Germany? Not very many, maybe none at all … it’s a one-way street.”

So, when asked what Trump could do to make sure German customers bought more American cars, Gabriel had a simple suggestion: “Build better cars.”

To continue reading: Germany Slams Trump Criticism: Urges US To “Build Better Cars”, Accuses Washington Of Causing Refugee Crisis

How Trump Could Unwittingly Gut Boeing’s Global Business, by Wolf Richter

When a country throws up trade barriers, other nations retaliate. Wolf Richter is being too kind using the word “unwittingly.” Donald Trump is a smart man, he certainly knows about the risks of retaliation. From Richter at wolfstreet.com:

Other US companies are equally vulnerable.

Boeing’s airliner business is in a slump. Serial large-scale layoffs of engineers and production workers have been percolating through its operations since early 2016, with another big wave announced a week ago, as net orders have collapsed 53% from 2014, to a seven-year low. The last thing Boeing needs is help from President Elect Trump to speed up the process.

But that’s what might happen next if the trade and investment policies proffered by Trump become reality after his inauguration.

In an interview published on Monday in the German tabloid Bild, Trump threatened BMW, Daimler, and Volkswagen with a 35% tax on imported vehicles, which would make them very expensive for US consumers. The automakers and their dealers would respond by cutting their margins, but it might not be enough to stem a large sales decline.

The three companies already have assembly plants, research & development offices, and logistics operations in the US, including:

• BMW has a manufacturing plant in Spartanburg, South Carolina; with the $1 billion expansion announced in 2014, the plant would become BMW’s largest in the world.

• Daimler has bought into the US heavy truck business (Detroit Diesel, Freightliner, Thomas Built Buses, etc.) and has those manufacturing plants in the US. Plus it has a passenger vehicle assembly plant near Vance, Alabama.

• Volkswagen has a manufacturing plant in Chattanooga, Tennessee.

As global manufacturers, they all have plants scattered around the world. So Trump:

“If you want to build cars in the world, then I wish you all the best. You can build cars for the United States, but for every car that comes to the USA, you will pay 35% tax,” he said, which Bild translated into German, which Reuters translated into English.

To continue reading: How Trump Could Unwittingly Gut Boeing’s Global Business

In Stunning Pair Of Interviews, Trump Slams NATO And EU, Threatens BMW With Tax; Prepared To “Cut Ties” With Merkel, by Tyler Durden

Trump upsets European apple carts. From Tyler Durden at zerohedge.com:

In two separate, and quite striking, interviews with Germany’s Bild (paywall) and London’s Sunday Times (paywall), Donald Trump did what he failed to do in his first US press conference, and covered an extensive amount of policy and strategy, much of which however will likely please neither the pundits, nor the markets.

Among the numerous topics covered in the Bild interview, he called NATO obsolete, predicted that other European Union members would join the U.K. in leaving the bloc and threatened BMW with import duties over a planned plant in Mexico, according to a Sunday interview granted to Germany’s Bild newspaper that will raise concerns in Berlin over trans-Atlantic relations. Furthermore, in his first “exclusive” interview in the UK granted to the Sunday Times, Trump said he will offer Britain a quick and “fair” trade deal with America within weeks of taking office to help make Brexit a “great thing”. Trump revealed that he was inviting Theresa May to visit him “right after” he gets into the White House and wants a trade agreement between the two countries secured “very quickly”.

Trump told the Times that other countries would follow Britain’s lead in leaving the European Union, claiming it had been deeply ­damaged by the migration crisis. “I think it’s very tough,” he said. “People, countries want their own identity and the UK wanted its own identity.”

To continue reading: In Stunning Pair Of Interviews, Trump Slams NATO And EU, Threatens BMW With Tax; Prepared To “Cut Ties” With Merkel

World Trade Falls to 2014 Level, just in Time for a “Trade War” by Wolf Richter

World trade was in none too great a shape, then trade protectionist Donald Trump got elected. From Wolf Richter at wolfstreet.com:

Threatened Trade War meets the Great Stagnation.

“If you get into a trade war with China, sooner or later we’ll have to come to grips with that,” Carl Icahn, now special advisor to President-Elect Trump, told CNBC on Thursday. “I remember the day something like that would really knock the hell out of the market.”

A trade war with China surely would be another wall of worry for stocks to climb. Trump’s rhetoric against China, each morsel packaged into 140 characters or less, has already recreated much-needed turbulence [read… Trump Tweets about China, US Businesses Freak out].

“But maybe if you’re going to do it,” Icahn said about the looming trade war with China, “you should get it over with, right?”

This comes after rumors emerged that Trump’s transition team is chewing over the idea to impose import tariffs of up to 10%, “according to multiple sources,” including a “senior Trump transition official,” CNN reported. The idea is to boost US manufacturing. The new tariffs could be imposed by executive order or by Congress as part of broader tax reform legislation.

The 10% would be an uptick from the 5% tariff that incoming White House Chief of Staff Reince Priebus had put on the table last week, in “meetings with key Washington players,” two sources “who represent business interests in Washington” told CNN. These tariffs would be in line with Trump’s campaign motto of “America First.”

Other countries would, as they always do, retaliate. Hence the term “trade war.” Countries will be careful not to escalate, but these things can escalate nevertheless, because no one wants to seem weak and back off. Either way, it would pull the rug out from under world trade.

To continue reading: World Trade Falls to 2014 Level, just in Time for a “Trade War”

 

TiSA: The Transatlantic Corporatocracy’s Last Straw, by Don Quijones

There’s one trade agreement that has seemingly slipped under Donald Trump’s and everyone else’s radar, and that may not be an accident. From Don Quijones at wolfstreet.com:

Trump’s silence on TiSA is deafening.

The year 2016 has not been a good one for the international corporatocracy. Its beloved Trans-Pacific Partnership (TPP) is dead and almost buried. The Transatlantic Trade and Investment Partnership (TTIP) is probably also mortally wounded. Meanwhile, the Comprehensive Economic and Trade Agreement (CETA), a Trojan-horse deal between Canada and the EU that could enable as many as 47,000 US corporations to launch lawsuits against European governments that threaten their profit-making capacity, has been signed but still faces big hurdles before being passed into law.

But the battle is far from over. Transatlantic corporations and their armies of trade representatives, lobbyists, think tanks and corporate lawyers have not certainly given up. They still have at least one card up their sleeve. Its name is the Trade in Services Act, or TiSA, and it is the most covert and, according to Wikileaks, “most important of the United States’ strategic ‘trade’ treaty triumvirate,” which also includes the resting-in-peace TPP and the semi-defunct TTIP.

With services accounting for around 75% of the EU economy, 80% of the US economy and the lion’s share of many of the world’s other economies, according to World Bank figures, it’s not hard to see why TiSA is so important.

The agreement involves more countries than TTIP and TPP combined: The United States, all 28 members of the European Union, plus Australia, Canada, Chile, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Taiwan, and Turkey. Together, these 50 nations form the charmingly named “Really Good Friends of Services” group, which represents almost 70% of all trade in services worldwide.

To continue reading: TiSA: The Transatlantic Corporatocracy’s Last Straw