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DougMacG
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« Reply #50 on: December 15, 2016, 08:58:12 AM »

DDF,  Thanks for your view on that.

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

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

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

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

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

If Trump focuses on doubling the growth rate of the whole economy rather than micromanaging the sectors of where and how that happens, we will be far better off.
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DDF
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« Reply #51 on: December 15, 2016, 05:09:20 PM »

I agree with your analysis 100%.

There is no way to compete with the 156 dollars a month they make in Vietnam, or the daily wage here in Mexico, without finding a way to stimulate their economies too, because if it comes down to dollars versus dong or pesos in terms of manufacturing, we lose. I've seen it. Key focus is getting other corrupt governments to play ball. I've seen that personally as well.
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Crafty_Dog
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« Reply #52 on: January 04, 2017, 11:17:55 AM »

https://www.washingtonpost.com/news/wonk/wp/2017/01/04/the-real-reason-ford-abandoned-its-plant-in-mexico-has-little-to-do-with-trump/?utm_term=.84b58104863a&wpisrc=nl_most&wpmm=1
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Crafty_Dog
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« Reply #53 on: January 04, 2017, 11:19:48 AM »

second post

Trade Stays Intact

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

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

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

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

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

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

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

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

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

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

And so, faced as they are with relatively low export growth, certain Latin American countries will seek increased access to markets abroad by advancing trade agreements with nations outside the region. In light of the demise of the Trans-Pacific Partnership and the rise of new if limited NAFTA negotiations, Mexico will tentatively try to enter discussions on trade deals with Asian states, particularly with China. The countries that comprise Mercosur, or the Common Market of the South, will also continue to negotiate with the European Union on a future trade agreement, though political constraints on both sides of that dialogue could drag things out.
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Crafty_Dog
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« Reply #54 on: January 20, 2017, 12:55:50 AM »

http://www.aei.org/publication/what-now-for-workers-after-the-china-trade-shock-short-read-version/?utm_source=paramount&utm_medium=email&utm_content=AEITODAY&utm_campaign=011917
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Crafty_Dog
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« Reply #55 on: January 25, 2017, 07:14:36 AM »

Not sure that I understand this , , ,
===============================

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

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

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

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

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

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

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

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

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

There are three main alternative solutions to the Triffin Dilemma:

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

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

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

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

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

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

Mr. Mueller directs the economics and ethics program at the Ethics and Public Policy Center.
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Crafty_Dog
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« Reply #56 on: January 25, 2017, 12:34:10 PM »

second post

"Mueller is right, but this is just one more way of demonstrating that Trump utterly fails to understand how international trade and the balance of accounts work. In our current system is it not only impossible but also foolhardy to attempt to have a balance in our international trade accounts. Trade ignorance is the most glaring of Trump’s deep-seated faults. On almost every other issue he is moving correctly. Too bad he’s not perfect. We can only hope that someone sets him right on this issue before he does something stupid."
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Crafty_Dog
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« Reply #57 on: February 17, 2017, 12:13:29 PM »

Not impressed with this article but I post it because it does make an argument of some relevance:

https://www.washingtonpost.com/posteverything/wp/2017/02/16/why-is-president-trump-attacking-foreign-investment-in-the-united-states/?utm_term=.1dbc4a4e02ea
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Crafty_Dog
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« Reply #58 on: February 26, 2017, 09:36:22 AM »

https://www.nytimes.com/2017/02/23/us/trump-talk-rattles-aerospace-industry-up-and-down-supply-chain.html?hpw&rref=us&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well
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Crafty_Dog
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« Reply #59 on: February 27, 2017, 09:36:48 AM »

https://www.wsj.com/articles/for-more-chinese-firms-it-pays-to-make-it-in-the-u-s-a-1488127931?mod=djemCFO_h
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Crafty_Dog
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« Reply #60 on: February 27, 2017, 01:17:03 PM »

Monday Morning Outlook
________________________________________
Trade Is Not Our Enemy To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 2/27/2017

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

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

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

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

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

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

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

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

Ultimately, free trade is critical to the prosperity of the US. Policies that seek to protect certain industries or companies are just a way of putting politicians in charge and weakening the inherent resourcefulness of the American people.
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Crafty_Dog
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« Reply #61 on: March 02, 2017, 10:05:19 AM »

http://www.businessinsider.com/china-zhenge-he-treasure-fleet-elite-free-trade-2017-2?IR=T
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Crafty_Dog
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« Reply #62 on: March 06, 2017, 09:03:28 AM »

Why the White House Worries About Trade Deficits
An imbalance imperils economic growth—and could put U.S. national security in jeopardy.
The then-president-elect speaking at Carrier Corp. in Indianapolis, Dec. 1, 2016.
The then-president-elect speaking at Carrier Corp. in Indianapolis, Dec. 1, 2016. Photo: Bloomberg News
By Peter Navarro
Updated March 5, 2017 6:21 p.m. ET
120 COMMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

Mr. Navarro is director of the White House National Trade Council. This article is adapted from his March 6 address in Washington before the National Association of Business Economists.
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Crafty_Dog
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« Reply #63 on: March 08, 2017, 12:00:55 PM »


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mr. Bolton is a senior fellow at the American Enterprise Institute and author of “Surrender Is Not an Option: Defending America at the United Nations and Abroad” (Simon & Schuster, 2007).
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« Reply #64 on: March 30, 2017, 10:52:44 PM »

http://www.cnn.com/2017/03/30/politics/trump-executive-orders-trade-china/index.html
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DougMacG
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« Reply #65 on: April 06, 2017, 09:22:05 AM »

Anti-free trade tough talk requires reliance on false facts.
-------------------------------------------------------------------
Trump Advisers Are All Wrong about South Korea Trade Deal
By ALAN REYNOLDS
https://www.cato.org/blog/trump-advisers-are-all-wrong-about-korea-trade-deal-korus

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

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

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

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

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

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

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

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

U.S. Korea Trade  (graph at link)

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

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

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

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

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

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

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

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« Reply #66 on: May 15, 2017, 01:26:55 PM »


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

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

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

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

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

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

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

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

While it’s good that Mr. Trump has pulled back from protectionism, dampening the swings in the way his Administration portrays China relations would bring better results. Mr. Ross’s accomplishment would have found a more appreciative reception if he had simply said that hard negotiating gets results from Beijing but much work remains to be done.
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« Reply #67 on: May 31, 2017, 01:43:18 PM »

http://scottgrannis.blogspot.com/2017/05/durable-goods-deflation-is-wonderful.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
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« Reply #68 on: July 06, 2017, 10:46:18 PM »

Japanese and European Union leaders on Thursday announced an agreement in principle to remove tariffs on 99% of goods as well as other barriers to trade. While it will be phased in over many years and some obstacles remain, the deal overcomes Japan’s reluctance to open its market to food products as well as Europe’s resistance to a free market for Japanese cars. Some have dubbed the deal “cars for cheese,” but its effects will be more far-reaching than bilateral trade.

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

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

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

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

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

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

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

The irony is that the productivity of American manufacturers leads the world, and employment is rebounding. At a moment when U.S. firms could grow their exports, the Trump Administration is burning bridges. The EU-Japan deal is a warning that others will take up trade leadership and capture the prosperity that Americans should enjoy.
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« Reply #69 on: July 24, 2017, 10:49:27 AM »


Trade War Games

By John Mauldin

July 19, 2017


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

– Peter Navarro

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

– Gandalf the White

 
Image: Wikimedia Commons

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

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

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

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

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

Comparative Advantage

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

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

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

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

Consequential and Contentious

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What Would Steel Tariffs Really Mean?

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

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

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

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

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

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

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

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

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

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

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

Buy American

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

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

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

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

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


AP Photo

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

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

Tit for Tat

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

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

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

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

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

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

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

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

Grand Lake Stream, Colorado (?), and Lisbon

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

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

Your hoping we walk away from protectionism analyst,

John Mauldin
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« Reply #70 on: September 28, 2017, 03:20:05 PM »

Boeing and Bombardier Take Their Dogfight to Court
A new Bombardier C Series aircraft takes flight.
(CLEMENT SABOURIN/Getty Images)


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

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

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

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

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

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

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

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

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

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

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

A Chapter 19 dispute panel sits at the heart of the long-standing softwood lumber dispute between Canada and the United States. The United States has previously tried to impose duties on imported Canadian lumber, only to see binational and WTO dispute panels reject U.S. justifications. As the Boeing-Bombardier fight picks up steam, that option is going to become even more closely inspected and debated in future NAFTA negotiations, the third round of which ended on Sept. 27.
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Crafty_Dog
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« Reply #71 on: October 05, 2017, 07:20:17 PM »

The Editorial Board
WSJ
Oct. 5, 2017 7:26 p.m. ET

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


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

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

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

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

Appeared in the October 6, 2017, print edition.
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DougMacG
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« Reply #72 on: October 06, 2017, 10:00:26 AM »

That's right.  The US should be the leader of the Trans-Pacific Partnership trade pact talks and every clause in it should be about free trade, not giving up sovereignty.  Now it will be negotiated badly and we'll still be pressured to join.
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« Reply #73 on: October 06, 2017, 12:55:54 PM »

y Jacob M. Schlesinger
Updated Oct. 6, 2017 12:48 p.m. ET
28 COMMENTS

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

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

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

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

What Impact Could a Remade Nafta Have On You?

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

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

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


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

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

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

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

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

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

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

The chamber and others are “urging the administration to recalibrate its approach,” he said. “They should stop and listen to the business community.”
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« Reply #74 on: October 16, 2017, 10:53:47 AM »


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

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

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

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

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

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

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

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

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

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

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

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

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

Appeared in the October 16, 2017, print edition.
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« Reply #75 on: October 19, 2017, 11:32:09 AM »

https://www.youtube.com/watch?time_continue=247&v=Tp1T7kPEdDY

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

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

(President Trump, listen up!)
http://www.aei.org/publication/for-president-trump-president-reagans-radio-address-on-free-trade-from-november-26-1988/
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« Reply #76 on: October 19, 2017, 12:46:07 PM »

Nice find.

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« Reply #77 on: December 05, 2017, 11:20:47 AM »

The Trade Deficit in Goods and Services Came in at $48.7 Billion in October To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 12/5/2017

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

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

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

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

Implications: The trade deficit expanded in October, coming in at $48.7 billion, a larger trade deficit than the consensus expected. Exports were unchanged, remaining at their highest level since December 2014. Imports rose $3.8 billion, hitting a new record high, with all major categories growing except for capital goods. Both exports and imports are up from a year ago: exports by 5.6%, imports by 7.0%. We see expanded trade with the rest of the world as positive for the global economy, and total trade (imports plus exports), which is what really matters, is up 6.3% in the past year, a great sign. Look for more of that in the year to come as economic growth accelerates in Europe and Japan. Better growth in Europe will increase global trade and US exports as well. In fact, exports to the EU are up 11.8% in the past year. Although rising imports are a positive sign for the underlying strength of the American economy, for GDP accounting purposes they mean growth in production is temporarily lagging behind the growth in spending. Because of this, international trade is on track to be a significant drag on real GDP growth in Q4, subtracting 0.5 to 1.0 percentage points from the real GDP growth rate for the quarter. In turn, this suggests real GDP is growing at the low end of our prior range of 3.0 – 4.0% for Q4. Trade is one of our four pillars to prosperity; freer trade leads to improved economic growth over time. And while we have our qualms with some of the talk coming out of Washington related to paring back free trade, there has been significantly more hot air than substance. We will continue to watch trade policy as it develops, but still don't see any reason yet to be sounding alarm bells.
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DougMacG
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« Reply #78 on: December 05, 2017, 12:43:46 PM »

It will be interesting to watch how exports are affected by business tax reform.

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

* http://cafehayek.com/2006/12/if_trade_surplu.html
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