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Topic: Trade Issues: (Read 2931 times)
Re: Trade Issues, Greg Mankiw, trade 'deficits' pro and con
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.
Re: Trade Issues: (TPP Trans Pacific Partnership and more)
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.
It's all a matter of perspective.
WaPo on Ford's decision to build in US
Reply #52 on:
January 04, 2017, 11:17:55 AM »
Stratfor's analysis of prospects for NAFTA
Reply #53 on:
January 04, 2017, 11:19:48 AM »
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.
China Trade Shock
Reply #54 on:
January 20, 2017, 12:55:50 AM »
WSJ: Trump's real trade problem is money
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.
By John D. Mueller
Updated Jan. 24, 2017 7:25 p.m. ET
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.
Scott Grannis comments on the Mueller article
Reply #56 on:
January 25, 2017, 12:34:10 PM »
"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."
WaPo: Trade Issues and Capital Flows
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:
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