Opinion | Worse Than Nafta – by Gustavo A. Flores-Macías and Mariano Sánchez-Talanquer – NYT

By Gustavo A. Flores-Macías and Mariano Sánchez-Talanquer

Professor Flores-Macías is an associate professor of government at Cornell. Professor Sánchez-Talanquer is an assistant professor of political science at the Center for Research and Teaching in Economics.

 

“North American business leaders are breathing a sigh of relief after Canada agreed, at the 11th hour, to join the revised North American Free Trade Agreement between the United States and Mexico. But before they break out the Champagne, they should look at the details.

Although the revised deal brings much-needed modernization in areas such as e-commerce and intellectual property, the media spotlight on Canada has obscured a bigger problem for the region: Under the new terms, North American trade is headed off the rails and, perhaps along with it, political stability south of the border.

A key goal of Nafta, like all free trade agreements, is bringing certainty to the rules of the game to facilitate commercial exchanges. The new deal, called the United States-Mexico-Canada Agreement, undermines that certainty in two ways.

First, the deal eliminates expert panels for resolving government-investor disputes in most industries, save for those covering energy and telecommunications. Although it preserves panels for bilateral disputes regarding dumping and countervailing duties, it defers to domestic courts as the main mechanism for solving controversies should governments change the rules down the road. This measure puts a lot of faith in the transparency and competence of the legal systems of the member countries and opens the door to potential cronyism, unequal access to those systems and even corruption.

Second, the agreement sets up a mechanism for automatically reviewing its terms on a periodic basis. This and the automatic expiration after 16 years as the default option introduce significant uncertainty by making it less costly for governments to upend existing rules and threaten to exit the agreement. Establishing periodic reviews as natural breaking points for the rules of the game would certainly shorten investors’ time horizons.”

via Opinion | Worse Than Nafta – The New York Times

Opinion | Trump Has No Idea What His Tariffs Have Unleashed for Farmers – By Robert Leonard – NYT

By Robert Leonard
Mr. Leonard is the news director for the radio stations KNIA and KRLS.

July 26, 2018

A farm near Amana, Iowa.CreditScott Olson/Getty Images
“KNOXVILLE, Iowa — Today President Trump is visiting Dubuque, Iowa, where every year at harvest time, millions of tons of grain come via rail and truck to be loaded onto barges on the Mississippi River and shipped to Mexico, China and much of the rest of the world. Harvest puts coin into the hands of farmers, and they and their communities — indeed all of America — profit. Not this year.

The president is here to trumpet a $12 billion plan to aid American farmers. Why do they need aid? For Iowans, it’s because 33 percent of our economy is tied, directly or indirectly, to agriculture, and Mr. Trump recklessly opened trade wars that will hit “Trump country” — rural America — hardest and that have already brought an avalanche of losses. Indeed, the impact of his tariffs will probably be felt by family farms and the area for generations.

So perhaps visiting Dubuque is the least he could do.

The cost of being shut out of overseas markets for soybeans, beef, pork, chicken and more will be in the billions. Once those markets are gone, they will be difficult to recover. Commodity prices continue to drop, and good weather suggests an excellent crop is in the making, which will drive prices further down.

Brazil is ready to step in with increased soybean production, and China has already shifted its purchasing power there.

via Opinion | Trump Has No Idea What His Tariffs Have Unleashed for Farmers – The New York Times

How to Combat China’s Rise in Tech: Federal Spending- Not Tariffs – by Farhad Manjoo – NYT

One program, Made in China 2025, outlines a road map for China to become a world leader in advanced manufacturing (things like robotics, aircraft and machine tools). Another plan calls for China to achieve dominance in artificial intelligence. Based on similar initiatives, the Chinese have already seen big wins. Americans invented the modern solar power industry, but thanks to Chinese government intervention, China’s solar industry leads the world. So does its high-speed rail system.

The Trump administration objects to China’s tech visions. It has cited Chinese government support for tech as a primary reason for imposing tariffs on Chinese goods. But its objections only put the disconnect in stark relief. If the United States is worried that the Chinese will win the future because they’re actually spending money to win the future, why aren’t we doing the same?

“It is a waste that we are not using the rise of China as a galvanizing cry to invest more in science and technology in America,” said Yasheng Huang, an economist who studies Chinese politics and business at the Massachusetts Institute of Technology’s Sloan School of Management. He has argued that rather than imposing tariffs to respond to programs like Made in China 2025, Americans should respond as we did in 1957, when we sharply increased government spending on science after the Soviet Union launched the world’s first man-made satellite, Sputnik 1.

via How to Combat China’s Rise in Tech: Federal Spending, Not Tariffs – The New York Times

David Lindsay:

Excellent piece by Farad Manjoo. He writes:”The Trump administration objects to China’s tech visions. It has cited Chinese government support for tech as a primary reason for imposing tariffs on Chinese goods. . . . If the United States is worried that the Chinese will win the future because they’re actually spending money to win the future, why aren’t we doing the same?

“It is a waste that we are not using the rise of China as a galvanizing cry to invest more in science and technology in America,” said Yasheng Huang, an economist who studies Chinese politics and business at the MIT’s School of Management. He has argued that rather than imposing tariffs to respond to programs like Made in China 2025, Americans should respond as we did in 1957, when we sharply increased government spending on science after the Soviet Union launched the world’s first man-made satellite, Sputnik 1.”

Yes, and, along with more investment, such efforts like the TPP, the Trans Pacific Partnership, are essential to our taking leadership in helping set the rules of trade, and discouraging intellectual property theft, and environmental degradation. Staying in the Paris Climate Agreement, and instigating a massive carbon tax would also help. Invest in the future, not the past. Clearly, we need better leadership.

David Lindsay Jr. is the author of “The Tay Son Rebellion, Historical Fiction of Eighteenth-century Vietnam,” and blogs at TheTaySonRebellion.com and InconvenientNewsWorldwide.wordpress.com

Opinion | Brexit Meets Gravity – by Paul Krugman – NYT

These days I’m writing a lot about trade policy. I know there are more crucial topics, like Alan Dershowitz. Maybe a few other things? But getting and spending go on; and to be honest, in a way I’m doing trade issues as a form of therapy and/or escapism, focusing on stuff I know as a break from the grim political news.

Anyway, as Britain’s self-inflicted Brexit crisis (self-inflicted with some help from Putin, it seems) comes to a head, it seems to me worth trying to explain some aspects of the economics involved that should be obvious – surely are obvious to many British economists – but aren’t, apparently, as obvious either to Brexiteers or to the general public.

These aspects explain why Theresa May is trying to do a soft Brexit or even, as some say, BINO – Brexit In Name Only; and why the favored alternative of Brexiteers, trade agreements with the United States and perhaps others to replace the EU, won’t fly.

Now, many of the arguments for Brexit were lies pure and simple. But their claims about trade, both before and after the vote, may arguably be seen as misunderstandings rather than sheer dishonesty.

via Opinion | Brexit Meets Gravity – The New York Times

Opinion | Someone Should Tell Donald Trump About America’s High Tariffs – The New York Times

To hear President Trump tell it, every other country in the world is taking advantage of the United States by selling milk, cars, steel and other products to America while refusing to buy made-in-the-USA merchandise. His ceaseless complaint about trade — with neighbors like Canada and Mexico, allies in Europe or mercantilist China — is that the United States is getting a raw deal. Much of what the president has said is malarkey.

It’s true that America has run a large trade deficit for many years, and that some countries — China in particular — have used underhanded tactics like depressing their currencies to boost exports. But, by and large, the world is not ripping off the United States. Scratch the surface of many of the president’s statements about trade, and it’s hard not to conclude that he is either trying to confuse the public or is rather confused himself.
Recently, Mr. Trump has unleashed his Twitter account on one of America’s oldest and closest friends, Canada, criticizing the country’s decision to protect its dairy industry. Last month, the president railed about that country’s “270 percent tariff on Dairy Products!” — a statistic that sounds outrageous but really is not. Canada allows a small quota of American dairy imports to come in with low or zero tariffs. Imports above that amount are taxed at varying rates that can exceed 300 percent for some goods.

via Opinion | Someone Should Tell Donald Trump About America’s High Tariffs – The New York Times

Opinion | c – The New York Times

“There is a new buzzword in trade circles these days: diversification.

“There has never been a better time to diversify,” a spokesman for Canada’s trade minister wrote in a tweet after the disastrous recent Group of 7 meeting.

South Korea became so frustrated as it renegotiated its six-year-old trade agreement with the United States in the spring that it became determined to turn elsewhere. South Korea’s trade minister started a “trade diversification” strategy soon after the agreement was announced.

Diversification is the polite way of saying that America’s friends and allies believe we have become an unreliable partner, and they are now looking elsewhere. From Ottawa to Brussels to Seoul, our trading partners are fed up with the Trump administration’s tariffs, and they have given up on trying to charm President Trump or persuade him that free trade is good. To reduce their economic dependence on the United States and their exposure to a potential global trade war, they are forging trade deals that leave us out of the picture altogether.”

Opinion | A Trade War Primer – The New York Times

At the moment, the Trumpian trade war appears to be on. And I’ve been getting some questions from readers about how this is possible. Congress, after all, hasn’t voted to back out of our trade agreements, and one suspects that it wouldn’t even if Trump asked for such legislation: to all appearances, a lot of Republicans are pretty much OK with the near-certainty that he colluded with a hostile foreign power and is currently obstructing justice, but policy actions that might strand and devalue a lot of corporate assets are something else entirely.

So how does Trump have the authority to do this? And what are the consequences for the world? It seems to me that this might be a good time to write down a brief, non-scholarly primer on how the trading system – and U.S. trade policy within that system – work.

The key thing you need to understand about trade policy is that the Econ 101 case for free trade plays very little role in actual policy, certainly in trade negotiations. That’s not because policymakers either reject that case or fail to understand it; some do, some don’t, but either way it doesn’t make that much difference. (In fairness, there’s an academic literature arguing that the underlying economics matter more than I’m suggesting, work that I consider admirable but unpersuasive.)

True, for the past 80 years the U.S. has sought to make trade gradually freer; this reflected in part the (very) indirect influence of economic theory, in part the belief that closer economic integration was good for peace and the free world alliance. But the process by which trade liberalization was sought was all about political realism rather than abstract ideals.

via Opinion | A Trade War Primer – The New York Times

Yes, and, here are the two top comments I endorsed. Note that Mr R. Law is the source of the post before this by John Brennan, CIA director to four presidents. He warns that Trump is a treat to democracy and freedom.

Rick Gage

Mt DoraJune 3

Thank you for the primer Mr. Krugman but I missed the part about bribery. You know, the part where Trump imposes trade restrictions on China because of a true national security threat from ZBT, the phone company that our security agencies pegged for espionage, but which he later rescinded when the Chinese government gave the president’s daughter 5 patents and invested half a billion dollars in a Trump resort in Indonesia, in direct violation of the emoluments clause of our laws regarding a president’s ability to profit off his position in the White House. As a matter of fact, I would start all future discussions about Trump’s trade policies with the topic of bribery, since it seems to animate and explain most of his actions.

Reply113 Recommended

R. Law commented June 3

R

R. Law

TexasJune 3

Perfect, Dr. K.

What the Rolling Trumpster Fire is now attempting (whether he knows it or not) is a reorganizing of the global trading economy, same as he reorganized our political economy with the abetting of GOP’er gatekeepers.

And it is widely agreed that the cracked prism which His Unhinged Unraveling Unfitness uses is clouded by delusions of some sort of a grand past which never existed – thus there are no American industry leaders nor union leaders who favor such tariffs, with even Paul Ryan and Sen. McConnell speaking against them.

What is being upset/destroyed is the global trading regime begun after WWII, along with driving a wedge between the U.S. and our NATO allies.

This is deadly serious business, being waged by a nincompoop who stands on the White House lawn telling us how wonderful the letter is that he’s received from North Korea – then 2 sentences later says he hasn’t even read the letter yet !

We utterly agree with everything in John Brennan’s excellent op-ed:

https://www.washingtonpost.com/opinions/john-brennan-i-will-speak-out-un…

and would only add:

” Considering how bad things are in Trumpworld from what’s been found out, imagine how bad they really are, considering what we don’t yet know. ”

The creeping authoritarianism – aided/abetted by Complicit Banana Republicans – is a clear and present danger.

Reply103 Recommended

Opinion | A Trade War Primer – by Paul Krugman – NYT

At the moment, the Trumpian trade war appears to be on. And I’ve been getting some questions from readers about how this is possible. Congress, after all, hasn’t voted to back out of our trade agreements, and one suspects that it wouldn’t even if Trump asked for such legislation: to all appearances, a lot of Republicans are pretty much OK with the near-certainty that he colluded with a hostile foreign power and is currently obstructing justice, but policy actions that might strand and devalue a lot of corporate assets are something else entirely.

So how does Trump have the authority to do this? And what are the consequences for the world? It seems to me that this might be a good time to write down a brief, non-scholarly primer on how the trading system – and U.S. trade policy within that system – work.

The key thing you need to understand about trade policy is that the Econ 101 case for free trade plays very little role in actual policy, certainly in trade negotiations. That’s not because policymakers either reject that case or fail to understand it; some do, some don’t, but either way it doesn’t make that much difference. (In fairness, there’s an academic literature arguing that the underlying economics matter more than I’m suggesting, work that I consider admirable but unpersuasive.)

via Opinion | A Trade War Primer – The New York Times

Trump Proposes Rejoining Trans-Pacific Partnership to Shield Farmers From Trade War – The New York Times

WASHINGTON — President Trump told a gathering of farm state lawmakers and governors on Thursday morning that he was directing his advisers to look into rejoining the multicountry trade deal known as the Trans-Pacific Partnership, as the White House tries to come up with ways to protect the agriculture sector, which could be badly hurt by the president’s trade policies.

Rejoining the trade pact would be a surprising change in policy for Mr. Trump, who long criticized the deal and withdrew from it last January, in his first major trade action. The president has long maintained that he prefers to negotiate trade deals one on one, a tactic he says gives the United States better leverage over its trading partners.

But the risk of an escalating trade war with China has panicked American farmers and ranchers, who send many of their products abroad. China has responded to Mr. Trump’s threat of tariffs on as much as $150 billion worth of Chinese goods by placing its own tariffs on American pork, and threatening taxes on soybeans, sorghum, corn and beef.

China’s aggressive response to Mr. Trump’s tariffs is aimed squarely at products produced in the American heartland, a region that helped send him to the White House. A trade war with China could be particularly devastating to rural economies, especially for pig farmers and soybean and corn growers. Nearly two-thirds of United States soybean exports go to China.

via Trump Proposes Rejoining Trans-Pacific Partnership to Shield Farmers From Trade War – The New York Times

David Lindsay Jr.

Hamden, CT Pending Approval at NYT Comments:

Dear fellow readers, If Donald Trump wants to show he can learn, and is willing to embrace the Trans Pacific Partnership, one of Obama’s smartest, most sophisticated, and most difficult to explain treaties, we should all applaud! (Applause.)

Unfortunately, it will have its negative effects. I was looking forward to all those red, agricultural states, turning blue in anger over Trump’s dumb as doornails tariff war with China.

David Lindsay Jr. is the author of “The Tay Son Rebellion, Historical Fiction of Eighteenth-century Vietnam,” and blogs at TheTaySonRebellion.com and InconvenientNewsWorldwide.wordpress.com

Some Things Are True Even if Trump Believes Them – by Thomas Friedman – NYT

Thomas Friedman is great when he is on. He writes that China is a big problem, but the Trump steel tariff hurts our allies and not China. Then:

“So what would a smart American president do? First, he’d sign the Trans-Pacific Partnership trade accord. TPP eliminated as many as 18,000 tariffs on U.S. exports with the most dynamic economies in the Pacific and created a 12-nation trading bloc headed by the U.S. and focused on protecting what we do best — high-value-added manufacturing and intellectual property. Alas, Trump tore it up without reading it — one of the stupidest foreign policy acts ever. We Brexited Asia! China was not in TPP. It was a coalition built, in part, to pressure Beijing into fairer market access, by our rules. Trump just gave it up for free.

Once a smart president restored participation in TPP, he’d start secret trade talks with the Chinese — no need for anyone to lose face — and tell Beijing: “Since you like your trade rules so much, we’re going to copy them for your companies operating in America: 25 percent tariffs on your cars, and your tech companies that open here have to joint venture and share intellectual property with a U.S. partner — and store all their data on U.S. servers.” “

via Some Things Are True Even if Trump Believes Them – The New York Times

Friedman could be more clear about which ideas are his, and which are from his interviewee, at MIT.