Warning From The World’s Biggest Shipping Line On Outlook for World Trade

The optimism on world trade didn’t last very long.
It was only late September when the WTO issued a ‘strong upward revision’ to their estimate for 2017 world trade. WTO economists raised their forecast to 3.6% from 2.4%, which was at the top end of the previous 1.8-3.6% range. This marked a sharp acceleration from the 1.3% growth in 2016. The IMF’s forecast for 2017 world trade, also made in September, was even higher at 4.2%. Now the Copenhagen-based Maersk, the world’s number one container shipping company, is sounding a warning about softer demand and downward pressure on freight rates. According to Bloomberg.
The world’s largest container shipping line says international freight rates are reversing after climbing for most of this year, raising questions about the sustainability of the global trade recovery. Decade-old oversupply issues swamped demand for containerized sea trade in the third quarter, a senior official at Maersk Line Ltd. said in an interview last week. Over 90 percent of trade is routed through ships, making the industry a bellwether for the worldwide economy. “We have started to see some pockets of downward pressure,” said Steve Felder, Mumbai-based managing director of Maersk’s South Asian unit. The global trade order book at around 13.5 percent of capacity isn’t high, “however, given that freight rates are largely determined on the basis of supply-demand balance, they remain fragile,” he said.

This post was published at Zero Hedge on Dec 12, 2017.

The WTO: Useless for Trade, Useful for the State

On Monday, WTO officials will gather in Buenos Aires for their 11th ministerial conference. There is very little hope that any of the deals on the agenda will be reached, as both the WTO’s negotiations and its dispute settlement system have long been paralyzed by political bickering and a deep-seated inefficiency in the organization itself. Anxious WTO ministers (such as the EU’s trade commissioner) are now grasping at straws and blaming Trump and his lack of support for the WTO’s troubles.
Yet twenty-two years after its creation, the organization has almost nothing to show for it as far as trade liberalization is concerned. Juggling 164 member countries, each with its own protectionist agenda, was never likely to bring about ‘more open trade’, ‘more competitive markets’, or ‘market stability and predictability’. Especially not after trade rules, services, intellectual property, and environmental protection were brought to the negotiations table alongside tariffs and non-tariff barriers. Countries started by holding agreements hostage to their demands, continued with disregarding agreements completely, and now end on quibbling over the language used in joint statements.
An easy, albeit crude, depiction of WTO’s failure can be seen in the figure below, where the world tariffs effectively applied (which include unilateral liberalization and preferential trade agreements) have been consistently lower than those achieved via multilateral negotiations (most favored nation) in the first twelve years after WTO’s creation – when it was allegedly most successful.

This post was published at Ludwig von Mises Institute on Dec 9, 2017.

“It Could Reshape The Global Trading System For Decades” – US Rejects China’s Bid For “Market Economy” Status

The US has filed a legal submission to the WTO as a third party, intervening in a case that China has brought against the European Union. The US rejects China’s argument that under the 2001 agreement, which confirmed China’s WTO status, it would should automatically be considered a ‘market economy’ fifteen years after joining. The dispute could affect both America’s and China’s future within the international body and, as the New York Times contends, ‘shape the global trading system for decades to come.’ It goes without saying that this will only ratchet up the current tensions between the US and China over trade, which has been a cornerstone of Trump’s rhetoric since he launched his election campaign.
Briefly, the US submission sets out the legal arguments explaining why China should not be designated as a market economy, which would give it preferential treatment under existing WTO rules. China is currently designated a ‘nonmarket economy’ which allows the US, EU and other countries to decide whether China is dumping products at unfair prices under a WTO framework. If they decide that China is dumping, countries can add an extra duty to protect domestic manufacturers.
According to the Financial Times, “the Trump administration has opposed China’s bid for recognition as a ‘market economy’ in the World Trade Organization, citing decades of legal precedent and what it sees as signs the country is moving in the opposite direction under Xi Jinping. The US opposition to China’s efforts to be recognised as a market economy in the WTO came in a legal submission due to be released on Thursday in a case brought by Beijing against the EU. Market economy status would make it more difficult for the US to prove anti-dumping cases against Chinese companies at the WTO.”

This post was published at Zero Hedge on Nov 30, 2017.

29/11/17: China vs U.S. – the WTO Fight

“The Trump administration has lambasted China’s bid for recognition as a market economy in the World Trade Organization, citing decades of legal precedent and what it sees as signs that China is moving in the opposite direction under Xi Jinping. The US move to oppose China’s longstanding efforts to be recognised as a market economy in the WTO came in a legal submission filed last week and due to be released publicly on Thursday in a case brought by Beijing against the EU.”
Here are background slides to the dispute from my recent lecture @MIIS :
First, what’s behind the WTO dispute: the fight between the U. S. and the EU against China and other emerging economies in core Bretton Woods institutions – the IMF and the World Bank

This post was published at True Economics on Thursday, November 30, 2017.

US Fires Latest Shot In China Trade War: Warns Beijing Is “Threat To World’s Trading System”

It’s been at least a few weeks since the topic of trade war with China dominated the news flow, so moments ago U. S. Trade Representative Robert Lighthizer decided to poke that particular wound, in during a speech in Washington said that “China’s coordinated effort to create national champions and distort markets is a threat to the world’s trading system.”
Some headlines from his speech, via Reuters:

This post was published at Zero Hedge on Sep 18, 2017.

Leading The Multipolar Revolution: How Russia And China Are Creating A New World Order

The last thirty days have shown another kind of world that is engaging in cooperation, dialogue and diplomatic efforts to resolve important issues. The meeting of the members of the Belt and Road Initiative laid the foundations for a physical and electronic connectivity among Eurasian countries, making it the backbone of sustainable and renewable trade development based on mutual cooperation. A few weeks later, the Shanghai Cooperation Organization meeting in Astana outlined the necessary conditions for the success of the Chinese project, such as securing large areas of the Eurasian block and improving dialogue and trust among member states. The following AIIB (Asian Infrastructure Investment Bank) meeting in ROK will layout the economical necessities to finance and sustain the BRI projects.
The Shanghai Cooperation Organization (SCO) and the Chinese Belt and Road Initiative (BRI) have many common features, and in many ways seem complementary. The SCO is an organization that focuses heavily on economic, political and security issues in the region, while the BRI is a collection of infrastructure projects that incorporates three-fifths of the globe and is driven by Beijing’s economic might. In this context, the Eurasian block continues to develop the following initiatives to support both the BRI and SCO mega-projects. The Collective Security Treaty Organization (CTSO) is a Moscow-based organization focusing mainly on the fight against terrorism, while the Asian Infrastructure Investment Bank (AIIB) is a Beijing-based investment bank that is responsible for generating important funding for Beijing’s long-term initiatives along its maritime routes (ports and canals) and overland routes (road, bridges, railways, pipelines, industries, airports). The synergies between these initiatives find yet another point of convergence in the Eurasian Economic Union (EEU). Together, the SCO, BRI, CTSO, AIIB, and EEU provide a compelling indication of the direction in which humanity is headed, which is to say towards integration, cooperation and peaceful development through diplomacy.
On the other side we have the old world order made up of the IMF, the World Bank, the European Union, the UN, NATO, the WTO, with Washington being the ringmaster at the center of this vision of a world order. It is therefore not surprising that Washington should look askance at these Eurasian initiatives that threaten to deny its central and commanding role in the global order in favor of a greater say by Moscow, Beijing, New Delhi and even Tehran.

This post was published at Zero Hedge on Jun 21, 2017.

Merkel Wants G20 Global Taxation of Internet

Markel is calling upon the G20 to regulate the internet. While she if pretending to be concerned about cyberattacks, which no regulator can prevent, you have to look into the finer details. Chancellor Angela Merkel called for a global regulation sayying: ‘Industry 4.0 will have to go through the process that we have already gone through at the World Trade Organization (WTO) with real trading operations that we have gone through in the G20 process with financial market regulation.’
She noted that the ‘concerns’ include ‘cyberattacks, the responsibility of social platforms to tax issues in international trade, and growing concern in the world Of policy. ‘

This post was published at Armstrong Economics on Jun 15, 2017.

The OECD predicts Britain will crash out of the E.U. without a trade deal

U.K. economic growth will slow sharply next year before Britain leaves the E.U. in 2019 without a trade deal, according to the Organisation for Economic Cooperation and Development.
The influential Paris-based policy group predicts in its latest U.K. forecast that GDP growth will weaken slightly to 1.6% in 2017 then slow dramatically to 1% in 2018.
The gloomy forecast is driven by the OECD’s assumption that Britain will leave the E.U. without a trade deal and fall back onto restrictive World Trade Organisation (WTO) tariffs, classified as a “most-favoured nation.”
Economists have warned that that a “cliff-edge” Brexit scenario whereby the U.K. fails to secure a deal would be economically destructive.

This post was published at Business Insider

What Trump’s Next 100 Days Will Look Like

Trump is often described as a “transactional” president who sees the world as one big negotiating table where he can leverage his business experience to exact better terms and conditions for American workers and corporations. Trump will, therefore, try to keep his core agenda focused on what he regards as his sweet spot: US economy and trade. But even though the domestic economy may be the thing closest to the president’s comfort zone, it’s also where he comes up against a wall of institutional barriers. As a result, his much-touted tax overhaul attempting a steep reduction in the corporate tax rate will remain gridlocked in congressional battles over health care and the budget.
The new US administration will have a bit more room to maneuver on trade issues. It’s simplistic fixation on countries with which the United States has a large deficit will become more nuanced with time. The United States cannot simply force other countries to buy more of its goods in volumes that would make an appreciable difference in the trade deficit. And in some cases, America’s existing factory capacity is neither ready nor able to meet a sizable increase in demand from abroad. Instead, for select industries, Washington will try to boost US purchases of American goods and the enforcement of trade measures to restrict certain imports from abroad.
The steel sector is a logical place for the White House to focus its attention. After all, it’s an industry that appeals to Trump’s support base in the Rust Belt (though price hikes risk alienating big US steel consumers); the United States has the domestic capacity to meet most of its steel demand (save for specific, often military-related applications); and there are several World Trade Organization (WTO) provisions that the United States can use to tighten restrictions on imports (well before Trump’s election, Washington had placed more than 150 countervailing and anti-dumping duties on steel imports).

This post was published at FinancialSense on 04/25/2017.

U.S. Not Bound by WTO Decisions, Trump Warns in Trade Agenda

The U.S. isn’t bound by decisions made at the World Trade Organization, President Donald Trump’s administration said in outlining a new trade agenda that promises to root out unfair practices by foreign countries.
America plans to defend its ‘national sovereignty over trade policy,’ the Office of the U.S. Trade Representative said in an annual document laying out the president’s trade agenda. Under the terms of its entry into the WTO, the U.S. didn’t abandon its trade rights, according to the document, obtained by Bloomberg News and titled ‘2017 Trade Policy Agenda.’
‘Given this history, it is important to recall also that Congress had made clear that Americans are not directly subject to WTO decisions,’ according to the trade office, which takes the lead in negotiating trade deals. Trump’s pick to lead the USTR, lawyer Robert Lighthizer, hasn’t yet been confirmed.
The Trump administration’s skepticism toward the WTO, the Geneva-based body that referees trade disputes, signals a new willingness by the world’s biggest economy to pursue its interests — even if it means undermining the global order the U.S. has led since World War II.

This post was published at bloomberg

Slow Growth and “Making America Great Again”

Call it stagnation, stagflation, or ordinary performance, there are reasons economic growth has moderated including demographics, declining productivity, low savings, low investment, erosion of the middle class, devastating recessions, automation leading to slow job growth, and high debt levels. The need to reform international tax codes is recognized by the OECD and WTO and is an evolving process. Corporate tax reform will be beneficial to ‘adjust’ for the U. S. tax system being based on income and the most of the rest of the world relying more on consumption (VAT) taxes. Tax reform may increase revenues by reducing the incentives to seek tax havens. High social entitlements and benefits enacted during periods of high growth cannot be supported during periods of slow growth. Reducing top tax rates and capital gains taxes will continue to benefit the wealthy more than the middle class, but will increase investment in the U. S. and reduce tax evasion. The trade imbalance is largely the result of low savings and capital flows and their impact on exchange rates. ‘Fair’ trade is beneficial to the U. S. economy and to U. S. firms. The current reforms and stimulus are likely to provide a temporary boost to the economy, but long-term growth of 4% is highly unlikely.

This post was published at FinancialSense on 02/01/2017.

China Warns U.S.: Stop Trying to Escape Your Trade Obligations

This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
China warns the U. S. once again…
This time about a World Trade Order (WTO) deal reached way back in 2001…
That’s when WTO members all agreed to treat Beijing as a ‘non-market economy’ until the arrangement officially expired – at which point China would then be upgraded to a ‘market economy.’
There’s a big difference between those two distinctions:
Liquidity moves markets!
Click here to learn how you can follow the money. A ‘market economy’ consists of private ownership of the means of production and of voluntary exchanges and/or contracts for goods. Competition in these economies is high, which makes goods production, as well as the value of goods themselves, significantly cheaper. On top of that, foreign investors often flock to ‘market economies’ because they bolster innovation, which, in turn, boosts profits. A ‘non-market economy’ consists of operations that are not market-based. Therefore, its prices for final goods do not reflect fair value. Government provision of goods – arguably on an even basis – typically occurs within ‘non-market’ economies – i.e., communist or socialist economies.

This post was published at Wall Street Examiner by Money Morning Staff Reports ‘ December 2, 2016.

Trade Agreements or Political Independence: A False Choice

A new international trade agreement has hit a stumbling block. Against the background of a decades long deadlock of the WTO negotiations, and the controversies surrounding the more recent Trans-Pacific Partnership, the Walloon region in Belgium has decided to ‘veto’ the CETA (Comprehensive Economic and Trade Agreement) between EU and Canada. As any decisions regarding the European Common Market require a unanimous vote of regional representatives, this veto appears insurmountable.
These recent events have raised significant concerns about the future of free trade talks. In fact, the past year has seen a rise in the anti-trade rhetoric across the globe, rhetoric often capitalized on by varying political candidates. Before drawing any conclusions, however, we should pay more attention to the many different facets of these controversies.
On the one hand, it’s always worth remembering that intergovernmental trade agreements are not equivalent to free trade, and in fact are purported to bring about a reduction in the ease of trade and an increase in costs favorable to some particularly well-connected interest groups to the detriment of consumers. This is why trade agreements, bilateral or multilateral, take so long to be negotiated and ratified, as they demand political maneuvering and reciprocal concessions to satisfy the conflicting interests of different industrial and agricultural lobbies. That they parade themselves as defenders of the old free trade ideals is indeed their foremost accomplishment.
Mises himself was partial to such efforts in the first half of the 20th century, around the time when he was employed at the Chamber of Commerce in Vienna. As Dr. Hlsmann explains:

This post was published at Ludwig von Mises Institute on Oct 25, 2016.

The World Bank and the IMF won’t admit their policies are the problem

We hear you, poor people. That was the message that blared out from Washington last week. It came from Christine Lagarde of the International Monetary Fund. It came from Jim Kim of the World Bank. It came from Roberto Azevdo of the World Trade Organisation. It came from every finance minister and central bank governor.
The people who run the global economy wanted the world to know that they understood what had caused the Brexit vote and given Donald Trump a shot at the White House. They talked a lot about the need for inclusive growth and a capitalism that worked for all. To those who have been left behind in the past three decades, they said: we get it, we feel your pain.
The recognition that there is a problem is progress. Lagarde means it when she says the growing gap between rich and poor is holding back the global economy. Kim genuinely wants to see the fruits of growth skewed towards the bottom 40% in every country. The World Bank, IMF and WTO can sense that they are sitting on the edge of a volcano that could blow at any time. They fear, rightly, that a second big crash within a decade would create a backlash leading to protectionism and the rise of dark political forces that would be difficult, if not impossible, to control.
That there are ingredients for a fresh crisis became apparent at various stages last week. According to the IMF, global debt has risen to a record level of $152tn (122trillion) – more than double global GDP – at a time when activity is sluggish. Collapsing commodity prices and weak demand from the west has meant that growth in sub-Saharan Africa is running at half the level of population increases. Companies in the emerging world loaded up on debt during the commodity boom and are vulnerable to rising U.S. interest rates and any softening of the world economy. China is the most egregious example of debt being used to boost activity artificially.

This post was published at The Guardian

Is America Still A Serious Nation?

Submitted by Patrick Buchanan via Buchanan.org,
Is America still a serious nation?
Consider. While U. S. elites were denouncing Donald Trump as unfit to serve for having compared Miss Universe 1996 to ‘Miss Piggy’ of ‘The Muppets,’ the World Trade Organization was validating the principal plank of his platform.
America’s allies are cheating and robbing her blind on trade.
According to the WTO, Britain, France, Spain, Germany and the EU pumped $22 billion in illegal subsidies into Airbus to swindle Boeing out of the sale of 375 commercial jets.
Subsidies to the A320 caused lost sales of 271 Boeing 737s, writes journalist Alan Boyle. Subsidies for planes in the twin-aisle market cost the sale of 50 Boeing 767s, 777s and 787s. And subsidies to the A380 cost Boeing the sale of 54 747s. These represent crippling losses for Boeing, a crown jewel of U. S. manufacturing and a critical component of our national defense.

This post was published at Zero Hedge on Sep 30, 2016.

Global Trade To Grow At Slowest Pace Since Financial Crisis

Over the past several years, whenever we have looked at the IMF’s global growth forecasts, the only chart we said is worth keeping an eye on, is that of global trade, because while GDP can be massaged, retroactively revised, and “double-seasonally adjusted” when the need arises – and is far more a political “metric” than an economic one – trade remains the most objective indicator of how the world is truly doing at any given moment, especially since “central banks can’t print trade.”
In fact, it has been our contention for several years now that the single best indicator of the global economy is the rate of growth in global trade, which unfortunately has been slowing for the past 5 years.
Making matters worse, according to a new update from the World Trade Organization, global trade is now set to grow at the slowest pace since the financial crisis. In a report issued today, the WTO said that world trade will again grow more slowly than expected in 2016, expanding by just 1.7%, well below the April forecast of 2.8%.

This post was published at Zero Hedge on Sep 27, 2016.

Exposing How China “Cheats On Trade” In The Aluminum Industry

Since entering the Presidential race last year, Trump has made international trade a cornerstone of his campaign and has promised to go after countries like China that “cheat on trade”. In fact, the Trump website promises that “day one” his administration will take steps to “designate China as a currency manipulator’ and crack down on“illegal export subsidies [that] intentionally distorts international trade.”
On day one of the Trump administration the U. S. Treasury Department will designate China as a currency manipulator. This will begin a process that imposes appropriate countervailing duties on artificially cheap Chinese products, defends U. S. manufacturers and workers, and revitalizes job growth in America. We must stand up to China’s blackmail and reject corporate America’s manipulation of our politicians. The U. S. Treasury’s designation of China as a currency manipulator will force China to the negotiating table and open the door to a fair – and far better – trading relationship. China’s illegal export subsidies intentionally distorts international trade and damages other countries’ exports by giving Chinese companies an unfair advantage. From textile and steel mills in the Carolinas to the Gulf Coast’s shrimp and fish industries to the Midwest manufacturing belt and California’s agribusiness, China’s disregard for WTO rules hurt every corner of America.

This post was published at Zero Hedge on Sep 10, 2016.

Global Investment to Plunge, Trade to Languish, on ‘Depressed’ Demand: G-20 Trade Ministers

What China said the G-20 projected at the Shanghai meeting.
Facing ‘depressed market demand’ and plunging global cross-border investment, the trade ministers of the G-20 countries along with folks from the IMF, the Organization for Economic Cooperation and Development, and the World Trade Organization, among others, met in Shanghai this weekend to hash out a plan.
As at all these meetings, they reached an agreement, of sorts. The G-20 countries account for about 85% of global trade and 70% of global investment, so they matter.
During the briefings on Sunday, everyone had their own version of what had been achieved, if anything. The Office of the US Trade Representativeannounced that the G-20 had reached an agreement ‘on a package of outcomes covering WTO multilateral and plurilateral trade agreements and negotiations, investment, and cooperation on global value chains.’
US Trade Representative Michael Froman ‘hailed the results as a good example of G-20 leadership and shared goals in promoting global trade growth and public support for trade.’ That sort of thing.
Then there was the issue of ‘global excess capacity in key sectors, such as steel,’ he said in the statement. This has been a sticking point between the US and China:

This post was published at Wolf Street on July 11, 2016.

Why Trump Is Routing The ‘Free Traders’

Submitted by Patrick Buchanan via Buchanan.org,
In Tuesday’s indictment of free trade as virtual economic treason, The Donald has really set the cat down among the pigeons.
For, in denouncing NAFTA, the WTO, MFN for China and the Trans-Pacific Partnership, all backed by Bush I and II, Mitt Romney and Paul Ryan, Trump is all but calling his own party leaders dunderheads and losers.
And he seems to be winning the argument.
As he calls for the repudiation of ‘globalism’ and a return to ‘Americanism,’ a Republican Congress renders itself mute on whether it will even vote on the TPP this year.
On trade, Bernie Sanders is closer to Trump. Even Hillary Clinton has begun to renounce a TPP she once called the ‘gold standard’ of trade deals.

This post was published at Zero Hedge on Jul 1, 2016.