This post was published at RonPaulLibertyReport
Tell me again why we don’t toss our so-called “free trade” with China right here and now…..
According to South Korean government sources, the satellites have pictured large Chinese and North Korean ships illegally trading in oil in a part of the West Sea closer to China than South Korea.
The satellite pictures even show the names of the ships. A government source said, “We need to focus on the fact that the illicit trade started after a UN Security Council resolution in September drastically capped North Korea’s imports of refined petroleum products.”
This post was published at Market-Ticker on 2017-12-27.
As long as this is business as usual, it’s impossible to slash costs and boost widespread prosperity.
It’s easy to go down the wormhole of complexity when it comes to figuring out why our economy is stagnating for the bottom 80% of households. But it’s actually not that complicated: the primary driver of stagnation, decline of small business start-ups, etc. is costs are skyrocketing to the point of unaffordability.
As I have pointed out many times, history is unambiguous regarding the economic foundations of widespread prosperity: the core ingredients are:
1. Low inflation, a.k.a. stable, sound money
2. Social mobility (a meritocracy that enables achievers and entrepreneurs to climb out of impoverished beginnings)
3. Relatively free trade in products, currencies, ideas and innovations
4. A state (government) that competently manages tax collection, maintains roadways and harbors, secures borders and trade routes, etc.
Simply put, When costs are cheap and trade is abundant, prosperity is widely distributed. Once costs rise, trade declines and living standards stagnate. Poverty and unrest rise.
These foundations characterize stable economies with widely distributed prosperity across time and geography, from China’s Tang Dynasty to the Roman Republic to the Byzantine Empire to 19th century Great Britain.
This post was published at Charles Hugh Smith on NOVEMBER 19, 2017.
NAFTA 2.0 gets complicated. With the fifth round of NAFTA negotiations scheduled to begin next week, Mexico finds itself facing a very uncertain future. The free trade agreement upon which its entire national economic model was built is now looking precariously fragile. Ildefonso Guajardo, Mexico’s economy minister, told the Mexican Congress last week that the way things stand, an end to NAFTA ‘cannot sanely be ruled out.’
In such an event, the resulting economic pain for Mexico could be considerable, according to calculations from Banco Santander. It forecasts a 15% drop in exports and a 16% fall in imports if the US declared a full trade war rather than reverting to World Trade Organization tariff rules. Moody’s Investors Service estimates Mexico’s economy could shrink as much as 4%.
The biggest problem for Mexico’s economy is the sheer scale of its dependence on trade with the US: 81% of its exports go to the U. S., and about half of its imports come from there. Mexico is so deeply integrated into US supply chains, particularly manufacturing production that the IMF describes Mexican and American industrial production as ‘co-integrated.’ Increases in American economic output are transmitted one-for-one to Mexican output.
This post was published at Wolf Street on Nov 13, 2017.
The US is about to fire another salvo in the international trade war, and this one may actually make sense.
That’s because the US government will, if President Trump approves, help an industry it almost destroyed a few years ago.
Is it ‘protectionism’ to restore the balance that existed before government intervened?
Maybe not. But stranger yet, this one puts the Trump administration and environmentalist groups on the same side.
They say politics makes strange bedfellows. Trade policy does too… and it points to an investment trend you should follow.
Subsidizing Your Own Competitors
In Connecting the Dots, I try to find stories that fit together in unexpected ways. Sometimes I don’t even have to look.
Two weeks ago, I wrote about free trade and manufacturing jobs. Last week’s topic was renewable energy. Today, we have all three.
This post was published at Mauldin Economics on NOVEMBER 7, 2017.
That wages have remained so low for so long is not by accident; it’s by design.
President Trump’s repeated bashing of the North American Free Trade Agreement between the US, Canada, and Mexico has failed to dull the allure of Mexico’s maquiladoras for global manufacturers looking to cash in on the country’s much cheaper labor costs. Tecma Group, a firm that helps US and Canadian firms relocate to Mexico, has more business than ever. In the past few weeks alone, it has helped a cleaning equipment company and packaging company move.
Mexico Consulting Associates, headquartered in Chicago, has three new clients interested in Mexico. Keith Patridge, who heads McAllen Economic Development, estimates that at least 12 companies will be installed this year in the north-western city of Reynosa. Another firm, Tacna Services, has helped two companies get set up in the Baja California area.
The southward migration of U. S. companies continues unchecked even as Trump threatens to abandon NAFTA, provoking fear and consternation among manufacturers that have production and supply chains spread across the three countries. If Trump followed through on his threat, traded goods would be subject to tariffs of around 3.5% in the case of Mexican companies and 7% in the case of US ones, according to Benito Barber, an economist for Latin America for Nomura Holdings.
On Tuesday a new coalition of major automakers, suppliers, and car dealers urged Trump not to withdraw from NAFTA. The members of the ‘Driving American Jobs’ coalition include trade associations that represent major global car manufacturers such as General Motors, Toyota Motor, Volkswagen, Hyundai Motor, and Ford Motor.
This post was published at Wolf Street on Oct 26, 2017.
If you think economics is boring, bring up ‘free trade’ and see what happens. I guarantee sparks will fly.
Some people preach free trade’s many blessings. Others curse the very idea, insisting free trade hurts honest working people.
Lately, this has become more than a theoretical argument.
President Trump came into office pledging to renegotiate or cancel trade agreements he thought unfair to the US. Meanwhile, the UK seems headed toward a ‘hard Brexit’ from the European Union.
Whether you think those are good moves or not, they’re important to the world economy. Millions of jobs and lives are at stake.
I think both sides are wrong… and it’s going to cause big trouble.
This post was published at Mauldin Economics on OCTOBER 24, 2017.
As Tesla falls further and further behind in its quest to produce 10,000 Model 3 sedans a week by the end of next year, WSJ reported Sunday that, after months of talks with local government officials, Tesla has finally received permission to open a factory in Shanghai, one of China’s designated ‘free trade zones.’
If accurate, the report would signal a major shift in China’s policy toward foreign automakers. Until now, US carmakers like GM hoping to sell cars in China’s domestic market have been forced to work (and more importantly share profits and technology) with a local partner.
But more surprising than the news itself is the timing, as Tesla continues to struggle with major production delays at its Fremont Calif factory, a problem that will no doubt be exacerbated by the company’s decision to lay off hundreds of workersand replace them with cheaper contract labor in what has been characterized as a blatant attempt to suppress unionization efforts. WSJ says cars produced at the Shanghai factory would primarily supply local markets while allowing Tesla to sale cars across the region. Meanwhile, any cars shipped to the US from the Shanghai factory would face a 25% tariff.
This post was published at Zero Hedge on Oct 22, 2017.
‘And I will pray to a big god, as I kneel in the big church’
– Peter Gabriel
Imagine for a moment that you are a British citizen with doubts about Brexit. You turn on the television and listen to the President of the European Commission, Jean-Claude Juncker, state the following:
That the 27 countries of the Union should adopt the euro and be in Schengen by 2019. That ‘we are not naive defenders of free trade’. That Europe needs a European superminister of Economy and Finance who is also Vice-President of the Commission and President of the Eurogroup. That a European Monetary Fund should be created Probably, at that moment, many doubts will dissipate. Unfortunately, for those who would like the UK to remain in the European Union, in the opposite direction of their wishes. You would probably think ‘thank God we are out’.
Juncker’s speech on September the 13th did not seek to find elements for an agreement with the United Kingdom, but to strengthen the current model of the Eurozone at all costs. It was presented as an opportunity to remind us all of his real project for the European Union, clearly based on the French interventionist economic and financial ‘dirigisme’, and very far from the UK, Finnish, Irish or Dutch open model of economic freedom.
This post was published at Ludwig von Mises Institute on September 28, 2017.
While much of Trump’s Sunday tweets have focused on the government response to the devastation resulting from the historic Texas and Houston flooding as Tropical Storm Harvey is expected to unleash as much as 40 inches of rain, the US president managed to sneak in a few threats to his North American neighbors, reiterating what he has periodically said, most recently last week, that the U. S. may cancel the North American Free Trade Agreement.
Trump also said that “with Mexico being one of the highest crime Nations in the world, we must have THE WALL. Mexico will pay for it through reimbursement/other.”
This post was published at Zero Hedge on Aug 27, 2017.
Western governments have an overriding problem, and that is they have reached or exceeded the bounds of taxation, at a time when legally mandated welfare costs are accelerating. Treasury departments in all the welfare nations are acutely aware of this problem, to which there’s no apparent solution. The economic recovery, so consistently forecast since the great financial crisis, has hardly materialised and has added to the problem.
There is, if treasury economists could only understand it, a solution in free trade.
One of the UK’s leading economists and Brexiteers, Patrick Minfordi, produced an interesting paper, which brought up this subject. It got little coverage in the press, and even that was extremely negative. Trading on the Future was the only economic modelling exercise that showed significant benefits for Britain from free trade.ii
This is the headline from the Independent (19 April): ‘Only economic study showing benefits of Brexit debunked as ‘doubly misleading’.’ The establishment, which is not attuned to free trade, strongly disagreed and presumably felt bound to protect its position.
This post was published at GoldMoney on August 17, 2017.
The battle-lines are drawn. When the world’s big trading nations convene this week at a G20 summit in Hamburg, the stage is set for a clash between a protectionist America and a free-trading Germany.
President Donald Trump has already pulled out of one trade pact, the Trans-Pacific Partnership, and demanded the renegotiation of another, the North American Free-Trade Agreement. He is weighing whether to impose tariffs on steel imports into America, a move that would almost certainly provoke retaliation. The threat of a trade war has hung over the Trump presidency since January. In contrast, Angela Merkel, Germany’s chancellor and the summit’s host, will bang the drum for free trade. In a thinly veiled attack on Mr Trump, she delivered a speech on June 29th condemning the forces of protectionism and isolationism. An imminent free-trade deal between Japan and the European Union will add substance to her rhetoric.
There is no question who has the better of this argument. Mr Trump’s doctrine that trade must be balanced to be fair is economically illiterate. His belief that tariffs will level the playing field is naive and dangerous: they would shrink prosperity for all. But in one respect, at least, Mr Trump has grasped an inconvenient truth. He has admonished Germany for its trade surplus, which stood at almost $300bn last year, the world’s largest (China’s hoard was a mere $200bn). His threatened solution – to put a stop to sales of German cars – may be self-defeating, but the fact is that Germany saves too much and spends too little. And the size and persistence of Germany’s savings hoard makes it an awkward defender of free trade.
At bottom, a trade surplus is an excess of national saving over domestic investment. In Germany’s case, this is not the result of a mercantilist government policy, as some foreigners complain. Nor, as German officials often insist, does it reflect the urgent need for an ageing society to save more. The rate of household saving has been stable, if high, for years; the increase in national saving has come from firms and the government.
Underlying Germany’s surplus is a decades-old accord between business and unions in favour of wage restraint to keep export industries competitive. Such moderation served Germany’s export-led economy well through its postwar recovery and beyond. It is an instinct that helps explain Germany’s transformation since the late 1990s from Europe’s sick man to today’s muscle-bound champion.
This post was published at The Economist
Today Britain and the EU officially begin the first day of formal Brexit negotiations, “aiming for a constructive, orderly launch that avoids a noisy clash on the big policy differences over Britain’s exit”, according to the FT although the sellside reaction was decidedly less optimistic, as summarized by SocGen’s Kit Juckes who in previewing today’s events said that he expects “nothing because the UK position is as clear as mud’ beyond growing signs that the UK wants free trade without being part of the customs union or conceding grounds on borer controls.”
To be sure, no breakthroughs are expected on Monday, or indeed for some weeks and possibly months to come. The idea is for the EU and UK sides to meet, exchange views, plan practicalities and set agendas, all ahead of more detailed talks in coming weeks. ‘This is about building trust, nothing more,’ said one senior EU diplomat quoted by the FT.
Looking at today’s main political event, DB’s Jim Reid writes that the Chancellor of the Exchequer Phillip Hammond suggested yesterday in a TV interview that a gentle departure from the EU should be targeted. The Chancellor indicated that ‘transactional structures’ would be needed to help smooth the process and that ‘we need to get there via a slope, not via a cliff edge’ – suggesting a softer tone in negotiations. In contrast to the PM, Hammond also rejected the mantra ‘no deal is better than a bad deal’. Hammond also said that his position was one of a ‘jobs first’ Brexit which is also a slight shift in tone compared to the PM. Separately, Hammond said that the UK government had ‘heard a message last week in the general election’ and that ways to soften austerity were being looked at with voters seemingly growing ‘weary’ of it.
This post was published at Zero Hedge on Jun 19, 2017.
There has always been a shared conceit at the heart of the special relationship between the United States and United Kingdom that global leadership is best expressed and exerted in English.
More boastful than the Brits, successive U.S. presidents have trumpeted the notion of American exceptionalism.
Prime ministers, in a more understated manner, have also come to believe in British exceptionalism, the idea that Westminster is the mother parliament, and that the U.K. has a governing model and liberal values that set the global standard for others to follow, not least its former colonies.
In the post-war Anglo-American order those ideas came together. In many ways, it was the product of Anglo-American exceptionalist thinking: the “city upon a hill” meets “this sceptred isle”.
NATO, the IMF, the World Bank and the Five Eyes intelligence community all stemmed from the Atlantic Charter signed by Franklin Delano Roosevelt and Winston Churchill in August 1941.
The liberalised free trade system that flourished after the war is often called the Anglo-Saxon model. The post-world global architecture, diplomatic, mercantile and financial, was largely an English-speaking construct.
This post was published at BBC
President Trump has called the Trans-Pacific Partnership deal a ‘rape’ of the United States. He has scolded Germany for being ‘very bad’ on trade because it runs a surplus. And in April he said that he was ‘psyched’ to terminate the North American Free Trade Agreement with Canada and Mexico, only to reverse course.
Despite Mr. Trump’s incendiary talk, his top trade advisers are taking a more cautious approach to dealing with America’s trading partners, striking a more moderate tone than the president but still laying the groundwork for the changes he has promised.
That more moderate tone has come as a relief to those who feared the Trump administration would swiftly usher in a wave of protectionism, while disappointing some people who hoped that a sweeping rewrite of trade deals would come in the administration’s early days.
Signs of greater moderation were on display this week when Wilbur Ross, the secretary of commerce, suggested that the administration would actually try to build off some aspects of the Trans-Pacific Partnership trade agreement, or T.P.P., that Mr. Trump abandoned in January as NAFTA renegotiations begin this summer.
This post was published at NY Times
In 1800, you had to work, on average, one hour to obtain ten minutes of artificial light. Today, this same hour allows you to buy 300 days of light. In 1900, one kilowatt-hour of electricity cost one hour of work. This costs five minutes of our time now. Buying one cheeseburger in McDonald’s required 30 minutes of hard labor in 1950. This same sandwich now costs about three minutes of your life.
According to British intellectual Matt Ridley, this evolution is the ultimate illustration of wealth in modern societies. In his book The Rational Optimist published in 2010, he evaluates our prosperity by outlining the goods and services we can purchase for the same amount of work. Thus, the main objective of economic development is to reduce the amount of time we have to work in order to produce what we need to live.
This discourse may sound surprising in a world where it is often said that ‘job creation’ is the most important goal of economic policy. But a job is not an end in itself. It is just a means to live better. As Milton Friedman reminds us in this conference dedicated to free trade, we don’t want jobs per se but productive jobs: jobs which enable us to consume goods and services we produce at a minimum expenditure of efforts.
In other words, if working is the price we pay to obtain things we want, then economic progress has always consisted of decreasing this price thanks to perpetual productivity growth. This explains our ability to create more wealth with less and less labor, in order to save time for more valuable activities.
This post was published at Ludwig von Mises Institute on June 1, 2017.
It was supposed to be China’s day of celebrating massive infrastructure spending for the sake of spending (read ghost towns, only now outside China’s borders) as Xi Jinping pledged $124 billion on Sunday for his new Silk Road plan to forge “a path of peace, inclusiveness and free trade” while calling for the abandonment of old models based on rivalry and diplomatic power games. However, it did not go quite as smoothly as expected.
A celebration years in the making, Xi hosted dozens of world leaders – including a piano-playing Vladimir Putin – on Sunday for the country’s biggest diplomatic showcase of the year, touting his vision of a new “Silk Road” that opens trade routes across the globe. Xi used the summit to “bolster China’s global leadership ambitions” as U. S. President Donald Trump promotes “America First” and questions existing global free trade deals.
In total, leaders from 29 countries attended the forum, including some of China’s close allies and partners such as Russian President Vladimir Putin, Cambodian Prime Minister Hun Sen, Kazakh President Nursultan Nazarbayev, Turkey’s quasi-dictator Tayyip Erdogan, as well as the heads of the United Nations, and the CapEx leeches from the IMF and World Bank.
This post was published at Zero Hedge on May 14, 2017.
One month after a startling reversion by the G-20 finance ministers and central bankers, who during their latest meeting in Baden-Baden dropped a decade-long tradition of rejecting protectionism and endorsing free trade, pressured by Trump’s delegate Steven Mnuchin, the IMF has done the same, and according to a communique from the IMF’s steering committee released on Saturday in Washington echoed the G-20 reversal, and said that officials ‘are working to strengthen the contribution of trade to our economies” while omitting a call from its last statement in October to ‘resist all forms of protectionism.”
The International Monetary and Financial Committee – which is the IMF’s top advisory panel, composed of 24 ministers and central bankers from nations including the U. S., China, Germany, Japan and France – released the statement during the spring meetings of the IMF and World Bank. Since joint statements at gatherings such as the G-20 and the IMF require assent from members, the change in the U. S. position on trade from the Obama administration is forcng modifications in language that was previously uncontroversial.
While the trade language was drastically changed, some positions remained the same: the IMFC statement reiterated pledges from October to ‘refrain from competitive devaluations’ of currencies and to avoid targeting ‘our exchange rates for competitive purposes.’
There were other changes: in addition to the trade stance, the latest communique omits language from October that welcomed ‘the entry into force of the Paris Agreement on climate change.’ Trump is contemplating whether to make good on his campaign promise to withdraw from the deal, as Bloomberg notes.
The shift in the trade “plege” was due to the Trump administration’s persistent threats to raise tariffs if US trading partners don’t agree to renegotiate trade agreements and create fairer conditions for U. S. goods; in the past week Trump fired the first shot in what may be upcoming trade wars when he signed an executive order looking into curbing steel imports under the guise of “national security” concerns.
This post was published at Zero Hedge on Apr 22, 2017.
Nick Giambruno: Doug, you predicted the fall of the European Union a few years ago. What has changed since then?
Doug Casey: Well, what’s changed is that the entire situation has gotten much worse. The inevitable has now become the imminent.
The European Union evolved, devolved actually, from basically a free trade pact among a few countries to a giant, dysfunctional, overreaching bureaucracy. Free trade is an excellent idea. However, you don’t need to legislate free trade; that’s almost a contradiction in terms. A free trade pact between different governments is unnecessary for free trade. An individual country interested in prosperity and freedom only needs to eliminate all import and export duties, and all import and export quotas. When a country has duties or quotas, it’s essentially putting itself under embargo, shooting its economy in the foot. Businesses should trade with whomever they want for their own advantage.
But that wasn’t the way the Europeans did it. The Eurocrats, instead, created a treaty the size of a New York telephone book, regulating everything. This is the problem with the European Union. They say it is about free trade, but really it’s about somebody’s arbitrary idea of ‘fair trade,’ which amounts to regulating everything. In addition to its disastrous economic consequences, it creates misunderstandings and confusion in the mind of the average person. Brussels has become another layer of bureaucracy on top of all the national layers and local layers for the average European to deal with.
The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C. beltway.
This post was published at International Man