For G-7, Trump’s racism and misogyny are ok, but his trade policies are intolerable

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U.S. President Donald Trump greets Canadian Prime Minister Justin Trudeau during the 2017 G-7 Summit in Italy. (Official White House Photo by Shealah Craighead)

U.S. President Donald Trump seems as welcome at the G-7 picnic as a rabid skunk.

Most G-7 leaders have worked to build warm relationships with Trump, despite his xenophobia, racism, misogyny, climate denialism, warmongering and corrupt business self-dealing. But apparently, taking on the trade status quo was a bridge too far.

That is a bitter irony, given that the trade and financial policies that the G-7 has relentlessly promoted created the political context that helped to make Trump president. Decades of U.S. presidents from both parties and their G-7 counterparts have pushed international economic policies that have created expansive new rights and powers for multinational corporations and hurt working people.

Pushing corporate-rigged trade agreements, blessing financial deregulation and loosening trillions in speculative investment flows were the economic priorities.

Even as millions of manufacturing jobs were lost, absent was coordinated G-7 action to counter China’s currency manipulation or a unified approach to end Chinese subsidies and other unfair trade practices that, among other problems, fueled the global steel and aluminum oversupply glut.

And as working-class wages declined and income inequality and financial instability grew, the majority harmed by the G-7 version of globalization were told their fate was inevitable.

In the United States, that message was conveyed by Democratic and Republican presidents alike even as the economic and social fallout became increasing difficult to deny. About 4.5 million net American manufacturing jobs have been lost since the 1994 start of the North American Free Trade Agreement (NAFTA) and 2000 trade deal with China related to its admission to the World Trade Organization. Sixty-thousand manufacturing facilities shuttered. And real wages flattened, given that the replacement of the higher-wage manufacturing jobs with lower-wage service sector jobs pushed down wages economy-wide even if one did not lose their job to trade.

Enter Trump, who, whatever else his trade policies may or may not do, ended the bipartisan presidential practice of not seeing or talking about the many Americans who have been harmed by our trade status quo.

Therefore perhaps Trump’s truly unforgiveable sin, finally meriting open ire from G-7 partners, is to demonstrate that the trade status quo is, in fact, not pre-ordained, but rather is a set of policies he is shredding.

Trump may well not achieve the better trade outcomes he promised.

That would require him to stay focused on changing China’s cornucopia of unfair trade practices rather than settling for the usual Chinese promises to buy more U.S. exports. And, unless he can implement a replacement deal that eliminates NAFTA’s investor-state outsourcing incentives and adds strong labor and environmental terms with swift and certain enforcement to raise wages, companies will keep moving jobs to Mexico to pay workers a pittance and dump toxins and import those products back for sale here.

And, the U.S. corporate lobby is in overdrive working against any attempt to change the trade policies to preserve the status quo. Doing so is apparently a higher priority for them than preserving the Republican congressional majority. The Koch Brothers just announced a campaign designed to line up congressional Republicans against Trump’s trade agenda before the midterm elections, even as polls show GOP and Independent voters support that agenda.

Plus, Trumpian chaos has led to Trump caving on well-thought-out policies, such as the China trade enforcement action aimed at dismantling the technology theft essential to the China 2025 agenda to dominate industries of the future. That approach was revived, for now.

But whether or not Trump’s trade policies succeed, the other G-7 leaders should reflect on the painful lesson of Trump’s rise and that of other authoritarian politicians who wrap themselves in economic populism: Political leaders who fail to offer a new approach on trade and the related economic policies that provide greater economic security for all only serve to alienate more and more people who are left behind, creating fertile political ground for more Trumps.

Trump’s pledges to upend the trade status quo, end job outsourcing and create manufacturing jobs attracted hard-hit working-class votes in the key Midwestern swing states that put him in the White House. And President Barack Obama’s relentless efforts right through the 2016 campaign to pass the business-as-usual Trans-Pacific Partnership (TPP), and Secretary Hilary Clinton’s ambiguous views on the TPP and connection to President Bill Clinton’s NAFTA, dampened working-class enthusiasm for the Democratic ticket.

If Trump’s foreseeably cringe-worthy exploits at the G-7 don’t drive home this point, perhaps yesterday’s election of Doug Ford — considered the Donald Trump of Canada and brother of the infamous right-wing, populist, crack-smoking Ontario Mayor Robert Ford — as Ontario’s new Premier will.


New Data Show Trump’s First Quarter 2018 China and Mexico Trade Deficits Largest on Record as All Eyes Focus on This Week’s Trade Discussions in China, Looming NAFTA Deadline

U.S. Trade Deficit With World Largest Since 2008 Financial Crisis, Contrary to Trump’s Campaign Pledge to Quickly Reduce Deficit to Bring Back Manufacturing Jobs  

Record-high first-quarter trade deficits add to the urgency of the Trump administration succeeding in reworking the terms of U.S.-China trade and the North American Free Trade Agreement (NAFTA), Public Citizen said today.

The 2018 first quarter goods trade deficit with China and with the world is significantly larger than figures for the first quarter of 2017 even as the March monthly goods deficit with China declined as U.S. exporters accelerated shipments to beat tariffs that may be imposed relating to the 301 action, which gave an extra boost to U.S. exports overall this month.

President Donald Trump’s pledge to quickly reduce the U.S. trade deficit remained unfulfilled after the U.S. trade deficit rose in 2017. As his second year in office begins:

  • The first-quarter goods trade deficit with China is the largest ever recorded at $91.1 billion, up from $80.7 billion for the same period last year;
  • The goods trade deficit with the world of $196.7 billion is larger than any period since before the 2008 financial crisis – up 8.5 percent over the first quarter of 2017 deficit of $181.4 billion.
  • The first-quarter goods trade deficit with Mexico is the largest ever recorded at $33.3 billion, up from $30.6 billion for the same period last year. After improving from 2011 to 2016, but worsening in 2017, the NAFTA first-quarter 2018 goods deficit is up slightly relative to the first quarter of 2017 – an increase from $49.1 billion to $49.6 billion. (NAFTA data exclude re-exports, which account for 20 percent of U.S. exports to NAFTA countries.)
  • The 2018 first-quarter goods trade deficit with the world is up $24.4 billion compared to the $172.4 billion first-quarter global goods deficit in 2016, the last year of the Obama administration. The deficit in manufactured goods remained 88 percent of the overall deficit from 2016 to 2017, contradicting Trump’s promises to help manufacturing workers.

(All data in inflation-controlled terms.)

With the comment period on proposed China 301 tariffs closing at the end of May, Trump’s senior trade and economic advisers are in Beijing this week seeking major changes to the terms of U.S.-China trade. NAFTA talks must be completed within weeks for a pact to be voted on this year, but only a deal that removes NAFTA’s job outsourcing incentives and adds strong and strictly enforced labor and environmental standards could change the trade deficit trends. Given the failure of the Trans-Pacific Partnership to obtain majority support in Congress, such a major redo of the past U.S. trade agreement model is also necessary for a new pact to be approved by Congress.

“This ever-expanding trade deficit is like the ghost of Trump trade promises past that is haunting the U.S. negotiators now in Beijing trying to remedy the debacle of our China trade policy and those trying to conclude a NAFTA replacement deal that ends the outsourcing incentives and thus could win broad support,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The Deficit Is Now Mostly Made Up of Manufactured and Agricultural Goods, With the Oil Deficit Down

Economists who critique the significance of bilateral deficits nonetheless agree that large sustained overall trade deficits can suppress demand and slow economic growth. The overall U.S. trade deficit is mostly made up of manufactured and agricultural goods. Growth in U.S. oil exports and a decline of oil imports since 2011 have masked the deterioration of the non-oil trade deficit.

Over the past three years, the worsening of the non-oil trade deficit has been comparable in magnitude to the worst part of the 2000s “China shock” period, reaching 3.5 percent of GDP between 2014 and 2017 compared to 3.6 percent of GDP between 2002 and 2005. The non-oil trade deficit increased from $573 billion to $756 billion from 2014 to 2017, including the increase in Trump’s first year of office from $703 billion to $756 billion.

“Expect ever-expanding trade deficits that eviscerate Trump’s grand trade reform promises unless the administration transforms our failed China trade policy and removes NAFTA’s job outsourcing incentives, adds strong labor and environmental standards, and thus achieves a NAFTA replacement that can get through Congress,” Wallach said.

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New Trump Administration Trade Report Sticks to the Status Quo

The Trump administration’s recently released 2018 National Trade Estimate Report could become classic reading for political science students studying the “deep state” concept.

The 2018 report, which provides a 500-page compilation of policies in other countries that U.S. commercial interests claim are “trade barriers,” is remarkably similar to Obama-era editions of this congressionally-mandated annual report.

Yes, it was shocking that the Obama administration issued a report that labeled countries’ public health and environmental policies, food-labelling laws, and even religious standards as significant trade barriers. Sadly, this aspect of the report is not surprising for the new administration. 

But attacks in the report on other countries’ policies that reflect the new administration’s approach can only be explained by the reality that too many career trade-policy staff are rutted in pro-status-quo groupthink.

Exhibit A: A key administration demand in the North American Free Trade Agreement (NAFTA) renegotiations is to cut investor-state dispute settlement (ISDS). Administration officials have made clear that ISDS is considered a problem because it makes it less risky and costly to outsource jobs and because it undermines sovereignty. The ISDS system empowers foreign investors and corporations to skirt domestic courts and attack domestic policies by going before tribunals of three corporate lawyers to adjudicate claims. These extra-judicial international arbitration tribunals can order unlimited compensation be paid to investors by a host country’s taxpayers.

Yet this year’s report identifies as a barrier Mexico’s hydrocarbons law because it requires foreign companies to use the domestic court system in Mexico to arbitrate certain government disputes – rather than allowing foreign firms to use unaccountable international tribunals.

Along the same lines, the Trump administration is seeking to roll back NAFTA terms that require the waiver of Buy American and other domestic preference programs. But the report attacks Quebec’s requirement that 60 percent of the goods used in wind energy projects be sourced domestically as this “could pose hurdles for U.S. companies in the renewable energy sector in Canada.”

Jumping from NAFTA to other news headlines, another barrier listed is the European Union’s new privacy law. According to the report, the policy adds “new requirements for accountability, data governance, and notification of a data breach,” which may “increase administrative costs and burdens” for U.S. companies operating in Europe. Funny thing is that U.S. megacorporation Facebook, facing attacks on its lax safeguards, just announced it is adopting the European standard for its operations worldwide.

It bears noting that once again even public health policies designed to improve maternal and infant health are attacked as trade barriers in the report. That includes Malaysia’s proposed revisions to “its existing Code of Ethics for the Marketing of Infant Foods and Related Products” that would restrict corporate marketing practices aimed at toddlers and young children. Also, the report criticizes Hong Kong’s recent regulations governing the marketing of infant formula. Although acknowledging that the regulations are based on “World Health Organization guidance and purportedly voluntary,” the report parrots the food industry’s concern that Hong Kong’s new policies might become mandatory.

Other eyebrow-raising trade barriers? The report criticizes Malaysia – a predominantly Muslim country – for having certain restrictions on the importation of alcohol, and Brunei – another predominantly Muslim country – for requiring that non-halal foods be sold in specially designated rooms.

It remains to be seen whether future National Trade Estimate reports by the Trump administration will be consistent with the administration’s stated positions or the deep-state “trade-think” of decades of Democratic and Republican administrations past will prevail. Either way, we will be watching closely.


On Announcement of Revisions to U.S.-Korea Free Trade Agreement

Statement of Lori Wallach, Director of Public Citizen’s Global Trade Watch

WASHINGTON, D.C. – As the administration announced revisions to the U.S.-Korea Free Trade Agreement (FTA), Lori Wallach, director of Public Citizen’s Global Trade Watch, commented:

“Despite the touted 10,000 tariff cuts and promises of more exports, more jobs, our deficit almost doubled in the FTA’s first five years as U.S. agricultural exports declined and a flood of Korean cars were shipped here.

“It’s unclear how the proposed changes to the pact itself would reverse the doubling of our Korea trade deficit under KORUS, but the new currency agreement could make a difference if it has teeth, delaying the U.S. tariff cuts on Korean trucks could stop the big imbalance from getting even worse, and the parallel steel agreement is significant.

“The limited revisions to KORUS do not the promised new American trade agreement model make, which puts added pressure on NAFTA renegotiations to deliver a deal that eliminates the job outsourcing incentives in our past trade deals and adds strong labor and environmental standards with swift and certain enforcement.  

“Success on many key issues that were not addressed at all in this deal – such as the elimination of job outsourcing incentives and the controversial ISDS tribunals, the tightening of automobile rules of origin, and the addition of strictly enforced labor and environmental standards – will determine if a renegotiated NAFTA can get the bipartisan support necessary to get it passed.”

KORUS Outcomes: First Five Years

Despite the Korea FTA including more than 10,000 tariff cuts, 80 percent of which began on Day One:

U.S. exports to Korea declined 7.8 percent ($3.7 billion), and imports from Korea increased 13.1 percent ($8.1 billion) by the end of KORUS’ fifth year.

  • Since the FTA took effect, Saverage monthly exports to Korea have fallen in nine of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA.
  • U.S. exports to Korea of agricultural goods have fallen 5.4 percentin the first five years of the Korea FTA, despite almost two-thirds of U.S. agricultural exports by value obtaining immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 45.4 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 8.1 percent, or $554 million, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on these products. However, despite U.S. officials’ promises that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korea has imposed temporary bans on imports of American poultry in each of the last three years, including 2017. Comparing the fifth year of the FTA to the year before it went into effect, U.S. poultry producers have faced a 78 percent collapse of exports to Korea – a loss of 82,000 metric tons of poultry exports to Korea. U.S. pork exports have also dropped 1 percent.
  • The 85 percent trade deficit increase with Korea under the pact – from $14 billion in the 12 months before the pact went into effect on March 15, 2012, to $26 billion in its fifth year – came in the context of the overall U.S. trade deficit with the world decreasingby 5 percent. While U.S. goods imports from the world decreased by 7.1 percent, goods imports from Korea increased by 13.1 percent.
  • During that period Korea’s GDP rose 15 percent, and the unemployment rate has averaged 3.4 percent, belying the claims from KORUS defenders that the growing deficit was fueled by weak growth and thus weak demand in Korea.  
  • The U.S. service sector trade surplus with Korea grew much slower since the FTA. In KORUS’ first five years, it increased by only $2 billion from 2011 to 2015, a growth rate of 29 percent, which is notably 64 percent slower than our services surplus growth over the five years before the FTA went into effect.
  • Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 59 of the 60 months of KORUS’ first five years, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the five years before the deal.
  • The auto sector was among the hardest hit: The U.S. trade deficit with Korea in motor vehicles grew 55.7 percent in the pact’s first five years. S. imports of motor vehicles from Korea have increased by 64.2 percent, or $6.4 billion by the fifth year of the Korea FTA.
  • Exports of machinery and computer/electronic products, collectively comprising 27 percent of U.S. exports to Korea, have fallen 17.1 and 18.8 percent, respectively.

Public Citizen Report: ‘Follow the Money: Did Administration Officials’ Financial Entanglements With China Delay Trump’s Promised Tough-on-China Trade Policy?’

WASHINGTON, D.C. – As the administration is poised to announce long-awaited action on a China trade investigation launched last summer, Public Citizen released a report revealing Trump administration Cabinet members’ and top advisors’ longstanding personal financial entanglements with the Chinese government and government-connected firms. The report raises the question of whether the lack of action during President Donald Trump’s first year in office despite China being candidate Trump’s top target of trade wrath is better explained by the current or past Chinese financial entanglements of numerous top administration officials rather than an ideological battle over trade in the White House.

The report reveals the widespread business connections – some ongoing – between Trump Cabinet officials and other senior staff and Chinese government-run or connected firms that may have affected administration trade policies on China. For instance, despite pledging to divest from two Chinese shipping firms in which he was invested, U.S. Commerce Secretary Wilbur Ross’ financial transaction reports do not include the sale of an estimated $125 million stake in Navigator Holdings, which operates a fleet of liquefied natural gas (LNG) tanker ships that could benefit from several gas-related investment deals with Chinese government-linked firms that Ross announced since becoming Commerce secretary.

“The exits of White House Economic Adviser Gary Cohn and U.S. Secretary of State Rex Tillerson will significantly diminish the top staff with past or current significant financial stakes in China and with Chinese government entities, although Ross remains,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Will changes in personnel lead to changes in policy with the recent trade enforcement actions paving the way to creation of the comprehensive new China trade policy that is decades overdue?”

Only on China trade were administration trade actions during Trump’s first year opposite of Trump’s campaign pledges and rhetoric. Even Trump’s bellicose China trade rhetoric from the campaign was replaced by an uncharacteristically subdued tone. Rumors have raged since Thanksgiving that the administration would impose punitive measures against Chinese technology theft via a Section 301 investigation that the administration initiated in August. But time and again, action was delayed.

During Trump’s China state visit, Ross gleefully touted Goldman Sachs’ new $5 billion joint fund with the Chinese government’s main investment arm and plans by other state-owned and state-linked firms to buy assets in sensitive U.S. infrastructure, energy and food sectors. Such investments may facilitate the Chinese government “Made in China 2025” plan to dominate the global economy but would seem antithetical to Trump’s promised “tough on China” agenda.

A review of the top-level staff of the Trump administration shows stark conflicts of interests not just relating to business in or with China, but with the Chinese government. These ties and conflicts include:

  • Previous or current ownership of shares in companies profiting from Chinese state-owned investment in the United States (Ross, Cohn, Treasury Secretary Steve Mnuchin, Trump Senior Adviser Jared Kushner);
  • Investments in companies doing business in China that may not have been divested at the time an official was engaged in policymaking that could impact his investments (Ross);
  • Co-investments with Chinese state-owned investors that may not have been divested at the time an official was engaged in policymaking that could impact his investments (Ross);
  • Previous direct ownership of stakes in Chinese state-owned companies (Cohn and Tillerson);
  • Ownership of businesses awaiting approvals for pending trademark applications in China (Ivanka Trump); and more.

The new report provides a compilation of information that is available about these links; many investments might not be disclosed as they may be held in investment vehicles in which the underlying assets are not known.