Trump Is Giving Protectionism a Bad Name

By William G. Moseley (guest post)

While it might not seem like it now, President Donald Trump is a gift to free market-oriented economists and policymakers. His clumsy approach to protectionism has ignited a trade war that inevitably will harm the U.S. economy. When the pendulum inexorably swings the other way after the Trump fiasco, free trade ideology will return with a vengeance. This is a potential tragedy for left-leaning policy analysts who have long been concerned about the excesses of neoliberalism and argued for a more measured use of tariffs to foster local economic development. As such, it critical that we distinguish between Trump’s right-wing nationalist embrace of tariffs and the more nuanced use of this tool to support infant industries.

As a development geographer and an Africanist scholar, I have long been critical of unfettered free trade because of its deleterious economic impacts on African countries. At the behest of the World Bank and the International Monetary Fund, the majority of African countries were essentially forced, because of conditional loan and debt-refinancing requirements, to undergo free market–oriented economic reforms from the early 1980s through the mid-2000s. One by one, these countries reduced tariff barriers, eliminated subsidies, cut back on government expenditures, and emphasized commodity exports. With the possible exception of Ghana, the economy of nearly every African country undertaking these reforms was devastated.

This is not to say that there was no economic growth for African countries during this period, as there certainly was during cyclical commodity booms. The problem is that the economies of these countries were essentially underdeveloped as they returned to a colonial model focused on producing a limited number of commodities such as oil, minerals, cotton, cacao, palm oil, and timber. Economic reforms destroyed the value-added activities that helped diversify these economies and provided higher wage employment, such as the textile, milling, and food processing industries. Worse yet, millions of African farmers and workers are now increasingly ensnared in a global commodity boom-and-bust cycle. Beyond that cycle, they are experiencing an even more worrying long-term trend of declining prices for commodities.

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Will Trump’s Trade War Make America Great Again?

By Jomo Kwame Sundaram, Anis Chowdhury
Crossposted at Inter Press Service.
The United States has had the world’s largest trade deficit for almost half a century. In 2017, the US trade deficit in goods and services was $566 billion; without services, the merchandise account deficit was $810 billion.
The largest US trade deficit is with China, amounting to $375 billion, rising dramatically from an average of $34 billion in the 1990s. In 2017, its trade deficit with Japan was $69 billion, and with Germany, $65 billion. The US also has trade deficits with both its NAFTA partners, including $71 billion with Mexico.
President Trump wants to reduce these deficits with protectionist measures. In March 2018, he imposed a 25% tariff on steel imports and a 10% tariff on aluminium, a month after imposing tariffs and quotas on imported solar panels and washing machines. On 10 July, the US listed Chinese imports worth $200 billion annually that will face 10% tariffs, probably from September, following 25% tariffs on $34 billion of such imports from 7 July.

What’s Different About Trump’s Tariffs?

By Jomo Kwame Sundaram

Cross-posted at Inter Press Service

At Davos in January, US President Donald Trump warned that the US “will no longer turn a blind eye to unfair economic practices” of others, interpreted by many as declaring world trade war. Before the US mid-term elections in November, Washington is expected to focus on others’ alleged “massive intellectual property theft, industrial subsidies and pervasive state-led economic planning” pointing to China without always naming names. With the Republican Party already united behind his tax bill, Trump senses an opportunity to finally unite the party behind him and to continue his campaign for re-election in 2020.

Since January, Trump has taken steps threatened in his mid-2016 election economic policy document, drafted by US’s National Trade Council head Peter Navarro and Commerce Secretary Wilbur Ross. In particular, he has imposed tariffs and other restrictions on imports to revive US manufacturing. Import tariffs of 25% and 10% on steel and aluminium respectively have been imposed by invoking Section 232 of the US 1962 Trade Expansion Act, allowing unilateral measures to protect domestic industries for “national defence” and “national security”.
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Crony Capitalism, or Plain-Old Capitalism?

Arthur MacEwan, Guest Blogger

Arthur MacEwan is professor emeritus of economics at the University of Massachusetts-Boston and a columnist for Dollars & Sense magazine.

The Export-Import Bank, created in 1934, is a U.S. federal government agency that supplies loans or guarantees loans to foreign firms to finance their purchases of U.S. exports. Its supporters argue that it strengthens the U.S. economy and creates jobs in the United States by bolstering demand abroad for goods produced here.

For the Export-Import Bank to stay in existence, Congress must reauthorize it by the end of September. Its existence, however, has come under attack by the anti-big-government forces of the right. They claim that there is no justification for the government to provide this support for U.S. firms. If the buyers abroad of U.S. goods cannot get financing for the purchases from regular banks—i.e., in the “free market”—the U.S. exporters are charging prices that are too high. That is, the U.S. firms are not effectively competing in the “free market,” and it is not the job of government to subsidize their inefficient operations.

These critics of the Export-Import Bank claim it is simply “crony capitalism,” where well-connected firms are able to get handouts from the government. This, they argue, is not the way “real capitalism” should and can function. For example, in the June 25 edition of National Review Online, with an article titled “The Ex-Im Bank: Crony Capitalism in Action,” the editors wrote that the Bank “hands out generous loans and credit guarantees to a select number of corporations [and] is corrupt and poorly managed. …The bank has a long history of dealing with dodgy firms and doling out suspiciously large amounts of loans to certain companies.”

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Trade and the Triple Crisis

John Weeks, Guest Blogger

A previous article of mine on Triple Crisis trashed the arguments for the international trade proposal called the Trans-Pacific Partnership, and applies as well to the loathsome Trans Atlantic Trade and Investment Partnership. These “partnerships” represent but two more attempts to sell the pernicious nonsense of “free trade”. In my new book, Economics of the 1%, I go to the analytical roots of the neoliberal trade ideology to rubbish the incantation of “gains from (international) trade.”

I recently attended a meeting in London with environmental activists, including a well-known British climate scientist. As a result of that meeting, I realize that my critique of “free trade” was far too timid and narrow. The essential problem is not these attempts by the U.S. bourgeoisie via our government to gain advantage in international markets. The problem is international trade itself. The charts below show why. The two countries with the most exports in 2012 are the United States and China, with Germany and Japan considerably further back (both the U.S. and China over US$2 trillion, Germany at just over US$1.5 trillion).

By no accident, China and the United States are at the top of the pollution list, with Japan #5 and Germany #6. But, “wait,” you say, these are also the largest economies in the world, so the issue is their domestic energy use, not whether what is produced is exported.

Well, actually, No.

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On Argentina's Secular Decline: Why The Economist is Wrong

The Economist had a few weeks ago an issue on Argentina (here; subscription required), which I wanted to address, but had no time before today. The argument implies that the current Argentine woes (discussed here before) are part of a pattern which is associated to the long decline in income per capita from the late 19th century and early 20th century until now.

The Economist suggests that:

“In 1914 Argentina stood out as the country of the future. Its economy had grown faster than America’s over the previous four decades. Its GDP per head was higher than Germany’s, France’s or Italy’s. It boasted wonderfully fertile agricultural land, a sunny climate, a new democracy (universal male suffrage was introduced in 1912), an educated population and the world’s most erotic dance. Immigrants tangoed in from everywhere. For the young and ambitious, the choice between Argentina and California was a hard one.”

In a sense that’s true. According to Maddison’s data in 1913 Argentina per capita GDP (in 1990s dollars) was 3,797 while France and Germany had respectively 3,485 and 3,648 (data available here). However, the reasons for the decline in the 20th century are based on simplistic notions, typical of the so-called New Institutionalism of North and more recently Acemoglu and Robinson (for a critique go here). In their words:

“Building institutions is a dull, slow business. Argentine leaders prefer the quick fix—of charismatic leaders, miracle tariffs and currency pegs, rather than, say, a thorough reform of the country’s schools.”

Read the rest of this entry »

On Argentina’s Secular Decline: Why The Economist is Wrong

The Economist had a few weeks ago an issue on Argentina (here; subscription required), which I wanted to address, but had no time before today. The argument implies that the current Argentine woes (discussed here before) are part of a pattern which is associated to the long decline in income per capita from the late 19th century and early 20th century until now.

The Economist suggests that:

“In 1914 Argentina stood out as the country of the future. Its economy had grown faster than America’s over the previous four decades. Its GDP per head was higher than Germany’s, France’s or Italy’s. It boasted wonderfully fertile agricultural land, a sunny climate, a new democracy (universal male suffrage was introduced in 1912), an educated population and the world’s most erotic dance. Immigrants tangoed in from everywhere. For the young and ambitious, the choice between Argentina and California was a hard one.”

In a sense that’s true. According to Maddison’s data in 1913 Argentina per capita GDP (in 1990s dollars) was 3,797 while France and Germany had respectively 3,485 and 3,648 (data available here). However, the reasons for the decline in the 20th century are based on simplistic notions, typical of the so-called New Institutionalism of North and more recently Acemoglu and Robinson (for a critique go here). In their words:

“Building institutions is a dull, slow business. Argentine leaders prefer the quick fix—of charismatic leaders, miracle tariffs and currency pegs, rather than, say, a thorough reform of the country’s schools.”

Read the rest of this entry »

China-Latin America Economic Bulletin

Jill Richardson, Guest Blogger

This post is a summary of the inaugural China-Latin America Economic Bulletin, from the Global Economic Governance Initiative (GEGI) at Boston University. Triple Crisis contributors Kevin Gallagher and Cornel Ban are the co-directors of GEGI.

As 2013 drew to a close, Boston University’s Global Economic Governance Initiative inaugurated its annual China-Latin America Economic Bulletin. The Bulletin is intended as a go-to source for analyzing and synthesizing trends within the burgeoning China-LAC [Latin America and Caribbean] relationship. It can be a significant challenge to come by reliable data detailing this trade and investment relationship. By providing concrete figures and data, the Economic Bulletin helps to fill in these gaps as well as provide an evidence-based understanding of trends and developments in the increasingly important China-LAC connection.

Many of the key findings of the 2013 Economic Bulletin involve the evolving nature of China-LAC trade. As a whole, LAC exports to China have risen massively since 2000, averaging a 23 percent annual export growth rate. This relatively rosy picture obscures the fact that in recent years this rate has dropped precipitously, slowing to just 7.2 percent growth in 2012. Much of this slowdown can be attributed to falling commodity prices. Despite LAC exports to China growing in volume, price volatility has allowed for stagnant, or even declining, export values.

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How Beer Explains 20 Years of NAFTA's Devastating Effects on Mexico

Timothy A. Wise

Cross-posted from Global Post.

Mexico’s largest agribusiness associated invited me to Aguascalientes to participate in its annual forum in October. The theme for this year’s gathering was “New Perspectives on the Challenge of Feeding the World.”

But it was unclear why Mexico, which now imports 42 percent of its food, would be worried about feeding the world. It wasn’t doing so well feeding its own people.

In part, you can thank the North American Free Trade Agreement (NAFTA) for that. Twenty years ago, on January 1, 1994, NAFTA took effect, and Mexico was the poster child for the wonders of free trade. The promises seemed endless.

Mexico would enter the “First World” of developed countries on the crest of rising trade and foreign investment. Its dynamic manufacturing sector would create so many jobs it would not only end the U.S.  immigration problem but absorb millions of peasant farmers freed from their unproductive toil in the fields. Mexico could import cheap corn and export electronics.

So much for promises.

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How Beer Explains 20 Years of NAFTA’s Devastating Effects on Mexico

Timothy A. Wise

Cross-posted from Global Post.

Mexico’s largest agribusiness associated invited me to Aguascalientes to participate in its annual forum in October. The theme for this year’s gathering was “New Perspectives on the Challenge of Feeding the World.”

But it was unclear why Mexico, which now imports 42 percent of its food, would be worried about feeding the world. It wasn’t doing so well feeding its own people.

In part, you can thank the North American Free Trade Agreement (NAFTA) for that. Twenty years ago, on January 1, 1994, NAFTA took effect, and Mexico was the poster child for the wonders of free trade. The promises seemed endless.

Mexico would enter the “First World” of developed countries on the crest of rising trade and foreign investment. Its dynamic manufacturing sector would create so many jobs it would not only end the U.S.  immigration problem but absorb millions of peasant farmers freed from their unproductive toil in the fields. Mexico could import cheap corn and export electronics.

So much for promises.

Read the rest of this entry »