President Trump announced a new executive order aimed at pushing forward his trade agenda. Targeting the US trade deficit, the order directs the Commerce Department and the US Trade Representative to lead an interagency investigation and produce a “comprehensive report” on the causes of the US trade deficit. They are to do so by looking at specific industries and trade policies by foreign countries that contribute to the continuing gap between US exports and imports.
According to the US Census data on trade, the US ran about a $500 billion net trade deficit in Goods and Services with the rest of the world in 2016. The US runs a larger deficit when looking only at Goods (such as manufactures, agriculture, etc.), at $750 billion, while the county runs a surplus of about $250 billion in Services (such as business services, finance, information technology, etc.). Broken down by country, the largest Goods deficits are with China (over $54 billion in the first two months of 2017) and Mexico, as well as Saudi Arabia (petroleum imports) and the European Union. In Services, it is noteworthy that the US runs sizable surpluses with all of these same countries. (Data from US Census)Continue reading →
By Jerry Haar and Altug Ulkumen Veni, vidi, vici. (“I came, I saw, I conquered”) Julius Caesar, 26 BC. Donald Trump, 2017. However, the new U.S. president confronts a landscape far more daunting and turbulent than the Roman emperor and his legions faced two millennia ago–namely one which is supplanting a decades-old, idealism-based global governance that originally arose from the ashes of the Second World War.
The world order that emerged after 1945 was one of even greater opportunities, as ideological barriers came crashing down a quarter of a century ago, unlocking vast labor pools that received their first taste of the free markets.
International trade and investment issues grow more complex and require major reconsideration by governments, firms and individuals. No-one is exempt from the new policy directions of the U.S. government and the impending British exit (Brexit) from the European Union (EU). They are accompanied by extensive security concerns and the need to manage vast immigration flows. Many of the accompanying political battles are not only driven by national options, but reflect the “because we can” principle. While U.S. policy changes are still under construction, Britain delivers the EU separation documents consonant with Article 50 of the Treaty of Lisbon by the end of March which then marks the bureaucratic starting point of Brexit.
Here in Washington D.C., the nation’s capital, we were drilled over the past few days to expect the snowstorm of the century. A minimum of 12 inches of snow were forecast and major anticipatory adjustments were taken. For example my health care office called to let me know about their closure – since the commute would be unbearable. Schools were closed (or on a ‘contingency’ basis), and even the visit of German Chancellor Merkel was postponed due to concerns about the plane and its landing.
The changing composition of U.S. trade
We have often heated discussions on trade policy shifts. To make reasonable arguments, we must consider that the fundamental composition of trade has been changing. For example, from the 1960s to 1990s, the trade role of primary commodities has declined precipitously while in parallel, the importance of manufactured goods has increased. This has meant that those countries and workers who had specialized in commodities such as rubber or mining typically fell behind those that had embarked on strengthening their manufacturing sector. With sharply declining world market prices for commodities and rising prices for manufactured goods, commodity producers were increasingly unable to keep pace. Some commodity-dependent countries realized temporary windfalls as prices of oil, wheat, and corn rose dramatically, only to watch them evaporate as prices dropped in 2009.