New World, New Policy: A Review of the Trade Deficit

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

Protectionism in its New Forms. Radio Interview with CRI English

Despite repeated calls by heads of government to fend off protectionism and ensure the free flow of global trade, companies with operations on foreign soil may find themselves in a new situation, where protectionism no longer manifests itself in terms of tariffs, but in subsidies, local content requirements and capital controls.

A chief editor from Economist Magazine even commented that policymakers have become choosier about whom they trade with, how much access they grant foreign investors and banks and what sort of capital they admit. Sadly, that is still part of picture; for Chinese companies, the biggest challenges facing their foreign operations might be the murky politics that threaten to shut them out of the local market. Chinese companies like Huawei and Sanyi have found the US market impenetrable, as the US federal government shut them out, citing national security concerns.

In what way are these new forms of protectionism affecting global trade? How can we deal with them?

Ni Hao, you’re listening to People In the Know, bringing you insights into the headlines in China, and around the World; I’m Zheng Chenguang in Beijing.

We speak to Professor Simon J. Evenett, Academic Director of the MBA Programme at the University of St. Gallen in Switzerland, Prof. Michael R. Czinkota from the McDonough School of Business at Georgetown University in Washington, DC, and He Weiwen, Co-Director of the China/US-EU Study Center at the China Association of International Trade.


What Would Obama Do?

As mentioned in What Democrats and Republicans are Forgetting in 2012, there is a key issue that seems to be on the back burner in the current presidential election.

President Obama’s initiative to reorganize the government’s trade functions seems like a good first step. The Objective is to “streamline” government services by merging several agencies under a new department charged with overseeing trade and investment, and economic development.

Three of the agencies targeted were created a half century ago with distinct mandates.
1. The Export-Import Bank –
2. The Overseas Private Investment Corporation (OPIC)
3. U.S. Trade and Development Administration (TDA)
The Export-Import Bank was established in 1952 to help Russia enter U.S. markets, has evolved as a mmajor provider of financial assistance (mostly loan guarantees) to American companies exporting goods and services.Both the OPIC and TDA were set up withing the State Department to leverage U.S. investments to help the economies of developing countries.

For U. S. exporters, these are the critical agencies.  They provide the financial assistance, loan guarantees, risk insurance, feasibility studies and other services that are essential. Other countries are far more generous in supporting their industries in pursuit of foreign markets, often placing U. S. companies at a disadvantage.

The two other agencies to be merged are:
1. The Small Business Administration (SBA)
2. U. S. Trade Representative (USTR).
The SBA brings value in that it has regional offices that could more readily make available export services to U. S. companies. Yet, the idea of merging USTR with other agencies has already drawn heavy criticism from the trade community and Capitol Hill, and for good reason.  USTRs activity is international in its outlook and mission.  Its mandate is to conduct trade negotiations and convince trading partners to comply with laws and preferences, and represent the U. S. at the World Trade Organization.  This relatively small office should not be bureaucratized if it is to maintain its independence and credibility, domestically and internationally.

From “Don’t Kill Commerce”
By Don Bonker and Michael Czinkota