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

Bali trade agreement cuts red tape for NZ exporters

A new international trade agreement is good news for exporters whose products are held up at borders but will make little difference for consumers, experts say.

Trade Minister Tim Groser said the WTO Bali package approved by 159 ministers in Indonesia yesterday was a “modest deal” with limited direct benefits to New Zealand.

But the cost of failing to reach an agreement would have been “very significant” for international trade.

The talks mostly centred on food security, and the deal would enable developing countries to get around rules on farm subsidies if they were trying to stockpile food to feed their poor.

The most important progress for New Zealand businesses were changes which could cut red tape and ease bottlenecks at overseas ports.

NZ International Business Forum executive director Stephen Jacobi said effects of the deal would not be felt by consumers because New Zealand’s customs service was already very efficient.

But it could be valuable to exporters and manufacturers because it would speed clearance of their goods at foreign companies’ customs services.

New Zealand companies lost millions each year through exports being stalled at borders.

Mr Jacobi said: “Goods are being held up in customs every day, which adds quite significantly to the cost of the transaction. For countries like New Zealand that are distant from major markets, if you can narrow down time … then you’re going to have some greater efficiencies.”

New Zealand had streamlined customs agreements with the United States and Japan, but products were often held up in other countries, including China.

Mr Groser said the agreement did little to advance the main objectives of the Doha Development Round, which aimed to create a level playing field by removing subsidies on agriculture and other markets.

Wealthy countries such as the United States subsidised local agricultural production, which made it more difficult for other countries to break into their markets.

Labour trade spokesman Phil Goff said the agreement breathed life into the bigger negotiations the WTO was involved in.

It was the WTO’s first global trade agreement since its inception in 1995.

Read more by Isaac Davison, Source:, Image: Trade Minister Tim Groser. Photo / NZPA


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.


Taking it personally: rethinking the effectiveness of tariffs

On September 16, 2013, an article from the Wall Street Journal, reports and discusses the new 6.5% tariff imposed by China on U.S. solar-panel materials. This is thought to be China’s retaliation for a tariff imposed last year on Chinese-made solar cells.

Washington enacted the tariffs after determining that the Chinese manufacturers were dumping the goods in the U.S., and had received illegal subsidies. China claims that the tariff is a result of the U.S. dumping of polysilicon in the Chinese market, which accounted for 36% of Chinese polysilicon imports in the first half of 2013. Although China fell short of  earlier threats of imposing tariffs as high as 57%, the new tariff could be detrimental to U.S. manufacturers, especially since China is currently the world’s largest producer of solar panels and has announced plans to increase production for the next three years.

My thinking goes to the motivation and effectiveness of tariffs. Including this case, it seems that in many instances when tariffs are imposed, the result is political tension and retaliation. Thus, it seems the motivation of imposing tariffs is not fully derived from an economic sense, but also increasingly from a pride/power perspective. The goal of the tariffs has deviated from a regulatory role, to a tool of political chess. In this China-U.S. case, China has allowed for its national solar panel business to take a hit by raising the input prices of polysilicon, albeit exempting three U.S. manufacturers who they cited as only having received minimal subsidies. With countries, especially China, quite willing to participate in tariff wars, perhaps this classic regulatory tool is losing its value in the face of the exponentially interconnected global economy.

This text was written and presented by Mr. Sho Shino, Student at the McDonough School of Business of Georgetown University in the course on International Business (STRT-261-01) on September 18th, 2013. You can contact the author here.

Visit to Taiwan

Professor Czinkota returned from a successful trip to Taiwan where he held discussions with the government on trade relations and export promotion. He also was honored by the invitation of the National Science Council (NSC) of Taiwan in recognition of his research contribution to export development. His keynote speech at the US Taiwan Commercial Council was titled “Turmoil in Academia:There is Sunshine above the Clouds”

Professor Czinkota with Vice Minister Cho

Professor Czinkota with Vice Minister Cho, Minstry of Economic Affairs

Professor Czinkota with Director General Tong

Professor Czinkota with Director General Tong, Department of International Cooperation