The US Senate Finance Committee has voted 25 to 3 to support a draft of the new North American trade deal known as the US-Mexico-Canada Agreement or USMCA. The House of Representative already approved the draft deal in December 2018 after adding in sections that protected workers more.

USMCA: Best Deal Ever?

According to US President Donald Trump, the USMCA is going to be “the best and most important trade deal” in American history. On the campaign trail in 2015 and 2016, Trump repeatedly slammed the North American Free Trade Deal (NAFTA) as a destroyer of US jobs and the worst trade deal ever made. Trump also referred to the Trans Pacific Partnership which he withdrew from by executive order in 2017 as a “rape” of America and a “job killer.” Democratic House Speaker Nancy Pelosi also said the new deal is “much better than NAFTA.”

This can be properly understood as mainly political rhetoric. The USMCA is basically just an updated version of NAFTA with a few more protections for American interests. It is unlikely to significantly boost US job numbers or fundamentally change the way trade works in North America.

How Is The USMCA Different Than NAFTA?

There are some areas where the USMCA breaks new ground. One is on auto parts. The new deal stipulates that three-quarters of an automobile’s parts have to be made in the US, Canada or Mexico in order to be tariff-free when shipped. Workers also have to get paid over $16 USD per hour, which will mean Mexican companies paying workers low amounts will be overtaken by higher-paying US firms in some cases. The Trump Administration is betting this will have major payoffs in the auto industry and optimistically predicts over 76,000 new auto jobs in the United States by 2025.

Other updates include in the dairy industry, where US dairy, chicken and egg farmers will get access to Canada’s heavily-subsidized dairy industry with their exports. For its part, Canada’s farmers and nut and sugar industry will get better access to the massive US market.

On the tech side, the USMCA protects the ability of US tech companies to store their data on American servers and shields them from being prosecuted for many issues that could occur with their content in Mexico or Canada. It frees up and empowers American tech companies and could set a precedent for deals later on with China and other bigger players.  Additionally, the new USMCA deal helps protect the environment somewhat with $600 million for dealing with environmental issues, although environmentalists say it is just a token and the deal basically does nothing to help the environment.

Politicians Weigh In On USMCA

Some American politicians are worried it doesn’t look after American workers and companies enough, especially Democratic presidential candidate Bernie Sanders of Vermont who said he will vote against the final bill. On the Republican side, Senator Pat Toomey of Pennsylvania is concerned for the opposite reason, saying the USMCA is “designed to restrict trade and investment” and would cut back on free trade growth, especially in the automobile sector where the USMCA puts tariffs on parts whose workers weren’t paid up to standards to stop one country from flooding the market and tariffs on origin companies whose products don’t meet certain standardized benchmarks. Others on the committee like Republican Senator Bill Cassidy of Lousiana and Democratic Senator Sheldon Whitehouse of Rhode Island expressed concern that businesses won’t have adequate ability to dispute deals and unfair treatment under the deal: therefore they voted no.

Senator Rob Portman called the deal a “big improvement” despite admitting it isn’t perfect, while Democratic Senator Sherrod Brown of Ohio, for example, particularly emphasized the deal’s enforcement of better work standards and wage protection for Mexican workers. If Mexico pays workers more and has to produce better products it will help slow down outsourcing and protect American jobs.

The USMCA faces the full US Senate vote for ratification next week, but this could be rescheduled depending on the timing of US President Donald Trump’s impeachment trial. It has a 16-year sunset clause meaning the deal will have to be renegotiated at that time. While some of the improvements and changes made in the new USMCA will undoubtedly help American workers and can also give various benefits to Mexican and Canadian companies and workers, the slow progress of the deal and its largely underwhelming advantages show just how slow trade negotiation and progress is in the real world once you cut through the political rhetoric.

L'articolo New North American USMCA Trade Deal One Step Closer To Passing proviene da InsideOver.

Ever since he was elected US President, Donald Trump has made it his mission to make trade fairer for America. Whilst his enemies have branded him as a protectionist for imposing tariffs on China and even close allies like Canada, it has always been his short-term strategy to inflict retaliatory tariffs on those countries until they lower their own. George W. Bush made a similar decision in 2002, but he did not see it through to the extent that Trump has. The President’s experiment with tariffs has had mixed results.

Reforming the North America Free Trade Agreement (NAFTA) was one of Trump’s signature policies during the 2016 general election. He has succeeded in replacing it with the United States-Mexico-Canada Agreement. In March 2018, the President imposed tariffs on steel (25 per cent) and aluminium (10 per cent) for most countries, including Canada, Mexico and the EU. In May 2019, he said he would impose a 5 per cent tariff on all imported goods from Mexico beginning June 10, a tax that would ‘gradually increase’ until the flow of undocumented immigrants from across the border stopped. Despite this, the fact that Trump has been able to persuade Canada and Mexico to support a new trade deal that will reduce tariffs in the long-term is a substantial success for his administration.

Furthermore, Mexico has already ratified the agreement while Canada is yet to do so. The US sent approximately $300 billion and $265 billion in goods to Canada and Mexico, respectively, last year. This demonstrates how important these two markets are for American businesses and why it is vital all sides can approve of this trade deal immediately.

Considering House Speaker Nancy Pelosi is leading an impeachment inquiry against the President, it is impressive that Trump has been able to win her approval for the USMCA to a certain extent. Unfortunately, the Democrats and the Trump administration were not able to reach a compromise on the trade deal during a meeting on Thursday due to Pelosi’s concerns about labour and environmental standards under the agreement. However, the House Speaker expressed her anxiety about not approving of the USMCA before 2020, which is when Trump is up for re-election.

If the President fails to convince the Democrats to vote for the USMCA before the election, he can accuse the latter of deliberately thwarting his prized trade agreement whilst the Democrats could say Trump has failed to deliver one of his key election promises. Either way, the USMCA is likely to dominate the 2020 general election.

Trump has been able to sign a limited trade deal with Japan recently. Japanese Prime Minister Shinzo Abe signed the trade pact hoping to avoid further US tariffs on cars. Japan’s lower house approved of the trade deal last Tuesday. Although both sides have been able to conclude a trade agreement, they must resolve their differences over auto tariffs before it can be concluded as a complete success.

US National Security Adviser Robert O’Brien also expressed his confidence that America and China can end their 16-month trade war by the end of the year, but he said he was concerned protests in Hong Kong could be an obstacle to signing a trade agreement. Trump’s success with China depends upon the outcome of Hong Kong’s district elections ending peacefully, or not.

The President’s negotiations in resolving trade differences with the EU see no end in sight. Trump administration officials are considering whether to investigate the EU as the window closes for slapping Brussels with auto tariffs. Neither side has entered discussions to reach a trade agreement and Brussels has made no offer to lower its 10 per cent tariffs on US vehicles. This trade war is likely to continue into the new decade.

Trump is close to succeeding in resolving his trade wars with Japan, China, Mexico and Canada. His success here will be determined by his concluding negotiations with those countries. This will improve his chances of winning the 2020 general election. But there is still more work to do with the EU and if Brussels wants to avoid being investigated by Trump administration officials, they need to budge at some point.

L'articolo Has Trump Succeeded in Making Trade Fairer for America? proviene da InsideOver.

Against a backdrop of strained diplomatic ties and an increasingly fraught relationship both personal and country-wise, Turkish President Recep Tayyip Erdogan came to Washington to iron out a long list of disagreements with President Donald Trump and his administration. The controversial summit happened despite calls by many American politicians and activists advising President Trump to call off Erdogan’s visit. This comes after Ankara’s ongoing military operation against the Kurds in northeastern Syria was launched a few weeks ago, targeting YPJ/SDF (Syrian Democratic Forces), Washington’s main Kurdish ally in the fight against ISIS in Syria.

Strained ties, breakthrough or breakdown?

Turkish-American military and security ties took a nosedive this year after Turkey took delivery of a Russian-made S-400 sophisticated air defence missile system in July. Ankara’s intransigent stance over the issue despite strong warnings from the US and other NATO nations not to go ahead with the deal, which breached NATO rules and ethics, instigated calls among some members of the Alliance to kick Turkey out of NATO altogether. Other controversial topics present at the table were Turkish unilateral oil and gas explorations in the Mediterranean off the coast of Cyprus, and Ankara’s threat to deport ISIS detainees – in Kurdish-controlled areas in Syria where the Turkish military operation “Peace Spring” is underway – to their EU countries of nationality.

Trump’s decision to pull out US troops from much of northeast Syria and leave his Kurdish allies in the open to fend off against an overwhelming Turkish onslaught has drawn sharp criticism from both Democrats and Republican politicians alike. Erdogan’s visit to Washington DC, comes fresh on the heels of yet another crisis phase in an increasingly fraught relationship. Trump’s all-too-familiar response was to throw a 100 billion US dollar worth of trade deal with Erdogan in an attempt to dampen mounting US pressure and criticism over the Turkish President’s visit. Trump himself has threatened to deport ISIS prisoners and land them at EU nations’ doorstep unless the Europeans pledged decent financial support to SDF who is guarding some 10,000 ISIS detainees in northern Syria, mainly at Al-Hole camp. He further struck a belligerent tone on Twitter, threatening to “obliterate” Turkey’s economy if Ankara did anything “off-limits” to the Kurdish fighters.

Trump’s harsh tweets vs generous treats

Trump seems to have softened up his harsh rhetoric as Erdogan and his wife Emine arrived at the White House, presenting his Turkish guest with a multi-billion trade deal to circumnavigate any potential punitive sanctions against Ankara. Such a move is bound to erode Trump’s popularity among American voters before the next presidential elections in the USA, particularly after Erdogan declared that he had handed back a ‘tough guy’ letter to Trump in response to the latter’s harshly-worded letter delivered by Vice President Mike Pence to Erdogan in Ankara 9 October before Turkey launched its military operation against allied Kurdish forces in Syria.

The two leaders appeared at odds, with Erdogan after his meeting with Trump Wednesday branding Kurdish forces allied with Washington as ‘terrorists’ and bringing up the extradition issue of Turkish cleric Fethullah Gulen, who lives in the USA, blaming him for the failed 2016 coup attempt in Turkey. With Washington’s continued refusal to extradite Gulen, and Ankara’s criticism of Trump’s invitation to Washington of SDF Chief Mazloum Abdi, considered a “terrorist” by Turkey, the two sides appeared as at loggerheads as ever, despite what some call a “special relationship” between Erdogan and Trump that has seen the White House tread lightly with punitive measures urged by US lawmakers and allies.

What will Syrian Kurds gain now?

The Turkish army and its so-called Syrian National Army militia which appeared to include some former ISIS terrorists in recently released footage, have been accused of war crimes against Kurdish civilians and fighters alike, as they conducted sweeping violence across northern Syria, carried out kidnapping and summary executions and even ISIS-style beheading  and mutilation operations in brutal revenge against the Kurds who rushed to the Russians and the Assad government in Damascus for protection.

The vast majority of Syrian Kurds feel betrayed and abandoned by the US administration, and that following the withdrawal of US troops, Turkey was given the green light by Trump to advance across its southern border on October 9 to establish a safe zone, free of Kurdish YPG fighters- viewed by Turkey as an offshoot of the armed Kurdistan Workers’ Party (PKK), considered by Ankara and many Western countries as a “terrorist” organisation – whose campaign for autonomy has claimed the lives of  tens of thousands of people over the past four decades or so. It is not utterly clear what the Syrian Kurds will gain, if anything, from this US-Turkish summit at the White House, especially in light of the rapidly diminishing trust they once had in their supposedly main ally in Washington who left them in the open against a mercilessly advancing Turkish killing machine.

L'articolo Strained Ties for Close Allies: Erdogan vs. Trump proviene da InsideOver.

US President Donald Trump was elected through a vector of powerful cultural and economic forces as well as the vastly underwhelming performance of Democratic opponent Hillary Clinton. In his campaigning and administration policy always seems to be shifting and repositioning: to supporters, this is to put America first at all costs, to detractors it is because Trump is an impulsive blowhard with no real knowledge or plan.

Trump’s Trade Troubles

Trump’s trade troubles started logically enough: out of a purported desire to create a more even playing field with China and other trade partners including the EU, Mexico and Canada. Trump wants to lessen the massive American trade deficit – standing at over $620 billion – and help job growth at home. Robert Lighthizer, the US trade rep who has had an outsize influence on trade policy in the Trump admin was saying in 2018 that a measured approach targeting certain industries and imports with tariffs would bring big rewards and minimal pain. However, when reality met rhetoric, Trump’s plans have gone haywire. If China and the US don’t agree to something by the middle of December, Trump is set to slap on 15 per cent in additional tariffs on $60 billion of Chinese products.

Why A Trade War?

Trump’s clashes with the EU, China, Mexico and Canada highlight his instinctive distrust of multilateral agreements and also his belief that leveraging competing interests against one another is bound to help the United States. Beyond that, though, Trump can’t even do much bilaterally either beyond what is already served on a silver platter. His ongoing tangle with China did not result in American companies all coming back to stay in the USA; it mostly resulted in them finding new places to set up shop like Vietnam, Taiwan, Mexico and Thailand. This has been presented as a positive development by Trump allies, but there is no reason to think it is the first step to going back to many products being Made in America. Still, the downsides of the Trump trade war and not being fully felt yet for various reasons related to American economic strength independent of Trump. Although it is unlikely that American trade disputes will cause damage of the kind that the 1930 Smoot-Hawley Tariff did–extending the Great Depression, and jacking prices up to 50 per cent, it is still an overall wild card that the world economy cannot afford to risk.

Where Trump Is Right On Trade

Trump is entirely correct about one major claim of his campaign and presidency: America buys much more than it sells. This is especially true when it comes to basic consumer items, automobiles and necessities. The Balance notes, “In 2018, the United States imported $648 billion in drugs, televisions, clothing, and other household items. It only exported $206 billion of these consumer goods. That alone added $442 billion to the deficit. America imported $372 billion worth of automobiles and parts, while only exporting $159 billion. That added another $214 billion to the trade deficit.” Of that trade imbalance, the vast majority is with China. In 2018 alone the US racked up $419 billion in trade deficit with Beijing, importing $540 billion of clothing, computers and other items and exporting only $120 billion in aeroplanes, soybeans and cars. Technology transfer is another big problem, and one that tariffs haven’t fixed. American companies in China are required to hand over “trade secrets” if of their technology if they wish to sell products in China. China’s ongoing currency manipulation is also a problem.

The Reality Of Tariffs

Tariffs sound like playing hardball: a stern message to China to compromise or else. In reality, they have frequently backfired on vulnerable US economic populations like small farmers. As retaliatory Chinese tariffs makes soybeans less and less profitable to export family farms get driven into the ground. Instead of actually finding a solution, the Trump admin shovelled $30 billion in subsidies to hurting farmers. It turns out that even if trade wars could be good they are not “easy to win,” especially in a globally-interconnected modern economy. As Democratic presidential candidate Bernie Sanders said this summer in a Democratic town hall, tariffs certainly can be used effectively as part of a coherent overall trade policy, but it’s the reactivity and irrationality of how Trump is using them that is the problem.

Trade War Spillover

Hope Of A US-Canada-Mexico Deal?

There is currently some hope of the Democrats coming together with Trump on a US-Mexico-Canada trade deal, which Trump is dubbing the USMCA. It’s a rare point of bipartisan cooperation and getting work done amid the ongoing impeachment inquiry, although those more to the left of the Democratic party are not yet on board with the USMCA. House Speaker Nancy Pelosi has said the deal is solid and “imminent” and can also potentially be a precedent for more similar deals going forward. The deal would scrap NAFTA, a free trade pact which helped Trump win the White House through disaffected American communities gutted by the Clinton Administration policy.

The deal is similar to NAFTA but gives some extra protection to American pharmaceutical patents, automakers and open up Canada’s subsidized dairy industry a little more to American milk producers. That said, it is not likely that it would significantly prevent or dis-incentivize American companies from outsourcing or heading out of the US. Moreover, the deal just recaptures ground in North America that Trump lost in the Asia-Pacific by withdrawing the US from the Trans-Pacific Partnership (TPP). Some Democrats want more union rights and enforceable provisions in the deal as well as better environmental regulations before they agree to the USMCA, but it could end up as a rare Trump trade win.

Is The Trade War Worth The Fight?

While some commentators feel the trade war with China will be worth the fight, even if this is true it is worth looking at why mini-trade disputes are popping up all over that offer no real advantage to the US or its trade partners. While it is true that a fluctuating stock market does not necessarily spell disaster, the Trump trade disputes consistently seem more emotionalized and ideological than logical.

L'articolo Trump’s Trade Philosophy: Emotions Trump Facts proviene da InsideOver.

With Jean-Claude Juncker and Donald Tusk due to retire as the President of the European Commission and President of the European Council respectively, US Secretary of State Mike Pompeo has expressed his intention of ‘resetting’ relations with Brussels. Tensions between the US and the EU have escalated over recent years due to disagreements over climate change, Iran and trade. Politico reports that Pompeo visited Brussels on Monday to meet European Parliament President David Sassoli and the EU’s incoming leadership team: Commission President-elect Ursula von der Leyen, Council President-elect Charles Michel, and the nominee for foreign affairs chief, Josep Borrell. Due to recent hostilities between both sides, the Secretary of State did not meet any of the EU’s current leaders.

US Ambassador Gordon Sondland was forced to deny that this meeting signalled that the Trump administration had given up on its relationship with the EU’s existing leadership team, and stressed that President Trump will collaborate with them when necessary. Regardless of who is leading the EU, in the meantime Iran and trade remain the two most vital issues that Brussels and Washington need to resolve. Trump could use this as an opportunity to resolve trade tensions with the EU’s new leadership team.

Trump has never liked the way the US and the EU trade with each other, and that is because he believes over the years the latter has imposed tariffs on American goods whilst Washington has allowed European products to arrive in the US with relative ease. He told a New Hampshire rally that the EU is “worse than China, just smaller. They treat us horribly.’” He has good reason to believe this.

Bloomberg says figures published last month show the EU’s trade surplus with the US stood at 75 billion euros in the first half of 2019, up more than 11 per cent a year earlier. A decade ago the EU’s bilateral surplus with the US was 18.7 billion euros. Furthermore, Germany’s surplus is by far the biggest in the bloc. Total exports outweighed imports by 112 billion euros from January to June. Berlin’s surplus for shipments remained steady at 88 billion euros for business with countries outside the bloc.

Meanwhile, the US is running a trade deficit with the EU. In 2018, the value of US goods to Europe stood at $575 billion, which was less than the value of European imports to the US ($684 billion).

The EU has managed to resist the effects of some of Trump’s tariffs so far. According to Bloomberg, the continent withstood his aluminium and steel tariffs. But this does not mean Brussels has experienced the worst of the US’s tariffs so far. The President has labelled German cars as a national security risk and he’s threatened France with a digital tax.

Nonetheless, the President’s strategy with China and the EU is to impose tariffs on their goods until they slash their own taxes on US goods. He knows that he can solve this trade war with Brussels and Beijing by drawing up separate trade deals with both sides. Trump told Al Jazeera that he is ‘very close’ to making a deal with the EU, though “it is not easy negotiating with them.” In order to make talks between both partners successful, they will have to reach an agreement on automobiles, foodstuffs, energy, airplanes and technology. Trump will be visiting Berlin soon to discuss how his country and the EU can conclude their trade discussions.

The ongoing trade war could persuade a new EU leadership team and a US administration keen on pursuing fair trade on both sides of the Atlantic that this is a chance to reach a new trade deal between Brussels and Washington. But until they do, tariffs are here to stay.

L'articolo How Trump could ease US-EU trade tensions proviene da InsideOver.