Author: s.mednick

President Trump is not going to pull out of the deal, but he vows to renegotiate. Here are industries that would be largely affected by the deal:

1. Automotive industry. Interestingly, this is the same industry that will likely suffer as a result of Brexit. Last year, the United States imported 1.6 million vehicles from Mexico, but about 40% of the value of those cars contained parts from the US. Restricting this trade could actually make the US auto industry less competitive, and rather than bringing back jobs, jobs would go to other countries like China or India. The Center for Automative Research suggests about 30K jobs could be lost in Michigan alone.
2. Apparel. American textile producers shipped more than $11 billion in goods to Canada and Mexico last year.
3. Agriculture. As we know, American exports a lot of corn to Mexico, and Mexico exports avocados to the US and Canada. But, the effects in this industry wouldn’t be felt as much as the auto industry.
4. Medical devices. The US imports about 30 percent of its medical devices and supplies, and Mexico is a leading supplier. Moving this industry back to the US would be very complicated, considering the FDA has to sign off on any changes in factories.

It will be interesting to see how industry leaders respond to trade negotiations. General Electric, for one, has come out in strong support of NAFTA.

One Belt One Road is a Chinese trade initiative conceived in 2013, and China is courting other world leaders to support it. It’s not only about Chinese interests and trade but about projecting Chinese power in a different way. What’s so fascinating about this to me is the way it’s being romanticized. There’s even a narrative aimed at kids. The state’s China Daily newspaper is running a web series of an American father telling his kid about “China’s idea which belongs to the world.” Here are the basics of the idea:

-China wants to put 100s of billions of dollars in infastructure around the world, reviving ancient trade routes

-Ports, pipelines, railways, industrial hubs, would integrate more than 60 countries and 60% of the world’s population.

-This road would boost the Chinese economy, increase Chinese access to oil, establish trading partners for the future

One of the major points of contention is the single currency system within the EU. Le Pen wants to leave the Euro system but that seems more based on nationalism than economics. Macron says no, but that EU reform is required. Le Pen says “the euro is dead”, but doesn’t suggest leaving the single currency system right away. It seems to me more like something she wants to campaign on, but not something she actually wants to do because she knows it would be harmful.

Le Pen reminds me so much of Trump. She uses inflammatory rhetoric, claims she will keep the French people safe, projects her own idea of what French culture is and should be. Macron on the other hand doesn’t seem to be tone-deaf the way Clinton’s campaign was. He recognizes the real struggles and desires of Le Pen’s supporters when it comes to trade, and he strongly advocates reform (and blames Germany for lack of said reform). From The Guardian:

“The dysfunctioning of the euro is of good use to Germany, I have to say,” said Macron, adding that a lack of trust between France and Germany was blocking major reforms that would increase solidarity among the 19 members of the eurozone.

“The euro is a weak Deutsche Mark,” said Macron. “The status quo is synonymous, in 10 years’ time, with the dismantling of the euro.”

Ironically, electing Macron could increase the value of the euro, as its value jumped last night.

 

https://www.nytimes.com/2017/05/02/world/australia/china-students-daigou.html?rref=collection%2Fsectioncollection%2Faustralia

Chinese students in Australia are purchasing Australian products and selling them back to people in China, by either selling them directly to customers in China or shipping them to Hong Kong, where traders carry them across the border, avoiding mainland tariffs. These students call themselves daigou (purchasing agents – I’m not sure if this is a direct translation or industry specific term).

This industry has grown to a point where Australian businesses meet with these sellers directly to share new products. It appears these individuals are successful because they are quick to spot new trends, and customers trust them. They sell directly to friends and family.

I think this has implications for trade worldwide. How much could individuals like these profit from circumventing official trade routes? Could the future of global trade rely on individual trendsetters more the multinational corporations? This article caught my eye because a Baruch alum named Marlon Willie -he was speaking at a panel the other day – has a sort of similar business called MangoErrands. It helps Jamaicans overseas run errands in Jamaica and purchase products they can’t find outside of the country. (His business of course is official and not evading taxes, like some of the daigou business are 🙂 )

I think it’s interesting how even markets we would think are separate depend a lot on each other. This article explains how activity in the EU directly affects trade in Asia. Unsurprisingly, France leaving the EU would be bad for Asian markets. A stable EU is good for Asia. Plus, France doesn’t have very strong times with Asia, not in the way that Germany does (with China) and the UK does (with India). So I understand this to mean that without access to the EU, there would be no trade with France, right away at least.

“If you look at trade, it’s more about how a shock in France can have a shock in the EU, then this can have a shock on Asia Pacific – that is the derivative impact on trade,” Mahamoud Islam, an economist for Euler Hermes in Hong Kong.”

Interesting perspective on what cattle ranchers stand to lose/gain in future international trade agreements. The US exports more beef than it consumes, and cattle ranchers would like for this to continue. They mostly voted for Trump and appreciate the regulations that Trump has rolled back, but are concerned about how his stance on trade deals will effect their business.

“As a part of TPP, US beef producers who currently face import duties of up to 38.5% on fresh and frozen beef entering Japan would have seen those tariffs phased out over 16 years.”

http://www.independent.co.uk/news/business/news/germany-donald-trump-border-tax-lawsuit-angela-merkel-wto-economy-minister-brigitte-zypries-world-a7634681.html

What’s so fascinating to me about international relations is that one country can actually sue another country. Germany’s economy minister said they may file a lawsuit against the US if Trump implements a proposed border tax. In the past Trump has advocated a 35% tax on cars that BMW plans to build in Mexico and export to the US. He’s likely bluffing, in my opinion.

http://www.reuters.com/article/us-g20-germany-imf-idUSKBN17C1AN

The International Monetary Fund, World Trade Organization and World Bank released a joint report called ‘Making Trade an Engine of Growth for All,’ which urges governments to address the negative impact global trade has had, especially in advanced economies. Christine Lagarde, IMF Managing Director, warns that trade will no longer be an engine for growth if there is no reform.

It seems as though states and international institutions are eager to change the conversation about trade by defending it and advocating improvement.

https://iccwbo.org/media-wall/news-speeches/5-key-takeaways-icc-world-trade-agenda-day/

The ICC World Trade Agenda Day took place a few weeks ago in London. It was managed in partnership with the Qatar Chamber of Commerce and Industry and brought together international and British business leaders to make the case for global trade and stem the tide of protectionist and anti-globalist sentiments. The 5 takeaways from the meeting were:

1. Time to counter the rhetoric on trade
2. Access to trade finance is vital
3. The WTO has never been more important
4. The Internet is democratising economic opportunity
5. The G20 must stand firm on protectionism

The ICC has a #TradeMatters campaign, designed to create meaningful conversation about trade without inflammatory rhetoric.

https://www.theguardian.com/commentisfree/2017/apr/04/the-guardian-view-on-theresa-mays-world-trading-on-fantasy

A fascinating approach to post-Brexit Britain: trade with other countries outside of the EU. The Guardian explains why “senior ministers are getting out into the world to promote what Theresa May calls “global Britain”.” She and other senior ministers have been traveling to countries from India to Saudi Arabia to east Asia trying to forge new agreements. To note how difficult this strategy would be, 44% of British exports currently go to others members of the EU, so it would take decades for Britain to make up for this loss. This seems very ironic considering the overwhelming sentiment behind the Brexit campaign was anti-globalization.