trade war

Momentous Week in Washington Touches on Core National Values

The Supreme Court ruled on gerrymandering and the Census citizenship question, Congress debated emergency border funding and set a date for testimony by former Special Prosecutor Robert Mueller, Trump flew to Japan for a G20 summit and Democratic presidential candidates debated in Miami. It was a pretty momentous week.

The Supreme Court ruled on gerrymandering and the Census citizenship question, Congress debated emergency border funding and set a date for testimony by former Special Prosecutor Robert Mueller, Trump flew to Japan for a G20 summit and Democratic presidential candidates debated in Miami. It was a pretty momentous week.

This has proven to be a momentous week in Washington, DC that touched on the nation’s core institutions and values and how they interrelate.

The Supreme Court, in separate 5-4 rulings, left untouched partisan-tinged congressional district gerrymandering and blocked the Trump administration’s attempt to place on a question about citizenship on the 2020 Census.

The high court’s majority said the US Constitution doesn’t bar politically influenced gerrymandering or allocate authority to the court to police it. In an impassioned dissent, the minority said the ruling is setback for democratic values.

Speaking for the majority, Chief Justice John Roberts said the Trump administration failed to make a persuasive argument that the citizenship question is needed to help enforce the Voting Rights Act. "If judicial review is to be more than an empty ritual, it must demand something better than the explanation offered for the action taken in this case," Roberts wrote. The Census Bureau has said it wants to start printing questionnaires next Monday. Calling the ruling “ridiculous,” Trump indicated he would try to delay the Census “for as long as it takes.”

Meanwhile, Congress struggled to reach bipartisan agreement on an emergency funding measure to address border migration issues before the July 4 recess. The Democratically controlled House and the Republican controlled Senate passed separate versions this week. Among the differences between the two bills is whether there will be specific directions on how the $4.5 billion can be spent. President Trump has threatened to veto the House version. 

The picture of the drowned bodies of Salvadoran migrant Oscar Alberto Martínez Ramírez and his nearly 2-year-old daughter Valeria lie on the bank of the Rio Grande shocked the nation and accentuated calls for actions to address the humanitarian crisis on the border. (Photo Credit: Julia Le Duc/AP)

The picture of the drowned bodies of Salvadoran migrant Oscar Alberto Martínez Ramírez and his nearly 2-year-old daughter Valeria lie on the bank of the Rio Grande shocked the nation and accentuated calls for actions to address the humanitarian crisis on the border. (Photo Credit: Julia Le Duc/AP)

Republicans and Democrats acknowledge there is a humanitarian crisis on the US-Mexico border, punctuated by the widely circulated photograph of a Salvadoran father and his young daughter clutching his neck who drowned in the Rio Grande trying to enter the United States without going through a port of entry.

The uproar caused by the photo and continuing coverage of child migrant holding facilities prompted John Sanders, acting head of US Customs and Border Patrol, to resign. Tellingly, he submitted his resignation to the acting head of Homeland Security.

As Trump flew to Japan for a G20 meeting on Wednesday, Democratic candidates sparred in Miami in the first of two debates in the 2020 presidential election. They talked about health care reform, immigration policy, climate change and economic policy. Trump, who watched the first night’s debate on Air Force One, called it boring as the first 10 candidates staked out largely progressive agendas that included moving away from private health insurance and increasing taxes on wealthy Americans.

The second set of hopefuls, which includes frontrunners Joe Biden and Bernie Sanders, will debate Thursday night.

In Japan, Trump is expected to meet on the sidelines with Russian President Vladimir Putin and Chinese President Xi Jinping. His conversation with Xi will likely center on an escalating trade war that is taking its toll on both countries’ bottom lines. Trump snarled at reporters who asked what he will discuss with Putin, telling them it was “none of your business.” Heightened tensions in Iran and Russian military involvement in Venezuela are two probable topics.

Ahead of the summit, Trump lashed out at India, Japan and Germany over trade policy and “security freeloaders.” Trump is expected once again to object to any joint statement at the summit that references the Paris Climate Accord, which will further strain US-French relations. 

Congressional Democrats announced former Special Prosecutor Robert Mueller will testify publicly July 17 before the House Judiciary and Intelligence committees. That suggests the two hearings will sequentially deal with Trump’s potential obstruction of justice and Russian interference in the 2016 presidential election..

Questioning of Mueller is virtually certain to zero in on testimony provided to his investigation under oath by White House officials who have been barred from testifying in Congress by Trump’s attorneys. The interrogation could prove pivotal to a decision by House Democratic leaders to draw up articles of impeachment.

Another fight is brewing over foreign policy. Democrats insist Trump needs a congressional declaration of war before launching any military action in Iran. Trump, supported by Senate GOP leaders, says he doesn’t.

A bipartisan resolution calling on the Trump administration to suspend an $8 billion arms sale to Saudi Arabia won’t stop the deal, according to Trump officials.

Under the radar, former Trump Secretary of State Rex Tillerson has been testifying in private to the House Foreign Affairs Committee. A transcript of his testimony released this week included Tillerson’s claim that Trump’s son-in-law Jared Kushner was in contact with world leaders without coordination with the State Department, often leaving him out of the loop on emerging policies. 

“Tillerson also described the challenge of briefing a president who does not read briefing papers and often got distracted by peripheral topics, noting he had to keep his message short and focus on a single topic,” according to a report in The Washington Post.

 

 

‘America First’ Policies Raise Questions about US Leadership

President Trump’s ‘America First’ policies have played well with his political base, but not so well with global leaders as tensions are growing over the specter of spiraling trade war with consumers at home and abroad likely to pay the price.

President Trump’s ‘America First’ policies have played well with his political base, but not so well with global leaders as tensions are growing over the specter of spiraling trade war with consumers at home and abroad likely to pay the price.

One of the unintended successes of President Trump’s ‘America First’ policies has been to galvanize the European Union, Japan and China to preserve and bolster multilateral trade, regulatory and security arrangements Trump disdains.

“After months of denialangerbargaining and depression, Europe and other parts of the world have accepted that Mr. Trump and his mission of disruption are not going away,” reports The New York Times.

Accounts suggest foreign leaders are stunned by Trump’s continuing attacks on traditional allies, cozy relations with Russian President Vladimir Putin and seeming disavowal of America’s role as the leading advocate of a liberal world order.

EU leaders are especially astonished at being referred to as “foes.” In June, 29 EU ambassadors to the United States sent an open letter to Trump in defense of free trade and investment policies.

“Together, the US and EU have created the largest and wealthiest market in the world. The transatlantic economy accounts for half of the global gross domestic product by value, which directly supports more than 15 million high-quality jobs and $5.5 trillion in commercial sales. And nearly one-third of the world’s trade in goods occurs between the EU and United States alone,” the letter said. The ambassadors added that EU investment in the United States exceeds US investment in Europe.

EU leaders, despite qualms about Chinese trade practices that mirror Trump’s, have met with Chinese leaders without US involvement. According to the Times, the “summit meeting produced an unusual joint declaration and a common commitment to keep the global system strong.”

The EU then signed what has been described as the largest free-trade agreement in history with Japan, again with no US involvement.

Now, the EU is preparing “whopping tariffs” in response to proposed Trump tariffs on items such as German-made cars, noting that 45 out of 50 US states export more goods and services to Europe than China, totaling around $500 billion in 2016.

GOP Senator Ben Sasse from Nebraska may have spoken for the wave of critics who think Trump’s tariffs are undermining US exports that have taken years to cultivate and who believe his proposed $12 billion package of one-time financial aid to farmers won’t come close to co vering the long-term damage done by the tariffs.

GOP Senator Ben Sasse from Nebraska may have spoken for the wave of critics who think Trump’s tariffs are undermining US exports that have taken years to cultivate and who believe his proposed $12 billion package of one-time financial aid to farmers won’t come close to co vering the long-term damage done by the tariffs.

On the regulatory front, the EU fined Google $5.1 billion for antitrust behavior, which drew a sharp rebuke from Trump. Google plans to appeal the EU ruling, but it may be forced to reckon with it in the marketplace in the meantime.

Interestingly, the basis for the fine echoed an unusually American-sounding rationale. “Google has used Android as a vehicle to cement the dominance of its search engine,” Margrethe Vestager, Europe’s antitrust chief, told the Times. “These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere.” 

European Commission President Jean-Claude Juncker travels to DC this week to discuss the deteriorating EU trading relationship with Trump officials.

Meanwhile, the impact of tariffs is beginning to be felt. The Associated Press carried a story last week about the stress felt by US soybean farmers, who are a target of retaliatory Chinese tariffs. One soybean farmer said he already has lost $250,000 in value for his current crop. Soybeans on the Chicago Board of trade have dropped $2 per bushel in value. Farmers interviewed say they still support Trump, but want to know what the end game is.

The Oregonian posted a story last week listing five Oregon exports at risk in a spiraling trade war with China. Noting Oregon exported $3.5 billion worth of goods to China in 2017, the article said the most vulnerable are:

  • Computer and electronic products ($2.1 billion)
  • Machinery ($435 million)
  • Chemicals ($363 million)
  • Transportation equipment ($262 million)
  • Agricultural products ($235 million)

Oregonian reporter Mike Rogoway provided a more comprehensive look at Oregon exports in a piece published in June. Among the interesting statistics Rogoway uncovered: 87,000 Fords produced in the United States were exported through the Port of Portland, 90 percent of which headed to China.

US business interests also remain frustrated at Trump efforts to negotiate changes in the North American Free Trade Agreement, which appear to have stalled and made more difficult by the election of a leftist president in Mexico.

Global tensions are growing over the budding trade war, as reflected by a statement coming out of the G20 meeting held in Argentina over the weekend. US Treasury Secretary Steven Mnuchin attended the meeting and agreed to sign the joint statement.

Mnuchin acknowledged what he called “micro impacts” caused by the Trump tariffs, but defended them as a pathway to freer trade that is fair to the United States. News reports said Mnuchin and Chinese finance officials conversed during the 2-day meeting, but only engaged in “chitchat,” not serious negotiations.

There are harsher judgments of Trump’s policies. WorldPost editor Nathan Gardels. wrote, “The ‘American First’ president who denigrates democratic allies as foes is no longer the leader of the free world….Trump appears to be not even the leader of the United States.”

 

Restricting Free Trade to Save Free Trade

Globalization has come under sharp scrutiny in the 2016 presidential election, exposing deepening political fault lines. Harvard professor and author Dani Rodrik offers ideas for how to save international trade by giving individual nations a license to restrict trade to protect domestic economic and political institutions. (Illustration by Andrew Holder/New York Times)

Globalization has come under sharp scrutiny in the 2016 presidential election, exposing deepening political fault lines. Harvard professor and author Dani Rodrik offers ideas for how to save international trade by giving individual nations a license to restrict trade to protect domestic economic and political institutions. (Illustration by Andrew Holder/New York Times)

Globalization has gotten a black eye in the 2016 presidential election and in the Brexit vote in the United Kingdom, but populist opponents have offered few tangible alternatives other than a trade war, rejecting the Trans Pacific Partnership or trying to renegotiate existing trade deals.

Dani Rodrik, a Harvard professor and author, offers suggestions in a New York Times op-ed that will annoy populists, labor unions and globalization cheerleaders. He says to preserve free-flowing trade – and the democracies the engage in it – will require giving individual nations the autonomy to protect their own interests. 

“Globalization has deepened the economic and cultural divisions between those who can take advantage of the global economy and those who don’t have the resources and skills to do so” Rodrik wrote. “Nativist politicians like Donald J. Trump have channeled the resulting discontent as hostility to outsiders: Mexican or Polish immigrants, Chinese exporters, minorities.” 

Rodrik’s solution is to cap “hyper-globalization” and replace it with a form of globalization with increased national autonomy. For example, he says nations should be able to place restrictions on cross-border transactions that involve worker or environmental rights violations.

That sounds eerily similar to the kind of trade restrictions that globalization and free-trade agreements have sought to eliminate. Rodrik claims some trade trimming will be necessary to salvage the basic idea of free trade, which he notes has “pulled 700 million people out of poverty." “Globalization,within limitations,” he says, “has been good economics. Globalization, within limits, can be good for our democracies, too.”

In his op-ed, Rodrik offers four specific suggestions:

  • Give individual nations the autonomy to choose trade-related institutions that best represent their interests and reflect their risk-tolerance.
  • Countries should be able to prevent “regulatory arbitrage” whereby corporations circumvent national labor or environmental laws by moving operations to offshore locations.
  • International economic negotiations should pivot on domestic policy autonomy combined with increased trade transparency to ensure both sides keep their commitments.
  • Global governance should focus on enhancing democracy, not globalization.

“Global governance cannot overcome major problems like inequality, social exclusion or low growth,” Rodrik says. “But it can help by devising norms that improve domestic policy transparency, public deliberations, broad representation, accountability and use of economic evidence in domestic proceedings.”

Interesting by its omission is mention of reforms to trade adjustment assistance, which has drawn criticism for being inadequate and training dislocated workers for jobs that don’t exist in their community – or at all.

The fundamental question raised by Rodrik’s call for a “little-less-free trade” is whether a little would turn into a lot. Nations already file actions alleging unfair trade practices that range from “dumping” products at low costs to self-serving tariffs that make imported products noncompetitive. The license to protect domestic economic interests could embolden industry, labor and environmental advocates to push for greater protections, which could trigger what amounts to trade wars between nations or international regions.

Rodrik also doesn’t address the issue of globalization of financial markets, which dwarf the movement of goods and services across national boundaries. Restricting the flow of money is considerably more complex and can be tied up with another international bugaboo – concessionary tax policies and tax havens.

None of this discounts the value of the conversation Rodrik’s op-ed started, which highlights the many moving pieces that must be addressed to find a balance that benefits consumers without unduly exposing workers to economic discoloration and ultimately posing a challenge to democratic governance.