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Why Europe Should Let Trump “Win” on Trade

The European Union says it’s ready to retaliate against new tariff measures proposed/instituted by the Trump administration. However, letting Trump “win” the trade war would be far smarter.

Mentioning Trump’s name in Brussels (the capital of the European Union) produces a lot of eye-rolls. Trump is not only unpopular, but he is also regarded as being uninformed at best and having malicious intent at worst. Whether or not those things are accurate is a story for another time, but the trade war debate reveals the level of self-reflection in Europe. Much is said about the tariffs imposed on European goods, and the narrative in Brussels is that the United States started the trade war, forcing the European Union to retaliate.

The fact that the European Union initiated the most important trade barriers didn’t occur to them.

On January 18, the European Union adopted a negotiating mandate for the trade talks with the United States. Brussels announced that every new tariff measure by Washington, DC, would be met with retaliatory tariffs in Europe.

EU Trade Commissioner Cecilia Malmström warned that if Trump decides to punish Europeans on trade, “we are very advanced in our internal preparations” to retaliate. “Should that happen, we are ready, it would have a very damaging effect on the negotiations,” she said.

Between 2010 and 2014, the US and the EU negotiated the Transatlantic Trade and Investment Partnership (TTIP). The negotiations ended after considerable public protests in Europe pressured Brussels to break-off the talks. Fear-mongering anti-free trade activists warned the public about the threat of importing goods from the United States, such as GMO foods.

However, importing goods produced to different standards than EU norms does not in the least “undermine” EU standards. Provided consumers are aware of the origin of their products, mutual recognition of standards poses no threat to anyone’s legislation.

report by Foodwatch, a German NGO pretending to stand for consumers, also treats the idea of free trade with contempt. This is well illustrated in a chapter on Mexican trade relations on page 47. The researchers write:

In 2001 Mexico introduced a tax on all soft drinks flavoured with sweeteners other than cane sugar (e.g. with beet sugar or isoglucose, a syrup made from corn or wheat starch). The exception for drinks sweetened with cane sugar protected the country’s own sugar cane production.

They continue by explaining that such taxes are being challenged under WTO trade rules and that industry lobbyists oppose them through the claim of “a form of trade discrimination.” The EU, of course, is well-known for trade discriminatory practices aimed at protecting its own producers, including its famous ban on beef treated with the estradiol-17β hormone.These activists would oppose free trade no matter what because it increases food trade.

Such agricultural protection is always a major sticking point in trade negotiations, so it is certainly an odd point for anti-trade activists to bring up.

The report’s tenor is exemplified by this statement from one of its authors, Thomas Fritz, during the Foodwatch press conference:

Our conclusion is that due to these FTAs [Free Trade Agreements], food trade is indeed likely to grow, along with the risks posed to the consumer and the environment.

Forget concerns about democracy, judicial procedures, or even those of food standards: these activists would oppose free trade no matter what because it increases food trade. “The risk to the consumer”—what risk are we talking about? The risk of falling food prices and increased quality? The risk of expanded choice? And to what “risk” are we exposing the producers in South America to? The risk of increased production and economic prosperity?

What would it take for Donald Trump to “win” the trade war? In essence, Trump supports getting rid of all tariff and non-tariff barriers. All the European Union needs to do is to tell the administration “you won” and drop the previously introduced retaliatory measures. This would open the market and provide cheaper goods for European consumers and enable Trump to approach his goal of a zero-tariff basis.

But that isn’t going to happen because the notion of “winning” is as politicized in Brussels as it is during a Trump rally. So next time you receive eye rolls at the mention of the trade war in Europe, recognize that over here on the old continent, we aren’t really any better.

Rice tariffs: who are we kidding on the EU’s “free trade”?

The European Union introduces tariffs on rice from Cambodia and Myanmar in an effort to protect Italian farmers. Another example of “free trade” à la European Union.

It was announced last Wednesday that tariffs on rice from Cambodia and Myanmar were being re-introduced, in order to fulfil safeguard clauses. The terminology here is telling. European farmers are supposed to be “safeguarded” from foreign competition. It was at the request of Italy the Commission already suggested structural tariffs in November, those starting at €175/tonne in the first year and then progressively dropping to €150 in the second year and €125 in the third year.

Back then, the proposal didn’t find a majority in the Council, and therefore bounced back to Berlaymont, which now confirmed its initial intention. Until now, Cambodia and Myanmar benefitted from the EU’s Everything But Arms (EBA) trade scheme, which unilaterally grants duty-and quota-free access to the world’s least developed countries (apart from arms and ammunition).

Italian MEP Tiziana Beghin said, according to Politico, that she had been fighting for a safeguard to protect Italian farmers since 2014, and said that the news was a “relief” for more than 4,000 enterprises and families.

The Five Star Member of the European Parliament surely completed a smart political move for her constituants, which benefit from new tariffs, or who have been misled into supporting them. More misled however have been those who for the longest time have believed that the goal of the European Union was to be in favour of free trade. What a disappointment that must be.

The European Commission writes in its press release:

“The initial request for trade safeguards on rice imports was tabled by the Italian government in February 2018 and supported by all other EU rice growing Member States (Spain, France, Portugal, Greece, Hungary, Romania and Bulgaria).”

It is written in this way because either the Commission has absolutely no notion of what it means to have a vested interest, or because it realises itself that free trade does not exist in the European Union.

While rice-producing member states are naturally lobbied by their local rice farmers, consumers have nobody to speak on their behalf. Too many of the established consumer organizations have nothing to say on tariffs. In fact, it seems all too often that they back the protectionist far-left and far-right positions, in order to “protect jobs” and “support local production”.

To them, consumer prices seem irrelevant. In fact, the European consumer organization BEUC has nothing to say at all about the EU’s re-introduction on rice tariffs. Does it not matter to them that it is low-income consumers who will be hit the hardest by this form of indirect taxation?

This is not the first time this happens. The European Union constantly introduces new tariffs, and many have been added since the United Kingdom voted to leave the European Union. The reasons are diverse: often it is because the producing country is accused of subsidizing their local economy (which the EU does also through the Common Agricultural Policy), but a safeguard measure can be as blatantly protectionist as in the example of rice imports from Cambodia and Myanmar.

If you were to suggest something similar on a national level, you’d be accused of nationalism. If done on a Brussels-level, it is merely a safeguard.

Protectionism is purely ideological because it is based on sentimental beliefs. If we were to take nationalism out of the picture, it would be difficult to argue that international free trade would be disadvantageous while domestic free trade (say, between cantons or provinces) is advantageous. This is particularly true in large trading blocs such as the European Union. Aren’t French farmers also hurt by imports from Bulgaria?

And if internal subsidization processes of the EU are working to eliminate those differences within the bloc, then how is Bulgaria supposed to rise out of its economic hardships, if nobody can ever compete with Western Europe, make a profit and innovate? And what is the big threat anyway, when cheap food for our consumers is the result?

The price for the economic illiteracy of this entire process is footed by the European consumer, who is told that the Trump’s of the world are the problem with free trade. And while Washington D.C’s trade politics have indeed changed for the worse, they’re unparalleled in their doublespeak by an EU pretending to stand for free trade in the world, while catering to local interests in order to keep the bloc together.

Warum sollen Arme Zölle auf Medikamente zahlen?

Zeitgleich zum Weltwirtschaftsforum trifft sich Ende Januar unweit von Davos in Genf der geschäftsführende Vorstand der Weltgesundheitsorganisation. Erschütternde Nachrichten über erneute Ebola-Fälle aus dem Kongo sollten vermuten lassen, dass es sich bei diesem Vorstandstreffen hauptsächlich um die effektive Bekämpfung dieser schrecklichen Seuche drehen wird.

Hilfsmitarbeiter haben teilweise ihre Arbeit im Kongo ruhen lassen müssen, da es Gewalt und Übergriffe auf sie gab. Gleichzeitig wurden Regionalwahlen in zwei Provinzen verschoben, was mit der anhaltenden Ebola Epidemie begründet wurde, aber von vielen Menschen als politisches Manöver gegen die Opposition wahrgenommen wurde. Dies sorgte für zusätzliche Unruhen und macht die Arbeit von internationalen Hilfskräften noch schwerer. In solchen Situationen ist auf die geballte Kraft der Weltgesundheitsorganisation und deren UN Mandat zu hoffen.

Doch der 2017 gewählte und amtierende Generaldirektor, Dr. Tedros Adhanom Ghebreyesus, hat zu häufig andere Prioritäten als die akute Bekämpfung von ansteckenden Viren. Der ehemalige äthiopische Außenminister zeigt offen seine ideologisch motivierten Vorstösse im Kampf gegen nichtübertragbare Krankheiten (englisch: non communicable disease oder NCD), wie zum Beispiel Videospielsucht. Erst letzten Sommer machte die WHO Schlagzeilen mit der Anerkennung von Videospielsucht (gaming disorder) als Krankheit.

Während Videospiele hoffentlich nicht die Agenda des nächsten Vorstandstreffens füllen werden, besteht die Gefahr, dass deutlich mehr über nationale Gesundheitspolitik gesprochen wird als die internationale Bekämpfung globaler Seuchen. So stehen große Teile der Agenda im Lichte der sogenannten Access to Medicines Roadmap, die sich zwar zum Ziel setzt den Zugang zu Medikamenten weltweit zu verbessern, aber hauptsächlich Regierungen vorschlägt private Gesundheitsunternehmen zu enteignen und deren geistiges Eigentum ohne oder zu deutlich geringeren Lizenzgebühren zu verwenden. So spricht sich die WHO für verpflichtende Lizenzen an lokale Generikaproduzenten aus, die es erlauben die bestehenden Patente von forschenden Pharmafirmen zu ignorieren.

Während die WHO also der forschenden Privatwirtschaft den Kampf erklärt, verschweigt sie die eigentlichen Probleme, mit denen Patienten in Entwicklungs- und Schwellenländern ringen.

Misswirtschaft und Korruption sorgen in diesen Ländern oft für eine schlechte oder sogar desolate Verteilung von bereits knappen Finanzmitteln im Gesundheitssektor. Anstelle Krankenhäuser zu modernisieren und die einfachsten aber notwendigen Materialien und Medikamente vorrätig zu haben, verschwinden sowohl Steuergelder als auch internationale Hilfszahlungen in den Koffern von korrupten Politikern und Mitarbeitern.

Aufgrund fehlender Rahmenbedingungen und mangelnder Infrastruktur kommen oft gespendete Medikamente und Impfstoffe erst gar nicht bei Patienten an. Von einem führenden Pharmamanager habe ich einmal gehört, dass seine Branche volle Warenhäuser mit AIDS-Medikamenten in mehreren afrikanischen Ländern hätte, diese aber leider nicht an die Patienten liefern könne. Gründe dafür liegen bei mangelnden Kühlketten, schlechten Straßen, aber auch korrupter Strassenpolizei und Übergriffen auf Ärzte.

Dies sind einige Punkte auf die sich die WHO konzentrieren könnte, falls sie wirklich effektiv das Patientenwohl steigern wolle. Zwei weitere, noch schneller wirksame, Maßnahmen wäre die einseitige Abschaffung von Mehrwertsteuern und Einfuhrzölle auf Medikamente. Besonders Schwellenländer wie China, Brasilien und Russland erheben oft hohe Zölle auf innovative Medikamente. So geht der Ökonom Matthias Bauer beispielsweise davon aus, dass chinesische Patienten über 5,5 Milliarden Euro durch die Abschaffung von Zöllen auf importierte Arznei sparen könnten. In Indien und Brasilien würde Freihandel die Medikamentenpreise fast halbieren.

Die oft finanzstarken Pharmaunternehmen könnten wichtig Partner in der Erschließung von benötigter Infrastruktur in diesen Ländern werden. Daher sollte die Weltgesundheitsorganisation solche Firmen nicht als Buhmann für Versäumnisse staatlicher Akteure ausmachen, sondern eher die wirklichen Gründe für schlechte Gesundheitssysteme und mangelnde Versorgung ausmachen: Korruption, Bürokratie und Protektionismus.

Während der Abbau von Korruption sicherlich ein langer Prozess ist, lassen sich Zölle einseitig und schnell abschaffen. Dies bedarf meist nur eines Erlasses des jeweiligen Landes. Ein schnelleres Zulassungsverfahren und ein einfacher Import von Medikamenten sind weitere Schritte die den Preis senken und Patienten einfacheren Zugang geben.

Proposed EU duties on rice would hurt European consumers, says #ConsumerChoiceCenter

European Affairs Manager of the Consumer Choice Center Luca Bertoletti criticized the request and said that it’s time the European Union stopped pushing forward protectionism.

“The reasoning behind trade barriers is to protect a specific industry – in this case Italian rice growers – from competition. What’s usually overlooked though is that whilst taking the producer side, protectionist policies end up causing a great harm to consumers who get stripped of the opportunity to enjoy the benefits of free trade. The Italian government is simply asking to limit the affordability of rice,” said Bertoletti.

“The Association of South East Asian Nations (ASEAN) is the third largest trading partner of the EU. In 2017, co-operation with the ASEAN resulted in the output of more than € 227,3 billion in goods. As part of this economic engagement, the European Union has been actively trading with both Myanmar and Cambodia and therefore using the agricultural imports, in particular, rice, to feed up the EU market.

“Before employing another protectionist measure, the European Commission should ask itself whether it wants to ensure European consumers are able to enjoy a great supply of rice and consequently a favourable pricing or whether it is the unwillingness of one group to compete which matters more,” Bertoletti concluded.

https://www.eureporter.co/frontpage/2018/11/08/proposed-eu-duties-on-rice-would-hurt-european-consumers-says-consumerchoicecenter/

Sorry Mr. Trump, we’re not “Chinese propaganda” on trade

This week, President Donald Trump took to Twitter to denounce several articles in the Des Moines Register as Chinese “propaganda ads” because of the facts presented on trade and tariffs.

Included was an article written by the Consumer Choice Center that revealed the impact of tariffs on communities in North and South Carolina, which could affect up to 150,000 jobs in the chemicals, transportation equipment, and machinery industries that rely on exports, more than 36 percent of them in the Charlotte area.

“There is no Chinese conspiracy on trade. The real conspiracy is against the American people, who suffer when tariffs are enacted and goods are made more expensive,” said Yaël Ossowski, deputy director of the Consumer Choice Center, a consumer advocacy group located in Washington, D.C.

“The fact that the president would characterize factual analysis on the impact on workers and consumers as ‘Chinese propaganda’ reveals that this trade war has not been thought out. Ordinary men and women across America have to pay higher prices for products when tariffs are enacted in order to offset the imposed taxes. Tariffs are taxes, plain and simple.

“Pointing out the economic lunacy of enacting a trade war that will impact small and medium-sized businesses across the country, including the employees in those firms and at firms that rely on them, is vital and necessary, and the Consumer Choice Center will never cease from doing so,” said Ossowski.

“That’s why we launched the #freetrade4us campaign, and why we are seeing such great response from the consumers we represent who have already signed our petition for more free trade, not less.

“We hope the president reverses his policies on trade and tariffs and allows American businesses and consumers to enjoy low prices and free trade that can make everyone more prosperous.”

Trump’s Free Trade Suggestion remains Unheard

During European Commission president Jean-Claude Juncker’s visit to Washington D.C, Donald Trump once again suggested a tariff-and subsidy-free trade area between the European Union and the United States. Yet, the American president continues to fall on deaf ears, for reasons that tell more about the EU than it does about ominous ‘Trumpism’.

The meeting in Washington seemed to have a positive announcement within, as both parties agreed on an end to tariffs, non-tariff barriers, and subsidies on non-auto related industries. In a joint press conference, both parties announced that the European Union would increase imports on liquified natural gas (LNG), as well as American soybeans.

The European Union Commission returned to Brussels in a self-congratulatory manner, claiming to have avoided a trade war. And yet, with the exception of free trade no non-auto industrial goods, as well as vague promises on avoiding retaliatory trade measures triggered by tariffs on steel and aluminium, the meeting was unproductive. The import of soybeans cannot be increased simply through a Commission president statement: there are no EU tariffs on soybeans, and if companies in Europe don’t magically decide to buy them, then literally is expected to change. On LNG, the story is comparable: the European Union has already been promoting LNG for years, and the press conference just reiterated that point.

Politico Europe conveniently called the whole process “The art of no deal“.

Juncker’s effort to charm Trump into believing that he scored a victory is sad, in comparison to the actual opportunity that President Trump presented to the EU. Not only did Trump repeat during Juncker’s visit in D.C that he’d prefer a free trade deal with Europe that’d exclude all kinds of tariff-barriers, he also repeated the said statement in a tweet on Thursday:

However, if Juncker were to actually claim to walk in the footsteps of statesmen such as Robert Schuman, he’d embrace full free trade. In trade between rich and poor countries, both sides benefit, because they pay less for products, capital goods (machines, computers, etc.), and highly specialised labor. While it is true that job losses can occur when competition increases, it is important to account for increases in exports through free trade. The German car producer Mercedes might not like the competition of Italian cars on the German market, but since many Italians purchase his product, it’s manifestly more profitable to freely trade.

Protectionism is purely ideological because it is based on sentimental beliefs. If we were to take nationalism out of the picture, it would be difficult to argue that international free trade would be disadvantageous while domestic free trade (say, between cantons or provinces) is advantageous. This is particularly true in large trading blocs such as the European Union or, for that matter, the United States.

Tariffs are nothing more than a useful tool for the reactionary extremes of the right and left wings of the political spectrum. This is all the more visible in the sense that whenever Trump addresses the idea of freeing trade relations from all government intervention, nobody bothers to even address it.

Trump’s free trade suggestions remain unheard, because the solutions of subsidising or protecting through standards are immediate and popular. The European Union doesn’t follow an ideological line on free trade, it merely pretends to do so for the efficacy of political point-scoring.

The solution on trade isn’t “somewhere in the middle”. The idea that we’ll import some American products here and there, in order to get temporary concessions on some of our goods, is unproductive and hurts consumers. The only answer Jean-Claude Juncker should give when Donald Trump suggest completely free trade between the two continents is “yes please”.

How the Carolinas could suffer from Trump’s tariffs

In the last election and on the global stage, President Donald Trump talked tough on trade. It’s us versus them and we’re losing, he says. Put simply, he views the current trade deficit, when we import more from a country than we export to it, as detrimental to American jobs. Since January, that trade deficit is $264.4 billion.

Our biggest trading partners, China, Canada, Mexico, and Japan have been able to sell more to us than we’ve sold to them, and that has left us worse off, says Trump. Tariffs, taxes placed on specific products that enter our country, will help balance that.

But that isn’t true.

To begin, tariffs raise costs for foreign firms, but that means that American businesses that rely on imports to source their products will themselves face higher costs. And that gets passed on to the consumer.

What’s more, globalization has made the cost of sourcing products from foreign markets much cheaper. Supply chains are now global, and that’s a good thing. It’s made products cheaper for consumers and producers alike.

In response, countries may retaliate. Then, we’re looking at all-out trade war. Kentucky bourbon, Harley Davidson motorcycles, cigars, and even peanut butter exported to the 28 European Union countries will have additional tariffs beginning Friday. Canada and China have threatened more.

That’s bad news for both workers and consumers, regardless of who fired the first shot.

North Carolina exports $32.6 billion of goods and services, according to the International Trade Administration. Over 150,000 jobs directly rely on exports of chemicals, transportation equipment, machinery and more. More than 36 percent of those originate from the Charlotte area.

Who will be the most affected by tariffs? Think beer drinkers and employees at automobile assembly plants, as well as pork farmers and agricultural machine companies. And everyone who depends on these industries.

North Carolina brewers have warned that tariffs on aluminum and steel will affect their bottom line, potentially raising the price of beer for you and me.

Daimler and its subsidiary Mercedes-Benz project that retaliatory tariffs will hurt profits. That affects plants in Gastonia, Cleveland, High Point, and Mount Holly, and Charleston and Gaffney in South Carolina, which employ more than 6,500 people. Thousands more will be indirectly affected.

Both states voted for Trump in the 2016 presidential election. Why would he punish those voters with tariffs that will hurt investment and affect jobs?

There are thousands of goods produced here that rely on parts, commodities and special technologies from abroad. And millions of consumers and workers depend on trade of those goods for their well-being.

The U.S. is the dominant economic power because of decades of free trade and free enterprise. Workers and consumers in North and South Carolina benefit when products flow freely across our borders, and we’re better off for it. Tariffs are a step backward.

Yaël Ossowski is a Charlotte-area native, economic journalist and deputy director at Consumer Choice Center.

Original link: https://www.charlotteobserver.com/opinion/op-ed/article213598444.html

When it comes to Canadian dairy, Trump is right

In most circumstances, President Trump is wrong about trade, but he is right to call Canada’s supply management system a “disgrace.”

Canada’s supply management system for chicken, turkey, eggs, and milk is a highly protectionist set of policies that insulate Canadian producers from foreign competition, including American farmers, despite the North American Free Trade Agreement. Trump has made it clear that he wants supply management to end in NAFTA renegotiation. Both Americans and Canadians would benefit substantially from a deal that would end supply management tariffs and avert escalating trade war.

Abolishing supply management would open up an additional market of 36 million people to American farmers, which is approximately equivalent to adding another California to their consumer base. If supply management is dropped, it will substantially alleviate the pain of dairy glut that American farmers are currently experiencing. When there is an oversupply of any product, a simple solution is to expand the consumer base, and this is exactly what abolishing supply management will accomplish.

However, ending supply management is not just a win for American farmers, it is also a major win for Canadian consumers. The artificial burden created by supply management pushes as many as 189,000 Canadians below the poverty line every single year, according to award winning research from economists at the University of Manitoba. This research demonstrates that supply management has a tremendously regressive impact on Canadian consumers, especially poor working-class families. Canada’s supply management system inflates prices by upwards of $500 per year for each Canadian family. For low-income Canadians, this policy costs 2.3 per cent of their income. If Trump and his negotiating team hold their ground on supply management, it will allow American farmers to compete fairly in Canada while providing tremendous financial relief for low-income Canadians.

Protectionist supply management policies also cause an enormous amount of waste on both sides of the border. If a Canadian farmer produces more than their quota allows, they have to throw out perfectly good excess product. This means dumping extra eggs and milk, and for chicken and turkey, it means killing and dumping animals prohibited by supply management regulations from being sold. American dairy farmers end up wasting excess milk because Canadian tariffs make it impossible to export American milk.

Those who lobby for supply management, like the Dairy Farmers of Canada, and Conservative Party Leader Andrew Scheer, argue that getting rid of supply management could cripple the Canadian dairy industry. Luckily for farmers, there isn’t any evidence to suggest this is true. In fact, research in the Canadian Journal of Economics strongly suggests that getting rid of supply management would be a boon for Canadian supply managed farmers. If you are a Canadian chicken, turkey, egg, or milk farmer, the elimination of supply management means you no longer have government protection, but it also increases your consumer base by 325 million Americans. We already know what this type of trade relationship will look like when we compare how Canadians and Americans trade beef. Canadian beef ends up on American shelves, and vice versa for American beef on Canadian shelves.

As former member of Parliament Martha Hall Findlay noted, the dairy lobby in Canada is as powerful, if not more powerful, than the National Rifle Association in the United States. That control is the reason why Canadian policy-makers are holding up NAFTA to maintain selective benefits for only 13,500 farmers.

Canadians and Americans have the second largest trading relationship in the world. Each year over $650 billion in trade crosses the US-Canada border. Canada is the USA’s largest oil supplier, while the USA is the most popular tourist destination for Canadians. It is a major understatement to say the trading relationship between our two nations is important.

As a result of inability to compromise on NAFTA negotiations, the Trump administration retaliated by imposing tariffs on Canadian metal producers with 25 per cent for steel and 10 per cent for aluminum, which will devastate these industries. Calls to escalate this trade war have already begun, but Canada should resist this urge and offer an end to supply management to save NAFTA.

Removing supply management would help keep NAFTA intact, while benefiting farmers on both sides of the border, and providing financial relief for low income Canadians. If ever there was a time for President Trump to stand his ground, and for Canadian policy-makers to enact change, it is now. Luckily for both Canadians and Americans, change could be forced upon the Canada’s political system via President Trump and his NAFTA renegotiation team.

David Clement is the North American Affairs Manager for the Consumer Choice Center and a native of Toronto. Kyle Walker is the Senior Director of International Programs at Students For Liberty and native to a dairy producing town in Western New York state.

Original link: https://www.thespec.com/opinion-story/8669428-when-it-comes-to-canadian-dairy-trump-is-right/

The European Union Started This Trade War

Within the next 30 days, the European Union wants to respond to new US tariffs on steel and aluminum, which were imposed by the Trump administration. After an initial exemption, the president now seems to be more determined to follow through with his attempt to “protect American industries.” With a trade war seemingly about to begin, let’s throw light on who started it in the first place.

The EU’s Retaliation

Through a 25 percent tariff on steel and a 10 percent tariff on aluminum, President Trump intends to shield American producers from foreign competition and keep jobs inside the United States. This is in line with Trump’s general tendency towards economic protectionism, demonstrated by his support for tariffs on the Canadian manufacturer Bombardier’s C-series jets (planes which are partially produced in the UK as well) and for tariffs on imported solar panels and washing machines.

The European Union recently announced its retaliation against those import duties. It has launched legal proceedings against the measure and plans on additional taxes on American imports in Europe, including things like clothing, motor vehicles, orange juice, or cigarettes.

It is certainly strange the European Union doesn’t manage to rise above the mercantilism of Donald Trump. Before his election, and during his first months in office, European politicians made positive signals for free trade. Where Trump wanted less free trade, Europe responded with more economic cooperation. Back in July 2017, we saw headlines like “EU, Japan seal free trade deal in signal to Trump.”

“Although some are saying that the time of isolationism and disintegration is coming again, we are demonstrating that this is not the case,” European Council President Donald Tusk said during a press conference with Japanese Prime Minister Shinzo Abe.

In a follow-up speech, however, EU Commission president Jean-Claude Juncker completely overturned this return to economic principles and to the moral high ground. In a now legendary quote, Juncker said in a speech in Hamburg, Germany:

So now we will also impose import tariffs. This is basically a stupid process, the fact that we have to do this. But we have to do it. We will now impose tariffs on motorcycles, Harley Davidson, on blue jeans, Levis, on Bourbon. We can also do stupid. We also have to be this stupid.

The episode ended with Trump granting an exemption to the European Union. That deadline has now expired, with no deal having been reached. In Brussels, lawmakers are up in arms about the measures, while Washington does not seem to see this as a priority.

Even Donald Trump seems unimpressed by threats coming from the EU. Unlike last time, we weren’t showered in tweets about German cars, but we did get a standard exclamation by the president, which was probably a reaction to the EU’s decision to launch an appeal at the World Trade Organization (WTO):

The EU Started the Trade War

The general media narrative is that the European Union is now forced to “respond” to a trade war initiated by the United States. But is Donald Trump right about the fact that American products get treated unfairly in Europe? The answer is: yes, absolutely.

Here are the tariff rates imposed on Europe by the United States on a number of goods (numbers taken from the United States International Trade Commission):

  • New Diesel car: 2.5 percent
  • T-shirt: 16.5 percent
  • Umbrella: Tariff-free
  • Olive oil: 5 cents/kilogram ($5/100 kg)
  • Biscuits: Tariff-free
  • Regular cigarettes: $1.05/kg + 2.3 percent
  • Orange juice: 7.85 cents/liter
  • Sugarcane: $1.24/ton

Here are the tariff rates imposed by the European Union on a number of goods (numbers taken from the European Commission):

    • New Diesel car: 16 percent
    • T-shirt: 8 percent
    • Umbrella: 4.7 percent
    • Olive oil: €134/100 kg ($156/100 kg)
    • Biscuits: 9 percent EA (additional “agricultural component” duty), 24.2 percent ADSZ (additional duty on sugar contents)
    • Regular cigarettes: 57.6 percent

Orange juice: 12.2 percent

  • Sugarcane: €4.6/100 kg ($5.37/100 kg, $53.7/ton)

Just on a random selection, it turns out that the European Union is already heavily taxing imports from the United States. In fact, while the EU is threatening to introduce duties on products it hasn’t been taxing yet (such as bourbon), it also wants to increase taxes on things like orange juice, which are already heavily taxed. On top of that, you also need to add two components of non-tariff barriers: food quality and other product safety standards, as well as agricultural subsidies.

In practice, this means that in order to export to the European Union or any of its associated members, an American orange juice producer needs to abide by the European Union Council Directive 2001/112/EC on fruit juices (this one was amended in both 2009 and 2012 to tighten requirements on labelling and content of the juices): Health control (food law, hygiene, microbiological criteria, contaminants, pesticides), Plant health control (harmful organisms), Marketing standards. This makes him obligated to know everything about Regulation (EC) No 852/2004 on the hygiene of foodstuffs as well as Commission Regulation (EC) No 2073/2005 on microbiological criteria for foodstuffs, and Commission Regulation (EC) No 466/2001 of 8 March 2001 setting maximum levels for certain contaminants in foodstuffs. Since the regular producer is unable to figure all of these regulations out by himself, he’ll have to pay compliance costs for firms to figure them out for him, because if he doesn’t, retailers will quickly drop his products because according to EU law the importer is responsible for the import.

On top of that, he will have to pay a 12.2 percent import duty.

After complying with all of these rules, he will then compete on a European market in which Spanish orange juice producers receive agricultural subsidies (which make up 40 percent of the EU’s annual budget), and can, therefore, sell for much cheaper.

Non-tariff barriers matter just as much as tariff barriers, even though they more difficult to measure. How exactly the European Union, given all of these restrictions, pretends to claim to hold free trade as a value is questionable.

What about a Race to the Bottom?

President Trump is clearly hyperbolic in his claim that there is such a thing as a 100 percent customs duty, but he isn’t wrong in bemoaning the EU’s trade policy. While the European Union might practice free trade within its own borders, it is a protectionist bloc for anyone who wishes to trade with it.

This is particularly frustrating given the important of Euro-American trade relations. Europe is the United State’s largest trading partner. US goods and services trade with the EU totaled nearly $1.1 trillion in 2016. Exports totaled $501 billion; imports totaled $592 billion.

The ones suffering from all of it are the consumers. It’s the consumers who pick up the tab when customs duties have to be paid, and when local producers can increase prices when they’re shielded from international competition. As low-income producers spend most of their income on consumption goods, they are suffering from it the most.

Of course, pointing fingers at “who started it” doesn’t resolve the fundamental problem. Neither Brussels nor Trump have an understanding of how trade relations work. If the European Union wants to appropriately respond to new tariffs on steel and aluminum, it should actually reduce tariffs on US imports. This would send a clear sign that the belief in free trade in Europe is consistent, no matter how much Trump uses mercantilism for political point-scoring with his base.

If there is to be a trade war, it should be a trade war to see who can slash tariff barriers the most.

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Boeing proves protectionism doesn’t pay

A stinging rebuke by the U.S. International Trade Commission last month was a hard defeat for Boeing.

The American aircraft manufacturer brought a case to the U.S. Department of Commerce last fall in hopes of sinking a deal with their Canadian competitor Bombardier to build narrow-body jets for Delta Airlines.

Agreeing with Boeing’s claims that Bombardier was “dumping” the planes in the U.S. at a cheaper price, the Department of Commerce promptly slapped a 300 percent tariff on the C-Series jets. But that decision was overturned by the ITC last month.

That was a cause for celebration in Canada as well as the United Kingdom, considering parts of the aircraft are fabricated in Belfast and upwards of 4,000 British jobs depend on the C-series jet project. In the U.S., thousands of consumers and travellers will soon benefit from a new fleet of aircraft.

On Feb. 13, we’ll learn the commission’s justifications for overturning the tariffs, which could prompt Boeing to take another approach to tackle its Montreal-based rival.

Beyond that report, what is clear now is that Boeing will have to compete if it wants to outperform the competition. Protectionism, though the mantra in Trump’s D.C., won’t pay. Crony capitalism cannot, in itself, be the main tool used by an international firm that wants to compete in today’s global economy. Entering the arena of politics can have serious blowback.

That’s a lesson the Chicago-based firm will certainly learn after causing flare-ups in London, Washington, and Ottawa. It even put Prime Minister Theresa May’s coalition government with the Democratic Unionist Party, who vowed to protest those Belfast jobs, on shaky ground.

What’s more, the company’s protectionist play has put its lucrative defence contracts in harm’s way. Canadian Prime Minister Justin Trudeau threatened to pull Boeing’s military contracts, and UK Defence Minister Michael Fallon said their actions “could jeopardise” Britain’s £500 million relationship with the aircraft firm to supply attack helicopters and aircraft.

For a company that relies on government contracts for a large chunk of its profits, this news is concerning.

If Boeing wants to stand its ground, it’ll have to work on rectifying these relationships. Putting jobs at risk in order to stake a monopoly isn’t a good look for business, and it is toxic in politics.

This will certainly serve as a warning to dozens of other multinational firms who hope to leverage trade by seeking government monopolies and tariffs targeted at their fierce competitors.

What this affair has proven, in due time, is that waging trade wars isn’t to anyone’s benefit, surely not consumers, workers, and citizens who have the most at stake.

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Workers can’t afford tariffs or a trade war, President Trump

To the Trump protectionist hammer, every product imported looks like a nail.

On Monday, we learned that President Trump’s trade enforcer, U.S. Trade Representative Robert Lighthizer, announced new tariffs on solar panels and washing machines assembled outside the U.S.

For washers and dryers from companies such as Samsung and LG, steep tariffs as high as 50 percent will be applied while solar panels assembled abroad face a duty of 30 percent for the next year. These tariffs act as taxes on foreign companies who wish to do business in the U.S.

To the casual observer, the biggest losers of these tariffs appear to be India, Korea, and, most of all, China.

But considering that millions of American consumers depend on imports for dozens of their appliances and goods at home, these measures end up hurting them the most instead.

Nearly 95 percent of Americans shopped at a Walmart in 2016, a retailer which offers low prices by a vastly robust supply chain with links all over the world. Is it really inconceivable that prices would have to rise in order to overcome the import barrier imposed on the various actors in that supply chain?

Without question, targeted tariffs may benefit one particular American company by increasing the costs of doing business for its foreign competitors. But that means prices for ordinary consumers and businesses that depend on those imports must rise, making them less affordable.

An analysis by the Wall Street Journal on the effect of steel tariffs in 2014 demonstrated that the higher cost of imported steel raised prices as much as 60 percent on products which use steel as a base metal. Domestic steelmakers such as U.S. Steel may have gained in trade volume and stock price, but companies that rely on cheap steel for their products were forced to raise prices and restrict supply – and that was bad for American consumers.

When the Department of Commerce announced a 300 percent tax on imported jets from Canada, domestic airlines balked. And with good reason. Now they will have to pay a premium to source their fleets, causing the price of air travel to rise for ordinary consumers.

The fact that China subsidizes its various industries is no doubt a concern for American manufacturers, and it should be.

A look at the United States International Trade Commission’s website finds dozens of China’s alleged manipulations: aluminum and steel tubing, wooden cabinets, paper products, and fluorescent lights.

But though slapping tariffs on every product deemed harmful to American industry may be well-intentioned, it has a demonstrated negative effect on the consumers Trump purports to help.

Low tariff rates since the 1980s have been a boon to shoppers and domestic manufacturers who rely on imports to sell to Americans.

No doubt, throughout the course of his campaign, President Trump pledged his support for American workers in manufacturing. But with advances in technology and streamlined processes, our economy is beginning to produce more engineers than part-assemblers. And that allows more and more Americans to raise their standard of living at a fraction of the cost.

It’s been 88 years since the disastrous Smoot-Hawley Tariff exacerbated the worst effects of the Great Depression, igniting an international trade war that made everyone worse off, as revealed in a 2003 paper by the New York Federal Reserve.

President Trump is still celebrating the victory he achieved with the massive tax overhaul in Congress, lowering taxes for entrepreneurs and workers across the country.

If Trump would like to help American workers, consumers, and companies, he’d be wise to not impose yet more government regulation and taxes on the imports that so many of us rely on.

A tariff, we should remember, is just another name for a tax.

Yaël Ossowski (@YaelOss) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is deputy director at the Consumer Choice Center and a senior development officer at Students For Liberty.

Original link: https://www.washingtonexaminer.com/workers-cant-afford-tariffs-or-a-trade-war-president-trump/article/2646883

Free Trade For Us is a single-issue campaign produced by the Consumer Choice Center and supported by partners to raise awareness about the positive impact of free trade and to show policymakers all over the world that the millennial generation is united against tariffs, trade barriers, and retaliatory measures that only hurt consumers and workers.