Tuesday, August 28, 2018

U.S. and Mexico signed a new trade deal

Lighthizer explains.

(I had to steal the code from view source to cue this because none of the online instructions work. Thank you, whoever you are.)



This is big. Shall we say y-u-u-u-u-g-e. 

Trump antognists are tying themselves in knots trying to spin this as problematic, inconsequential etc.

Know what I despise about Fox? They try too hard to be fair and balanced. They just had to put out the contrary view no matter how ridiculous, "but not everyone is convinced."

Of course not!

That would be admitting their own incompetence. Marcy Kaptur imagines herself expert on the devil in the details while clawing to rescue NAFTA that damaged American interests in predictable ways in the details that allowed for a loophole so huge all of China drove right through it.  She actually believes failure enhances her gravitas. Trump is repairing her damage and yet she resists.

It's fashionable. But there's nothing else for her, no other avenue allowed her. She cannot be supportive. That would run counter to her political DNA. She must attempt to sound like a heavy. Like she knows more than Trump and his excellent expert team and with each word she displays she's a dope.

There's more.

Adam Austen, spokesman for Canadian Foreign Minister Chrystia Freeland has difficulty accepting that there is no NAFTA anymore. It's gone. History. Dead. Pining for the fjords, as it were. Is no more, ceased to be, bereft of life, rests in peace, an ex-treaty, and all the rest of the skit. And there will be no new NAFTA. Thus sprach Zarathustrump. Austen would know had he and Freeland actually listened.

What is so difficult to accept? What is so threatening  about free trade? Free trade that benefits both nations. All nations, actually. China is even worse, much slower on the uptake. They just flatly cannot accept untampered trade. Justin Trudeau's base isn't having it. So they'll be having higher tariffs instead. Trump will increase tariffs on Canadian automobiles to compensate for Canada inviting protectionist China on their side of our North American agreement. Trump will increase tariffs until Canada accepts their own protectionism brings more misery than protection. Until their voters put out the barriers to genuine free trade.

Trudeau painted his country into a lose-lose corner.

In order for Canada to join the U.S./Mexico deal they must:

1) eliminate soft-wood subsidies in the lumber sector
2) eliminate protectionist tariffs in AG, specifically dairy
3) accept the 75% rules of origin that eliminates the NAFTA loophole.
4) agree to enforcement mechanisms
5) open their financial sector by allowing U.S. banks to operate in Canada

Does that sound good to you?

Does that sound fair all around?

These five issues are locked into the agreement between U.S. and Mexico. They are not negotiable. Given the politicization of all this Trudeau cannot agree to these terms and keep his fragmented political support intact. So the blame for failure then goes to voters of Canada who prefer their government protections more than they prefer free trade with the U.S., they're saying through their voting patterns they require imbalanced trade, or no trade. Free trade is too scary. Too competitive. Too insecure. They'd rather have less through imbalance tariff-ridden protectionist trade, and higher prices for key commodities from milk to lumber and automobiles and financial services. They're saying they need government protection from big scary U.S.  It's a very narrow and fearful approach and it won't be shaken until their voters shake off the political entities interfering with their freedom and limiting their ability to thrive.

Try thinking about this from Canadian point of view.

Pretend you're Canadian dairy farmer.

The United States overproduces. We've actually poured milk away. Our own government makes cheese from the surplus. And cheese-wise it's nothing to brag about. To keep prices for milk reasonably high to assure continued production. And the cheese is good for what? Macaroni and cheese, and that's about it. The cheese melts very well, I suppose, and it's good on hamburgers. That's about it. Our government has warehouses of the stuff. To Canadian dairy farmers, American dairy is like Chinese steel to the U.S. From Canadian p.o.v., we'd be dumping our surplus that is over our cost of production like we complain about China dumping cheap low-quality steel on the world. They see us like we see China. It's either protect their dairy farmers or go out of business. That's where they're coming from.

Milton Friedman would say, "Good. Suspend business and buy cheap milk from America. Make fantastic cheese with it.  Take advantage of America's surplus for so long as America is willing. He would say, he has said, that same thing about Chinese steel. While China is planned economy and Western nations much less so and steel is a critical commodity for national security.

They'll have to break through all of that to reach an agreement. And Trudeau cannot do it as things stand presently. It's not that Trudeau is stupid, it's that he represents a constituency that feels it requires protection from competition. From us.

8 comments:

edutcher said...

Anybody still think there'll be a Blue Wave this Fall.

And, of course, Songbird was dead set against it, "We weaken our greatness when we confuse our patriotism with tribal rivalries that have sown resentment and hatred and violence in all the corners of the globe. We weaken it when we hide behind walls, rather than tear them down".

My God, what drivel. The smallest of men to the end.

Evi L. Bloggerlady said...

I am looking forward to Canada and China getting in line.

deborah said...

How does this work re China dumping low quality steel on the world? If Canada makes cheese with our milk, we make what with China steel? Or do we not buy it?

Leland said...

Some people read NYT; we get Chip. I prefer Chip.

edutcher said...

Right on.

deborah said...

How does this work re China dumping low quality steel on the world?

Trump is building a coalition of trading partners (incl Russia and NoKo) that can stand up to Red China. Keep in mind, trying to sustain 9% growth has bankrupted them.

If enough people with enough of an axe to grind against the Reds gets together, then good things happen.

The eminent Mr Surber explains it better than I ever could.

deborah said...

Thanks, ed.

Right, Leland, I meant to say, Chip you magnificent bastard!

ndspinelli said...

That "Giant sucking sound" Perot spoke about 25 years ago is slowly ending.

AllenS said...

Good point, Nick. Had Perot won the Presidency that year, he would have been a mini-Trump.