Trade was always the worry, wasn’t it?

Mexico may be forced to pay for the building of a wall between itself and America through an aggressive 20 per cent tax on all its exports to the United States, the White House said last night.

As Mexican President Enrique Pena Nieto refused to fund the estimated $15 billion cost of the wall, and cancelled a visit to the US next week, President Donald Trump vowed to renegotiate the North Atlantic Free Trade Agreement.

He said: “The US has a $60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning.”

His spokesman Sean Spicer later said there were plans to “tax imports from countries that we have a trade deficit from, like Mexico”.

He said: “If you tax $50 billion at 20 per cent of imports, by doing it that way we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding.”

Mr Trump has discussed the proposal for a 20 per cent import tax on Mexican goods with Republican leaders in Congress, and wants it to be part of a comprehensive tax reform package.

That’s Americans paying for the wall then…..

A liberal arguing against competition

Melton Mowbray pork pies, stilton cheese and British-made chocolate such as Cadbury’s could be under threat from Brexit, the former deputy prime minister Nick Clegg has warned.

Speaking to a food and drink industry conference on the impact of leaving the European Union, Clegg said it was possible that European rivals would start producing lookalikes to British foodstuffs if they lost the legal protection from imitation offered by EU rules.

“Outside the EU they won’t enjoy the appellation bestowed on those products and I would have thought other countries would take advantage of that pretty quickly and put products into the European market that directly rival those protected brands,” Clegg said.

Then again, it is Nick Clegg, not an actual liberal.

Clegg said that food import tariffs were there to protect British as well as German and French farmers. He added that it would not be in the national interest to unilaterally remove them as this would remove the UK’s bargaining power when it was trying to gain access with trade partners for exports such as legal services and accountancy.

This is the fucking heir to the party of Cobden. Oh Woes, Eheu Fugaces, tempora mores.

Oh dear

He added: “We’ve got to change the culture in our country. People have got to stop thinking about exporting as an opportunity and start thinking about it as a duty — companies who could be contributing to our national prosperity but choose not to because it might be too difficult or too time-consuming or because they can’t play golf on a Friday afternoon.”

Contributing to national prosperity is not a duty of anyone or anything. Let’s not come over all fascist here, shall we?

I wish someone would tell me where this is

This is a continual claim:

One of the legitimate complaints against the EU is its determination to drag us into treaties that claim to be about trade but are really about releasing multinational corporations from democratic control. Three of the agreements it is trying to impose – the Transatlantic Trade and Investment Partnership (TTIP), the Comprehensive Economic and Trade Agreement (CETA) and the Trade in Services Agreement (TiSA) – make a mockery of parliamentary sovereignty.

They threaten to reduce to the lowest common denominator the laws protecting us from predatory finance, the exploitation of workers, food adulteration, climate change and environmental destruction. They threaten to force the privatisation of public services.

Specifically that privatisation. I have at least skimmed two of those three. And I cannot find anything, anywhere, which advocates, insists upon, determines, hinders or advances privatisation.

I can find things which say that if you do privatise and then reverse then compensation must be paid but that’s a standard part of current law anyway.

Anyone help me out here? Where is this insistence or advancement of privatisation?

Isn’t this fun about Philip Morris?

An international tribunal has unveiled a secret ruling confirming it rejected a bid by tobacco giant Philip Morris to sue Australia over its plain packaging laws, calling the attempt “an abuse of rights”.

In its heavily redacted 186-page ruling dating from 17 December 2015, the permanent court of arbitration said it had no jurisdiction over the case brought by Philip Morris.

There’s lots of heavy panting about the ISDS provisions in TTIP and TPP. And this Philip Morris case is eternally used as an example of how terrible it all is. But, but, corporations would be able to sue governments!

Yep, they can. And look what happens: often enough they get sent away with a flea in their ear.

ISDS gives people a neutral court venue to sue a government. It most certainly doesn’t say that they’re going to win.

Caroline Lucas sure is dumb

Green MP Caroline Lucas said that access to documents on “this hugely significant trade deal” was necessary before UK parliamentarians were asked to vote on it. “But the bad news is that a cloak of secrecy still surrounds TTIP. If the same rules apply here in the UK as they do in Brussels, which is what the minister is implying, then MPs will be bound by a confidentiality agreement if they want to see the text,” Lucas said. “This opaque process, which shuts citizens out of this crucial debate, is profoundly undemocratic.”

MPs don’t have all that much say in the matter actually.

And when we have a final text, it’ll be governments and MEPs who decide.

Oh, and the reason for the secrecy? Because it’s a document still being negotiated. The final text will be public.

Pillock of the day

Yep, if we let foreign investors into the NHS then all that money that is paid to doctors, to nurses, to porters, all that cash spent on water, electricity, land, every single penny of the £120 billion a year we lavish upon health care for the citizenry immediately flows abroad, doesn’t it?

Pillock.

The only part that can possibly flow to foreign investors as a result of privatisation is the profit. And the profit is, by definition, the amount that is being added in value. So, they send their capital in (and we get the use of their capital, Yippee!) and if, and only if, they manage to add value do they get that profit stream back.

Adding value = we get more health care for less of our money.

Pillock.

BTW, do note the implication of his argument. The more locally the cash circulates the better. Thus I should never buy anything outside my own household because that makes the cash move outside my household. And thus, by his argument, makes me poorer.

Pillock.

He’s arguing that I am made poorer by buying my bananas from Tesco rather than building a greenhouse to grow my own.

Pillock.

And George gets it wrong on trade again

They have good reason to ask. The commission insists that its Transatlantic Trade and Investment Partnership should include a toxic mechanism called investor-state dispute settlement. Where this has been forced into other trade agreements, it has allowed big corporations to sue governments before secretive arbitration panels composed of corporate lawyers, which bypass domestic courts and override the will of parliaments.

This mechanism could threaten almost any means by which governments might seek to defend their citizens or protect the natural world. Already it is being used by mining companies to sue governments trying to keep them out of protected areas; by banks fighting financial regulation; by a nuclear company contesting Germany’s decision to switch off atomic power. After a big political fight we’ve now been promised plain packaging for cigarettes. But it could be nixed by an offshore arbitration panel. The tobacco company Philip Morris is currently suing Australia through the same mechanism in another treaty.

Sigh.

All it is about is making sure that governments also obey the law. If you nationalise something you’ve got to pay compensation, that sort of thing. And yes, that really is all it is.

The old paradigms die hard, don\’t they?

The eurozone crisis certainly provides a convenient excuse but it doesn’t really explain why the UK’s export performance has been so poor relative to its continental competitors. The latest projections from the European Commission suggest that the UK’s export performance in 2012 will be one of the worst in the EU. A likely 0.2 per cent gain compares dismally with projected increases of 3.9 per cent for Germany, 2.6 per cent for France, 2.1 per cent for Spain and 1.1 per cent for Italy. Even Greece does better, with an expected gain of 0.8 per cent. None of these figures is particularly impressive, but in a sea of mediocrity, the UK stands out for all the wrong reasons.

In a world of fixed exchange rates export performance is vital.

In a world of floating exchange rates it doesn\’t matter a toss. For exports are our labour and resources that we send abroad for foreigners to enjoy. So we export less? We enjoy more of our own labour and resources.

The only point of exports in this floating rate world is, eventually, to pay for the things that Johnny Foreigner can supply us with better than we can make ourselves.

We\’re just no longer in an \”Export of Die!\” world, yet all too many people seem to think we are.

Trading note

Fun:

I\’ve just been asked if I can sell some \”baleine oil\”. I assume, given that the email came from a native French speaker, that they mean whale oil.

Does anyone at all still use this stuff?

If you start with the wrong facts……

Then your conclusions are obviously going to be wrong.

In real terms, Americans are on average no better off than they were 30 years ago;

That simply is not true.

The way you get to a figure which seems to show that it is is by looking at median household income.

And median household income is a horribly misleading figure.

Firstly, household size has changed. Meaning that income per person in the median household has risen even if household income has stayed static.

Secondly, the measurement used is of income, not compensation. And in the US this is important (much more so than in the UK) because the majority of US households get their medical insurance as part of working compensation  but not as part of working income. And yes, the cost of such insurance has been soaring in recent decades. It\’s not just the cost that\’s risen, so has the effectiveness of the care that is purchased: it\’s not purely inflation here. Which means that household compensation has been rising in a way that is not captured by the statistics.

Yes, this is important. Because if you start by saying that the average household hasn\’t gained from the past 30 yeasr then you\’re going to end up thinking that there\’s something terribly wrong with the way the economy has been working these past 30 years. But if you note that actually household income has been rising then you\’re less likely to make that mistake, aren\’t you?

Sure enough, the world as a whole is getting a whole lot richer. In the past decade alone, the global economy has doubled in size. But most of the benefits of this explosion in activity have gone to the developing world and, in the West, the already rich, highly educated and talented. The wealth divide has widened to record levels almost everywhere.

But having made that correction, let us now ignore it. And let us be good little liberals as we do so.

We already rich people haven\’t been getting any richer. We people already living as high on the hog as any society of humans has ever done have just been treading water. At the same time hundreds of millions, billions in fact, of the formerly destitute are now not just getting three sqaures a day, they\’re joining us high on that hog, becoming middle class, bourgeois.

As good little liberals, if this was a deal offered to us, should we take it? I\’d say yes, absolutely, this is not just desirable it is our moral duty to not just accept it but to embrace it. You know, aiding the poor in getting rich sort of thing?

The principles of free trade are the same for nations as they are for individuals. Rather than trying to produce everything we need to live, most of us choose to work in quite specialist forms of employment, the product of which we sell to others. We then use the proceeds to buy in other goods and services. Nations ought similarly to derive a collective economic benefit by specialising in the things they do best and then trading with others for the rest.

No, a country is not a household. and that\’s not even comparative advantage, that\’s absolute advantage. And the case for trade rests on comparative, not absolute. It is individuals, companies, associations of people, who should concentrate on doing whatever it is they do least badly, not nations doing what they do best.

Adam Smith’s “invisible hand” cannot operate efficiently in a world of wildly different labour standards, attitudes to the rule of law and manipulated currency values.

Complete and total bollocks. Partly that Smith didn\’t wibble on about invisible hands (his actual one use of the phrase in WoN is actually a reference to how people will naturally employ their capital at home rather than go for the extra profits available from investing aborad) and more importantly,  there is absolutely nothing at all about markets which means they cannot operate with such different attitudes. Such differences are just another thing that markets will arbitrage, that\’s all.

In the long run, all nations must become better balanced and self-reliant. It was madness to outsource so much of what we used to do to foreign climes, just as it is unsustainable for China and other surplus nations to rely on ever-growing exports.

Where are the jobs going to come from, it is often despairingly asked, in Western economies? There’s a simple, if challenging answer: by returning to the way we were and doing more things locally. And that starts with washing our own sprouts for the Christmas dinner table.

I fear that Mr. Warner (for it is he) has been bitten by a very nasty bug. He\’s turned economic nationalist; wibble about the soul of the nation and the way that the darkies are polluting it cannot be far behind.

Trade is just the side effect of the division and specialisation of labour. And one needs only to look at \”home made\” anything to see that reversing that makes us poorer.

Say it Brother!

Free Trade held out a mutually convenient if idealized concordat: politics kept out of business, and business kept out of politics.

Please complete the PJ O\’Rourke quote: when legislators decide what can be bought and sold…..

What excellent news!

More globalisation!

The Centre for Economics and Business Research (Cebr) forecasts that the value of seaborne UK imports, adjusted for inflation, will grow by 287pc over the next two decades, with exports delivered by sea up 119pc.

Britain\’s £345bn imports by sea in 2010 will rocket to £1.95tn by 2030, the Cebr estimates, with exports up from £233bn to £1.63tn – growth that will demand significant investment in port facilities.

Ever more division and specialisation of labour.

How wondrous! It means we get richer.

Back to Adam Smith\’s pin factory: by dividing labour and then specialising, we can get more production from the same input. Us more moderns would extend this to other inputs than labour: the more you specialise in slicing silicon ingots to make solar cells for example, the thinner you can slice them and the more solar cells you can get out of one silicon ingot (and yes, this has actually been one of the major determinants in the reduction in cost of solar cells. We\’re, umm, Chinese factories are,  making three times as many cells out of the same kg of ingot as they were a decade ago).

So, more trade among specialists means we\’ve more output for our inputs, we\’re simply richer.

No, this doesn\’t say anything at all about the distribution of those greater riches: but in and of itself greater wealth through greater efficiency is to be applauded.

Yeah, right, energy is like the 30 years war

The actual energy analysis is that bad. But the surrounding argument is nonsensical.

The energy \”war\” is going to lead to global conflict like the Thirty Years\’ War that devasted Germany.

Umm, right.

Never heard of trade then?

Sigh. The Thirty Years\’ War was, at heart (and whole libraries have been written about the causes so allow me to simplify) about \”who rules\”? This is a binary decision: if you do I don\’t, if I do you don\’t.

You can indeed think of energy as being such a binary decision: I get it, you don\’t and vice versa, so let\’s fight over it. But to think that way is to be an idiot. For if we have a method of producing energy (say, solar PV, tidal, whatever) then we\’ve a system by which all can have it. \”Trade\” we call this system. It can be trade in the actual product, energy (the UK gets some 2% of its electricity from France today) or it can be trade in the materials used to produce energy (I think I\’m right in saying that the UK gets all of its solar cells from abroad) and it can be trade in the manufacturing of such materials (First Solar is a US company with large factories manufacturing solar PV systems in Germany), it can be trade in the machinery to make such materials (Can\’t remember the name but a US company sells the silicon slicing machines to China which are used to them make China\’s solar cells) and it can even be trade in the ideas about how you build the machines that build the systems which produce the energy (licences on patents too numerous to mention).

Trade means that human innovation is not a zero sum game, is not a binary decision. Therefore we don\’t need to go to war over it. Thus using the analogy of war to describe the future path of such innovation is nonsensical.

The Guardian doesn\’t understand trade

Quelle Surprise.

Either the EU gets tough in its demands, by threatening to shut out firms from countries like China that remain closed – barring them from tendering for public contracts in Europe

The aim and point of trade is not to make exports. It is to purchase imports. Those lovely things that Johnny Foreigner can make better/cheaper than we can.

Exports are just the shite we do to afford them.

To ban imports from people who will not buy our exports is simply insane. Who cares whether they will buy our trains, pottery, planes, cars? What we want is their cheap spanners, low cost solar cells and mountains of tchotchke. So we should buy these from them, whatever they deny their own citizenry by excluding the results of our labours.

Our lives are made better by having low cost spanners, cells and tchotchke. So we should act in our best interests and ignore whatever fucks ups they might be making.

On the distribution of the gains from trade

Saying that everyone could be made better off with increased international trade is not the same as people actually being made better off. There are winners and losers from increased international trade, and while I agree that the gains exceed the losses in almost all cases, the gains haven\’t been distributed in a way that leaves everyone, or even most everyone, better off (see, e.g., widening inequality and where the costs of these kinds of adjustments fall). When some people are made better off and others made worse off at the same time, economists cannot say it is unambiguously better or worse. If we are going to make the argument that trade is good because everyone could potentially be made better off, we should do much more than we have to ensure that this potential is realized, i.e. that the gains from trade are distributed widely across the population rather than concentrated among a smaller set of winners.

Mebbe.

But this argument then generally morphs into an insistence that we should not have free trade until that compensatory mechanism is put in place, so that, say, I, who will be gaining from that free trade will be compensating those who will lose from that free trade.

Hmm. But do you see what is implicit in that argument?

That there are gains that I am not getting, gains that are going to some other, as a result of our not currently having free trade.

This is obvious: if free trade benefits me and disbenefits you, then not free trade must disbenefit me and benefit you.

Which leads to the question: are you compensating me for those benefits you are getting and the disbenefits I am getting from the absence of free trade?

Where, in short, is my check from those benefitting from protectionism?

What\’s that?

*crickets*?

Fuck you then matey.

Why we\’d all really rather not have a trade policy at all

But on trade policy formulation, it seems that the right hand doesn’t always know what the left hand is doing. Last year, while magnesium imports from China were subject to U.S. antidumping duties, the Obama administration launched a WTO case against China for its restraints on exports of raw materials, including magnesium. That’s right. The U.S. government officially opposes China’s tax on exported magnesium because it imposes extra costs of U.S. consuming industries, but it insists on enforcing its own antidumping duties on magnesium imported from China despite those costs.

Even if Ja Hoon Chang and the rest were right, that infant industry protection works (they\’re not) then we\’d still have whatever the trade policy is being created and enforced by the idiots in the government.

And that just ain\’t gonna work, is it?

(We have some interestingly similar hijackings of EU import tariffs: there\’s only one EU producer of rhenium and yes, there\’s an import tax on it. And no, they\’re not an infant industry nor do they face unfair competition. Just have a good lobbying office in Brussels. )