Re: [Salon] Trade once again



Well stated. Tom Pauken 



Sent from my Verizon, Samsung Galaxy smartphone


-------- Original message --------
From: Clyde Prestowitz via Salon <salon@listserve.com>
Date: 1/22/23 3:48 PM (GMT-06:00)
To: Warren Coats <wcoats@gmail.com>, Chas Freeman <cwfresidence@gmail.com>
Cc: Chas Freeman <salon@listserve.com>
Subject: Re: [Salon] Trade once again

It is interesting to me how even the most conventional thinkers like Bill Reinsch have adjusted their thinking over the past six or seven years.

 

For instance, Bill speaks of global corporations having to take steps to adjust to assure the safety and operational ability of their supply chains. This, of course, has to mean that their initial anticipation of costs, security, and profitability were substantially wrong. That they did not even bother to insure themselves must suggest that their forecasting was badly wrong. But it was perfectly in line with the then prevailing conventional wisdom and the conventional econometric models.

 

Some of us have long argued that the assumptions of the models are simplistic and fall far short of covering all the costs and uncertainties of globalization. Bill’s comments essentially confirm that.

 

Another point on which he is far out in left field is his notion that somehow the U.S. is not offering very interesting trade opportunities to the Asian, especially the Southeast Asian countries. I hear this a lot from the critics of U.S. trade policy. But the facts are after all the facts. The U.S. has big trade deficits with all the Asian countries which in turn, with the exception of Singapore, all have big trade deficits with China. Not only do they have deficits, but the quality of their trade with China is deteriorating. That is to say that they are increasingly exporting commodities in place of the more sophisticated, higher value added items they exported to China as recently as five years ago.

 

Let me add a couple other points if I may. Trade cannot be totally disconnected from the other parts of international relationships. We have all been around enough to know that.

 

Let’s look at Singapore. It trains its army in Taiwan. Does Singapore really want Beijing to grab Taiwan? Top leaders of Singapore have told me personally that they find themselves always in a difficult balancing act with China because Beijing uses its ability to control the arrival or non-arrival of tourists, students, and other trade as a way of exerting political discipline on a variety of broader issues. We all know this to be true. We have seen it blatantly recently in the case of Australia and the sudden cutting off of its exports to China.

 

The Philippines, Indonesia, Vietnam and others have all found their fishermen drowned and boats sunk by China. They have all found reefs and islands long understood to be part of their sovereign territory now occupied by China.

 

There is no great love of China in Southeast Asia and certainly not in Northwest Asia. Bill Reinsch to the contrary notwithstanding, the trade and investment flows between the U.S. and Southeast/Northwest Asia are the best, least problem laden flows these countries have.

 

Nor is the United States the only country engaging in “friendshoring, reshoring, and enhancing domestic manufacturing capacity. Japan is far ahead of the U.S. in this regard. South Korea is striving to make itself less dependent on China and certainly is not anxious to transfer its cutting edge semiconductor technology to China. Germany is in the midst of a massive internal debate about whether to commit more or less to China.

 

The old conventional wisdom is just no longer adequate to the realities of our times.

Cheers, Clyde  

 

 

 

From: Salon <salon-bounces@listserve.com> On Behalf Of Warren Coats via Salon
Sent: Sunday, January 22, 2023 12:49 PM
To: Chas Freeman <cwfresidence@gmail.com>
Cc: Chas Freeman <salon@listserve.com>
Subject: [Salon] Trade once again

 

It still surprises me how so many fall for the protectionist rhetoric:  https://wcoats.blog/2023/01/22/trade-once-again/ 

 

Warren Coats
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On Jan 22, 2023, at 3:32 PM, Chas Freeman via Salon <salon@listserve.com> wrote:

 

An inflection point in US trade policy

22 January 2023

December 2022 highlighted how much US trade policy has changed in recent years. It is tempting to blame the changes on former US president Donald Trump, whose protectionist views were strongly held and clearly stated. Many observers have been surprised by the Biden administration’s continuation of many Trump policies, albeit with different rhetoric, which culminated in the December rejection of two World Trade Organization (WTO) decisions that went against the United States.

Image removed by sender. US President Joe Biden listens to other leaders joining the Indo-Pacific Economic Framework for Prosperity (IPEF) launch event virtually, at Izumi Garden Gallery in Tokyo, Japan, 23 May 2022 (Photo: Reuters/Jonathan Ernst).

The change is due to several developments in the global economy that have been underway for some time. The first is the confluence of trade and national security. US public opinion has shifted markedly against China over the past decade and China is now viewed as both an economic and security threat.

This perception, combined with Russia’s invasion of Ukraine, has made it difficult to have a conversation about trade without also discussing its impact on US national security. Much of the debate has concerned sanctions and export controls, but the Trump tariffs on China, especially steel and aluminium tariffs, have also been a major cause of controversy and, in the latter case, the source of WTO litigation.

The second change is the belief of many in the Biden administration that traditional free trade agreements have benefitted large corporations and their executives at the expense of workers. The administration is determined to rectify that inequity. So far this has meant avoiding traditional trade negotiations that include market access and instead promoting re-shoring, or at least ’friend-shoring’, to bring manufacturing jobs back to the United States. The recently enacted Inflation Reduction Act is a good example of this, providing substantial incentives for bringing manufacturing back to the United States in sectors like semiconductors, batteries and critical minerals.

The third change, long in the making, is companies’ interest in making their supply chains more resilient and less vulnerable to chokepoints and shortages caused by natural disasters, pandemics or political interference. Here, too, companies are interested in security, though for them it is economic and supply security rather than national security, although the former is directly related to the latter. Company efforts to shore up their supply chains generally have the support of the US government.

The result of all these trends is a thorough reassessment by both companies and government of the risks of doing business internationally. All three trends are at work in the US economic policy in Asia, particularly in the Indo-Pacific Economic Framework (IPEF). Although no one says it out loud, the IPEF is about reinforcing US presence in the region and presenting an alternative to China’s influence, just as the Trans-Pacific Partnership was. It is also conspicuously not about market access.

Asian nations looking for tangible benefits are not going to find very many. The US approach, typified by its slogan, ’a trade policy for workers’, focuses on better rules and standards on labour and the environment as well as other regulatory issues.

The changes in other countries’ policies that the United States is seeking are not economically or politically cost-free, but so far the United States does not seem prepared to pay for them, arguing that the changes sought are good for these countries and for the world in order to avoid a ’race to the bottom’. That is probably true, but it is not likely to be sufficiently persuasive by itself.

As a result, much of the negotiation will focus on issues not directly related to trade but which align closely with the trends noted above, like supply chain resilience, cooperation, information sharing, infrastructure, decarbonisation, tax and anti-corruption policies.

The most difficult pillar will be the trade pillar. The Asian parties will find many of the US demands difficult to accommodate and without tangible benefits.

In the United States, Biden has put forward the IPEF in response to widespread criticism that he does not have an Asian economic policy. He will soon discover that his proposals do not solve the political dilemma of trade for the Democratic Party. The proposals are too little for the business community who want more market access and too much for the Democrats’ left wing, who will oppose binding trade agreements that might tie the Congress’ hands in developing US policy in the future.

The US rejection of the WTO cases that it lost will further complicate trade negotiations by casting doubt on the US’ willingness to respect international trade rules and undermining its credibility when it seeks to call out other countries for their violations. The United States has been the bulwark of the system for the past 75 years, but it now risks becoming the chief offender.

If the other parties to the IPEF begin to doubt the US commitment to expanding trade and to the international rules that govern it, two things are likely to happen. The IPEF negotiations will be more difficult to conclude and the other nations may start devoting more of their time and resources to other regional groups, such as RCEP and APEC. This would not be in the US’ interest and the consequential increasing in China’s economic influence in the region may not ultimately be in theirs.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, DC.

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