Archive for the ‘Trade’ Category

In Trade War, U.S. has Economic Edge, but China has Political Advantage

August 17, 2018

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C. Donald Johnson (Office of the United States Trade Representative, 1998-2000)

Cross posted from The Hill

Over the past few months, President Trump has threatened punitive tariff increases — effectively economic declarations of war — with all of our major trading partners.

From one week to the next, no one — including the often conflicting senior officials within his administration — has been certain which country or countries would be among the president’s targets.

After recently calling the European Union a “foe,” he has, for now at least, agreed to a vague commitment to settle his differences with the EU. The North American Free Trade Agreement (NAFTA) renegotiations with Mexico and Canada seem a bit more promising now but remain in a similarly uncertain state.

With China, the United States’ largest trading partner and its third-largest export market, we are now engaged in the first stages of a full-fledged trade war. Both countries — representing the two largest economies in the world — are destined for damage if this war lasts very long. (more…)

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Trump Trade Policy Isolates US as World Moves on Without it

August 17, 2018

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Richard Holwill (Ecuador, 1988-1999)

Cross posted from The Hill

The United States has a trade problem; we buy more goods than we sell to foreign nations. President Trump contends that our trading partners treat us “unfairly.” This is a misperception of the problem. The issue is not that our trading partners treat the U.S. unfairly, they just treat other countries better.

They do so through a network of so-called free-trade agreements (FTAs). That term disguises the actual effect of the FTAs, which has little to do with free trade. They should be called “preferential-trade agreements.”

Through these agreements, the parties offer each other tariff levels lower than those charged to parties outside of the agreement. Most of these agreements also deal with non-tariff barriers, establish mutual-recognition agreements for regulated products and establish procedures for conflict resolution. (more…)

Mexico: Ready to Launch, AMLO minus…

August 8, 2018

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Antonio Garza (Mexico, 2002-2009)

Cross posted from Ambassador Garza’s website

It’s been over a month since President-elect Andrés Manuel López Obrador swept the election to become Mexico’s next leader.

With 53 percent of the votes, López Obrador won every Mexican state except Guanajuato, and received a higher percentage of the overall vote than any of the past four presidents. The electoral mandate wasn’t only at the federal level, but also showed up in state and local elections. Overall, López Obrador’s Morena party won four of the available eight governorships and more than 250 mayoral elections across the country, including Mexico City; La Paz, Baja California Sur; Morelia, Michoacán; and Hermosillo, Sonora. The electoral results signal a dramatic political shift for Mexico, and the impact will soon become increasingly visible.

The new president-elect has nominated a range of established political players and new faces to his transition team. To lead the incoming administration’s foreign policy, López Obrador has announced his nomination of the well-regarded and extraordinarily capable former mayor of Mexico City Marcelo Ebrard, who will be heading up the country’s relationships globally, and with the United States. Other transition team designees include, Alfonso Romo, a Monterrey businessman for Chief of Staff; Olga Sanchez Cordero, a former judge on the Supreme Court, who was nominated as the next head of the Ministry of the Interior; Carlos Manuel Urzua, who earned his PhD in economics at the University of Wisconsin – Madison, tapped as minister of Finance and Public Credit; Esteban Moctezuma, an ex-minister of the Interior, who has been announced as the incoming Secretary of Education; and Jorge Alcocer Varela, an internal medicine doctor, who was nominated to take charge of the country’s health system. (more…)

Advice to Trump on New Mexico President: Don’t Push Him

July 5, 2018

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Bill Richardson (United Nations, 1997-1998)

Bill Richardson is a former governor of New Mexico and OAS envoy for Latin America between 2011 and 2015.

Cross posted from CNN.

Like President Donald Trump, the new President-elect of Mexico, Andrés Manuel López Obrador, is adding his name to a growing list of elected leaders worldwide who have been swept into office on a trend of populist disaffection with the global political establishment. López Obrador’s decisive win is rattling international investors, Mexican business leaders, and many Americans who are alarmed that a leftist Evo Morales-type leader has suddenly appeared right on our doorstep.

The US-Mexico relationship is at its lowest and most dangerous level in years. Recent US policies advocating a security wall and separation of families at the border, along with NAFTA negotiations on the verge of collapse, have left this once very special relationship in tatters even before the Mexico election. Given these political realities, what should the United States’ position be towards the new Mexican leader, who comes to office with an electoral mandate? (more…)

GOP Must Find Courage to Stand Up to Trump’s Ruinous Trade Tactics

June 19, 2018

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C. Donald Johnson (Office of the United States Trade Representative, 1998-2000)

Cross posted from The Hill

As President Trump rebuffed and insulted our closest allies before, during and after the recent Group of Seven debacle in Quebec, his craven apologists have attempted to rationalize this blatant attempt to undermine our postwar economic and strategic alliances and to dismantle the rules-based world trade system that has prevented trade wars from becoming shooting wars ever since the devastation of the World War II and the Great Depression.

It’s dangerous nonsense, and they know better. Yet, congressional leadership is largely silent, though many know that something is badly wrong here. Senator John McCain (R-Ariz.), now in the twilight of his career in public service and perhaps his patriotic life, was right to try to reassure our allies that “Americans stand with you, even if our president doesn’t.” (more…)

Trump’s latest actions effectively declare a global trade war

June 7, 2018

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C. Donald Johnson (Office of the United States Trade Representative, 1998-2000)

Cross posted from The Hill

Last week’s decision by the erratic Trump trade team to raise steel and aluminum tariffs amounts to declaring a trade war on effectively every major trading partner in the world market.

It presents an enormous economic threat to domestic industries that use steel and aluminum — that will have to raise prices, no doubt — and to sectors that will suffer from trade retaliation, such as agriculture and other political targets. But these losses are not the only damages that may result from these wars.

The Trump administration claims that these tariff increases are justified under Section 232 of the Trade Expansion Act of 1962, which permits an exception to trade rules to protect national security and are recognized under World Trade Organization rules.

Commerce Secretary Wilbur Ross issued a finding in January that steel and aluminum were being imported into the United States in such quantities as to weaken “our internal economy” and threaten the national security of the United States.  (more…)

Trade Tensions Reflect U.S.-China Battle for 21st Century World Order

April 6, 2018

us_china_trade_1Stuart Eizenstat (European Union, 1993-1996)

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Anne Pence (International Policy Adviser to the State Department, 1992-2005)

Cross posted from The Hill

The arms race was a defining element of the Cold War between the U.S., its allies and the Soviet Union. President Trump’s recent proposal for $60 billion in unilateral actions against China presages a pitched 21st-century battle over technological supremacy, with fateful consequences for the world order.

The Trump administration rightly sees that China’s aggressive efforts for economic domination hurt the competitiveness of U.S. industries — and that of our allies. But its unilateralist response is unlikely to change China’s approach and could damage U.S. interests. A more comprehensive, coordinated and strategic U.S. approach is necessary. (more…)

Big Lessons for Japan and America from three small countries

November 14, 2017

Curtis S. Chin (Asia Development Bank, 2007-2010; Asia Fellow, Milken Institute)

Cross posted from The Japan Times

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When Prince Akishino and his wife Princess Kiko visited Bankok late last month to attend the royal cremation of the late King Bhumibol Adulyadej, they joined representatives of nations large and small. Together, they all bid a final farewell to a monarch whose remarkable 70-year reign coincided with the transformation of a nation and a continent.

The destruction of World War II and that of the Korean and Vietnam Wars, as well as the tremendous economic troubles that once swept large parts of Asia starting in 1997 beginning in Thailand seemed a world away.

The story of Asia today is one driven by its largest nations and economies. A slow-growing Japan and an increasingly assertive China dominate headlines, as do the mounting tensions that continue to be a major focus of U.S. President Donald Trump’s ongoing visit to Asia.

Yet, three of the region’s smallest countries each offer up a lesson for all of “Asia rising” as well as for the United States and Japan.

First: environment matters. “Going green” is a phrase embraced for many years by both countries and companies — in words, if not action.

The small Himalayan kingdom of Bhutan — 750,000 people in a nation of only 17,500 square kilometers — offers, however, an example that large nations can learn from.

Bhutan’s leaders have put conservation at the heart of their environmental agenda, pledging to keep the country carbon neutral and writing into their constitution the requirement that 60 percent of the nation must remain forested. Other initiatives include bans on plastic bags, restrictions on private vehicles in the capital Thimphu, and a commitment to become the world’s first 100 percent organic-farming nation.

Second, democracy must be nurtured. Another of Asia’s smallest countries, with 1.2 million people and 14,875 square kilometers, offers an example of how people can move forward post-conflict and take control of their own destinies, when given the chance.

The former Portuguese colony of Timor-Leste, also known as East Timor, this year held its first parliamentary elections administered without U.N. oversight since the country regained independence in 2002 from Indonesia. The results were a peaceful and powerful example to many nations, big and small, increasingly doubtful of the wisdom of entrusting their citizens with the power to vote.

While significant economic challenges continue, the people of this newest of Asian nations deserve praise as they progress from decades of conflict and centuries of colonialism. Timor-Leste was ranked first in the Economist Intelligence Unit’s Democracy Index 2016 for Southeast Asia and fifth in Asia, behind the well-established democracies of Japan, South Korea, India and Taiwan.

Third, rule of law powers business. The densely populated city-state of Singapore, 5.6 million people in an area of only 719 square kilometers, is a leading example of a small nation that thinks big — and succeeds big. With one of the highest GDP per capita in the world, Singapore showcases the economic benefits of transparency and the embrace of free markets and free trade.

Singapore has not reached global prosperity by conforming to “small-country guidelines” or “thinking small.” This prosperous “Lion City” is ranked the second easiest place in the world to do business in the World Bank’s just released Doing Business 2018 report, behind New Zealand, and the seventh least corrupt economy in the world according to Transparency International’s Corruption Perceptions Index 2016.

As small fish in the big pond that is Asia, these three nations’ futures are by no means certain in a region that will continue to transform in the decades ahead.

According to United Nations estimates, India is on track to replace China as the world’s most populous nation. Wealth and inequality likely also will continue to grow across Asia, as will the risk of military conflict amidst competing demands for energy, water and other resources, including in the South China Sea.

As Prime Minister Shinzo Abe and Trump underscored in Tokyo, Japan and the U.S. share a vision for an Asia-Pacific that is both prosperous and at peace. Much though will depend on their actions and that of others, including China and North Korea.

Countries will continue to apply economic or military pressure to shape their smaller neighbors’ behaviors and policies — no different than today. Traditions will also endure in places such as Thailand and Japan, with their embrace of centuries-old traditions and institutions.

Asia and the Pacific, however, will be better off if all nations adopt some modern-day, “small-state ideas” offered up by Bhutan, Timor-Leste and Singapore — namely the embrace of a greener, more representative and more transparent future for all their citizens.

NAFTA 2.0: Let the ‘Games’ Begin

August 25, 2017

Antonio O. Garza (U.S. Ambassador to Mexico, 2002-2009)

Cross posted from Ambassador Garza’s website

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The NAFTA talks kicked off this past week in Washington DC, with negotiators from the three countries outlining their visions for improving trilateral trade. While the mood appeared to be generally constructive, tensions surfaced as U.S. Trade Representative Robert Lighthizer repeated the Trump administration’s focus on reducing trade deficits. The negotiators will sit down next in Mexico City on September 1st to continue hashing out the details on this point and others, but even if they can successfully produce a NAFTA 2.0 by early next year they may still face the biggest challenge of all. As I wrote about for Texas Monthly, the toughest part of redesigning NAFTA may not be determining the agreement’s content but managing the political risk both during and after the process.

With the 23-year old NAFTA in a vulnerable position, it’s worth taking a step back and remembering what is at stake. While far from perfect, the trade agreement guides the cross-border exchange of billions of dollars in agricultural products, motor vehicles, and appliances. It underpins millions of jobs from California to Kansas to Maine, and is the framework for entire industries’ business models. If NAFTA suddenly disappears, it would be impossible for the three region’s economies to exit unscathed. The disruptions that come from businesses’ reshuffling their operations and absorbing higher costs would cause some to shut down and others to pass along the costs to consumers through higher prices. There are ways to gradually adjust the agreement to make it work better for all parties, but this requires using proverbial scalpels to adjust, finesse, and stabilize the agreement, rather than a hammer to smash the parts that aren’t working quite right.

Yet in Mexico, the NAFTA talks are only one of the big news stories, as the country is already beginning its 2018 presidential and congressional election preparations. While the campaigns don’t kick off until next year, Mexico’s National Electoral Institute and Congress have allocated funding for political parties (unlike the United States, Mexico uses public funds for campaign financing), capping off campaign financing at the highest levels ever. There is a general sense that Ándres Manuel López Obrador is the frontrunner, but the jockeying among presidential hopefuls in the PRI and PAN parties is just beginning. For those reading the political tea leaves, changes in President Enrique Peña Nieto’s PRI will now allow individuals from outside the party to become a presidential candidate, in a move that would appear to favor the current Finance Minister Jose Antonio Meade. But with just under a year to go and a deep bench of contenders, there surely will be many twists and turns to come.

For those of you in South Texas or interested in local border issues, it’s worth tuning in to two upcoming construction projects. The first project is for a section of border wall that will cut straight through cross-border Santa Ana Wildlife Reserve and the second are LNG export terminals set to be constructed in the Port of Brownsville. These projects raise significant economic and environmental issues, and unfortunately—as I write about here—local residents’ voices and concerns have so far been given short shrift.

Why Timor-Leste Deserves to Join ASEAN

August 23, 2017

Curtis S. Chin (U.S. Ambassador to the Asian Development Bank, 2007-2010; Asia Fellow, Milken Institute)

Cross-posted from The Japan Times

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Fifty years since its establishment, it is time for the Association of Southeast Asian Nations to welcome another member into its midst—with Japan’s support.

The recent meeting of Southeast Asian foreign ministers in the Philippines drew more attention than usual to its concluding communique. More so than in past versions, this year’s ASEAN concluding joint statement made clear the grouping of 10 nations’ hopes for a demilitarized South China Sea. In one paragraph, the communique also noted “the importance of maintaining and promoting peace, security, safety and freedom of navigation in and over-flight above the South China Sea.” While not explicitly named, China was very clearly the focus of attention.

Garnering much less attention was the single paragraph that “noted Timor-Leste’s application for ASEAN membership and looked forward to the continued discussion” about reports and capacity building regarding that small Southeast Asian island nation’s longstanding efforts to join the regional bloc.

That’s unfortunate. ASEAN should welcome the accession of Timor-Leste, just as Laos and Myanmar were welcomed in 1997, and Cambodia in 1999.

I had the privilege of serving as an election monitor for Timor-Leste’s recent parliamentary election as part of the International Republican Institute’s (IRI) election observation mission. I was struck by the passionate commitment of the Timorese people to the democratic process, and inspired by their optimism about their country’s future. I believe that the country is in a strong position to continue progressing in its own development and make a positive contribution to the development of Southeast Asia. Timor-Leste deserves ASEAN support for its efforts to further integrate and engage with the wider region.

After regaining independence from Indonesia in 2002, Timor-Leste declared its desire to join ASEAN and applied for membership in 2011. While its ultimate accession is likely, there is a chance that the delays that have arisen over the past six years may persist indefinitely. Such a development would not only deprive the Timorese of a chance for further development; ASEAN would forgo an opportunity to welcome a country that can serve as a valuable example of a successful democracy to fellow members.

Over the past 15 years, Timor-Leste has grown into a well-functioning democracy where citizens actively engage with their government. The country was ranked as the most democratic in Southeast Asia by the Economist Intelligence Unit’s 2016 Democracy Index, and 43rd in the world—an impressive feat given the country’s traumatic experience during the 24-year Indonesian occupation.

One of the important ways Timor-Leste has been able to deliver sustainable democratic reforms has been through its openness to regional and international support. To this end, organizations like IRI have worked with civil society, government bodies and political parties to help them represent Timorese citizens responsively and effectively. IRI has worked in the country since 2002, and its assistance has been an important contributor to the country’s democratic consolidation.

Likewise, when I served as the U.S. ambassador to the Asian Development Bank and traveled to Timor-Leste in years past, I saw the importance of regional and international economic assistance to this and other developing countries first-hand. The ADB has supported infrastructure expansion, macroeconomic capacity-building and community-based development in Timor-Leste, and is well-positioned to assist not just in improving the country’s roads, but also its water supply and sanitation systems. I grew to appreciate the complementary nature of different types of development assistance, and found that the aid provided by the ADB complements the assistance provided by groups like IRI, and vice-versa.

As ASEAN continues to grow in importance, it is vital that its members collectively pursue policies that advance the region’s development in a sustainable manner. At a time when democracy is backsliding in the region, Timor-Leste’s accession to ASEAN would provide the region with a valuable example of how citizen-centered democracy can deliver a more prosperous and stable future.

Additionally, Timor-Leste’s accession to ASEAN would be economically beneficial to the region. Despite its small size, Timor represents a relatively untapped market for Southeast Asian trade; likewise, the region represents a largely untapped market for Timorese goods. In short, this would be a win-win situation for the region, and an important example for how inclusive economic development can sustain growth that benefits all.

During the lead-up to the election, election administrators, political parties and other stakeholders worked collaboratively to ensure a credible electoral process. This commitment to the rule of law and democratic institutions bodes extremely well for Timor-Leste’s potential as a cooperative and responsible member of ASEAN. My experience travelling through this small yet vibrant nation has driven home the benefits for all of proceeding with Timor-Leste’s accession.

Now is a time for coming together. We owe no less to the many people who across Asia’s newest nation proudly held up an indelibly-inked finger as a mark and proof of democracy in action.