Trump: Chinese Students in US are [PRC] Spies

♠ Posted by Emmanuel in ,, at 8/14/2018 05:34:00 PM
Trump to Chinese students in America: You ain't nuthin' but PRC spies.
Donald Trump loves a conspiracy theory: Ted Cruz's dad was involved in the assassination of John F. Kennedy. Global warming is a hoax invented by the Chinese to make US manufacturing non-competitive. Ever so fond of bashing China in any way, shape or form, a recent gathering of executives from America's largest multinational corporations (and some Trump toadies besides) represented a reversion to Trump's mean. Instead of discussing ways to stop Trump's trade war--fat chance of that--they were instead subjected to another of his lunatic rantings:
The president entertained a group of 15 CEOs and senior White House staff at a dinner in the middle of his annual working vacation. The dinner was billed as “an opportunity for the president to hear how the economy is doing ... and what their priorities and thoughts are for the year ahead...”

At one point during the dinner, Trump noted of an unnamed country that the attendee said was clearly China, “almost every student that comes over to this country is a spy.”
Unsurprisingly, the United Chinese Americans (UCA) are up in arms over Trump's racist characterizations. Not that Trump is the only white guy in government insulting Chinese students...
The United Chinese Americans (UCA), a leading federation of Chinese American organizations across the country, is greatly disturbed by multiple news reports that, at a private dinner with corporate executives in New Jersey on August 7, President Donald Trump spoke in alarming terms about Chinese students studying in America as mostly spies for China... 

Recent reported remarks by President Trump, FBI Director Christopher Wray, and Senator Marco Rubio, who has characterized persons of Chinese origin in the United States as a national security threat, are unjustified and deeply offensive. The United Chinese Americans calls on the White House to clarify the President's reported disparagement of Chinese students.

We also call on the Chinese American community and other Americans of conscience to contact the White House, their Members of Congress and their local news media outlets to protest these negative portrayals of Chinese students. And we call on all Americans to continue the fine American tradition of welcoming all international students and scholars to our shores.
Fat chance of that as well for as long as Trump perceives there is political capital to be made from characterizing Chinese students Stateside as spies. There may, however, be economic fallout from this latest bout of Trump's white supremacy. Insofar as Chinese students represent the largest group of international students, payback would be substantial if these students decided to go elsewhere:
There are more than 350,000 Chinese students studying at U.S. universities -- the largest group of international students by far -- and Chinese students earned about 10 percent of all doctorates awarded by American universities in 2016.

"Generations of foreign policy leaders agree that international students and scholars are one of America’s greatest foreign policy assets," Jill Welch, NAFSA's [National Association of Foreign Student Advisers] deputy executive director for public policy, said in a statement about what the president reportedly said. "Blanket generalizations about students from any country will undoubtedly make international students think twice before choosing the United States as their destination. If students, particularly from strategic regions around the world, no longer come here, America will lose the ability to build relationships with future leaders abroad and strengthen our own national security."

"Chinese students contribute $12 billion to the U.S. economy, alongside countless other benefits, so even a modest reduction in Chinese enrollment would be devastating, and virtually every community in America would feel the impact if Chinese students decided not to study in the United States," Welch added. "To make America more secure and welcoming to international students and scholars the president must avoid unwelcoming rhetoric and policies. We are already in a global competition for talent, and students around the world pay close attention to the policies and rhetoric emanating from the White House. In order to avoid a further chilling effect in the United States, it is incumbent upon policy leaders to act boldly and decisively to let students know that they are welcome here and that we value their contributions."
For someone presumably wanting to increase American exports, the idiot Trump probably doesn't realize that higher education is its sixth-largest service export, worth over $43 billion. Already, Trump is phasing in limits on those studying STEM (science, technology, engineering and math) disciplines over fears that the United States is giving away its competitive edge in these key areas of the future to Communist interlopers. I am 100% certain that discouraging its young people from studying in America is one of the actions that the Chinese government is considering should the US-China trade war get worse. At this rate, don't count such a possibility out by any means.

Trump Antagonizing Turkey is a Really Bad Idea

♠ Posted by Emmanuel in ,, at 8/10/2018 05:51:00 PM
Perhaps someone should tell Trump of US bases in Turkey prosecuting the War on Terror.
Here we go again: some months ago, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt embargoed Qatar over its alleged support for terrorism. Qatar, after all, has comparatively cordial relations with the likes of Hamas and Hezbollah. There's also the matter of state-funded broadcaster Al Jazeera continuously blasting Qatar's neighbors over authoritarian rule when Qatar just happens to be an, er, absolute monarchy. What right did the network have to criticize the likes of Saudi and the Emirates?

Enter Trump. Ever so vainglorious, he suggested that the embargo against Qatar was a good idea, and that he encouraged leaders of some of these countries to isolate Qatar besides. Whether the ignoramus was aware that thousands of American troops "fighting terrorism" were stationed in Qatar or not, Trump had to backtrack on his Qatar-bashing a few days later:
But Qatar is also home to the Al Udeid Air Base, which hosts more than 10,000 American servicemen. The air base is the main regional center for air missions against ISIS.

Trump mentioned the base in a May 21 speech in Saudi Arabia, calling Qatar a "crucial strategic partner," but MSNBC reported Thursday that a source close to the President suggested that Trump was perhaps unaware that there were American troops stationed in the oil-rich nation.

"I think it is fair to say that if there is a crisis this would be the first time he was briefed on exactly where our bases are in the region," Nicole Wallace said.
At present, global financial markets for stocks, bonds and currencies are being roiled by Trump fighting Turkey over the release of some evangelical minister jailed over what appears to be a trumped-up charge. Adding fuel to the fire, he's just announced forthcoming additional tariffs on Turkish steel and aluminum. What started the entire imbroglio were negotiations that broke off over the release of one Andrew Brunson, the pastor detained in Turkey. Likely to please his base of evangelical voters who overlook his enormous and ever-growing portfolio of seven deadly sins, Trump probably calculates that destroying the world's 19th most populous country is a small price to pay for a few more votes come election time Stateside. "Stick it to the "Mooslems"!" is probably the Trumpian rallying cry of them moment.

But, there's also the small, neglected detail that Turkey is a key part of the Western security equation in that part of the world:
It is unlikely that the United States and Turkey will resolve their differences anytime soon. But given Turkey’s geostrategic location—in the backyard of Russia, and bordering Iraq, Iran, and Syria—the United States has an interest in maintaining the relationship. Turkey, meanwhile, does not need to add to its economic woes. The hope, at this point, is that as both Erdogan and Trump play to their bases, they’ll refrain from actions that would be hard to walk back from without embarrassment to either leader’s large ego. Despite the shifts of recent decades, the United States and Turkey still need each other. And the temporary political benefits domestically probably don’t outweigh that.
While it is indeed true that Turkey under Erdogan is moving away from democracy and towards authoritarianism, so is the United States under Trump. Still, it's inadvisable that the American blowhard offend the Turkish blowhard enough as to blow up the postwar security arrangement underpinning NATO. That is, NATO has sought Turkey as a moderating force with regard to Muslims participating in regional security arrangements to counterbalance accusations of religious prejudice. Not that Erdogan is reserved in fanning such insinuations:
President Erdogan described the sanctions on his ministerial colleagues as a “Zionist Evangelist plot” and vowed to retaliate in kind by imposing sanctions on the American counterparts of the Turkish ministers.

Pro-government Turkish newspapers are baying for United States troops to be kicked out of Incirlik, a Turkish air base used in the fight against Islamic State militants and other critical missions, but the Turkish government has not moved in that direction yet.
Insofar as Trump's USA is really punishing Turkey without much enthusiasm from other NATO allies, this brouhaha may be another case of him blowing up long-established relations for the sake of (perceived domestic) electoral gains. But, who would NATO turn to if Turkey boots the US bases out of the country? Where would the Yanks go then? The answers aren't clear, and you do hope Trump is apprised of this potential complication should he continue to punish Turkey over perceived personal slights.

PRC Tells Yanquis to Shove It On Iran Oil Imports

♠ Posted by Emmanuel in ,, at 8/05/2018 04:11:00 PM
Truly *independent* countries--from American influence, at least--are free to buy Iranian oil.
It's odd that Trump campaigned on American isolationism--withdrawing from misadventures in Afghanistan, Iraq, Syria, et cetera--and then to see his actions on Iran. Being the archetypal Stuck in the 80s sort of guy, Trump seems to have an odd fixation on bashing Iran. Famously leaving the agreement struck on Iranian compliance on limiting enriched nuclear materials in exchange for lifting sanctions, the United States wants to get its way when none of the other signatories to the JCPOA agreement have left it.

The oddity here is that the United States wants everyone else to follow through with re-implementing sanctions on Iran. If this isn't a prime example of playing "globocop" and busybodying in world politics, then I don't know what is. Given the commercial ties of countries like Western European ones with the United States, it's certainly difficult for them to ignore American pressure to stop buying Iranian fuel. For instance, the Germans may chafe at the neophyte US ambassador telling them to stop buying Iranian fuel, but they ultimately will have to comply lest they face American economic sanctions.

Thankfully, though, there is someone bucking the trend. What's more, it's a JCPOA signatory, a permanent member of the UN Security Council, and now the largest buyer of Iranian oil. Yes, I am talking about China:
The U.S. has been unable to persuade China to cut Iranian oil imports, according to two officials familiar with the negotiations, dealing a blow to President Donald Trump’s efforts to isolate the Islamic Republic after his withdrawal from the 2015 nuclear accord...

Teams of U.S. officials have been visiting capitals around the world to try to choke off sales of Iranian oil by early November, when U.S. sanctions are due to snap back into effect. While the Trump administration has said it wants to cut Iranian oil exports to zero by Nov. 4, most analysts viewed that target as unlikely.

Francis Fannon, the assistant secretary of state for the Bureau of Energy Resources, was recently in China to discuss sanctions, according to a State Department spokesperson. Unfazed, the administration has warned that even allies would face sanctions if they didn’t show “significant” progress in reducing Iranian oil purchases by Nov. 4, ruling out broad exemptions or waivers.
Instead of putting the brakes on its Iranian oil purchases, China has hit the gas instead. Sanctions, if applied, would not be against PRC entities with significant American trade. So, Yanquis pressuring the Chinese has been less effective:
China -- the world’s top crude buyer and Iran’s No. 1 customer -- has said previously that it opposed unilateral sanctions and lifted monthly oil imports from the country by 26 percent in July. It accounted for 35 percent the Iranian exports last month, according to ship-tracking data compiled by Bloomberg.
You can hardly expect the Chinese to become even more compliant / subservient to the United States on this matter given their ongoing trade war fisticuffs. I am not particularly fond of the Iranian leadership's blowhard stances just as I am not of Trump's. However, I do think it unfair to punish Iran's government for living up to JCPOA's commitments. Obviously, the wealthiest country in the world bullying a developing country trying to play by the rules doesn't strike me as an exemplary event, even if Iran's leadership certainly has many foibles.

But then again, what can we say about American "leadership" that relishes separating refugee seekers' children from their parents and then throwing them into cages like cattle?

US 'Woos' Asia With Puny $113M Belt-Road Alternative

♠ Posted by Emmanuel in , at 8/02/2018 04:25:00 PM
Yanks budget for, er, one pork dumpling at the global economic feast that is the Asian Century.
Trump's Secretary of State Mike Pompeo is scheduled to visit Asia this week to shore up American support there. His previous trips involved going to North Korea to see Kim Jong-un, but now he's supposedly in our part of the world for maintaining diplomatic ties a la winning friends and influencing people. The trouble is, his boss didn't seem to budget all that much in brib...I mean, monetary inducements to stick with Washington and stick it to Beijing:
The US government is expanding its infrastructure drive in the Asia-Pacific region using new investment programmes amid rising anxiety in Washington about China’s aggressive overseas development policies. Announced by Secretary of State Mike Pompeo on Monday, the initiative follows concerns about the Trump administration’s commitment to engaging with countries in the Indo-Pacific region.

Pompeo will visit Southeast Asia from Wednesday to Sunday, when he is expected to announce funding plans for the region. Pompeo’s “Indo-Pacific Economic Vision” will increase the financial support that the US government provides to countries in the region through a proposed merged agency, the US International Development Finance Corporation (USIDFC). Along with US$113 million in direct government investment, the plan would double the global spending cap for the development finance corporation to US$60 billion, which could be used to provide private companies with loans for projects overseas.

The move comes in response to China’s ambitious “Belt and Road Initiative” – a group of multibillion-dollar transport and power projects that Beijing has used to assert its influence in Asia and beyond – and is likely to fuel suspicions from Beijing.
You know, for a country projected to run trillion dollar plus ($1,000,000,000,000+) budget deficits into perpetuity, setting aside $112,000,000 is even smaller than a rounding error. Going by my calculations, it's even less than an hour's worth of American trillion dollar annual deficits. Yet, that's all the mighty United States of America has announced for helping gain the affections of the world's most populous continent. This puny effort is of course a charm counteroffensive to China's One Belt, One Road project. How much have the Chinese budgeted in direct outlays for that?
China is pledging more than $100 billion to finance projects under its "One Belt, One Road" strategy, an ambitious initiative to strengthen the world's second-largest economy's investment, influence and trade links to the rest of the globe.

"China will endeavor to build a win-win business partnership with other countries participating in the Belt and Road Initiative," President Xi Jinping said in his opening speech at a two-day forum on the plan. "These efforts are designed to promote growth both in our respective regions and globally."
That's official PRC government spending, not loan guarantees for national firms or other cheat counts. While China's motives in promoting the Belt and Road initiative are certainly questionable, you do have to wonder how muck influence 1/884th China's commitment will have in encouraging Asian nations to take America's side over China's. You also have to question whether the United States, whose own infrastructure merits a near-failing mark from civil engineers, has much to offer in this respect relative to China with its gleaming airports, expansive and smooth highways, etc.

I've heard about hegemony on the cheap, but what Trump and Pompeo have to offer is beyond laughable--especially after you factor in the tens of billions of damage the US is doing to regional economies via trade war.

Trade War Winners: Logistics Firms Helping Flee PRC

♠ Posted by Emmanuel in ,, at 7/31/2018 03:46:00 PM
Deserting PRC factories in the trade war era? Asian logistics companies are here to help...for a nominal fee.
With assorted China-made, US-bound manufactures being hit with 25% tariffs, some firms have responded by moving their factories out of the PRC to elsewhere in Asia. From an efficiency standpoint, I am ambivalent about this phenomenon. On one hand, there may be some wastage in leaving already-established production facilities--especially if the end result is resettling elsewhere where it's not necessarily more efficient simply to avoid the aforementioned tariffs. (Yes, that's trade diversion.) On the other hand, the move may hasten the inevitable. That is, mainland China is no longer the lowest-cost production location for labor-intensive goods, so Trump's tariffs could simply be the last straw in forcing a (sensible) decision to move.

Regardless, there is a clear beneficiary of all this movement of production facilities out of China: Asian logistics firms. Hong Kong's South China Morning Post cites Kerry Logistics, owned by Malaysian billionaire Robert Kuok:
Kerry Logistics Network, a Hong Kong-listed firm owned by Robert Kuok, Malaysia’s wealthiest man, has become a beneficiary of the ongoing trade war between the world’s two largest economies, as customers shift part of their production lines from mainland China to such destinations as northern Malaysia’s Penang to skirt US tariffs.

“Our clients have been shifting part of their production lines as early as March from China to other Asian countries where they already have manufacturing plants,” said the logistics company’s managing director, William Ma Wing-kai.

The Sino-US trade war has been forcing Kerry’s clients to shift their production towards the members of the Association of Southeast Asian Nations (Asean), or to ship finished goods to the Americas to avoid the increased tariffs. Either way would increase shipping volumes, Ma said. “This is a reallocation of global production bases,” Ma said during an interview with the South China Morning Post.
The net beneficiary of all this movement, geography-wise, could be lower-cost, investor-friendly Southeast Asian destinations:
The ongoing shift of production bases will lead to trade growth in Malaysia, Vietnam, Myanmar and Laos starting in the second half of this year, Ma said, a trend that will last for many years to come. “Our business in China may be affected a bit, but business in Asia is rising,” he said.


Asininity is Believing the *EU* Will Buy More US LNG

♠ Posted by Emmanuel in ,, at 7/29/2018 05:00:00 PM
Actually, European countries are not among the most profitable destinations for American LNG.
Ho-hum, here we go again. After the supposedly triumphal meeting between Trump and EU Commission President Jean-Claude Juncker, The Orange One loudly exclaimed that Europeans would buy lots more natural gas in the form of liquefied natural gas (LNG). Recall that LNG is the product of, well, liquefying natural gas for the purposes of transporting it over long distances--usually overseas--when pipelines are physically or economically unfeasible to build.

That said, there are additional costs incurred by both sellers and buyers in handling gas-to-liquid and liquid-to-gas conversions, respectively. Therein lies the rub this time: given current efficiencies, it doesn't make much economic sense for Europeans to buy American LNG. Let's begin with the (sadly) expected Trumpian hyperbole:
President Donald Trump’s plan for “vast amounts” of U.S. liquefied natural gas (LNG) to be sold to the European Union after trade talks with its top representative faces a reality test...“European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!,” Trump wrote in a Tweet.
But alas, such is not the case. Given the greater distances involved, European destinations are not quite economically viable for trade in LNG. Locations near Western Europe cost lower given advantages of geographic proximity and a cheaper way of transporting natural gas--through pipelines that do not require conversion of gas into liquid form and back again; e.g., Trump's favorite Russian pipelines:
It appeared that a major LNG deal between the trading partners had been struck. 

In reality, three-quarters of Europe’s existing import facilities lie empty while demand for U.S. LNG on the continent remains limited. The most lucrative markets for U.S. LNG are in South and Central America, India and the Far East, with Europe near the bottom of the pile given its relatively low prices and ample supplies of gas via pipelines from Russia and Norway.
We come around to the same issue concerning the similar Trump-Juncker "agreement" with soybeans discussed in an earlier post. The last time I checked, the European Union was composed of 28 (soon 27) sovereign nations that don't take orders on where to buy energy from, least of all the European Commission. Short of EC subsidies, market access to American LNG is already as good as it gets since tariffs on LNG are essentially zero:
“Will U.S. LNG reach Europe? Yes, but only if there is an arbitrage opportunity that makes sense,” he said. Politicians have little sway over this. The EU applies zero tariffs on U.S. LNG imports, so cutting them is not an option to boost trade in any future U.S.-EU talks.
The EU-28 are not command economies like China where you can rely on an apparatchik to make state-owned firms buy US LNG if agreed to. So, even European gas projects in America may find it more economically feasible to sell to nearby markets given the aforementioned costs that increase with distance:
A number of European companies have already announced plans to buy LNG from a new wave of planned U.S. projects. Portugal’s Galp, Italy’s Edison, Britain’s BP and Royal Dutch Shell are all lining up to lift LNG from Venture Global’s planned Calcasieu Pass project in Louisiana. But supply from these and other projects will not be ready for years and even then there is no guarantee it will come to Europe in meaningful quantities if more lucrative markets, such as China, emerge.
There. Another day, another Trumpian verbal vomit cleaned up. 

Idiocy is Believing the *EU* Will Buy More US Soy

♠ Posted by Emmanuel in ,, at 7/26/2018 06:50:00 PM
Don't count on so-called Trump "friend" Jean-Claude Juncker to somehow get the EU to buy boatloads of American soy.
The stock market is not very smart: Late yesterday when it was announced that the US and EU had arrived at a temporary "ceasefire" on slapping additional tariffs on each other as they negotiate some nebulous trade deal--I hesitate from calling it an agreement--US stock markets rallied. However, there is significantly less than meets the eye here. Consider that most sensitive and vulnerable of products, the humble soybean.

Actually, there are no tariffs being applied to the foodstuff already, hence there is no way of securing additional EU market access or purchases short of subsidizing them. Moreover, the EU isn't China where one guy from the Communist Party can order his minions to buy as much soy as necessary to appease Trump if the Reds felt like doing so. Last I checked, it was made up of 28 (soon-to-be 27) independent countries. Anyway....
But a mere handshake agreement to send more soybeans across the Atlantic won't make up for a reduction in exports across the Pacific.

For starters, that's because the European Commission doesn't actually have authority over how many soybeans Europe imports. It doesn't procure soybeans for European markets and it doesn't tell European businesses where to buy their soybeans.

Of course, there are other ways that governments can encourage businesses within their borders to purchase materials from certain sources. Lowering trade barriers is one way to do it. If the Trump-Juncker agreement would lower European tariffs on American-grown soybeans, for example, that might do the trick of getting Europe to buy more American beans.

Except, well, the European Commission currently doesn't charge any tariffs on American soybeans. Which means European businesses already have access to all the American soybeans they would want. It's hard to see how—short of subsidizing demand across the pond—Juncker will follow through with his promise to have Europe buy more soybeans.
That brings me to another point unmentioned in the Reason blog post excerpted above: Most of the soybeans planted in the United States are genetically modified (GM). Think something on the order of 93%. While the US has been wanting to crack open the EU market for GM soy for the longest time, the EU has always been reluctant about doing so. Not only do they plant far less of the stuff--negligible quantities, really--European consumers generally disdain GM unlike the vast majority of indifferent American consumers. This case has been a long-running saga at the WTO. And because European consumers dislike GM foodstuffs, it's unsurprising EU regulations are quite stringent on their importation (e.g., labeling that these are indeed GM):
But soybeans intended for Chinese markets can’t necessarily be redirected to the European Union, which has stringent regulations on genetically modified foods.

According to a senior E.U. official, there have been no discussions about lifting those standards to purchase U.S. soybeans. The same official said that agricultural products were outside the talks between Juncker and Trump, directly contradicting comments from Commerce Secretary Wilbur Ross, who said Tuesday that “all agricultural products are something that will be discussed.”
It is thus highly unlikely that all these GM soybeans meant for the Chinese market will now find a place in GM-hating Europe. It may be good for show when Trump glad-handed European Commission President Jean-Claude Juncker, but it's really hard to see how the EU becomes a replacement for lost sales to China when (a) it already can buy as much American soy as it needs tariff-free and (b) GM foods like soy are shunned by consumers in Europe.

A Canadian Patriot's Guide to Boycotting America

♠ Posted by Emmanuel in at 7/24/2018 04:55:00 PM
I suppose those WWII-era posters still resonate during a trade war 73 years later.
You must be a real @#%hole to annoy the normally placid and reserved Canadians. However, Trump has apparently accomplished this feat by slapping tariffs on softwood lumber used for building homes as well as steel and aluminum. The equally mild-mannered Justin Trudeau has even been reserved "a special place in hell" by Trump's ultra-protectionist trade advisor, Peter "Death by China" Navarro. What's next, Death by Canada (when it doesn't even have a trade deficit with the "US)?

At any rate, bemusement over US hostility over some imagined slight has turned to real anger among Canadians, who are not usually prone to jingoism like their cousins to the South. Voila! We now have a patriot's guide to Making Canada Great Again by boycotting all things US-made in favor of locally-made goods.

Below are some of my favorites. Whiskey, anyone?
The Trudeau government has also chosen to tariff American-made whisky. This includes bourbon from Kentucky, the home state of Republican Senate Majority Leader Mitch McConnell. But fear not, for Canada has a rich history as a whisky maker since the rum-running days of the Prohibition era. Put down the Jim Beam and try J.P. Wiser’s Deluxe, a rye distilled in Windsor, Ont. The brand is owned by Corby Spirit and Wine, a Canadian firm listed on the TSX. And don’t forget Crown Royal Northern Harvest Rye. The distiller might be owned by a British multinational, but the whisky’s made in Gimli, Man., and was named 2015’s best whisky in the world.
Maybe you need your daily dose of orange juice? Fear not as tariffs have made American multinationals source more of the stuff locally:
The tariffs also affect Florida, known for being an orange juice producer and a volatile swing state. But with Minute Maid manufactured in Peterborough, Ont., you can get your OJ domestically and stick it to the sunshine state. Expect to see more products coming from the Peterborough beverage plant—its owner, the definitively American Coca-Cola Company, just announced an $85-million investment in the facility.
Dumping US purchases of toilet paper? There's a lot of that stuff made in Canada, anyway:
It’s another tariff targeted at Pennsylvania. Kimberly-Clark operates a paper mill in Chester, Pa., producing Scott toilet paper. Charmin toilet paper also comes from the Keystone state, as Procter & Gamble has a plant in the town of Mehoopany. Thankfully, these aren’t your only options. Cascades, a Quebec-based tissue paper manufacturer, has several plants in La Belle Province as well as in the Greater Toronto Area. In addition, Kruger Products has plants in Quebec, B.C. and Ontario that manufacture Purex, Scotties and Cashmere.
What Trump forgets is that there are plenty of locally-sourced goods in the countries he slaps tariffs on to retaliate with by buying domestically.   

Tariff-Loving Whirlpool Suffers From...Tariffs

♠ Posted by Emmanuel in , at 7/24/2018 04:36:00 PM
Whirlpool's tariff-loving geniuses are now having a hard time dealing with, er, tariffs draining away their profits.
Just today, the uber-protectionist Trump tweeted about his enduring love for taxes on imported goods. Which, of course, is a rather contradictory thing to do for someone purportedly wishing to minimize government intrusion on people's lives. That's not to say he had his supporters. Take the case of Whirlpool. Apparently unable to compete with foreign appliances, it successfully petitioned the government to hit imported washing with tariffs.

I suppose this story would be happier for Whirlpool had the Trump administration stopped there. However, it also hit imported steel with stiff 25% tariffs (and another 10% on aluminum). Apparently, Whirlpool didn't prepare for those tariffs on raw materials since it's now taking a large financial hit largely due to its increased manufacturing costs:
"Tariffs are the greatest!" President Donald Trump said on Twitter Tuesday morning. Whirlpool used to agree. In January, when Trump announced tariffs on imported washing machines, CEO Marc Bitzer told analysts, "This is, without any doubt, a positive catalyst for Whirlpool."

But the Trump administration didn't stop there. It imposed tariffs on steel and aluminum, sending raw material prices skyrocketing. Steel prices in the United States are 60% higher than the rest of the world, Bitzer told analysts on Tuesday. That has raised costs for Whirlpool by $350 million and squeezed its profit margins. Now Whirlpool is backtracking on its protectionist cheerleading. he company on Monday slashed its profit outlook for 2018 in part due to a "very challenging cost environment."

Whirlpool's (WHR) stock tanked 12% on Tuesday after it missed Wall Street's expectations. "The global steel costs have risen substantially, and in particular, in the US, they have reached unexplainable levels," Bitzer told analysts. "Uncertainty" around additional tariffs and global trade had disrupted Whirlpool's supply chain, he said.
Good job, Whirlpool. This episode perfectly illustrates the dangers with initiating trade war: where do they stop? One you go down that slippery slope, there's no telling how they will affect other business operations since you cannot expect Trump and his minions to do your bidding perfectly. It does serve them right, but American consumers would probably wish they'd never started down this road in the first place--especially those in the market for new washer/dryers.

All hail Trump and his "greatest" tariffs!

Trump’s New Anti-Immigrant Assault: Denaturalization

♠ Posted by Emmanuel in , at 7/18/2018 05:19:00 PM
If Trump had his way...[insert Pink Floyd lyrics of choice here].
I am simply astounded that a person purportedly engaged in the hospitality industry is the most incredibly inhospitable and, well, misanthropic person imaginable. How would foreign would-be patrons of Trump's businesses respond to blatantly discriminatory rhetoric and policies against any and all unfortunate enough to be of the *wrong* color or creed? Are there enough white Christians to staff and patronize Trump-owned and -licensed properties? The hypocrite's enterprises apparently don't believe so as they keep trying to hire foreigners, arguing there aren't enough natives to get the job done [1, 2].

Well, no matter: If it doesn't affect him or his enterprises, anything goes. UT Austin Prof. Ruth Allen Wassem warns that Muslim bans and family separations apparently aren't enough punishment for being foreigners and/or coloreds. Now, Trump will attempt to denaturalize recent US citizens. By finding technical violations before they were naturalized, they will be stripped of their American citizenship:
A few weeks ago, U.S. Citizenship and Immigration Services (USCIS) Director L. Francis Cissna told The Associated Press that his agency is hiring dozens of attorneys to form a task force to review the records of people who have become U.S. citizens since 1990, in order to identify people who deliberately lied on their citizenship applications. “We finally have a process in place to get to the bottom of all these bad cases and start denaturalizing people who should not have been naturalized in the first place,” Cissna told the AP.
The really galling things is that the bar is quite high to accumulate evidence sufficient for denaturalization. So, instead of using resources for more pressing matters, they're being used for an outright racist agenda despite the likelihood of limited "returns":
USCIS is going beyond the OIG’s recommended investigation of individuals identified in its report. It is unclear if the task force will again review all 17 million naturalization petitions approved from 1990 to 2016 (beyond those the OIG identified in its review), but he predicted that several thousand cases likely will be referred for denaturalization. Rather than requesting money for this task force, USCIS will reallocate funds from immigration application fee account, which is likely to slow the processing time for legitimate immigration and naturalization petitions.
The impression made is this: just as immigrants are less human in this administration's eyes, so are recently naturalized Americans (or so-called Americans from their perspective):
By going above and beyond the OIG report, the Trump administration is sending a clear signal to all naturalized citizens: They are under review and vulnerable. I have encountered citizens who fear that their use of a fake ID years ago may prompt denaturalization proceedings. This initiative fits into the Trump administration paradigm that views immigrants as criminals. Most disturbing, this initiative has a chilling effect on civic engagement.

France & Belgium: Football's Cases for Migration?

♠ Posted by Emmanuel in ,, at 7/15/2018 06:37:00 PM
Why can't the non-footballing talents of Belgium and France be spotted and nurtured too? That is the question.
Apologies for the light posting over the past few days. Like most of you probably, I've been following the World Cup rather too closely to have time to post. However, with the tournament over as I write--France has won and Belgium finished third--there is actually an IPE angle here. (Even fourth-place UK deserves mention here.)  Bloomberg op-ed writer Leonid Bershidsky penned an interesting commentary from a few days back asking whether immigration's case is bolstered by multicultural French and Belgian teams. Indeed, these teams are more diverse than the general populations of these nations:
France’s starting lineup in Tuesday’s semifinal against Belgium contained five players born overseas or to immigrant parents: Cameroonian-born Samuel Umtiti; N’Golo Kante, whose parents came from Mali; son of Guinean parents Paul Pogba; Kylian Mbappe, whose father is Cameroonian and mother Algerian; and Blaise Matuidi, son of an Angolan father and a Congolese mother. That’s 45 percent of the starting 11. Non-European Union immigrants and their children make up only 13.5 percent of France’s population, according to Eurostat.

Belgium’s starting 11 also had five players of immigrant background: Nacer Chadli, who started out playing for the Moroccan national team before he switched to Belgium; Marouane Fellaini, whose parents are also Moroccan; Vincent Kompany and Romelu Lukaku, whose fathers are Congolese; and Mousa Dembele, whose father is from Mali. Belgium’s population of first- and second-generation non-EU immigrants is 12 percent.
There is a meritocratic nature to footballing that you don't necessarily find in other walks of life in these nations:
In soccer, the son of a banker and a lawyer (that’s the background of French goalkeeper Hugo Lloris) is on an equal footing with someone like Lukaku, whose family couldn’t pay its electricity bills for weeks at a time and whose mother had to water down his milk to make it last longer. Or like Sterling, whose mother cleaned hotel rooms to put herself through school.
Therein lies the rub: Unlike their footballing counterparts, migrants haven't done as spectacularly well as these footballing stars without as established infrastructure for spotting and developing talent:
The odds are stacked against kids with the same background as the world-class soccer players in a number of important ways. Statistics show a higher percentage of second-generation immigrants than native-born people go to college in France and the U.K. (though not in Belgium) — but, according to a 2017 report from the Organization of Economic Cooperation and Development, an overwhelming majority of young people with low educational attainment in all three countries are second-generation, non-EU immigrants.
Then again, why is it not the case that similar mechanisms for spotting and developing talent are not available in other endeavors?
There’s a lesson in this for the rest of society. Soccer’s support networks for talented kids can and should be replicated in other areas of endeavor. Some of the boys and girls growing up in no-hope areas today could be the Mbappes and Lukakus of tech, finance or the arts. The national teams, multicolored as they are, exist to remind governments, businesses and educational institutions that they just need to look harder.

So football does provide an example in how migrants can achieve outstanding success. However, the real challenge from a societal perspective is to make similar means for advancement available for other migrants and their offspring who are not as blessed with sporting skills. That would seal the case for migration.
Let's be timely here: Although the Ugly American Donald Trump did his best to insult the Europeans for welcoming migrants, I would venture these nations would much rather have their first- or second-generation footballing talents for company instead of the US-based racist-in-chief. Why not make migrants' contributions as evident in other areas to shut up people like him for good? If it can be done in football...

Does Trade War Slow PRC Global Ambitions?

♠ Posted by Emmanuel in ,, at 7/05/2018 08:39:00 PM
How much should Indonesia and others the Chinese are providing infrastructure to fear its ambitions in this trade war era?
Here's a thoughtful rejoinder to a previous post in which it was opined that the Chinese are lending to various infrastructure projects worldwide--with less regard to their borrowers' financial conditions or the viability of these projects--for as long as the PRC can ultimately benefit. So what if the borrowers can't repay? They might be able to obtain prime infrastructure on favorable terms in strategic locations when the fools default.

Or, is that cynical viewpoint not really how the Chinese go about things? Certainly they'd want to rebut such characterizations. Apropos for the times we find ourselves in, the eve of global trade war--US tariffs kick in on $34B worth of Chinese goods on Friday, July 6--may mean the Chinese need to scale back grand ambitions. Delusions of grandeur forestalled and all that...
The value of the deals that Chinese companies are striking under the country’s big global plan — called the Belt and Road Initiative — is smaller than a year ago, according to new data. Chinese officials themselves are sounding a cautious note, voicing worries that Chinese institutions need to be careful how much they lend under the program — and make sure their international borrowers can pay it back.

“Current international conditions are very uncertain, with lots of economic risks and large fluctuations for interest rates in newly emerged markets,” said Hu Xiaolian, the chairwoman of the Export-Import Bank of China, a state-controlled lender that plays a big role in financing the projects, at a forum this month in Shanghai. “Our enterprises and Belt and Road Initiative countries will face financing difficulties.”

China has begun a broad, interagency review of how many deals have already been done, on what financial terms and with which countries, say people close to Chinese economic policymaking, who asked to speak on the condition of anonymity because the effort has not been made public.
The gist of the argument here contains the following: (a) foreign expansionism may be curbed by difficulties at home brought on by Trump's global trade war; and (b) foreign partners do not have infinite patience with being exploited for China's gain:
Under the initiative, Chinese government-controlled lenders offer big chunks of money — usually through loans or financial guarantees — to other countries to build big infrastructure projects like highways, rail lines and power plants. That money often comes with the requirement that Chinese companies be heavily involved in the planning and construction, throwing them a lot of business.

But even with its financial firepower, China has its limits. Its economy is showing signs of slowing, and it is in the middle of a trade war with the United States. Beijing is struggling to tame domestic debt problems — problems an international lending spree certainly hasn’t helped. Too much overseas activity risks creating wasteful white elephants that can drag down Chinese companies and local partners alike.
Which version of events is correct, of the PRC as the new imperialists or that of co-suffering developing countries on the eve of trade war? As with most things, reality probably lies somewhere in between. However, I veer more toward the version described above in that the PRC needs to maintain the trust of other countries as it seeks to build up its international relations, and failed projects cannot always be redeemed by the Chinese if their foreign partners fold.

Can Trump Withdraw US From WTO as He Wishes?

♠ Posted by Emmanuel in , at 6/29/2018 08:06:00 PM
Are the WTO's days numbered with Trump desiring that the US leave it?
Well, it always was bound to come down to this: I have discussed about how various US trade actions on aluminum, steel, automobiles and heaven knows what else are flat-out WTO-illegal. These Section 232 actions on dubious "national security" grounds and Section 301 actions on equally questionable claims about righting US trade partners' injurious trade policies predate the WTO. Indeed, Trump's US Trade Representative Robert Lighthizer who was renowned for using these actions was last in government when Ronald Reagan was in power.

A common thread here is a desire to return to a pre-WTO situation when international trade rules were less codified and the United States presumably had more leeway in pushing others around as it pleased--at least according to the likes of Lighthizer and Trump's assorted minions. Ironically, of course, many developing countries have criticized the WTO for being designed largely to fulfill US wishes regarding trade such as the incorporation on intellectual property rights. At any rate, the main reason to leave the WTO as I have explained is that cases involving Trump's trade actions are likely to be ruled against when brought to its dispute settlement mechanism. To his way of thinking, this outcome would be "unfair." So, why not just leave altogether?
President Trump has repeatedly told top White House officials he wants to withdraw the United States from the World Trade Organization, a move that would throw global trade into wild disarray, people involved in the talks tell Axios.

What we're hearing: “He’s [threatened to withdraw] 100 times. It would totally [screw] us as a country,” said a source who’s discussed the subject with Trump. The source added that Trump has frequently told advisers, "We always get fucked by them [the WTO]. I don’t know why we’re in it. The WTO is designed by the rest of the world to screw the United States."
There will certainly be "globalists" even in Trump's cabinet pushing back against this line of action. But, as his other moves on trade demonstrate, he often ignores advisers going against his racist / protectionist / isolationist instincts:
Between the lines: Even if his advisers put a policy process in place and try to make sure he’s well-informed on what it would mean to try to withdraw from the WTO — there is no guarantee that Trump won’t do it. History shows he doesn't care about the process.
  • Remember when Trump upended his globalist trade advisers’ carefully constructed policy process and simply announced he’d be imposing massive tariffs on steel and aluminum imports? It’s not unimaginable that the same could eventually happen with his desire to try to withdraw from the WTO.
So, what can Trump do? Similar to NAFTA, it is a question as to whether withdrawing from the body in question can be done by the executive. That is, congress having authorized entry into NAFTA or the WTO, another act of congress should also be necessary to authorize departure:
The safety valve: Should Trump defy his advisers and announce a withdrawal at some point in the future, he would run into significant legal hurdles.
  • As head of state, Trump under international law could make the notification at the WTO. But the U.S. law implementing the WTO agreements states quite plainly that withdrawal from the WTO requires an act of Congress.
Just because he isn't authorized to leave NAFTA or the WTO doesn't mean he won't try since this president does not feel bound by law.

One Belt, One Empire? PRC's Sri Lankan Port

♠ Posted by Emmanuel in at 6/26/2018 06:17:00 PM
A port in Sri Lanka made by China and now owned by it shows dangers in borrowing from the PRC for infrastructure.
A continuing thread I've been investigating is the PRC's grandiose One Belt, One Road Initiative, lately abbreviated to the Belt and Road Initiative. Its stated intention is to restore the commercial infrastructure of the historic Silk Road which stretched from China all the way to the Middle East. To this end, the Chinese government has been spending a lot on infrastructure projects in many developing countries stretching from the Far to the Middle East.

It cuts both ways: developing countries are keen on alternate sources of financing for their infrastructure needs. What's more, China knows a thing or two about improving infrastructure going by the improvements they've made in this respect over the years. Meanwhile, the Chinese benefit by gaining commercial and of course trade access to these nations.

Today, though, we have an interesting counterpoint: What if China's "non-intervention" in the internal affairs of other countries actualy involves lending to corrupt leaders who the Chinese know have no ability to pay them back for these grandiose infrastructure projects? Then the Chinese may still benefit by taking over these facilities. Indeed, the cynical would say that's the entire point of this initiative.
“John Adams said infamously that a way to subjugate a country is through either the sword or debt. China has chosen the latter,” said Brahma Chellaney, an analyst who often advises the Indian government and is affiliated with the Center for Policy Research, a think tank in New Delhi.
Witness what's happening with Sri Lanka nowadays. As the Chinese sought a presence on the Indian subcontinent, its borrowers have conveniently gone belly up and have given up control of a newly port by the Chinese to its builders:
Over years of construction and renegotiation with China Harbor Engineering Company, one of Beijing’s largest state-owned enterprises, the Hambantota Port Development Project distinguished itself mostly by failing, as predicted. With tens of thousands of ships passing by along one of the world’s busiest shipping lanes, the port drew only 34 ships in 2012. And then the port became China’s.

[Former Sri Lankan President] Rajapaksa was voted out of office in 2015, but Sri Lanka’s new government struggled to make payments on the debt he had taken on. Under heavy pressure and after months of negotiations with the Chinese, the government handed over the port and 15,000 acres of land around it for 99 years in December.
The case of a single port is not enough to indict China's intentions, of course. A multi-country study would be useful on whether infrastructure projects were actually completed, used, or worse handed to the PRC after recipient governments could not pay off loans. At this point, though, nobody should believe China's intentions are purely altruistic "third world solidarity" and all that jazz.

There are many dupes like those in Sri Lanka just waiting all over the world.

Trade Wars & Impending Death of American Soy

♠ Posted by Emmanuel in , at 6/20/2018 04:21:00 PM
 
There's a saying that you get the leaders you deserve, and it seems American soybean farmers have voted to put themselves out of business.  Overwhelmingly carrying states where soybean farmers are located, Trump is hellbent on rewarding his voters with economic misfortune. Given Trump's radically anti-China campaign rhetoric, let's say this turn of events is of no surprise to no one. What's more, the export of soybeans was one of the few bright spots in an otherwise dismal agricultural industry:
Soybean-producing counties went for Trump by a margin of more than 12 percent, according to a Washington Post analysis...

Like most large-scale soybean farms in the United States, [this] business relies heavily on foreign markets. China buys 60 percent of all U.S. soybean exports to feed a growing fleet of hogs, fish and chicken.

The high demand has made soybeans a bright spot of profitability for farmers at a time when many other crop prices are down. But Trump’s aggressive tariffs against Chinese goods, meant to protect U.S. intellectual property and manufacturing interests, have incited retaliatory actions that farmers say threaten their profits.
In recent days, the price of soybeans has dropped precipitously, probably causing no small amount of concern for the folks who voted for Trump to punish themselves:
Soybean futures for July delivery dropped more than 7 percent to a low of $8.415 a bushel, their lowest since March 2009, according to Thomson Reuters. They were trading near $8.64 a bushel as of 11 a.m. ET. There are a lot of "unknowns and no confidence," said Rich Nelson, director of research at Allendale, an agricultural market research and trading firm...

With Tuesday's late morning sell-off, soybean prices are now more than 17 percent lower for the quarter and down more than 10 percent for the year..."The dramatic drop today is soybeans because soybeans is first and foremost what the Chinese like to buy from us," said Phil Flynn, senior market analyst at The Price Futures Group.
As a mainly export-driven industry selling to the Chinese, the future of soybean farming has been cast in doubt despite the trade making sense on paper. But, who says logic matters during a trade war as belligerents seek to one-up each other in harming themselves?
But that situation only holds in the short term. Yes, as the world’s top buyer, China needs U.S. soybeans today, in a few months, and likely even next year. However, it is not unreasonable for China eventually to wane itself off American beans in the longer term, which could have detrimental and irreversible effects on U.S. markets...

On paper, a soybean trade war involving the United States and China makes no sense for either party. China imports roughly 100 million tonnes of soybeans each year, primarily from Brazil and the United States, which together produce 70 percent of the global supply.

Simple math demonstrates that under the current structure, China cannot avoid U.S. soybeans right now if it is to meet its import schedule. And besides, why would China want to pay more for a product it clearly needs? Why would the United States threaten its No. 2 export (behind aircraft) to the East Asian country? But logic apparently matters not in this case, as these are the choices that have ultimately been made under the decision to proceed with the tariff tit-for-tat, and potentially a full-on trade war.
When they chalk up the demise of the American soybean industry years from now, it will come down to one word: "Trump". Having voted for him in the first place, soybean farmers will have no one to blame but themselves.

UPDATE: Using the familiar computable general equilibrium model GTAP, researchers at Purdue University estimate Chinese soybean imports from the United States can drop up to 71% if 30% tariffs are applied. Currently, Chinese authorities have indicated a 25% tariff. Not far off...

US Against the World: Three-Front Trade War

♠ Posted by Emmanuel in ,,, at 6/01/2018 07:25:00 PM

Military historians generally believe that World War II was lost by the Germans waging a two-front war. In the West, it fought against the UK, France, and the rest while it simultaneously fought Russia in the East. Not being a close follower of military history, Donald "Trade Wars are Good and Easy to Win" Trump has now  simultaneously declared war not on two but three fronts: against China (by vowing to make good on slapping tariffs on $50B worth of Chinese imports), the European Union, and North America (by not renewing exemptions from steel and aluminum in June).

Can Trump Make America Great Again through US Against the World? Jeffrey Sachs believes Trump has gone insane and that the obvious answer is "no" in calling for Trump to be relieved of office:
The US has probably never before had a delusional President, one who speaks gibberish, insults those around him including his closest associates, and baffles the world. By instinct, we strive to make sense of Trump's nonsense, implicitly assuming some hidden strategy. There is none.
Trump's trade actions are blatantly illegal. They are flimsily justified as an act of national security, but this is sheer nonsense. They are also fatuous in terms of US economic and geopolitical interests. Harming our closest allies, raising the prices on key intermediate products, and provoking retaliation cannot possibly deliver higher wages, better jobs, or an improved trade balance. Trump's latest notion to slap tariffs on German automobiles would be even more damaging geopolitically.
Jeffrey Frankel, like most other sensible observers, also sees folly in Trump's nonsensical moves:
But the economics would be illusory. There would be virtually no effect on the overall U.S. trade deficit: We would otherwise sell the natural gas to some other country, and in reality those smartphones already get about 95 percent of their value added from South Korea, the United States and other countries anyway. Focusing on the bilateral balance is a waste of time. Regardless what happens with China, the overall U.S. trade deficit will rise this year as a result of the Republican tax cuts, enacted at a time when the economy is already producing at the limit of its capacity.

Similarly unmoored from both economic and legal logic are the tariffs that Trump has imposed on imports of steel and aluminum, and threatens to impose on automobiles and other goods. With respect to legal criteria, the national security justification that he has invoked is flimsy in the extreme and will likely inspire other countries to retaliate. With respect to economic criteria, the beneficiaries in the steel industry, for example, are vastly outnumbered by those who will be hurt because they use steel as inputs, they consume the final product, or they produce export goods that will be hit by the repercussions, such as farmers.
Anyway, on to the belligerents. Take, for instance, slapping unexpected steel and aluminum tariffs on Canada and Mexico after Canada's PM Justin Trudeau flat refused to have NAFTA renegotiated every five years (as he should):
The White House launched a round of strong-arm tactics Tuesday when Vice President Mike Pence called Justin Trudeau and issued an ultimatum: A reworked NAFTA deal would need to be renewed every five years. In response, Trudeau canceled a trip to the U.S. Then on Wednesday, the Trump administration announced surprise steel and aluminum tariffs on Canada and Mexico. And on Thursday and Friday, President Donald Trump bashed Canada’s trade practices.

The White House is hoping the campaign of aggression will cause Canada and Mexico to cave as talks to renegotiate the 25-year-old NAFTA agreement are plagued by standoffs and delays. But instead, the moves could backfire as Canada and Mexico retaliate with their own tariffs, leading to a stalemate that would result in Trump pulling out of NAFTA altogether.
The other NAFTA countries are now engaged in a retaliatory tariff slapping frenzy:
Starting July 1, Canada will impose duties on about $12.8 billion worth of U.S. imports. The tariffs will target steel and aluminum imports from the U.S., but also agricultural and manufactured goods like cucumbers, laundry detergent and mattresses.

Mexico also said it would impose tariffs on $8 billion in American pork, blueberries, lamps and other goods. Mexican Economy Secretary Ildefonso Guajardo told reporters on the sidelines of a summit in Paris that his government is taking the action under the rules of NAFTA, which will allow the country to impose its retaliatory tariffs immediately, as soon as early next week.
Not content with irking the normally placid Canadians, the Yanks are making Europeans also deal with the same steel and aluminum tariffs. More specious measures are said to be forthcoming on "national security" grounds on Germans cars:
Mr Trump had warned before Thursday’s decision that any EU countermeasures would be responded to in kind — a message reaffirmed by US officials in recent contacts with European diplomats. The US administration in May announced an investigation into whether car imports pose a national security risk— a probe that is being eyed warily in Germany and elsewhere, as auto tariffs pose a much larger potential threat to the EU than the steel and aluminium duties. Germany, for example, accounted for just 4 per cent, or about $1.2bn, of the US’s $29bn in steel imports last year. But the US imported $20.2bn worth of cars from Germany and a further $8.6bn from the UK.
We'll see how the third round of China-US trade talks will go the next few days, but the writing appears to be on the wall already. As many have observed, the US trade actions are unlikely to be upheld at the World Trade Organization. Following China and India, the European Union has just initiated a case at the WTO against these steel and aluminum tariffs.

Given Trump's unrivaled ability to offend everyone--others Asians like China and Japan included over steel and aluminum alone--I would expect the rest to consolidate their cases against America. An interesting aspect here is that Trump is potentially driving the Europeans into the arms of China now since the EU has traditionally had complaints about the PRC more similar to those of the United States concerning the overproduction and dumping of Chinese steel and other goods. America will be left with no real major economic allies, be they Asian, European, or North American.

Let's further assume that the Europeans and the others win their WTO case(s) against the United States. These things take time. It may be that the case stretches into the 2020 US presidential elections when a less protectionist candidate wins--it's hard to imagine anyone more protectionist than Trump. The more "exciting" outcome would be the US losing its case while Trump is still president, in which case the US will probably just ignore the WTO ruling. It has done so in the past, and Trump has already pledged to ignore those it sees as "anti-US". With that result, we must return to the idea that Trump's intent, knowing full well that his trade policies are WTO-illegal, is to blow up the institution. Here, the question would be how long it is before a more conventional American leader is put in place to shore up an institution the United States thought up in the first place.

So, can the US "win" a three-front trade war? Two was already a stretch going by conventional wars; three is probably a step even beyond "too far already". In the end, the losers here are probably everyone involved as history suggests there are no real victors in these trade wars.

The Case for Singapore Rejoining Malaysia

♠ Posted by Emmanuel in at 5/31/2018 03:28:00 PM
Perhaps the only time Lee Kuan Yew cried in public was when Singapore left the Malayan Federation. Can things still work out?
Our longtime contact Andy Mukherjee of Bloomberg View recently penned a thought-provoking op-ed on why it makes sense for Singapore to rejoin Malaysia. Recall that Singapore was kicked out in 1965 of what was then known as the Malay Federation. Refusing to accept "affirmative action" laws aimed at ensuring ethnic Malays would gain preferences especially over the economically dominant ethnic Chinese, Lee Kuan Yew felt no choice but to leave. However, to the end of his life, he never gave up on the possibility of reintegrating with Malaysia.

Interestingly enough, recent events make this possibility less remote. Mainly, it makes economic sense. That said, we have to wait for  upset election victor, 92-year-old Mahathir Mohamad, giving up the reins of power to his onetime protege, 70-year-old Anwar Ibrahim. Due to Mahathir's age, it may actually happen fairly soon. The hope is that Anwar would once and for all do away with the "New Economic Policy" of Malay-favoring affirmative action that offends Singaporeans with their mix of ethnic Chinese, Indians, and Malays:
But guess what. The latest Malaysian election, with its big upset, offers a reason to reconsider Lee’s 1996 and 2007 optimism [on reunification]. Maybe the analyst in him was right all along.

Once Anwar Ibrahim is out of prison and in the Malaysian prime minister’s seat, and once he starts taking apart the system of state-sponsored racism that has existed there since 1971, the difference between peninsular Malaysia and Singapore will be of living standards. In fact, with a shared heritage of British-inspired common law and parliamentary democracy, the difference will be even less than it is between Shenzhen and Hong Kong.
There's also the added attraction of gaining a relatively populous market in Malaysia for famously low-birth Singapore. Simply, Malaysia has more of the people Singapore needs. The example of the Pearl River Delta is also an attractive example to consider in a "one country, two systems" sense that works well enough economically:
Much better institutional arrangements are possible now, taking a leaf perhaps out of the Greater Bay Area that Beijing wants for Hong Kong, Macau and Guangdong province. If the agglomeration proves to be an economic success for Hong Kong, it would again put pressure on Singapore to find the one thing it doesn't have: a hinterland.

A hinterland, and babies. Almost 25 percent of Malaysia’s 32 million population is below 14 years of age. For aging Singapore, where the figure is 15 percent, the neighbor’s demographic dividend — if harvested well by Anwar — is a valuable resource. Defense savings, should the two countries agree to share resources, are an added attraction.
The catch remains a strong one that Mahathir, who was already in a position of leadership when the "New Economic Policy" was implemented, is habituated to the old ways. Indeed, the recently defeated Najib Razak was rather more Singapore-friendly than Mahathir.
Mahathir is too wedded to the status quo to move the needle on race relations. But if Anwar does manage to plant the seed of equal opportunity and rules-based competition while clearing out the weeds of rent-seeking and cronyism, a mutually beneficial economic union with some sharing of the defense burden is possible. None of this will occur tomorrow. The shock election result has increased the odds of a loose confederacy from zero to, say, 10 percent over the coming 30 years. Still, that’s a start.
Maybe Lee Kuan Yew will still find solace over this matter in the afterlife; I for one don't rule it out happening...one day.

How OPEC Boosts US Oil Exports to Asia

♠ Posted by Emmanuel in at 5/28/2018 08:56:00 PM
Us Asians don't need Trump to force us to buy American oil. Fancy that.
As it was in the beginning with cartels, so it shall be until their end. The trouble with these things is that they only work if compliance with production limits are observed by a clear majority of the producers. I must admit that while the recent OPEC/Russia effort has been quite impressive--if you told me oil prices would reach their current levels when they started, I'd have said you're mad--there are limits.

The clear "antagonist" to these would-be petroleum oligopolists are the Yanks. Namely, the shale oil producers who have taken advantage of new production techniques to extract more oil and gas than previously thought possible from the United States. They too have been helped by the lifting of an oil export ban at the end of 2015; exports resumed in January of the next year.

The type of crude oil exported by non-American sourced is called Brent, whereas that coming from the United States is West Texas Intermediate (WTI). OPEC/Russia have succeeded in limiting supplies of Brent which they produce more of, while American WTI has been less affected. So, the price "spread" (difference) between cartelized Brent and WTI has been widening lately. The question is, why would oil customers worldwide buy OPEC/Russia's pricier Brent instead of WTI? The answer has to do mainly with bottlenecks getting US shale out of the ground and delivered to world markets. After all, you don't expect a country forty years dormant in exporting oil, the USA, to develop the necessary infrastructure overnight:
The simple reason for this is that the shale oil boom has left crude sloshing around the U.S., resulting in a local oversupply. While Brent prices have risen some 14 percent over the past three months, WTI is up just 7.5 percent and Midland crude – the version of WTI priced in the booming Permian basin rather than the benchmark delivery point in Cushing, Oklahoma -- is down 4.8 percent.

The last time we saw these sorts of spreads, there were sound legal reasons for it. The U.S. had forbidden almost all exports of crude oil for four decades until the end of 2015, so for many years its soaring shale oil production was trapped by the ban and the capacity limits of U.S. refineries that were able to convert it into exportable products.

The growing spreads now suggest that supply is pushing up against a different sort of bottleneck: A shortage of pipeline capacity between Midland and Cushing, and then a further shortage of pipeline and port capacity to get U.S. crude onto a hungry global market.
What may happen is that if OPEC/Russia keep artificially limiting oil production to boost prices, it may become even more economically viable for American shale producers to develop the infrastructure to get their oil to customers in Asia and elsewhere. Already, shale and similar sources have increased their production to almost counterbalance OPEC supply reductions:
There’s a further factor to consider, though, and it relates to what’s happening on the plains of Texas and Oklahoma. The latest period of supply restraint from Opec and Russia has in essence seen them give up market share to onshore North America. The 1.8 million barrels a day that they’ve taken off the market is almost entirely compensated for by the 1.53 million barrels a day of additional unconventional crude production from the U.S., not to mention 640,000 of additional daily barrels that have come out of Canada.

At the moment, infrastructure bottlenecks are keeping the U.S. shale boom almost as quarantined from global markets as legal restrictions did in the pre-2016 era. But, as my colleague Liam Denning has written, those widening spreads between delivery locations are driving midstream operators to seek profit from new export channels, from pipelines to the nascent capacity to load larger tankers from Louisiana’s Loop terminal.
We are already seeing the Yanks eat the lunch of greedy OPEC/Russia in Asia:
In Asia, China - led by Sinopec, the region’s largest refiner - is the biggest lifter of U.S. crude. The company, after cutting Saudi imports, has bought a record 16 million barrels (533,000 bpd) of U.S. crude, to load in June, two sources with knowledge of the matter said. India and South Korea are the next biggest buyers in Asia, each lifting 6 million to 7 million barrels in June, sources tracking U.S. crude sales to Asia said. Indian Oil Corp bought 3 million barrels earlier this month via a tender, while Reliance Industries purchased up to 8 million barrels, the sources said, although it wasn’t clear if Reliance’s cargoes would all load in June.

South Korea’s purchases are driven by its top refiners SK Energy and GS Caltex. Taiwanese state refiner CPC Corp has also snapped up 7 million barrels to be lifted in June and July. U.S. exports to Thailand will increase to at least 2 million barrels. State oil company PTT PCL is 1 million barrels of WTI Midland, while Thai Oil and Esso Thailand bought at least 500,000 barrels of Bakken crude each, said traders with knowledge of the country’s crude deals.
It's rare to find American good guys in the age of Trump, but I suppose the shale producers' contributions to punishing OPEC/Russia for introducing price distortions hurting oil consumers like you and me counts.