More Drivel: Trump, Trade, and Unicorns

For those who haven’t had enough of the Trumpian penchant for stringing together cliches, generalizations, buzz words, dog whistles, and nonsense, there’s a heavy dose of all the above in the Pensacola Speech…including “America First” isolationism.  Evidently, the United States of America will be “great again” when we posture, pose, and pound our way to the elimination of international trade agreements.  Gone the Trans Pacific Partnership.

Lovely.  The TPP was a flawed proposal, but it was a close version of what the Chinese thought it was — a way to contain Chinese influence in the region.  So, instead of ongoing negotiations we have the increasing importance of the Regional Comprehensive Economic Partnership spearheaded by (Guess Who?) China. [CNBC]

“The mainland is already the biggest trading partner for the bulk of Asian countries, but it’s gradually increasing its political and economic sway by leading projects that impact the region. Those included the Asian Infrastructure Investment Bank and the “One Belt, One Road” infrastructure program.”  [CNBC]

The Australians have figured this out, with one analysis observing the TPP model was better fitted to large developed economies (read: US, Australia, Japan) but without US participation and leadership, the Chinese version RCEP is currently the only game in town.

“We will hopefully keep NAFTA…” he said in Pensacola, but the talks are stalled.  As of November 22, 2017 the outlook wasn’t all that optimistic healthy:

“The United States, Mexico and Canada failed to resolve any major differences in a fifth round of talks to rework the NAFTA trade deal, drawing a swift complaint from the Trump administration on Tuesday that the lack of progress could doom the process.” [Fortune]

And more:

U.S. President Donald Trump has threatened to withdraw from NAFTA unless he can rework it in favor of the United States, arguing that the pact has hollowed out U.S. manufacturing and caused a trade deficit of over $60 billion with Mexico.  The U.S. official expressed frustration that Mexico and Canada were not engaging in talks on the auto content proposal and others aimed at “rebalancing” trade in the region. [Fortune]

Here’s a Pro Tip:  In order to negotiate you have to have a partner.  In this case, partners. If the partners are not at the table then instead of a “reworked” agreement in favor of the US we have nothing.   Trump is also wrong to assume that NAFTA is the only game in town:

“This year, for the first time, 94% of goods moved tax-free across borders in the Pacific Alliance, a trading bloc that includes Mexico, Colombia, Chile and Peru. Formed in 2011, it accounts for half of all trade in the region and covers about 200 million people.

“We are trading as a group of countries in agreement on free trade,” Mexico’s foreign minister, Luis Videgaray,said Wednesday evening in New York. Videgaray spoke alongside the presidents of Colombia and Chile, as well as a Peru’s trade minister.” [CNNMoney]

In other words, watch what happens in the Pacific Alliance, and the South American trade bloc Mercosur.   And, the current  trade negotiations between Mexico and Argentina likely aren’t founded on Mexican reaction to Trump’s continual references to His Wall, but are more likely the result of comments like the ones he made in Pensacola — that NAFTA should benefit the US, and everyone else gets the hind quarters.  Moving from the general to the specific issues with agricultural trade between Mexico and South American nations:

“Mexico bought 100,800 tonnes of yellow corn from Brazil in September and 41,000 from Argentina — a drop in the ocean compared with the 10.5m tonnes bought from the US. But so far this year, it has bought 11 per cent more of the commodity from the two South American countries than in all of 2016, according to government data.” [FinancialTimes]

Pro Tip Number Two: Always assume a negotiator has a back up plan, and it probably won’t be the one you want.  Are we Great yet?  Have we rounded up all those Unicorns Trump said we were going to get?

Unicorn driven negotiations aren’t successful.  The Trump administration appears to believe a tenuous notion: if you start with a Unicorn then you can negotiate your way into getting the Unicorn.  Unicorn 1: The US gets 80+% content on cars in NAFTA (even though auto manufacturers say this will make their autos noncompetitive in the marketplace.}  Saying, “I want my Unicorn, and I’m walking away if I don’t get it,” assumes there’s a Unicorn in the first place, and you can get the thing in the second.

Those who persist in believing there are Unicorns may explain their elusiveness by saying they must all be grazing somewhere else.  Fine.  However, the Trump administration chasing its trade Unicorns would be well advised to remember that if they exist but are elusive it’s because they have other pastures in which to play.  The Chinese are more than willing to step in to fill the vacuum created by the loss of American leadership in the TPP, and the Mexicans are perfectly willing to increase their trade with Pacific Alliance and Mercosur partners in South America.  They’ve already done so.

The rhetorical sound track of Trump speeches in which we are promised Unicorns (American Made, America First, American Work) is a thin and tinny cover for inept trade talks during which bluster replaces substance and the Unicorns are no more substantial than the empty promises.

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