Jul 252018
 
 July 25, 2018  Posted by at 12:59 pm Finance Tagged with: , , , , , , , , , , ,


René Magritte Empire of light 1950

 

There’s not a shade of a doubt that I’m not an expert on tariffs, trade barriers and subsidies, and I’d be the last to suggest any such thing. But I can read. Still, do correct me if I’m wrong anywhere. The whole field is so complicated -no doubt often on purpose- that there’s always the possibility that there are side issues involved for which one would need to actually be an expert.

But still. Now that EU chief Jean-Claude -‘When it becomes serious, you have to lie’- Juncker is due to arrive at the White House soon, I looked at some of the items involved. Last night Trump said that all tariffs, barriers and subsidies should be dropped between the EU and US. Why the TTiP doesn’t come anywhere close to that is anyone’s guess. Too complicated for the boys and girls?

In at least some major fields, Trump does seem to have a point or two. The US has a 2.5% tariff on European cars, while the EU slaps a 10% tariff on American cars. That’s 4x as much, or a 300% difference. Whoever said yes to that? Sure, the US has a 25% tariff on EU pickups, but nobody in Europe drives pickups, hence they don’t produce them, so that’s not consequential.

So what had Trump done? He’s threatened a 20% tariff on Beemers and Mercs, and added -for entertainment value only- that he doesn’t want to see any of them in on Fifth Avenue anymore. Cue EU carmakers warning about the cost to American customers.

That’s all fine and well, but those tariffs on personal cars are still 300% higher. So push your European government to make them equal. Easy as -American- pie. How about zero? I can see where Trump’s coming from. Issuing warnings to the American public about BMW’s getting more expensive doesn’t look entirely on the up and up.

 

Also, I was looking at agriculture. Now, I grew up in Europe, and I do have an idea about EU farm subsidies (they’re notorious even inside the EU, going all the way back to the 1950s-60s). There was a point where they were over 70% of the total EU budget. They’re 30% or even somewhat below that now, but that’s not because subsidies have gone down, it’s because the EU budget has grown exponentially.

US farm subsidies were some $23 billion last year, and a year ago the Trump administration proposed a $4.8 billion cut to that. Now that Trump has initiated a one-time $12 billion for farmers to make up for the effects of his tariff proposals, one half of America -Conservatives- cry foul because: “that’s Soviet-style politics”, and no doubt the EU will cry right with them.

But look: under the EU’s Common Agriculture Policy (CAP), EU farm subsidies for the 2021-2027 period will fall a whole 5% to ‘only’ $420 billion. And that’s just a proposal, and already France, the main beneficiary of the subsidies, has declared that such a cut is unacceptable. Soviet style?

The meeting of tee-totaller Trump and wine-totaller Juncker is interesting enough in and of itself, and you bet the Donald knows what and who Juncker is, but unless Jean-Claude comes with something very substantial, the numbers I cited above would seem to be very clear. And that’s without steel, aluminum etc etc.

If your side gives its farmers almost 20 times as much as the other side, what are you going to say? You may ask for some time to adapt, but that would seem to be it. However, Juncker could never sell egalization of subsidies ‘at home’. France and others would shave his head and ass and apply tar and feathers. And Macron would fear the same fate if he gives in. As Merkel would on the car issue.

Juncker has no room to wiggle on the whole shebang. All he can do is damage control and a good glass of wine (wonder if Trump instructed his staff not to give him any, or merely cut him off after the first bottle). It’s just that Trump has noticed the policy damage, and doesn‘t like it. And you have to wonder, who ever accepted those terms, and signed treaties like that TTiP that they are engraved in?

 

If you ask me, communities and countries should always make sure they remain in control of all their basic necessities. And food is certainly one of them. Also. if any politician near you ever proposes selling the rights to your drinking water to some foreign party, tar and feathers is your reply. Let Americans make their own cars, And German and French theirs. It’s not of the same importance as food, water, shelter and clothing, but you get the drift.

Schlepping food halfway across the planet is a dangerous thing once you become dependent on it to feed your children and your community (schlepping it halfway through Europe is as well). Selling your local water rights is even worse. That’s downright insane.

But if you’re going to trade, and once you’ve excluded basic necessities, zero tariffs or at least equal tariffs seems the way to go. Just wait till Trump starts that discussion with China for real. That conversation is largely about barriers, it’s different from Europe, though -hidden- subsidies feature ‘bigly’ as well.

 

Still, summarized, though I’m far from a Trumponado, I can see his point(s). I find it much harder to see what earlier US administrations were thinking when they agreed to all this stuff. And sure, his approach is brusque and perhaps brutal, but the country he’s, for better or for worse, president of, does seem to have gotten the short end of an very extensive array of sticks.

But by all means, don’t listen to me, listen to the experts. Then again, also look at the numbers.

 

 

Home Forums Tariffs, Barriers and Subsidies

This topic contains 6 replies, has 7 voices, and was last updated by  V. Arnold 4 months, 2 weeks ago.

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  • #41949

    René Magritte Empire of light 1950   There’s not a shade of a doubt that I’m not an expert on tariffs, trade barriers and subsidies, and I’d be t
    [See the full post at: Tariffs, Barriers and Subsidies]

    #41953

    regionswork
    Participant

    Interest groups cooperate in the setting of tariffs. There are individual industry deals. Businesses seek protection from local, state and national governments. They can get it in various ways.

    Foreign car makers have chosen to build plants in the U.S. for decades. Others have given up on this market: Peugeot, Renault, Citroen. Ford will stop making passenger cars except for the Mustang, Focus and C-max hybrid. I wonder what they’ll race in NASCAR? Maybe NASCAR will race SUVs in the future like the truck series. I never understood that.

    As for agriculture, it has been reported that US dairy producers now have a whopping 1.39 billion-pound surplus of cheese; 4.6 pounds per American. At the same time there is over production, there’s risk to herds due to overuse of antibiotics. Then there’s the whole GMO thing and a consumer desire to get back to some sort of organic purity. Robotic bug and crop pickers will handle this.

    The U.S. financed itself, infrastructure building and protected its young industry from cheap British goods with tariff revenue. The South didn’t like paying higher rates for goods it’s cotton made in order to build the textile industry in the North. Eventually they’d inherit it before it went offshore.

    Countries can’t/aren’t supposed to do that today. They are too late to the game, so they must settle for whatever jobs they can buy. This is true within countries as well as between them. Everyone wants foreign investment, most certainly the U.S. too. Tariffs create this incentive. Agriculture is a bit different.

    The trade game, as I understand vaguely from reading of the WTO, has become weighted toward guaranteeing profit for vendors, enabling them to override local regulation that was harmful to their sales. They could sue the country for damages.

    U.S. public-private partnerships often have a guaranteed profit built in.

    We can thank the MBAs, their spreadsheets, and the lawyers for all of this. Their risk-limiting moves transfer the risk to the “we the people” governments. When legislators actually knew the game, having played it while gaining seniority and having knowledgeable staff, not just lobbyists, there was a balance of power.

    Now they run on memes and neither they nor staff even read the legislation. In the case of the TPP, they couldn’t read it.

    Puerto Rico was not prepared for Hurricane Maria. World trade may not be prepared for the New art-of-the Deal MegaStorm Donald. With such 24/7/365 disruption, there’s just one calm day every four years, leap year’s February 29, though that may not be the day.

    Let us hang on. “Hang on Sloopy” goes the song.

    #41955

    Dr. D
    Participant

    No intent of honesty in reporting. Just because you disagree doesn’t mean the other guy doesn’t have a point or a plan.

    Example: “Trump Plans 25% Tariff On Up To $200BN In Foreign Cars As Advisors Helpless To Stop Him”

    This line is wildly common. It’s a soup of click-bait assumptions.
    A) that a 25% tariff automatically isn’t a good thing. We reporters have been wrong about everything for 20 years, but not this time. WE know best.
    B) if it’s a bad thing it’s not just that he’s whacking them to get them to table.
    But most importantly,
    C) that the Presidency is a job where you do whatever your advisors tell you. The Cabinet, the Intel agencies, the Chamber of Commerce, Congressmen, Angela Merkel, Obama — doesn’t matter who. Doesn’t matter that in reality, they all disagree with each other, so no matter who you pick one group will always be “helpless” to “stop” the Trumpnado. Because whatever he does, push, pull, or go sideways, is always and forever wrong simply because he does it. There’s no article, “Half of Trump’s Cabinet Pleased He Chose Their Side While the Other Half Sulks in Rejection This Time”, a much more plausible headline.

    But there’s more. There’s the assumption that the President MUST obey the always-wrong, hopelessly-discredited, war-crime Intel agencies; he’s REQUIRED to obey CNN pundits. You see, it’s not that the head of the executive branch, the President, as the CEO and executor of Congress’s will, is the boss of the Department of Justice, with complete hiring and firing power over the CIA, the FBI, etc….no. You see, REALLY the President works FOR the CIA and FBI and their leaking handmaiden CNN and he does whatever THEY say. Trump is their employee, the waterboy, just as Eisenhower and Kennedy warned.

    But what does THAT say? It implies that — Russia notwithstanding — we don’t really have elections. The American people have no voice. There’s no sense in electing Trump since he’s only allowed to obey the unelected, unaccountable bureaucrats of the CIA and FBI anyway and NOT the people of the United States.

    …And they say, with two years of headlines like this, about how the American people should be overrun, overruled, ignored, defied, stymied, attacked in form and body, that there’s no bias, there’s no deep state. How can there be a deep state? Donald Trump just needs to obey everything N.Y. Think Tanks and D.C. advisors say and do everything CNN and Raytheon tells him to do, and it’ll be fine.

    …Newsflash: if we wanted his ADVISORS’ policies enacted, we would have elected THEM. The electorate wants HIS policies, and to spank every D.C. advisor red and send them home with feathers. If you hadn’t noticed — yet! — that’s why they elected him: to crush every D.C. pundit to powder and destroy everything they ever made. Things like a 4:1 tariff ratio acting AGAINST every American from Pasadena to Philly. The one that makes Flint too poor to afford water while they yuk it up at $100,000 fundraisers. As with President Kennedy and CIA Director Dulles, we’re just having a little argument about who works for whom.

    #41956

    Ken Barrows
    Participant

    Why do we need more trade? If 65% (pick a number) of the increased income goes to 1% and the world requires almost 100 million barrels of oil per day to move it around, we should argue for less trade.

    I agree food independence is important. But why the ever increasing number of cars? You’d think the proponents of free trade believe in infinite growth on a finite planet.

    Free trade provides benefit, though, for those at the top. The rest want to be there. No fun if you get there and cannot outsource all the unpleasant stuff for low wages.

    #41957

    Nassim
    Participant

    “If you ask me, communities and countries should always make sure they remain in control of all their basic necessities”

    As you well know, the Egyptians cannot export their massive horticultural potential to Europe – tomatoes, onions, new potatoes, lettuce, flowers, cucumbers etc. – as that would put out of business many of the farmers of southern Europe (who depend on cheap illegal migrants from Africa to grow the stuff) and the Netherlands. Egypt is an open-air glasshouse that needs no gas for heating.

    On the other hand, you wll find that Greek, Italian and Spanish tinned vegetables dominant in much of Africa. That is outrageous. Not only do they prevent Africans from exporting, but they destroy any indigent attempts to move up the food chain.

    Common Agricultural Policy is another of the things that is encouraging illegal migration to Europe. People cannot earn a living in their own country because of this malevolent policy.

    #41958

    VietnamVet
    Participant

    Tariffs are beyond me. So is exiting the EU. There are experts who do know the details. The Wealthy and Multi-national Institutions have them on retainer. So naturally the Elite have a leg up in trade negotiations. Democratic government is intended to counter balance the Oligarchy. However, when government deregulates over the last 40 years and doesn’t hire the experts to protect the people; inequality grows by leap and bounds. The Trump and May governments have reached the ultimate level of incompetency; lost in myths; unaware of reality.

    #41960

    V. Arnold
    Participant

    In the west the game is rigged in favor of the few and against the majority.
    Sovereignty is under attack everywhere and the bitter pill the west must swallow is Russia, China, and Iran; who maintain as sovereign nations. India and Pakistan? So far, so good, but for how long is anybody’s guess.
    The countries of Africa are presently being contested.
    Usian’s are probably, individually, the least sovereign humans walking the planet…

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