WITA’s Friday Focus on Trade – July 28, 2023




US & EU Take Different Approaches To Electric Cars From China

Next Thursday, August 3, WITA will hold an event to discuss the rapid expansion of Chinese auto manufacturing and what that may mean for US and global auto markets, especially in EVs. Information can be found below, or here.
There was a time when cars manufactured in China were ridiculously unsafe. They tended to crumple in a collision like they were made of cardboard. But over the past 20 years, the Chinese have learned a lot from the American and European car companies that started manufacturing in China, thanks to local rules that require foreign companies to partner with a Chinese company.
That requirement has sparked a transfer of information and technology unlike any in modern history. Today the Chinese are making cars that are as good or better than those from companies like Mercedes, Ford, Volkswagen, or GM, and the Chinese new car market dwarfs all others. Last year, there were 27 million new cars sold in China, 13.75 million cars and light trucks sold in the US, and 9.25 million cars sold in the EU.
Now the Chinese automakers are ready to start exporting cars to foreign markets, but are finding Europe much more welcoming of Chinese made cars than the US, which has been having an on again, off again trade war with China since a former president bragged that trade wars were easy to win.
Tariffs play a major role here. The EU import duty on foreign made cars is 10%, and all cars — foreign and domestic — are eligible for EV purchase incentives. In the US, the import duty is 27.5% and only cars that follow stringent rules regarding the sourcing of battery materials and components are eligible for federal EV incentives. In addition, cars must have their final assembly point in the US, Canada, or Mexico.
06/27/2023 | Steve Hanley | CleanTechnica

China’s Top Policy Group Encourages Economic Opening, but on Political Terms

Chinese leaders are slowly realizing the post-COVID recovery they had counted on to revive growth this year is struggling to endure. Policy responses include limited supply-side stimulus, positive messages to private firms, and encouragement for foreign trade and investment. But a recent meeting of the country’s most powerful policy body signaled this fragility has not stopped efforts to build an economy that is secure, self-reliant, and coordinated by the Chinese Communist Party (CCP).
On July 11, General Secretary Xi Jinping chaired a meeting of the CCP Central Comprehensively Deepening Reform Commission (CCDRC), its second convening since the 20th Party Congress last October. The top focus was deliberating an “Opinion on Building a New Higher-Level Open Economic System to Promote the Construction of the New Development Paradigm.” While details were not released, Xi said he wanted to “proactively raise China’s opening-up to a new level” and “deepen institutional reforms” in foreign cooperation on trade, investment, finance, and innovation.
This constructive language accords with recent moves to lift market sentiment. Last month top leaders warmly received visiting U.S. business titans, including Tesla’s Elon Musk and Tim Cook of Apple. Beijing then unexpectedly appointed Pan Gongsheng as Party Secretary of the People’s Bank of China, reportedly due to his international experience. Treasury Secretary Janet Yellen visited earlier this month, soon after officials in Shanghai paid a friendly visit to the U.S. consulting firm Bain, whose workers were questioned by security officials in April. Financial regulators are inviting foreign fund managers to Beijing this week to hear their concerns. The CCDRC readout suggests China will further appeal to overseas firms by expanding market access, cutting red tape, and “optimizing the business environment.”
However, efforts to stimulate economic exchanges are not coming at the expense of party direction or national security. The readout indicated that economic opening should “revolve around serving the construction of the new development paradigm.” This language refers to Beijing’s “dual circulation” strategy to grow China’s domestic market while making the world more reliant on Chinese supply chains. New opening measures will likely target high-tech firms and financial actors who the party believes can help domestic industries become global powerhouses, but without fundamentally altering the statist, mercantilist, and political orientations of Xi’s economic agenda.
Indeed, a meeting of the party’s economic commission had established in May that “strengthening the party’s leadership of economic work is the right thing to do” and Beijing must “take the maintenance of industrial security as the top priority [and] strengthen the top-level design of strategic spheres.” The CCDRC readout said the party must “persist in bottom-line thinking and extreme thinking” and improve its capacity to “supervise opening,” implying that self-reliance efforts and security crackdowns are unlikely to be a thing of the past, even if they do moderate somewhat in the coming months.
Read the Full Article Here
07/19/2023 | Neil Thomas | Asia Society Policy Institute

Trump’s Renegotiation of the NAFTA Free Trade Deal is Helping Workers—in Mexico

To President Donald Trump, America’s trade relationship with Mexico was intolerable. He seethed over the U.S. trade deficit and the shuttered factories in America’s heartland. “No longer,’’ he vowed six years ago, “are we going to allow other countries to break the rules, to steal our jobs and drain our wealth.”
So Trump pressured Mexico and Canada to replace their mutual pact with one more to his liking. After a couple of years of negotiations, he got what he wanted. Out was the North American Free Trade Agreement. In was the U.S.-Mexico-Canada Agreement.
The USMCA, which Trump hailed as “the fairest, most balanced and beneficial trade agreement we have ever signed,” will reach its third anniversary Saturday.
The trade pact hasn’t proved to be the economic bonanza Trump boasted it would be. It couldn’t have been, given that trade makes up less than a third of America’s $26 trillion economy.
Yet while the the deal’s overall impact has been slight, it has nevertheless been helping workers on the ground. It’s just that the beneficiaries have so far been mostly in Mexico. Novel provisions of the pact have enhanced the ability of long-exploited Mexican workers to form unions and secure better wages and working conditions.
Trade officials and experts predict, though, that the benefits will also flow, in time, to U.S. workers, who no longer must compete with severely underpaid Mexican laborers without real bargaining power.
“U.S. workers win when workers in other countries have the same rights,’’ said Cathy Feingold, director of the AFL-CIO’s international department.
Thea Lee, a deputy undersecretary at the U.S. Labor Department, suggested that the pact and Mexico’s reforms haven’t been around long enough to yield measurable help to American workers yet. “We’re going to see the positive results first for Mexican workers because Mexico is undergoing a massive, comprehensive, ambitious labor market reform,” she said.
In some ways, the USMCA as a whole has fallen short of Trump’s promises.
Take the trade deficit with Mexico. Despite Trump’s insistence that the USMCA would pull more manufacturing back to the United States, the gap between what America sells and what it buys from Mexico keeps widening: It has surged from the $64 billion gap in 2016 that so irritated Trump to a record $139 billion last year.
The former president also predicted that exports of U.S. auto parts to Mexico would rise by $23 billion. They have increased since 2020 — but only by about $8 billion.
“I don’t expect that we’re ever going to be able to say that (the USMCA) accomplished very much,’’ said Alan Dierdorff, a professor emeritus of economics and public policy at the University of Michigan. “I don’t think it hurt much. But I don’t think it helped much.’’
Read the Full Article Here
06/29/2023 | Paul Wiseman, Mark Stevenson, Tom Krisher and The Associated Press | Fortune

How to Cut Emissions Through Agricultural Trade

In many ways, 2022 was a bad year for U.S. agricultural trade. Russia’s invasion of Ukraine cut off exports of wheat, sunflower, and other products from both countries. Mexico proposed banning imports of GMO corn from the United States. And the Office of the U.S. Trade Representative and the U.S. Department of Agriculture (USDA) were both left trying to operate without anyone in charge of agricultural trade until late December when the Senate finally confirmed two highly qualified nominees. Although total agricultural exports did rise in 2022 to record levels, so did imports, which nearly exceeded exports. USDA projects that imports will fully overtake exports in 2023, which has only happened twice before in the past 50 years. These trends shape the costs of farm inputs and outputs, including food, fiber, livestock feed, and biofuels, and affect where and how agricultural production occurs. That, in turn, not only affects farmers’ bottom line and consumers’ pocketbooks, but the climate as well.
Every country and region produces agricultural goods with a different carbon footprint—that is, the quantity of greenhouse gas emissions generated per pound, bushel, or other unit of agricultural production. This is due to factors like fertilizer use, irrigation, and other farming practices; domestic policy support for agricultural innovation and production; and environmental conditions such as climate and soil quality. If trade policies shift production from a country with a high carbon footprint to one where production is more efficient, total global emissions could decrease, and vice versa. In fact, concentrating global crop production in optimal locations with high yields could decrease its carbon and biodiversity footprint by 71% and 87%, respectively.
Yet trade has not been a major focus of U.S. policy debates about how to decarbonize agriculture or otherwise improve environmental sustainability. Policy proposals have generally focused on other areas such as how to increase domestic adoption of no-till farming and other practices, limit agriculture’s land use footprint, and sustainably manage livestock operations. Only recently has Congress considered agricultural trade’s potential role in decarbonization. The 2021 FOREST Act, for instance, would limit U.S. imports of beef, soy, and other commodities originating from illegally deforested land. We show that agricultural trade and trade policy can play an even larger potential role in cutting agricultural global carbon footprint.
By analyzing data from the Food and Agriculture Organization of the United Nations (FAO) on five of the world’s top agricultural exports—maize (corn), wheat, beef, pork, and chicken—we find that the United States produces several key commodities with a lower carbon footprint than other major exporters (defined as the countries that accounted for 80% of global export quantity for each product from 2015-2019). However, many countries with higher carbon footprints export more than countries with lower emissions. In many cases, exports are also growing most quickly in high-emissions countries. For example, while the United States produces beef and chicken with a smaller carbon footprint than Brazil, exports are growing at a much faster rate in Brazil than in the United States.
These findings suggest that policy makers should consider policies that concentrate production in countries with the lowest rates of agriculturally-driven deforestation and other land-use change, which is a large contributor to agriculture’s carbon footprint. In the United States, for example, Congress could pass policies, such as the FOREST Act, that require imports to be deforestation-free or to meet other minimum standards. The executive branch can act too, for instance by developing trade agreements that increase exports of goods the United States produces with a relatively low footprint.

Read the Full Report Here

06/01/2023 | Dan Blaustein-Rejto | The Breakthrough Institute


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