Is NAFTA dead? Or near breakthrough?

U.S. Trade Representative Robert Lighthizer expressed hope a breakthrough could be made in coming days on reworking the NAFTA trade deal. At the same time, President Trump is saying he is in "no rush to make a deal".

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4 minutes ago, 李伟王芳 said:

U.S. Trade Representative Robert Lighthizer expressed hope a breakthrough could be made in coming days on reworking the NAFTA trade deal. At the same time, President Trump is saying he is in "no rush to make a deal".

It is quite clear that Trump’s definition of fair trade has to do not with the rules that govern trade but with the end result: If one side exports more than the other, it is winning. Wrong

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Britain went free trade in 1846. Within 50 years she had lost forever her dominance in the world; within a century her trade deficits had exploded beyond all recognition, from which she has never to this day recovered. Japan has been adamantly protectionist since the 1950s and has rocketed to world prominence in numerous industries. Germany has been forcefully protectionist since the 1950s and today she runs Europe with the mightiest economic engine outside of the U.S & China.

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Just now, Sefko Trafikant said:

Britain went free trade in 1846. Within 50 years she had lost forever her dominance in the world; within a century her trade deficits had exploded beyond all recognition, from which she has never to this day recovered. Japan has been adamantly protectionist since the 1950s and has rocketed to world prominence in numerous industries. Germany has been forcefully protectionist since the 1950s and today she runs Europe with the mightiest economic engine outside of the U.S & China.

Don’t forget about Korea. They didn’t grow their economy via free trade. Instead the government backed home grown industries and promoted them.

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Just now, Ajan Bosnjacki said:

Don’t forget about Korea. They didn’t grow their economy via free trade. Instead the government backed home grown industries and promoted them.

And then you have Trump in 2017. He uttered the hall of fame, classic, stupid statement of all time with "Trade wars are good and easy to win." It will go down in the history of economics as possibly the most naive statement ever made by a world "leader."

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3 minutes ago, Joanna said:

And then you have Trump in 2017. He uttered the hall of fame, classic, stupid statement of all time with "Trade wars are good and easy to win." It will go down in the history of economics as possibly the most naive statement ever made by a world "leader."

If the US and it's trading partners were to remove all trade barriers - what Trump and co. don't get - is that the US would still not be able to compete with trading partners with lower labor costs and or more abundant critical resources that we have in the US. Consequently Trump's trade arguments and proposed solutions, like most of his other simple approaches to solve our obvious problems that most everyone sees, but that are far more complex than a 10 minuted summary would allow Trump to grasp.

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5 hours ago, Nigerian Price said:

 but that are far more complex than a 10 minuted summary would allow Trump to grasp.

Trump clearly isn't a policy wonk, but he is smart. He reads his voters well. And it's the folks who vote for him that need to grasp the nuances, and for now they are convinced we are winning.

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What is the Canadian trade rep doing today?  She keeps coming out and saying "we'll only enter a trade Agreement if its good for Canada"  I say "lady, don't waste our time telling us what you're not going to do - unless you have something final to say - go home!

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21 hours ago, Jo Mack said:

What is the Canadian trade rep doing today?  She keeps coming out and saying "we'll only enter a trade Agreement if its good for Canada"  I say "lady, don't waste our time telling us what you're not going to do - unless you have something final to say - go home!

Chrystia Freeland is "book smart" but not "street smart."  Her running her mouth is intended for domestic consumption back home, trying to rally dispirited Canadians to stick with the Liberal Government (Federally and Provincially) and keep them from dumping the Liberals the way the voters did in Ontario, where they booted out a majority Liberal Party government and premier and installed the Conservatives, complete with a "leader" or provincial premier who is, candidly, a bit of a buffoon. 

The reality of Canadian electoral maps is that the Liberals absolutely must have the support at a bare minimum of all of Quebec and the rural parts of Ontario.  And the key to that is the "supply management" policies in the dairy sector, which is now pretty much sacrosanct.  In reality, on an aggregate or national level, Canada's dairy sector is minuscule, but in the specific rural Ridings, it is overwhelming.  Without those Ridings voting Liberal, the Liberals are out the door.  Ergo, the dairy sector receives these price supports and Americans are largely excluded. 

The Donald has seized on the dairy sector as a bully-point.  It really does not amount to much for American producers, basically removing the State of New York as a market, but it means everything to the Liberal Party in Ottawa. The Liberals cannot let go of it, and Trump is getting a bit obtuse in his insistence that this immovable rock be dynamited into oblivion.  Thus, I predict "no deal" to be presented to the US Congress. 

Will Trump whack the Canadian auto sector?  Hard to say.  My hunch - and it is only a hunch - is that he will do it, with a 60-day inauguration window.  That will be to scare the living bejesus out of the Canadians.  If he follows through, the Canadian auto building sector is in for a very rough time.  Some 85% of its production is exported directly to the USA.

If that tariff is proposed, expect the Loonie (currency) to sink further.  Could go all the way to 45 cents. 

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(edited)

1 hour ago, Jan van Eck said:

The Donald has seized on the dairy sector as a bully-point.  It really does not amount to much for American producers, basically removing the State of New York as a market, but it means everything to the Liberal Party in Ottawa. The Liberals cannot let go of it, and Trump is getting a bit obtuse in his insistence that this immovable rock be dynamited into oblivion.  Thus, I predict "no deal" to be presented to the US Congress. 

Will Trump whack the Canadian auto sector?  Hard to say.  My hunch - and it is only a hunch - is that he will do it, with a 60-day inauguration window.  That will be to scare the living bejesus out of the Canadians.  If he follows through, the Canadian auto building sector is in for a very rough time.  Some 85% of its production is exported directly to the USA

I wanted to know what you thoughts of these goings on, Jan.  My hunch is that Mr. Trump will indeed insist on getting the dairy market barriers to disappear as completely as possible.  Makes sense for him, given that the numbers are so skewed, he can trumpet (sorry) a huge victory.  As you say, it won't matter much to the U.S. producers, but, unfortunately, I would put money on the U.S. producers stepping right in and squashing the Canadian producers at some point.  In today's America, if there is untapped market share and opportunity to take it, companies will force themselves upon the market.  They'll tell themselves and the rest of the world that it's just business.  Sorry for the damage to your local producers and communities.  It's just business, and you did it to us for far too long.  I'd also say his ultimate goal is to shutter the Canadian car factories and bring those UAW jobs back home.  Massive win for him and the American workers.  Sorry Canada.

But what I really wanted to get your feelings on is: Will Canada back down or will they reject Trump's deals and take their chances?  From what I've read of your other posts about Canadian politics, I'd say they will make the worst decision possible (I say worst because they won't have a good choice).

Edited by Dan Warnick

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On 8/20/2018 at 7:35 AM, Meanwhile said:

It is quite clear that Trump’s definition of fair trade has to do not with the rules that govern trade but with the end result: If one side exports more than the other, it is winning. Wrong

Would you care to elaborate on why you think it is "wrong?"

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1 hour ago, Jan van Eck said:

Will Trump whack the Canadian auto sector?  Hard to say.  My hunch - and it is only a hunch - is that he will do it, with a 60-day inauguration window.  That will be to scare the living bejesus out of the Canadians.  If he follows through, the Canadian auto building sector is in for a very rough time.  Some 85% of its production is exported directly to the USA.

If that tariff is proposed, expect the Loonie (currency) to sink further.  Could go all the way to 45 cents.

Don't forget about the effects of the 2020 sulfur cap, as well as their judges deciding to halt their tar sands pipelines...  It could go lower than 45.  Canada might end up becoming the next Mexico: the Canadians will end up running drugs into the US for a living.  Good thing Oct 17th is right around the corner for their new cash crop.  

Do you think Canada will pay for their wall or will Mexico have to pay for both?

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16 minutes ago, Dan Warnick said:

I wanted to know what you thoughts of these goings on, Jan.  My hunch is that Mr. Trump will indeed insist on getting the dairy market barriers to disappear as completely as possible.  Makes sense for him, given that the numbers are so skewed, he can trumpet (sorry) a huge victory.  As you say, it won't matter much to the U.S. producers, but, unfortunately, I would put money on the U.S. producers stepping right in and squashing the Canadian producers at some point.  In today's America, if there is untapped market share and opportunity to take it, companies will force themselves upon the market.  They'll tell themselves and the rest of the world that it's just business.  Sorry for the damage to your local producers and communities.  It's just business, and you did it to us for far too long.  I'd also say his ultimate goal is to shutter the Canadian car factories and bring those UAW jobs back home.  Massive win for him and the American workers.  Sorry Canada.

But what I really wanted to get your feelings on is: Will Canada back down or will they reject Trump's deals and take their chances?  From what I've read of your other posts about Canadian politics, I'd say they will make the worst decision possible (I say worst because they won't have a good choice).

The Canadian dairy sector is inefficient.  It is "old school," with cows that actually feed outside on real grass, and in small operations of say 40 animals.  The US operations can run to 50,000 cows all producing milk by the river. I would estimate that the costing differential between US and Canadian milk on the producer level is a dollar a gallon.  That is a huge margin.  Now, it is offset by the devalued Canadian currency.  If the Loonie stays devalued and continues to slide, and I predict it will, the dairy sector remains protected due to the exchange rate.  If the exchange rate goes in a slow drift towards par  (does not have to reach it), then the US producers in Wisconsin and New York State will enter the Canadian urban markets and take them over. 

Will the Liberal Party government in Ottawa blink?  Hard to say.  Personally, I don't think so; to do so is suicide for the Party.  Getting over to the car industry, ironically those assembly plants are not the big employers.  The big dollars and the big employment is in the vast auto-parts sector, where perhaps 190,000 people work in Canada.  Now, those parts are sold both to the domestic Big Three (Ford, GM, Chrysler) but also to the "transplant plants" in both the USA and Canada:  Honda, Toyota, Fiat, all those players.  If Trump demands that autos have 50% auto parts made in the USA, and he can do that, then the Canadian auto parts sector collapses.  That pushes Canada into a deep recession, mostly because past governments (especially in Ontario) have wrecked the manufacturing sectors, in machinery, rail, food processing, and military building.  Auto parts has survived the carnage of incompetent successive governments, but if Trump whacks it, then bye-bye. 

I think Canada will refuse to dump supply management in dairy and will keep its tariff walls; the votes make it impossible to do otherwise. And that means that NAFTA is probably history. Who really knows, Ottawa is in a mess (now that Kinder Morgan has bailed and the pipe is history), so cannot really tell how it shakes out.  People under pressure do strange things. 

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7 minutes ago, Epic said:

Don't forget about the effects of the 2020 sulfur cap, as well as their judges deciding to halt their tar sands pipelines...  It could go lower than 45.  Canada might end up becoming the next Mexico: the Canadians will end up running drugs into the US for a living.  Good thing Oct 17th is right around the corner for their new cash crop.  

Do you think Canada will pay for their wall or will Mexico have to pay for both?

Canadians are already running lots and lots of drugs for a living into the USA.  Those are pharmaceuticals, which are vastly cheaper than in the USA.  There are tour companies that run busloads of seniors from the US over the Border to go fill up on prescriptions in Canada.  Amazing.

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9 minutes ago, Epic said:

Do you think Canada will pay for their wall or will Mexico have to pay for both?

That's funny!

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(edited)

The problem is Canada has a bunch of incompetents running the show right now.  Chrystia Freeland is a prime example.  She has already destroyed Canada's relationship with Saudi Arabia by tweeting about human rights concerns in that country rather than going through the usual diplomatic channels.   The end result is a Saudi boycott of Canada and no improvement in human rights in that country.

The Trudeau administration also has the annoying habit of putting virtue signalling ahead of actual negotiations.  For instance saying climate gas emissions should be part of a new NAFTA.  Doesn't Trudeau read the newspaper and know what Trump administration's view on climate change is? Trudeau and his cabinet seems to live in their own little left wing amusement park world and that is a problem!

 

Edited by PeterfromCalgary
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1 hour ago, PeterfromCalgary said:

The problem is Canada has a bunch of incompetents running the show right now.  Chrystia Freeland is a prime example.  She has already destroyed Canada's relationship with Saudi Arabia by tweeting about human rights concerns in that country rather than going through the usual diplomatic channels.   The end result is a Saudi boycott of Canada and no improvement in human rights in that country.

The Trudeau administration also has the annoying habit of putting virtue signalling ahead of actual negotiations.  For instance saying climate gas emissions should be part of a new NAFTA.  Doesn't Trudeau read the newspaper and know what Trump administration's view on climate change is? Trudeau and his cabinet seems to live in their own little left wing amusement park world and that is a problem!

 

But remember how this happens.  The position of Member of Parliament does not attract reasoned people: scientists, engineers, folks grounded in logic.  Rather, Parliament attracts people who like to argue.  Lawyers like to argue.  You end up with an entire body of "legislators" who achieve "consensus" by arguing.  That is not a predictor of rational solutions to complex problems.

You recite for example the Trudeau fascination with "climate gas emissions."  Yet, even there Trudeau is out of his element.  Those folks focus on CO2, and take the position that rises in CO2 equates to massive climate change, specifically global warming.  Yet that does not even pass the laugh test.  CO2 is a trace gas, measured in parts per million.  It is not like nitrogen, measured in parts per hundred.  The concentration of CO2 is roughly where Argon gas is.  Do you hear anybody shouting about the argon gas emergency?  Well, why not?  

What CO2 will do is increase the rate of absorption of growth materiel into plants.  So, for example, the Saskatchewan grain crop will come in with fatter grains and higher yields per acre, merely by increases in the CO2 in the atmosphere.  Further, tree crops will add fibrous matter more rapidly, as is evidenced by wider growth rings.  What CO2 will NOT do is increase surface temperatures.  That is unfortunate; you will wish it does.  The long-term prognosis for the planet is a continuing drift to cold.  We have at best 400 years of warmth and then the plant starts its shift into Ice Planet Hoth.  At that point it gets unpleasant very quickly; in less than 200 years a sheet of ice a mile thick will be moving down from the Poles, all the way to 42 degrees N. Latitude.  

That "little left wing amusement park world" is going to get Canada into a bucket of blood.  Watch out for those guys in Ottawa, they are trouble.

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