By Roger Annis, A Socialist In Canada, Feb 13, 2017
Canadian Prime Minister Justin Trudeau is in Washington on his first, official visit since the election of Donald Trump. Trudeau is there to pledge his and his government’s fealty and enduring partnership with the U.S. empire.
Global commentators—liberal and leftist alike–have been promulgating the idea that that the U.S. government under Trump may reign in its unceasing hostility to the Russian government and people, a decades-old policy carried forward from the years of the Soviet Union. Facts on the ground already dismiss this idea–including the ongoing, U.S.-led military buildup by NATO in eastern Europe, including in Ukraine; heightened hostility to Iran; and the carrying forward from the Obama regime of expansions to the U.S. military arsenal, including its nuclear arsenal.
Another idea, argued especially by liberals, is that Trump wants to curb the regimes of ‘free trade’ globalized capitalism that became implanted during the 1980s and 1990s, including the North American Free Trade Agreement, which came into force on January 1, 1994 (Wikipedia).
Two recently-published analyses help to sort fact from fiction and are re-published below. The first is authored by political commentator and RT.com host Chris Hedges. The second is by economist Jack Rasmus, a professor at St. Mary’s College in California.
The New Cold War.org website is closely following the news of the new administration in Washington, including in the New Cold War.org Information Bulletin, which is a news summary bulletin published most every weekday and also emailed to website subscribers. The Bulletin is a supplement to the feature articles that are published on the website.
The elites won’t save us
By Chris Hedges, published on Truthdig, Feb 13, 2017
The four-decade-long assault on our democratic institutions by corporations has left them weak and largely dysfunctional. These institutions, which surrendered their efficacy and credibility to serve corporate interests, should have been our firewall. Instead, they are tottering under the onslaught.
Labor unions are a spent force. The press is corporatized and distrusted. Universities have been purged of dissidents and independent scholars who criticize neoliberalism and decry the decay of democratic institutions and political parties. Public broadcasting and the arts have been defunded and left on life support. The courts have been stacked with judges whose legal careers were spent serving corporate power, a trend in appointments that continued under Barack Obama. Money has replaced the vote, which is how someone as unqualified as Betsy DeVos can buy herself a Cabinet seat. And the Democratic Party, rather than sever its ties to Wall Street and corporations, is naively waiting in the wings to profit from a Trump debacle.
“The biggest asset Trump has is the decadent, clueless, narcissistic, corporate-indentured, war-mongering Democratic Party,” Ralph Nader said when I reached him by phone in Washington. “If the Democratic strategy is waiting for Godot, waiting for Trump to implode, we are in trouble. And just about everything you say about the Democrats you can say about the AFL-CIO. They don’t control the train”. . .
Read the full article at the original weblink above. He writes a weekly column on Truthdig, published every Monday. Chris Hedges is the host of the weekly interview program on RT.com, ‘On Contact‘. The latest edition of the program, on February 12, features an interview with Rolling Stone writer Matt Tayibi.
Trump as neoliberal free trader
By Jack Rasmus, published on CounterPunch, Feb 9, 2017 (full article)
To read and listen to the U.S. press and media, one would think Trump is against free trade and for protectionism. The media—like some of the American left and progressives—remains obsessively fixed on what Trump says and not what he does. They continually fall into a critique of Trump’s personality traits, at the expense of trying to understand the strategy behind Trump and the billionaire-led new aggressive capitalist forces allied with him and the policies they together are beginning to implement.
The misunderstanding of where Trump is going is especially notable in the media’s coverage of Trump’s emerging trade policies. They interpret Trump’s rejection of the TPP and attacks on Mexico-NAFTA represent Trump as anti-free trade. But nothing could be further from the truth.
Less than a week after assuming office, President Donald Trump signed an Executive Order abandoning the 12 nation Trans-Pacific Partnership (TPP) free trade agreement negotiated by former president, Barack Obama, but not yet ratified by the U.S. Congress. He then quickly attacked Mexico—abruptly cut short a phone conversation with Mexico’s president, Pena Nieto, canceled a meeting with Pena Nieto after demanding Mexico pay for a wall on the U.S. border, and threatened to impose a 20 per cent border tax on goods exported to the United States based on the North American Free Trade Agreement, NAFTA.
Trump’s trade representative, Peter Navarro, then dropped another trade policy bomb by publicly declaring Germany was manipulating the Euro currency unfairly to its advantage, stealing U.S. exports, while similarly exploiting the rest of the Eurozone economy as well.
Trump meanwhile continued to declare that China and Japan were also currency manipulators who were taking advantage of U.S. businesses and increasing their exports at the expense of the U.S. Their currencies declined by 8 per cent and 15 per cent, respectively, in recent months. The Mexican peso fell by 16 per cent after the U.S. election and the Euro and British pound each by around 20 per cent in 2016.
Trump’s flurry of Executive Orders canceling trade deals, his phone calls to country leaders, his appointed representatives public statements, and his constant ‘tweets’ on social media suggest to some, including the U.S. mainstream media, that Trump is anti-Free Trade, that Trump is ushering in a new trade protectionism, and that his attacks on free trade agreements, like TPP and NAFTA, will precipitate a global trade war. It is this writer’s view, however, that none of this is likely.
Trump is a dedicated free trader. He just rejects multilateral, multi-country free trade deals like TPP and NAFTA. He wants even stronger, pro-U.S. business free trade deals and intends to renegotiate the existing multilateral treaties—to the benefit of U.S. multinational corporations and at the expense of the U.S. trading partners. Trump’s threats of protectionist measures, like the 20 per cent border tax and previous election promises of imposing a 45 per cent import tax on China goods, are primarily tactical aimed at conditioning U.S. trading partners to make major concessions once U.S. renegotiation of past deals and agreements begin. And as for a trade war, the answer is also a very likely ‘no’. The big ‘four’ targeted trading partners—China, Japan, Germany, and Mexico—currently exchange goods and services with the huge U.S. economy amounting between $1 to $2 trillion a year. China-U.S. two-way trade amounts to nearly $500 billion a year, Mexico about as large, and Japan and Germany also account for hundreds of billions of dollars of trade with the U.S. per year. These are the countries with which the U.S. has the largest trade deficits: China’s about $360 billion and the largest, Japan’s close to $100 billion, Mexico and Germany around $60-$70 billion. Given the large volume of lucrative trade with the U.S., these countries will eventually agree to renegotiate existing free trade treaties and trade arrangements with the U.S.
What Trump trade policies represent is a major shift by U.S. economic elites and Trump toward bilateral free trade, country to country. Trump believes he and the U.S. have stronger negotiating leverage ‘one on one’ with these countries, and that prior U.S. policies of multilateral free trade only weakened U.S. positions and gains. But free trade is free trade, whether multi or bilateral. Workers, consumers, and the environment pay for the profits of corporations on both sides of the trade deals, regardless how the profits are re-distributed between the companies benefiting from free trade.
Trump’s shift to bilateral trade represents the intent of U.S. economic elites to increase their share of trade profits and benefits at the expense of their capitalist trading cousins. And this is not the first time the U.S. has set out to ‘shake up’ trade relations to its advantage.
In 1971, Richard Nixon introduced his ‘New Economic Program’(NEP), at the center of which was eliminating the post-war Bretton-Woods international monetary system which pegged the U.S. dollar to gold at $35 an ounce. That meant the dollar would devalue, giving U.S. exporters a cost advantage over their rivals in Europe and Japan, which were growing increasingly competitive with U.S. capitalists. The NEP also provided historic new corporate tax cuts and corporate subsidies. The NEP was thus a major assault on U.S. offshore capitalist competition. It also attacked unions and collective bargaining by freezing wages and then reducing the prior two years of union wage increases to no more than 5.5 per cent. The average wage gains of 1970-71, produced by the second largest strike wave in U.S. history those years, garnered union workers gains of 20 per cent-25 per cent in the new contracts. So Nixon was the pioneer of Neoliberalism, which has its major hallmarks both an attack on foreign capitalist competitors as well as on workers wages and social benefits.
Ronald Reagan institutionalized neoliberal policies coming to office in 1980. He too attacked wages and workers’ benefits across a number of policy fronts, and proposed even deeper corporate-investor tax cuts: $750 billion, on a U.S. GDP of $4 trillion at the time. Reagan also launched an assault on U.S. foreign capitalist competitors via new trade initiatives. In 1985-86, when the U.S. under Reagan was losing out exports to Europe and Japan, the U.S. forced Japan to the bargaining table and negotiated the ‘Plaza Accords’ in which Japan was forced to make major concessions to the U.S. This was immediately followed up by the ‘Louvre Agreements’ with Europe, with the same results.
The Reagan team, led by James Baker of the U.S. Treasury, decided to abandon multi-lateral trade negotiations through the then global ‘General Agreements on Tariffs and Trade’ or GATT. GATT was an attempt to negotiate trade on a global scale involving scores of countries. The U.S. could not get the deal it wanted from GATT trade negotiations, so it turned its fire on its biggest capitalist trading partners—Europe and Japan—and forced the Plaza and Louvre Agreements on them. The results were great for U.S. business, especially multinational corporations. But the agreements play a large part in leading to banking crashes in the early 1990s in Europe and in Japan. Japan thereafter went into chronic recession for the rest of the decade and Germany in the 1990s ended up being described as the ‘poor man’ of Europe.
Similarly today, Trump’s nixing of the TPP and his attacks on Mexico-NAFTA, Germany, and Japan reflect a strategic shift from multilateral free trade strategies and a U.S. policy turn to bilateral approaches to free trade where the U.S. can extract even more concessions from competitors in the critical decade ahead.
One reason for this strategic shift is that global trade volumes have been slowing rapidly in recent years. The global trade pie is shrinking, especially since 2010, when global trade grew at a 20 per cent rate; but this past year the growth will be less than two per cent. Capitalist elites are thus increasingly fighting over a smaller share of trade. For the first time, in the past year, the growth of global trade is slower than the growth of global Gross Domestic Product (GDP), even as GDP itself is slowing globally.
Another explanation for the Trump shift is that the U.S. dollar and interest rates are expected to continue to rise. That will result in an increase in inflation in the U.S. The rising dollar and U.S. prices will mean U.S. multinational corporations’ profits from trade will take a hit. They already are. The Trump shift to bilateral trade is therefore in anticipation of having competitors make up the expected losses of U.S. businesses from trade due to the rising U.S. dollar and U.S. price inflation.
The consequences of the Trump trade shift for the ‘big four’ trade deficit trading partners are mostly negative. Eighty per cent of all Mexico exports now go to the U.S. and 30 per cent of Mexico’s GDP is from U.S. trade. Mexico’s peso will continue to fall, import inflation rise and undermine standards of living. Mexico’s central bank will raise interest rates to try to slow capital flight and that will cause more unemployment in addition to import inflation and a slowing economy.
For Europe, the U.S. turn from multilateral free trade will add impetus to Britain’s ‘Brexit’ from the European Union, as well as further legitimize other countries in the EU exiting the Eurozone. France could be next, should the pro-Trump French National Front party there win the upcoming elections this spring. Polls show it is in the lead.
Japan appears to want to be the first major U.S. trading partner to cut a bilateral deal with Trump. Japan Prime Minister Shinzo Abe continues to shuttle back and forth to Washington to meet with Trump. The first to strike a Trump bilateral deal may get the best terms. Britain’s Teresa May is not far behind, however, equally desperate to cut a bilateral deal to enable the UK to ‘Brexit’ sooner than later.
Where the U.S. clearly loses from the trade policy shift is with China. The end of the TPP means that China will likely expand its own free trade zone, the ‘Regional Comprehensive Economic Partnership’ negotiated now with South Korea, Australia, India and also Japan. The TPP was the U.S. economic cornerstone for its so-called ‘pivot’ to Asia (China) politically and militarily. That has now been set back. The expansion of China’s regional trade zone will also further solidify its currency, the yuan, as a global trading currency as well as strengthen its recent Industrial Bank and ‘One Belt-One Road’ initiatives.
The biggest negative impact of the Trump shift on free trade will be the global economy itself. The shift will take time, produce a lot of uncertainty as well as reactions and counter-measures. That will only serve to slow global trade volumes even further. All emerging market economies will consequently pay a price in lower exports sales for Trump’s strategic trade shift, the ultimate aim of which is to restore U.S. economic hegemony in trade relations over trading partners—a hegemony that has been weakening in recent years. But this is not 1985 or 1971. And a safe bet is that restoration will not prevail.
Dr. Jack Rasmus, Ph.D Political Economy, teaches economics and politics at St. Mary’s College in California. He publishes the website Jack Rasmus: Predicting the Global Economic Crisis.