Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
GBPUSD Top in Place, GOLD Price Ready to Rocket? - 27th May 17
Silver Mining Stocks Fundamentals - 27th May 17
BBC Newsnight Falls for FAKE POLLS, Opinion Pollsters Illusion for Mainstream Media to Sell - 27th May 17
UK Local Election Results Forecast for General Election 2017 - 26th May 17
Stock Market & Crude Oil Forecast! - 26th May 17
Opinion Pollsters UK General Election Seats Forecasts 2017 - 26th May 17
Bitcoin and AltCoins Crypto Price Correction - 26th May 17
Bearish Head and Shoulders in EURUSD? - 26th May 17
SELL US Stocks - Massive Market CRASH WARNING! - 26th May 17
EURGBP: A Picture of Elliott Wave Precision - 26th May 17
Credit Downgrades May Prompt Stock Market Capital Shift - 26th May 17
Rosenstein and Mueller: the Regime Change Tag-Team - 25th May 17
Stock Market Top - Are We There Yet? - 25th May 17
Should I Invest My Fortune in Gold? Inaugural Lecture by Dr Brian Lucey - 25th May 17
USD/CAD Continues Decline - 25th May 17
Bitcoin Price Goes Loco! Surges through $2,500 Despite Unclear Fork Issues - 25th May 17
The US-Saudi Arms Deal - Sordid Saudi Signals - 25th May 17
The No.1 Commodity Play In The World Today - 24th May 17
Marks and Spencer Profits Collapse, Latest Retailer Hit by Brexit Inflation Tsunami 2017 - 24th May 17
Why Online Trading Platforms Are Useful for Everyone - 24th May 17
The Stock Market Will Tank Hard - 24th May 17
It’s Better to Buy Gold & Silver When It DOESN’T Feel Good - 24th May 17
Global Warming - Saving Us From Us - 24th May 17
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

Trump's Disruptive Approach to Trade

Economics / Global Economy Mar 06, 2017 - 02:40 PM GMT

By: STRATFOR

Economics

A shift in U.S. trade policy that follows the outline presented today to Congress would upend the foundations of global trade as it is currently conducted. The biggest change in the approach that the administration of President Donald Trump may take is its assertion that U.S. sovereignty in trade disputes could empower it to supersede rulings made by the World Trade Organization (WTO).


At its core, the Trump trade agenda aims to return the United States to the forefront of the global system while supporting growth in the domestic jobs market. Specifically, according to a leaked copy of the report, it "reject[s] the notion that the United States can strengthen its geopolitical position by adopting trade measures" that make U.S. industries weaker globally. This represents a repudiation of the strategy pursued under President Barack Obama in which the pursuit of multilateral trade agreements such as the Trans-Pacific Partnership (TPP) was as much about achieving regional political goals as solely economic ones. But despite its rejection of some existing norms, many of the policies that the new agenda prescribes are not that different from those pursued by previous administrations.

The objective of the Trump administration's initial Trade Policy Agenda, a document that the Office of the U.S. Trade Representative is required to submit annually to lawmakers, does not appear to be to work against trade or institute an entirely protectionist stance. The U.S. trade representative has not even been confirmed yet, so U.S. trade policy is fickle at the moment. But the document reflects the thinking of the Trump administration that the existing framework for global trade negotiations and the trend toward multilateral trade deals are inadequate. The Trump team wants to achieve its trade goals through bilateral negotiations where it can protect its own interests — while also compelling other countries to change their policies. Its approach is centered along four major policy directions:

1. "Strictly enforce U.S. trade laws."

2. "Use all possible sources of leverage to encourage other countries to open their markets to U.S. exports of goods and services while protecting U.S. intellectual property rights."

3. "Negotiate new and better trade deals with countries in key markets around the world."

4. "Defend U.S. national sovereignty over trade policy."

The first three points do not represent much of a shift from trade policies under Obama. Since the WTO was founded, the United States has aggressively used its framework to prosecute trade grievances. It has also tried to impel foreign markets to open up to U.S. exports. And although the Obama administration faced criticism for its pursuit of the TPP, it was one of the most advanced trade deals in terms of the number of issues that it attempted to address.

Where Trump's approach differs the most is the assertion that the United States is not bound by its WTO commitments, nor is it compelled to comply with the group's decisions on trade disputes. By reasserting its national sovereignty, the United States wants to take the final decision-making process on trade disputes out of the hands of the WTO.

At its most basic, the WTO can be reduced to two key agreements. First, it is an international set of standards on trade protocols that includes the concept of Most Favored Nation status, reducing trade barriers and tariffs. Second, it includes a mechanism intended to resolve disputes between two parties. It is quite clear that the Trump administration values the first accord. It does not want to break apart the WTO, causing trade barriers to rise and conflicting with its objective of opening markets for U.S. exports.

On the other hand, it is clear — despite White House press secretary Sean Spicer's denial that Washington would not ignore WTO rulings — that the Trump administration feels that the WTO's dispute settlement mechanism is lacking. It has reportedly tasked the United States trade representative to find a way to legally file trade cases outside the WTO framework rather than submit them to the group's arbitration process. This would represent a fundamental shift in the U.S. approach. While the administration may initially decide to file a dispute related to a sector of the economy under the WTO, whose mechanisms are well suited to settle such arguments, it could then choose to ignore an unfavorable ruling in favor of using U.S. law. For example, if Trump's trade team argues that China is unfairly subsidizing steel exporters, the United States still would likely file the dispute with the WTO. If, however, the WTO dispute panel were to rule against the U.S. argument, Trump's policy might be to punish China under U.S. laws on trade enforcement regardless.

If the United States chooses that path, it certainly would weaken the WTO's power, inspiring other countries to ignore its rulings as well. Countries with which the United States has large trade deficits, including China, Mexico, Germany, Japan, Ireland and South Korea, could be the targets of such maneuvers. That could lead them to follow a similar path: First weighing whether to bring a case against the United State in the WTO, then deciding whether to fall back on their own trade laws if Washington did not comply with its decision.

But there could be a hesitation among those countries to bypass the WTO or to bring about significant challenges to the United States in a broad way in the WTO. A fundamental tenet of the WTO is trust and belief in the system among its members, a valuable commodity among trading partners. Though each of the countries in question has a sizable trade surplus with the United States, it does not represent the biggest overall trade partner of any, with the exception of Mexico. Germany's main market, for example, is the European Union. This would lead to hesitance among U.S. trading partners to bring a significant case against it outside the WTO; retaliatory cases could cause trade disruptions to the tune of nearly $400 billion (in the event that they challenge the proposed U.S. import tax). Such a series of disputes could bring the entire concept of the WTO into question in the eyes of the United States. And U.S. trading partners simply cannot risk undermining global confidence in the WTO as a ruling framework, given their dependence on trade outside the United States. Instead, China, Germany and others are likely to challenge the United States along the margins in key industries to achieve certain goals and pressure Washington as best they can without risking the WTO framework itself.

In pursuing a policy of U.S. trade sovereignty, the Trump administration hopes that it can push countries to settle disputes with the United States outside of the WTO framework. To achieve his goals, Trump is betting that others will be willing to put the United States at the center of the global trade order and adhere to its view of the WTO as a guiding principle, not a final arbiter, calculating that no one wants to risk jeopardizing the organization.

"Trump's Disruptive Approach to Trade is republished with permission of Stratfor."

This analysis was just a fraction of what our Members enjoy, Click Here to start your Free Membership Trial Today! "This report is republished with permission of STRATFOR"

© Copyright 2017 Stratfor. All rights reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.

STRATFOR Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife