Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

The USMCA Quest for ‘America First' World Trade

Politics / Protectionism Oct 26, 2018 - 04:40 PM GMT

By: Dan_Steinbock

Politics The era of post-1945 multilateralism is fading. After the revised NAFTA, Trump's dream is U.S.-dominated world trade and the ‘America First’ Asian Century, says Dan Steinbock.

President Trump seeks to redefine all major free trade agreements on the basis of U.S. economic and geopolitical leverage.


In these efforts, the United States Mexico Canada Agreement (USMCA) is likely to serve as a blueprint.

From NAFTA to U.S. First North America

Despite all Trump's hyperbole, the USMCA reads like a mix of Clinton's NAFTA and Obama's Trans-Pacific Partnership (TPP). Within North America, the treaty will tighten current restrictions on North American vehicle content and introduce new rules for manufacturing in high-wage factories, mainly in the U.S. and Canada, though it may leave major supply networks largely intact. Moreover, NAFTA's dispute settlement mechanism, which the U.S. would have liked to eliminate, will carry over into the USMCA.

To investors, businesses and consumers, the net effect means rising costs.

Internationally, the effects will be more ambiguous but potentially consequential. The contract is mined with fine-print clauses designed against possible Canadian or Mexican deals with a “non-market economy” (read: China) - which, through the USMCA, Trump would like to extend into all other major U.S. free trade agreements.

What's worse is that some provisions could make it easier for companies to challenge climate and environment regulations in the three countries, even before they are adopted. In this way, the USMCA has the potential to extend the Trump administration's pollution agenda and thus prolong its climate damage legacy for years after he leaves the office, despite the just-released UN (IPCC) warning about impending global climate risks.

From the failed FTAA to U.S.-South America trade?

In the 1990s, President Clinton hoped to extend the NAFTA into a Free Trade Agreement of the Americas (FTAA). Venezuela's Hugo Chavez condemned it as a "tool of imperialism." Latin America's leaders, including then-presidents of Brazil, Luiz Inácio Lula da Silva, and Argentina, Néstor Kirchner, demanded the pact eliminate U.S. agriculture subsidies and offer access to South American producers to U.S. markets. Yet, instead of opening South America to free trade, the FTAA split the region into two blocs, as President Lula had predicted.

Like the Reagan administration in the 1980s, the Trump White House is willing to resort to hard power and is now in a better position to superimpose U.S. trade terms on South America.

After the ‘soft coup’ in Brazil and the controversial imprisonment of former President Lula to prevent his likely victory in the 2018 presidential election, the first-round triumph of the extreme-right ex-paratrooper Jair Bolsonaro bodes well for U.S. efforts. Bolsonaro is an admirer of its military dictatorship (1964-85), which heralded the rise of Chile's Pinochet, Latin American juntas and Operation Condor; the U.S.–backed campaign of political repression and terror by right-wing dictatorships. In Argentina, the pro-U.S. President Mauricio Macri has undermined the economy with a $50 billion deal with the International Monetary Fund (IMF) that led interest rates to a world record 60 percent.

In brief, the bargaining position of the key South American economies is currently significantly lower than it was only a decade ago. Nevertheless, an ‘America First' South America deal will not materialize without resistance, thanks to Trump's controversial immigration policies, and U.S. withdrawal from international trade and climate change agreements.

Stalemate in U.S.-EU trade talks

When President Obama began talks on the Transatlantic Trade and Investment Partnership (TTIP) in early 2013, EU leaders were divided over goals and the Democratic White House was constrained by a Republican-controlled Congress. As the talks dragged out, transatlantic goals faced new head winds across Europe, where free trade is increasingly opposed and mainstream parties felt uneasy with the secret and opaque TTIP negotiating process.

Trump has alienated and weakened German Chancellor Angela Merkel. French President Macron has stated that he is not in favor”of a “TTIP-style” U.S. deal. European public opinion is vehemently against the Trump White House. The series of disagreements between Washington and Brussels extend from trade and protectionism to the Iran nuclear deal, and the U.S. withdrawal from the Paris Accord. Moreover, the impending UK Brexit clouds projections.

Despite a short-term trade truce last July, the EU has warned that Trump's pressure tactics will not work with Brussels. The outgoing European Commission president Jean-Claude Juncker has gone further highlighting the dependence of the US dollar on the euro, saying, "It is absurd that Europe pays for 80 percent of its energy import bill, worth €300bn a year, in U.S. dollars when only roughly 2 percent of our energy imports come from the United States.”

In brief, Brussels is posturing, positioning and transacting with Trump; just as Trump is with Brussels. The historical stress on “common values and interests” hasn't crumbled but is eroding.

Toward 'America First' Asian Century

In Asia Pacific, the most dynamic world region, Trump killed the TPP during his first day in office. More recently, he has considered rejoining a revised TPP, but only if the U.S. is granted a “better deal.” In turn, some TPP-11 participants hope Trump will prove a one-term president and U.S. withdrawal will be reversed after 2020. Others have joined China-led talks at a Regional Comprehensive Economic Partnership (RCEP).

An Asia Pacific USMCA will not be an easy sell in the region. Even America's allies - Japan and South Korea - feel unsettled about new protectionism. But as before, Trump is likely to use geopolitics as leverage to get an economic deal he wants.

Irrespective of the outcome of the mid-term elections, Trump is likely to push a new Asia Pacific alignment, which strategically will seek to cement America's Indo-Pacific Vision to contain China's rise. Economically, it aspires to neutralize China's One Road One Belt initiative. Militarily, it is exploiting the “freedom of navigation” doctrine to dominate the South China Sea as 60 percent of U.S. naval fleet will be transferred into the region by 2020.

If U.S. protectionism will undermine free trade in Asia Pacific, the regional extension of the USMCA could prove more 'moderate' than initially projected, but it would split the region, seek to undermine China's rise and thus derail the highly-anticipated Asian Century.

What Trump wants is an ‘America First' Asian Century.

Dr Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more information, see http://www.differencegroup.net/

© 2018 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. 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. Individuals should consult with their personal financial advisors.

Dan Steinbock Archive

© 2005-2019 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

6 Critical Money Making Rules