Trade policies are affecting business decisions

September 9, 2018

The Charleston Gazette published this editorial on Sept. 3 regarding the effect of President Donald Trump’s trade positions:

Late last week, Ford Motor Co. abandoned plans to build the Focus in China and import it to the United States, thanks to President Trump’s new 25 percent tariff.

This is a win for American manufacturing, right?

The Wall Street Journal says it shows American manufacturers are starting to make decisions based on this policy, rather than waiting to see if it changes.

Ford will sell off the current stock of cars and shift toward more SUV’s which are more popular, the Journal said. The expected demand for the new version of the vehicle is too small to warrant making them here. ...

Another example that the president’s trade positions are having an effect also occurred last week when the United States and Mexico agreed to some terms in the re-negotiated North American Free Trade Agreement, as mentioned last week.

In Sunday’s Gazette-Mail, Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and former chief economist to Vice President Joe Biden, concluded that the proposal under discussion is better than the Trans-Pacific Partnership that was scrapped and would be good for both U.S. and Mexican workers. Talks with Canada were expected to continue this week.

Specifically, Bernstein praises an improved investor-dispute process outlined in the new proposal.

Under the 25-year-old NAFTA, disputes between investors in the member countries were resolved by a tribunal of three lawyers — not the court system that everyone else lives under. It was intended to protect investors from countries with legal systems considered inadequate, meaning Mexico.

But in 25 years, investors mostly sought to get around not Mexican courts, but U.S. and Canadian courts, thus avoiding legitimate environmental and health laws, and costing taxpayers in the process. ...

Meanwhile, Adam Posen writes in Foreign Affairs that the United States is paying a price for the tough trade tariff talk and action. Anti-globalization talk is making the United States a less attractive place to do business. Posen writes: “This year, net inward investment into the United States by multinational corporations — both foreign and American — has fallen almost to zero, an early indicator of the damage being done by the Trump administration’s trade conflicts and its arbitrary bullying of companies and governments. This shift of corporate investment away from the United States will decrease long-term U.S. income growth, reduce the number of well-paid jobs available, and reinforce the ongoing shift of global commerce away from United States. That shift will subject the entire world economy to greater instability.”

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