The G20 watered down free trade rhetoric but Italy wants to try again.
Italy will host the next G7 meeting, and Italy’s Prime Minister calls for G7 to Challenge Donald Trump.
Italy has called on G7 countries to reject protectionism at their summit in Sicily in May, setting up a clash with Donald Trump just days after his administration’s trade stance caused conflict at a G20 meeting in Germany.
The US forced a watering down of the language on trade after the G20 finance ministers’ meeting in Baden-Baden, changing its traditional call to “resist all forms of protectionism” to the need to “strengthen the contribution of trade to our economies”.
But on Tuesday night, Paolo Gentiloni, Italian prime minister, said the G7 group of leading economies should be steadfast and unambiguous in its support for an open global economy, making it a priority for the summit.
Mr. Gentiloni’s comments amount to a challenge to Washington, which has performed a sharp U-turn on trade policy since Mr. Trump took office as president.
Aside from last week’s tussle in Germany, the US has over the past two months pulled out of the Trans-Pacific Partnership, questioned the World Trade Organisation’s dispute settlement mechanism and vowed to change the North American Free Trade Agreement with Canada and Mexico.
As host of the G7 summit, Mr. Gentiloni is in a position to craft the agenda but other G7 leaders — who have been troubled by the US’s new stance on trade — appeared to agree that it was worth trying to force the issue when they meet Mr. Trump in Sicily.
G7 Statements are Irrelevant
Japan’s prime minister Shinzo Abe made this statement in Rome: “In a context in which protectionist and isolationist tendencies are growing, the G7’s role is more important than ever.”
What a hoot. G7 statements are meaningless.
For decades the G7, G20, GWhatevers, have all agreed to do something about agricultural tariffs. At the end of every summit, the results have been the same, zero progress.
Obama’s Trans-Pacific Partnership (TPP) agreement was seven years in the making but Hillary, Trump, and Bernie Sanders were all against it. TPP is officially dead.
It Only Takes One
It only takes one nation to kill an agreement. In the case of G7, we are not even talking about agreements, but on agreements to agree later.
Italy claims to want free trade. OK, how about starting with free trade in the EU? How about killing French agricultural tariffs? How about not punishing the UK over Brexit?
Curiously, Gentiloni is on the right side of that argument, at least more than the rest of the EU. Paolo Gentiloni told Theresa May his country’s Brexit Approach will be ‘Friendly and Constructive.’
Unfortunately, all 27 nations have to agree. Moreover, there is a difference between friendly and genuine free trade.
Agreements to Agree
In the G7, year in and year out, there is always one country that objects to something. Historically, China dissented over steel and currency manipulation, the EU over agriculture, and Japan over interest rates (until the whole world followed with ZIRP).
The G7 nations spend an amazing amount of time trying to reach agreement on a three paragraph communiqué at the end of each summit. Then a year goes by and nothing ever happens.
Agreements to agree are very difficult. Actual G7 agreements in the form of commitments are next to impossible.
Free Trade is Easy
Free trade is easy in theory. Just do it.
A simple one sentence document is all it takes: “Effective today, all tariffs and all subsidies are abolished.”
Oops, Italy can’t do that. Italy is precluded from free trade because it is bound to the un-free trade policies of the EU.
Moreover, I am certain Italy would not have such a policy even if it could. Many countries are in favor of free trade until the time comes to actually do it.
Me First
Free trade has become nothing more than a euphemism for wanting no export restrictions but massive import restrictions.
In his inaugural speech, Trump said ‘Protection will lead to great prosperity and strength‘.
On March 19, I reported “Me First” Philosophy: G20 Waters Down Free Trade Language.
Such “Me First” policies cannot mathematically work.
The more countries that try “Me First”, the bigger the global trade collapse will be, no matter what the next totally useless G7 communiqué states.
Mike “Mish” Shedlock
Italy needs (…is desperate for…) the G7, IMF, World Bank, ECB, ESF, and all the other three and four letter curse words to appear relevant. Someone needs to force taxpayers to lend to Italy, because no one will voluntarily.
The rest of this story, as Mish points out, is just stupid posturing and bad theater.
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Sure wish all the one world government globalism garbage would have died with Rockefeller last week.
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I’m waiting for a rotting corpse springing to life on heart transplant #8 instead.
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Agree, all the talk is just noise. Trading commodity products is always going to be difficult. Meaning no way of fully blocking commodity market forces for prolonged time periods, as we know well from oil. Trading somewhat unique and superior products everybody desires is the way to go: e.g. Apple iPhones, German precision machinery. USA needs to be innovative to boost exports. Blocking imports makes other nations poorer, and less able to buy USA goods and services (e.g. tourism to USA suffers).
Barriers to trade, just like barriers to immigration, mean less of it will happen. Unfortunately, less trade also means fewer jobs in production, transport, distribution, sales, services, etc. Some protectionism is inevitable for political reasons, like French agriculture, Japanese rice and USA sugar (the real reason for USA candy/confection industry job loss). USA cannot even mobilize support for ending its own sugar protectionism that is anti-USA jobs. Cruz and Trump railed against sugar protection, but in the end Rubio and winning Florida mattered more than jobs. Which makes sense, as without Florida the path to the White House might have been impossible. USA hypocritical to expect otherwise from France, Japan et al.
The only way to evaluate Trump is how NAFTA plays out with Canada and Mexico. I suspect changes will be minor. Perhaps the stock market sell-off day is also a reaction to USA import tax proposal, which would likely be a major economic contraction factor.
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The EU is based on what they consider “intelligent protectionism”.
Take ZERO notice of an EU statement related to free trade.
ZERO. Trade has been WEAPONISED by the EU.
They use their population as a bargaining tool (for access) and lumber the same population with overly priced food to supposedly protect various internal sectors and then access to the market is controlled and given to PREFERENCE RECEIVING countries.
The below is just Oranges.
“The motivation of the EU’s external market regulations for oranges is to PROTECT EU producers by mitigating international price competition while creating an EU market price which is HIGHER than the world market price. In contrast to this, trade preferences are intended by the EU to create imports from the PREFERENCE RECEIVING countries.”
The EU has no right to comment on Free Trade. It doesn’t partake in FREE TRADE.
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The US weapon is access to their market and Trump is not wrong to consider allowing access to “preference receiving” countries just as the EU does.
If you study it long enough the idea the EU has weaponised trade is correct. Conform to their ideas and become “preference receiving” and thereby they influence.
Access to their corralled population is used as a political tool to spread their ideology – hallmarks of Nuevo Totalitarianism through Trade.
Any form of free market thinking is an anathema to their ideology. All must be harmonized and regulated. An ultimate aim is to bring the US to heel in all areas.
Trump is coming from a position of weakness now the US industrial core has been hollowed out. His attempt at any form of protectionism, even in the mould of the techniques of the EU, will be shouted down, lambasted, held up to ridicule.
Hypocrisy abounds. Do as they say, not as they do. Don’t prioritise your own interests just because the EU does etc.
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Mish, read this for protectionist example. From Travelmole.
Now they are dictating shareholder base geography too !!
You couldn’t make this shit up.
“EU officials have warned UK-based airlines that they will have to axe their routes within continental Europe unless they relocate their headquarters to the EU and sell shares to EU nationals post Brexit.
Executives at major carriers have been told during private meetings with officials that to continue to operate on routes within the continent they must have a significant base on EU territory and that a majority of their shares must be EU-owned, according to the Guardian.
However, it is believed that the EU’s Brexit taskforce, which met with representatives from British Airways, easyJet, Ryanair and TUI last week, made it clear that the majority of the shares in the airlines must also be EU-owned if they are to continue to operate routes within the Continent, such as Paris – Milan.”
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Going to have to give a catchword to this … EUnionised, EUnionisation ?
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EUthenized.
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ECB fast tracking banking applications too to take banks out of London.
First on the block should be any defence commitment to anywhere in Europe. No British troops or tanks stationed and no air cover and no security co-operation, It all costs a fortune but Brits pick-up the bill if the US doesn’t.
Source says security info is already a problem. EU agencies (German in particular) are stuffed with Russian spies and sympathisers. A very leaky bucket over there.
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European infrastructure at defense/intelligence level is archaic, it is a mixture of all sorts, some up to date run by not up to date people, and some out of date run by… not up to date people either. A very confused mixture of all sorts with not knowing own let alone those of others.
I was looking at airline story, the unspoken crux of it seems to be UK being denied reentry into ECAA
https://en.wikipedia.org/wiki/European_Common_Aviation_Area
after no longer qualifying as an EU state.
Background https://www.pilotcareernews.com/brexit-airline-industry/
Although other non EU based nations/carriers are part of that framework.
So basically airlines are having their arm twisted in this.
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This is very representative at all levels of various negotiation topics :
You have bilatteral conventions, in this case
https://en.wikipedia.org/wiki/Chicago_Convention_on_International_Civil_Aviation
apllicable to all, but being forged into a union monopoly of decision over a whole region ( EU), where outside countries can no longer seek bilatteral agreements without regional union permission.
Understand that, and you will understand where the future uncertainty in all these negotiations originates.
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@Fish — I saw a news story about the EU trying to strong arm airlines, not sure it was the same you saw. The threats (if real) are coming from low level eurocrats making suggestions to the drunk guy in Brussels, they are not even formal EU proposals and even the eurocrats worry about passage in Brussels never mind enforcement.
The UK airlines didn’t even bother to respond, because the threat (assuming it is real) is silly. Give up Heathrow to keep Charles de Gaulle Airport? No EU airline executive would even think about it. Milan has even less chance. Expecting UK airlines to give up Heathrow? That is funny.
Meanwhile the EU has the same issues they had trying to impose fraudulent carbon taxes on Asian carriers last year. China led the way telling every single EU airline they could kiss Hong Kong and Shanghai landing slots good-bye. China tried to get other countries to “go along”, but the other countries claimed to have had the same idea first.
Air France, British Airways and Luftansa stood to lose landing slots in Hong Kong, Shanghai, Singapore, Mumbai, Seoul, Tokyo overnight. The fraudulent edict from the unelected sh!t heads in Brussels got tabled just as fast.
Airbus needs England to stay alive. Luftansa and Airfrance need landing slots in Heathrow or they become irrelevant.
Frankfurt is the only EU airport considered important right now — both Geneva Switzerland and Istanbul Turkey would love to take Frankfurt’s travel business away.
Asian and US air carriers do not have headquarters inside the insanity of the EU, British carriers won’t either.
Its just more really stupid temper tantrums from eurocrats, not a threat they can actually implement.
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doesnt it all come down to the Triffin Paradox
and a lot to do with the rest of the world free-riding the US and the US dollar.
PS for the past 12 mths i’ve been following tweets from Luke Gromen
regarding currency wars and the status of the US Dollar
“The US holds the trump card in any “currency wars” (pun intended): If the US abrogated the USD’s reserve status = “currency wars” over.”
PS i like your recent video in recent post of 2 cats taking there turns
of drinking milk from a saucer
https://mishtalk.com/2017/03/19/me-first-philosophy/
its funny that they never actually manage to accidentally spill any milk
and never get intrude into each others “personal space”
wish humans could get along in a similar way (fat chance)
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The Triffin paradox is bunk. I will post something on that when I get a chance
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“A simple one sentence document is all it takes: “Effective today, all tariffs and all subsidies are abolished.”
You go first.
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First is best. Only even better, from a purely relative POV.
Nothing better than having Toyota pay for every American’s car, Samsung their 60 inch flatscreens, Asus their computer and Foxconn their phone. While America pay’s for nobody’s nothing
Also nothing better, relatively speaking, than everyone else putting tariffs on eachother, so every price is distorted over there. To the point where the best price/performance car in Switzerland is a Swiss made one, and the ditto Sushi in Austria is locally made from local ingredients of the landlocked country. While Americans get to pick and choose from the best the world has to offer, at the lowest cost possible.
What then happens, and this has happened over and over again, with the latest examples being Switzerland and Singapore from the graph Mish posted yesterday, is that the ones in the best position to solve tomorrows problems, are the ones for whom today’s are already solved at the lowest possible cost. Which is why innovation thrives where there are no artificial barriers.
If the entire population is busy simply trying to make domestic copies of what is already cheaper and/or better available somewhere else, there are no resources left to build new stuff. “Innovation” requires going beyond what is cutting edge today. Which requires you to already be at that cutting edge, or all you’re doing is simply playing catch up. And innovation is what wealth is born from.
Hence, if increased wealth and economic well being is the goal, the best/only way to achieve that, is to put as few barriers in front of Americans to have as much of the best stuff available anywhere, available to them. At a lower cost than anyone else. Without that, the other guys will come up with the new things first, and all America will be stuck doing, is trying to be lowest cost producer of commodities. Hardly a recipe for world beating wealth creation and high salaries.
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bookmarked, wonderful site!
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