Last week, in a rare bipartisan moment the Senate voted 82-14 confirming Robert Lighthizer as Trump’s U.S. Trade Representative.
Three Republicans, ten Democrats, and independent Bernie Sanders voted against confirmation.
Lighthizer is firmly against free trade as is Peter Navarro, Director of the White House National Trade Council.
While most of President Donald Trump’s nominees have cleared a divided Congress by narrow margins with mainly Republican support, Mr. Lighthizer on Thursday won significant backing from Democrats as well. That is a sign that, even as the opposition party battles the White House on much of its agenda, they are eager to work with Mr. Trump to beef up trade enforcement to curb imports and pry open foreign markets—and to craft policies aimed at curbing the U.S. trade deficit.
Utah Republican Orrin Hatch, the chairman of the Senate Finance Committee, also backed Mr. Lighthizer but openly voiced concerns about the changes the new administration may try to make to Nafta, which has wide support from the American business community and states near the Mexican border. “I told Mr. Lighthizer there are definitely opportunities to update and improve Nafta, but it is important that the administration follow the spirit of the Hippocratic oath: First do no harm,” Mr. Hatch said on the Senate floor.
In contrast with many other Trump appointees who have had little prior experience in government, Mr. Lighthizer, 69 years old, is a Washington trade-policy veteran, having worked as a staffer for the Senate trade committee and as a deputy United States Trade Representative under President Ronald Reagan in the 1980s. In those roles he was a free-trade skeptic, and helped to negotiate trade agreements aimed at curbing Japanese imports.
“I would slash the ‘free’ out of free trade and say trade is an expedient,” he told The Wall Street Journal in a 1996 interview when he was serving as a campaign strategist for Republican presidential nominee Robert Dole.
Mr. Lighthizer was most recently a Washington partner at law firm Skadden, Arps, Slate, Meagher & Flom LLP, where he represented steelmakers and other manufacturers seeking government protection from cheaper imports.
Beyond Nafta, Mr. Lighthizer is expected to help Mr. Trump flesh out the “America First” trade policy that was a main plank of his nationalist presidential campaign.
So far, Mr. Trump has done little to carry out the pledge, other than to withdraw from the 12-nation Trans-Pacific Partnership negotiated by President Barack Obama. Commerce Secretary Wilbur Ross has so far taken the lead shaping trade policy in Mr. Lighthizer’s absence, and has launched a series of studies and investigations that could ultimately lead to a harder-edged trade policy, but it is still unclear where they will lead.
During his confirmation hearings in mid-March, Mr. Lighthizer said he would look for ways to take more aggressive action to confront China, and reiterated his longstanding skepticism about the ability of the World Trade Organization to handle Chinese trade practices in a manner he considers fair. Both Mr. Trump and Mr. Lighthizer have suggested rethinking American compliance with the WTO decisions, a threat that has unnerved many U.S. trading partners, as well as American free-trade advocates and multinationals.
Mr. Trump’s own administration has been torn by tensions between one-time business leaders, like former Goldman Sachs Group Inc. President Gary Cohn, who runs the White House National Economic Council, and trade hawks like economist Peter Navarro, who runs a newly created Office of Trade and Manufacturing Policy. Mr. Lighthizer is seen as helping tip the balance more toward the trade hard-liners like Mr. Navarro and Mr. Ross, though his longstanding expertise in trade policy is also expected to lead him to encourage taking a more aggressive stance in using existing rules, rather than blowing them up.
What’s Next?
The safest answer is “I don’t know” and that especially applies to Trump who has not yet managed to deliver any of his key campaign goals and promises.
Trump repeatedly promised to label China a currency manipulator, a threat he reversed course on quickly. At one point media presumed hard-liners like Navarro were slowly being relegated to the sidelines, but the appointment of Lighthizer effectively buries that notion.
So far, Trump has managed to avoid a global trade war, and that is a plus. However, Lighthizer ties to the steel industry are particularly troubling. Tariffs may protect a few steelworkers but it would be at the expense of the auto manufacturers and every other manufacturer (and ultimately consumer) who uses steel.
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Fair Trade
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My position is clear.
Mike “Mish” Shedlock
Yes Mish but it has to be both ways!!!!!!!!!!!!
There’s no such thing as free trade, it’s always manipulated trade. The TPP could have been a one liner if it really was free trade. Instead it’s 6000 pages. Thank goodness it fell over.
But the real poison pill in trade is subsidies. Every car manufacturing nation subsidised the industry. When Australia decided to pull the pin, it no longer, or soon, will have a car manufacturing industry. The US has agricultural subsidies and they are designed to undercut local production in nations that buy US corn etc. No one in the US wants to stop subsidies so there’s no prospect of free trade.
Had Hillary slipped through the cracks into the White House TPP would have eventually become reality. Another reason I stand proud behind my vote for Trump.
You see, it’s not only what Trump hasn’t done. It’s what Trump has PREVENTED. Most people miss that important point.
– I don’t think the Trump administration will impose tariffs on meat imports from Europe. As a result of less precipetation in western parts of the US meat prices have risen. And because the EUR/USD has gone down since early 2014 it’s quite profitable to import meat from e.g. Europe.
– Imposing import tariffs means that live will become (much) more expensive in the US. It will reduce the US Current Account (= Trade deficit). But it also will mean that foreigners also will subsidize the US to a lesser extent.
– But I never heard one politician in Washington DC who knows this kind of intracacies of Balance of Payment dynamics. Or wants to know those details.
– Mr. Michael Pettis gave a good interview to Financial Sense in february of this year.
http://www.financialsense.com/michael-pettis/most-dont-understand-how-global-trade-works
http://www.financialsense.com/michael-pettis/capital-flows-debt-crisis
– Look at the title in one of those webarticles:
“Michael Pettis: Most People, Including Trump, Don’t Understand How Global Trade Works”
Michael Pettis leaves out the very important fact that US deficit spending is the foundational cause of the imbalance. Without US deficits that need to be financed by capital inflows, China would have too many dollars to deal with. They would force Chinese manufacturers to raise their prices. How? By not giving enough yuan to their manufacturers in exchange for the dollars they earned to make a profit, forcing their manufacturers to raise their prices to make up for that. That is right, the yuan would have become stronger.
– Nope. Reducing deficit spending certainly would already help A LOT. But there are – at least – 2 more completely other reasons:
1) The USD is the world’s reserve currency and that leads to a Current Account (CA) Deficit here in the US. If the Euro would become the world’s reserve curreny from now onwards then within say 12 to 24 months the current US CA Deficit would move to the Eurozone.
2) US military spending abroad. That also is a MAJOR component the imbalances.
However, some countries (China, Germany, ………. ) have deliberately created a Current Account Surplus and then somewhere else in the world (e.g. the US) is FORCED to run a Current Account Deficit.
– It’s very simple to get rid of the CA Deficit here in the US.
1) Increase taxation by say 5, 10 or 20% across the board.
2) Lower wages by say 5, 10, 20% across the board
3) Withdraw all US troops from around the world and bring them back to the US.
and within say 12 months the CA deficit has shrunk to nearly zero.
But these last 3 things are extremely difficult to accomplish. Then we’ll see much more “turmoil” here at home.
The fact that so many neoliberals (from both parties) voted for Lighthizer and that Sanders voted against him shows that he is a wolf in sheep’s clothing, and will continue the destructive trade policies that Trump is supposedly opposed to.
Free Trade? In a world run by special interest bankers? Yeah,whatever.
Time for the global small fry to talk, stand together and go for free trade to help each other out.
1. Gorsuch – Promise Kept. “hasn’t kept any”. He’s kept more, some are ambiguous.
2. thousand pages of a treaty that is full of cronyism, subsdies, restrictions, and worse is called “free trade”?
It is not free trade when done in fiat currencies.
It is not free trade when there’s different laws and legal systems.
http://www.chinalawblog.com/2012/06/how-not-to-get-kidnapped-in-china-part-3-resolve-your-debt-problems-before-you-go.html
It is not free trade when wages, property, or something else is stolen or vandalized without compensation to make it cheaper.
You know, we should sign an agreement with some modern day pirates so we can sell them destroyers and they can plunder the ships bringing in oil or cars or other things to the USA – that form of “free trade” could give us $1.00/gal gasoline, and $3000 Toyotas.
Free Trade means not to ask why it is so cheap?
There is no free trade, period. Yes, the economic professors ideal, the holy grail of comparative advantage, is largely a chimera. Why should that be so? Why has Saudi Arabia and all the other oil producing countries have not built their own refineries and sold the fuels and other distillates to the rest of the world. One would believe that if one has one has a comparable advantage in resources then the next course of action is to convert those raw resources into finished good or at least mid process goods for export. So how is it that this has not happened?
Would we believe that outsourcing our manufacturing to foreign countries such as China is because they have the raw resources, in this case, cheap labor and cheap labor is an item of comparable advantage? I’m sorry, Mish, but you free traders rarely look at the overall picture. What is the cost of outsourcing labor? Have you ever calculated that cost to the american people? Oh, that’s right, technology will make us all highly paid computer programmers until we import them as cheap labor via H2B programs. WTF? Where is the accounting of costs associated with these programs? Erect a steel mill and pollute the land but don’t count the cost of the pollution, the cost of the environment clean up, the cost of the environment damage to the local citizenry. Pardon me please, but WTF? I am not a rabid environmentalist but I know a scam when i hear and read one. This is the problem with current economic thinking. It is so focused on short term thinking that it cannot see long term consequences.
“Erect a steel mill and pollute the land but don’t count the cost of the pollution”
Private property = cost to the owner.
“the cost of the environment clean up” On the mill’s land = see above.
“the cost of the environment damage to the local citizenry” What cost based on what damage with what proof? If you are talking about health, most people cause the vast majority of the damage to their own bodies through their behaviors and their genetics takes care of some of the rest.
“I am not a rabid environmentalist” Really now? You fall for their BS. Must be a forager’s ‘nature is my god and provider’ liberal mindset.
I grew up within a mile of two large (longterm) auto plants and a little over two miles from a third one. They are gone now and when I visit someone in the neighborhood there is no detectable difference between then and now in terms of “pollution”. And no “pollution” cleaned up.
I’ve worked in factories, I’ve worked with chemicals that were declared safe. My experiences tell me different. No, I don’t fall for every tall tale of environmentalists. I accept that life has an element of danger, to pretend otherwise would be to indulge in fantasy. On the other hand many health issues that are industrial are caused by ignorance at the time. Who would have foreseen that asbestos would have been the scourge at the time. On the other hand you are correct, those who smoked cigarettes have themselves to blame. You misread my words to your own bias. I am not liberal in the least nor am I willing to join others in blaming corporate America for all the ills that have befallen us. We are a most ignorant species and we seem, as a rule to ignore basic issues of pollution. An outhouse in the country represents little peril for disease but that same outhouse multiplied in the city by several tens of thousand times represents the threat of cholera in the extreme. To ignore the history of such disease is facile and dangerous. You argue out of ignorance, I do believe. Please blow you sunshine up someone else’s skirt.
“You misread my words to your own bias.”
So did you. A forager’s ‘nature is my god and provider’ mindset is shared by liberals, that is not the liberal’s entire mindset. Both do have a very weak concept of other people’s property, though.
Pollution on private property is none of your business. If it affects those outside of that property there should be a high standard for proof of cause. Not the government run shyster lawyer trials, real proof. Certain size asbestos fibers and levels of exposure are risk factors for mesothelioma, but then that was not known until recently. Use of asbestos went up during WWII and probably would have even if the government had been aware of the risks.
It is interesting that you mention the drawbacks of ignorance but acknowledge the benefit of the technology of plumbing and sewage treatment versus outhouses that would be
practically useless in modern cities. If cars hadn’t come along, cities would have been buried in horse crap, too. Visit Mackinaw Island sometime.
Pollution is a bete noire of the left that is becoming the horse shit of the 21st century, thanks to technology that continues to evolve.
Pollution is something that is with us always. We do not always think some “stuff” pollution. You are of the belief that any pollution on your private property is your affair and no one else’s. To point, yes. But your private property never stays yours. When you die it will belong to someone else and they will have to deal with your pollution. Excrement, in its raw state is a type of pollution, whether it be cat, dog, bead, or man made. After it has broken down it ceases to be pollution unless there is simply too much of it. Feed lots for beef produce a lot of excrement and flys which carry disease. Farmers using commercial fertilizers are far more prone to use too much so as to increase the size of their harvests and the chemical companies are far too willing to sell as much as they can. Well intention environmentalists are only too happy to see ethanol made from corn added to gasoline because they believe it reduces pollution. Unfortunately it does not. Oh, but ethanol burns cleaner. true, but it lacks as much energy as gasoline so by adding it to your fuel tank you must use more gasoline for the power you need from the vehicle.
We live in a world full of contradictions. Environmentalism is one of those contradictions because it fails so often to see the world as a whole. It grasps the easiest problem and uses emotion based science to distort its claims. That is what activism does. Bill Nye is a classic idiot. Yes the man has some knowledge of science but he lacks so much more knowledge of the very things he pushes as science and truth. If he died in an automobile accident tomorrow the world would never miss him. And you spout off about how any talk of pollution is BS because technology is going to save us. To my mind, you are no better than Bill Nye. In your ignorance you call me a liberal.
I drove truck for a number of years and i will tell you about the most common pollution I saw. It was on the side of almost every road I traveled. All that garbage. Dirty dippers, bottles of piss, and a host of uneaten food not to mention the plastic bags, the newspapers, and everything else. People dump furniture, contractors dump construction waste, it never ends. But you get up in arms whenever someone mentions the word pollution and call them a liberal. Wow, such brilliant thought.
It’s just like with self-driving cars, William. It’s sounds great in theory. But nobody wants to look at the unintended (or even intended) consequences.
Yes, you have a valid point. We like the procrastinations of those who tell us of all the benefits of the new technology and yet fail to mention the pitfalls. Of course in fairness we can cut them some slack since they never saw any pitfalls, As always, we should take such information with multiple grains of salt.
A chance at bi-partenship: tie strict immigration control with a crackdown on illegals to single payer for citizens only.
Of course when we say “America First” we really mean International Bankers and Globalists First, or am I being repetitiously redundant?
I am strongly in favor of free trade as I own US stoxx and Chinese stxx or from India as I have put my savings in mutual funds or trackers etf invested in Asia ex japanese stxx of course
As a small retail investor seeking to take advantage of the globalization ;
that is a fact and not a political choice/ option by the way
I m expecting the spy and russell 2000 to go higher
The house always wins
free trade = strong corporations earnings = higher US exchanges indexes
do not need to be a rocket scientist to get that
You cannot go against free trade without in the long term facing some kind of retaliation
detrimental to ones country economy
Steel is good for Brazil or Russia , in the US high tech industries QQQ stxx
Oh Oh. I may have to reduce my forecast for US and Global growth if Trump follows through with his trade reduction policies. A trade war could be the black Swan event that causes the global depression to commense sooner than I previously predicted. I agree with Mish: The only fair trade is free trade.
Trump is talking to Russia (Lavrov just visited).
Trump fired Comey (draining the swamp, one by one).
Climate change agreements signed by Tillerson and Lavrov re the Arctic.
Trump told Nikki Haley to stop her Russia bashing and to clear comments with Tillerson.
Trump cancelled TPP.
U.S. attended the One Belt One Road meeting.
Against the howls of the media, the opposition, the snowflakes, things are getting done.
Hopefully the Attorney-General’s office goes after Hillary Clinton next. Justice must be done. While we’re at it, send Soros out into space!
Don’t get too hopeful about President Trump, the reality is that one man or even several cannot change government all that much. All we can hope for is that some change occurs. this is what the French forgot in their rejection of Le Pen. She was never going to be the perfect candidate but she was going to cause change and change is what the French need. Macaroon represents the continuation of Holland’s policies and as such he will fail.
williambean2014 – yes, small changes are all we can hope for.
If the establishment truly wants free trade, all it has to do is to repeal our numerous tariffs, import quotas, anti-“dumping” laws, and other American-imposed restrictions on trade. No foreign policy or foreign maneuvering is needed.
https://mises.org/library/nafta-myth
The trade barriers Trump is proposing, in the words of Milton Friedman, “benefit a few, at the expense of many.” True free trade “benefits many at the expense of a few.” Friedman pointed out that what’s known as a “favorable” balance of trade is actually “unfavorable”: getting more goods in and sending fewer out is a good thing, not a bad thing.
https://fee.org/articles/in-trumps-alphabet-f-is-for-protectionism/
ho hum, still waiting on the Mish recession,,,,,,,,,,5 years later.
Hey Tampa. Barring a black swan event (like a trade war) I agree with you. No recession anytime soon. Continued modest growth of 1-2%.
tradingtampa – yeah, central bank backstops.
“Free Trade” is a MYTH.
It has NEVER existed.
The first “corporations” were legal MONOPOLIES granted by their respective governments.
The closest we have to “Free Trade” happened in Hong Kong, and that no longer exists.
Some see Singapore as close, but it has always been “managed”.
“Free Trade” is NEVER supported by “Government” as “Government” always seeks an “Advantage”.
“Fair Trade” is the banner “Governments” now promote, but individual “Private, a.k.a. large corporate interests” dominate the agenda for example the TPP.
It has always been a WAR between the small and the large and the large usually wins all the battles.
The first thing one must do is to stop accepting the BS that governments, the press, Wall Street, and the establishment dish out and think for yourself.
Follow the Money.
Look to Who benefits.
Remember “Government” is motivated by power and needs supporters both in the ballot box and “donations” to hold onto it.
Free trade forever. “Dump” your goods on me, please.
I have commented before on our trade problems especially with China with a deficit of nearly a billion a day. If we lowered the corporate tax rate, or totally eliminated if possible for our multinational corporations to reincorporate here n America, gutted regulations, got a fair corporate health plan in place and even provided subsidies if need be, call it something else as all our trading partners do it, well we would at least have a plan in place. Also I have read that a big number of our manufacturing jos are outsourced primarily because we don’t have nearly enough trained people to operate sophisticated machinery. As depressing as this is,what is most depressing of all is the lack of strong leadership at the top which is of course our president! IMO there is no reason to go any further here with more ideas until Trump pulls his head out of his ass! He has some smart people, I really do believe who r telling him the news media is never going to be fair, they are going to continue to exaggerate and to lie so get over it, ignore it and damn it get to work!!!
Why doesn’t anyone consider the CAPITAL FLIGHT that has occurred in this country in the last forty years. Every one complains about trade deficits and currency manipulation and all that crap. The crux of it is that we have lost our ability to make the things people want at the best price. We have lost our capital. I’ve read the opinion that the trade deficit is the best deal for US consumers in history, because the debt is never intended to be paid back. SO WHAT? Also, that what is good for consumers is also good for the country. The fact is the capital to produce what used to be produced in the US is now in China, Viet Nam, The Philipines, Malaysia, Sri Lanka and who cares where else. Piles of cheap foreign crap filling our houses do not make up for the loss of real wealth. At some point people will figure out that these debt dollars from nowhere that paid for all that stuff aren’t worth the hard disk space they are printed on. Then what?
I’ve generally thought that free trade is a good idea. In the context of the way things work now, I no longer think so.
But then again, perhaps this is more a symptom than the disease. We’ve become a nanny-state socialist enterprise and that always comes the same end. The Soviet Union couldn’t feed itself in the 60’s and 70’s without US grain, and collapsed in the 80’s China starved between 10 and 100 million people in the cultural revolution until they gave up on Marxist economics. They are starving in N. Korea. They starved in Cuba. Eastern Europe and Yugoslavia… Splat! Venzuela, with 1000000000000 barrels of oil in the ground (That is 12 zeroes ), will be starving soon, too. I’ll give Western Europe 15 years, with the US about 5 years behind.
Plan well.
Economics has shown itself to be a field of study that specializes in fairy tales. Proof of that is the theory of “free trade.” How can Japan afford to ship a million cars to the other side of the world and still make a profit on them? FINANCIAL MANIPULATION. Their central bank is bankrupting the country trying to keep the currency weak, a de facto subsidy to Japan’s car companies. There was an article in the Nikkei review last week quoting a Japanese official complaining about Trump trying to talk down the dollar when Japan had very specific plans to weaken the Yen, and thus increase the profit on cars sold overseas. This is the government and car companies working hand in hand to keep market share in the U.S., and jobs overseas. But the solution is simple – stop foreign governments from using money and U.S. Bond markets to game the system. Starve them of the dollars they need to cheat. Both China and Japan are desperate for dollars to keep their surpluses going, dollars they obtain completely out of sight and mind of “economists.” The U.S. could stop that game without any tariffs or WTO complaints. Unfortunately, that would tick off the financial companies that are just fine with the way things are. But if Trump is serious about fixing the broken trade system, he needs to hire someone who knows how to play whack a mole with foreign central banks.
I’m trying to understand why getting better deals for America in Trade Deals is not Free Trade? Every other country in the world tries to get the best deals for themselves in trade. Why shouldn’t the US?
Do you think the US exporting things to other countries is not Free Trade?
Getting good Trade deals that benefit BOTH parties is the only real way to increase trade. Otherwise it’s not “Trade”. Unless you think printed Fed dollars is a “product”?