Protectionism

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patriot1
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Re: Protectionism

Post by patriot1 »

ghariton wrote: I don't see any bilaterals with large economies on the horizon either.
UK? :lol:
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Re: Protectionism

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We should try for bilaterals with India and China, but both will take a long time.

A bilateral with a post-Brexit Britain may be the easiest to achieve.

Added: didn't see previous post, which beat me to it.
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Re: Protectionism

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I think that the U.K., if it survives, will be busy negotiating with the E.U. That will take a very long time.

China, India and Japan are probably the best long-term bets, but that will take decades. There was an interview recently with the Indian minister who would be responsible for such negotiations, and he seemed surprised at the idea. As for China, I think that human rights will be the biggest obstacle -- I doubt any Canadian government would find the necessary compromises, easy to make. That leaves Japan, with whom negotiations have already taken place some years ago. Maybe we could pick up there. Maple syrup in return for fugu fish.

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Re: Protectionism

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Trump transition memo: Trade reform begins Day 1 - CNNPolitics.com
"The Trump trade plan breaks with the globalist wings of both the Republican and Democratic parties," the document notes. "The Trump administration will reverse decades of conciliatory trade policy. New trade agreements will be negotiated that provide for the interests of US workers and companies first."....

Day 1: Begin NAFTA reform
On Day 1, Trump would begin reforming NAFTA, including ordering the Commerce Department and International Trade Commission to begin a study on what the ramifications of withdrawing from the treaty would be, and what would be required legislatively to do so. He would also have the US Trade Representative notify Mexico and Canada that the US intends to propose some amendments to the treaty, which could include measures on currency manipulation, lumber, country of origin labeling and environmental and safety standards.
Although the target is Mexico, we should not expect changes to be to our benefit.
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Re: Protectionism

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" A verbal contract isn't worth the paper it is written on " Samuel Goldwyn
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Re: Protectionism

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I think a strong case can be made that US has greatly benefited from globalization. USA corporations dominate the global business world and sit upon 4 trillion after tax dollars outside the USA. The USA can only blame their stupid tax codes and rates as the reason why this capital doesn't come back to the USA.
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Re: Protectionism

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U.S. levies preliminary duty of 20 per cent on Canadian softwood lumber.

As expected. And this is preliminary. An anti-dumping inquiry is still ongoing, and may result in additional countervailing duties.

The issue will go to a NAFTA review panel -- until such panels are abolished under a renegotiated NAFTA -- and to the WTO. Canada may well win in the long run, but in the meantime this will be painful. I don't think that the Canadian government has leverage on this one. Yes, I know, U.S. users of Canadian lumber won't like it, but I don't think that their voice is powerful enough to amount to much.

Some of the investing consequences seem clear. Avoid Canadian lumber companies and ancillary industries. As well, the CAD may take a hit tomorrow.

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Re: Protectionism

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Given that the US always keeps the money they collect, I don't understand why Canada does not slap a 20% export tax on the lumber so that we keep the money?
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Re: Protectionism

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kcowan wrote: 25 Apr 2017 16:38 Given that the US always keeps the money they collect, I don't understand why Canada does not slap a 20% export tax on the lumber so that we keep the money?
That's what we did in 1986, to resolve a previous phase of the dispute. But as I recall, Canada withdrew from the 1986 agreement in 1991, and the U.S. renewed its demand for countervailing tariffs at that time.

A very convoluted dispute, that has been going on for some 35 years. Currently all previous agreements have expired. A new agreement was supposed to be negotiated at the end of 2015, but with the change of government, that didn't happen.

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Re: Protectionism

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So CETA, Canada's free trade deal with the EU, is due for implementation in July. But there are bumps on the road.

As part of the deal, Canada agreed to let in 18,000 of European cheese imports, duty-free. That is essentially an import quota, and presumably worth a lot of money. So who gets the quota, i.e. who gets the right to import European cheese duty-free? Well, it looks like 60 per cent of the quota qill be given (free) to the Canadian dairy producers.

The Europeans are very unhappy. They believe that the Canadian dairy producers will warehouse their quota, i.e. let it sit idle and so reduce that amount of European cheese coming into Canada. That way, they will keep prices high for domestic production. (I would add that they probably don't want Canadians too exposed from higher quality cheeses from elsewhere.)

Let them eat (domestic) cheddar.

And as for Canada being a champion of free trade, hmm... Let me consult our friendly marketing boards before doing anything so rash.

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Re: Protectionism

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As expected, the U.S. government's preliminary decision is to levy countervailing duties on Bombardier, on the C-Series aircraft it wants to sell to Delta. And, also as expected, the Canadian government is denouncing Boeing and refusing to buy the Super Hornets.

The lead in to the story from the CBC is ominous:
After what seems like the first shot of a trade war....
Bombardier itself is at some risk:
The first casualty may be the fighter purchase, but Baskin said he believes that Bombardier's contract with Delta will have to be cancelled, because neither the airline nor the manufacturer will pay that enormous duty.

Even if the ruling is overturned on appeal before international trade watchdogs, he said, the timing of the ruling is horrible for Bombardier because of "its terrible balance sheet."
Other problems:
But the military could also be left in a long-term lurch.

The Liberals insisted they needed to buy 18 Super Hornets on an urgent basis to cover a gap in the country's ability to field fighters for Norad and NATO at the same time.

The next best option would be to buy used FA-18s from another country until a competition to replace the entire fleet of Canadian CF-18s is launched.

During the election campaign, however, Trudeau ruled out buying the Lockheed F-35 stealth fighter, and the bruising political rhetoric surrounding Boeing suggests that company has also been ruled out.

Defence experts say that leaves only European fighter jets to consider.

"I can't see us going ahead with a competition that doesn't include the North American entrants," said Dave Perry, of the Canadian Global Affairs Institute.

"They've painted themselves into a corner, and they're going to have to make a choice about which one of these positions they back away from."
Ouch, all around.

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Re: Protectionism

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I am kind of the view to simply have a short round of bidding for European fighters and get on with it. Given the stupidity of American behaviour, knowing full well Boeing is subsidized by the US anyway, and given CETA is now in effect, what better way to send a message?
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Re: Protectionism

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They'll buy the Aussie F18s as interim.

The European fighters are insufficiently integrated with the USAF or USN.

Seeing Boeing cry "Subsidies!" is hilarious.

Added: Personally, I'd like to see us walk away if the US gets more ridiculous. "Cancel? Go ahead."


Terence Corcoran: Goodbye NAFTA, hello NATPA, our new North American Trade-Protection Agreement | Financial Post
After a few months of alleged negotiations, the three nations have yet to indicate any real interest in free trade. Every action, every comment, every appointment, every public statement, every speech, every analysis has been grounded in the language of trade protectionism.
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Re: Protectionism

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Andrew Coyne has an interesting take on the Bombardier situation:
But all of this presupposes some sort of ordinary business relationship, as between two parties at arms’ length. Whereas it is increasingly clear the federal government, at least, views itself and Bombardier as being one and the same.

This was perhaps most explicit in the prime minister’s announcement earlier this week that the government would refuse to buy military jets from Boeing, though it had earlier said it would, on the grounds that “we don’t do business with a company that’s busy trying to sue us.”

Boeing, of course, is doing no such thing. The suit it has brought before the U.S. International Trade Commission is not against the government of Canada, but Bombardier. It was not Boeing that mistook the interests of the citizens of Canada for those of a private company, or that subordinated a critical military procurement decision to the outcome of a private trade dispute. It was the government of Canada that did that.
<Snip>
That Boeing has a perfect right to seek the protection of its own country’s trade laws; that Canada would be the first to cry foul if the situations were reversed; that Boeing, a global company with annual revenues nearly six times the Canadian defence budget, shows no signs of caving to this amateurish extortion attempt: all these are of secondary importance.
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Re: Protectionism

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A take on Boeing versus Airbus from the EU perspective.

In short, none of these companies seem to prosper without massive government transfusion.
The governments, in turn, identify themselves with these coddled children.

Screw Boeing's fighter jets. Let's kickstart the Avro Arrow again! :P
How is Boeing supported by the US Government?
Boeing receives different forms of support from the US federal and state
governments that benefit the development, production and sales of its civil aircraft.
Taken together (e.g. tax breaks, R&D and infrastructure support), US support has
consistently exceeded the limit allowed under the EU-US Agreement of 1992 by 2 to
3 times. This support has not and will not be repaid to the US government.

Does Boeing receive R&D support?
Boeing relies on the R& D subsidies it receives from a variety of quarters.
In the US, Boeing receives subsidies from NASA’s and Department of Defense
programmes and contracts (estimated at being at least $22 billion), as well as the
Department of Commerce and the Department of Labor, e.g. by providing funds for
specific research into composite technology from which the 787 airframe will be
constructed and sophisticated software tools that Boeing will use for 787 design and
manufacture. Civil R&D support in the EU is granted in the form of generally
available programmes (e.g. the EU R&D Framework Programme) in which a large
number of companies participate, including Boeing.

Surely, the subsidies Boeing receives only benefit its military or space
business?
No.
So-called “military” and “space” subsidies provide considerable benefits for Boeing’s
civil aircraft business. Department of Defence and NASA subsidies for military and
space assignments have helped Boeing develop technologies (e.g. composites)
which the company in turn transfers without any cost to its civil aircraft production to
improve and manufacture the necessary technology. Boeing also makes use of DOD
centres and testing facilities to work on the design and wings of its civil planes. Those
subsidies have for instance enabled Boeing to develop the technologies used in its
B-787 and other civil aircraft models. This reduces, and effectively subsidises,
Boeing’s production costs and puts Airbus at a competitive disadvantage.
Another issue are non-competitive “military” contracts at inflated prices which benefit
Boeing’s civil aircraft business. The situation is therefore problematic: Boeing
receives a number of benefits courtesy of US government programmes, its non-
competitive military contracts, awarded at inflated prices by the US government,
benefits which are passed on to its civil airplane production. In other words, R&D for
Boeing’s civil airplanes is effectively being paid for from US military budgets, rather
than Boeing’s own pocket.
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Re: Protectionism

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Two wrongs don't make a right.

Yes, Boeing is heavily subsidized by the U.S. government. U.S. taxpayers are paying huge amounts so that Boeing can sell aircraft below the cost of making them. That's just stupid. Not only is it an unnecessary burden for U.S. taxpayers, it comes at the cost of more productive uses of the money, and wastes society's resources as a whole. Instead of aircraft subsidies, spend on more extensive healthcare, for example.

And think of the consequences. Airlines get aircraft artificially cheaply, which enables them to charge lower prices to passengers, who fly more than they would otherwise. For those who are worried about GHG emissions, this should be terrible news, and a reasons for public protests.

<Crickets chirping>

Of course, many other governments are also subsidizing their aircraft manufacturers. As a result, the world market for commercial aircraft is highly distorted, and extremely difficult to operate a rational business in. These are fifty and seventy year old infants who will never grow up, and will require massive subsidies indefinitely.

Why does Canada want to participate in this foolishness? If other countries let themselves be governed by special interests, and narrow regional job-creation (and vote-buying) tactics, why must we? Rather, we should stop playing this stupid and harmful game. Instead of heavily subsidizing Bombardier forever, why not spend the money on things that will let real businesses grow, such as better infrastructure, lower corporate taxes, and so on?

Yes, Canada's role in the world aerospace industry will be limited to what we can do better than the others, rather than including markets into which we must buy our way. But so what?

As for Boeing, if the U.S. government and its taxpayers want to give us a gift, through high subsidies and low aircraft prices, why not accept a share of that money and say: "Thank you"?

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Re: Protectionism

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1. Yes, government thinking seems to be:
massive R&D spending => technological breakthroughs => competitiveness => more and better jobs => happier and safer populace => votes!

2. Yes, a smaller (economically-wise) country like Canada needs to pick and choose what we spend our tax money on carefully.

I actually don't disagree with either of these points.

As to picking aerospace for a massive transfusion of government cash.. well, I personally think a focus on robotics would be much more profitable in the long-term, but there are side benefits to aerospace research.. I mean, we wouldn't have Tang without them, right? ;)
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Re: Protectionism

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Delta intend to go ahead with their order of Bombardier CS-100s.
Delta chief says airline won’t abandon Bombardier order
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Re: Protectionism

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Somewhat surprised by this.

https://www.theglobeandmail.com/report- ... e37748395/
The U.S. International Trade Commission (ITC), a quasi-judicial federal agency that directs action by the United States against unfair trade practices, ruled Friday that U.S. giant Boeing Co. and the wider American aerospace industry were not injured or could not be injured, by Bombardier C Series imports into the United States.

The ruling, a victory for Bombardier and its government partners, is the final step in a U.S. investigation of Bombardier's 100 to 150-seat C Series following a petition by Boeing alleging that the plane benefited from massive state subsidies that allowed the airliner to be sold in the United States at less than fair value. It means duties totalling nearly 300 per cent imposed by the U.S. Department of Commerce on the C Series will be called off.
Except, of course, in the US adverse rulings are never called off.
Boeing issued a harshly worded statement that suggested it could appeal the decision or launch a new petition.
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Re: Protectionism

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Globe and Mail editorial
The Trudeau government's relentless push for a "progressive trade" agenda – one that tries to impose labour and environmental standards on trade partners, along with protections for vulnerable groups – has managed to annoy just about everyone.

The left thinks "progressive trade" is an oxymoron. Right-wingers think it's politically correct nonsense.

Our most important trade partners, meanwhile, find it a distracting roadblock at best, and an arrogant stunt at worst. After some grumbling, members of the revised Trans-Pacific Partnership – now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – have accepted some of our progressive demands (they even put the word in the new title!).

But China and the U.S. are unlikely to be as accommodating. Canada's insistence on progressive trade may soon come at a price. The question is whether it's worth it, or just a vacuous marketing exercise.
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Re: Protectionism

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So, Trump fired another shot in the stupidity Olympics. Apparently, "trade wars are easy to win". Canada would be impacted the most by the new tariffs. Presumably we will retaliate with rolling sanctions on US products, targeting US farmers and manufacturing as well as our own consumer.

Will the Senate and people with actual braincells within his administration be able to stop this?
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Re: Protectionism

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I am stunned that the US Congress has delegated power to the president to impose tariffs of arbitrary size on arbitrary imports on what is, as far as I can tell, a morning's whimsy. This has nothing to do with this president either. Why should any president have this power?
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Re: Protectionism

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Mordko wrote: 02 Mar 2018 16:26
Will the Senate and people with actual braincells within his administration be able to stop this?
To which country do you refer?
I don't intend to offend anyone, that part is just a bonus.

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Re: Protectionism

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Norbert Schlenker wrote: 02 Mar 2018 18:29 I am stunned that the US Congress has delegated power to the president to impose tariffs of arbitrary size on arbitrary imports on what is, as far as I can tell, a morning's whimsy. This has nothing to do with this president either. Why should any president have this power?
https://www.quora.com/Does-the-U-S-Pres ... on-imports
3. Trump's limited options: hit specific industries or low tariffs on everyone

Trump can also rely on the Trade Act of 1974, Section 122. It gives him authority to impose across-the-board tariffs.

Trump just needs to find "an adverse impact on national security from imports." Lost jobs could qualify.

The caveat: There is a cap on the tariffs of 15% and it's only good for 150 days. Then Congress needs to approve it. So, it's a blunt rule that could have a severe short term impact but it expires after five months, unless it is extended by Congress.

Trump can also use the Trade Expansion Act of 1962. Ronald Reagan used this one. It allows Trump to slap targeted tariffs on certain industries, like steel. It's not as broad, but Trump can raise tariffs as high as he wants on specific things.
I expected bigger reactions by global stock markets today. There will be retaliation and presumably countries will be shrewd enough to pick on American sectors that have the most to lose (those with disproportionate export businesses).
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Re: Protectionism

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AltaRed wrote: 02 Mar 2018 20:10
I expected bigger reactions by global stock markets today. There will be retaliation and presumably countries will be shrewd enough to pick on American sectors that have the most to lose (those with disproportionate export businesses).
Not sure the markets have priced in a US vs the world trade war just yet. Still hard to believe this would actually happen. And if it does, profits might be hurt less than consumers, farmers and workers. There will also be corporate winners. All depends on how the targets are selected and on the scale of retaliation/counter-retaliation. The whole thing would surely kill Republicans' chances to hold on to the Senate in 2018.
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