WJ Byrnes banner

Global Partner for Personalized Logistics Services

TradeInFocus   Our compilation of news to keep you in focus on key trade matters

on Samsung Galaxy Note 7 Phone
Virgin Atlantic Cargo - 09/09/16
Please note with immediate effect and until further notice, we are placing an embargo on all consignments of Samsung Galaxy Note 7 phones. These products have been recalled by the manufacturer due to concerns regarding the safety of some of the lithium batteries contained within the equipment. We have therefore been advised that at this current time, all consignments containing these phones are not safe to travel as air cargo.

Thank you in advance for your help and support with this embargo. If you have any questions, please do not hesitate to contact me on steven.coles@fly.virgin.com or, alternatively please contact your Account Manager.
Details: Virgin Atlantic Cargo

Why Voters Don't Buy It When Economists Say Global Trade Is Good
NY Times Economic View - July 29, 2016
One defining characteristic of recent political debate - in the United States and abroad - is anxiety about foreigners. You see it in Donald Trump's railing against immigrants and trade agreements. It may well be part of Hillary Clinton's shift, under pressure from Bernie Sanders, against the Trans-Pacific Partnership, which she once embraced as "the gold standard in trade agreements to open free, transparent, fair trade."

You certainly see it in the British decision to exit the European Union, which has become known as Brexit. That vote flummoxed most political forecasters, and it makes one wonder whether Americans might also produce a surprise in November. What's going on?

Voters clearly aren't listening to economists. In a recent poll, an overwhelming number of leading economists agreed that Brexit would most likely lower incomes both in Britain and in the rest of the European Union.
Similarly, in the United States, most top economists agree that "past major trade deals have benefited most Americans" and that "trade with China makes most Americans better off." But those aren't sentiments we will be hearing anytime soon from Mr. Trump or Mrs. Clinton.

In one respect, it is easy to understand why. According to a CBS News/New York Times poll conducted last month, only 35 percent of registered voters thought the United States gained from globalization, while 55 percent thought it lost. On issues of international trade, the current crop of candidates is following public opinion. (Henceforth the president, rather than being our elected leader, may be called our elected follower.)
But all this raises the question of why so many people, on both sides of the Atlantic, are ready to embrace a move away from international economic engagement when expert opinion overwhelmingly calls for a very different approach. Economists do not have a good answer.

In particular, Edward Mansfield and Diana Mutz, professors in the political science department of the University of Pennsylvania, have written a pair of research papers exploring attitudes toward free trade and offshore outsourcing. This work gives some clues about what may be happening inside the minds of today?s voters.
For an economist, one natural hypothesis to entertain is that people?s attitudes toward globalization are based on their self-interest. That is because textbook economic theory says that openness to international trade increases a nation's overall prosperity, but it also says that some people gain and others lose. Even if the gains exceed the losses over all, those who get the short end of the stick may still object.

Yet Mr. Mansfield and Ms. Mutz reject this theory of voter attitude. If people were just looking out for themselves, their view of globalization would be determined by the industry in which they worked. Those in industries with a high concentration of exports should be favorable to an open economy, while those in industries that have to compete with imports should be opposed. In actuality, however, people's attitudes about free trade and offshore outsourcing are unrelated to the characteristics of the industry in which they are employed. After analyzing their survey data on individuals" attitudes and attributes, these political scientists conclude that voters embrace policies based on the broader national interest. This theory is called sociotropic voting. There are several reasons people may look beyond narrow self-interest.

One is simply that people are more altruistic than economists usually think they are. But it's also possible that it is just hard for people to determine with much precision how national policies affect their personal circumstances, and in light of this uncertainty, it is reasonable to presume that any policy good for the overall economy is probably good for you, too. The issue then becomes why people think that globalization is bad for the economy in the first place. In other words, why do they doubt what so many economists teach about the gains from trade" The data analysis of Mr. Mansfield and Ms. Mutz suggests that skepticism about trade and outsourcing is closely related to three other sets of beliefs.

The first is isolationism more broadly. Trade skeptics tend to think, for example, that the United States should stay out of world affairs and avoid getting involved in foreign conflicts. They are not eager for the United States to work with other nations to solve global problems like hunger and pollution.

The second is nationalism Trade skeptics tend to think that the United States is culturally superior to other nations. They say the world would be better if people elsewhere were more like Americans.

The third is ethnocentrism. Trade skeptics tend to divide the world into racial and ethnic groups and think that the one they belong to is better than the others. They say their own group is harder-working, less wasteful and more trustworthy.

As Mr. Mansfield and Ms. Mutz put it, "trade preferences are driven less by economic considerations and more by an individual's psychological worldview." They also report that this isolationist, nationalist, ethnocentric worldview is related to one's level of education. The more years of schooling people have, the more likely they are to reject anti-globalization attitudes.

Consistent with this, Andrew McGill reports in The Atlantic that the recent Brexit vote was strongly correlated with education. Districts with a high percentage of college graduates tended to vote to remain in the European Union, while those with a small percentage tended to vote to leave.
In the long run, therefore, there is reason for optimism. As society slowly becomes more educated from generation to generation, the general public's attitudes toward globalization should move toward the experts?.


A Setback in Latin America - Failure to Ratify the Trans-Pacific Partnership Would Deal a Blow to US Credibility in its Own Hemisphere.
US News - Sept. 7, 2016
After five years of negotiations, the fate of the Trans-Pacific Partnership now rests with the US Congress. Proponents of the ambitious multinational trade deal, which comprises roughly 40 percent of global GDP, have centered their promotion efforts on both its economic benefits and its importance to US geopolitical interests in Asia. Yet the implications for US policy goals in Latin America are no less real. A failure to ratify the pact would represent not only a loss for the world economy, but also a setback for US leadership and credibility in the Western Hemisphere.

At the most basic level, such a failure would damage perceptions of the United States as a reliable partner. The TPP includes four close US trading partners in the Western Hemisphere: Canada, Mexico, Peru and Chile. Policymakers in these countries and others in the region would likely interpret a defeat of the trade deal as symptomatic of Washington's declining interest and ability to lead on promoting international rules and norms. If the US cannot meet its commitment on this agreement, counterparts would have little incentive to pay domestic political costs to negotiate with the US in the future.
Each of the signatories made sacrifices in the negotiations, and there is no appetite to reopen them. Just as US credibility is at stake, so are strategic economic objectives. If Congress fails to pass the deal it will squander the best available opportunity for the US to liberalize trade, encourage market-oriented reforms and update international trade rules - goals that are currently unattainable at the World Trade Organization or other fora.

The administration's 2015 National Security Strategy stated, "Despite its success, our rules-based system is now competing against alternative, less-open models. To meet this challenge, we must be strategic in the use of our economic strength to set new rules of the road, strengthen our partnerships, promote inclusive development." Originally conceived as a pragmatic exercise in trade liberalization in the face of moribund global talks, the TPP meets this challenge with provisions that match the realities of the 21st-century economy, from strong labor and environmental protections to new rules on intellectual property and limits on state-owned enterprises.

The potential impact on Latin America of an abortive ratification process would be particularly magnified in the case of Mexico, the second largest export market and third largest trading partner for the United States. Since the 1994 North American Free Trade Agreement, Mexico has become one of the world's most open economies and a global trading power, boasting a network of free-trade agreements with 44 countries and, most recently, co-founding the Pacific Alliance, a regional integration scheme with Chile, Colombia and Peru.

The Mexican government lobbied hard to join the Trans-Pacific Partnership negotiations in 2012 in order to protect its highly integrated North American supply chains. Mexican diplomats made a compelling argument" that the pact offers an opportunity to upgrade NAFTA and thus deepen North American economic ties without reopening a political Pandora's box. NAFTA has enhanced prosperity through increased trade and investment and lower prices for consumers, but it could not consider technologies, products and trade disciplines that did not exist when the agreement was signed more than 20 years ago.

Conversely, a failure by the US Congress to ratify the deal would miss an important opportunity to modernize the trading framework for North America. The US has a vital interest in the stability and prosperity of Mexico; membership of NAFTA served that interest and also strengthened Mexico's domestic commitment to open markets. Yet, without the TPP, both Mexico and the US lose the ability to improve the efficiency of North American supply chains and explore new markets for jointly-produced goods. While the US will remain Mexico's most important export market, the Mexican government and business community would seek to further diversify Mexico's trade relationships. Meanwhile, the Pacific Alliance would continue to lead economic integration in the hemisphere, without the participation of the United States.

A languishing TPP would also negatively affect US interests in non-signatory countries in the Western Hemisphere. For proponents of the agreement, an oft-cited implication is that if the US fails to write the rules, China will (i.e., with lower standards). In some ways, Brazil is the China of the Western Hemisphere. Although not a geopolitical rival in the same way as China, it is the largest economy in the region yet the most closed to foreign trade. Washington and Brasilia have battled over a variety of irritants, from the US failure to reform its cotton subsidy program to Brazil's imposition of non-tariff barriers, such as import license restrictions and rules of origin requirements. If the US succeeded in ratifying the TPP, Brazil could face growing isolation and trade diversion. Without it, like-minded countries in the region would miss a chance to present Brasilia with a new and potentially interesting path of joining the economic centers of gravity in a high-standards trading regime.

Ironically, as Washington hesitates over the deal amidst toxic election-year debates on trade, the political moment in Latin America has rarely been more propitious. In 2014, The Economist identified a "continental divide," between the alternative blocs of the Pacific Alliance and the more statist Atlantic-based economics; today, following political shifts in Argentina and Brazil and the decline of Venezuela's regional influence, that fault line is beginning to fade. The beauty of the TPP is that it is an open platform, with the original parties stating that additional countries will be permitted to accede if they are willing to adopt the same standards.

This presents a powerful incentive. Congressional ratification of the deal is justified on its economic merits and its geopolitical dividends. The alternative adds up to missed opportunities, weakened credibility, and an abdication of US leadership on trade expansion in its own hemisphere.


German Vice Chancellor: TTIP Negotiations Have 'Failed'
Free trade negotiations between the US and the EU have "failed" because Americans are widely considered to be getting the better end of the deal, according to a German government official who blames the lack of progress regarding the Transatlantic Trade and Investment Partnership on unfair terms for Europeans. "In my opinion, the negotiations with the US have de facto failed, even though nobody is really admitting it," German Vice Chancellor and Minister for Economic Affairs Sigmar Gabriel said in an interview with German broadcaster ZDF on Sunday, according to German media outlet Deutsche Welle. "Nothing is moving."

TTIP negotiations have been ongoing since 2013 in an effort to establish a massive free trade zone that would eliminate many tariffs but which critics contend would jeopardize American businesses. Congressional opposition has been steep, and the anti-free trade rhetoric that's permeated the 2016 election cycle thus far suggests TTIP's only hope of approval could lie in the waning days of President Barack Obama's administration.
But US opposition isn't the biggest hurdle for negotiators to tackle, according to Gabriel. He said Europeans don't want to "subject ourselves to American demands" and highlighted that out of the 27 chapters of the deal that have been discussed, international negotiators have yet to fully agree on any of them.

Over recent months, American politicians on both sides of the aisle have railed against free trade agreements as unfair to US companies and workers, with the brunt of the ire aimed at the TPP. So it's interesting to hear politicians across the ocean suggest America is pushing for terms that already have left foreign powers uncomfortable. German opposition to TTIP has been steep, but Gabriel's sentiments are not radical in Europe. French President Francois Hollande, for example, indicated earlier this year that France would "never accept questioning essential principles for our agriculture, our culture."

And the fact that former British Prime Minister David Cameron ? an outspoken proponent of TTIP ? is no longer involved in negotiations is another major setback for the deal, which at this point is believed by many to be dead in the water. Not typically one to hold his tongue, Gabriel confirmed as much this weekend. The German vice chancellor also has grabbed headlines for suggesting the EU would end up going "down the drain" if Brexit sparked similar uprisings, and doubled down on his decision to raise his middle finger at a group of neo-Nazi activists, saying the only mistake he made was that he didn't use both hands.

tradeinfocus is a summary of news and events on the trade policy front for clients, trade & legislative colleagues, and professional friends of W.J. Byrnes & Co.