Apapa Seaport in Lagos — Pius Utomi Ekpei/AFP
❝ A landmark free-trade agreement removing most tariffs and other commercial barriers in the African continent became operational on Sunday, as 54 member states agreed on the process to implement the accord.
❝ The African Free Trade Agreement commits the governments to greater economic integration, as the signatory states begin a multiyear process to remove trade barriers including tariffs on 90% of commodities. The duty-free movement of goods is expected to boost regional trade, while also helping countries move away from mainly exporting raw materials and build manufacturing capacity to attract foreign investment…
Trading with the slashed tariffs will start in July 2020 to give member states time to adopt the framework and prepare their business communities for the “emerging market,” said Albert Muchanga, the African Union’s commissioner for trade and industry…
No one asked for advice from our fake president. No invited suggestions from his sycophant advisors – all of whom were past their economics sell-by date some time in the last century.
Thanks, Barry Ritholtz and the Visual Capitalist
❝ Among the first steps being floated by the incoming Trump administration is a 5 to 10 percent tariff on imports, implemented through an executive order. It’s the sort of shoot-first, ask-questions-later action that President-elect Donald J. Trump promised during the campaign. It’s also unconstitutional.
That’s because the path to imposing tariffs — along with taxes and other revenue-generating measures — clearly begins with Congress, and in particular the House, through the Origination Clause. When presidents have raised (or lowered) tariffs in the past, they have tended to do so using explicit, if sometimes wide-ranging, authority from Congress.
❝ The founders thought about this issue a lot: After all, taxes, as every grade schooler knows, fueled the colonies’ push for independence. So they wrote the Constitution, and its Origination Clause, to give the taxing power to the part of government that is closest to the people, thereby protecting against arbitrary and onerous taxation…
❝ True, tariffs are no longer used to raise money, but to protect domestic industries, and to punish foreign ones. But they unquestionably still produce revenue. And while tariffs on imports are aimed at foreigners, they affect domestic industries that use or compete with imports; they can also have an enormous impact on the overall economy by raising consumer prices. Allowing the executive to circumvent the House to enact otherwise unfavorable tax policies that affect Americans is what the clause is designed to avoid — that those furthest removed from the people have the ability to tax them…
❝ Of course, Mr. Trump doesn’t have to act unilaterally; he has Republican majorities in both chambers that are eager to work with him. One option would be to push for a border adjustment tax, a proposal already being floated in the House as part of comprehensive tax reform, which would forbid tax deductions for imports and exempt exports from taxes.
A border adjustment tax is a far better option than tariffs. It would eliminate incentives in the current tax system to manufacture abroad, and to shift income abroad. Unlike a tariff, it aims to be trade neutral, with any changes in consumer pricing of imports and exports being offset by a rise in the dollar. And with strong support in the House, it could be enacted in full compliance with the Origination Clause, lending it legitimacy that a unilateral tariff would lack.
It won’t be difficult to find a few Representatives or Senators to oppose a move hampering any significant portion of the US economy. Waving the Free Trade flag won’t be needed. Just a phone call from any of the sectors of American business with profit centers both inside and outside our national boundaries. A phone call to a segment of the all-encompassing clot of politicians housed in Congress. The global economy was a done deal decades ago.
And that doesn’t begin to include those corporations directly filing lawsuits. Like, um, any major retailer.
❝ The prospect of Donald Trump winning the race to the White House has joined China’s slowing economy, the Greek debt crisis and Britain’s EU referendum as a major threat to the global economy, according to a respected risk analysis firm…
The EIU placed the possibility of Trump being sworn in as US president next January sixth on their latest list of global threats, as serious as a resurgence of jihadi terrorism, and only marginally less risky than the collapse of the eurozone…
❝ “In the event of a Trump victory, his hostile attitude to free trade, and alienation of Mexico and China in particular, could escalate rapidly into a trade war…”…It added: “His militaristic tendencies towards the Middle East – and ban on all Muslim travel to the US – would be a potent recruitment tool for jihadi groups, increasing their threat both within the region and beyond…”
❝ According to the EIU, there was “a moderate probability” of Trump winning November’s presidential election, and serious conflict in Washington if he succeeded.
“Although we do not expect Mr Trump to defeat his most likely Democratic contender, Hillary Clinton, there are risks to this forecast, especially in the event of a terrorist attack on US soil or a sudden economic downturn,” it said.
But, then, are there any Trump supporters who care a rat’s ass about global commerce, international treaty obligations, friendship and cooperation between nations and nationalities?
That’s Bob Shiller’s book on Irrational Exuberance on the shelf
The International Monetary Fund and the World Bank are poised to hold their annual meetings, but the big news in global economic governance will not be made in Washington DC in the coming days. Indeed, that news was made last month, when the United Kingdom, Germany, France, and Italy joined more than 30 other countries as founding members of the Asian Infrastructure Investment Bank (AIIB). The $50 billion AIIB, launched by China, will help meet Asia’s enormous infrastructure needs, which are well beyond the capacity of today’s institutional arrangements to finance.
One would have thought that the AIIB’s launch, and the decision of so many governments to support it, would be a cause for universal celebration. And for the IMF, the World Bank, and many others, it was. But, puzzlingly, wealthy European countries’ decision to join provoked the ire of American officials. Indeed, one unnamed American source accused the UK of “constant accommodation” of China. Covertly, the United States put pressure on countries around the world to stay away.
In fact, America’s opposition to the AIIB is inconsistent with its stated economic priorities in Asia. Sadly, it seems to be another case of America’s insecurity about its global influence trumping its idealistic rhetoric – this time possibly undermining an important opportunity to strengthen Asia’s developing economies.
China itself is a testament to the extent to which infrastructure investment can contribute to development. Last month, I visited formerly remote areas of the country that are now prosperous as a result of the connectivity – and thus the freer flow of people, goods, and ideas – that such investments have delivered.
The AIIB would bring similar benefits to other parts of Asia, which deepens the irony of US opposition. President Barack Obama’s administration is championing the virtues of trade; but, in developing countries, lack of infrastructure is a far more serious barrier to trade than tariffs.
A generally wholistic understanding of the workings of the global economy is just one of the reasons Joe Stiglitz was honored with the Nobel Prize in economics. It ain’t a bad start.
RTFA and understand why modern economists think our government’s hypocrisy ain’t new – just backwards for a couple new reasons.