President Donald Trump is out on the hustings telling voters he is accomplishing great things. The economy is growing faster and creating more jobs but the deals with North Korea and the European Union he touts don’t ring true.
The Chinese and Russians are apparently helping North Korea evade sanctions and it has not slowed its missile program. U.S.-EU trade relations dodged a full blown trade war with the recent agreement to negotiate lower barriers to commerce on many industrial, agricultural and energy products but it is doubtful those talks will radically reduce the overall U.S. trade deficit.
European Commission President Jean-Claude Juncker did promise to take more natural gas and soybeans but Russian piped natural gas is simply a lot cheaper in Europe than U.S. LNG. Juncker can’t arm-twist his members to make bad commercial decisions.
Soybeans are a fungible commodity on global markets. With China shifting purchases toward Brazil in the wake of U.S. tariffs on metals and other products, the Europeans, who don’t grow a lot of soybeans and are looking for the best price, will naturally source more from the U.S. farmers no matter what Juncker and Trump decide.
Modern trade agreements are the product of sound economics and a sensible reflection of political realities. Governments lower tariffs and accept disciplines on subsidies, product standards, foreign investment rules and similar practices that can favor domestic suppliers over imports to create a broader international market where businesses can compete, specialize and accomplish scale efficiencies in production and R&D.
Voila, the iPhone designed in America but assembled in China from components and software from across Asia, America and elsewhere. The internet and Windows platform provide a global framework for the inexpensive exchange of ideas and deal making.
Jobs get rearranged, and jobs are votes. Consequently, the multitude of World Trade Organization, EU, North American Free Trade Agreement, and other trade and investment agreements were crafted with the express intent of creating a balance of benefits. American frustration stems from the increased trade deficits that came after China was admitted into the WTO and with Mexico after NAFTA.
