US trade wars
Detailed look at today's big trade disputes affecting the US and the west
 AS the fear of trade wars and ever-widening protectionism mounts, it would a worthwhile to examine that lies ahead in terms of international trade disputes affecting the United States and the West generally.
Such fears have given rise to much talk about fair versus free trade. Free trade involves the powers that be absenting themselves, or at the very least minimising their involvement the natural process of pricing based on supply and demand.
Fair trade involves trade controls imposed by government or government-sanctioned, or at least tolerated, monopolies or oligopolies. One cause of the American revolution was the control imposed by the mercantilist system, insisting American shippers to only sell to a limited number of buyers in Britain, who together dictated the price to American exporters who could go nowhere else - legally, that is. This situation prompted many to smuggle goods to France, with whom Britain was at war.
Today, a cursory glance at the Bloomberg list of trade disputes does not show anything alarming. The disputes seem to be much as the same niggling quarrels that often occur with business partners and most of them seem likely to be ironed out in the same way.
Even the best of friends, such as Canada and the US, are forever in a tussle about how they calculate industrial subsidies involving softwood lumber. Deciding what's fair and what is not appears as difficult as ever - even with the best will in the world.
Most serious disputes end up before the World Trade Organisation. There they are run through a dispute mechanism. While much is made of the US preparing to take a more aggressive approach to dispute resolution, so far there seems to be more bark than bite - though these are early days.
Not that the US has been idle in the pre-Trump era. Since 1994, the US has filed over 110 WTO dispute cases against its trading partners and defended itself in nearly 130 cases.
As it stands there are a number of big disputes brewing. First up is China fighting back against US charges that is has been dumping, which is defined as selling surplus goods at below the cost of production. Of course, deciding whether that has actually taken place rather than the cost of production simply being lower in China is another matter.
But often it is a matter of no consequence to the protectionist, who sees anything that undersells domestic products as bad, whatever the reason, foul or fair. To this end, US President Donald Trump has said that the United States will not be bound by WTO rules. Whether that is the hardwired policy of the new Republican administration or one of its many rhetorical flourishes - or something in between -remains to be seen.
In this dispute China alleges that the US and EU have imposed unfair anti-dumping duties its products. A loss for the West would hurt their ability to protect domestic producers from an influx of cheap Chinese products. The US and EU may have to modify anti-dumping rules or face retaliation from China.
As it stands, this investigation should begin this year with a final WTO ruling next year or the year after. Keenly awaiting the outcome are American concerns such as AK Steel Holding, Allegheny Technologies, Carpenter Technology, Commercial Metals, Nucor Corp, Steel Dynamics and US Steel. On the European side, ArcelorMittal, ThyssenKrupp, Acerinox, Aperam, British Steel, Gruppo Riva, Salzgitter, SSAB and Voestalpine are greatly concerned as well.
Then there is the nettlesome China's raw materials dispute in which the US and EU allege China has imposed unfair export restrictions on raw materials used to make aircraft, cars, computers and mobile phones.
If China loses this one, it must eliminate export curbs or face the threat of billions of dollars in retaliatory trade measures. The investigation and a final decision are likely next year or the year after. And those companies awaiting the outcome include Apple, Boeing, Ford, General Motors, Nucor, US Steel Corp and Vulcan Materials. On the European side they include. ArcelorMittal, ThyssenKrupp, Airbus Group SE, Volkswagen, Fiat Chrysler, Renault, Groupe PSA, BMW and Daimler.
Another dispute coming to the boil concerns China's aluminum production with the US alleging China provided domestic aluminum producers with cheap loans and illegal subsidies for inputs like coal, electricity and alumina.
If China loses, it must modify its loans and subsidies and with any luck there may be an adjudication panel before the year is out.
Awaiting with interest is Alcoa, Aleris International, Century Aluminum, Kaiser Aluminum and Reynolds Group Holdings.
In another matter, the Americans allege China provided more than US$100 billion in illegal government subsidies for producing rice, wheat and corn, which has annoyed American Rice, Archer Daniels Midland, the Rice Corporation, Bunge and Cargill and Louis Dreyfus Co. A final ruling is expected next year or the year after.
China does not have a monopoly in trade disputes. The US and EU are mired in a lengthy dispute over their respective aircraft manufacturing tax and subsidy regimes for Boeing and Airbus. The outcome may result in billions of dollars in retaliatory trade measures. The dispute stems from the ending of a 1992 bilateral aircraft pact that allowed each to provide a certain level of support to their domestic aircraft industries. This case is well advanced and expected to reach resolution later this year or early next.
A more bizarre case involving four countries concerns Australia's 2011 tobacco plain packaging law. It is alleged that the law imposes unfair curbs on the use of trademarks and geographical indications. Companies involved include China National Tobacco Corp, Philip Morris, British American Tobacco, Japan Tobacco International, Imperial Brands and the Altria Group.
An adverse ruling could force Australia to revise its anti-smoking law and halt new plain packaging rules. If it wins, it could encourage other countries to enact new health-related warnings and policies that affect tobacco and products like junk food and alcohol. The ruling is expected this year.
There has been much talk in recent month of “free trade” versus “fair trade”, and indeed this debates continues to have bearing on the present situation.
Free trade and free trade agreements (FTAs) focus on lowering tariffs, quotas, and regulatory barriers to trade between countries. Free trade reduces if not eliminates preferential policies for particular economic sectors with the goal of improving the overall economic growth of most, but not all - as well as the acceptance that there will be winners and more importantly losers.
Fair trade is chiefly concerned with the fate of the losers, particularly losers who have political influence. For example, one can be scrupulous about insisting on open competition and equal access to the market in the case of shipping lines, which have little or no domestic political clout, but highly protective of taxi drivers and medical doctors, to stave off outside competition. So when discussing fair trade, it is dealt with gingerly as fairness applies to some players more than others.
In trade finance, no one's hands are clean and a good measure of hypocriscy rules the day. The question is how do the various parties in the game optimise trade levels so that not too many people are hurt and the great majority benefit. Reviewing the list of the world's most contentious trade disputes, that goal seems entirely possible.
|
