BREXIT AND TRUMP THE DIFFERENCE–TRADE

White House Night Close Up Pennsylvania Ave Washington DCPolitical developments have moved the Trump trade story forward.  On June 23, 2016, the British public by over a million votes voted to leave the European Union by a vote of 52 to 48%.

On June 29, 2016, Ed Rollins, who formerly worked for Ronald Reagan, and runs a pro-Trump pac, published an article, “Why Brexit Signals a Trump Victory”, stating that the professional pundits and pollsters have it all wrong the Brexit movement points to a Trump victory in November.  Rollins further states:

The fact of the matter is that what just happened in the Brexit is the same thing that’s happening here in America.. . . .

These numbers show just how upset the American people are with the status quo. They don’t want a third term of President Obama’s abysmal economic growth and feckless foreign policy. They want someone who will upend the status quo rather than worsen America’s decline. . . .

This is just happened in the Brexit vote. So no one should be surprised when the same thing happens here in November.

But there is a significant difference between Brexit and Trump—Trade.  The British were not objecting to the free trade agreement with Europe.  They were objecting to open borders and immigration flowing into Britain.  Forty percent of British production is exported to the European market.  Britain needs the open EU Market.

Recently, I spent two weeks traveling around Europe.  I met an elderly British couple from the Midlands and before the vote I asked them what they were going to do.  Answer– vote Brexit.  Why?  The British couple told me that unfettered immigration into England has completely changed the cultural makeup of villages, towns and cities in England.  During the last several years, over 1 million Poles have come into Britain along with nationalities from many different countries, including the Middle East.

The British Politicians who led the Brexit movement promised that Britain could have its cake and eat it too.  With Brexit, Britain could negotiate a deal with the EU giving it access to the European market and yet with the ability to stop immigration into Britain.  Former London Mayor Boris Johnson, a prominent figure in the “leave” campaign, stressed that the U.K. should control its own borders and limit the free movement of EU citizens across them.

But on June 29th, after the Brexit vote, the 27 heads of the EU governments, including France, Germany and Poland, made it clear that there will be no access to the European single market for the U.K. unless it adheres to the EU’s four freedom principles — the free movement of goods, services, capital and people in the EU.  Thus to get unfettered access to the European market, Britain has to agree to the freedom of movement across borders.  That was the crux of the problem in Britain—unfettered immigration.

Brexit resulted in an enormous drop of the British pound to levels not seen in 30 years with predictions of a British recession.  To do well economically Britain needs access to the European market and the trade agreement that the EU provides.  In fact, the attached link from Facebook and an Australian entertainment group tracks an episode from Seinfeld, a well-known US comedy series, that Britain should just pretend that Brexit never happened:  http://www.news.com.au/entertainment/tv/flashback/pretend-like-it-never-happened-brexit-as-told-by-seinfeld/news-story/52ca8a5854dc49e7f635462bb2f6723c

The British want and need the trade agreement with the EU and its very large market.  But that is not the Trump position.

TRUMP’S LATEST ATTACK ON FREE TRADE AGREEMENTS

Donald Trump’s position is very different.  He wants walls not only against immigrants, but also no trade agreements and instead protectionist walls against imports.  Britain wants the trade agreement with Europe; Trump wants to close the border to both illegal immigrants and imports.

On June 28, 2016 following the Brexit decision, in the attached a speech, DJT_DeclaringAmericanEconomicIndependence, entitled “Declaring American Economic Independence”, Donald Trump stated in part:

Our politicians have aggressively pursued a policy of globalization – moving our jobs, our wealth and our factories to Mexico and overseas. Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache. . . .

This wave of globalization has wiped out our middle class.  . . .

My campaign has the opposite message. I want you to imagine how much better your life can be if we start believing in America again. I want you to imagine how much better our future can be if we declare independence from the elites who’ve led us to one financial and foreign policy disaster after another.

Our friends in Britain recently voted to take back control of their economy, politics and borders. . . .

Trump went on to state that the Clinton Administration made big mistakes by implementing NAFTA and letting China join the World Trade Organization (“WTO”).  Trump wants to return the United States back when “America became the world’s dominant economy by becoming the world’s dominant producer” creating “the biggest middle class the world had ever known”.

Trump complains:

“We allowed foreign countries to subsidize their goods, devalue their currencies, violate their agreements, and cheat in every way imaginable.  Trillions of our dollars and millions of our jobs flowed overseas as a result. . . .This is not some natural disaster. It is politician-made disaster.  It is the consequence of a leadership class that worships globalism over Americanism. . . .

We tax and regulate and restrict our companies to death, then we allow foreign countries that cheat to export their goods to us tax-free.  As a result, we have become more dependent on foreign countries than ever before.

Trump then states “it’s time to declare our economic independence once again” and he pledges that a Trump administration will change trade policy quickly with 7 steps:

One: I am going to withdraw the United States from the Trans-Pacific Partnership, which has not yet been ratified.

Two: I’m going to appoint the toughest and smartest trade negotiators to fight on behalf of American workers.

Three: I’m going to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers. I will then direct all appropriate agencies to use every tool under American and international law to end these abuses.

Four: I’m going tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. And I don’t mean just a little bit better, I mean a lot better. If they do not agree to a renegotiation, then I will submit notice under Article 2205 of the NAFTA agreement that America intends to withdraw from the deal.

Five: I am going to instruct my Treasury Secretary to label China a currency manipulator. Any country that devalues their currency in order to take unfair advantage of the United States will be met with sharply, and that includes tariffs and taxes.

Six: I am going to instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO. China’s unfair subsidy behavior is prohibited by the terms of its entrance to the WTO, and I intend to enforce those rules.

Seven: If China does not stop its illegal activities, including its theft of American trade secrets, I will use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.

President Reagan deployed similar trade measures when motorcycle and semiconductor imports threatened U.S. industry. His tariff on Japanese motorcycles was 45% and his tariff to shield America’s semiconductor industry was 100%.

But President Reagan was the most- free trade President in my generation, appointing the most free- trade Commissioners ever to the US International Trade Commission and taking a position directly contrary to Donald Trump.  In many section 201 cases on products, such as Footwear, President Reagan refused to provide import relief.  Even back in the 1980s, the US steel industry was trying to persuade the Administration to take over the Pensions of the Steel Workers.  President Reagan refused.  Reagan knew that protectionism does not work and that it is destructionism, which costs jobs.  Why?  In contrast to Trump, President Reagan lived through the Great Depression and he knew personally what the 1930 Smoot Hawley Act did to the United States.  Smoot Hawley made the Depression a Great Depression.

The difference between Trump and Brexit is Trade. The British know they need access to the European markets because of exports.  Trump is still living in protectionist world, when most customers live outside the United States.

On June 20th, Moody’s which provides economic research regarding risk, performance and financial modeling predicted that Donald Trump’s economic program “would “significantly” weaken the country, driving the U.S. into a “lengthy recession” with nearly 3.5 million job losses and a 7 percent unemployment rate”.

In subsequent articles, I will discuss how the weak Free Trade arguments along with the Commerce Department’s decision to find dumping and subsidization in every case have led to a globalization victimhood and the sharp rise in protectionism in the United States.  Will also address the only trade program that works and saves companies and the jobs that go with them—the Trade Adjustment Assistance for Companies Program.

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