Posts Tagged ‘quotas’

Trump Shows How Not to Be a Protectionist

May 30, 2018

Tariffs are better than quotas and other lessons in how to do protectionism well

President Trump promised this week to restrict Chinese investment and imports over intellectual-property violations, but his record raises doubts about whether he will follow through.
President Trump promised this week to restrict Chinese investment and imports over intellectual-property violations, but his record raises doubts about whether he will follow through. PHOTO: EVAN VUCCI/ASSOCIATED PRESS
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Free trade, for all its virtues, isn’t an easy sell. Every country applies some level of protectionism out of economic or political necessity.

But protectionism can be done well or done badly. Done well, it minimizes costs to taxpayers and consumers, maximizes benefits to domestic industry, and discourages bad behavior by trade partners. President Donald Trump routinely does protectionism badly, using the wrong tools on the wrong behavior and the wrong countries.

On Tuesday, he actually suggested hitting the right target the right way, when he promised to restrict Chinese investment and imports over intellectual-property violations. But his record raises doubts about whether he will actually follow through.

Here are some lessons in how to do protectionism well:

Lesson one: tariffs are better than quotas. Tariffs, which are a tax on imports, are more predictable and transparent than non-tariff barriers such as quotas, which are a quantitative limit on imports.

Protected But Still ShrinkingU.S. steel has enjoyed varying levels of   since the 1990s but total employment has still shrunk.Percentage of steel imports covered    : Chad Bown, Peterson Institute forInternational

Yet Mr. Trump is negotiating quotas on imported steel in lieu of tariffs. Quotas, by restricting supply, raise prices, just as tariffs would. But whereas tariff revenue goes to taxpayers, the higher prices on imports caused by quotas benefit foreign companies.

Quotas have unpredictable effects. If demand for steel softens, imports will fall, the quota will no longer bind, and domestic industry will lose protection at its most vulnerable time.

Allocating the quota also invites lobbying, favor trading and opaque gamesmanship, yielding odd results. Argentina’s steel quota is 35% larger than recent exports, enabling it to take market share from competitors such as South Korea whose quota is 30% smaller.

Lesson two: threatening tariffs is worse than actual tariffs. For months Mr. Trump threatened to impose tariffs without actually enacting them. That prompted steel buyers in the U.S. to stock up, an important reason the volume of imports is up 2% year to date. The Alliance for American Manufacturing, which backs the tariffs, complains the influx of imports during the administration’s drawn-out investigation into whether steel and aluminum imports threaten national security cost 13,500 jobs last year. Yet because demand for steel is strong thanks to a healthy U.S. economy, prices are up nearly 40% this year—as if a tariff were already in place. That means the foreign suppliers of those imports are enjoying a windfall.

Mr. Trump thinks threats are a useful lever in broader negotiations. But domestic manufacturers can’t be sure if the tariff will ever take effect or if it does, will stay. The gamesmanship thus reduces their incentive to invest in new capacity or jobs.

Lesson three: punish bad actors, not good. Presidents typically save their harshest treatment for the most egregious rule breakers in hopes of changing their ways.

Mr. Trump has done the opposite: he has picked fights with Western Europe, Japan, South Korea, Canada and Mexico, all U.S. allies or neighbors that more or less play by the rules. He has thus far been relatively easy on China, which even free traders agree is a serial violator of the rules of free trade and the ultimate cause of global overcapacity in steel and aluminum. He promised tariffs on $150 billion worth of imports then suspended them, announced devastating penalties against telecommunications company ZTE Corp. for violating sanctions on Iran and North Korea then softened them.

On Tuesday, he reiterated a threat to hit $50 billion of imports containing “industrially significant technology” with a 25% tariff, but it might be another negotiating tactic that China doesn’t take seriously.

Mr. Trump sees trade as governed by power and leverage, not rules. Because Japan, South Korea, Canada, Mexico and most of Western Europe depend on the U.S. military, market or both, he counts on them rolling over without retaliating. China, which is a strategic and economic rival, hasn’t hesitated to exercise all the leverage at its disposal, from its sway over North Korea to its agricultural imports from key Republican states.

This calculus may yield short-run wins but at the expense of long-term cooperation. “With friends like that who needs enemies,” European Council President Donald Tusk recently tweeted in response to Mr. Trump’s tariffs on European Union steel and aluminum. “But frankly, EU should be grateful. Thanks to him we got rid of all illusions. We realize that if you need a helping hand, you will find one at the end of your arm.”

Lesson four: have a post-protection plan. China’s protectionism is future-focused, seeking to become globally competitive in industries such as aerospace, renewable energy and robotics. Mr. Trump, by contrast, seems obsessed with the past, when American coal, cars and steel ruled the world.

But protection cannot make an industry grow that is fundamentally in decline: tariffs and quotas didn’t prevent the long-term decline of U.S. clothing manufacturers as production shifted to countries with cheaper labor.

Chad Bown of the Peterson Institute for International Economics notes steel has been protected to varying degrees from European, Japanese, South Korean and other Asian competitors since the 1990s. At the end of 2017, 60% of U.S. steel imports were subject to protection, compared with 4% of all imports in 2016, Mr. Bown has found. In that time, import penetration didn’t change much, but U.S. steel employment fell by half as productivity rose and the relative importance of steel to economic output declined.

Even if several thousand manufacturing workers see their jobs brought back by protection, many thousands who aren’t so fortunate will need skills in growing industries where the U.S. has an advantage. On this, Mr. Trump hasn’t had much to offer.

Write to Greg Ip at greg.ip@wsj.com

https://www.wsj.com/articles/trump-shows-how-not-to-be-a-protectionist-1527692912

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US eyes heavy tariffs on China, Russia to counter steel, aluminum glut

February 16, 2018

AFP

© AFP | US Commerce Secretary Wilbur Ross believes that cheap steel and aluminum imports from places like China and Russia “threaten to impair our national security”

WASHINGTON (AFP) – The US Commerce Department said Friday it recommended imposing tariffs on China, Russia and other countries to counter a global glut in steel and aluminum which it says threatens national security.In a report to President Donald Trump, Commerce Secretary Wilbur Ross includes among the options a nearly 24 percent tariff on all products from China, Russia and three other economies.

Other options would impose either high tariffs or quotas on steel and aluminum imports.

The findings are part of an investigation into the impact of the oversupply of steel and aluminum, and whether it undermines US national security.

In each case “the imports threaten to impair our national security,” Ross told reporters in a conference call about the so-called Section 232 investigation.

China and Russia are primary targets, but many other countries are included in the recommended sanctions, which are sure to spark fears of a global trade war if implemented.

Ross said the sanctions were designed to be broad to prevent targeted countries from circumventing the limits by shipping through a third country.

He said “serial offenders can evade these orders by transshipment through another country.”

For steel, Ross recommended three possible options: a 24 percent tariff on all steel from all countries; a 53 percent tariff on imports from 12 countries, including China, Russia and Brazil; or a quota on steel from all countries.

For aluminum, he recommended either a 7.7 percent tariffs on the metal from all countries; a quota for all countries; or, perhaps the most shocking of all the options, a 23.6 percent tariffs on imports of all products from China, Russia, Hong Kong, Vietnam and Venezuela.

Ross submitted the two reports to the White House in late January.

Trump has until mid-April to decide on any possible action, which he acknowledged likely would prompt action by US trading partners in the World Trade Organization.

US industries have urged the administration to take care since high import tariffs would raise the cost of supplies for major industries.

But Commerce said the goal of the measures is to boost domestic aluminum and steel prodcution.

Related:

U.S. Weighs Tariffs and Quotas on Steel, Aluminum Imports

February 16, 2018

Trump administration weighs different options, ranging from a global tariff of at least 24%, to a more targeted approach focusing on China and other nations

The Trump administration on Friday said it was weighing broad-based tariffs and quotas to curb imports of steel and aluminum to protect national security, though officials stressed no final decisions had yet been made and the ultimate policy could be considerably more limited.

The recommendations were part of internal administration reports released Friday laying out the options for President Donald Trump as he considers how to fulfill a campaign promise to take a more aggressive stance than predecessors to shield domestic steel and aluminum makers from growing foreign competition.

The recommendations suggest the president choose among several options. One of them is a global tariff of at least 24% on all steel imports from all countries. Another is a tariff of at least 53% on steel imports from a dozen countries. Under the latter, targeted option, the tariffs of 53% would be applied on steel from Brazil, China, Costa Rica, Egypt, India, Malaysia, South Korea, Russia, South Africa, Thailand, Turkey and Vietnam.

The report from the Commerce Department also included, as an alternative, a quota on steel products from countries equal to 63% of the countries’ 2017 exports to the U.S.

“I am glad that we were able to provide this analysis and these recommendations to the president,” Commerce Secretary Wilbur Ross said in a statement. “I look forward to his decision on any potential course of action.”

The recommendations are opposed by many lawmakers and businesses who worry that the tariffs risk provoking a trade war and raising prices on a range of domestic products.

The recommendations sent sector stocks soaring Friday. Nucor Corp, the largest U.S. steel producer by sales, rose almost 5% and US Steel Corp and AK Steel Holding Corp gain more than 10%. Aluminum stock reaction more muted, with market leader Alcoa Corp. recently up almost 3% and Arconic Inc up 1.6%, both off earlier highs

Mr. Trump faces an April deadline to decide whether, and how, to restrict imports under little-used section 232 of the 1962 trade law that gives the president wide discretion to impose tariffs and quotas if he deems certain imports pose a national security threat. Mr. Trump launched the studies in a White House ceremony last April with cheering industry and union executives by his side, and he promised at the time dramatic action within weeks.

On aluminum, the Commerce Department recommended global tariffs of at least 7.7% on all aluminum imports, or a tariff of 23.6% on select countries or a quota on imports equal to a maximum of 86.7% of the countries’ 2017 exports to the U.S. Under the second option, which targets individual countries, tariffs would apply to aluminum from China, Hong Kong, Russia, Venezuela and Vietnam.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and William Mauldin at william.mauldin@wsj.com

 https://www.wsj.com/articles/u-s-recommends-tariffs-and-quotas-on-steel-aluminum-imports-1518801588

EU refugee quota row flares up ahead of summit — “The paper prepared by President Tusk is unacceptable, it is anti-European.”

December 13, 2017

AFP

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© AFP/File | Refugees protest outside the German embassy in Athens to demand a faster family reunification process in Germany

BRUSSELS (AFP) – A row over controversial quotas for the sharing out of refugees across EU countries broke out on Wednesday on the eve of a summit where leaders will discuss the way forward on migration.EU President Donald Tusk said in a pre-summit letter to leaders that mandatory relocation was “ineffective” and “highly divisive”, recommending that efforts should instead be directed to securing Europe’s borders.

Under a scheme introduced in 2015, asylum seekers from the frontline states of Greece and Italy were moved to other EU countries under a quota system, but Hungary, Poland and the Czech Republic have refused to take almost any.

Plans by the European Commission to introduce a permanent mechanism for refugee-sharing for any future crises have been stalled for months due to fierce opposition from some member states.

EU Migration Commissioner Dimitris Avramopoulos launched a stinging attack on Tusk on Tuesday, saying that “the paper prepared by President Tusk is unacceptable, it is anti-European.”

European Commission spokesman Margaritis Schinas returned to the subject on Wednesday, insisting there was “no dispute, no drama”.

But Schinas said the commission, the executive arm of the EU, “firmly disagrees with the statement that relocation as an emergency response has been ineffective.”

He said that over 32,000 people had been relocated under the plan, or 90 percent of those eligible. The scheme was originally meant to relocate 160,000 refugees.

Germany and Sweden lead the states backing a permanent quota system under a reform of the EU’s asylum rules in the wake of the biggest migration crisis in its history.

But many central and eastern European states are against them, promising a long night of talks on the issue on Thursday.

“We can expect a very lively and maybe controversial debate,” one EU diplomat said on condition of anonymity.

Reflecting the divisions, another European diplomat said that Avramapoulos had overstepped the mark “by far” with his comments, but a third said that there had been “criticism of the balance” in Tusk’s note.

Supreme Court Justice Elena Kagan “not sure” if President Barack Obama would have nominated her if she had not been a woman

October 22, 2012

(CNSNews.com) — Justice Elena Kagan said she was “not sure” if President Barack Obama would have nominated her to the Supreme Court if she had not been a woman.

During a talk before law students on Friday at the University of Tennessee Law School, Kagan said, “And to tell you the truth, there were also things that I got because I was a woman. I mean I’m not sure I’d be sitting here.”

“I’m not sure that I would’ve been President Obama’s nominee if I weren’t a woman,” she said. “And if he wasn’t as committed as he was to ensuring that there was diversity on the Supreme Court.”

Supreme Court Justice Elena Kagan and President Barack Obama. (AP)

“So, mostly what I think when I think about this question is how far we’ve come and how much I owe — and all the women who have come after me owe– to people like Justice Ginsburg and Justice O’Connor,” she said.

Kagan was initially asked by Dean of Tennessee Law School Doug Blaze, “It’s been a remarkable career, and you’ve been quite a pioneer along the way. [The] first woman to be Dean of the Harvard Law School, first woman solicitor general of the United States. You’re now the fourth woman to serve on the United States Supreme Court and one of three presently serving.”

“Along the way, what challenges have you faced as a woman and what changes have you seen in the legal profession, if any, over that period of time?” he said.

Kagan replied that most of the challenges of being a woman in the legal profession were already overcome by the women who preceded her.

“Well, I feel pretty lucky that I haven’t had to surmount all that many barriers or leap over all that many hurdles that were there because I was a woman,” said Kagan. “And I think that that’s because of the time I came along where a lot of the women who preceded me had done a lot of the hard work to make sure that women and men were evaluated equally and had the same opportunities as each other.”

http://cnsnews.com/news/article/kagan-not-sure-i-wouldve-been-president-obamas-nominee-if-i-werent-woman