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This editorial in the WSJ argues against Trade Representative Lighthizer's move to increase the percentage of North American content in a vehicle so that it creates more jobs. Currently Nafta rules require 62.5% of a duty free vehicle be made in North America. Lighthizer wants to lower the content coming from Asia or Europe. This is not favored by Canada and Mexico and it makes Mexico less competitive than it is now.

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Greg Ip of the WSj points out that Britain is in a weaker position to tackle Brexit than it was when Boris Johnson called for supporting the Yes vote to Leave the EU three years ago in the referendum. Business investment is lower than France, Germany and even Italy. And today protectionism, nationalism, hostility to globalization mean that its not so easy to increase exports by signing free trade agreements with other nations. Even a treaty with a friendly Trump administration  is not certain as Mr. Trump favors looking at how he can get the best deal and reverse any advantages of other trading nations, Britain being no exception. A trade agreement with the U.S. could mean the U.S. barring Britain from signing one with China as a condition of Mr. Trump. Greg Ip also points out that it was precisely joining the EU that helped Britain catch up with German and French standards of living after a period of low growth, inflation, and balance of payments crises in the 1970's. Joining the European Economic Community was as prime minister Heath stated would " enable us to be more efficient and more competitive in gaining more markets not only in Europe but in the rest of the world."   ...

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China's current account surplus has declined to 2.8% of GDP for 2011 from about 10% in 2007, and will be around 2.3% of GDP in 2012, according to IMF estimates. The U.S. current account deficit is down to 3.1% of GDP from 5.1%. By controlling the exchange rate China was able to keep the competitiveness of its exports, resulting in a five fold increase in exports from 2000 to 2010, according to the IMF. The decline could be temporary say experts, as the the recession in Europe and the U.S. resulted in slowing exports, with its infrastructure buildup sucking in imports of machinery and other goods from the western countries at an accelerated pace with its 2009 stimulus measures. Another reason is that in the last decade China has developed its own high tech and other companies which will now increase exports. IMF forecasts show a pickup in China's trade surplus to 4.25% by 2017. This could be lower if the renminbi is allowed to appreciate. Estimates of appreciation of the renminbi are 8 percent in nominal terms since June 2010 against the dollar. Including inflation, which is higher in China, the renminbi has appreciated by 13% since June 2010. ...

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Gretchen Morgenson sees systemic risk looking ahead beyond 2013 in the $4.6 trillion repurchase obligations market or repo market. Problems in the repo market caused the collapse of Lehman Brothers in the financial crisis of 2008. Bernanke, Dudley, Bair and other finance officials have referred to the risk in the repo market which have not been reduced since the 2008 financial crisis. In the repo market money market mutual funds provide short term funding to banks accepting collateral such as mortgage securities. These are overnight loans made to banks and other financial institutions based entirely on trust. During normal functioning the trades are rolled over. The risk is that the trust disappears in a few days as happened for Bear Stearns and Lehman and the firms not able to obtain this short term financing. This is a very unstable form of financing and Lehman depended on it because of the low cost and not having to set aside capital for the trades. Basel III rules require that banks set aside capital against the assets they finance inthe repo markets, and a recent JP Morgan report says the 8 largest banks would need to raise $28-$34 billon in capital for their repo business....

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Issues of inequality and lack of upward mobility came up in the last presidential election. A Federal Reserve Survey for 2018 shows the financial fragility facing many Americans. One quarter of working individuals say they do not have any retirement savings. About 17% of households say they cannot pay all their monthly bills. About 40% of Americans say they do not have enough cash to cover an unexpected $400 expense, and would have to rely on credit cards balances or loans from family to make the payment. This survey by the Federal Reserve is done each year since 2013, after the financial crisis hit in 2009 it became more important. Still Americans are showing unusual resilience and upbeat spirit. About 75% say they were doing Ok or living comfortably up from 63% in 2013. And two out of three described lovcal economic conditions as "good" or "excellent."  This shows that the financial vulnerability resulting in the loss of jobs in the U.S. both from jobs lost in manufacturing going overseas,  jobs lost through automation or industrial decline in some sectors, and the hit from job loss during the financial crisis and its aftermath years of 2009-2014 is still leaving a lot of families financially vulnerable. Low interest rates and stagnant wages also meant savings growth for ordinary Americans was less than it should be in a healthy economy without booms and busts. This is also the environment in which the U.S. is tackling challenges to its technological leadership in 5G following a decline in sectors such as autos and electronics, with job losses to Japan and South Korea. New trade agreements are focussed on correcting the imbalance, first with Mexico, South Korea, and now with China. Focus is also on fair wages and labour overseas to raise American wages in key sectors. The damage done by a low interest rate to savings of ordinary Americans outside the stock markets is also being seen as a downside in the boom bust cycle, that includes loss of jobs for vulnerable American families. The rise of the tech sectors has diluted the traditional protections of working class Americans with the shifts and realignment of the major parties. ...

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The India-Pakistan-Afghanistan issues are still framed in the old way in terms of communalism, cold war then and the war on terrorism now. These policies were a legacy of the colonial policies of an earlier empire designed to preserve foreign rule, with a policy of perpetuating divisions between communties on religious and other lines. Modernization, the spread of mass communications that makes possible the reduction of prejudice and division by assimilating different values and beliefs into acommon aspiration for progress and better living standards, and the spread of education, commerce, and technological progress, create the conditions that should put this behind us. Put behind us communalism, and the political and military structures of communal states. Pakistan needs to be transformed from a communal state with a military structure designed to preserve that state - resulting in conflicts with its neighbors- into a state that represents a community and a religion, but in all other ways seeks peaceful coexistence and economic integration with the rest of South Asia. A good example of this is Mexico with its own culture, language and religion (Spanish Catholicism), and Canada with its own bilingual French-English heritage and British political structures and allegiances, both arriving at an arrangement of peaceful coexistence and economic integration with the USA with its different political structures and culture and sporadic conflicts with Canada and Mexico. This has promoted the peaceful development of the North American region. The US involvement in the region can then be seen as a misguided effort that continued framing the region's differences in the old British way or in a cold war stereotyping, first with John Foster Dulles in the India-Pakistan conflicts, and then with Reagan in the Afghan anti-Soviet war. This has worked to exacerbate the conditions that led to slow progress in the drive for economic development, infrastructure building and modernization in all of South Asia. Just as in Europe, as in North America, the processes of economic development work best when a policy of inclusiveness and integration of different communities and people is followed. ...

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Ekrem Imamoglu, three time elected Mayor of Istanbul follows a career similar to that of Erdogan who became Mayor of Istanbul and was then elected prime minister in 2003, as the administration of the CHP party failed to manage the economy. A period of economic growth followed with increasing foreign investment and Erdogan was reelected till 2013 when he decided to run for president following the term limits for prime minister. At that time his rule had become increasingly authoritarian. He was elected with smaller majorities with no effective opposition leader ,and the Middle East in turmoil with ISIS and Syria's civil war. Erdogan fought a tough election against a civil servant candidate from CHP turning out the nationalist  and conservative vote.in 2020. By this time the economy was having high inflation and his popularity was down, and he won barely with 52% of the vote. By 2019 Ekrem Imamoglu, 47 years, emerged as a more effective opposition leader, winning election for Mayor of Istanbul. He won again in 2024 and is now emerging as an alternative to run the country. Erdogan is 71 years and the world around Turkey has changed with DJT in the US, and Russia- Ukraine peace talks, trade tariffs worldwide, and the investment climate completely different, inflation increasing to 39 percent, and no easy solutions to economic problems. Some of the conservative and small business vote is no longer assured for Erdogan as the economy and Turkey's situation in Europe has changed. ...

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President Trump outlines a plan for Afghanistan that increases the U.S. troop presence from about 8500 with an addition of 4000 more troops and advisors, in addition to a counter terrorism force. To war weary public in the U.S. he says: "I share your frustration over a foreign policy that has spent too much time, energy, money- and most importantly, lives- trying to rebuild countries in our own image instead of pursuing our security interests above all other considerations." About his criticism of the war when president Obama was in office as a huge costly waste of resources Trump said: My original instinct was to pull out, and historically I like to follow my instincts... I heard that decisions are much different when you sit behind the desk at the Oval Office." After resisting the advice of his own advisers Trump decided to fire Bannon who had supported use of American private security contractors for the war in Afghanistan, and used parts of the media to question national security advisor McMaster's views on this. Gen. Mattis, completed a strategy review that showed the mistake of creating a vacuum would repeat the situation of Iraq where president Obama withdrew forces in 2011, leading to a sequence of negative events- with Russia, Iran and Islamic State moving into the vacuum, making American intervention in the war necessary, increase in terrorist incidents worldwide, and a flood of refugees into Europe. Ironically clearing the path for an outsider's bid for the White House, with Brexit in which refugee fears and uncontrolled immigration played a part, and the news of terrorism and the war in Syria-Iraq creating a sense of insecurity. A key difference in the Trump approach with Obama's approach is that "conditions on the ground, not arbitrary timetables will guide our actions from now on," in line with Trump's criticism of Obama's approach. The military in the U.S. has long maintained that the best approach would have been to insist on U.S. presence in negotiations with the Iraqi government under the sectarian prime minister Nouri Maliki. Gen. Mattis was head of Central Command under the Obama administration and must have pushed the view of the military to president Obama to no avail. Failure to do so led to the growth of Shiite militias and the alienation of Sunnis in Mosul, leading to the fall of Mosul to Islamic State thus creating the current crisis. Gen. Mattis and Lt. Gen McMaster are intimately aware of the problem and must have convinced Trump that this is what really happened, that a repeat would waste the sacrifices of American soldiers in the twin wars. Trump gave this as his reason when he said in his televised speech to the nation- essentially a criticism of Bush that he expanded the conflict too quickly, and Obama exiting too quickly to create a void. Trump call his policy "principled realism."  The roots of the crisis are in the India-Pakistan conflict. Like the conflict in South East Asia the conflict in South Asia extending from Iran to India and Pakistan, may take a generation to overcome. A rapprochement between India and Pakistan, beginning with trade and economic relations, is not only in America's interest, it also provides the basis for a realistic American withdrawal. ...

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The WSJ Dollar Index , which shows the strength of the U.S. dollar against a trade-weighted basket of currencies, jumped up by 22% from July 1, 2014 to March 17, 2015, according to FactSet. Since that time the dollar has risen slowly by 2.7%. Scott Mather, chief investment officer, U.S. core strategies, PIMCO, says the dollar normally rises faster in the period when there is an expectation of rising rates than when the actual increase of rates takes place. Analysts say if the Fed raises rates in 2016 this could strengthen the dollar further, complicating the Fed's rate increase plans with slower increase in inflation. U.S. S&P 500 companies have reported lower earnings by 10-12% in the third quarter of 2015- when actual earnings dropped by only 1.5%- because of the stronger dollar, according to Binky Chadha, chief global strategist at Deutsche Bank. He says core goods inflation would have risen by half a percentage point more without the stronger dollar, meeting the 2% Fed target, had the dollar not strengthened....

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S. Korea and the U.S. propose limiting trade imbalances to 4% of each country's GDP by 2015. S. Korea is the host of the current G-20 meeting. Germany and Japan oppose this move, arguing that their governments cannot engineer such outcomes, as it was determined by economic activity in the private sector. Japan's representative, Finance Minister Yoshihiko Noda, said that while he was dubious about the idea of setting strict numerical goals, it would be acceptable to use them as reference numbers. Germany has traditionally opposed the idea. Germany wants to be counted as part of the European Union, rather than as a single nation, in any such reference goal. China has not commented on the target. S. Korea has presented the idea as a way to use more than currency exchange rates to achieve a global rebalancing. And People's Bank of China Deputy Gov. Yi Gang said Oct 10, that China is planning policies that could result in its surplus falling below 4% of GDP in 3 to 5 years, from about 5.8% in 2009....

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Compromise reached at the October 2010 G-20 meeting in S. Korea to reduce trade imbalances, and for countries with current account surplus exceeding 4% of GDP (China 4.7% and Germany 6.1%) to bring these balances down by 2015. Countries with large current account deficits, Turkey 5.2% and South Africa 4.3%, were expected to bring their deficits down and increase national savings. The US is at 3.2%. The US proposal for a target was accepted by Japan as long as it was not a fixed target but a reference point. Germany was opposed, saying it was a return to planned economy thinking. China did not comment on the issue. Canada, Australia and the UK supported the US position. The compromise was an effort to continue pressure on China to redirect its policies away from exports to increasing domestic consumption, while still refraining from a fixed target. It also takes some of the pressure off a fast track currency rebalancing, with China expected to increase the value of the yuan, but given more flexibility than the rhetoric would suggest....

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Senate Foreign Relations Committee chairman's view of Afghnistan differs significantly from New York Times correspondent Filkins understanding from years of reporting going back about a decade. Filkins sees the complexities of Pastun country inside Afghnistan and Pakistan and the military and ISI's involvement, and other correspondents have pointed to the narcotics trade and corruption. Kerry's simplistic view is that the Taliban do not enjoy much support, when actually Americans are seen on the ground as foreign occupiers. These correspondents in the field point to this as an everpresent danger, which would tilt support to those fighting foreigners, with nationalist and Muslim sentiment prevailing over everything else. And Kerry appears to be too willing to dismiss allegations of narcotics involvement of the Karzai administration with the "show me" comment. For critics of the Bush administration this is simply astounding, when so much is at stake. Does patient mean digging in one's heels slowly? But that is how the Vietnam intervention ran into trouble, without public sentiment in support of the plans....

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The nuclear trade deal with India and approval by the Nuclear Suppliers Group. If passed by Congresas in September the deal goes into effect. At the NSG, New Zealand, Austria and China were the holdouts and had to be persuaded by the United States. Under the deal India cannot conduct nuclear weapons tests and if it does its upto the USA to decide if it will continue to supply India with nuclear materials and technologies. India is running short of uranium and other nuclear materials it needs for its civilian andnuclear weapons programs since it was refused access by the NSG after earlier tests decades before. It also depends on how the US sees China and Pakistan in relation to India and its nuclear programs. One thing is certain India will push forward aggressively with new nuclear energy programs and setup its own nuclear energy reactors to provide its growing energy needs and to reduce existing shortages and also lower its oil bill. So in the next couple of years or the next decade the world will certainly see the peaceful development of nuclear energy and development of new technologies in the nuclear energy field as India becomes a key user and developer of nuclear energy technologies. At that point India may become a part of the fabric of peaceful nuclear energy development in the world as it meets asignificant part of its energy needs through nuclear reactors. It will be a welcome development as it will ease the burden on oil supplies that in the case of China became a key part of the upward pressure on oil prices as China relied mostly on oil and gas for energy needs. This is probably the thinking in the current Republican administration as it pushed hard for this nuclear deal to supply India....

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Public sentiment shifts sharply against free trade in the March 2016 Michigan primary for the U.S. presidential election, with candidates saying trade agreements do not take into account the interests of American manufacturing workers making large gains. Between 1999 and 2010 public sentiment shifted against trade agreements for all age, education and income groups. A study by Autor, Hanson and Dorn showed loss of 5.6 million jobs in the last decade and large trade deficits, and demonstrated the effect by counties in the U.S. most hurt by trade policies.

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The WTO negotiations in Bali, Indonesia, in Dec. 2013 with agreement on streamlining customs procedures worldwide.

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President Trump's failure to followup on his decision to shut down all flights to China on January 29 with speedy action on preparing for the coronavirus as suggested by some of his advisors is the subject of this article in the NYT.  There were two distractions one was the trade deal with China that was being negotiated, and then the impeachment trial in the U.S. Congress that was set in motion by Democrats. Another problem was the lack of good information about the extent of the virus spread in China and infected case numbers. As it turns out no one really knows the real scale of infections in China. If is was known that there were as many cases in China as there are in the U.S. today this would have resulted in shaking up any complacency in the Trump administration and in the states. Considering the experience of Europe and the U.S. it could be that China had the same number of infected cases as the U.S. does today for a population three times the size. China had a strict quarantine but it also did not realize what it was up against in the first weeks of the crisis in January. It appears now that China, Europe and the U.S. all lost some time from 2-4 weeks before realizing the severe consequences facing each region. This report says one of the vital pieces of information that was learned about infected people in China, was learned as late as the end of February by leaders of a government team looking at the coronavirus threat. It was that seemingly normal healthy people without symptoms but infected by the virus could spread the virus. This meant that this was very, very contagious. The lack of good information played a significant part, adding to the level of complacency in states such as New York and in the Trump administration. Politics such as the impeachment trial and political infighting added an unnecessary distraction. ...

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The bottom half of all U.S. households have only recently recovered the wealth lost in the 2009 financial crisis. They still have 32% less wealth than in 2003 when inflation is taken into account. The top 1% of households have more than twice as much as they did in 2003. Wealth is defined as net worth that includes houses , savings and stocks minus any debt. The wealthy have 85% of their wealth in stocks and bonds. For the bottom 50% half of the assets are in the house or family home. Economic and regulatory trends have happened in ways that favored the people investing in stocks, and rescued people investing in stocks with policies designed with this purpose by central banks and the U.S. government. By contrast for the bottom 50% buying a home is more difficult today. The problem this WSJ report points out is that the next recession would most hurt the bottom 50%, even before they have recovered from the last one which was a result of shaky practices of banks in financial lending and not some cyclical swing in the economy. Policy was then geared to provide a recovery first for stock markets as a way to economic recovery. The bottom 50% have little stake in the stock market, the top 1% have most of their gains from the stock market. Much of the popular anger comes from the way policies by both Democrats and Republicans differed little in past administrations in the way they approached this in shaping economic policy. As a result infrastructure building and investments in public services took less priority in this period of 30 years with trade imbalances with China building up on the external front, in another side to this development. The shift to Trump and to right wing populists in Europe is only the first phase in the corrective action that has to take place to return to a fairer distribution of wealth that existed before the last 3 decades. Eventually it is not right wing or left wing factions or parties, but healthy policies, that matter to create a better balance for society.  ...

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China's trade surplus increased to $18.4 billion in April from $5.4 billion in March. Exports were up 4.9%, slower than expected and down from 8.9% in March. But imports went up by only 0.3%, much lower than March's 5.3% increase. The hopes for improving the trade balance in recent months may be dashed because of slowing imports for infrastructure development, as economic growth slows in China, even as export growth declines from its earlier high levels.

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11 Pacific Rim nations form the Trans-Pacific Partnership in 2018. The Obama administration supported the trade pact alienating supporters in its union base particularly in the midwestern states. Mr. Trump opposed the TPP in his election campaign and made it a significant issue for swing voters in midwestern states after job losses in the auto industry. With the opposition of president Trump the U.S. decided to withdraw from TPP.  The 11 nations agreeing to join a revised agreement are Japan, Canada, Mexico, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. So far six countries have formally approved the deal, Australia, Canada, Mexico, Singapore, New Zealand and Japan, setting the stage for two rounds of tariff reductions starting December 30, 2018. Agricultural products duties will be duty free within 3 to 7 years including for Japan and Mexico. Australia, New Zealand, Canada are major agricultural exporters. Japan supported the deal as a way to counter China's influence in the region. In the U.S. the gains would be in intellectual property rights but losses for workers in the auto and manufacturing industries, a point Mr. Trump recognized in his election campaign as he campaigned in the midwestern states. Mr. Obama pursued TPP over objections of workers organizations and unions including auto workers union, with his advisors suggesting this as a way to counter China's influence in the region. By 2018 the Democratic party support base fractured on this as one of the major issues.   ...

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The yuan has gained 16% since the peg to the dollar ended in 2005. For years China has resisted letting its currency appreciate significantly, why the change of heart now? Its seen as a positive thing by China's leaders to let the yuan appreciate and its now part of Chinese policymaking. First it helps keep inflation down, keeps the rising prices of imports energy, commodities, and food under control as they are denominated in USA dollars. Second it sends a signal to manufacturers to move up to more sophisticated value added products that are not sensitive to pricing and can accomodate a stronger yuan, because its precisely the manufacturers who operate on thin margins and make lower end products who will go close down. They also cost the economy in terms of higher pollution and damage to the environment in a way that higher tech products do not. And China wants to undo or limit the damage to its environment. Third by lowering rebates or eliminating rebates and letting the curtrency appreciate its changing the emphasis from exports to domestic markets and domestic consumption. This combined with new laws on wages and benefits is designed to promote domestic consumption which can better carry the burden of economic growth than exports because of the slowing down of the developed western economies especially the USA which is going through what may be a severe and protracted downturn. It also helps that China need no longer be portrayed as taking advantage of free trade through huge surpluses. Its constructive as it will help rebalance the world trading system as the USA can improve its trade deficit and China can accelerate its growth by importing more western machinery and technology and not have to depend on precarious export markets for economic growth that it badly depends on to improve the living conditions of hundreds of millions of its people. By building a large middle class of consumers china can continue growth using its domestic markets at a pace that is still very healthy and not likely to build inflationary pressures which may be a welcome thing....