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The WTO setimates that global merchandise trade will decline by 9% in 2009. Betweeen 1990 and 2006 these trade flows increased by 6% a year, outstripping the growth of world output which remained at 3%. See the chart showing GDP and world trade growth year over year. Because of vertical supply chains products were shipped across borders and imported back into the country that exported a product, till the product was finally assembled in some third country like Mexico, in the case of automobiles. This interlinking of countries worsens the effect in adownturn, by bringing output down in many countries at once in any particular industry with these supply chains. And conversely positive effects are exaggerated in a upturn or boom cycle like that which was witnessed in recent decades. It makes a 1930's like situation less likely, where trade dropped by over 25%, because now all countries are affected, America's car industry exports as well as imports the same item as it is processed in several countries, and imported to the USA as a semifinished product and then assembeled in Mexico, as one example. Leaders of the G-20 agreed to fight protectionism athe the London meeting in April 2009. Is this enough? Should the Doha Round of talks be resumed? Arvind Subramanium of the Peterson Institute, and Aaditya Mattoo of the World Bank, argue that the Doha Round is too ambiious, as it tries to open markets for rich countries manufactured goods just when the crisis has hit developing countries making this ahard sell. At the same time DOha Round does not exclude Buy AMerica provisions and subsidies to fialing industries like the auto industry support measures taken by both the EU countries and the USA. So they sugggest anew "crisis round" of talks to replace Doha, and this makes sense as the items on the agenda can now be tailored to the pressing needs of a different time from when Doha round was conceived, and thus more realistic in its approach. And in the meantime all WTO members would commit to astandstill and take no measures that are protectionist. The Economist says the new "crisis round" would not do any better as there may not be the same level of interest in another round. It suggests that agood start would be for the leaders of the G-20 to be specificabout what protectionist measures it sees as unproductive and unhelpful in containing this crisis. Draw up a comprehensive list of protectionist measures that go beyond tariffs and export subsidies. The WTO would then be asked to monitor the countries based on this list and publish alist of offending countries, letting embarassment of these countries act as a kind of policing. And in addition an agreement should be reached on coordinating fiscal policy, so that it would reduce fears of leakages abroad. ...

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Wages in U.S. manufacturing are declining as the U.S. regains competitivness with Mexico, China and other emerging market countries in manufacturing, through a combination of productivity from new machinery and lower wages. At the same time as this revives U.S. manufacturing this is lowering wages in manufacturing based economies in the midwest and other parts of the country. This can be seen in cities like Dayton, Ohio, where in the past good paying jobs could be found in manufacturing without a college diploma. Many of these jobs paying $15-$20 an hour are being replaced by lower paying jobs paying $10 an hour. With the cost of college education already spiralling beyond the reach of ordinary incomes, and college debt reaching $1 trillion and harder to payoff, the move to lower wages increases the probabilities that college will remain elusive to children in these families. The automated plants and lower number of workers needed to operate machinery in new and modernized plants means unemployment in manufacturing will see slow growth. This is likely to lead to continued high unemployment in cities that lag behind in college education for opportunties outside of manufacturing and in manufacturing jobs. This is also why more experts are calling for government, college and private sector support for vocational training to improve job and income opportunties....

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WSJ reporters McDowell, Otto and Murray's interview with Indonesia's president Joko Widodo in December 2014, focusses on Indonesia's need for foreign investment for badly needed infrastructure development. Widodo says Indonesia will compete with Vietnam, Malaysia and other countries to attract foreign investors and offer better terms to attract projects. Widodo plans to take up reform of state electricity company PLN, open a limited, national one-stop investment center, and tackle land acquisition for the Adaro power project in central Java to be built with Japanese investment, in coming months, always following a deadline. His goal is to streamline processing and approval of foreign investment projects so that the time is cut from about a year to a few weeks. Investors such as Samsung have preferred to invest in Vietnam, and other investors have preferred to invest in Malaysia, because of a deteriorating foreign investment climate under the previous administration. Indonesia remains dependent on coal and commodity exports to China. The goal says Widodo is to increase the growth rate from 5% to 7% by 2016. This includes revising the old structure of contracts with oil companies to encourage oil exploration investments by foreign oil companies, according to Economics Minister Sofyan Djalil. Indonesia's oil production has declined in the last decade and it is now a net importer, a situation similiar to that in Mexico....

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The shift of offshore manufacturing jobs from China to Mexico in 2014-2015.

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Europe responds with platitudes and vague references to "benefits for everyone" and "detrimental" without facing up to the facts. How many American cars do you see on the streets of Germany? in Berlin or Frankfurt?- or Japan? in Tokyo or Osaka?-or South Korea? in Seoul? And how long has this been going on - since the 1980's. Europe's answer to the Marshall Plan and Japan's and China's to post war American help for recovery, was to exclude American cars and other products. GM and Ford have pulled out of China and so has VW. China's plan is to flood the world with electric cars, and Japan's to flood the world with hybrids. For far too long America has relied on capitalism that has no state involvement. In this kind of competition with hidden subsidies and national planning at the core of industrial growth in Asia. The US government has to have state involvement in it's auto, steel, aluminium, and chip industries, not to create trade disturbances but to create an even playing field for all, and rebuild a middle class destroyed by unfair trading practices of Asian nations and the EU, including Canada and Mexico which are simply used as bases to ship to the US. Ford makes 80% of its cars in the USA and GM can make the investments in new plants to raise its production from 60% in the USA to 80%. South Korea's Hyundai and Kia are investing $21 billion to make in the USA. Toyota and Nissan, VW, BMW and Mercedes can do the same.   ...

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Mexico's growth rate has averaged annual growth of below 2% for 2013-2015 under the Pena adminstration. Predictions were for growth of 5-6%. The investment in the oil industry is low with decline in demand for oil. The peso has dropped in value to 16 to the U.S. dollar in August 2015 compared to 13 in 2014. The popularity rating of the Pena administration dropped to 34% in August 2015.

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Research on agricultural production and improving and protecting rice, wheat and other food crops has suffered in the last decade as budgets for research have been cut. The USA is in the middle of cutting its $59.5 million annual support for a global research network by 75%. This includes the funding for the International Rice Research Institute in the Philippines which has suffered from budget cuts for years. Its amazing that this Institute is the world's main repository of rice seeds as well as genetic and other information about rice, the staple food in Asian and many other countries. This includes the International Maize and Wheat Improvement Center in Mexico. Agricultural experts have warned about this neglect for many years but have been ignored as the pace of industrialization took off in many developing countries and agricultural production was taken for granted. With the current crisis in agricultural production one would expect this cutting of research aid to be reversed, as President Bush asked Congress on May 1, 2008, for an extra $770 million to pay for food aid and to help improve agricultural productivity in developing countries. Its ironic that growth of food supplies has suffered just when incomes are improving in the developing countries leading to greater demand for beter food and nutrition and resulting in soaring food prices which cuts into that very effort to improve the nutrition and diets in the developing countries. ...

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The Group of 20 finance ministers and central bankers meet i Sao Paulo, Brazil. On the side the BRIC countries finance minsters hold their first meeting. Brazilian President Da Silva calls for greater say for the BRIC countries and for countries like Argentina, Mexico, South Africa, Nigeria, S. Korea and other large developing country economies in shaping the new global financial architecture. There is extreme frustration in Brazil that all their efforts to build a better life for millions of Brazilians may come to nought, and the first real sustained growth in decades that came to Brazil may now be cut short abruptly with huge cost to millions or rural and urban poor, a fate shared by all the BRIC and other developing countries. Wall Street source of the crisis remains closed to the BRIC and developing countries in the sense that what goes on there is determinied by insiders from the G7 countries, but the severe consequences of a fallout in Wall Street on trade and credit hit these countries just when there was hope for millions to live a better life. Just as when the Asian crisis and other crises hit in the last two decades there is a lot of talk about global financial architecture with Treasury's Rubin then and IMF's Kahn and World Bank's Zoellick now making statements, but no clue except to accept the need for getting the large developing countries of the G20 to the table for concerted action. ...

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Mexico is close to becoming the U.S.'s largest trading partner. Trade increased by 17% between Mexico and the U.S. to $461 billion in 2011, compared to $502 billion in trade between the U.S. and China.

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Mexican president Nieto's poll numbers are at all time low of 24%, according to Reforma newspaper. He took office in late 2012 and has been hurt by human rights scandal of the murder of 43 students in the state of Guerrero, corruption issues, and failure to improve the economy. The invitation to Trump to visit Mexico left even people close to the president surprised, and was criticized widely inside Mexico. It is not clear what Trump or Nieto gained from the trip. As Trump continued his talk about building a wall on the Mexican border and having Mexico pay for the estimated $23 billion it would cost. He did this in a speech to supporters in Pheonix on the same day he met Nieto, showing the use of teleprompters and prepared script was not his way of campaigning. Just as the message to black people that Democrats take them for granted cannot resonate without the basic message delivered with compassion and understanding- such as done by the presidents Bush and Reagan- so also the message to Hispanic people is suffering from the same lack of empathy. Recent polls show only 3% of blacks support Trump. McCain and Romney gained only 4-6% in the U.S. presidential elections of 2008 and 2012. The message of the wall is also baffling as an election strategy. A Gallup poll in July 2016 shows only 15% of Americans opposing a pathway to citizenship for illegal immigrants, and only 24% of Republicans. There is another problem in the strategy. The rhetoric about walls and mass deportations, and the Trump temperament combined with handling of nuclear weapons is not winning college educated women in the suburbs with polls showing Trump lagging behind Clinton by about 20 points or 4 million voters with this group. It is hard to undo the damage done by this kind of rhetoric used in the primary elections as it gains distrust of voters. It would require a bad economy with illegal immigrants taking local jobs, and handling of immigration seen as weak, for such a message to gain some national traction. Both are absent for the most part with a steadily improving economy since 2012, lower unemployment, a tough enforcement policy on deportatons under Obama that exceeded that under Geoge W. Bush, and the talk of a wall comes with illegal immigration having declined steeply since the 2008 financial crisis. The real culprit appears to be elsewhere, the triple hit taken from hollowing out of the manufacturing economy that hurt the Conservatives in Canada, the insecurity created for older whites from the job losses and hits to net worth from the 2008-2009 financial crisis, and the increasing loss of access to health care and educational opportunities with high  costs. About 62 million households or the bottom half of the distribution in the U.S. have a net worth of about $10,000, a quarter of this group having zero net worth, according to the Federal Reserve's Janet Yellen at an Inequality Conference in Oct 2014. Problems no wall is going to solve, problems that built up over 2 decades, problems that will take a generation to fix.  It shows the tech miracle of the last 2 decades as a mirage for quality of life of the middle and working class. Tech as a tool to a goal, not a goal in itself, is the better way forward. ...

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Even China has not campaigned the way Canada, Mexico and British, American media have against DJT Tariffs because China knows it is basically about getting an even playing field when it is the only country with $1 trillion in trade in its favor in 2024, 12 times the Japanese high of $82 billion trade surplus in 2007. But why should China campaign when the American and British, German media are going to do the job for China? A simple quiz to K-12 would ask school children when is the last time a country has a $1 trillion trade surplus? Answer: Never. Greg Ip has written a few years back that the devastation of China outshoring of American factories and jobs was unlike the 1980's Japan trade invasion because of first China's size, second by the speed with which it happened at 10-14% Chinese GDP growth. There is a third Japan was an ally needing US for security and backed down, China's case is different it is challenging the US for control of the world economy and will fight this one over the long haul. Greg Ip of WSJ on the 53 countries asking to negotiate US Liberation Day April 2, 2025 Tariffs. These countries include Allies of the US in full support asking to negotiate Israel, Japan, Taiwan, South Korea, India Allies of the US in partial support asking to negotiate Britain Allies of the US not in full support asking to negotiate Germany, France Allies of the US in the past campaigning against the US, asking to negotiate Canada, Mexico Not Allies of the US, not in full support, not campaigning against the US China A look at his list tells one only one thing, mostly all trading partners except for the $146 billion exports of the US which represents exports to China are the exports that are at risk if things don't work out on tariffs. This is what the media today WSJ added this last week to the NYT, Wash. Post and the BBC, Guardian of UK, German media will not tell the reader.  The DJT Tariffs and Tariff negotiations are Lighthizer Tariff negotiations which won the fight with Japan in the 1980's over unfair trade and gaining a level playing field. Lighthizer as Deputy US Trade Representative conducted the tough negotiations with Japan. He was USTR in 2016-2020 and his Deputy Jamieson is now USTR in 2025       ...

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Miroff describes the situation for Mexico's middle class in the face of rising crime, a deep distrust of the police that extends to neighbors. This is seen through the lives of a middle class family, Alfredo and Lilia Hoyos, in the town of Cuernavaca, 50 miles south of Mexico City. Long known for its quiet neighborhoods, a second home to many civil servants in Mexico City, a university town famous for its language schools, Cuernavaca is now caught up in the struggle with drug gangs and rising crime. The Mexican government sent marines in helicopters to kill drug gang leader Beltran Levya. The level of trust in the police with rising crime is low making the situation worse. In a recent poll, only 6% of respondents said they could trust the police, 40% said "little" or "none." An OECD survey in 2008 showed Mexico at the bottom of the list of 34 countries for citizens expressing trust in their neighbors and community. The drug war has taken a serious toll on trust in the community since then. Hoyas had a difficult time setting up a neighborhood watch for security because people feared to participate. As Mexico modernizes and the middle class expands the situation on this basic parameter of development deteriorates....

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The increasing competitiveness of Mexico compared to China and India as an investment destination in 2013. Foreign companies are investing heavily in Mexico because of investment advantages in labor cost, supply of engineering and management talent, and proximity to the U.S.

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The election win of Sebastian Pinera in Chile marks a shift in Latin America away from left parties. Economic conditions improved initially with the left parties in Brazil, Chile and Argentina, following currency crises and debt problems. The commodities boom helped the left party governments finance social programs which increased their popularity. The middle class also benefited with increased consumer spending and a growing economy. All this changed as the commodities boom collapsed and state finances were stretched thin in Brazil and Argentina. Corruption scandals, and decline in economic growth exposed serious problems in delivery of services, infrastructure and other areas which had been neglected. Voters decided to turn to alternatives and parties from centre right with Macri in Argentina and Pinera in Chile as a consequence.   The striking fact is that instead of shifting to the right leaders of the centre right, Macri in Argentina and Pinera in Chile have decided it is best to keep some of the best initiatives and achievements of the previous governments that have created a broader middle class in Chile and Argentina. Pinera says he will preserve some of Bachelet's initiatives in bringing broader access to education and health care. In this sense Latin America has matured so that the sharp conflicts have been set aside to set a more conciliatory tone and work together. Compared to Chile and Argentina Brazil is different in that corruption scandals affect most parties and there is a general loss of confidence in Congress and politicians across the spectrum. Brazil is looking at a situation in which a whole generation of politicians would have to give way to a new generation for the public to gain a renewal of confidence- so deep is the loss of confidence.  ...

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Robert Lighthizer, U.S. Trade Representative, makes a passionate plea for the dignity of work in America, the founding principle for the society of opportunity that America has been and the reason it was settled by immigrants from Europe over 200 years. He points out that trade policy is not about geopolitics or about efficiency as others perceive, it is about what kind of society we want to live in. Is it about a society of opportunity? This is the foundation on which this American continent was settled by settlers from Britain and Europe, and the basis of the growth over two hundred years till the last four decades. From 2000 and China's entry into the World Trade Organization under president Clinton to 2016 the U.S. manufacturing base has shrunk with the loss of five million jobs, two million jobs lost to China in the period 1999-2011 alone. And 350,000 automobile manufacturing jobs to Mexico since 1994, one third of all U.S. automobile jobs. Without the initiative and hard work of Mr. Lighthizer both American workers and Mexican workers would be stuck in low paying jobs. The USMCA he negotiated changed all that by giving Mexican workers fair wages and American workers and manufacturing the opportunity for revival.  This view was also expressed by Intel founder Andy Grove, a founder of one of the first pioneer companies in Silicon Valley. Grove asked the question after seeing the outsourcing of production out of America and the condition of the American worker- he said for him it was about what kind of society he wanted to live in. It was all about the dignity of the American worker long ignored by economists who live in a world of theory and the elite that has lived for so long apart from the places where the fabric of American workers and working life was torn apart. It was a question that touched Andy Grove's heart just as it does for Robert Lighthizer and others who are fighting to make America a society of opportunity for the American worker and opportunity for the American people, for dignity in America. It also charts a new course for the French worker, the British worker, the Indian worker, as other countries learn from the American experience. We have covered Grove and Lighthizer from the early days of their leadership and wise reminders to the people of what America is and stands for. Lighthizer points out one huge error that makes the thinking of these economists and elite that have not listened for so long, more than a bit crazy, reckless and callous. He says there about half of 250 million adults who lack a college diploma in America. Historically manufacturing has provided stable well paying employment. Even if with investment in education they were taught to write software code, there aren't enough jobs for them. The combined total of jobs at Apple Google, Facebook and Netflix is 300,000 jobs. Never has so much been at stake for so many and defended by so few. ...

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Problems of declining production at the Cantarell oil field in Mexico have been known for some time. Now President Calderon is trying to take on this issue. Brazil's Petrobras reached an impasse also some years back but was able to make the reforms, see the link to Petrobras. See the link in the WSJ for 8/30/07 on Petrobras . In 1995 President Cardozo of Brazil pushed through reforms after a oil workers strike at Petrobras. Upto that time Petrobras had problems similar to Pemex with underinvestment, state meddling in its affairs and finances, and too much bureaucracy and inefficiency. Can Calderon get reform for Pemex. Which amount of Pemex revenues should go to the government, how much should Pemex have so that it can adequately fund investment in new oil field exploration offshore, how to overcome bureaucracy and inefficient management, and how to arrange board representation so that Pemex can transform itself like Petrobras did. Some of the answers to these questions are emerging. Calderon wants to prepare his political position as the reform of Pemex is something that previous Presidents have failed to tackle. To do this the Senate's Energy Committee is holding a private debate on the issues. Calderon may try to forge a consensus with the Institutional Nacional Party, as he did with pension reforms if an all party consensus eludes him. Already in reforms of public finances that Calderon has pushed through Pemex will pay 71.5 centavos on every peso of oil extracted by 2012, instead of 79 centavos as royalty payments to the government. One reform being considered is to givePemex control of its own budget. At this time $10 billion a year goes back to the government on top of the royalty tax payments. Another reform would open up refining, transport and distribution to private enterprise. A think tank expert at CIDAC in Mexico City thinks that this can be done without reforming the constitution as was done to allow private investment in electricity generation in the 1990's. The same methods could be used to promote risk sharing contracts with other companies to bring in new technology for oil exploration, including companies from emerging countries like Petrobras, Petrochina and others, given Mexican's bias against the western oil majors. Especially because Petrobras has proven expertise in deep water drilling offshore. There is no question that Mexico is falling behind. One energy expert at the National Autonomous University estimates that the density of drilling rigs in the American portion of the Gulf of Mexico is 20 times greater than in the Mexican part, with Mexico having drilled only 20 exploratory wells in water deeper than 980 feet. in other areas like refining Pemex has not built a new refinery in 20 years, and imports 40% of its gasoline from US refineries, and its 7500 gasoline stations need expansion as Mexico's economy expands. Cardozo's transformation came with setting up an independent Board of Directors and putting an investment banker in charge. International oil companies were allowed into Brazil as a way to get Petrobras to compete with western oil companies and increase efficiency. And Cardozo got Petrobras listed on the New York Stock Exchange selling some 16% of Petrobras in the capital markets. This listing ensured transparency and improved corporate governance, as about 50 analysts now tracked Petrobras. ...

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Failing schools with poor teachers, and no examination system to keep out teachers who lack training and education, are a major problem for Mexico. It was part of the education reforms passed in Congress in 2013. A week before elections the militant teachers union CNTE has mounted protests to prevent this from taking place. The Mexican government of president Nieto temporarily suspended examinations as a result of the protests. This article in the Economist magazine says this affects the credibility of the government's committment to the reforms Mexico needs to become competitive in the global economy, and could affect how investors see the reforms being implemented for the oil industry. It also questions the autonomy of independent bodies setup to implement the reforms, leading to a statement by the National Institute for Education Evaluation(INEE), clearly setup by Congress to implement this reform, that this violates the constitution. Can this happen to the telecom and energy regulators, whose authority could be undermined in other ways, say critics....

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A report released by the Organization for Economic Cooperation and Development (OECD) shows growing income inequality in 34 OECD countries. OECD Secretary General, Angel Gurria says: "The social contract is starting to unravel in many countries. This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, income inequality will continue to rise." Countries with the largest ratios between incomes at the top and the bottom, are the United States, Turkey and Israel, roughly 14 to 1. Germany, Denmark and Sweden have ratios of 6 to 1, with their ratios up from the 1980's. Gaps in Chile and Mexico are at 25 to 1. The study covers the period from 1980 to 2008. Overall inequality went up by 25% in the U.S. from 1980. In 2008 the top ten percent in the U.S. earned $114,000, 15 times than incomes for the bottom 10%. The top 1% of Americans saw incomes go up from 1980 to 2008, increasing from 8 percent to 18 percent. The richest 1% having $1.3 million in after tax income, and the lowest 20% making $17,700. The trends have accentuated an increase at the highest end- the top 1% and top 10% of the people- and a sharp decrease for the bottom 20%, which can be grasped from the $17,700 and the $1.3 million, both at extreme ends. The study attributes the rise in inequality to a growing gap in wages for highly skilled workers as technology advances, a surge in foreign direct investment and a looser regulatory regime that reduces employee protections leading to wage premiums for financial jobs and smaller incomes for workers at the bottom. Income groups and professions and sectors that had the greatest influence in government were able during this period to get the greatest protection for incomes, and able also to maximize their incomes. Incomes in the financial sector increased dramatically in the last decade, as a result of deregulation leading to higher risk and speculative activities in the financial sector, leading to the financial crisis of 2008-2009. Financial crises further depress incomes at the lower end. Similiar income inequality trends can be seen for India and China. China has a Ginni coefficient of 0.5 according to researchers at Beijing Normal University, up from 0.3 three decades ago- a Ginni Coefficient above 0.4 is considered destabilizing. Another factor that played a part in these countries is corruption and lobbying by special interests for favored treatment of sectors or groups. Austerity measures taken in Europe and in the U.S. are likely to widen income gaps by depressing the lower end income groups, creating social unrest, especially in the absence of efforts to stimulate growth....