USA starts a trade war with allies

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Jeff Kuta
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Re: USA starts a trade war with allies

#41 Post by Jeff Kuta » Mon Mar 05, 2018 4:47 pm

Ogion wrote:
Mon Mar 05, 2018 1:16 am
...but according to Nate Silver, Trump was actually the favorite at various times. in any event, Silver nailed his prediction: Clinton by 3%, which is what she won by.
Last night I was thinking about the upcoming U.S. Senate election in California where centrist Dianne Feinstein recently lost the endorsement of California Democrats (they endorsed no one). I wondered what the chances were for a progressive candidate to upset her in November considering that we have a "top two" primary system (enacted Nov 2010) where two candidates advance irrespective of party.

That got me to thinking about the 2016 U.S. Senate election in California where Kamala Harris (D) defeated Loretta Sanchez (D) in the general after they both handily defeated all others in the primary (Duf Sundheim (R-who?) got 7.8% of the vote).

Well, in 2016, there was almost no reason for Republicans to turn out to vote in California since it was a foregone conclusion that Hillary Clinton would get our electoral votes and Donald Trump was rather unliked here so many abstained. I am sure that skewed the turnout statewide, as well as had a measurable impact on the national popular vote as we have one-ninth of the U.S. population. This may have played into Nate Silver's predictions if California was overweighted with respect to "plan to" voters in the polling.

pangloss
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Re: USA starts a trade war with allies

#42 Post by pangloss » Mon Mar 05, 2018 5:28 pm

Trade law is shaping up to be a fascinating area, for all you aspiring lawyers out there.

As I understand it, Trump is relying on Article XXI of the General Agreement on Tariffs and Trade (GATT) to justify the new tariffs. Interestingly, I haven't found any examples of this Article being used since the WTO began in 1994. I did, however, find the GATT Analytical Index on this section, which gives an overview of its history, use, and drafting.

In the first paragraph, there is a quotation from one of the drafters that outlines pretty much exactly what the concern is with countries using Article XXI too broadly.
We recognized that there was a great danger of having too wide an exception and we could not put it into the Charter, simply by saying: ‘by any Member of measures relating to a Member's security interests,’ because that would permit anything under the sun.'
As a result, the text of Article XXI seems to narrow its potential uses. I'm not sure which part Trump would use, although I can hazard a guess.

Article XXI(b)(ii) provides an exception relating to the traffic of arms or materials that is directly or indirectly supplying military establishments. I think it would be difficult for Trump to justify a global tariff under this paragraph, since he's hitting every single country. There is a lot of jurisprudence on the words "relating to", which has the effect of narrowing their scope. In a sense, every action "relates to" another, but the WTO's Panels and Appellate Body have limited the meaning of these words.

Article XXI(b)(iii) allows countries to take measures in times of war or emergency in international relations. Trump might try to justify this under the War on Terror or the emergency of being stuck in the "worst trade deal ever", although I suspect a WTO Panel would look upon that with some healthy scepticism. Again, it's hard to justify a global tariff rather than a specific one.

Article XXI(c) allows countries to take any measure in keeping with their obligations under the UN Charter for the maintenance of international peace and security. Judging from the GATT Analytical Index (linked above), this has been invoked when countries are imposing UN-backed sanctions on various countries. Seeing how this is not the case at present, and seeing how there is a global tariff, I'm not sure how Trump would win this either.

Trump is trying to start a trade war, although I bet that many countries will be using the DSU to try to resolve this. This takes a lot of time, and so countries will likely respond with tariffs immediately and have the WTO Panel/Appellate Body back them up afterwards. Of course, I strongly suspect that Trump is using this for leverage for various trade negotiations (see NAFTA, for example) rather than seriously contemplating the use of this exception.

Now, I'm not a trade lawyer, so maybe I'm wildly off-base with everything. But that's my understanding of the WTO Agreement as a lowly student.
Octavious wrote:Well, that confirms Trump's national security argument then. If the US relies on overseas powers for types of steel unavailable at home he has a valid point.
This doesn't necessarily confirm Trump's national security argument, because he defines national security very broadly to include every country in the world. I think it's pretty hard to justify slapping Canada and the EU with tariffs in the name of national security. This gets especially difficult since Trump has explicitly said he's starting a trade war.
leon1122 wrote:The title is misleading and false. Our “allies” started the trade war. We just refused to fight back up to now.
If the USA's allies started a trade war, the USA could easily have made use of the Disute Settlement mechanism under the WTO. Most countries of the world, including the USA, have done so. Here is a link to the DSU Gateway; you can read Panel Reports and Appellate Body Reports for every case there. Be forewarned, however, that these make for very dry reading.
peterlund wrote:USA violates the rules of WTO of which it is a signed member.
Then other countries may make use of the DSU. See above in my reply to leon1122. Trump is trying to justify this under Article XXI of the GATT, which would mean that there is no violation (if he's correct).
Jamiet99uk wrote:Would you care to verify this, dickhead?
Easy, Action.
Ogion wrote:Economics works that way.
I have noticed a tendency among first year students and people who spend too much time on Reddit of referring to disciplines as uniform wholes with 100% correct answers. An example of this would be people who say "science works like that", or "math works like that", and so on. These people also tend to read Vox and think they can solve the world's problems after being given a rudimentary understanding of basic social science principles, as summarised by people like Ezra Klein. I am always thoroughly unconvinced by their arguments.
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leon1122
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Re: USA starts a trade war with allies

#43 Post by leon1122 » Tue Mar 06, 2018 7:51 am

Jamiet99uk wrote:
Mon Mar 05, 2018 12:37 am
leon1122 wrote:
Sun Mar 04, 2018 7:45 pm
The title is misleading and false. Our “allies” started the trade war. We just refused to fight back up to now.
Would you care to verify this, dickhead?
I would love to. The EU imposes a 10% tariff on US cars, while we only impose a 2.5% tariff on their cars. How, then, can they claim that it's unfair for us to increase our tariffs in other areas?

https://www.cnbc.com/2018/03/05/trumps- ... rmany.html

President Eden
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Re: USA starts a trade war with allies

#44 Post by President Eden » Tue Mar 06, 2018 8:08 am

pangloss wrote:
Mon Mar 05, 2018 5:28 pm
Ogion wrote:Economics works that way.
I have noticed a tendency among first year students and people who spend too much time on Reddit of referring to disciplines as uniform wholes with 100% correct answers. An example of this would be people who say "science works like that", or "math works like that", and so on. These people also tend to read Vox and think they can solve the world's problems after being given a rudimentary understanding of basic social science principles, as summarised by people like Ezra Klein. I am always thoroughly unconvinced by their arguments.
😍
Have a NaN on the house

ksako8
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Re: USA starts a trade war with allies

#45 Post by ksako8 » Tue Mar 06, 2018 9:28 am

@leon: there are several products where it is the other way around.

However, I would get when the US government equalizes and raises the tariffs on EU cars to 10%. Expect the EU to apply equalizers too.
I do not get why the US president is targeting steel and aluminium.

leon1122
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Re: USA starts a trade war with allies

#46 Post by leon1122 » Tue Mar 06, 2018 10:16 am

ksako8 wrote:
Tue Mar 06, 2018 9:28 am
However, I would get when the US government equalizes and raises the tariffs on EU cars to 10%. Expect the EU to apply equalizers too.
I do not get why the US president is targeting steel and aluminium.
When someone punches you in the face, you don't punch them back in the face. You kick them in the crotch. The EU is able to hurt our auto industry much more than we can hurt theirs with tariffs. Therefore, a tit for tat doesn't work. We have to hit them where it hurts, and steel and aluminum, as the article I posted mentions, will hurt them a lot more.

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Re: USA starts a trade war with allies

#47 Post by Jamiet99uk » Tue Mar 06, 2018 1:56 pm

Why should we be trying to hurt each other?

Jeff Kuta
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Re: USA starts a trade war with allies

#48 Post by Jeff Kuta » Tue Mar 06, 2018 2:19 pm

Do you really want to hurt me?

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Re: USA starts a trade war with allies

#49 Post by Jamiet99uk » Tue Mar 06, 2018 2:28 pm

Do you really want to make me cry?

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Re: USA starts a trade war with allies

#50 Post by pangloss » Tue Mar 06, 2018 6:09 pm

leon1122 wrote:I would love to. The EU imposes a 10% tariff on US cars, while we only impose a 2.5% tariff on their cars. How, then, can they claim that it's unfair for us to increase our tariffs in other areas?
I had a great time double checking all of this. Fun fact: the HS Code for cars is 8703 (the chapter and heading... subheadings differ for the various types of cars).

The applied rate for tariffs is 2.5% for cars entering the USA from the EU and 10% for cars entering the EU from the USA. However, I was unable to find anything on the bound rates. Under the WTO, countries are allowed to impose tariffs up to the amount specified in the relevant Tariff Schedule. The maximum allowable rate is called the bound rate. The applied rate is what the rate actually is.

I had some trouble finding out what the bound rates are in both countries. I very easily found the applied rates. In the USA, a rate of 2.5% applies to countries with a trade relationship with the States (Column 1 countries) and a rate of 10% applies to countries with no trade relationship (NTR) with the States (Column 2 countries). Judging by this, I suspect that the bound rate is 10%.

In any event, GATT II:1 prohibits charging tariffs in excess of the bound rate. If the EU were charging in excess of its bound rate, then the USA could make use of the DSU and challenge the tariff rates. Seeing as how they have not, I would assume that they are within the bound rate.

This is all permitted under the rules of the WTO, to which all Members have agreed. It's not enough to say that there's a difference between the tariffs in both Members; you have to show that this difference is against the rules.

As a matter of policy and fairness, you might have an argument. However, as ksako8 has pointed out, there are probably other products that have the opposite treatment. It's possible that the tariffs as they stand are the result of some negotiations or understandings. For example, maybe the tariff rate on European cars is lower in exchange for the EU turning a blind eye to American farm subsidies. You take too narrow a view of this.
leon1122 wrote:When someone punches you in the face, you don't punch them back in the face. You kick them in the crotch. The EU is able to hurt our auto industry much more than we can hurt theirs with tariffs. Therefore, a tit for tat doesn't work. We have to hit them where it hurts, and steel and aluminum, as the article I posted mentions, will hurt them a lot more.
It's interesting to me that you would characterise tariff rates like this. I would watch WTO meetings if there were fights like that. In reality, though, they are very boring.

EDITED: Accidentally put the wrong GATT Article.
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Re: USA starts a trade war with allies

#51 Post by ksako8 » Tue Mar 06, 2018 9:46 pm

Thanks pangloss

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Re: USA starts a trade war with allies

#52 Post by Incrementalist » Wed Mar 07, 2018 3:30 am

I was unable to find anything on the bound rates.
Although the WTO rules aren't exactly laws, it is disturbing to me than a motivated and interested citizen can't easily find out what the rules actually are.

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Re: USA starts a trade war with allies

#53 Post by Jeff Kuta » Wed Mar 07, 2018 6:35 am

I'm not a fan of tariffs either, but they do serve a clear purpose: massaging competitive imbalances to protect domestic industry.

Every country in the world wants to have domestic steel and manufacturing, agriculture, electronics, and energy production. Some countries have more natural resources and labor, while others have a technology and a skilled workforce.

The tariffs allowed by the WTO are meant to level the playing field just a bit so participating countries can keep domestic businesses more or less healthy so they don't completely fail in critical industries.

Yes, times change and trade agreements need to be re-evaluated. Whatever the POTUS is doing is really not that though. He's trying to be the bull in a china shop and will end up wrecking everything while blaming others for the mess.

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Re: USA starts a trade war with allies

#54 Post by ksako8 » Wed Mar 07, 2018 7:39 am

If you want a change, you negotiate. You do not start with just introducing a new tariff.
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Re: USA starts a trade war with allies

#55 Post by Octavious » Wed Mar 07, 2018 9:00 am

Trump often starts by giving the people he's negotiating with a good look at what failure might look like. In this case a massive trade war, in the case of North Korea a load of fire and fury etc. He's negotiating with governments and negotiating with governments is all about managing the expectations of the people. It is far easier for a government to sell an inferior trade deal to their electorate if the people believe that they have prevented a mad Yank starting a damaging trade war than it is if the people believe that they have just kowtowed to a bully demanding better terms.

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Re: USA starts a trade war with allies

#56 Post by Jeff Kuta » Wed Mar 07, 2018 1:51 pm

Right. The old "he's so crazy he might just do it" plan.

Problem is, irrational and unstable people like 45 turn off the rational ones who then start looking for other rational partners.

Unless they perversely enjoy being abused by their partner.

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Re: USA starts a trade war with allies

#57 Post by Octavious » Wed Mar 07, 2018 2:02 pm

Jeff Kuta wrote:
Wed Mar 07, 2018 1:51 pm
Right. The old "he's so crazy he might just do it" plan.

Problem is, irrational and unstable people like 45 turn off the rational ones who then start looking for other rational partners.

Unless they perversely enjoy being abused by their partner.
Which might be true (I confess I have no idea what "like 45 turn off the rational ones" actually means, but I think I get the gist) if not for the fact that there isn't an alternative rational partner to the US, and no one really believes that Trump is irrational or unstable.

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Re: USA starts a trade war with allies

#58 Post by ksako8 » Wed Mar 07, 2018 3:28 pm

I really do believe Trump is irrational and unstable. So your statement is objectively false (unless I am no one).

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Re: USA starts a trade war with allies

#59 Post by Octavious » Wed Mar 07, 2018 3:41 pm

ksako8 wrote:
Wed Mar 07, 2018 3:28 pm
I really do believe Trump is irrational and unstable. So your statement is objectively false (unless I am no one).
My apologies, ksato. What I had left unwritten, but had thought was implicit given the context of international diplomacy, was that no one who matters really believes that Trump is irrational or unstable.

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Re: USA starts a trade war with allies

#60 Post by Jeff Kuta » Wed Mar 07, 2018 4:39 pm

Octavious wrote:
Wed Mar 07, 2018 3:41 pm
...given the context of international diplomacy, was that no one who matters really believes that Trump is irrational or unstable.
I don't believe that is true either. I think there are plenty of world leaders who must be worried about Trump's mental health, some of whom believe he is irrational and unstable. They cannot say that publicly, but they absolutely have to craft their diplomacy around that possibility.

Trump uses this to his advantage when possible, but I don't think he has the capacity to think through all the long-term third order ramifications of his actions. He bullies individuals, but there is always someone else to turn to in the world willing to pick up the pieces.

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