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Meanwhile, today’s main article deals with a trend that traders are starting to frown about, and that is the risk of a subsidy race that could become the new Airbus Boeing.
Mapped waters looks at shipping prices on Northern European routes.
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The storm clouds are brewing for the US via trade
Joe Biden is fast approaching his mid-term term and it is safe to say that his trade policies have so far been less confrontational than those of his predecessor. But just as protectionist.
The US Trade Representative’s Office is justifiably pleased that it has reached agreements with Europe to suspend tariffs running into billions on transatlantic trade. These deals include both the decade-long dispute between Airbus and Boeing (now postponed) and a suspension of Trump’s controversial national security crusade on steel and aluminum. With that in mind, we could say that some protectionist measures have been paused. None of these disputes are near the end. Aircraft subsidies are a constant topic of discussion and, on metals, virtually no work has been done to discuss exactly how both sides will turn steel green. In addition, there are quotas instead of a return to duty-free trade. Anyway, the tariffs are gone for the time being.
But storm clouds are gathering on the horizon. The first and most pressing issue is the threat to the US-Mexico-Canada trade agreement that Biden’s electric vehicle tax credits pose. Canada has threatened to suspend parts of the deal (particularly the milk quota parts that it believes the US will enjoy and that it deems detrimental in turn) in retaliation for the tax credits. Ottawa has also threatened to impose tariffs on the US auto sector and plans to release a list of proposed additional products shortly.
It’s worth noting that the U.S. tax break plan is still in pending law and its shape may change. So far, despite intense lobbying from both Canadian and Mexican officials, there does not appear to be any substantial effort to change this on the hill. Europe has also expressed its displeasure with the proposal. The EU trade chief Valdis Dombrovskis has complained that the proposals are incompatible with the rules of the World Trade Organization.
Another pressing issue is the issue of chip subsidies. So far, the US and the EU have agreed that subsidizing their semiconductor industry is a good idea. The US is proposing to invest billions of dollars to boost its domestic chip manufacturing, and the EU is making similar plans. Both sides say they are talking about how best to do this in order to avoid a subsidy race, which, as EU competition leader Margrethe Vestager emphasizes to the FT, “is a waste of taxpayers’ money”. The subsidies in Europe are “appropriate, proportionate and necessary” and in the USA “a legal basis for the granting of subsidies is created”. In Washington, however, European diplomats are beginning to worry about this issue, and one of us complains that it has the potential to become “the new Airbus Boeing”.
And what about the WTO? Well, the WTO might be a good place to discuss this. But the days when the US cared about what was and what wasn’t WTO compliant may be over. The US has just blocked the appointment of an appellate judge for the 48th time. USTR officials say they care about the WTO and WTO reform, and they say they are concerned with finalizing the fisheries negotiations. But there is unlikely to be any fish left in the sea until trade diplomats in Geneva reach consensus on the matter. Meanwhile, Europeans in Washington are muttering about the new subsidy race.
Like Simon Lester, formerly the Cato Institute think tank and now China Trade Monitor, a news website, refers to Twitter, the Biden administration seems to want more leeway for protectionist measures, while resisting regulations like the fledgling European Digital Markets Act, which they believe “disproportionately” affect US companies.
In fact, it appears that any attempt to regulate or tax US tech companies leads Washington to accuse unfair discrimination of any government that happens to try to create its own sovereign laws or tax systems. (The US was, by and large, angry about the imposition of taxes on digital services in other countries). Washington itself, however, wants a free hand to subsidize and stimulate its own selected industries (such as electric vehicles or chips).
Contaminated sites such as Airbus-Boeing and steel could have been swept under the carpet in Europe. But the contradictions may at some point escalate, and bigger problems – those that threaten to fundamentally challenge global trade rules – lie ahead as the US pushes ahead with its new doctrine of self-reliance and secure supply chains.
Yesterday’s trade secrets found that travel on other world trade arteries remains as expensive as it was a few months ago, despite some dramatic reductions in container shipping costs on the high-ranking Far East to US West Coast route. Among these routes are two that include Northern Europe.
We figured out the price of shipping a 40-foot container on these arteries using numbers from shipping data company Xeneta and Compass Financial Technologies. We’re not sure why they still have the same falls as the routes from the Far East to the US West Coast. If so, please contact us. Claire Jones
Washington hasn’t learned the real lesson of the China shock, after that Bloomberg piece.
Martin Sandbu has joined us in helping global manufacturers meet the rampant demand for Consumer Goods. His piece – Bottlenecks, which bottlenecks? – is worth reading.
European gas prices rise again due to concerns over Ukraine.
above Japanese clothing manufacturer will move most production home from (Nikkei, $) China and Vietnam over the next three to five years due to pressure from a weaker yen, overseas labor costs and delivery problems.
Thailand targeted (Nikkei, $) food exports of around $ 30 billion this year, but a shortage of migrant workers out Myanmar, Cambodia and Laos has brought that goal out of reach. Aime Williams and Francesca Regalado
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