Last week, U.S. Trade Representative Robert LighthizerRobert (Bob) Emmet LighthizerGOP senator warns quick vote on new NAFTA would be ‘huge mistake’ Pelosi casts doubt on USMCA deal in 2019 Pelosi sounds hopeful on new NAFTA deal despite tensions with White House MORE testified before the House Ways and Means Committee that other countries’ “very high bound tariff rates” are unfair to the United States.
Lighthizer called for a “reset” of tariffs at the World Trade Organization (WTO) to level the playing field. He is right to do so. But a tariff reset would put a new spin on trade remedies like antidumping duties.
If Lighthizer were to get his tariff reset, U.S. exporters would increasingly be harassed by trade remedies abroad. That’s because countries lowering their bound tariffs rates would back fill with measures like antidumping duties. This would dramatically change the politics of trade remedies in Washington.
First, the problem.
It’s true that many countries have higher bound tariff rates than the U.S. What does this mean? Bound rates are WTO-agreed ceilings on tariffs that countries can levy on imports. But countries don’t typically charge their bound rates. Rather, they use applied rates that are often quite a bit lower. Applied tariffs can fluctuate, but they can’t exceed the country’s bound rates.
Applied tariffs reflect a country’s domestic politics at a given moment. Consumers, and the retailers that sell to them, want low tariffs. Exporters that use foreign inputs also want low tariffs. But industries that compete with imports want high tariffs. So do countries that depend on tariff revenue for central budget revenue, a reality across the developing world.
Take motorcycles as an example. There are different tariffs for small versus big bikes, as well as for electric ones. Let’s focus on big bikes with engines greater than 800cc. Brazil’s bound rate is 35 percent on these motorcycles, but it currently charges an applied rate of 20 percent. China’s bound rate is 30 percent, as is its applied rate. Egypt’s bound rate is 45 percent, while its applied rate is 30 percent. The U.S. applied rate on 800cc bikes, by comparison, is set at its bound rate of 2.4 percent.
The problem is even worse in some countries. In 1995, developing countries fell short of binding all of their tariffs, leaving about a quarter unbound. On 800cc motorcycles, for example, India’s applied rate is 100 percent, but it has no bound rate. In theory, India’s tariff on big bikes could go to infinity.
Similarly, Indonesia’s applied rate is 25 percent, but, like India, it doesn’t have a bound tariff on big bikes. Are Indonesia and India cheating? No. They joined the WTO having convinced all other members, including the United States, to let them do this.
In short, Lighthizer actually understates the problem. It’s not just that many countries have higher bound rates than the U.S. It’s also the gap between their bound and applied rates. This gap, known as “overhang,” deters trade, since exporters abroad fear volatility in the tariff.
Why would a country want overhang? To respond to imports with tariff hikes in a WTO-legal way. It’s a political insurance policy.
And that’s why a tariff reset will necessarily turn attention to trade remedies.
There is, in fact, a tariff reset underway. It’s happening through all of those free trade agreements that now dot the landscape of the global economy. The WTO alone covers nearly all trade in goods, however, so a tariff reset in Geneva would matter a lot.
Suppose, then, that WTO members not only slashed all their bound rates but also agreed to ceilings on all of their unbound tariffs. U.S. exports would surely flourish, given the much greater degree of certainty they’d have about foreign tariffs. This would also promote economic growth in the countries that cut their tariffs. A win-win.
But it would not get at why these countries negotiated high (un)bound rates in the first place. Governments like having a political insurance policy. They need to be able to relieve the pressure of free trade in tough economic times. In 1995, many countries had no choice but to rely on tariffs to do this. That’s because they lacked the capacity to use trade remedies like the United States and other developed countries.
Trade remedies include antidumping and countervailing duties, and safeguards. These, too, are political insurance policies aimed at foreign firms found to be selling below their cost, getting subsidies from their government, or slowing exports threatening to flood the domestic market, respectively. These measures were largely beyond the reach of developing countries in 1995. No longer.
Take antidumping duties (ADs), the most widely used trade remedy. The year before the WTO debuted, India didn’t have any ADs in force. By 2018, India had become the most frequent user of ADs, besting the United States by a sizable margin. Argentina, Brazil, China and Turkey are also prolific users of ADs. Others are learning.
U.S. exporters, moreover, are increasingly being targeted by these ADs, notably in China, India and Brazil, the top filers against American firms. Others will follow too. Across the Middle East, for example, countries are building their capacity to wield ADs. Similarly, the U.S. has seen fit to call on Kenya to “establish transparency and due process obligations” on its trade remedy regime, fearful that these measures could harm the benefits of their proposed free trade deal.
Notice the twist here. Washington typically discusses trade remedies in the context of the U.S. on defense against China, for example. This is the U.S. worried about trade remedies on the offense, looking to strike down misapplied antidumping duties, in particular.
Lighthizer is right to propose a tariff reset at the WTO. The U.S. will find that it has allies on this.
But perhaps the most interesting thing about discussing a tariff reset is that one would change the debate in Washington over trade remedies. This debate, like the bound tariff rates that Lighthizer bemoans, is out of date. The U.S. is increasingly on the offense against the trade remedies imposed by other countries. This is what the future holds if talk of a WTO tariff reset gains political momentum.
Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, a nonresident Senior Fellow at the Atlantic Council, and host of the podcast TradeCraft.
Govt Watchdog: Politics Caused 'Sharpiegate' Frantic Rebuke – The New York Times
Political pressure from the White House and a series of “crazy in the middle of the night” texts, emails and phone calls caused top federal weather officials to wrongly admonish a weather office for a tweet that contradicted President Trump about Hurricane Dorian in 2019, an inspector general report found.
Commerce Department Inspector General Peggy Gustafson concluded in a report issued Thursday that the statement chastising the National Weather Service office in Birmingham, Alabama, could undercut public trust in weather warnings from the National Oceanic and Atmospheric Administration (NOAA) and for a short time even hindered public safety. Agency officials downplayed and disputed the findings.
“Instead of focusing on NOAA’s successful hurricane forecast, the Department unnecessarily rebuked NWS forecasters for issuing a public safety message about Hurricane Dorian in response to public inquiries—that is, for doing their jobs,” the report concluded.
Former Obama NOAA chief Jane Lubchenco, a scientist at Oregon State University, said in an email that high level officials “put politics and their own jobs above public safety. In my view, this is shameful, irresponsible, and unethical.”
At issue was a Sept. 1 tweet from the Birmingham weather office that “Alabama will NOT see any impacts from #Dorian.”
The tweet came out 10 minutes after President Donald Trump had tweeted that Alabama was among states that “will most likely be hit (much) harder than anticipated.” Forecasters in Alabama said they didn’t know about the president’s tweet, which was based on outdated information, and that they were instead responding to calls from a worried public.
By the time the two tweets were posted, Alabama was no longer in the hurricane center’s warning cone, although it had been in previous days. One hurricane center graphic at the time showed a “non-zero” chance of tropical storm force winds for a tiny corner of Alabama, something NOAA officials later scurried to highlight, according to the report.
However, NOAA acting chief Neil Jacobs told the inspector general’s office that the day of the president’s tweet he was baffled by Trump’s reference to Alabama: “(T)hat was the first time when I was wondering why are we still talking about Alabama, you know?”
The dustup came to be referred to as “Sharpiegate” after the president later displayed a National Hurricane Center warning map that had been altered with a black marker to include Alabama in the potential path of the storm. The president is known for his use of Sharpies.
Four days after the tweets, then acting White House Chief of Staff Mick Mulvaney sent Commerce Secretary Wilbur Ross an email after 9 p.m., saying “it appears as if the NWS intentionally contradicted the president. And we need to know why. He wants either a correction or an explanation or both.”
That triggered a series of texts, emails and phone calls involving Ross underlings, especially Department of Commerce Chief of Staff Michael J. Walsh Jr. from 1 a.m. to 3:43 a.m., laying the groundwork for a NOAA statement that came out the next day.
Jacobs said “things went crazy in the middle of the night.”
Then-NOAA communications chief Julie Kay Roberts told the inspector general’s office that Walsh told her “there are jobs on the line. It could be the forecast office in Birmingham. Or it could be someone higher than that. And the higher is less palatable.”
Walsh denied that to the inspector general. The report said there was no credible evidence found to say that jobs were threatened. However, Jacobs told the inspector general’s office he “definitely felt like our jobs were on the line” but that “nobody told me I was going to get fired.”
The eventual unsigned statement from NOAA said: “The Birmingham National Weather Service’s Sunday morning tweet spoke in absolute terms that were inconsistent with probabilities from the best forecast products available at the time.”
Dorian made landfall in North Carolina and had no major impact on Alabama, which is about 600 miles away.
“By requiring NOAA to issue an unattributed statement related to a then-5-day-old tweet, while an active hurricane continued to exist off the east coast of the United States, the Department displayed poor judgment in exercising its authority over NOAA,” the inspector general report said
The report also criticized Roberts for deleting text messages, which is contrary to government document retention rules.
In a statement attached to the report, Walsh said the report’s conclusions “are completely unsupported by any of the evidence or factual findings that the report lays out. The Inspector General instead selectively quotes from interviews, takes facts out of context.”
The White House declined comment. The Department of Commerce attached a letter to the report saying the report doesn’t dispute the accuracy of the Sept. 6 statement that criticized the Birmingham office nor does it find that the agency suppressed scientific communication.
Sen. Maria Cantwell of Washington, the ranking Democrat on the Senate Commerce Committee, said she could not support Jacobs’ nomination to be the full-time, no longer acting, chief of NOAA, saying the report shows Jacobs “failed to protect scientists from political influence.”
Politics with Michelle Grattan: Christopher Pyne on being 'the ultimate insider' – The Conversation AU
Former Liberal Minister Christopher Pyne attracted critics for his political front. But he always had plenty of friends and networks, enabling him often to be a player, if not always a “fixer”.
After his election to the South Australian seat of Sturt at age 25, he went on to hold senior portfolios, notably education and defence, and to stride the parliamentary stage as Leader of the House of Representatives.
In his memoir, The Insider, the former politician provides his take, humorous and candid, on a tumultuous 26 parliamentary years.
In this podcast, Pyne talks about life after politics, and stories from the ‘Canberra bubble’.
“I don’t miss politics at all – because I left happy, and I wanted to go.
“So I’m not one of these politicians that was dragged kicking and screaming. I left when people wanted me to stay, which is a great rarity.”
Pyne is ultra candid about his ambition to be prime minister:
“I think when you’re 15, and you decided you want to be a member of the House of Representatives, you kind of think ‘I’m going to dream big.’ So of course I dreamt to be prime minister”.
Reality, it appears, didn’t hit for quite a while.
“I think that week when Malcolm [Turnbull] was deposed and nobody was suggesting that I should be running for leader, it dawned on me that the generation that was being elected, which was Scott Morrison and Josh Frydenberg, were a generation different to me.”
The semiconductor industry is where politics gets real for Taiwan
One might wonder how something as small as five nanometres – about the width of two strands of DNA – could be of consequence to the complex political relationships between the US, China and Taiwan.
Semiconductor chips are the brains of all our electronics, from mobile phones to cars to fighter jets. And the most advanced chips on the market today have billions of five nanometre switches on them.
Taiwan has a dominant role in the international supply chain for these tiny but strategically vital products. Together with South Korea’s Samsung and Intel from the US, Taiwan is at the cutting edge of semiconductor technology. It is also a major presence in their manufacturing: one Taiwanese company, TSMC, produces about half the world’s annual supply of chips.
The industry has been a diplomatic asset for Taiwan, entrenching US and Chinese interests in Taiwan’s stability and autonomy.
Taiwan’s semiconductor industry has deep links to the US. This is not surprising when you know the history. Taiwan’s sector took off in the 1970s and 1980s when Taipei was looking for a way out of an economic slump caused by the 1973 oil shock. A combination of industry policy and unlikely personal connections with leaders in the Radio Corporation of America saw a generation of Taiwanese engineers trained in the US. Today, almost all major US technology firms have some presence in Taiwan. The US sources its most advanced chips for military hardware from TSMC – chips it is unable to make at home. Taiwan is also the second-largest market for US semiconductor equipment.
But China’s emergence as the world’s largest consumer of semiconductor chips has led Taiwan to develop links there, too. Since the early 2000s Taiwanese semiconductor firms have radically increased sales into the Chinese market. And the benefits of this relationship run both ways. China’s domestic manufacturing meets less than a fifth of domestic demand for chips and is about five years behind the technology frontier. China leans heavily on Taiwan’s manufacturing capacity for the chips vital to its electronics industry, including some of its most profitable export lines.
The Taiwanese semiconductor industry’s vested interests in both the US and Chinese markets have seen it quietly lobby for Taipei to maintain friendly ties with both sides. But Taiwan’s status as a neutral player is becoming harder to maintain. With US-China tensions rising, both fear the influence of the other over their supply of chips.
The US technology war with China, by a combination of both default and design, is pulling Taiwan closer into the orbit of the United States.
Under the Trump administration, the US has become more pro-Taiwan than at any time since it switched diplomatic recognition to Beijing in 1979. This policy is more a confluence of many interests than clear strategic vision. With the White House largely looking the other way and anti-China sentiment running high, pro-Taiwan elements in the US concerned with historical or geopolitical reasons for Taiwan’s continued autonomy have been vocal in shaping policy. And they’ve found support from elements within the national security apparatus who want to exert influence over Taiwan’s technology sector and ringfence it from China.
The US technology war with China, by a combination of both default and design, is pulling Taiwan closer into the orbit of the United States. There have long been reports of US pressure on Taiwanese semiconductor companies to resist sales to China and do more manufacturing in the US. In May, this culminated in both an announcement from TSMC that it would spend US$12 billion on a US manufacturing plant (with an unspecified amount of US government support) and a technical change to export rules.
New export rules in the US designed to target Huawei will have big implications for Taiwanese semiconductor manufacturers such as TSMC. In the past, TSMC earned nearly a fifth of its revenue from sales to China. But much of that has ground to a halt. Because TSMC uses US semiconductor equipment to make the chips it sells, there are now limits on who it can sell to. The rules mean TSMC will be ever more reliant on the US market for sales.
For China, the new rules won’t bite for a little while. Huawei has reportedly stockpiled a year’s supply of chips. There has also been some media speculation about an exemption – will TSMC’s US$12 billion investment in the US buy it some leeway? And a year is a long time in both politics and technology; whether China can negotiate, or innovate, its way out of this dilemma is anyone’s guess.
The ability of Taiwanese semiconductor firms to seek out friendly ties with both the US and China is also made harder by the ideological approach of President Xi Jinping to Taiwan’s status. One might think that China’s dependency on Taiwan for chips might endear it to the status quo. But Xi isn’t such a realist when it comes to Taiwan. Beijing views Taiwan in largely political terms – preoccupied with “the great trend of history” towards unification, as Xi claimed in his January 2019 speech which soured cross-strait relations. This is because ideas of the Communist Party’s legitimacy are tightly bound together with control over China’s territory and historical sovereignty of Taiwan. Save for paying handsome salaries to attract Taiwanese talent, China’s increasingly hostile policy to Taiwan is remarkably at odds with its trade interests.
The technology war, increasingly nationalist trade policies in the US, and ideological hardening in China mean that Taiwan’s ability to keep calm and carry on is getting tricker. And the semiconductor industry is where politics gets real for Taiwan. The industry accounts for around 15% of Taiwan’s GDP, so there’s a lot at stake. Taiwan’s dominance in this tiny but strategically important technology is becoming another layer of complexity in the US, China, Taiwan triangle.
Source: – The Interpreter
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