Mixed trade deal and financial news

It is difficult to predict what the longer term effects of all this might be.

Whether trade deals or agreements can be reached between the US and Canada and also with China, and also with the EU, will make a difference. In the meantime, the trade wars over tariffs with US subsidies to compensate will continue to disrupt markets.

Trump threatens countries who don’t negotiate ‘fair trade’ deals with tariffs

The United States negotiated a wide ranging trade deal with eleven Pacific rim countries in the Trans-Pacific Partnership Agreement.

Donald Trump withdrew the US as son as he became president. The eleven remaining countries went on to ratify the agreement without the US. Since then Trump has reconsidered – Trump Proposes Rejoining Trans-Pacific Partnership – but hasn’t done anything more than pontificate.

Trump has also attacked other trade agreements and trading arrangements, including with:

With all this chaos going on Trump has just issued another  threat:

Trump may succeed in bullying some countries into better deals for the US, but this ultimatum approach is not good for getting mutually beneficial and long lasting trade agreements.

And it is not good for international relations generally.

Playing the tough guy (except with Russia) may keep pleasing Trump’s dedicated base supporters,

And this is also having an impact on the US, with farm subsidies, already a major factor in trade issues, set to increase.

WSJ: Trump Administration to Offer About $12 Billion in Farm Aid to Ease Concerns Over Trade Disputes

The Trump administration on Tuesday is expected announce a plan to extend some $12 billion in emergency aid to farmers amid growing concerns that the U.S. agricultural sector could suffer from President Donald Trump’s escalating trade dispute with allies…

US agriculture has long been bolstered by subsidies and tariff protection – and still needs more aid to survive. Nuts.

WSJ: The Many Ways Trump’s Trade Disputes Are Affecting the Auto Industry

Auto-industry representatives are expected to argue during a U.S. Commerce Department hearing Thursday that President Donald Trump’s proposed tariffs on auto imports would cost jobs and increase car prices.

The White House in May asked the Commerce Department to investigate whether it could use a national-security law to impose tariffs of up to 25% on imported vehicles and car parts. Mr. Trump has argued trade barriers are needed to pressure manufacturers to build more goods in the U.S. and expand factory jobs.

WSJ editorial: Trump Rides a Harley—to Europe

Donald Trump’s trade war has been an abstraction for most Americans so far, but the retaliation has now begun in earnest and the casualties are starting to mount. The President’s beloved stock market took another header Monday on news of more restrictions on investment into the U.S., and the Dow Jones Industrial Average is now down for 2018.

The rest of the world can’t avoid being affected by Trump’s trade interventions and tariffs, but at least they can trade amongst each other. In the meantime Trump is isolating the US, and burning a lot of diplomatic and good faith bridges.

Trump’s trade chaos could get very messy, and not just with trade wars.

Half a billion dollars spent on movie making subsidies

Over half a billion dollars has been handed out to movie makers to encourage them to come to New Zealand.

Is this money well spent? Or is it subsidising the already rich?

Matt Nippert (Herald) – Inside Wellywood: How NZ taxpayers forked out $575 million for Hollywood to film here

Act leader David Seymour isn’t willing to dance around this issue of whether subsidising Hollywood’s costs – including for their celebrity starlets – is worthwhile: “I think New Zealanders can decide for themselves whether they feel good about likely having given Scarlett Johansson $3m.”

“Every dollar spent on subsidies is a dollar that can’t be spent elsewhere. Who amongst us believe politicians are the wisest at investing our dollars?”

An otherwise boosterish recent government evaluation of the latest iteration of the subsidy scheme, released yesterday, found $177.1m in grants paid out over the past three years resulted in a significant economic boost for the country but only generated $126.9m in additional tax revenue, costing the government $50m.

It isn’t stated how widely additional tax revenue was considered in that equation. It would be difficult, for example, to quantify the financial and tax benefits that tourism gets out of movies made here.

While Seymour put a firm foot forward in opposing the decades-old scheme, Grant Robertson, the Minister of Finance but perhaps more saliently member for Wellington Central – the location for two-thirds of the country’s subsidised film production – was keen to stay light on his feet.

Robertson wasn’t willing to weigh in on whether ScarJo was worth it, but said criteria letting productions qualify for the maximum subsidy had “been tightened in recent years”.

“I think it’s an area we want to be in. There are obviously always limits to how much you put in – what the scale of any subsidy scheme might be – but from my perspective, New Zealand has done well, produced good people, and this is part of being in that particular industry,” he says.

Sounds a bit like Labour’s immigration rhetoric while in opposition turning around to a more pragmatic approach in Government.

There’s a lot more about it in the Nipper article, and Rod Emmerson has his take on it too:

WTO agreement to eliminate agricultural export subsidies

A World Trade Organisation conference in Kenya has agreed to eliminate the ability of WTO members to subsidise their agricultural exports.

This will benefit New Zealand as we are one of the few major agriculture traders who don’t use subsidies.

NZ Herald reports in Export deal will boost dairy prices, Fonterra says.

Fonterra chairman John Wilson said the historic breakthrough would be good news for dairy farmers.

“For years the use – or even the threat – of export subsidies have resulted in world dairy prices below their true level, reducing returns to dairy farmers,” Wilson said.

It should also help with our meat, wool and other agricultural exports.

A World Trade Organisation ministerial conference held in Kenya and attended by New Zealand Trade Minister Todd McClay has agreed on the WTO Nairobi package, which will eliminate the ability of WTO members to subsidise their agricultural exports.

That is an outcome successive New Zealand governments have sought for decades, with trade envoys identifying agricultural subsidies, along with tariffs, as one of the biggest obstacles to free trade.

McClay said it had been illegal to subsidise the exports of industrial goods for more than half a century, and it was a major achievement to have that extended to agriculture.

“This outcome directly benefits New Zealand agricultural exporters who have to compete in some markets with subsidised goods.”

New Zealand has led the way in free trade and has become competitive in an uneven playing field. As the rest of the world moves in the same direction our trade will benefit more.

A survey by the Worldwatch Institute last year showed New Zealand’s largely subsidy-free status was not the norm – and that the top 21 food-producing countries paid out an estimated US$486 billion ($722 billion) in farming subsidies in 2012.

China paid US$165 billion in 2012, mostly to support rice and wheat farmers, with Japan paying US$65 billion, the European Union more than US$100 billion and the United States $30 billion.

That’s huge subsidies that will have distorted pricing.

Federated Farmers National President William Rolleston said it was a positive and potentially significant deal. “Given the scale and significance of New Zealand’s agricultural export earnings, the removal of any instrument that can distort market forces and disadvantage our exporters is an important step forward,” he said.

“Achievements at a WTO level also remove the need to develop bilateral solutions with individual trading partners, so we hope there are more deals of this nature to come from the WTO.”

The deal completed a year of important international wins in what have been difficult market conditions for much of New Zealand’s farming sector, he said.

Agricultural production and markets will always have ups and downs, but this should reduce the impact of the downs and boost the returns from the ups.