Is the US ‘Too Big’ for the G7?

Q: Are the concerns of a superpower relevant to the other G7 members? A: Not really.

Maybe it’s time for a superpower group of the US, China, the EU, Russia, and The Commonwealth of Nations to form up, instead of the G7 group that has worked very well until now.

Even the sage Moses who lived 3400-years ago, suggested, “Thou shall not plow with an ox and a donkey yoked together” and the reason is quite clear to every farmer. Being so dissimilar in size and power, both the ox and the donkey will be miserable the entire time they try to plow forward together and the farmer will spend most of his time ‘arbitrating’ disputes between the two and the plowing enterprise will get little actual plowing done.

It’s unfair to the US, it’s unfair to the smaller or weaker members of the G7 club and it’s unfair — even to near-superpowers like Japan and Germany which have far different challenges and causes to ‘plow’ than those of the superpowers.

Steve Hilton: Trump’s criticism of G-7 is ‘unprecedented’ scream the elite -- That’s the whole point of Trump!
Trump’s Criticism of G-7 is ‘Unprecedented’ Scream the Elite – That’s the whole point of Trump! | Steve Hilton, Fox News

Shall I list the ways?

If so, this would become a very long blog post indeed!

For just three examples:

  1. Which of the G7 partners have a negative balance of trade of $862.8 billion for 2017? The entire G7 combined doesn’t have a negative balance of trade anywhere approaching that of the United States.
  2. Which of the other G7 members have an inventory of nuclear warheads like the United States which includes 6450 nuclear warheads; 1750 that are retired and awaiting dismantlement, and 3800 that remain part of the U.S. stockpile?
  3. If we’re talking GDP, the US represents 52.8% of the Group of Seven’s GDP, while the next largest country in the group (Japan) represents 13.3% of GDP, with only Germany at 10% remaining as the only other double-digit GDP member of the G7.

Population figures and economic growth indicators may be even more telling than the above indicators of superpower status.


Should the US Join It’s Own 1-Member Club?

That may be a tempting thought for President Donald Trump and certain members of his administration, but there are common concerns among superpowers that only apply to superpowers (and there’s no doubt the US remains the Number One superpower by a significant margin) and it’s those superpowers that must work together to deliver solutions for their large populations.


If we look at a superpower club of 5 members: The United States, China, the EU, The Commonwealth of Nations and Russia, we’re looking at a group that is roughly comparable to each other and have similar challenges.

Let’s look at our three main indicators, just to be certain:

GDP

Big 5 (Nominal) GDP
U.S.A. --------- $20.3 trillion (USD) (Focuseconomics.com)
China ---------- $13.0 trillion (USD) (Focuseconomics.com)
EU ------------- $19.7 trillion (USD) (IMF)
Commonwealth --- $10.4 trillion (USD) (Commonwealth.org)
Russia --------- $1.72 trillion (USD) (IMF/StatisticsTimes.com)

Although there are some disparities in nominal GDP among the five countries, we must remember that China is on an exponential growth curve while The Commonwealth of Nations statistic (provided by commonwealth.org) is from 2017 and their economic group is also growing at a rapid rate ($13 trillion by 2020). Russia is the outlier in this group, however, as we shall see, that country has other (huge) chips on the table when it comes to retaining its superpower status.

Top 10 Countries as ranked by GDP includes G7 countries. Image courtesy of FocusEconomics.com
Top 10 Countries as ranked by GDP — includes G7 countries. Image courtesy of FocusEconomics.com

Nuclear Warheads

Big 5 Nuclear Warheads
U.S.A. --------- 6450 (Federation of American Scientists)
China ----------  270 (Federation of American Scientists)
EU -------------  300 (Federation of American Scientists)
Commonwealth ---  485 (Federation of American Scientists)
Russia --------- 6850 (Federation of American Scientists)

Although nuclear stockpiles vary, the US and Russia were the main protagonists of the Cold War which lasted from 1950 through 1990 which is why they own far more nuclear weapons than all other countries combined. The only EU country to publish their ownership of nuclear weapons is France, with 300 warheads. The Commonwealth of Nations countries that publish ownership of nuclear weapons include the UK, Pakistan and India.

G7 comparison: Estimated Nuclear Warhead Inventories, 2018. Federation of American Scientists
Estimated Nuclear Warhead Inventories, 2018. Federation of American Scientists

Balance of Trade Issues

Big 5 Balance of Trade (in US Dollars)
U.S.A. --------- $-862.8 billion (2017) (Handlesblatt/IMF/WTO)
China ---------- $+98.46 billion (2017) (TradingEconomics.com)
EU ------------- $+44.45 billion (2016) (Statista.com)
Commonwealth --- $-187.5 billion (2015) (Commonwealth.org)
Russia --------- $+115.3 billion (2017) (Statista.com)

GDP and Balance of Trade among the G7 countries in 2017

While balance of trade issues vary wildly between the United States, China, the EU, The Commonwealth of Nations and Russia, very few countries can play in the triple-digit or even high double-digit space occupied by those nations. Especially when analyzed using their (Nominal) and (Purchasing Power Parity) GDP numbers, these are exceptional nations and groupings of nations, which put them in a different category than other countries.


The Big 5 (B5) A Better ‘Fit’ for the United States, China, the EU, The Commonwealth and Russia

There is nothing wrong with small countries and there is nothing wrong with big countries. But small countries have far different challenges than large countries, and everything happens on a truly massive scale for the bigger countries and in country groupings like the EU and The Commonwealth of Nations.

And those differences cause irritations.

Instead of heads of government trying to plow forward with their challenges and issues while ‘yoked’ to dissimilar and dissimilar-sized partners, why not make it easier on everyone and ‘put like with like’ to gain a more comfortable fit?

It’s so obvious this should be done and the latest G7 meeting proves that the problems in that organization are systemic problems and are the sole cause of divisions between the oddly mismatched countries of that group.


The ‘Big 5’ followed by the ‘Next 20’

Every country stuck in a trade or political grouping that doesn’t match it’s particular talents will suffer. Therefore, the Big 5 must form into a group of their own, and the G20 (minus the by-then departed ‘Big 5’ members) must attract ‘the Next 20 nations’ to their refashioned N20 organization.


Helping Every Country and Individual to ‘Become All That They Can and Should Be’

In that way, the top 25 countries in the world can finally become all that they can and should be instead of being held back by arbitrary, mismatched, or outdated groupings.

And, isn’t that’ what it’s really all about?

!!!

Written by John Brian Shannon | Reposted from JohnBrianShannon.com


Read the next blog post: G7 – Please Save Our Seas!

Is NAFTA a Bad Deal for America?

by John Brian Shannon | Reposted from Letter to Britain

There seems to be only one man in all of America who thinks the NAFTA agreement between the three North American economies is a bad deal for the United States. Which would be a very ordinary thing except that man happens to be the president of the United States of America. At least for now.

The one great thing about the American electoral system is that U.S. presidents can serve only two concurrent terms in office, so no matter how bad or popular a U.S. president is, he or she can stay in office for a maximum of 8 years. Although nothing prevents them from running for their old job once another president has served, other than the fact that American voters have never returned a previous two-term president to office.

That law is a tiny part of what makes the United States exceptional in the world. The most meritorious or most popular presidential candidates rise to the top — but unlike other countries where leaders can serve several terms in office — the American system is refreshed by new leadership every 4 or 8 years. And that’s what makes America great.

‘New blood’, a ‘new vision’, a ‘breath of fresh air’, or however you wish to describe it, occurs at regular intervals. No wonder America is exceptional! It’s too bad they don’t do the same thing with members of the Senate and Congress — and yes, even the office of Mayor in every U.S. city. If they did, the United States would be twice as exceptional on account of all that new blood and fresh enthusiasm.

Alas, because only one office in the land is refreshed regularly, America is great from the top down only — not up and down and in the middle — at least where governance is concerned.


Where Donald Trump is Wrong

President Trump arrived on the scene 13 months ago and with no particular government experience behind him, declared that many things are wrong with America and he’s just the man to fix it. And he may be that man, but only time will tell.

Yet, we’re seeing a man who sees symptoms and sincerely wants to treat the symptoms instead of wanting to solve the underlying condition that created the symptoms in the first place.

Certainly no one can fault Donald Trump for being enthusiastic about America, about America’s history in the world, and no one can deny he’s a breath of fresh air to the Oval Office.

But we need to have a conversation about the present symptoms in order to ascertain what the underlying condition may be in present-day America, and for that, we must travel back in time to see how America lost its way.


When Henry Ford was right: Creating the American middle class by filling a transportation need

Henry thought that ‘everyman’ should own an automobile, instead of only railway barons with their obscene personal wealth able to afford motorized transportation. During a downturn in Ford company fortunes, Henry decided to increase the pay of his workers to $5.00 per day, and was thereafter able to cherry-pick whatever workers he wanted from Louis Chevrolet, Buick, General Motors, Cord, Packard, and others.

Once Henry had created a whole new economic classification which later came to be called ‘the American middle class’ so many people bought Ford vehicles that 16.5 million Model T’s were produced in less than 20 years of production.


The moral of this story? Paying higher wages created ‘the middle class’ — a growing cohort of workers earning good wages and able to afford a car, which catapulted Ford’s fortunes into the stratosphere.


The Post-war Boom

Early in the 20th-century, the U.S. became the most powerful manufacturing nation in the world and surpassed even longtime patent leader Germany as the country that received the most annual patent applications.

This occurred only because of strong patent law in the United States. Any inventor with a worthwhile invention brought their idea to America for one reason — because out of all the countries in the world only the U.S. offered the maximum level of legal protection for their idea, design, system, or machine.

Even German scientists brought their ideas to America to have them registered with the U.S. Patent Office!

For countries other than America, the existence of a strong U.S. Patent Office created a ‘brain drain’ in their own countries, meaning that all their scientists and inventors headed to America instead of registering their contraptions in their home country.

Having received their patent protection in the United States, it was a natural step to have their inventions manufactured in America. Although not its primary mandate, the U.S. Patent Office was often excellent at matching inventors with such suppliers or manufacturers as they required.

It was a clear case of the American government passing the right legislation at the right time to attract the best and brightest in the world.


The moral of this story? Not a tariff in sight!


Because the postwar economy was booming and expectations were high, the Baby Boom generation went on a buying spree that is unparalleled in history

All of which worked to make all those patent-holders and their manufacturing companies obscenely rich. And good for them! When you work hard, you should see a positive return for your effort.

The favourable consequence of powerful U.S. patent protection combined with a huge and growing manufacturing base, created a booming economy and concomitant high consumer confidence which provided an unexpected result — usually about 9 months later.

Yes, during the boom times when one family member earned enough to support an entire family, the birthrate in America skyrocketed, creating even more demand as Americans began to have more children per fertile woman.


The moral of this story? When one breadwinner could support a spouse and up to 4 children, afford a new car every 3 years, a couple could own their own home via a 10-year mortgage and enjoy a refreshing vacation every year, the American economy was operating at full output!


American Foreign Policy in the Postwar Era

In the 41 years leading up to 1974, the Saudi government had been selling their oil to America for only the price of production (sans profit) as their contribution to the Cold War effort.

Interestingly, they were allowed to reinvest their cost of production payments in crude oil deliveries and refined oil products — so although they made zero profit on the crude oil as it came out of the ground — they were able to amass considerable wealth by speculating on oil stocks.

But that ended when it was perceived by the Saudis in 1973 that America was favouring Israel, a country that had never delivered billions of barrels of free oil to America.

When America’s oil supplier felt slighted, they decided that they wanted to get paid for their oil after all. ‘Oh, and, we’re pulling back on our Cold War commitment too.’

Which is why the Soviets thought they could successfully invade Afghanistan and tone the world’s opium supply down to almost zero.

When the Saudis suddenly wanted to be paid for their oil and they simultaneously lowered their Cold War commitment to America, the U.S. economy slowed.

With 20/20 hindsight, the ensuing economic disaster was only a symptom of a bungled foreign policy that caused a dramatic increase in new car registrations of foreign cars (with their better gas mileage) moving from 4% of all U.S. new car registrations in 1970 to 65% of new car registrations by 2017. Not only that, but up to 75% of the parts used in today’s American cars are made in Asia.

Therefore, the problem clearly isn’t NAFTA which came into effect in January 1994.

Here’s how that looks expressed as a math equation:
America -10 trillion dollars Japan +10 trillion dollars
(If you’re not into math, the symbol means ‘therefore’)

It could be argued that the United States took a highly principled stand on account of the people of Israel, but it was America’s decision alone, and it cost America 10 trillion dollars and poisoned relations with their oil-producing and Cold War ally, Saudi Arabia.


The moral of this story? The problem of offshoring American manufacturing jobs began in 1973 due to an American foreign policy decision which took place long before NAFTA had been created. Blaming Japan for American capital flight since 1974, or blaming NAFTA (which wouldn’t be created for 20-years) is disingenuous.


Social problems in 1960’s and 1970’s America: Racism, weak civil rights for women, and the Vietnam War worked to reverse America’s earlier gains

A lost generation occurred in the 1960’s where The People lost faith in their elected representatives, but they didn’t lose faith in the institutions of government.

President Carter worked to restore the faith the American people felt toward the executive branch of government by working on some very noble causes and meeting with some success. President Reagan moved things forward by strengthening the U.S. economy, infusing Americans with newfound confidence by offering loan guarantees to struggling American automobile manufacturers and dramatically increasing military spending.


The moral of this story? President Carter and President Reagan didn’t fix America by blaming other countries — they did it by empowering American citizens with tax changes and supporting American industry with loan guarantees to at-risk corporations, with huge defense spending increases, and plenty of positive exhortations about what made America great in the first place.


Every American, Canadian, or Mexican captain of industry wanted NAFTA back in 1994

If NAFTA was so grievous to be borne, why did almost every CEO in North America want NAFTA?

But some U.S. Congressmen and Senators were nervous prior to NAFTA on account of so many job losses in the American economy since 1974 and they were concerned that even NAFTA could go wrong. And let’s face it, some members were creating a negative stir so that new U.S. president Bill Clinton would feel compelled to direct more federal funding to their districts in advance of the accord, in case NAFTA failed.

In reality, the only U.S. and Canadian companies that lived in fear of NAFTA were ones that didn’t keep up with the times. In the booming 1980’s and 1990’s economy, some companies decided they wouldn’t modernize and consequently continued to spend millions per month on electricity costs (for example) instead of reinvesting their (then record) profits in newer, energy-efficient factories or foundries.

For other corporations in the mergers era, it seemed a time to slow capital spending in order to maintain high profit margins and pay record-high dividends to their shareholders. But when the bull market finally came to its end, many businesses were suddenly cash poor and couldn’t afford a new, energy-efficient factory or foundry. Which was brilliant tactical thinking, but abysmal strategic thinking.

So… the question is; If corporations employ poor strategic thinking, should taxpayers be forced to bail them out?


Why should U.S. taxpayers bail out industries that choose high shareholder returns over sound financial management?

In the 1970’s and 1980’s, some American automakers needed the federal government to subsidize them with billions of taxpayer dollars to save them from implosion. That’s only one example out of thousands of U.S. companies that accepted or have lobbied for federal subsidies. Canada is just as bad as the United States on this point. Governments in both countries spend more on corporate welfare than they do on citizen welfare — times two!

Now in 2018, President Trump wants American taxpayers to pay even more for their cars (and anything else made of steel or aluminum) via a 25% tariff on steel imports and a 10% tariff on aluminum.

For one example, Trans Canada Pipeline will be forced to pay the tariff on the steel pipe for the proposed Keystone XL pipeline. Although steel is a small part of the overall cost of building a pipeline, the cost of the multi-billion dollar project will now rise by 5% or more. Just for comparison, 5% on 10 dollars is 20 cents — but 5% on 5.4 billion dollars adds 270 million dollars to the overall project cost.


The moral of this story? While Donald Trump’s motives are obviously ultra-pure, tariffs are simply a de facto form of taxation that U.S. citizens will pay because a few American corporations preferred high profits/high shareholder returns over competitiveness


Is there ever a good case for tariffs?

In a word, yes. Everything that’s imported into the U.S. (or any country) should face a globally standardized 5% tariff because every government needs money to improve port facilities, to streamline customs, and to maintain the transportation corridors that are essential to trade flows.

Even countries with free trade agreements like the NAFTA countries should institute a standardized 5% tariff on every good that crosses their border — and be required by legislation to use that money to improve transportation corridors and border security.

Consumers would find that presently high tariff items would drop in price, and zero tariff items would rise by 5%, but the trade-off would be astonishingly better roads, bridges, tunnels, rail links, airports and seaports, complete with better security. Every citizen would like to spend fewer hours per week stuck on congested highways, in airports, and enjoy faster and more secure delivery of goods.

Suddenly we wouldn’t be talking about ‘trade wars’ we’d be talking about improved trade, improved infrastructure, and a complete standardization and levelization of tariffs between every country.

And instead of heated rhetoric from politicians, we’d become more efficient throughout our countries and less efficient corporations wouldn’t continue getting rewarded for not re-investing in their businesses.

This Week in Brexit: Trump Promises a Trade Deal

by John Brian Shannon | Reposted from LetterToBritain.com

This Week in Brexit

On the sidelines of the G20 Hamburg summit, U.S. President Trump found time to meet with UK Prime Minister May and to offer welcome words that the United States will sign a bilateral trade deal with the UK as soon as Brexit is complete.

It’s very good news for the UK and also for PM Theresa May (who has had a rough time in domestic politics of late) and it was obvious that the U.S. president went out of his way to assure Ms. May that a reciprocal trade agreement — one that works for both America and for Britain — is one of his administration priorities.

So much of the UK’s post-Brexit success will hinge on bilateral trade accords because no matter how good the final Brexit agreement, there will be some amount of economic adjustment for Britain in the months following Brexit. A quick trade agreement with the United States will not only ease the Brexit transition, but also  improve the UK (and America’s) economy indefinitely.

It was a classy thing for Mr. Trump to do for Theresa May knowing that her domestic political fortunes have taken a hit. Let’s hope the Prime Minister is able to return the favour at some point during the Trump administration. That sort of respect makes for strong allies.

During WWI, but especially during WWII the relationship between America and Britain was raised to a very high level by Prime Minister Winston Churchill and President Harry S. Truman, and in the postwar era during a time of unprecedented economic growth, President Ike Eisenhower continued the wise course set by his predecessor.

However, it could’ve so easily gone the other way if the leaders hadn’t gotten along.

Both sides would’ve missed geopolitical opportunities of huge importance such as the formation of NATO, the establishment of the Nuremberg trials and the creation of other institutions and agreements such as Bretton Woods and the IMF. Without the ambition of the UK and the power of the United States those things simply wouldn’t have occurred.

Millions of Americans and Britons prospered over the past 72 years because their postwar political leaders *didn’t drop the ball* and made a conscious decision to *make the best of the postwar relationship* for their respective people.


What Kind of Free Trade Agreement Should Prime Minister May and President Trump pursue in the post- Brexit timeframe? (Hint: A ‘Win-Win‘ agreement)

Present-day Prime Minister of Canada Justin Trudeau was still in school when Canada first approached the European Union to ask about a bilateral trade deal, and that many years later it still hasn’t come into effect. (It’s about to, they say)

It will have taken eight years to hammer out and begin to abide by, the Comprehensive Economic and Trade Agreement (CETA) which arrives so late in the game and market conditions do change over time (remember way back to the 2008/09 financial crisis when the CETA agreement was first floated?) that some of the hard-won negotiating points are no longer relevant and may never be finalized.

Canada, EU to provisionally apply CETA in September (CBC)

I’m sure it’s a fine agreement and congratulations are due. However, with America and Britain at the controls of a mutually beneficial trade agreement between two friendly Anglophone nations, it should take less than a year from first discussion to signed agreement.

Though we don’t know what shape an Anglo-American trade agreement might look like from our vantage point in July of 2017, probably the best idea would be for both sides to embrace reciprocity and fair dealing in all trade matters as a way to enhance both economies, and as a way to later attract other Anglophone nations such as Canada, Australia and New Zealand to sign on to such an agreement.

Hitting the Right Note with Commonwealth of Nations member India

What a great thing it would be if all Commonwealth nations eventually agreed to sign on to a U.S. / UK trade agreement. Commonwealth of Nations member India has 1.5 billion consumers alone!

Both America and Britain could add 5% to their respective GDP just on the improved trade flows of doing business in the booming Indian economy.

“Although India’s rapid population growth is part of what accounts for the forecasted jump […] that is only part of the story. Drastic improvement in terms of per-person productivity due to capital investments and better technology will play an even more important role.

“PwC predicts that India’s economy will grow by about 4.9% per year from 2016 to 2050, with only 0.7% of that growth caused by population growth.

“India’s economy is currently the third-largest in the world, and is expanding at an estimated annual growth rate of 7.1% for the 2016-17 financial year. —  India’s economy is forecast to surpass that of the US by 2040  (Quartz)

Both America and Britain just need to hit the right note with India — a respectful note — in order to profit from the massive growth that is available in that burgeoning country.

Working out an Anglo-American trade agreement with a view to adding all Commonwealth member nations within 24 months, guarantees that other powerful trade blocs don’t beat the Anglo-American alliance to supply the rocketing Indian economy with much-needed goods and services.

Projected growth for selected countries – As measured by Purchasing Power Parity (PPP)

UK Brexit free trade deal with United States and with Commonwealth partner India
UK Brexit free trade deal with United States and with Commonwealth partner India.


It’s so obvious but still worth repeating; ‘Hitch your wagon to the fastest horses if you want to place well in the race.’

Britain has the Commonwealth of Nations connections, Britain needs a trade agreement with NATO ally America and with Commonwealth partner India, and the United States wants to increase mutually beneficial trade with Britain and its 2-billion-strong Commonwealth partners.

In all of human history, rarely has such a synergistic match-up suddenly appeared where different but extremely valuable benefits are available to all three parties.

Just as nobody predicted the massive Japanese economic boom which began to form the day after WWII ended, an Anglo-American trade agreement, followed by a Commonwealth trade agreement (before other trade blocs grab the low-hanging fruit!) could match or exceed the massive performance statistics of the postwar Japanese economy.

Dear United States and Commonwealth of Nations, Let’s not miss this rather obvious ‘Win-Win-Win’ opportunity!

U.S. World Leader In Clean Energy, Electric Vehicles

America Leads World In Clean Energy, Electric Vehicles, and High Energy Consumption

The U.S. leads the world in investment in Electric Vehicles (EV) and clean energy Next 10 Green Innovation Index, International Edition for the first time analyzes and ranks the economic and energy performance of the world’s 50 largest greenhouse gas emitting nations.

While the U.S. ranks high in investment in clean energy and electric vehicle ownership, it… Continue reading U.S. World Leader In Clean Energy, Electric Vehicles

California Approaches 10 Gigawatts of Installed Solar Power

To put this number in context, California’s 10 GigaWatts of installed solar power provides electricity to 2.5 million homes — while the entire United States of America has 20 GW of installed solar power.

In addition to lowering airborne emissions, California’s renewable energy policies have added 15,000 renewable energy jobs to the state economy. — Editor’s note.

“From an environmental perspective, solar power in California is helping to offset more than 11.7 million metric tons of carbon emissions, which is the equivalent of removing 2.5 million cars off California roads and highways.” — Rhone Resch, President and CEO of SEIA

California, America’s solar leader, stands poised to become the first state in the nation to have 10 gigawatts (GW) of installed solar capacity – enough to power nearly 2.5 million homes, according to the recently-released U.S. Solar Market Insight 2014 Year in Review. FYI: In 2014, America reached a solar milestone with 20 GW of solar… Continue reading California Approaches 10 Gigawatts of Installed Solar Power