Is Growth Possible in a Post-Brexit Economy?

“KPMG predicts economic growth of 1.4 per cent next year, but cuts this to 0.6 per cent if Britain leaves the EU without a deal.”The Times

While some firms predict slower than normal growth for the UK economy in the post-Brexit timeframe, it’s always good to reflect on the assumptions that forecasters employ in creating their reports and why such forecasts can cause more harm than good.

  1. If you tell your employees that, ‘the chips are down, the economy is sinking, and corporate belt-tightening isn’t far off’ they are likely to respond in a negative way. Some may look for other employment, some will opt for early retirement, while others spend more time in the staff room talking with their coworkers about their employment concerns than getting their work done. Which means such reports can actually cause the negative outcome they’re warning about. It’s human nature to perform to a predicted level instead of trying to exceed expectations. There are few exceptions to this behavior and they are called names like; Olympic athlete, Pulitzer Prize Winner, President, or Astronaut who have the innate ability to ‘power through’ the negative times without losing momentum.
  2. Such reports deal with known inputs only. For example, a zero-tariff trade deal with the Americans may seem far off today, but by 2020 it may already be signed. And not only the U.S., other political and trade blocs are likely to sign trade deals with the UK following Brexit. The AU (Africa), MERCOSUR (the South American trade bloc), the Pacific Alliance (several Pacific nations), the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) nations, ASEAN (the Association of Southeast Asian Nations), The Commonwealth (Commonwealth of Nations), and China, are likely to expand their trade links with the UK after it departs the European Union. America and those seven trading areas will have a combined total of 7.0 billion people by 2020. That’s a lot of potential consumers, and the massive opportunities presented by signing zero-tariff trade deals post-Brexit are absent in most economic projections by design. Even if the UK were to sign only one free trade deal (with the U.S., for example) it could improve UK growth by a full 2 per cent or more. Presto! A shiny new UK economy!
  3. “Now we’ve got them!” While economic forecasting provides vital information for policymakers, Brexit negotiators aren’t helped by the news that growth will slow even in the face of a ‘good Brexit deal’ and will slow moreso in a ‘no Brexit deal’ scenario. It’s the kind of report that makes Michel Barnier’s day! KPMG is certainly one of the most respected firms around, but if you’re a Brexiteer and a report like this has been released to the public instead of it remaining in the hands of policymakers it plays with your mind; “Are they working for the UK’s best interests or are they working for the EU’s best interests?” (and) “Who commissioned (who paid for) this report and what parameters were used?”

So, while the good people of KPMG do their best to provide policymakers with the best near-term assessment of the UK economy, making such reports public can actually cause the negative things to occur about which the report warns.

That’s why policymakers everywhere must be ahead of the curve and treat all such documents as ‘the worst-case scenario’ without exception.

Now that UK Prime Minister Theresa May has been reliably informed that the worst the UK can do is 0.6 per cent growth between now and 2020, it should be an easy matter to arrange a number of free trade deals and blow the doors off that projection by 3 or 4 per cent by 2020.

Looking at this in the proper context means accepting that exiting the European Union is merely a necessary stepping stone to get the UK to 4 per cent growth by 2020 — which should result in Theresa May keeping the PM’s chair for at least one more term and with all past ‘political sins’ forgiven.

Not a bad deal Theresa, if you’re up for it! 🙂

Written by John Brian Shannon

How Canada and the UK Could Work Together Post-Brexit

Until the official Brexit date of March 29, 2019 the UK remains in the European Union — which means that Britain remains a party to the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

And the CETA accord is a very fine agreement (as it should be, because it took 7-years to negotiate) but it may take another year or two to become fully implemented. At the moment CETA is only partially implemented, but eventually 98% of tariffs between Canada and the EU will be eliminated.

Once Brexit happens on March 29, 2019, the UK will cease to be a CETA signatory and something else (a ‘drop-in’ agreement) will need to replace it.

That is the topic of this blog post.

Enter the United States, Canada, and NAFTA.


Where’s Canada on the International Trade Map?

Canada is a surprisingly strong exporting country. With a population of only 36 million and a territory that measures 3.855 million square miles, it means the country is practically empty.

Across this huge landscape are fields of crops larger than the entire UK, but Canada’s few cities are large. In fact, the Greater Toronto Area (the GTA) is larger and has a greater population than the New York Metropolitan Area.

And it’s an exporting superstar; Making it the 11th highest exporting nation in the world.

“Canada is currently the fourth largest exporter of cars in the world and the ninth largest auto producer in the world, making 2.1 million cars a year. Trade with the U.S. is by far the most powerful driver for the automotive sector.”Export Development Canada


What if There’s No New NAFTA Agreement?

If the NAFTA agreement falters due to insufficient efforts between U.S. and Canadian negotiators Canada will end up producing cars for itself — which means it won’t be exporting 1.8 million cars to the United States annually once NAFTA is terminated (or) once President Trump slaps a 25% tariff on Canadian cars exported to the United States.

Which means a lot of Canadian autoworkers are going to become unemployed the day after that announcement.

Which means that Canada (insert drum roll here) needs a ‘Plan B’.


President Trump Isn’t ‘Being Evil to Canada’ He’s Protecting American Interests Because That’s His Job!

You can’t blame him for that. For goodness sake he’s the President of the United States, not of Canada.

But Canada can’t sit idly by and wait for the world to end. The country must pick itself up and get on with business.

And the best way to do that is to respectfully approach the UK and inform them that it’s likely NAFTA will be terminated or changed in ways that result in Canada having an excess auto manufacturing capacity of up to 1.8 million units per year.

Such manufacturing capacity could be very useful to the UK government and to UK industry.


How Canada and the UK can Work Together for Mutual Benefit

The cost of living in the UK is much higher than it is in Canada, therefore wages in the UK are higher than in Canada.

And it’s the reason why only premium car lines are built in the UK where the high labour cost for exceptional hand-built cars are reflected in the final price and nobody minds paying extra. See; Aston Martin, Jaguar, Land Rover, etc.

Even Rolls Royce and Bentley were forced to move to continental Europe because they couldn’t afford the high labour costs of UK workers and the costly land/building/business costs of manufacturing cars in the United Kingdom.

Post-NAFTA, huge opportunities exist for Canada to export lower-priced GM, Ford, and Fiat Chrysler (FCA) cars and trucks to the UK — freeing-up huge amounts of disposable income for Britons.

Which means that saved money will be spent elsewhere in the UK — whether on home renovations, tuition, school supplies, vacations or investments — because it isn’t going anywhere (it isn’t going to magically vanish!) it will simply be spent on other items.

Any Canadian-built vehicles that are exported to the UK over what the UK market can sustain can be forwarded to Commonwealth of Nations countries by UK re-exporters.

India alone has a population of 1.32 billion and its economy is rising fast to become the third-largest consumer economy in the world. There’s no lack of demand for cars and trucks in the Commonwealth.

A Must Read: India Poised To Be Third Largest Consumer Economy (Forbes)

All of which works to help the UK economy.


Trump Wins, Trudeau Wins and May Wins!

President Trump wins because he will have prevented Canada from exporting 1.8 million vehicles to the United States annually, and American factories (meaning American workers) will need to fill that demand gap, Prime Minister Trudeau wins because he will have saved the Canadian jobs associated with the manufacturing of those 1.8 million cars and trucks, and Prime Minister May wins because she will have ushered in three new lines of lower-priced vehicles for UK consumers and those savings will translate into higher levels of disposable income for British consumers that can be spent elsewhere in the UK economy.

It’s so easy when you know how…

Written by John Brian Shannon

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!

The Iran Nuclear Deal: Obligation or Opportunity?

by John Brian Shannon | Reposted from JohnBrianShannon.com

It’s always helpful to look at a country’s actions over the past 200 years to help understand what its intentions may be here and now, and in the future.

The burgeoning but relatively isolated country of Iran hasn’t militarily attacked another country for over 200 years, and it was Saddam Hussein’s Iraq that militarily attacked Iran in September 1980 — a conflict that finally ended in August 1988 with 1 million casualties and an economic cost of $680 million to $1 trillion dollars — with no clear winner and no benefit to either country.

After all that blood and treasure, no benefit to either country(!) although via the UN-sponsored peace accord and as a penalty to Iraq for starting the war, Iran gained access to the Shatt al-Arab waterway which runs into the Persian Gulf.

Since 2000, Iran has purportedly financed organizations (some listed as terrorist organizations, and others not) throughout the Middle East and most recently in Syria, Iraq, and perhaps Lebanon, in an attempt to exert some control on the various forces operating around their region. (Every country uses various methods to control what happens in its own region, so no news there)

But nothing captures the world’s attention like the Iran nuclear deal.

U.S. President Donald Trump says the deal is a bad one for the West and shouldn’t have been signed and wants to walk away from the deal, reserving the right to act unilaterally if he feels the country is a danger to the U.S.A. or its Middle East allies.

Last week, France’s President Emmanuel Macron flew to Washington to meet with the U.S. President to convince him to stay in the deal or to embrace a ‘third way’ which means renegotiating some of the agreement to better suit U.S. concerns.

Iran barely signed the previous agreement… so it will be interesting to see how the U.S. can get everything it wants from a renegotiated deal while still obtaining Iran’s signature to a new agreement. A deal isn’t a deal unless both sides sign on the dotted line.


Why Would the U.S. Care About Iran? (and Syria, for that matter)

From a strategic perspective, there isn’t a country in the world that could be less important to the security of the United States than Iran, and ditto for Syria.

Neither country has the kind of military that could threaten America, nor could they project their power anywhere near the North American continent.

Unless the United States is actively working for Israel — a country which has an irrational fear of Iran (again, Iran hasn’t invaded any other country for over 200 years) and is willing to spend billions or even another trillion dollars to wage another Iraq War-style conflict against Iran, there’s no reason for the U.S. to have any dealings with Iran whatsoever.

If the United States is actively working for Saudi Arabia — a country that views Iran as an unwelcome competitor in the race to dominate the region, the same advice applies. Why should the U.S. spend multi-billions and sacrifice thousands of young soldiers to satisfy the Saudi ambition to be the local hegemon?

Iran is a regional power at best, and will remain so for approximately the next 30-years as it hasn’t the capacity to be anything else.


Why is Iranian Oil in Such High Demand?

It’s not like Iran is withholding oil deliveries. On the contrary, Iranian oil is easily obtainable with a phone call — the country is highly motivated to sell every drop of oil due to high spending on social programmes by the Iranian government which are largely funded by oil revenue.

And Iran’s crude oil is rated either #2 (sweet) or #3 (semi-sweet) which means it’s in high demand around the world. Global oil producers have already pumped all their #2 sweet crude out of the ground years ago; only Iran and Venezuela have significant reserves of sweet crude in the 21st-century.

As for oil refineries, they need Iran’s (or Venezuela’s) #2 sweet crude oil to blend with the oil supplied by their producers which is almost always #4 (sour) or #4.75 (very sour) like the Canadian oil sands product.

Most refineries won’t accept sour crude oil unless plenty of #2 or #3 sweet crude is blended into the sour crude. It’s just too toxic to refine ‘sour’ as it requires a much more stringent maintenance protocol, meaning the refinery needs to shut down and go into ‘maintenance mode’ more often. That downtime represents a significant loss of revenue for oil refineries.

Therefore, as long as Iran continues to ship huge quantities of sweet crude, the United States should be facilitating that oil business instead of trying to curtail it.


The EU View of Iran is a Mature View

Say what you want about the Europeans, but they don’t allow themselves to be used by countries like Israel that have an irrational fear of Iran and want to use the United States and the EU to keep the Iranians ‘down’ and in their ‘proper’ place and thereby become the regional superpower, or countries like Saudi Arabia that want to use the United States and the EU to keep the Iranians ‘down’ and in their ‘proper’ place and thereby become the regional superpower.

To oversimplify the EU view; As long as Iran’s sweet crude continues to flow (it is) and as long as Iran isn’t actively invading any other country (it isn’t) then there’s no reason to use some imagined breach of the Iranian nuclear deal to launch another trillion dollar war in the Middle East. And, as always, the EU continues to refuse to allow itself to be used by regional powers such as Israel and Saudi Arabia.

In the final analysis, the EU’s position on the Iranian nuclear deal is the most enlightened of all and it is the view the United States should support.

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.