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Global Protection and Subsidies| Analysis and Commentary
Global protectionism and trade wars are on the rise as governments try to protect domestic industries and jobs. Protectionist policies like tariffs restrict international trade but can negatively impact consumers through higher prices. While protectionism aims to help local businesses compete, it can backfire and hurt economic growth if other countries retaliate. To reduce tensions, countries need to address unfair subsidies and find balanced multilateral trade agreements through organizations like the WTO.
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Global Protection and Subsidies| Analysis and Commentary
- 1. GLOBAL PROTECTIONISM AND GDP GROWTH PAULYOUNG CPA CGA APRIL 9, 2019
- 2. PAUL YOUNG -BIO • CPA, CGA • SME – Risk Management • SME – Close, Consolidate and Reporting • SME – Public Policy • SME – Financial Solutions • Former Lecturer – CGA Ontario – Public Finance, Advance Accounting, Finance and Advance Information Systems Contact information: [email protected]
- 3. OVERVIEW This presentation looksprotectionism policies when it comes to merchandise trade. I said back in 2017 that world was headed to more protectionism policies and trade wars. The trade wars has escalated as USA has moved forward with a string of tariffs on imports like steel and aluminum. USA has also raised concern with theft of IP that is also leading increase trade tensions between USA and China
- 4. AGENDA • What isprotectionism • Issues with protectionism • Top exporting countries • World GDP Growth • IP Theft (Most Protective vs Less Protective • China and USA Trade • Canada and Trade Deficits • Blog – Protectionism • Blog – Canada and Trade • Trump and USA Trade • Trump and EU • Business Subsidies • Solutions
- 5. WHAT IS PROTECTIONISM Protectionismrefers to government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition. Typical methods of protectionism are tariffs and quotas on imports and subsidies or tax cuts granted to local businesses. The primary objective of protectionism is to make local businesses or industries more competitive by increasing the price or restricting the quantity of imports entering the country. Source - http://www.investopedia.com/terms/p/protectionism.asp
- 6. ISSUES WITH PROTECTIONISM Manycountries are receiving pressure at home to create jobs. The problem is that government cannot create jobs directly as that is up to private sector. Government has a role and that is to do with policies, like taxation or regulations or trade/investment agreements with various countries around the world. Some countries artificially keep their currency low as part of trying secure foreign direct investment. Many countries feel these countries that are using labor and/or currency rates to keep their costs down are not acting fairly as such will look at counter measure through the form of tariffs/duties. Some countries artificially control investment by putting restriction on ownership. Foreign ownership restriction along with business subsidies can lead to companies within those countries having an unfair advantage over companies in other countries. Consumers can pay higher prices due to import taxes
- 7. GLOBAL PROTECTIONISM Source -https://www.cnbc.com/2019/02/05/un-warns-of-currency-wars-and-protectionism-if-trade-war-escalates.html
- 8. GLOBAL TRADE PROTECTIONISM Source- https://www.washingtonpost.com/news/theworldpost/wp/2018/11/12/wto-2/?utm_term=.c7058dcb14cf Washington Post – November 12, 2018
- 9. PROTECTIONISM – GLOBALCONSUMER • Source - http://www.jsonline.com/story/opinion/contributors/2017/04/13/roth-donald-trumps- protectionist-trade-inclinations-hurt-wisconsin/100413028/ In contrast, hiking taxes on imports — as Trump has signaled — is regressive and serves to hurt consumers, particularly the working class, by forcing American consumers to pay higher prices. Whether it is a tariff or the BAT tax, consumers ought to know that the end result will be higher prices on cars, clothes and Coronas. Milwaukee Journal-Sentinel – April 13, 2017
- 10. IP THEFT Source -http://www.theglobalipcenter.com/wp- content/uploads/2017/02/GIPC_IP_Index_2017_Report.pdf Best Worse
- 11. TOP EXPORTING COUNTRIES Source- http://www.worldatlas.com/articles/exports-by-country-20-largest- exporting-countries.html FORECASTED GDP GROWTH Source - https://www.oecd.org/.../Growth-has-peaked-amidst- escalating-risks-economic-outloo...
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- 14. GDP GROWTH/COMMODITY PRICES Source– Scotiabank
- 15. USA VS CHINA TRADE2016 Exports $116B Imports $463B Deficit ($347)B New Trade 2017 • $43B Alaska LNG • $37B Aerospace • $170 Other
- 16. USA AND CHINATRADE WAR Source - https://www.industryweek.com/economy/trump-xi-agree-temporary-truce-bid-contain-trade-war?NL=IW-07&Issue=IW-07_20181203_IW- 07_943&sfvc4enews=42&cl=article_1_b&utm_rid=CPG03000001519274&utm_campaign=31183&utm_medium=email&elq2=c02fc733fbff47a2a5d7c5e7ac45d037 Industrial Week – December 3, 2018
- 17. CANADA TRADE DEFICIT Source- Stats Canada Issues: • More taxes (Carbon Taxes) • Tax hikes (Payroll Taxes, Income Taxes, Small Business Taxes) • High hydro costs • Pipelines approved, but not built • Lack of capacity to expand exports (Ports, pipelines, roads, bridges) • No new trade deals (Emerging Markets) • Pushing social agenda (Agenda 2030)
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- 19. BLOG - PROTECTIONISM • Whatis Protectionism? • Protectionism refers to government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition. Typical methods of protectionism are tariffs and quotas on imports and subsidies or tax cuts granted to local businesses. The primary objective of protectionism is to make local businesses or industries more competitive by increasing the price or restricting the quantity of imports entering the country. • Source - http://www.investopedia.com/terms/p/protectionism.asp • • What causes protectionism? • Many countries are receiving pressure at home to create jobs. The problem is that government cannot create jobs directly as that is up to private sector. Government has a role and that is to do with policies, like taxation or regulations or trade/investment agreements with various countries around the world. • Some countries artificially keep their currency low as part of trying secure foreign direct investment. Many countries feel these countries that are using labor and/or currency rates to keep their costs down are not acting fairly as such will look at counter measure through the form of tariffs/duties. • Some countries artificially control investment by putting restriction on ownership. Foreign ownership restriction along with business subsidies can lead to companies within those countries having an unfair advantage over companies in other countries. • • Why is the world heading to more protectionism? • Slow growth globally which is impacting both exports and the domestic markets for various countries. • New government leadership like Trump in the United States ran on platform to create jobs. New government can lead to change in policies, like reducing taxation or reducing red tape or tariffs/duties on imports.
- 20. BLOG - TRADE •http://www.canadianmanufacturing.com/exporting-and-importing/canada-u-s-trade-not-broken-no-need-trump-fix-freeland-says- 181024/?custnum=11196356799&title=&utm_source=CMO&utm_medium=email&utm_campaign=161222B • • Key Quote “I think the reality is the trading relationship with Canada is the farthest possible thing from being broken. It is very balanced and mutually beneficial” • • Fact: • Mexico has leapfrog Canada in terms on trade with the United States - http://www.huffingtonpost.ca/2016/12/07/mexico-us-trade- canada_n_13487730.html . “According to data from the U.S. Commerce Department, trade in goods between the U.S. and Mexico amounted to US$245.3 billion this year through October, while U.S.-Canada trade totaled $230.4 billion” • Canada is imposing carbon taxation and United States is not - http://www.cme-mec.ca/download.php?file=58ju7z2st.pdf – Canada needs to be competitive in terms of taxation as well as regulations. Business investment by companies will go to various jurisdictions that maximize return on investment (ROI) • http://www.huffingtonpost.ca/2016/11/18/alberta-texas_n_13075844.html “Texas is right now in much better fiscal condition than Alberta.” • Softwood Lumber - http://www.forestbusinessnetwork.com/66288/softwood-goes-deeper-than-just-lumber/ “The fact remains that Canadian lumber companies continue to enjoy a supply of logs from government sources, while US counterparts that are in areas with a high density of federally owned timberland continue to die off. This has far-reaching consequences for the US Forest Service and other land managers that no longer have markets to sell their logs. That brings me to a question, why can’t mills positioned near the Canadian border compete for logs that are in Canada? Now that the Canadian system is more market-based, shouldn’t logs be free to cross the border like lumber?” • Canada has dropped out of the top 10 for FDI - https://www.slideshare.net/paulyoungcga/fdi-foreign-direct-investment-the-importance-of- capital-inflow • Ontario has fallen in terms of mining investment - http://www.mining.com/canadas-saskatchewan-manitoba-worlds-new-top-mining- destinations/
- 21. USA TRADE AND TRUMP Source- http://www.ttnews.com/articles/us- trade-gap-narrows-seven-month-low- record-exports or http://www.startribune.com/ap-fact- check-trump-ignores-strong-points-in- us-trade/485093841/
- 22. PROTECTIONISM POLICIES AND WTO The Trumpadministration’s economic policy is rapidly breaking down the World Trade Organisation (WTO) system and shattering the rules-based international order. On top of imposing tariffs, the United States is blocking the appointment of new judges to the body that interprets and enforces WTO rules, decisions and agreements. If this continues, the WTO will virtually cease to function by the end of 2019. This will cause a gradual breakdown of the multilateral trading system and lead to a new international economic order that is no longer anchored in liberal democratic values, nor fully constrained by the rule of law. Source - https://theconversation.com/australia-has-to- prepare-for-life-after-the-world-trade-organisation-100522
- 23. WTO REFORMS SOURCE -HTTPS://IISD.ORG/BLOG/WTO-REFORM-2019
- 24. STOCK MARKET /GLOBAL INVESTMENT Source – OECD and BMO Economics
- 25. IMMIGRATION/REFUGEE – GEOPOLITICALEVENTS • I am all about helping people but let’s start going to the root cause https://m.washingtontimes.com/news/2018/jan/23/roughly-80-of-all-voters-say-us-needs-secure- borde/?utm_campaign=shareaholic&utm_medium=facebook&utm_source=socialnetwork&fbclid=IwAR0K7_f ms2PQCAEdPrRGY3IEzq8Z-zMkVoVR4bp2WlmsKAhomFeKw-Mr1NI If people want to come to USA and Canada that is there choice, but they should do it through proper channels • • I applaud people’s passion to help people but too many people do not grasp geo-political events Source - https://www.slideshare.net/paulyoungcga/understanding-cause-and-effect-of-geo-political-events- january-2019
- 26. INDIA AND USA Source- http://www.globaltimes.cn/content/114 1048.shtml
- 27. FOREIGN RELATIONS RANKING Source- https://foreignpolicy.com/2017/09/06/report-u-s-ranks-near-bottom- in-commitment-to-global-development-foreign-aid-diplomacy/ 2018 ranking
- 28. USA VS EU(TRADE WAR) Source - https://www.industryweek.com/economy/eu-us-trade-war-escalates-over-disputed-aviation-subsidies?NL=IW-07&Issue=IW-07_20190409_IW- 07_62&sfvc4enews=42&cl=article_2_b&utm_rid=CPG03000001519274&utm_campaign=34034&utm_medium=email&elq2=b3a9aaab56344c9b8b193525150a4a83
- 29. GLOBAL BUSINESS SUBSIDIES Source- https://www.voanews.com/a/wto-member-group-vows-to-reform-rules-on-subsidies-dispute-settlement/4630023.html or https://www.atlanticcouncil.org/blogs/new-atlanticist/the-wto-may-be-beyond-saving or https://www.investopedia.com/terms/s/subsidy.asp • Tax deductions are determine by the tax code. This should not be view a subsidies as they include Capital Cost Allowance and R&D deductions. These deductions are available to every business no matter the sector. • WTO needs to start going after emerging markets to ensure that govt’s are not providing direct subsidies. • Tariffs wars do nothing but raise the price for consumer goods. • The focus should be on direct subsidies • Price support • Government loans/grants to businesses • Duties/Import taxes
- 30. SOLUTIONS / TRADE Source- https://piie.com/blogs/trade-investment-policy-watch/three-ways-reduce-trade-deficit 1. Consume less and save more. If US households or the government reduce consumption (businesses save more than they spend), imports will drop and less borrowing from abroad will be needed to pay for consumption. This means that consumption taxes—like those that nearly all other countries in the world have—could help reduce the deficit, by discouraging consumption, increasing saving, and reducing the government deficit. In contrast, an unfunded tax cut, such as the one proposed by the administration, will expand the deficit because the government will be consuming more relative to its earnings 2. WTO needs to be reformed to ensure all countries follow similar policies when it comes to FIPA and Trade Agreements 3. Countries need to stop pushing their social agenda on to countries. 4. Depreciate the exchange rate. Trade deficit reversals are typically driven by a significant real exchange rate depreciation. A weaker dollar makes imports more expensive and exports cheaper and improves the trade balance. Given the dollar is the world's reserve currency, and still regarded as the safest for investors, it tends to run stronger than other currencies. But when foreign governments actively push the dollar up to maintain their surpluses, the United States could counteract interventionby selling dollars and buying foreign currencies. The administration could also encourage the adoption of other major currencies, such as the euro, yen, or renminbi, as alternative reserve currencies. A weaker dollar would be good for the US economy, but relinquishing the role as the dominant currency would reduce the power of the United States in global markets and the seigniorage (profit) earned 5. Tax capital inflows. One of the reasons that the United States runs a trade deficit is because borrowing from abroad is cheap and easy. If it were more expensive, US citizens and the government would borrow less. A tax on (non–foreign direct investment) capital inflows that rises with the size of the inflow could reduce excessive borrowing for consumption and help close the government imbalance. While some worry that capital controls could distort asset prices and reduce investment, they could also curb excessive speculative investment, such as happened before the financial crisis.
Editor's Notes
- #16 Source - http://www.industryweek.com/economy/breaking-down-250-billion-china-deals-trump-got-america?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+IWNews+%28IndustryWeek+Most+Recent+News%29&sfvc4enews=42&cl=article_1&NL=IW-07 https://www.thebalance.com/u-s-china-trade-deficit-causes-effects-and-solutions-3306277