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CGD in the News

March 27, 2019

How the U.S.-China trade war could damage the Amazon rainforest (PBS News Hour)

From the article:

The trade battle between the U.S. and China could exacerbate deforestation in the Amazon, an analysis published Wednesday in Nature warns.

Last year, the Trump administration imposed tariffs on $250 billion worth of Chinese goods being imported to the U.S. China retaliated with a set of its own tariffs, including a 25 percent import tax on U.S. soybeans. To avoid paying higher prices, China cut soybean purchases from the U.S. by 90 percent and bumped up imports from Brazil to fill the gap.

Now, Brazil is responding by increasing soybean production, which means farmers might clear more land in the rainforest to make room for new crops.

“Massive deforestation of the Amazon over what’s already happening will have profound impacts on global attempts to mitigate climate change and protect biodiversity,” the report states.

If the tariffs continue, the researchers behind the report say, increased soybean production could cause up to 32 million acres of deforestation in the Amazon over the next several years — more land than in New York state. Aside from the ecological devastation, Brazil’s burgeoning soy fields could supplant American farmers and their exports. The researchers, from Germany and the UK, say major steps such as eliminating the tariffs as soon as possible must be swiftly taken to stop irreversible damage


Is ending the trade battle the solution?

The U.S. and China are taking steps to reduce trade tensions. Earlier this year, President Donald Trump and Chinese President Xi Jinping reached a truce as their countries continue negotiations. As a result, China bought a large supply of soybeans in December, putting a damper on Brazil’s soybean exports.

Even if the tariffs ended tomorrow, the damage could already be done.

“A lot of trade is built on trust and networks,” Fuchs told the NewsHour. “Once this is damaged or even destroyed, I wonder if the Chinese wouldn’t learn a lesson from that in the future to diversify their supplier,” relying less heavily on the U.S. to meet its demand.

And eliminating tariffs will not halt the growing demand for soybeans throughout the world.

As the economies of developing nations grow, demand for meat, and the soybeans that go into animal feed, are likely to increase — putting further pressure on Brazil to expand its soybean production, anyway.

“There were already concerns about deforestation in the Amazon before the trade war, and I definitely agree that makes things worse, but there is still the underlying problem that needs to be addressed,” said Kimberly Elliott, a visiting fellow at the Center for Global development who focuses on trade policy and is not affiliated with the research team.

The main way to address it: reduce meat consumption. That is a heavy lift for many nations, including both Brazil and the U.S., which have some of the highest meat consumptions per capita in the world.


February 5, 2019

Why U.S. Oil Sanctions on Venezuela Could Be Too Little, Too Late (World Politics Review)

From the article:

The scale of the humanitarian disaster in Venezuela is almost inconceivable. Despite the world’s largest proven oil reserves, the economy barely functions. People struggle just to survive. Store shelves are nearly empty of food, medicine and other necessities. The few goods available are out of reach for most people because of hyperinflation that the International Monetary Fund estimates reached a shocking 1 million percent in 2018. An estimated 3 million Venezuelans have already fled to neighboring countries, and more will likely join them.

Last fall, the Pharmaceutical Federation of Venezuela estimated that only around 20 percent of needed medicines were available; the Medical Federation reported that around one-third of Venezuela’s physicians had left the country. The death rate for children under the age of five is similar to that in war-torn Syria, and more than one in 10 young children suffer from acute malnutrition, which can have lifelong consequences in terms of stunted physical and mental development...

Click here to read more!

January 29, 2019

Brexiteers Sold a Vision of Britain That Wasn’t Rooted in Economic Reality (World Politics Review

From the article:

British Prime Minister Theresa May suffered a humiliating defeat earlier this month when Parliament voted by an overwhelming margin to reject the Brexit deal she had negotiated with the European Union. Yet there doesn’t appear to be a Plan B. 

Many are now betting that May will request a delay for Britain to leave the EU beyond the deadline of March 29, which May triggered in March 2017 by invoking Article 50 of the Lisbon Treaty and beginning the exit process. But the odds of a no-deal breakup also went up this month, despite fears that that outcome could lead to immediate delays in shipments and shortages of some foods and medicines. In the longer run, the current impasse reflects the fact that there are no easy answers. Assuming Brexit goes forward one way or the other, its costs could be felt for years.

Click here to read more!

December 4, 2018

Don’t Count on the Truce Holding in Trump’s Trade War With China (World Politics Review)

By Kimberly Ann Elliott

From the article:

As widely expected, U.S. President Donald Trump and his Chinese counterpart Xi Jinping declared a truce in their trade war over dinner in Buenos Aires this past weekend. According to the White House statement after the meeting, Xi committed to increase imports of American agricultural and energy products to reduce the bilateral trade deficit and to immediately begin negotiations over China’s unfair trade policies. In exchange, Trump agreed that he would not increase tariffs from 10 percent to 25 percent on $200 billion in Chinese exports as scheduled on Jan. 1, but that he could do so later if there is no broader agreement within 90 days. The Chinese statement was not so specific, saying only that it would import more from the U.S. and that the two countries would “work together to reach a consensus on trade issues,” with no mention of a deadline. Vagueness plus a tight U.S. deadline virtually guarantee that this is only a temporary truce.

This should all sound very familiar. Indeed, I’m tempted to say that it is déjà vu all over again, again. On three prior occasions, Trump administration officials announced similar deals to increase American exports and address trade barriers in China. In the most recent instance, at the end of May, chief economic adviser Larry Kudlow announced that the administration had reached a deal that would avoid the imposition of tariffs over China’s unfair trade practices, following an investigation under Section 301 of the 1974 Trade Act. He claimed that Chinese negotiators had agreed to reduce the trade deficit by at least $200 billion, and “just as important, they have to lower their tariff rates, they have to lower their non-tariff barriers. We have to have a verifiable process whereby the technology transfers and the theft of intellectual property stops.”

Read the full article here


November 27, 2018

The EU’s Dilemmas Over Trade Access and Human Rights in Asia (World Politics Review)

By Kimberly Ann Elliott

From the article:

What price should workers in Cambodia and Myanmar, two of the poorest countries in the world, pay because of their governments’ severe violations of human rights? The European Union is currently grappling with this question. Under its Everything But Arms trade preference program, the EU provides duty-free, quota-free market access for all imports, except weapons, from states designated by the United Nations as “least developed countries.” On paper, eligible countries are supposed to respect democracy and human rights; in practice, many do not.

In Cambodia, the government of longtime ruler Hun Sen has squelched democracy, while in Myanmar, the military has committed horrible atrocities against the Rohingya ethnic minority. Yet both countries still enjoy their duty-free market access to the EU. That might change soon.

The EU has generally been reluctant to take action against countries that enjoy the Everything But Arms trade preferences, in part because they are not a gift. Rather, they are part of a development policy that is intended to create jobs and improve livelihoods by encouraging exports. European officials rightly worry that frequent changes in eligibility would increase political risk and undermine those goals by discouraging investment in the countries affected.

Read the full article here


November 20, 2018

Trump’s Iran Sanctions Are Especially Costly for America’s Closest Allies (World Politics Review)

By Kimberly Ann Elliott

From the article:

President Donald Trump is again sending mixed signals on an important policy. Earlier this month, his administration followed through on reimposing oil sanctions against Iran, though the immediate effect is on third parties doing business with Tehran. He then immediately waived the sanctions for six months for eight countries that are Iran’s major oil and gas customers, explaining the waivers by saying he did not want to roil oil markets

The administration did not, however, issue a waiver for the European Union, which played a key role in the United Nations sanctions that forced Iran to come to the negotiating table five years ago and later agree to stop developing the capacity to produce nuclear weapons. The EU wants to salvage the 2015 nuclear deal with Iran, which Trump pulled the U.S. out of earlier this year, and is actively trying to prevent European-based firms from cooperating with the new American sanctions. 

Oil is the key to squeezing the Iranian economy, while broad international cooperation is key to shutting off exports of an economically critical and relatively homogenous product like oil. Trump’s approach and off-the-cuff statements are undermining both aims. 

Read the full article here.


November 13, 2018

Could a Democratic House Reach a Grand Bargain With Trump on Trade? (World Politics Review)

By Kimberly Ann Elliott

From the article:

Trade policy had a high profile in the run-up to last week’s midterm elections in the United States. With a blue wave in the House of Representatives and in many states, even as Republicans added to their majority in the Senate, two obvious questions arise. Did the widening trade war with China, and the narrower disputes with Europe and others over steel and aluminum, influence the outcome? And how will Democratic control of the House of Representatives affect U.S. trade policy for at least the next two years?

On the first question, it is difficult to detect a clear pattern linking President Donald Trump’s protectionism with electoral outcomes. On the one hand, Illinois, Iowa and Kansas, which have been hit hard by China’s retaliatory tariffs on U.S. exports of soybeans, corn and pork, saw shifts toward Democrats in key races for governor and the House. On the other hand, North Dakota, which was hit by China’s agricultural retaliation, and Missouri, which had firms hit by the steel tariffs, replaced Democratic senators with Republicans. And it was likely a surprise to Trump that Democrats picked up House seats or governorships in Michigan, Pennsylvania and Wisconsin, which were primary targets of his attacks on trade agreements as job killers in the 2016 campaign.

The problem with trying to use trade policies to sway voters is that they have mixed effects. Steel producers gain from higher tariffs, but all kinds of manufacturers that use steel face higher costs. And no Americans—except maybe lobbyists—are gaining from the retaliatory tariffs imposed by China, Europe and others against U.S. exports. Wisconsin dairy farmers, for example, welcomed the renegotiation of the North American Free Trade Agreement, but they are disappointed that the expanded dairy market access they got in Canada is partially offset by Canada’s retaliatory tariffs against American steel. And Wisconsin-based Harley-Davidson got hammered twice—by higher input costs from the steel and aluminum tariffs, and by the retaliatory tariffs that the European Union imposed in response.

Read the full article here.


November 6, 2018

Trump’s Trade War Was Bad Enough for Brazil’s Amazon. Then Came Bolsonaro (World Politics Review)

By Kimberly Ann Elliott

From the article:

From 2004 to 2012, the rate of deforestation in the Brazilian Amazon dropped more than 80 percent, even as Brazil’s agricultural production continued to grow. But that progress in protecting a fragile and essential ecosystem reversed in recent years, before the outlook got even worse.

First, U.S. President Donald Trump launched a trade war with China, shifting more Chinese demand for soybean products from the United States to Brazil, potentially leading to more deforestation to meet the demands of Brazilian agriculture. Then, last month Brazilians elected the far-right Jair Bolsonaro as president, a major supporter of agribusiness who has vowed to put economic growth over environmental protection. That combination could mean a surge in deforestation in the Amazon with serious implications not just for the Brazilians most directly affected, but for the wider world.

The Amazon basin is home to the world’s largest rainforest. Its trees release carbon dioxide when cut down or burned, and sequester it when planted or left in place. The pace of deforestation, especially in tropical areas like Brazil, has become a major contributor to climate change, as large in the aggregate as the European Union’s greenhouse gas emissions. Reversing those trends could reduce global emissions by even more—as much as 30 percent according to some estimates. Rainforests like the Amazon’s are also important for global biodiversity and local resilience. In addition to the ecological benefits it provides, biodiversity creates economic opportunities through eco-tourism and sources of new pharmaceutical products. Forests also contribute to localized amenities, such as clean water and protection from climate-related disasters that include flooding and mudslides, as well as drought. Reducing tropical deforestation could stem the temperature rise due to greenhouse gas emissions faster and more cost-effectively than other options, according to researchers at the Center for Global Development.

Read the full article here.


October 16, 2018

Can the World Trade Organization Be Saved? (World Politics Review)

By Kimberly Ann Elliott

From the article:

The World Trade Organization’s woes began long before Donald Trump was inaugurated as America’s president, and many countries are to blame. The latest round of global trade negotiations has been stalled for a decade and there is still no clear way out of the impasse. India insists on resolving long-standing problems, such as trade-distorting agricultural subsidies, before the WTO can begin to negotiate any new issues. China has no interest in taking a leading role on many pressing issues, such as regulations on state-owned enterprises, which might impinge on its industrial policies. Both Presidents Barack Obama and Donald Trump undermined the operation of the WTO’s dispute-settlement system by disrupting the appointment of members to the body overseeing appeals. And the European Union has been among the most prolific of those negotiating regional trade agreements outside the WTO.

The threat to the WTO’s continued viability ratcheted up notably, however, after Trump took office in January 2017. He has taken unilateral trade actions in violation of WTO rules and has reportedly told aides on multiple occasions that he wanted to withdraw entirely from the organization. The increased threat has, in turn, triggered renewed efforts to reform and strengthen the WTO. Officials from Australia, Brazil, Canada, Chile, the EU, Japan, Kenya, South Korea, Mexico, New Zealand, Norway, Singapore and Switzerland met in Geneva in September and discussed WTO reform proposals from the EU and Canada. Trade ministers representing those countries plan to continue the discussions in Ottawa later this week.

Despite Trump’s rhetoric, U.S. Trade Representative Robert Lighthizer met with his counterparts from the EU and Japan in late September to identify areas for cooperation. Indeed, it was on the same day that Trump told other leaders gathered at the United Nations that his administration had rejected “the ideology of globalism” in favor of “the doctrine of patriotism.” In a joint statement, however, Lighthizer, EU Trade Minister Cecilia Malmstrom and Japanese Minister of Economy, Trade and Industry Hiroshige Seko issued a joint statement pledging cooperation in areas of mutual interest, including China’s allegedly unfair trade practices—though this was not named—along with digital trade, e-commerce and WTO reform.

Read the full article here.

October 9, 2018

Trump’s NAFTA Rebrand Looks More Like the TPP, Minus the Partnership (World Politics Review)

By Kimberly Ann Elliott

From the article:

“It’s not NAFTA redone. It’s a brand new deal,” U.S. President Donald Trump declared triumphantly at the White House last week, announcing the revised free trade agreement with Mexico and Canada. Don’t tell Trump, but his brand new deal is really just the Trans-Pacific Partnership with a few tweaks, and many fewer countries than the 12 that signed on before Trump withdrew.

American negotiators won concessions in a few areas that were important to them, and made concessions in a few that were important to Mexico and Canada. But the new NAFTA, which Trump clumsily renamed the United States-Mexico-Canada Agreement, or USMCA, is anything but a “brand new deal.” The new North American agreement might more accurately be called the TPP minus nine. 

While the deal added chapters to address new 21st-century trade issues, and updated other provisions, it is not a sharp break from the U.S. free trade agreement template that has evolved for two and a half decades from the original NAFTA model. By contrast, Trump’s willingness to use tariffs and threats to withdraw from NAFTA to get a deal are different, but not in a good way. 

Last week, I evaluated the key issues that determined the outcome of the negotiations, including automobiles, dairy and certain aspects of dispute settlements. This week, I’ll look at the overall architecture of the new agreement and where it departs, or not, from past efforts.

Read the full article here.