As the Administration mulls over possible trade actions against China, it is important to concede official trade statistics do provide in some sense a misleading picture of US-China bilateral trade — but not misleading in a way such that if corrected bolsters the Administration’s arguments.
Category Archives: Trade Policy
Would a Gold Standard Result in Fast Adjustment to Parity?
Judy Shelton argues that “Free trade needs sound money”:
…[T]he time has come to develop a comprehensive approach to international monetary reform compatible with genuine free trade under free-market conditions. If markets are to function properly, money needs to convey accurate price signals; that won’t happen as long as governments can manipulate exchange rates.
“Who Will Pay for the Wall?”
That’s the title of a new post written by me, on Econofact. Short answer to the question posed: not likely just the Mexicans…
Killing Nafta: Making Japan, Germany (and Korea) Great Again…
From Head and Mayer, “Brands in motion: How frictions shape multinational production”, an examination of how the auto industry fares if Nafta is terminated:
In the end-of-NAFTA scenario, depicted in orange in Figure 7, all three members reduce [auto] production.
Paying for the Wall/Fence: Tariff Edition
Tax reform (DBCFT) will not pay for the wall. A remittances tax will not yield sufficient revenues, except perhaps over many years. What about a tariff?
What Does Corporate Tax Reform and Paying for the Wall Have to Do with Each Other?
Maybe something, maybe nothing.
Two Trade Policy Terms to Remember: VER and ERP
Voluntary Export Restraint (VER)
With Robert Lighthizer going to USTR, it’s useful to remember that he was “implementer” of many VER’s, or “Voluntary Export Restraints” on steel imports, during his last stint at USTR during the Reagan Administration.
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A 10% Across-the-Board Tariff?
Today the idea of a 10% across-the-board tariff rate increase was mooted. As Noland et al. (2016), pp.9-10 observe, the President has authority to undertake such measures. However, as a member of the WTO, other members have a right to dispute. More likely, they’ll retaliate.
Trade Policy with China
Since President-elect Trump has nominated Peter Navarro* to direct the newly formed Trade Policy Council, now seems a good time to review some trade data.
Post-Brexit Out-of-Sample Forecasted Electricity Consumption
Take England+Wales log daily electricity consumption, detrend using Christiano-Fitzgerald band pass filter, and then regress on seasonal (calendar) terms, and temperature/wind/rain factors (Kirchmaier and de Guana de Santiago, 2016, h/t Simon Kennedy at Bloomberg), through April 2016. Then forecast out of sample; the residual looks like this:
Figure 3 from Kirchmaier and de Guana de Santiago, (2016).
Electricity consumption is way under what would be expected from historical correlations, suggesting a decline in economic — particularly industrial — activity.
While monthly estimates of November GDP are up 1.1% relative to June, industrial output is down by 1.2%, according to NIESR (Dec. 7).
It is always useful to keep in mind that economic statistics are sometimes revised by large amounts.