EuroWire March 2017

Transatlantic cable

Previous attempts at erecting a barrier favoured companies with decades of government contracting experience, but even the most seasoned players ultimately conceded defeat. After some $1 billion had been spent, the Barack Obama administration cancelled a misbegotten security project led by Boeing Co, the world’s largest aircraft maker and the second-largest federal contractor in the USA. Mr Obama’s predecessor in the White House, George W Bush, had already come up short with the Secure Fence Act, mandating 700 miles of double-layered reinforced fencing to protect the border. The barrier went up, deterring vehicles; but it was found to be ine ectual against foot tra c. As to the present state of the border terrain, the Times reported that the hundreds of miles of existing wall are “in a form – wire mesh, chain link, sheet piling, concrete vehicle barriers, post and rails and X-shaped beams – that Mr Trump may not have envisioned.” Ms Ivory and Ms Creswell observed that none of this history “seems to have tempered Mr Trump’s enthusiasm” for a wall. Perhaps not. But the president so set on protecting American industry may not have considered how much money from his signature project could ow to Mexicans and Mexican companies. † Mr Trump also may not have given enough thought to another aspect of his wall project. The Times noted that, according to construction executives and others in Texas, it comes at a time when a construction boom across much of the USA has created a signi cant shortage of “legal labour” – workers whose certifying documents are in order. According to a study released in 2012, an estimated half of construction workers in Texas were undocumented workers. “If this wall gets built in Texas, there is a high likelihood that a signi cant bit of the work force will be undocumented,” the Times reporters were told by executive director Jose P Garza of the Austin-based Proyecto Defensa Laboral, which supports low-income workers seeking fair employment. † That is to say, many of the labourers on the wall, intended to forestall illegal immigration from Mexico into the United States, could be illegal immigrants. Exclusive focus on trade de cits – without reference to the exports and imports that generate them – can be a mistake Trade pacts are much in the news, none more so than the North American Free Trade Agreement among the United States, Canada and Mexico. On 26 th January, US President Donald Trump started his Twitter day with criticism of NAFTA, calling it a one-sided deal resulting in “a 60 billion dollar trade de cit with Mexico.” Mr Trump is right that the current USA-Mexico trade de cit is around $60 billion. He might also have noted, again accurately, that the USA had in fact been running a modest trade surplus with Mexico before NAFTA took e ect on 1 st January 1994. Does this prove that the USA is party to a raw-deal pact that is bad for the American economy? Trade

Not exactly, according to Christopher Ingraham, who writes about “all things data” in the Washington Post . He pointed out that the trade de cit blew up only because USA trade with Mexico has ballooned even faster. In 1993, on the eve of NAFTA, the volume of this trade – imports and exports – stood at about $85 billion. As of 2015 (the latest year with available complete data), USA-Mexico trade totalled $532 billion. That is to say, since 1993 the annual USA trade de cit with Mexico has grown from essentially zero to $60 billion. But, over the same period, the USA sent about $193 billion in exports per year to its neighbours to the south. For 2015 those exports stood at $236 billion. Wrote Mr Ingraham, “That’s $236 billion in business for American companies and the workers they employ. You reduce that number, you reduce American jobs.” (“The Smart Way To Think About that Trade De cit with Mexico,” 26 th January) † He acknowledged the ip side: that the USA is also buying more from Mexico, as seen in the import numbers. Some of those imports represent purchases of cheaper products than those once made by American workers and o ered for sale at a higher price. Economists consulted by the Washington Post generally consider the trade-o worth it. As Neal Rothschild and Christopher Matthews of Axios Media wrote (26 th January), from a big-picture economic standpoint “you’d rather have $10 worth of exports and $15 worth of imports than $8 of both and no trade de cit.” † While workers in industries a ected adversely by NAFTA may take a contrary view, Mr Ingraham urged his point that an exclusive focus on trade de cits – without reference to the value of the exports and imports from which they are derived – can be misleading. He quoted a 26 th January tweet from economic correspondent Neil Irwin of the New York Times ’s “Upshot” feature: “I am running a considerable trade de cit with my neighbourhood Mexican restaurant and therefore insist that they pay to renovate my kitchen.” Green energy may have lost its friend in the White House, but it is gaining in importance as a driver of USA economic growth As reported by Bloomberg in November, Jacob Pedersen, head of equity analysis at Sydbank, the Danish banking group with branches in Germany, neatly summarised the energy mind-set of then US President-elect Donald Trump: “He hates wind turbines and will do what he can to ght them.” On 24 th January, only his fourth day in o ce, President Trump con rmed that the proponents of alternative energy no longer have a friend in high places. He signed executive orders to revive the controversial Keystone XL and Dakota Access oil pipelines which had been blocked by former president Barack Obama. It was a shot across the bow to those working to promote the development of energy sources other than those derived from fossil fuels. Energy

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March 2017