Bill Owens: Confounding And Confusing Events 5/6/19

May 6, 2019

Mexico became our top trading partner in February of 2019 with 15%, followed by Canada with 14.2% and China with 13.9%.  It is not clear what these statistics evidence, but it is a trend which has been increasing over the last several years.  The impact of the USMCA (new NAFTA) will be negligible in terms of US GDP and jobs as reported by the International Trade Commission.  Mexico, nonetheless, continues to be a low-cost jurisdiction for manufacturing.  Even with Mexico increasing its labor costs, or at least it’s minimum hourly wage in certain industries, it seems quite likely this trend will continue, and the entire purpose of renegotiating NAFTA in the USMCA will be largely defeated. 

In Vermont, 28,000 jobs are related to Canada/Mexico trade, while in New York the number of jobs is 680,900.  The measurement of these numbers is also a bit tricky.  Let me give you an example.  Goods coming into the United States pass through US Customs, typically are handled by a Custom’s House broker and freight forwarder, are delivered by a trucker or a train, may pass through a warehouse or go directly to the customer, or the imported goods will be “picked and packed” at the warehouse for shipment to a customer, the goods will then be placed on the shelves and sold.  All of those jobs ( I estimate minimally 7) are trade related, but many of those jobs will be delivering, handling or selling simultaneously none-NAFTA/USMCA goods, so it is always good to look at how those statistics are derived.  Not that I am saying you should be cynical. 

There are approximately 7 million jobs that have gone unfilled throughout the United States.  Mr. Trump is threatening to deliver illegal immigrants to sanctuary cities, which in large measure means California, both from the number of sanctuary cities and the logistics being somewhat easier.  It may well be that those sanctuary cities will welcome those immigrants with open arms.  Why?  Because they have jobs for them, (some of those 7 million) and Mr. Trump runs a dangerous risk legally of sending people to those cities, presumably not to a detention center, and allowing them to live and work there.  This entire process is frought with all kinds of potential unintended consequences.  Will judges deport people who have been delivered to cities and are working in jobs that are necessary for the economy when the administration has put no constraints on what they do in those sanctuary cities; will Mr. Trump simply deliver these immigrants to sanctuary cities with limitations on where they can work and what they can do, if so, that in its self will engender litigation. 

Mr. Trump in his speech before the NRA (which is suffering its own turmoil) indicated he was pulling the U.S. from the Arm’s Trade Treaty.  This is another major departure from virtually every previous administration going back to Truman, where the US was working to control arms sales and the proliferation of arms in an effort to bring the world to a less hostile and combative place.  I suspect the words “less combative” and “hostile” are actually the reverse description of Mr. Trump and his style and attitude. 

On a more positive note, a young man by the name of Dakota Johnson who was suffering from a terminal illness in Johnson City, Tennessee, received his high school diploma at a special graduation ceremony at his hospital bed, granting him what became his final wish.  This was largely driven by his family and a special teacher who worked hard to make this happen.  Teachers do many good works, let’s remember that. 

In another bizarre Trumpian moment.  Mr. Trump ignored the Number 1 pick in the NFL draft, Tyler Murray, and instead congratulated the Number 2 pick, Nick Bossa, and ended his congratulatory tweet with “Make America Great Again”.  I will let you draw your own conclusions about Mr. Trump’s actions, but it is important to note that Mr. Bossa has himself tweeted and posted on Instagram racist and homophobic slurs.  He is an ardent supporter of Mr. Trump at least on social media, and while everyone is entitled to their own politics, the President should have a broader perspective, particularly when he is tweeting on my dime.

Vodafone of Italy recently disclosed that they found hidden backdoors in Huawei equipment.  Apparently, the work done by Vodafone Group, PLC, discovered these vulnerabilities going back years with equipment supplied by Huawei.  These backdoors are essentially embedded in the software to give Huawei unauthorized access to Vodafone’s fixed line network in Italy.  This, of course, comes on top of the allegations which have been discussed for months regarding other illegal activity of Huawei.    In my view, this simply indicates that no matter what Mr. Trump negotiates, the Chinese are not likely to walk away from their very successful business, espionage. 

George Will in a recent commentary about deficits and spending in general noted “Under a Republican President and until four month ago, with Republican’s in control of both Houses of Congress, the nation is about to run trillion dollar budget deficits with the economy expanding, employment more than full:  The unemployment rate is at 3.8%, and according to the Bureau of Labor Statistics there are 7.1 million jobs “unfilled”.  I have commented a number of times as to where the Republicans are on spending, deficits and debt.  Obviously, Mr. Trump blew the abandon ship whistle.

Attorney General Barr’s testimony before the House will not go forward without a subpoena, but he did testify in the Senate on Wednesday, May 1, 2019.  The introduction of Mr. Mueller’s letter to the Attorney General voicing concern about the Attorney General’s characterization of the Mueller report was something of a surprise and clearly casts the Attorney General in an even dimmer light.  Mr. Mueller’s testimony could be the most revealing and troublesome of any thus far.  Mr. Barr appears to languish below the bar and should be disbarred.   

Chuck Grassley, Chairman of the Senate Finance Committee has advised President Trump that his failure to remove the tariffs on steel and aluminum will severely limit or eliminate the chance of passage of the USMCA in the Senate.  Recent announcements by the House would indicate that the agreement is in substantial trouble there, as well.  I would reiterate that the International Trade Commission’s analysis of the USMCA is probably not helping, and it is quite likely that if the President fails to get the USMCA passed and attempts to terminate NAFTA, that Congress will intervene, potentially overriding a termination of NAFTA, which would be a serious defeat for Mr. Trump.

Mr. Owens is a former member of Congress representing the New York 21st, a partner in Stafford Owens in Plattsburgh, NY and a Senior Advisor to Dentons to Washington, DC.

The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.

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