Supply Chain Latest: Debate Flares Over Value of US Free-Trade Deals - Bloomberg

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Trade deals don’t always live up to the hype.

Back in 2000, then-U.S. President Bill Clinton said China’s decision to join the World Trade Organization would lead to Beijing’s “profound” shift toward Western-style economic norms.

“By joining the WTO, China is not simply agreeing to import more of our products,” Clinton said. “It is agreeing to import one of democracy’s most cherished values: economic freedom.”

Now, 21 years later, it’s clear that Clinton’s exuberance didn’t exactly pan out in the way that many had once hoped.

But the fact that American trade deals have not always delivered on their promise doesn’t necessarily mean they aren’t delivering real results for Americans.

So it’s worth revisiting a recent report from the U.S. International Trade Commission, an agency that concluded free-trade agreements added very little to American economic growth and their gains were not distributed evenly.

The 390-page report found that in 2017 America’s free-trade deals collectively spurred the U.S. economy by a meager 0.5% — with an increase of $88.8 billion in real GDP — and boosted U.S. employment by only 0.3%, adding 485,000 full-time jobs.

Threatened by Trade

Nearly a third of Americans view trade as an economic threat, Gallup says

Source: Gallup

Those conclusions didn’t sit well with Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. He unleashed a digital takedown arguing those figures are wrong.

The report “committed serious methodological blunders that mislead the public on the value of trade accords,” Hufbauer wrote in a blog post.

Specifically, he said the USITC made two major mistakes:

• It underestimated the impact of Mexico’s trade liberalization efforts as part of the North American Free Trade Agreement
• It omitted China’s accession to the WTO on the grounds that it wasn’t technically a free trade agreement

As a result, the USITC “seriously underestimated the annual gains that can be fairly attributed to U.S. trade diplomacy,” Hufbauer wrote.

A spokeswoman for the USITC said its reports “speak for themselves.”

Hufbauer says it’s important to set the record straight at a time when the Biden administration is not actively pushing for new trade liberalization deals like the pending pacts with the U.K. and Nigeria. It’s also an opportune time to debate the pros and cons because the American public’s support for trade has taken a hit recently, according to Gallup.

“The real payoff comes from lowering barriers and increasing two-way trade,” Hufbauer told Bloomberg. “Americans today enjoy the payoff from trade diplomacy a generation ago.”

— Bryce Baschuk in Geneva

Charted Territory

Kuehne+Nagel’s Big Year

Shares of the Swiss logistics company are up about 60% this year

Source: Bloomberg

Shares of Kuehne + Nagel International rose to a record on Tuesday after the Swiss logistics giant said it more than doubled earnings in the first half of 2021, citing rising global demand for all modes of transportation. “We are experiencing uniquely high consumer demand combined with supply chain uncertainty,” CEO Detlef Trefzger said in a statement. “We expect demand to remain strong and look forward with confidence to continuing the positive development.”

Today’s Must Reads

• Currency truce | The U.S. Treasury and Vietnam’s central bank said they reached an agreement under which Vietnam will allow more flexibility in its currency, easing a dispute in which Washington had discussed whether to impose tariffs on the Asian nation.
• Trade dispute | The European Union lodged a preliminary WTO dispute request that alleges Russia illegally discriminated against 290 billion euros worth of European goods.
• Gateway to Southeast | The head of one of the largest U.S. gateways for trade said robust demand for imported goods will likely be sustained into 2022, as companies scramble to rebuild stockpiles during an uneven rebound from the pandemic.
• Opening up Africa | As the developed world starts to reopen after hoarding vaccines, Africa is the least inoculated region, leaving it vulnerable to new waves of infection and extended lockdowns. The experience is bolstering the case for the continent’s new free-trade pact. 
• Lorry story | A U.K. shortage of truck drivers, exacerbated by Brexit and Covid restrictions, is pushing up delivery costs and leading to empty shelves in stores across Britain.
• Traffic jam | Trucks are lined up for hours at the border between Saudi Arabia and the United Arab Emirates as some international manufacturers find their goods snarled up in a deepening economic rivalry.
• New hire | President Joe Biden nominated Judith Pryor as first vice president of the Export-Import Bank of the U.S., the nation’s official export-credit agency.

On the Bloomberg Terminal

• Stubborn inflation | Bloomberg Economics’ baseline view is that high inflation will prove transitory. But it’s not hard to imagine risk scenarios where it stays stubbornly high. 
• Reopening Britain | As the delta variant rages through Europe, U.K. Prime Minister Boris Johnson has eliminated nearly all curbs on everyday life in England. The danger is that consumers respond adversely to heightened health risks, slowing the recovery by more than the Bank of England expects. 
• Use the AHOY function to track global commodities trade flows.
• Click HERE for automated stories about supply chains.
• See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
• Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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Supply Chain Latest: Debate Flares Over Value of US Free-Trade Deals - Bloomberg
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