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Chicago School of Business Professor: Strong US is bad for world trade

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  • Chicago School of Business Professor: Strong US is bad for world trade

    https://www.cnbc.com/2018/06/05/ragh...y-quickly.html

    In a speech at the forum, Rajan warned that investors cannot take it for granted that "sensible negotiations" will happen between the U.S. and its trading partners.

    That's especially so when "too many countries are led by too many strong leaders," who would find it hard to back down from their tough stance, he added.

  • #2
    Re: Chicago School of Business Professor: Strong US is bad for world trade

    Ricardo's comparative advantage is alive and well. Makes no sense for Canada to burn natural gas in winter greenhouses to grow oranges when it can buy them in abundant quantity much cheaper from the USA. Makes no sense for the USA to make aluminum when it can buy it far cheaper from Canada.

    The USA has a long history of bullying and threatening trade partners. Witness the never-ending softwood lumber actions against Canadian wood. The Dispute Settlement Mechanism was a make-or-break for Canada & Mexico during the original NAFTA negotiations. No deal would have happened without it, as the alternative was to take cases to the US court system, which neither Canada nor Mexico trusted. All in all that has worked reasonably well for all players.

    This is one of the things the USA would like to scrap in a revised NAFTA. I doubt a deal will happen until it is pursuaded to
    reconsider. And I think it will reconsider, this and some other demands, given how tightly integrated the USA and Canadian economies especially have become. Right now it's firmly in the realm of politics...needing to appeal to voters supportive of the President in the rust belt fly-over States as we approach mid-terms.

    Yes, it could all go off the rails. But China is the real target, and the US needs allies at the table that have a similar view of Chinese trade advantage. Canada is increasingly one of those.

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