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Good news on trade

Summary:
Here’s the Financial Times: For any politician to admit that a signature policy has backfired is unusual. So it was refreshing when Robert Lighthizer, Donald Trump’s trade chief, last week blamed the bind that US farmers are in on his boss’s decision in early 2017 to pull out of the Trans-Pacific Partnership. “We have a real problem,” Mr Lighthizer told the Senate finance committee. “We have a situation that’s not good now and it’s going to get bad very quickly.” Mr Lighthizer’s concern is all about Japan. The CPTPP — as the remaining Pacific Rim countries renamed their trade pact following the US’s departure — came into force in late December, followed by the EU-Japan trade deal in early February. Since then US farm exports to Japan have sunk, as producers from

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Here’s the Financial Times:

For any politician to admit that a signature policy has backfired is unusual.

So it was refreshing when Robert Lighthizer, Donald Trump’s trade chief, last week blamed the bind that US farmers are in on his boss’s decision in early 2017 to pull out of the Trans-Pacific Partnership.

“We have a real problem,” Mr Lighthizer told the Senate finance committee. “We have a situation that’s not good now and it’s going to get bad very quickly.”

Mr Lighthizer’s concern is all about Japan. The CPTPP — as the remaining Pacific Rim countries renamed their trade pact following the US’s departure — came into force in late December, followed by the EU-Japan trade deal in early February. Since then US farm exports to Japan have sunk, as producers from other countries benefit from preferential tariffs. Sales are being lost by the Americans, along with market share.

It’s always good news when protectionists wake up to the fact that their policies have failed.

And it’s also good news when small countries push back against bullies:

The Trump administration’s aggressive campaign to prevent countries from using Huawei and other Chinese telecommunications equipment in their next-generation wireless networks has faltered, with even some of America’s closest allies rejecting the United States’ argument that the companies pose a security threat.

Over the past several months, American officials have tried to pressure, scold and, increasingly, threaten other nations that are considering using Huawei in building fifth-generation, or 5G, wireless networks. Mike Pompeo, the secretary of state, has pledged to withhold intelligence from nations that continue to use Chinese telecom equipment.

There is no evidence that Huawei poses a security threat to the US.  But there is evidence that the US is using this issue as a way of pressuring China to give in to our demands on trade, unrelated to national security.  The world is better off when US bullying fails to achieve its objective.

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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