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When 'Great' Is Not Enough

Wednesday, October 16, 2019 12:57

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“When ‘Great’ Is Not Enough”

by David Stockman

“To follow the Silk Road is to follow a ghost. It flows through the heart of Asia, but it has officially vanished leaving behind the pattern of its restlessness: counterfeit boarders, unmapped peoples. The road forks and wanders wherever you are. It is not a single way, but many: a web of choices.

– Colin Thubron, “Shadow of the Silk Road” (2007)

“There is no “deal.” “Phase One” is more nonsense. The clear differences between the U.S. and China – beyond commerce – are well exposed. This is, as Orwell once distilled it, about “authoritarians” and “libertarians.” But markets continue to bounce on “optimism” – about a deal here about tariffs and farm products, or a deal “over there” on Brexit. Upside from here is just filling a bubble that will collapse, because fundamentals continue to deteriorate.

We dig into some of that in the October issue of “The Stockman Letter” – the deteriorating fundamentals, that is, represented most recently by the Institute of Supply Management’s services index for September. We also zero in on the widening fissures that threaten to undermine the inside-the-Beltway coalition of elite/establishment Republicans and Democrats we call the “Duopoly.” Main Street is already onto the grift. And, in place of a “Great Disruptor,” we might yet see a cryptosocialist.

Meanwhile, the U.S.-China Trade War has seemingly receded amid all this Turkey talk. As Chris Scott makes clear in “Super Power-Great Power” conflict, it’s nowhere near finished. Indeed, not much has changed, at all, since last week, despite what you might have gleaned from Bubblevision and/or Twitter…

○

“Super Power-Great Power:

Trump’s Trade Tragedy”

By Chris Scott

“A few weeks ago, I explained why a potential trade truce with China would be “limited, fragile, and temporary.” To the extent that we got a truce last week – and, to be sure, we haven’t yet – it is extremely limited, fragile, and temporary. But forget about a trade “deal,” as Trump characterized the understanding that was reached; a truce that will potentially see China buy U.S. farm goods hasn’t even been agreed yet.

No, there is not a “deal” Trump has boxed himself into another corner, touting a great accomplishment that will see a “formal signing” with President Xi next month. His Chinese counterpart, meanwhile, took advantage of the “mission accomplished” moment to say “progress” has been made but more work needed to be done. There was no word of a “deal” or even a “truce” from any official sources in China.

What more is Xi demanding of Trump? The U.S. has to promise not to enact tariffs that are scheduled to go into effect in December and to roll back existing tariffs, thus eliminating any leverage the administration still has to ask for actual trade concessions. The Donald’s trade team has not yet agreed to do that.

The Tweeter-in-Chief will have to grovel on his knees just to get back to where we were in December 2018. Not only are China’s leaders making it crystal clear they won’t give him a political win ahead of 2020. They just pulled the rug out from under him following his tweet describing the “greatest and biggest” deal for farmers “in the history of our Country.”

R.I.P. American farmers: That tweet couldn’t be further detached from reality. The greatest deal for American farmers was still possible until the first week of the Donald’s administration. Before Trump took office, the U.S. had extracted wide-ranging and unprecedented concessions on agriculture market access with Japan, Canada, and Mexico.

In fact, even outside of farm exports, the trade deal achieved basically everything that Trump is desperately hoping to achieve with his “new NAFTA” and Japan trade deals.

But, unlike the new deals with Canada, Mexico and Japan, which are unlikely to pass muster in those democracies because Trump has vocally antagonized the allies, the Transpacific Partnership (TPP) has been ratified by all those countries already. Too bad for our suffering heartland that Trump backed out of that deal as one of his first official acts as president.

There were some tradeoffs with the TPP, but in America the biggest winners by far were our farmers. With Trump’s China approach, as we all know, America’s farmers are the biggest losers. The heartland will never recover agricultural sales to China to past levels. For them, any trade progress will amount to closing the stable door after the horse has bolted.

Years ago, I worked in Shanghai as a trade representative for the State of Missouri. My job was to help American businesspeople, including soybean farmers, build relationships with Chinese buyers and government officials. Building goodwill with people from a vastly different culture takes decades. It is gained in drops and lost in buckets.

Trump poured out the buckets that I saw American farmers filling painstakingly in frequent trips to the Middle Kingdom, where they built personal relationships that have now been ruined unnecessarily. Now, the flights booked to Shanghai are filled with farmers from Brazil.

What could have been: As we speak, while the U.S. is flailing about, lashing out at every trading partner, our real competitor, China, is further integrating its economy with our closest allies.

So, what to do? We can build a new trade regime to replace the rules of the World Trade Organization with rules that better protect America’s interests. Under this strategy, we’ll allow our allies in if they play by the rules. But Beijing will have to wait until it cleans up its act to join the party. The U.S. already did that over the course of years of tireless negotiating with a group of nations that made up 40% of global gross domestic product – and excluded China.

Sure, tariffs could have been used to hit Beijing at the same time. But why not increase market access for our businesses across the globe, deepen integration with China’s neighbors, and make the WTO irrelevant while still being the world’s rule maker – to ensure our interests are protected?

What we’re left with now is a tragedy of epic proportions, which will take years to fix. Trump’s trade policy has opened the door for any country to find excuses such as “national security” to raise levies on imports. Why not? The U.S. does it. It’s a race to the protectionist bottom. And it’s given China cover to claim it is the “responsible” actor, though we all know it is not.

Protect Yourself: This is the most politicized market in history, and the Tweeter-in-Chief is still in charge. So, the situation is changing almost by the minute. It’s “Impeachment!” in Imperial Washington and all over the Mainstream Media. It’s “Easy Money!” on Wall Street and across Bubblevision. And it seems as if the whole world has, indeed, gone mad.

Amid this chaos, prices will continue to rise and fall, trends will continue to develop and dissipate. The stakes are as high as they can be heading into 2020. Markets appear to be straining, catching up to an economy that’s been weak and getting weaker for years. The Donald is tied up in the day-to-day movements of the major stock indexes like no president before him. The increasingly desperate incumbent will do anything he must to hold the White House. It’s a major tipping point. And there’s no telling what the Donald’s great disruptions could do… “

- http://deepstatedeclassified.com/

Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2019/10/when-great-is-not-enough.html

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