EuroWire March 2017

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Transatlantic cable
March 2017 40
Previous attempts at erecting a barrier favoured companies with
decades of government contracting experience, but even the
most seasoned players ultimately conceded defeat.
After some $1 billion had been spent, the Barack Obama
administration cancelled a misbegotten security project
led by Boeing Co, the world’s largest aircraft maker and the
second-largest federal contractor in the USA.
Mr Obama’s predecessor in the White House, George W
Bush, had already come up short with the Secure Fence Act,
mandating 700 miles of double-layered reinforced fencing to
protect the border. The barrier went up, deterring vehicles; but it
was found to be ine ectual against foot tra c.
As to the present state of the border terrain, the Times reported
that the hundreds of miles of existing wall are “in a form – wire
mesh, chain link, sheet piling, concrete vehicle barriers, post
and rails and X-shaped beams – that Mr Trump may not have
envisioned.”
Ms Ivory and Ms Creswell observed that none of this history
“seems to have tempered Mr Trump’s enthusiasm” for a wall.
Perhaps not. But the president so set on protecting American
industry may not have considered how much money from
his signature project could ow to Mexicans and Mexican
companies.
† Mr Trump also may not have given enough thought to
another aspect of his wall project. The Times noted that,
according to construction executives and others in Texas, it
comes at a time when a construction boom across much of
the USA has created a signi cant shortage of “legal labour” –
workers whose certifying documents are in order. According
to a study released in 2012, an estimated half of construction
workers in Texas were undocumented workers.
“If this wall gets built in Texas, there is a high likelihood that
a signi cant bit of the work force will be undocumented,”
the Times reporters were told by executive director Jose P
Garza of the Austin-based Proyecto Defensa Laboral, which
supports low-income workers seeking fair employment.
† That is to say, many of the labourers on the wall, intended
to forestall illegal immigration from Mexico into the United
States, could be illegal immigrants.
Trade
Exclusive focus on trade de cits – without
reference to the exports and imports that
generate them – can be a mistake
Trade pacts are much in the news, none more so than the North
American Free Trade Agreement among the United States,
Canada and Mexico.
On 26th January, US President Donald Trump started his Twitter
day with criticism of NAFTA, calling it a one-sided deal resulting
in “a 60 billion dollar trade de cit with Mexico.”
Mr Trump is right that the current USA-Mexico trade de cit is
around $60 billion. He might also have noted, again accurately,
that the USA had in fact been running a modest trade surplus
with Mexico before NAFTA took e ect on 1st January 1994. Does
this prove that the USA is party to a raw-deal pact that is bad for
the American economy?
Not exactly, according to Christopher Ingraham, who writes
about “all things data” in the Washington Post. He pointed out
that the trade de cit blew up only because USA trade with
Mexico has ballooned even faster.
In 1993, on the eve of NAFTA, the volume of this trade – imports
and exports – stood at about $85 billion. As of 2015 (the latest
year with available complete data), USA-Mexico trade totalled
$532 billion.
That is to say, since 1993 the annual USA trade de cit with
Mexico has grown from essentially zero to $60 billion. But, over
the same period, the USA sent about $193 billion in exports per
year to its neighbours to the south. For 2015 those exports stood
at $236 billion.
Wrote Mr Ingraham, “That’s $236 billion in business for American
companies and the workers they employ. You reduce that
number, you reduce American jobs.” (“The Smart Way To Think
About that Trade De cit with Mexico,” 26 th January)
† He acknowledged the ip side: that the USA is also buying
more from Mexico, as seen in the import numbers. Some of
those imports represent purchases of cheaper products than
those once made by American workers and o ered for sale
at a higher price.
Economists consulted by the Washington Post generally
consider the trade-o worth it. As Neal Rothschild and
Christopher Matthews of Axios Media wrote (26th January),
from a big-picture economic standpoint “you’d rather have
$10 worth of exports and $15 worth of imports than $8 of
both and no trade de cit.”
† While workers in industries a ected adversely by NAFTA
may take a contrary view, Mr Ingraham urged his point that
an exclusive focus on trade de cits – without reference to
the value of the exports and imports from which they are
derived – can be misleading.
He quoted a 26th January tweet from economic
correspondent Neil Irwin of the New York Times’s “Upshot”
feature: “I am running a considerable trade de cit with my
neighbourhood Mexican restaurant and therefore insist that
they pay to renovate my kitchen.”
Energy
Green energy may have lost its friend in the
White House, but it is gaining in importance
as a driver of USA economic growth
As reported by Bloomberg in November, Jacob Pedersen, head
of equity analysis at Sydbank, the Danish banking group with
branches in Germany, neatly summarised the energy mind-set of
then US President-elect Donald Trump: “He hates wind turbines
and will do what he can to ght them.”
On 24 th January, only his fourth day in o ce, President Trump
con rmed that the proponents of alternative energy no longer
have a friend in high places. He signed executive orders to revive
the controversial Keystone XL and Dakota Access oil pipelines
which had been blocked by former president Barack Obama.
It was a shot across the bow to those working to promote the
development of energy sources other than those derived from
fossil fuels.