Canada, United States, and European Union - out of Sync on Trade Agreements? or Are We Sympatico?

By Colares, Juscelino F. | Canada-United States Law Journal, Annual 2017 | Go to article overview

Canada, United States, and European Union - out of Sync on Trade Agreements? or Are We Sympatico?


Colares, Juscelino F., Canada-United States Law Journal


TABLE OF CONTENTS  I. Issue #1 : The Big Picture--Why Are We Living In Dangerous Trade Times? II. Issue #2: Areas Of Convergence, Therefore Easier Cooperation III. Issue #3: Two Very Important Issues: Lumber And The Trans-Pacific  Partnership 

Thank you for being here and thank you to Steve Petras, Ted Parran, and Chios Carmody and Members of the Canada-United States Law Institute Board for helping us host such a great gathering.

Let me start by giving the audience a brief big picture of why this is a particularly perilous time for free trade. Then, I will transition to a few punctual trade issues where Canada and the United States can engage in cooperation to address current protectionist practices. Finally, I will conclude with a couple of comments about two very important trade issues in the bilateral relationship where we may not be as "trade sympatico": the expiration of the Softwood Lumber Agreement ("SLA") and the current status of the Trans-Pacific Partnership ("TPP") in Congress.

I. ISSUE #1: THE BIG PICTURE--WHY ARE WE LIVING IN DANGEROUS

Trade Times?

Since the economic slowdown that started in December, 2007 and the following Great Recession, the United States and its biggest trade partners (Canada, the European Union ("E.U."), Japan, and China) have lived in a world awash with excess savings and inadequate demand. In this stagnant economic environment, interest rates in the Western world cannot fall any further to help boost investment and economic activity because rates are already near zero.

In other words, we are in a liquidity trap: without an increase in government spending, the private sector will keep on saving and waiting for a recovery in the long term, and the long term becomes longer as further economic retrenchment occurs. Thus, President Obama's first-term economic stimulus helped reduce the depth of the recession, but later budget sequesters and other forms of political budget brinkmanship damped the frail recovery. Abenomics, a mix of quantitative easing and massive spending in infrastructure, is having mixed results, getting Japan out of a two-decade long period of stagnation.

If you do not believe we are in a liquidity trap, remember the warnings about how the United States' "dependence on Chinese financing" through purchases of Treasury bonds would harm the United States once the Chinese stopped buying bonds? Well, the Chinese have been selling them for nearly a year and a half and not much has happened. Here is the annual rate of change in Chinese Foreign Reserves (1):

From the beginning of 2014 to the end of 2015, the Chinese Central Bank reduced total reserves (well over half of which are U.S. bonds) by about $800 billion. (2) Yet, the sky is not falling:

U.S. interest rates on ten-year bonds are still below two percent, (3) and it does not look like they are poised to rise anytime soon! But why am I pointing out this macroeconomic/finance data to you? I am a trade law professor. What do I know?

I am pointing this out, because, in a normal growth world, the negative employment effects of running a trade deficit tend to be offset, partially and, possibly totally, by greater capital inflows. Capital inflows reduce interest rates, which, as economists point out, boost economic activity and thus employment. Of course, a trade deficit can also eliminate some employment, but that impact is mostly distributional as other sectors benefit from cheaper availability of capital and investment and may hire more than otherwise.

Now, here is the big problem: this balancing effect of greater capital inflows that comes with trade deficits disappears when interest rates are already close to zero. As you recall, in such a world, rates can go no lower. So, in a stagnant macroeconomic environment, the following occurs: (i) trade deficits are bad for jobs because capital inflows provide little to zero relief; and (ii) every devaluation by traditionally export-growth-based countries is a hit on economic recovery. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Canada, United States, and European Union - out of Sync on Trade Agreements? or Are We Sympatico?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.