The United States – Mexico – Canada Agreement progress has been stalled for most of Q1. On Tuesday, March 26 the House Committee on Ways and Means trade subcommittee held a hearing titled, “Trade and Labor: Creating and Enforcing Rules to Benefit American Workers.” Witnesses ranging from the American Association of Port Authorities to United Auto Workers testified in regards to their concerns about NAFTA 2.0. There is also some general hesitation by the House about the current deal in regards to protection for American workers, pharmaceutical regulation concerns, and environmental standards. Worldwide water shortages in India, Africa, and some Asian countries are good reason for pause, as it’s expected about 5 billion people will live in seasonal water scarce areas by 2050, driving up demand for water. Everyone seems to agree that a new deal needs to happen, but it needs to put North American countries in a favorable position for future economies on a global scale.
Canadian Foreign Affairs Minister Chrystia Freeland, who was involved in the initial deal, met with U.S. Trade Representative Robert Lighthizer and members of Congress to begin the process to ratify the deal. Hopefully the deal will be in its final form in the upcoming months, however subcommittee member Rep. Earl Blumenauer (D-Ore.) has been quoted by CNBC as saying House Democrats won’t be bound by “artificial deadlines.”
US-China Trade Talks
2018 was fraught with talks of Trade Wars, but all that hype has now boiled down to actual Trade Talks. Back in December 2018, Presidents Trump and Xi agreed to put a hiatus on implementing drastic tariffs until a compromise could be reached in regards to IP and tech transfer issues. In the middle of February, talks stalled between the US and China as “very difficult issues” arose, but they have since resumed. US representatives, Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, traveled to Beijing on March 28th to continue the talks. Vice Premier Liu He will bring a Chinese delegation to the US to conclude the discussions the first week of April.
The March 2, 2019 deadline for a final agreement between the two countries has come and gone, and tariffs are still in limbo. Finalization of the terms is still pending as President Trump is insisting the final deal be agreed on by both presidents in person. President Xi is insisting if that must be the case, then his arrival to the US should be a formal state visit and “not just a trip to Mar-a-Largo.” All these delays in varying agreements are causing the meeting between the leaders to be pushed back into May or possibly June.
While there are still plenty of details to smooth out, there is overall optimism that both parties will agree on terms soon. The recent conclusion of Mueller’s investigation should help move talks along. Since the investigation officially revealed there was not enough evidence against Trump to indicate that he or his campaign colluded with the Russians, China realizes that they might have another presidential term with Trump. This could potentially give the US more leverage towards the final terms of an agreement.
Until that agreement is reached, Trump intends to maintain 25 percent tariffs on nearly $50 billion a year in goods. This has annoyed China, who had retaliated with tariffs on $110 billion a year of US goods. Some believe it’s put unnecessary strain on the talks, but the administration has been “willing to discuss removing a 10 percent tariff” imposed on some $200 billion a year goods. This is has been received well by corporate lobbyists in Washington, who, to China’s relief, are also working to have the 25 percent tariffs on the other goods removed as well.
Until the talks are finalized and an agreement between the two countries is reached, they’ll continue to contribute to the slowdown in the world’s economy.
Slowing Global Growth
FedEx reported in a recent Economic Update that the global market is experiencing a slower growth rate than previous years. The parcel delivery company has service to 220 countries and links more than 99 percent of the world’s GDP. With a finger on the world’s economic pulse, FedEx blames worldwide trade wars and unfavorable exchange rates for the decline. The stalled negotiations between the US and China and the “potential for a hard Brexit” are contributing to the economic outlook.
US GDP projected growth is down a few tenths of a percent for the next two years, although the numbers are not terribly pessimistic. US Industrial production is expected to remain fairly strong. The agricultural outlook is optimistic as well; due to the catastrophic spread of African Swine Flu among hog herds in China, the country will increase US pork imports by an expected 80 percent since the Trade Wars began. Other top US exports are expected to be beef, poultry, fish, soybeans, cereal grains, and cotton.
On the other hand, China’s economy is being hit not only by the Trade War and epidemic agricultural outbreaks, but also by a lack of investments by private sector business leaders. The New York Times reports that due to the slowing economy and a growing share of available loans going towards state-owned Chinese enterprises, private investments may not return desired profits. Without that outside investment coming in, China might not be able to maintain its economic leverage in the US-China talks.
The authority of the truck driver shortage has been thrown into the spotlight. The Bureau of Labor Statistics published a study in the last half of 2018 titled “Is the U.S. labor market for truck drivers broken?” It significantly downplayed the shortage of drivers, instead identifying the current state as “tight.” The weekly financial news publication Barron’s determined that when looking at rising prices of transportation and comparing them to rising fuel prices, the employment compensation is actually rather fair. The increase in driver wages is allegedly catching up from the recession, but is not noticeably exceeding blue collar industry averages.
There has been significant back-lash towards these publications. Critics include the ATA’s Chief Economist Bob Costello and the United States Congress. Costello has responded to the BLS publication with some frustration, pointing out limitations in the study and the use of some outdated information. He also drew attention to the fact that truck driving is a unique blue collar profession, and that “there are many barriers to entry for new drivers: age requirements, CDL testing standards, strict drug and alcohol testing regimes and, perhaps most importantly for many fleets, safe and clean driving records.” Costello and other industry agents are quick to point out that there is not a shortage of applications, but rather there is a shortage of qualified drivers.
The US Congress is throwing its support towards addressing the heavy truck driver shortage through the Developing Responsible Individuals for a Vibrant Economy Act, originally introduced in 2018 to the House by Rep. Duncan Hunter (R-CA50) and to the Senate by Todd Young (R-IN). The DRIVE Act aims to lower the minimum age for interstate CDL drivers to 18 from its current age of 21. GovTrack.us summarizes the legislation saying the Act will require the young apprentice drivers “to complete 240 hours of on-the-road experience with an experienced truck driver. The trucks in such training would be required to include certain safety features such as automatic “active breaking” systems and dashboard video capture.” While there is understandable concerns for the tri-partisan legislation, overall the public response is positive and backed by more than 50 industry trade groups. The original version died in the 115th Congress, but has been reintroduced in 2019 for the 116th Congress with the co-sponsorship of 3 republicans, 2 democrats, and 1 independent.