Posts Tagged ‘World Trade’

What’s behind Trump’s demands on NATO?

July 18, 2018

Click to enlarge

President Trump last week demanded that NATO allies, who have already pledged to increase their military spending to 2 percent of GDP by 2024, raise their spending to 4 percent.

This is supposedly necessary to defend against Russia.  Whether or not he really thinks Russia is that much of a threat, the fact is that the European members of NATO already outspend Russia by a considerable amount.

According to the Stockholm International Peace Institute, Russia’s spending military spending last year was $66.3 billion, down from $69.2 billion in 2016.

France spent $57.8 billion, the UK spent $47.2 billion and Germany spent $44.3 billion—a combined total of $149.3 billion, more than double what Russia spent.  Estimated US spending was $610 billion.

The International Institute for Strategic Studies made different but similar estimates.

Its estimate was that Russia spent $61.2 billion last year, while the UK spent $50.7 billion, France spent $48.6 billion and Germany spent $41.7 billion—a combined total of $141 billion, also more than double Russia’s.  The IISS estimated that US spent $602.8 billion.

So what was the purpose of Trump’s demand?  I think it was to increase sales by the U.S. armaments industry.

I think his motivation was the same for his criticism Germany for importing 70 percent of its natural gas from Russia and planning a second natural gas pipeline across the Baltic.

His goal is to have Germany import American liquefied natural gas (LNG), despite its higher cost and current lack of suitable infrastructure.  Russia is just an excuse.  He wants American companies to get Germany’s business.s.

The European Union countries are competitors of the United States in world trade.  Hence his hostility to the EU.   Russia is not.  Hence his lack of hostility to Russia.

Donald Trump sees foreign affairs in terms of trade, and trade in terms of making deals. That is shortsighted.  The way for the United States to regain our advantage in world trade is by building up our own industry, not by demanding other countries do things that are not in their own interest.

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The march of globalization

October 7, 2016

trade-goldmansachchart-barry-rithholtz

This chart, produced by Goldman Sachs and reproduced by FT Alphaville and Barry Ritholtz, shows how world trade has grown in the past half-century.

In 1960, a quarter of world output was for export.  Now it is well over half.

There is a benefit in being able to buy things that are produced in distant lands.  There also is a risk in depending on long and vulnerable supply chains for what you need.  We the people and our governments need to think about what balance to strike.