Jul 26, 2019 05:03 AM
(This post was last modified: Jul 26, 2019 05:16 AM by C C.)
NAFTA's demise puts Canada in the 'penalty box,' study shows (Canadian community)
https://www.eurekalert.org/pub_releases/...072519.php
INTRO: Research has long indicated that the elimination of the North American Free Trade Agreement (NAFTA), or simply the withdrawal of the U.S. from NAFTA, would reduce standards of living in Canada, Mexico and the U.S. A new study from the University of Notre Dame shows the move would indeed economically hurt all three countries, but with a surprising twist -- Canada would suffer the most.
Typically, the smallest economy -- in the case of NAFTA, Mexico -- loses the most in per capita income because smaller economies tend to rely more on international trade, but not here, according to the study, "Putting Canada in the Penalty Box: Trade and Welfare Effects of Eliminating NAFTA," forthcoming in The World Economy by Jeffrey Bergstrand, professor of finance in Notre Dame's Mendoza College of Business.
"When a free trade agreement is eliminated, tariffs between the former members rise," Bergstrand explains. "With NAFTA, as each country's tariffs rise, it makes goods in non-member countries cheaper to buy and export. And it makes goods at home relatively less expensive. However, the fall in members' trade does reduce demand in each country and lowers wage rates in all the countries, which we found. It also -- due to higher tariffs among the former members -- raises prices in all the countries, which we also found. This is what lowers standards of living."
The study's determination that Canada's standard of living fell the most is due to the economic and geographic structure of the Canadian economy. "As some of Canada's trade with the U.S. and Mexico is diverted to its own economy, that new intra-national or domestic economic activity in Canada is much more expensive," Bergstrand says. "Canada's population is much more dispersed, which increases the costs of trading within the Canadian borders. Canada's population is one-tenth that of the U.S., but its geographic area is three times its size. Canada's area is five times that of Mexico, and one may argue that Canada's economic activity is heavily concentrated in adjacent provinces of Ontario and Quebec; however, half of Mexico's GDP is generated among three cities that are all within 450 miles of one another. Also, Mexico has one common language for transactions, while Canada is prominently bilingual, which historically raises costs of doing business." (MORE)
Boris Johnson's new Cabinet makes a soft Brexit more likely than ever (UK community)
https://ukandeu.ac.uk/boris-johnsons-new...than-ever/
INTRO: That Boris Johnson has appointed a cabinet full of Brexit hardliners and ‘Britannia Unchained’ fanatics will be alarming for anybody concerned about the possibility of a no deal Brexit – and indeed the stewardship of our economy and public services. But it is not the whole story. In practice, the appearance of a hardline stance on EU withdrawal by a Johnson government may be the very thing that unlocks the possibility of avoiding a chaotic break with the continent.
We saw the worst and best of Boris Johnson on his first day in office. The appointment of people with highly reactionary views, or people who have shown contempt for both Britain’s democratic system and national security, purely because it suits his immediate political interests, paints a disturbing picture of the character of Johnson’s premiership. At the same time, the assembly of Team Boris may just have demonstrated – no less disturbingly, perhaps – Johnson’s supreme skills as a political operator.
It is generally understood that Johnson is not being entirely truthful about his Brexit plans. Conventional wisdom suggests that he will simply rebrand May’s withdrawal agreement – which he did eventually vote for – and force it through Parliament with sheer bravado. But this scenario understates the backstop problem: without Labour’s support, there will still be enough true-believing Brexiters on the Conservative backbenches to block any deal containing May’s hated backstop – even ministerial resignations would be likely. (It should go with saying that the EU will not countenance anything resembling May’s deal without a backstop-like mechanism for the Irish border.)
In Johnson’s cunning plan, however, the backstop becomes the first stop. He will soon signal his willingness for Britain to remain in both the single market and customs union as part of a lengthy transitional period (possibly as long as five years) before a UK/EU free trade deal is agreed. All he requires from the EU is a commitment to this timetable, in return for ongoing budget contributions for several years, and of course the divorce settlement when single market/customs union departure finally occurs. This does not fully alleviate the need for something like the backstop – since even five years may not be enough time to agree a trade deal – but with May’s 21-month ‘implementation period’ now forgone, it starts to feel purely hypothetical.
Crucially, Britain will leave the EU in a formal sense on 31 October 2019, relinquishing all political representation. With ironic inevitability, we will become the rule-taking ‘vassal state’ of which Johnson once warned. An elongated Brexit will be deemed a price worth paying for an irrevocable Brexit. Johnson’s masterstroke is to tie the key figures of the Leave campaign to this strategy, while effectively conceding the demands of Tory Remainers. The former know this might be their last chance to secure Brexit, and the latter know this might be their last chance to avoid no deal.
We can then expect a general election to be called, for early November – or sooner if the new withdrawal process has been agreed. Johnson’s minority government cannot possibly function, beyond Brexit, with so many ousted ministers on the backbenches. However, whether he wins a workable majority or not, we can also expect the complexion of his government to change dramatically after this point... (MORE)
https://www.eurekalert.org/pub_releases/...072519.php
INTRO: Research has long indicated that the elimination of the North American Free Trade Agreement (NAFTA), or simply the withdrawal of the U.S. from NAFTA, would reduce standards of living in Canada, Mexico and the U.S. A new study from the University of Notre Dame shows the move would indeed economically hurt all three countries, but with a surprising twist -- Canada would suffer the most.
Typically, the smallest economy -- in the case of NAFTA, Mexico -- loses the most in per capita income because smaller economies tend to rely more on international trade, but not here, according to the study, "Putting Canada in the Penalty Box: Trade and Welfare Effects of Eliminating NAFTA," forthcoming in The World Economy by Jeffrey Bergstrand, professor of finance in Notre Dame's Mendoza College of Business.
"When a free trade agreement is eliminated, tariffs between the former members rise," Bergstrand explains. "With NAFTA, as each country's tariffs rise, it makes goods in non-member countries cheaper to buy and export. And it makes goods at home relatively less expensive. However, the fall in members' trade does reduce demand in each country and lowers wage rates in all the countries, which we found. It also -- due to higher tariffs among the former members -- raises prices in all the countries, which we also found. This is what lowers standards of living."
The study's determination that Canada's standard of living fell the most is due to the economic and geographic structure of the Canadian economy. "As some of Canada's trade with the U.S. and Mexico is diverted to its own economy, that new intra-national or domestic economic activity in Canada is much more expensive," Bergstrand says. "Canada's population is much more dispersed, which increases the costs of trading within the Canadian borders. Canada's population is one-tenth that of the U.S., but its geographic area is three times its size. Canada's area is five times that of Mexico, and one may argue that Canada's economic activity is heavily concentrated in adjacent provinces of Ontario and Quebec; however, half of Mexico's GDP is generated among three cities that are all within 450 miles of one another. Also, Mexico has one common language for transactions, while Canada is prominently bilingual, which historically raises costs of doing business." (MORE)
Boris Johnson's new Cabinet makes a soft Brexit more likely than ever (UK community)
https://ukandeu.ac.uk/boris-johnsons-new...than-ever/
INTRO: That Boris Johnson has appointed a cabinet full of Brexit hardliners and ‘Britannia Unchained’ fanatics will be alarming for anybody concerned about the possibility of a no deal Brexit – and indeed the stewardship of our economy and public services. But it is not the whole story. In practice, the appearance of a hardline stance on EU withdrawal by a Johnson government may be the very thing that unlocks the possibility of avoiding a chaotic break with the continent.
We saw the worst and best of Boris Johnson on his first day in office. The appointment of people with highly reactionary views, or people who have shown contempt for both Britain’s democratic system and national security, purely because it suits his immediate political interests, paints a disturbing picture of the character of Johnson’s premiership. At the same time, the assembly of Team Boris may just have demonstrated – no less disturbingly, perhaps – Johnson’s supreme skills as a political operator.
It is generally understood that Johnson is not being entirely truthful about his Brexit plans. Conventional wisdom suggests that he will simply rebrand May’s withdrawal agreement – which he did eventually vote for – and force it through Parliament with sheer bravado. But this scenario understates the backstop problem: without Labour’s support, there will still be enough true-believing Brexiters on the Conservative backbenches to block any deal containing May’s hated backstop – even ministerial resignations would be likely. (It should go with saying that the EU will not countenance anything resembling May’s deal without a backstop-like mechanism for the Irish border.)
In Johnson’s cunning plan, however, the backstop becomes the first stop. He will soon signal his willingness for Britain to remain in both the single market and customs union as part of a lengthy transitional period (possibly as long as five years) before a UK/EU free trade deal is agreed. All he requires from the EU is a commitment to this timetable, in return for ongoing budget contributions for several years, and of course the divorce settlement when single market/customs union departure finally occurs. This does not fully alleviate the need for something like the backstop – since even five years may not be enough time to agree a trade deal – but with May’s 21-month ‘implementation period’ now forgone, it starts to feel purely hypothetical.
Crucially, Britain will leave the EU in a formal sense on 31 October 2019, relinquishing all political representation. With ironic inevitability, we will become the rule-taking ‘vassal state’ of which Johnson once warned. An elongated Brexit will be deemed a price worth paying for an irrevocable Brexit. Johnson’s masterstroke is to tie the key figures of the Leave campaign to this strategy, while effectively conceding the demands of Tory Remainers. The former know this might be their last chance to secure Brexit, and the latter know this might be their last chance to avoid no deal.
We can then expect a general election to be called, for early November – or sooner if the new withdrawal process has been agreed. Johnson’s minority government cannot possibly function, beyond Brexit, with so many ousted ministers on the backbenches. However, whether he wins a workable majority or not, we can also expect the complexion of his government to change dramatically after this point... (MORE)