(What’s Left of) Our Economy: Worsening U.S. Trade Deficits are Back for Now

Tags

Advanced Technology Products, CCP Virus, China, coronavirus, COVID 19, dollar, euro, Europe, exchange rates, exports, goods trade, imports, manufacturing, natural gas, non-oil goods, services trade, Trade, trade deficit, Wuhan virus, Zero Covid, {What's Left of) Our Economy

At least if you don’t factor in inflation, this morning’s official U.S. figures (for October) show that an encouraging recent winning streak for America’s trade flows and their impact on the economy has come to an end for now.

The winning streak consisted of overall monthly trade deficits that shrank sequentially from April through August, which means – according to how Washington and most economists calculate such things – that trade was contributing to the economy’s growth. And that five month stretch was the longest since the shortfall declined for six straight months between June and November, 2019.

Even better, this contribution translated into expansion that was healthier, fueled more by producing and less by borrowing and consuming. Better still, during the last part of this period, the deficit was falling while growth was taking place – as opposed to the more common pattern of a declining deficit limiting contraction mainly because a shriveling economy was buying fewer imports. And better still, for most of these months, the trade gap shrank both because exports climbed and imports dropped.

In October, however, the combined goods and services deficit rose for the second consecutive month, and by 5.44 percent, from an upwardly revised $74.13 billion to $78.16 billion. That total, moreover, was the highest since June’s $80.72 billion. And also for the second straight month – exports dipped and imports advanced.

That consecutive sequential export decrease was the first such stretch since the peak CCP Virus period of March thru May, 2020. The actual decline was 0.73 percent, from an upwardly revised $258.51 billion to $256.63 billion – a total that was the lowest since May’s $256.08 billion

The total import increase was also the second straight, and marked the first back-to-back improvements since January through March of this year (which capped an eight-month period of increases). These foreign purchases advanced by 0.65 percent in October, from an upwardly revised $332.64 billion to $334.79 billion.

Up for the second straight month as well as the goods trade deficit – a development that last happened from November, 2021 through January, 2022. The gap widened by 6.51 percent, from upwardly revised $93.50 billion to $99.59 billion, and this figure was the highest figure since May’s $104.33 billion.

Goods exports fell for the second straight month in October, too – a first since that peak virus period of March through May, 2020. (The streak actually began in February.) The October retreat was 2.06 percent, and brought the total from a downwardly revised $179.69 billion to $175.98 billion – its worst since April’s $176.80 billion

Goods imports grew a second straight month, too, from an upwardly revised $273.19 billion to $275.57 billion. The 0.87 percent increase resulted in the highest monthly level since June’s $282.68 billion.

Services trade, which is dwarfed by goods trade, nonetheless produced some bright spots in the October trade report. The longstanding surplus in this sector, which was so hard hit by the pandemic, improved for the first time in three months, froma downwardly revised $19.37 billion to $21.43. The 10.62 percent increase produced the best monthly total since last December’s $21.66 billion.

Most of this progress stemmed from the ninth consecutive advance and the seventh straight record in services exports. In October, they expanded from an upwardly revised $78.82 billion to $80.65 billlion.

Services imports dipped by 0.38 percent, from an upwardly revised record of $59.45 billion to $59.22 billion.

Manufacturing’s chronic and enormous trade shortfall became more enormous in October, worsening by 4.32 percent, from $129.14 billion to $134.73 billion. That total was the second highest ever, after March’s $142.22 billion.

Manufacturing exports inched down by 0.24 percent, from $110.69 billion to $110.42 billion, while imports surged by 2.07 percent, from $240.10 billion to a second-highest ever $245.17 billion (behind only March’s $256.18 billion).

At $1.2745 trillion (up 18.06 percent from the 2021 level), the year-to-date manufacturing trade deficit is already close to the annual record – last year’s $1.3298 trillion.

By contrast, dictator Xi Jinping’s over-the-top Zero Covid policies no doubt helped depress the also chronic and enormous U.S. goods trade deficit with China by 22.58 percent on month in October. The nosedive was the biggest since the 38.93 percent plummet in February, 2020, when the People’s Republic was locking itself down against the first CCP Virus wave. And the October monthly trade gap was the smallest since August, 2021’s 31.66 percent.

Interestingly, U.S. goods exports to China soared by 31.38 percent on month in October, from $11.95 billion to $15.70 billion. That amount was the highest since last November’s $15.87 billion, and the monthly increase of 31.33 percent was the fastest since October, 2021’s 51.23 percent.

Imports, however, sank by 9.49 percent, from $49.25 billion to $44.57 billion. The level was the lowest since May’s $43.86 billion and the rate of decrease the greatest since April’s 11.82 percent.

Year-to-date, the China goods trade gap has ballooned by 18.68 percent, once again faster than the rise of the U.S. non-oil goods deficit (17.53 percent), its closest global proxy.

In October, for a change, the widening of the overall U.S. trade deficit – and then some – came largely from a booming imbalance with Europe. The goods gap with the continent skyrocketed by 48.51 percent, sequentially, from $15.78 billion to $23.44 billion. That new total was the biggest since March’s $28.50 billion and the rate of increase the fastest since it shot up by 68.37 percent that same month.

U.S. goods exports to Europe actually set a new record in October ($44.27 billion, versus the old mark of $43.61 billion in June). But American global sales of natural gas, which are up 52.51 percent on a year-to-date basis due largely to the continent’s need to replace sanctioned Russian energy supplies, oddly pulled back by 9.90 percent.

At the same time, American goods imports from Europe, surely reflecting a weak euro, leaped by 16.35 percent, from $58.19 billion to $67.71 billion. That total was the second highest on record (trailing only March’s $70 billion) and the monthly increase (16.35 percent) the fastest since March’s 32.43 percent.

October trade in Advanced Technology Products (ATP) set several records, but most were the bad kind. The deficit worsened by 7.70 percent, from $24.32 billion to $26.19 billion, and hit its second straight all-time in the process.

Exports set a new record, rising 4.08 percent on month, from $34.33 billion to $35.73 billion. (The old mark of $34.91 billion dates back to March, 2018.)

Imports also reached their second straight all-time high, climbing 5.58 percent sequentially, frm $58.65 billion to $61.92 billion.

Moreover, year-to-date, the ATP trade shortfall is up 32.17 percent, and at $204.21 billion, it’s already set a new annual record.

Some relief could be in store for America’s trade flows in the coming months. The dollar has weakened in recent weeks, which will restore some price competitiveness for U.S.-origin goods and services at home and abroad. And a recession, a further growth slowdown, and/or continued high inflation could keep reducing imports as well (though that’s the kind of recipe for smaller trade deficits that no one should welcome).

At the same time, solid economic growth could continue, as it has throughout the second half of the year. Americans’ spending power could remain strong, given still huge (though dwindling) amounts of savings amassed during the pandemic. At the behest of U.S. allies, President Biden seems likely to weaken the Buy American provisions governing the green energy production incentives in the Inflation Reduction Act. And China’s export machine could revive as Beijing decides to back away from economically crippling levels of lockdowns.

At this point, however, I’m thinking that recent deficit improvement will keep “rolling over” as Wall Streeters call a steady reversal of investment gains. It’s not much more than a gut feeling. But my hunches aren’t always wrong.

Advertisement

Our So-Called Foreign Policy: Europe’s Worrisome Fence-Sitting on China

Tags

alliances, allies, Biden, Bloomberg.com, China, Emmanuel Macron, Europe, export controls, France, free-riding, Mark Rutte, national security, Netherlands, Our So-Called Foreign Policy, semiconductors, technology

Ever since he belatedly admitted their importance (see here and here), a foundation of President Biden’s strategy for dealing with the wide-ranging challenges posed by China has been bringing America’s long-time treaty allies on board.

As the President made clear in a major speech shortly after his inauguration, China is America’s “most serious competitor” and “America’s alliances are our greatest asset” in countering this threat – and dealing with other global threats and crises.”

Mr. Biden seems to be making progress in mobilizing support from America’s Asian allies, both in terms of pushing them to get serious about their military budgets, and by winning meaningful cooperation for U.S. efforts to stay ahead of China in the means to produce ever more advanced semiconductors – which are central to creating the cutting-edge military systems of today and tomorrow.

But on the Europe front, this allies-focused strategy is hitting some serious roadblocks. Specifically, as Bloomberg.com just reported, although the continent’s major economies – especially the Netherlands, home of ASML, the company that makes the world’s most important semiconductor manufacturing equipment – have gone along to some degree with this American campaign, they’ve also warned that their cooperation will be limited in important ways.

Most disturbingly, particularly given U.S. plans to expand its new, sweeping controls on doing advanced semiconductor business with China, the Netherlands trade minister declared that the country “will not copy the American measures one to one. “We make our own assessment….” His remarks came after Chinese dictator Xi Jinping urged Dutch Prime Minister Mark Rutte to “oppose the politicization of economic and trade issues and maintain the stability of the global industrial chain and supply chain.”

Less disturbingly (because his country isn’t nearly as important a link in the global semiconductor supply chain) but disturbingly nonetheless (because it has always spoken with an outsized voice in European councils), France’s President Emannuel Macron told a group of business leaders, “a lot of people would like to see that there are two orders in this world. This is a huge mistake, even for both the US and China. We need a single global order.”

As a foreign policy realist, I can’t possibly criticize these and other countries for prioritizing what they view as their own national interests. Nor should American leaders. (Criticizing the accuracy of these views? That’s another story.) But Washington should call out avowed allies like the Netherlands and France for what looks like another version of long-time European national security free-riding, and make clear that continuing to play the game of what Bloomberg reporters call “carving out a middle ground when it comes to China” will carry severe consequences.

After all, Macron is right that the United States and China are “two big elephants” in a jungle, and that “If they become very nervous and start a war, it will be a big problem for the rest of the jungle.”

By the same token, however, allies that can’t be counted on when such conflicts start aren’t really allies at all, for their uncertainty makes impossible sound military planning, and could lead to dangerously erroneous miscalculation and other decisions.

In 1931, Florence Reece, the wife of a union organizer, wrote the classic protest song “Which Side Are You On?” to decry the notion of fence-sitting during times of conflict like those in Kentucky’s coal fields during that era. It’s a question that American allies like the Netherlands and France soon need to start answering much more clearly as China’s systemic threat to the United States grows ever more serious.

Our So-Called Foreign Policy: Is Biden Learning the Limits of Multilateralism?

Tags

Afghanistan, alliances, allies, America First, ASML, Biden, Biden administration, Blob, China, Chips Act, Europe, export controls, Japan, multilateralism, NATO, North Atlantic treaty Organization, oil, oil price, OPEC, Our So-Called Foreign Policy, Saudi Arabia, semiconductors, South Korea, Taiwan, Ukraine War

Remember the buzz worldwide and among the bipartisan globalist U.S. foreign policy Blob that Donald Trump’s defeat in the 2020 presidential election heralded the start of a new golden age of America’s relations with its longstanding security allies?

Remember how President Biden himself pushed this line with his claim that “America is back” and that Washington would end the supposed Trump practice of denigrating and even rupturing these relationships, and resume its post-World War II strategy of capitalizing on these countries’ strengths and fundamental agreement with vital American interests to advance mutually beneficial goals?

Fast forward to the present, and it’s stunning how thoroughly these American globalist hopes – and the assumptions behind them – have been dashed.

The latest example has been Saudi Arabia’s rejection of Mr. Biden’s request to delay an increase in oil prices announced by Riyadh and other members of the OPEC-Plus petroleum producers cartel. It’s true that few Americans currently view the Saudis as ideal allies. Continuing human rights abuses and especially evidence that its leaders ordered the assassination of a dissident Saudi-American journalist – and coming on top of revelations of Saudi support for the September 11 terrorists and Islamic extremism more broadly – will do that. Indeed, candidate Biden had even promised to make Saudi Arabia as a “pariah.”

But follow-through? Forget it – largely for fear of antagonizing the Saudis precisely because of their huge oil production and reserves, and because the President evidently still viewed them as a key to countering Iran’s hegemonic ambitions in the energy-rich region.

As for Saudi Arabia, it and much closer allies (including in Europe) were far from enthralled with how Mr. Biden pulled U.S. forces out of Afghanistan – which they charge took them by surprise and seemed pretty America First-y.

Under President Biden, the United States appears to have performed better in mustering allied support for helping Ukraine beat back Russia’s invasion. But look beneath the surface, and the European contribution has been unimpressive at best, especially considering that Ukraine is located much closer to the European members of the North Atlantic Treaty Organization (NATO) than is the United States.

In particular, according to Germany’s Kiel Institute for the World Economy, which has been tracking these developments since the war began, to date,

 “The U.S. is now committing nearly twice as much as all EU countries and institutions combined. This is a meagre showing for the bigger European countries, especially since many of their pledges are arriving in Ukraine with long delays. The low volume of new commitments in the summer now appears to be continuing systematically.”

In fact, European foot-dragging has reached the point at which even Mr. Biden’s Treasury Secretary, Janet Yellen, has just told them (in diplospeak of course) to get on the stick.

Apparently, America’s allies in Asia as well as Europe have hesitated to get behind another key initiative as well: Slowing China’s growing technological progress in order to limit its potential militar power.

In a September 16 speech, White House national security advisor Jake Sullivan confirmed that the United States had officially doubled down on this objective:

“On export controls, we have to revisit the longstanding premise of maintaining “relative” advantages over competitors in certain key technologies.  We previously maintained a “sliding scale” approach that said we need to stay only a couple of generations ahead. 

“That is not the strategic environment we are in today. 

“Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”

And on October 7, the United States followed up by announcing the stiffest controls to date on doing business with Chinese tech entities – controls that will apply not only to U.S.-owned companies, but to other countries’ companies that use U.S.-owned firms technology in high tech products they sell and high tech services they provide to China.

Including these foreign-owned businesses in the U.S. sanctions regime – as well as in parallel efforts to rebuild American domestic capacity and marginalize China’s role in these sectors – is unavoidable for the time being, since the domestic economy long ago lost its monopoly and in some cases even its presence in the numerous products vital to semiconductor manufacturing in particular.

But as the Financial Times reported last month, a year after Washington drew up plans to create a “Chip 4” initiative to work with Taiwan, Japan, and South Korea to achieve these goals, “the four countries have yet to finalise plans even for a preliminary meeting.”

The prime foot-dragger has been South Korea, which fears Chinese retaliation that could jeopardize its massive and lucrative trade with the People’s Republic. But the same article makes clear that Japan harbors similar concerns.

Also unenthusiastic about the U.S. campaign is the Dutch manufacturer of semiconductor production equipment ASM Lithography (ASML). ASML’s cooperation is crucial to America’s anti-China ambitions because it’s the sole global supplier of machines essential for making the world’s most advanced microchips.

So far it’s been playing along. But similar complants about possibly losing business opportunities in China – which may account for nearly half of the world’s output of electronics products along with much of its production of less advanced semiconductors – have already persuaded the Biden administration to give some South Korean and Taiwanese microchip manufacturers a one-year exemption from the new export curbs. Could ASML try to win similar leniency?

In fairness, the Biden administration hasn’t wound up placing all its foreign policy bets on alliances and securing multilateral cooperation. Indeed, its new National Security Strategy re-states the importance of rebuilding American economic strength as a foundation of foreign policy success; the legislation it successfully sponsored to bolster the United States’ semiconductor and other high tech capabilities put considerable money behind that approach; and to its credit, it announced the new China tech curbs even after it couldn’t initially secure adequate allied cooperation – assuming, correctly, that an act of U.S. leadership could bring start bringing them in line.

Hopefully, a combination of these rifts with allies and its recognition of the importance of maintaining and augmenting national power mean that President Biden at least is learning a crucial lesson: that supporting multilateralism and alliances can’t be ends of a sensible U.S. foreign policy in and of themselves. They can only be means to ends. And although they can obviously be valuable in many instances, the best ultimate guarantor of the nation’s security, independence, and prosperity are its own devices.       

Following Up: Podcast Now On-Line of TNT Radio Interview

Tags

abortion, China, conservatism, culture wars, election 2022, electric vehicles, energy, Europe, Following Up, gay marriage, inflation, left-wing authoritarianism, midterms 2022, migrants, national conservatism, National Conservatism Conference, national security, politics, Sanctuary Cities, The Hrjove Moric Show, TNT Radio, Trade, Ukraine War

I’m pleased to announce that the podcast is now on-line of my appearance Tuesday night on “The Hrvoje Moric Show” on the internet network TNT Radio. Click here for a timely discussion on the future of American conservatism, on the culture wars that should and shouldn’t be fought, and a on a wide range of other domestic and international subjects, both strategic and economic.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Our So-Called Foreign Policy: U.S. Allies are Standing (A Tiny Bit) with Ukraine

Tags

alliances, allies, burden sharing, EU, Europe, European Union, free-riding, Kiel Institute for the World Economy, North Atlantic treaty Organization, Our So-Called Foreign Policy, Russia, Ukraine, Ukraine-Russia war

Even a long-standing critic like me of the record of U.S. allies in Europe in sharing the burden of their own defense found the graphic below to be quite the stunner. It makes clear that, so far, countries that for decades have been deadbeats and free-riders when it comes to fielding armed forces capable of defeating first Soviet and then post-Soviet Russian aggression, are behaving just as selfishly and miserly in supporting Ukraine’s resistance to the Kremlin’s invasion – and presumably keeping themselves safe from attack or bullying by Moscow.

The graphic comes from a leading German think tank – the Kiel Institute for the World Economy – and it shows that between the February 24 start of the invasion of Ukaine through March 27, the United States, in the words of the Institute’s research director, “is giving significantly more than the entire [European Union], in whose immediate neighborhood the war is raging.”

The specific amounts of combined financial, humanitarian, and military assistance (in euros) , according to Kiel: the United States, 7.6 billion; all European Union countries combined, 2.9 billion; EU institutions (like the European Investment Bank, 3.4 billion. Adding the United Kingdom (not an EU member) increases the European total by $712 million euros – and would still leave this figure below that of U.S. aid in all forms.

True to RealityChek‘s long-time insistence that data be presented in context, the Europeans come off somewhat better when these aid figures are presented as percentages of total economic output. After all, it’s completely unrealistic to expect even the most vigilant very small economy to donate as much in absolute terms as a much larger economy, all else equal.

But as the Kiel graph beow shows, most of the Europeans don’t come off that much better.

In fact, except for Estonia, Poland, Lithuania, Slovakia, and Sweden, the United States holds the lead according to this measure, too. And remember: Poland and Slovakia are right next door to Ukraine, Estonia and Lithuania border Russia, and Sweden is located just across the Baltic Sea to them. As for the rest of Europe, I’ll just circle back to the point made by the Kiel Institute research director: It’s their “immediate neighborhood”! So their relative efforts should be exponentially greater than America’s, as should those of the countries even closer to the fighting.

Moreover, it’s easy to understand why European military aid has been so modest. These countries have been skimping on their militaries for decades. But as a result, they should be compensating by providing much greater amounts of economic and humanitarian assistance.

These figures are damning enough as examples of continued European fecklessness. But they’re even more important because the continent’s free-riding means that for the foreseeable future, American military forces will keep playing a predominant role in any response to the Ukraine invasion. And even if President Biden sticks with his pledge to keep U.S. troops out of the fighting in Ukraine, their very presence in the vicinity of a conflict could expose the U.S. homeland literally to mortal danger. 

For as I’ve noted, if the war spills over borders into the countries where the American units are based, and that enjoy a legally ironclad promise of protection by the United States and the rest of the North Atlantic Treaty Organization (NATO), U.S. and Russian forces will almost surely wind up shooting at each other, and the prospect of escalation to the all-out nuclear war level becomes terrifyingly real. 

A Europe willing and therefore at some point able to defend itself would reduce this danger to acceptable levels. But as the Kiel data show, because the Europeans remain protectorates much more than genuine allies, this point looks as far off in the future as ever.                     

 

 

Those Stubborn Facts: Funny Definitions of Environmentally and Socially Responsible Investing

Tags

China, Enviromental Social and Governance risks, ESG, Europe, European Union, finance, investing, sustainability, Those Stubborn Facts

Amount of China assets held by Europe-based investment funds

legally required “to avoid environmental, social and governance

[ESG]risks”: c.$130 billion

Amount of China assets held by Europe-based investment funds

“that have screened for ESG-related hazards”: $160 billion

 

(Source: “China Stirs Unease for ESG Managers Blindsided by Russia’s War,” by Natasha White and Saijel Kishan,” Bloomberg.com, March 27, 2022, China Stirs Unease for ESG Managers Blindsided by Russia’s War – Bloomberg)

Im-Politic: So the Vaccines Work…Except in Europe?

Tags

CCP Virus, coronavirus, COVID 19, Europe, Im-Politic, infections, lockdowns, mortality, vaccination, vaccine mandates, vaccines, Washington Post, Worldometers.info, Wuhan virus

There’s no doubt about it: Europe is having a terrible time with what looks like a severe new CCP Virus wave. Not made nearly as clear by the coverage – this new wave is rising despite high vaccination rates in most of the countries being hit. As this post will show, two key trends are casting serious doubt on broad claims of vaccine effectiveness claimed by the U.S. public health establishment and others who have viewed it as the only reliable source of “The Science” on the pandemic and fighting it.

The first trend is in reported infection rates. As known by RealityChek regulars, I don’t take this metric especially seriously because it can be impacted by developments having little to do with the actual severity of the pandemic – like testing rates and numbers of asymptomatic infections. (The latter complicates the situation because people carrying the virus who are feeling no effects are relatively unlikely to take a test.)

But the public health establishment takes infection rates very seriously – and evidently in Europe as well as in the United States. So here are the relevant figures for eleven European countries – with their full vaccination rates as of November 22 on the left and the change in the seven-day moving average (7DMA) of daily new infections between November 15 and November 22 on the right. The vaccination rates come (with the exception noted below) from the Washington Post‘s virus tracker feature, and the infection rates from the worldometers.info website. And for comparison’s sake, I’m including the U.S. figures as well.

Netherlands:        73.0 percent*     +48.76 percent 

Germany:             68.0 percent      +30.62 percent

Belgium:              75.4 percent      +45.52 percent

Austria:                65.7 percent      +24.40 percent 

UK:                      69.1 percent        +9.06 percent 

France:                 69.6 percent      +81.76 percent 

Czech Republic:  58.6 percent      +39.58 percent 

Portugal:              86.9 percent      +48.04 percent

Denmark:             78.5 percent      +21.30 percent 

Spain:                   79.8 percent      +58.98 percent 

Italy:                     73.1 percent      +26.59 percent

USA:                    59.0 percent      +11.24 percent

*See here for the Netherlands vaccination rate   

It’s easy to see that there is absolutely no correlation between the two sets of numbers. Just look at the contrast in infection rate increases between the United Kingdom and France – even though their full vaccination rates are nearly identical. Also, how come highly vaccinated Spain and Portugal are seeing case numbers rise so quickly? Why are Italian case numbers rising much more slowly than those on the Iberian peninsula, even though it’s vaccination rate is somewhat lower? And why does the United States, with the second lowest vaccination rate (due to all those supposed kooks who won’t get vaxxed?) come in with the second lowest infection growth rate in this group?

But like I said, in my view, infection rates don’t deserve much relative attention. Death rates aren’t a flawless measure of virus severity, either, but they’re another matter – especially because so many inside and outside the public health establishment say that the main value of the vaccines is less their power to prevent infections than to prevent serious illness and death. That proposition holds more strongly for Europe, but as you’ll see, there are several big exceptions.

Below are the data comparing the same vaccination rates (on the left) and CCP Virus death rates (on the right) for the eleven European countries plus the United States. The death rate number is the change in the 7DMA between November 15 ad November 22 and is also from the worldometers.info site.

Netherlands:        73.0 percent*       +52.17 percent 

Germany:             68.0 percent        +22.35 percent

Belgium:              75.4 percent        +27.59 percent 

Austria:                65.7 percent        +27.27 percent

UK:                      69.1 percent           -5.80 percent

France:                 69.6 percent        +27.03 percent 

Czech Republic:   58.6 percent       +43.75 percent

Portugal:               86.9 percent       +30.00 percent 

Denmark:              78.5 percent       +50.00 percent

Spain:                    79.8 percent        -26.09 percent 

Italy:                      73.1 percent         +5.36 percent

USA:                      59.0 percent        +0.29 percent 

The lessons of this table are more difficult to draw for one main reason – the absolute numbers of deaths involved for most of these countries are extremely low. Meaning single or double digits low. And as known by RealityChek regulars, very low numbers can be highly volatile when it comes to percentage change terms, because only a tiny move in absolute numbers can produce huge relative moves. (For exampile, an increase of one to two in absolute terms equals a 100 percent increase.)

The three exceptions are Germany (where the daily deaths 7DMA have been growing recently by the high-100s), the United Kingdom (where they’re rising by the mid-100s), and the United States (where daily growth still exceeds 1,000). Even taking these disparities into account, it’s interesting that the U.S. daily death rate has been stable lately and in fact has come way down since August; and that in the United Kingdom, with its average vaccination rate, mortality is declining.

And in relative terms, on this front, both countries have been out-performing Germany – whose vaccination rate is a bit lower than the United Kingdom’s but a good deal higher than the United States’. It’s true that death rates are lagging indicators (because CCP Virus victims typically take a while to pass away). But the different directions in this indicator in these three countries don’t seem to have much to do with their vaccination rates.

As for the high vaccination countries, the rates of mortality increase are indeed worrisome, and simply because of their often-soaring infection rates could worsen. But the absolute numbers are still so low that the only reasonable conclusion is “Wait and see.”

That’s why even though tight virus-related restrictions are reappearing all over Europe (see, e.g., here, here, and here), it seems panicky at best to close down entire economies and societies – especially given all the collateral damage that would result. Sweepingly linking employment opportunities to vaccination status, as the Biden administration has sought seems equally unreasonable in light of these mounting signs that the jabs simply aren’t the panacea that was initially advertised.

An announcement yesterday by the President’s coronavirus response coordinator that “We can curb the spread of the virus without having to in any way shut down our economy,” indicates that Mr. Biden is learning the first lesson. A more targeted approach toward vaccinations and other responses, focusing on the most vulnerable, would be a welcome sign that he’s learning the second.

Our So-Called Foreign Policy: Will the Foreign Policy Experts – Finally – Start Learning Some Geography?

Tags

Afghanistan, Biden, Blob, Bloomberg.com, CNN.com, Europe, geography, globalism, Jeremy Shapiro, Luke McGee, Mainstream Media, Marc Champion, Our So-Called Foreign Policy, Robert D. Kaplan, The Economist

I’m thrilled to report that I may have jumped the gun in my post last Wednesday in scoffing at the possibility of President Biden’s botched Afghanistan withdrawal – and the broader U.S. failure in that Forever War – would resulting in any major changes in America’s needlessly risky and costly globalist approach to foreign policy.

I’m not saying that the two-decade Afghanistan fiasco and its humiliating final chapter will spur a search for real alternatives in the foreseeable future, or even that significant new strategies will ever be put into effect – at least not without a much bigger disaster reflecting the same kinds of mistakes. But it’s nonetheless remarkable not only that any unconventional idea has appeared – especially given the determination of the strongly globalist Mainstream Media to suppress them – but that the one that has surfaced challenges the root assumption of globalism.

Specifically, some establishment voices are, inchoately to be sure, pointing out that for all the worries understandably expressed by Americans about new threats to their security appearing in Taliban-controlled Afghanistan, Europe faces much greater threats. The reason, moreover, is that it’s located much closer to Afghanistan than the United States.

In other words, geography counts, and America’s position halfway around the world from this troubled region and its utterly dysfunctional Middle East neighborhood, and separated from them and from its leading adversaries by wide oceans, is a leading contributor to its security that creates options enjoyed by no other major power.

Further, by implication – given that these points are being made in the context of the United States concluding that a Taliban victory in Afghanistan is acceptable after all – one of the most important of these options when many forms of trouble arise in any number of locales abroad is simple non-involvement.

The importance of America’s unique geography and its advantages may seem screamingly obvious. But as I’ve explained in detail (see, e.g., here and here), it has not only been ignored by generations of globalist American leaders and thinkers literally since Pearl Harbor. It’s been actively rejected.

Instead, the prevailing foreign policy conventional wisdom has consistently held that peace and security around the world make up a seamless whole, and that war and aggression and even instability anywhere across the globe are matters of urgent concern to the United States and must be squelched or resisted ASAP lest they mestastasize and directly endanger the American homeland.

Some of these “Geography matters”-type statements have been made by members of America’s most prominent and influential proponents of universal and open-ended foreign policy activism – the so-called Blob. This Washington, D.C.-centered bipartisan agglomeration of globalist former diplomats and Congressional aides, retired military officers, genuine academics, and think tank hacks shapes American diplomacy in two critical ways.

First, it represents the main personnel pool drawn on to staff presidential administrations and House and Senate offices on rotating bases, and also serves as key informal sources of advice for these politicians. In other words, it’s a central portion of what’s often called the “permanent bureaucracy” (and by some, the “Deep State”), whose combination of experience (which of course has unmistakable value), sheer staying power, and skill at projecting an air of authority (which clearly have much less intrinsic value) enables it often to steer policy independent of what elected officials favor – and especially to keep the status quo alive through inertia-reenforcing foot-dragging and even sabotage.

Second, the Blob powerfully influences what so many Americans read, hear, and see about foreign policy by dominating the list of sources used by Mainstream Media journalists (who are predominantly sympatico by virtue of shared elite educations and clubby intertwined social networks) to report and interpret the news. The resulting permeation of reporting and analysis with Blob-y globalist perspectives goes far toward defining for the public which foreign policy ideas are and aren’t legitimate to discuss.

That’s why I was so gobsmacked when Blob mainstay Robert D. Kaplan wrote in the (ardently globalist British magazine) The Economist that

“America is a vast and wealthy continent densely connected by navigable rivers and with an economy of scale, accessible to the main sea lines of communication, yet protected by oceans from the turmoil of the Old World.

“And that geography still matters, despite technology having shrunk the globe….”

As a result, Kaplan added that “geography helps explain why America can miscalculate and fail in successive wars, yet completely recover, unlike smaller and less well-situated countries which have little margin for error.” Moreover, logically speaking (and these are my views, not Kaplan’s), the very geography-grounded security that enables the United States to recover quickly from (at least most) foreign involvements that produce disastrous consequences means that it was never significantly vulnerable to the perceived threats that led to that involvement to begin with.

Similar opinions have been offered by former senior U.S. official Jeremy Shapiro, who argues that post-Afghanistan, the United States “can and will work effectively with allies, but only when its vital interests are at stake. It sees those interests in the competition with China. Increasingly, however, in places such as central Asia, the Sahel, and perhaps even Europe’s eastern neighbourhood, it does not.”

By contrast, he observed, “Europeans have more direct interests at stake in those places.”

Further, some Mainstream Media journalists have followed suit – providing further evidence that such once utterly heretical notions are now being bandied about in some Blob-y circles.

For example, Bloomberg.com‘s Marc Champion has contended that

“The U.S. left Afghanistan on Tuesday humbled and with few of its goals achieved after 20 years of war. For America’s European allies, the humiliation may just be starting.

“Connected to Afghanistan by land, unlike the U.S., for Europe the return of the Taliban presents more concrete threats. Those include not just terrorism but also mass migration and the heroin trade.”

More vividly, a recent CNN.com post was headlined, “Europe left exposed as Biden walks America away from the world stage.” It seems reasonable to infer that if the headline writer – and his editors – regarded America as exposed, too, they’d have mentioned that danger explicitly. Indeed, correspondent Luke McGee went on to report that “Multiple European officials and diplomats told CNN of their shock at Biden’s assertion that the only US interest in Afghanistan was to neutralize the terrorists who attacked the US in 2001 and prevent further attacks on American soil.

“They now fear the humanitarian and political consequences of mass migration from a country run by militants who’ve historically harbored terrorists and that is connected to mainland Europe by land” – unlike, I’d remind again, the United States.

Again, I’m not saying that an intellectual revolution in U.S. foreign policy is on the horizon. But as suggested above, only a few weeks ago, I couldn’t have imagined seeing so many examples of any of the above in so short a timespan.

On balance, I’m still convinced that the Blob will wind up stamping out such dissent, at least within its own ranks – if only because at the end of the day, so few would be employable in a truly post-globalist America. But many Blob-ers are also savvy enough to recognize a potentially sinking ship. So I feel pretty confident in predicting that the longer lousy headlines and optics keep emanating from Afghanistan, the more of these globalists will start appreciating the virtues of America’s geography.

Im-Politic: Has Biden Bet Right Politically on Afghanistan?

Tags

Afghanistan, Biden, border security, Charles Lane, crime, Donald Trump, election 2022, election 2024, Europe, hostages, Im-Politic, Immigration, Jimmy Carter, Lloyd J. Austin III, Open Borders, politics, refugees, Taliban, terrorism, Washington Post

Even if he didn’t peevishly block me on Twitter, I’d consider Washington Post columnist Charles Lane’s Tuesday piece on – how President Biden can “contain” Afghanistan-related damage to his presidency and historical legacy – pretty silly. For it completely ignores some screamingly obvious ways that this debacle can greatly worsen and keep degrading his image far into the future – and of course through the midterm 2022 elections and the 2024 presidential campaign.

Not that it’s out of the question that the domestic political calculation on which Mr. Biden is widely reported to have based his Afghan withdrawal will prove correct. The American public’s attention span can be pretty short and, as the President has rightly noted, who controls that remote “country” has no bearing on U.S. national security. (I use quotes because American policy has been led astray largely because there’s so little evidence that Afghanistan is a country in any meaningful sense of the word.)

Moreover, in case you haven’t noticed, the national news cycle has sped up considerably in recent years. Therefore, any public anger over the withdrawal botch could quickly evaporate once the next crisis or Biden failure, or Biden triumph that comes barreling down the pike. And the twenty-plus year Forever War remains unpopular. (See, e.g., here and here.  For an interesting exception, see here.) As a result, Afghanistan could indeed become yesterday’s meat loaf as far as U.S. voters are concerned, and even surprisingly quickly. 

Even so, it’s easy to imagine how fallout from the withdrawal could pose genuine threats to America and keep Mr. Biden “in the woods” politically.

For example, the odds seem good that the Biden administration will not be able to pull all American citizens out of Afghanistan during the partially open window the Taliban victors seem willing to provide – for now. Defense Secretary Lloyd J. Austin III has already admitted that the U.S. military can’t guarantee Americans not already at the Kabul airport safe passage to the airport, and the State Department has advised these individuals to “shelter in place.” Many could be widely scatttered throughout Afghanistan’s Texas-sized territory.

The Taliban might agree to allow the United States to keep troops in the country beyond the August 31 total military withdrawal deadline set by the President – which Mr. Biden now says may be necessary to complete the evacuation. Or it might not. And if its leaders (whoever they really are) do decide to play nice with the United States, some groups in its jihadist ranks might not.

It’s plausible to believe that those Taliban leaders would want the American military completely gone as soon as possible, and therefore have strong incentives to play ball with Washington. But it seems to me just as plausible to believe that they’d find hostages very useful – say, as leverage to prompt the United States to release large amounts of the ousted Afghan government’s funds (which are currently held at the U.S. Federal Reserve), and the International Monetary Fund to release the smaller but not negligible amount of economic credits (called Special Drawing Rights or SDRs) that the previous regime was scheduled to receive about now. (See here for the details.)

If a hostage situation does emerge, then Mr. Biden could find himself with a problem at least as bad as former President Jimmy Carter suffered after the Iranian revolution in 1979. But even if hostages aren’t taken, a Biden administration decision to keep American troops on the ground in the country in defiance of  Taliban wishes in order to find U.S. personnel and escort them to the airport, or even increase the deployment to carry out these missions, could trigger renewed fighting and American casualties. And this fighting could last for weeks and even months.

Afghan refugees admitted into the United States could vex President Biden for years to come as well – and in two ways. First, as noted, if his administration casts too wide a net (and it’s widened already), any number of Taliban or Al Qaeda members or other jihadists could wind up resettling here. Few question the desire to protect Afghans directly employed by the U.S. military or other government agencies – and I don’t, either.

But calls are being issued to extend visas to still other categories of Afghans, and as always, it’s difficult to imagine that all of them could have been adequately vetted in peacetime given that the previous Afghan government wasn’t exactly the gold standard for efficiency or honesty. Now of course, conditions in the country are utterly chaotic, so the vetting challenge looks that much greater.

If any of those resettled in the United States wind up committing terrorist acts, there’ll surely be political hell to pay for the President. In fact, although, as I’ve argued repeatedly (e.g. here) the key to preventing Middle East-spawned terror strikes on America was never sending U.S. forces to chase around that terminally dysfunctional region every new jihadist group it would inevitably spawn. Instead, it was always securing America’s borders.

Consequently, Mr. Biden can now be fairly accused of failure on both these fronts.Thanks to his Afghan pullout, the Taliban might indeed permit jihadists from re-establishing a terrorist base benefiting from the protection of a sovereign state. And it’s reasonable to conclude that Islamic extremists in other countries and regions will be emboldened as well. At the same time, his Open Borders-friendly immigration policies were making it harder to keep them out even before Kabul fell. Talk about the worst of all possible worlds.

There’s a third refugee-related problem that could stain the Biden record long-term also: crime. Europe’s naive admission of literally millions of Afghans and other Middle Easterners fleeing their war-torn lands greatly undermined public safety in countries like Austria, Germany, and Sweden. No comparable problem has yet appeared in the United States. But so far, U.S. refugee admissions have been much more limited – largely, but not exclusively, because of the Trump administration’s more restrictive policies. If their numbers greatly increase during the Biden years, either because of more indulgent policies or failure to secure U.S. borders, all bets are off.

The 2020 U.S. presidential election showed that it’s dangerous to count Mr. Biden out. After all, until his primary victory in South Carolina, he was derided as a political “dead man walking.” In that contest, however, he benefited from powerful political allies like longtime South Carolina Democratic Congressman James Clyburn. I’m straining to see any similar saviors on the ground in Afghanistan or over the horizon. 

(What’s Left of) Our Economy: More of the (Wrong Kind of) Records in the New U.S. Trade Figures

Tags

Canada, CCP Virus, China, coronavirus, COVID 19, Delta variant, Donald Trump, Europe, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, services trade, Taiwan, tariffs, Trade, trade deficit, trade policy, trade war, Wuhan virus, {What's Left of) Our Economy

About a week ago, I wrote here that the new (second quarter) figures on U.S. economic growth displayed some tentative signs of pre-pandemic normality returning to the nation’s CCP Virus-disrupted trade flows. This morning’s release of the detailed official U.S. trade figures for June reveals that those signs (which came from the inflation-adjusted numbers) were awfully tentative, and that pandemic distortions remain the order of the day.

Indeed, the June trade data brought to an end for the time being the pattern this calendar year of the total U.S. deficit and goods shortfall statistics stabilizing on a monthly basis, along with the crucial non-oil goods gap data. As known by RealityChek regulars, those trade flows can be called the “Made in Washington” portion of U.S. trade, since they make up the category of imports and exports whose levels and changes are most influenced by U.S. trade policy. In that way, they differ from oil trade (which is almost never the subject of trade negotiations and other policy decisions) and services trade (where liberalization efforts worldwide have made only modest progress). Moreover, manufacturing trade in June exhibited the same discouraging characteristics. 

There is one important exception to June’s trend break: The China goods deficit and goods import numbers changed only slightly (for the worse). In fact, they’ve stayed in the same neighborhoods since China’s export-heavy economy rebounded from its own virus-induced shutdown in early 2020. These results look like strong indicators that the Trump tariffs have played major roles in reducing the harm done to the U.S. economy by Beijing’s predatory trade practices. So does the resilience throughout the pandemic shown by U.S. domestic manufacturing – since industry dominates Sino-American trade flows.

But the trade records set in June remain noteworthy. After staying right around $70 billion on average since January (with the exception of a brief March move to just over $75 billion), the combined goods and services shortfall rose 6.70 percent,from $70.99 billion in May to $75.75 billion in June – an all-time high that broke the record set in March.

Since goods make up the great majority of U.S. trade flows, it wasn’t surprising that their deficit pattern was identical. They remained consistently in the high $80 billions since January (also with the exception of March) and then grew in June by 4.53 percent, from $70.99 billion to $75.75 billion. And this total also replaced March’s total as the new record.

The pattern was the same for Made in Washington trade. Its monthly deficit totals, except for March, remained in the high $80 billion range since January, too, then broke out in June from $86.73 billion to $92.42 billion – a rise of 6.56 percent to another all-time high that surpassed a previous March record.

Services trade set no records in June, but its $17.43 billion surplus was the smallest since August, 2012’s $17.08 billion. Because the CCP Virus’ Delta variant hadn’t raised the prospect of more economic curbs back in June, this figure will be worth following closely, since services are so vulnerable to virus-prompted restrictions.

Combined U.S. goods and services exports did bump up by 0.58 percent on month in June, from May’s $206.47 billion to $207.67 billion. In addition, that represented the biggest monthly total since the $209.88 billion recorded in December, 2019 – just before the pandemic is thought to have arrived in the United States. But the much greater amount of total imports climbed by 2.15 percent, from $277.46 billion to a new record of $283.42 billion.

At $145.91 billion, goods exports set their fourth straight monthly record in June. But they continued to improve slowly – by just 0.19 percent over the May total. In fact, since March, they’ve only advanced by 1.57 percent in all on a monthly basis, no doubt in part to relatively sluggish growth in most of the world outside the United States.

The much larger amount of goods imports climbed much faster in June – by 1.84 percent on month, to reach their second straight all-time high of $239.09 billion.

As for services, exports in June advanced by a respectable 1.53 percent, to $61.76 billion. The monthly improvement was the fourth straight, and their best performance since February, 2020’s $69.12 billion. But clearly these levels remain depressed.

Services imports in June also set a post-February, 2020 high ($44.35 billion versus $47.06 billion) and increased for the fifth straight month. But they rose more than twice as fast (3.84 percent) as services exports, and their levels are also well below pre-CCP Virus levels.

America’s non-oil goods exports actually fell sequentially on month in June – by 1.62 percent, from a record $129.66 billion in May to $127.56 billion. The much greater amount of imports, however, grew by 1.66 percent, to $219.98 billion, a level that slightly topped the previous all-time high of $219.68 billion set in March.

The U.S. goods trade deficit with China did worsen in June – from May’s $26.32 billion to $27.84 billion. But the 5.79 percent increase trailed that of the non-oil goods gap, the closest global proxy (6.56 percent). The year-to-date totals tell the same story: The China goods shortfall is up more slowly ( 20.81 percent) than the global Made in Washington deficit (24.59 percent).

Back to the monthly figures, U.S. goods exports to China fell by 2.49 percent between May and June – from $12.41 billion to $12.10 billion. Imports, however, were 3.13 percent higher ($38.73 billion to $39.95 billion).

Especially interesting: On a monthly basis, U.S. goods imports from China have inched up only from $39.11 billion to $39.95 billion. For all non-oil goods by this measure, U.S. imports have risen much faster – from $205.08 billion to $219.98 billion. So it seems clear that the Trump tariffs keep pricing many Chinese goods out of the U.S. market.

But although America’s China and non-oil goods trade shortfalls have stayed fairly stable on a monthly basis since January, its manufacturing trade gap has widened substantially. Already lofty enough during the first month of the year at $99.79 billion, it stood 4.87 percent higher in June – $114.06 billion.

Further, this total broke the previous record of $110.20 billion, set last October.

Domestic manufacturing exports improved by 1.81 percent on month, from $95.33 billion to $97.06 billion. But the much greater amount of imports jumped by 4.49 percent, from $202.04 billion to $211.11 billion.

On a year-to-date basis, moreover, the manufacturing deficit has surged by just under 30 percent. At $622.12 billion as of June, it’s headed toward an all-time annual record.

Other manufacturing records or multi-year highs revealed by the June data included a record monthly deficit of $28.14 billion goods deficit with Europe (including its eastern and western regions, as well as Russia); the third consecutive record monthly goods deficit with new world semiconductor manufacturing technology leader Taiwan ($3.49 billion); and the highest goods deficit with Canada ($5.46 billion) since October, 2008 ($5.65 billion).

A single month’s worth of data doesn’t prove anything, so truly credible judgments about the possible return to pre-pandemic U.S. trade normality still can’t be made based on the data. Also crucial is examining trade figures and their changes against the backdrop of the entire economy’s size and its changes, in order to provide crucial context. When looking at growth and contraction rates in particular the challenge is difficult because trade flow changes only affect the rest of the economy after the passage of some time. 

And of course, if the virus’ Delta variant prompts major, nation-wide U.S. economic restrictions and behavior changes, all trade – and broader economic – forecasting bets are off for the time being.