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Trump and ‘checks & balances’ in the early months of his presidency
The recent talk by Francesc Xavier Mena in the ESADE Refresher Programme series examined the first 150 days of Donald Trump’s US presidency and how his decisions have been dealt with by institutional checks & balances.
On November 8th 2016, Donald Trump, a Republican Party outsider, won the US election. Since then he has concentrated on removing certain elements of the Obama administration and rethinking part of the US global strategy in an attempt to bring international organizations round to bilateralism. Against this backdrop, Xavier Mena compared some of Trump’s electoral promises to his achievements and the checks & balances he has encountered along the way.
International trade and globalisation
Of all the issues discussed, the area of foreign trade relations was the one that professor Mena dwelt on longest whilst addressing the trade relations between the US and the rest of the world. He began by looking at the NAFTA free trade agreement that Trump wants to renegotiate in order to apply a 35% tariff on Mexican imports, especially in the automobile industry. The aim is for products consumed in the United States to be manufactured in the United States in order to redress its balance of payments. These plans clash with the automobile industry, part of which has been relocated since NAFTA came into force in 1994, because bringing their manufacturing back to the US would remove their competitive edge – and they told Trump so during a meeting held a few days after he took office.
''The response of Tim Cook (Apple) was very clear when Trump threatened to impose a 45% tariff on the products he assembles in China, ‘Apple and I will become Canadian.’ Let’s not forget that Apple is the biggest company on the US stock exchange. And all companies could give the same answer,'' said Mena.
Mexico and China
The countries threatened with US tariffs on their products now are considering reprisals. Mexico, for example, is the main export market for US livestock and farming products, and China is the potentially the main market of the world’s largest agricultural producer and one of the biggest meat producers. In addition, Trump has announced the deportation of 11 million undocumented immigrants at a time when 50 - 70% of the workers on US farmland are Latin American, including many illegal immigrants. As a result, American farmers and cattle ranchers have expressed their concern to Trump about the possible consequences.
Trump’s main target, however, is China. He argues that the Chinese must be curbed because they have an unfair competitive edge: they exploit their workers, manipulate the exchange rate and do not respect intellectual property rights, to name but a few. During the summit between Donald Trump and Xi Jinping, the US president announced import duties of 45% on their products. China warned that, in that case, they would respond by massively selling the ‘treasury view’ portfolio held by the Chinese currency reserve. China is the second largest treasury view holder (after Japan) and these are the bonds with which the US has funded its public deficits during the recent economic and financial crisis. If China did this, the global economy and currency markets would be disrupted. ''These arguments, which are obviously checks & balances, made Trump forget about the 45% tariff,'' said Xavier Mena.
''Trump’s vision of the world is rather simple and full of clichés.'' He has clashed with many groups. He refused to enact the TPP trade agreement signed by Obama and destroyed another agreement with the EU, the TTIP. The decision to refuse the nationals of some Muslim countries entry into the US has been criticised on several fronts: Silicon Valley, Hollywood, universities, NBA, airlines, etc. ''This is another instance of checks & balances. The founding fathers of the United States determined that if a federal judge suspends a president’s executive order, then that executive order is not enacted. We’ll have to see how far this goes but for the time being, it’s suspended.''
The US aims to be self-sufficient in hydrocarbons. It is already self-sufficient in gas, which it already exports, and is also heading in the right direction as regards oil. In fact, the budgets submitted to Congress include the sale of half of strategic US oil reserves.
Trump has joined the fracking movement, has approved the oil pipelines that Obama refused to authorise, and will allow exploration anywhere including the Arctic, Alaska, national parks, etc. He has also repealed environmental regulations and withdrawn from the Paris agreement on climate change.
Several other Trump policies were discussed: his budget policy with its massive infrastructure investment program, tax reform and the repeal of Obamacare; his monetary policy, with a gradual rise in interest rates; and his regulatory policy, with extreme deregulation.
In short, F. Xavier Mena believes that Trump will complete his four-year office, although the string of resignations will continue because of the many interests in this administration. ''Trump has had to adjust many electoral promises each time he runs up against reality,'' he said.
Mena finished his talk with a quick overview of Brexit and the Spanish economy, and outlined the cornerstones of the two-year (renewable) negotiation period that has just begun and the difficulties that Theresa May will face, following the general elections on June 8th, when renegotiating 750 treaties. Mena mentioned a crucial fact: 50% of UK imports and exports deal with the EU.
On the subject of Spain, Mena described it as an economy out of sync with the world, with skyrocketing investment and construction, an extraordinary balance of payments and record-breaking numbers of tourists. It does, however, have problems which include its public accounts, high unemployment (new jobs are poorly paid and do not contribute much to the treasury), and the high levels of default to which banks are exposed. Programme
ESADE Alumni invites you to another talk in the Refresher Programme, ''The first 150 days of the Trump Administration: checks and balances'' by Francesc Xavier Mena, professor of economics at Ramon Llull University and associate professor at ESADE.
President Trump wanted to bring a style of business management typical of organisations and companies to the White House.
The decisions taken and executive orders signed in the oval office have run up against different obstacles: the institutional checks and balances of the House of Representatives, the Senate and federal judges; the lobbies and stakeholders affected, such as Silicon Valley, the automotive industry, farmers and cattle owners, the tourist industry and Hollywood; possible reprisals from third parties including China and the EU; today’s global political scenario and much more.
From an economic standpoint, this talk will compare Trump’s election manifesto and what he has achieved during his first 150 days in the White House in the realms of international trade (NAFTA, TPP, TTIP), energy policy (combined, oil pipelines, prospection), immigration policies (Mexican wall, visas), fiscal policy (deficit, public borrowing, taxation changes), monetary policy (Federal Reserve, interest rates, dollar exchange rate), and regulatory policy (Dodd-Frank Act, labour market).
The talk will also consider the 2017-18 outlook for the economies of Europe and the world taking into account the Trump Administration in the United States and the Brexit negotiations in Europe. F. Xavier Mena
Chair of Economics at Ramon Llull University. Doctor and Bachelor of Economics. Degree in Law. Professor at ESADE, where he has been head of the Department of Economics, Finance and Accounting, director of the DAF Programs (MSc) and visiting professor at several business schools and universities including CEIBS, Shanghai. Former president of the Jesuit Xavier Foundation. Former researcher (FPI) at the Directorate General of Science Policy. Former member of the Community of European Management Schools Evaluation Committee, member of the Editorial Board of academic journals, member of the Group of Industrial Competitiveness Experts, member of the Board of Governors of the College of Economists, member of Eurostat, co-director of the EU ''Phare'' Programs in eastern countries, and president of the International Conference on the Indo-European Economic Relationship (New Delhi, India).
In the professional field, he has been the director of Consultur (Editur group), economist in the Directorate General of Economic Programming and economist in Banco Sabadell’s Department of Systems and Control. Adviser to the private equity firm Ardian Investment (London, Paris) and member of various boards of directors. He has been a consultant and carried out projects commissioned by international organisations and companies in a total of 48 countries, in such diverse industries as energy, tourism, infrastructure, finance and social services.
In the public sector, he was formerly the minister of Enterprise and Employment in the Government of Catalonia (2010-12). President of the public agency for business competitiveness, ACCIÓ. President of the telecommunication and IT centre, CTTI. President of the energy institute, ICAEN. President of the tourism agency, ACT. President of the trade, crafts and fashion consortium, CCAM. President of the public employment service, SOC. See you there!
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