Trade On, Trade Off

Can trade be improved?

There are reports out of Davos—the generally worthless confab of glitterati and celebrity wannabees—that the US and Europe are close to a trade deal. UK Prime Minister Gordon Brown and Germany’s Chancellor Angela Merkel were among leaders pleading for lower tariffs and regulations. US Trade Representative Ron Kirk also got into the act, but noted that any deal would have to pass muster with US farmers and other interested parties.

Any deal would help. It’s estimated that existing trade barriers with Europe cost the US economy some $50 billion a year. That’s a lot of jobs. And the Europeans need to find some way to spur their anemic economies. Businesses on both sides of the Atlantic are generally in favor of reducing trade barriers. It opens the path to markets with millions of consumers.

But trade barriers can crop up in funny places. Many Europeans are skeptical of “frankenfoods”—genetically modified crops that help farmers fight plant diseases and pests. And pathogens like hoof-and-mouth or mad-cow disease pose difficult problems. It’s not just taxes, tariffs, and subsidies. Sometimes it’s a matter of culture as well. So while it’s well-and-good to talk about doing a deal in the next two years, one can’t help wondering, what about the last ten?

It’s not like the Bush administration was hostile to trade, or the US has lots of barriers now. Europe currently exports $20 billion in food to our 300 million consumers, while we only export $11 billion to theirs. Indeed, one of the best ways for Europe to spur growth would be for them to unilaterally reduce tariffs—enriching their consumers and eliminating deadweight loss to the economy. But that’s politically hard to do.

Still, every little bit helps. And if the pols and pundits at Davos can build a bridge and have it actually go somewhere, that will be an unexpected pleasure.

Douglas R. Tengdin, CFA

Chief Investment Officer

By |2013-01-29T05:05:33+00:00January 29th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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