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The US is a whole lot richer because of trade with Europe, regardless of whether EU is friend or ‘foe’

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Greg Wright, University of California, Merced

President Donald Trump recently questioned the value of the long-standing United States-Europe alliance. When asked to identify his “biggest foe globally,” he declared: “I think the European Union is a foe, what they do to us in trade.”

This view is consistent with his recent turn against trade with Europe but ignores the immense benefits that Americans have reaped due to the strong economic and military alliance between the U.S. and Europe – benefits that include nothing less than unprecedented peace and prosperity.

As such, Trump’s trade war with Europe and his hostility toward broader Western alliances such as NATO portend a future of diminished standards of living – as a direct result of less trade – and greater global conflict – indirectly due to reduced economic integration. In the words of columnist Robert Kagan, “things will not be ok.”

Some of my research focuses on the impact of increased international trade on U.S. standards of living, which I show are causally linked during the late 20th century. Most of the trade in this period occurred among rich nations and was dominated by the U.S.-Europe relationship.

By calling Europe a “foe,” Trump makes clear that he simply doesn’t understand why rich countries trade with one another, which, to be fair, is something that also puzzled economists for many years.

Why rich countries trade

Though in some ways it seems obvious why the U.S. and Europe trade with one another – some might enjoy Parmigiana from Italy, while others prefer Wisconsin cheddar – economists initially had trouble explaining exactly why there was so much trade among rich countries. Surely, they thought, the U.S. can produce good quality cheese at a cost that is similar to producers in Italy, and vice versa, so why would we need to go abroad to satisfy our palettes?

In 1979, economist Paul Krugman provided a clear answer that would eventually win him the Nobel Prize in economics. The first part of his answer was simple but important and boils down to the fact that consumers benefit from having a wide range of product varieties available to them, even if they are only small variations on the same item.

For instance, in 2016 the top U.S. exports to the EU were aircraft (US$38.5 billion), machinery ($29.4 billion) and pharmaceutical products ($26.4 billion). The top imports from the EU seem almost identical: machinery ($64.9 billion), pharmaceutical products ($55.2 billion) and vehicles ($54.6 billion). Although the product categories clearly overlap, there are important differences in the types of pharmaceuticals and machinery that are sold in each market. Consumers benefit from having all these options available to them.

The second part of Krugman’s answer was that, by producing for both markets, companies in Europe and the U.S. could reap greater economies of scale in production and lower their prices as a result. This has been found to indeed be what happens when countries trade. And more recent research has shown that increased foreign competition can also lower domestic prices.

These benefits have been quantified. For instance, the gains to the U.S. from new foreign product varieties and lower prices over the period 1992 to 2005 were equal to about one percent of U.S. GDP – or about $100 billion.

In short, Krugman’s answer emphasized the extent to which international trade between equals increases the overall size of the economic pie. And no pie has ever grown larger than the combined economies of the U.S. and Europe, which now constitute half of global GDP.

Pfizer Inc. is headquartered in New York. Both the U.S. and the EU import and export pharmaceuticals.
AP Photo/Richard Drew

Largest trading partner

The European Union is the largest U.S. trading partner in terms of its total bilateral trade and has been for the past several decades.

Overall, the U.S. imported $592 billion in goods and services from the EU in 2016 and exported $501 billion, which represents about 19 percent of total U.S. trade and also represents about 19 percent of American GDP.

A key feature of this trade is that almost a third of it happens within individual companies. In other words, it reflects multinational companies shipping products to themselves in order to serve their local market, or as inputs into local production. This type of trade is critical as it serves as the backbone of a vast network of business investments on both sides of the Atlantic, supporting hundreds of thousands of jobs.

It is also a network that propels the global economy: the EU or U.S. serves as the primary trading partner for nearly every country on Earth.

A ship to shore crane prepares to load a shipping container onto a container ship in Savannah, Ga.
AP Photo/Stephen B. Morton

Shipping and new institutions

The U.S.-Europe trade relationship also laid the groundwork for the modern system of international trade via two distinct innovations: new shipping technologies and new global institutions.

On the technological front, the introduction of the standard shipping container in the 1960s set off the so-called second wave of globalization. This under-appreciated technology was conceived by the U.S Army during the 1950s and was perfected over Atlantic shipping routes. In short, by simply standardizing the size and shape of shipping containers, and building port infrastructure and ships to move them, massive economies of scale in shipping were realized. As a result, today container ships the size of small cities are routed via sophisticated logistics to huge deepwater ports around the world.

These routes eventually made it profitable for other countries to invest in the large-scale port infrastructure that could handle modern container ships. This laid the groundwork for the eventual growth of massive container terminals throughout Asia, which now serve as the hubs of the modern global supply chain.

At the same time that these new technologies were reducing the physical costs of doing business around the world, the U.S. and Europe were also creating institutions to define new international rules for trade and finance. Perhaps the most important one was the post-war General Agreement on Trade and Tariffs, which eventually became the World Trade Organization, creating the first rules-based multilateral trade regime. A large body of research shows that these agreements have increased trade and, more importantly, raised incomes around the world.

Overall, these advancements contributed to the subsequent enrichment of hundreds of millions of workers in Asia, Latin America and Africa by helping to integrate them into the global economy.

And when the world gets richer, the U.S. also benefits for many of the same reasons noted above: demand for U.S. products increases as incomes rise around the world, as does the variety of products the U.S. can import, and the prices of these goods typically fall.

A cartoon Trump blimp flies as a protesters speak out against Trump’s visit to London.
AP Photo/Matt Dunham

Taking the long view

But it appears that President Trump sees the U.S. on the losing end of a failed relationship.

It is unsurprising that tensions with Europe have come to the forefront over perceived imbalances in trade, particularly for a president who is not afraid to take long-time allies to task.

This is because U.S. trade policy has arguably been overly optimistic in recent years, particularly with respect to China, whose accession to the WTO proved to be much more disruptive to labor markets around the world than was predicted. Previous U.S. administrations preferred patience over confrontation, leading to a perhaps inevitable backlash that has spilled into other relationships, such as the one with Europe.

However, the U.S. relationship with Europe is clearly different, primarily because it is longstanding and has been largely one of equals. But also because their shared values mean that there are many non-economic issues — such as the spread of liberal democracy and the promotion of human rights — that get advanced by the close economic ties.

It’s important to not underestimate what is at stake if the U.S.-Europe alliance is allowed to falter. Americans are likely in the midst of the most peaceful era in world history, and global economic integration, led from the beginning by the U.S. and Europe, has been a key contributing factor. Global extreme poverty is also at its lowest point ever, again in large part due to globalization.

The ConversationThese are the byproducts and legacies of seven decades of expanding international trade and should not be taken for granted.

Greg Wright, Assistant Professor of Economics, University of California, Merced

This article was originally published on The Conversation. Read the original article.

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Legendary singer Aretha Franklin dies at age 76

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Legendary singer Aretha Franklin has died.

The 76-year-old Queen of Soul was said to be “surrounded” by her closest friends and family in recent days, after battling extensive health problems in recent years.

The legendary singer was diagnosed with cancer in 2010, and delivered her most recent performance at the Elton John AIDS Foundation party in New York last November.

This is a Breaking News Story.

Timeline:
1954 – Sings her first solo at the New Bethel Baptist Church in Detroit.

1956 – Along with her two sisters, performs backup on her father’s gospel recording for Gotham Records.

1960 – Leaves Detroit for New York, signs with Columbia Records and releases first album, “The Great Aretha Franklin.”

1967 – Leaves Columbia Records after an unsuccessful attempt at developing a jazz style; signs with Atlantic Records; wins Grammy Award Best R&B Recording for “Respect.”

1967-1974 – Wins a total of ten Grammy Awards.

April 9, 1968 – Sings “Precious Lord, Take My Hand” at the funeral of Dr. Martin Luther King Jr.

January 20, 1977 – Performs “God Bless America” at the inauguration gala of President Jimmy Carter.

1980 – Appears in the movie “The Blues Brothers” and performs the song “Think”; leaves Atlantic Records for Arista Records.

1981 – Wins Grammy Award for Best R&B Vocal Performance, Female for “Hold On I’m Comin’.”

1985 – Wins Grammy Award for Best R&B Vocal Performance, Female for “Freeway Of Love.”

January 3, 1987 – Is the first woman inducted into the Rock and Roll Hall of Fame.

1987 – Wins two Grammy Awards for Best R&B Vocal Performance, Female for “Aretha” and Best R&B Performance by a Duo, with George Michael, “I Knew You Were Waiting (For Me).”

1988 – Wins Grammy Award for Best Soul Gospel Performance, Female for “One Lord, One Faith, One Baptism.”

1991 – Receives the Grammy Legend Award.

January 20, 1993 – Performs “I Dreamed a Dream” at the inauguration ball of President Bill Clinton.

1994 – Receives the Grammy Lifetime Achievement Award. She is the youngest recipient of a Kennedy Center Honor at that time.

1997 – Performs an aria from Puccini’s La Boheme at the wedding of Vice-President Al Gore’s daughter, Karenna.

February 6, 1998 – Reprises her roll of Mrs. Murphy from “The Blues Brothers” in the sequel “The Blues Brothers 2000.”

February 25, 1998 – Substitutes for an ailing Luciano Pavarotti at the Grammy Awards performing “Nessun Dorma” by Puccini, unrehearsed.

September 1, 1999 – Publishes an autobiography “Aretha: From These Roots,” where she discusses her private and personal life for the first time.

September 22, 1999 – Is named a winner of the National Medal of Arts by the National Endowment for the Arts.

2003 – Wins Grammy Award for Best Traditional R&B Vocal Performance for “Wonderful.”

March 2004 – Is hospitalized and released for allergic reaction to antibiotics.

2004 – Starts her own record label, Aretha’s Records.

2005 – Wins Grammy Award for Best Traditional R&B Vocal Performance for “A House Is Not A Home.”

November 5, 2005 – Is awarded the Presidential Medal of Freedom by President George W. Bush.

2006 – After Franklin points out that no Motown talent was appearing in the Detroit Super Bowl halftime show, the NFL asks her to sing the national anthem along with Aaron Neville prior to the game.

2007 – Wins Grammy Award for Best Gospel Performance for “Never Gonna Break My Faith,” shared with Mary J. Blige.

February 10, 2008 – Is Grammy’s 2008 MusiCares Person of the Year.

February 14, 2008 – Receives the NAACP Vanguard Award at the annual Image Awards ceremony.

January 20, 2009 – Performs “My Country ‘Tis of Thee” at the inauguration of President Barack Obama.

February 2010 – A Snickers commercial starring Franklin and Liza Minnelli airs for the first time.

July 27, 2010 – Appears on stage with former Secretary of State Condoleezza Rice on piano, in Philadelphia, to raise money for charity. Rice is a classical pianist. They perform individually and together, classical, pop and patriotic selections.

August 1, 2010 – Falls in her home, breaking two ribs. The incident forces her to cancel concert appearances for August.

February 25, 2011 – During an interview with Wendy Williams, Franklin reveals a loss of 85 lbs. The ailment that resulted in surgery in December remains undisclosed and a topic of conversation she dismisses with the comment, “I’ve left that behind, I’m feeling wonderful.”

May 3, 2011 – Releases new album, “Aretha: A Woman Falling Out of Love.”

October 8, 2014  Achieves a milestone in music history by becoming the first female to earn her 100th hit on Billboard’s Hot R&B song chart with “Rolling in the Deep (The Aretha Version).”

October 21, 2014 – Releases a new album, “Aretha Franklin Sings the Great Diva Classics.”

March 5, 2015 – Performs live on the Motown themed episode of American Idol in Detroit.

September 26, 2015 – Franklin sings “Amazing Grace” at the Festival of Families, one of the events sponsored by the Vatican for Pope Francis‘ visit to Philadelphia.

February 7, 2017 – Franklin announces she will retire from performing in concert after the release of one more album. “I am retiring this year, she told a local television station in Detroit. “I will be recording, but this will be my last year in concert.”

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Car crashes into security barriers outside Houses Of Parliament

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 Armed police surround driver after car smashes into Parliament security barriers

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Kremlin “pleased” with Helsinki summit, US and Western intelligence assesses

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CNN Reports:

Russian officials were “pleased” with the Helsinki summit between Presidents Donald Trump and Vladimir Putin, US and Western intelligence agencies have found, according to two intelligence sources with knowledge of the assessments.

The assessments, based on a broad range of intelligence, indicate that the Kremlin believes the July 16 summit delivered a better outcome than it had expected, but that Moscow is perplexed that Trump is not delivering more Russia-friendly policies in its aftermath.

The intelligence sources say the Russians were particularly satisfied with the press conference the two leaders gave in Helsinki after Trump and Putin met for about two hours without staff and accompanied only by translators. In the 45-minute press conference, Trump discredited US intelligence and American policies more broadly, saying “the United States has been foolish” about ties with Russia, a country that has engaged in ongoing attacks on US democracy.

A spokesperson for the Office of Director of National Intelligence declined to comment, and the White House did not respond to request for comment.

The administration’s decision last week to impose sanctions on Russia for the poisoning of former Russian spy Sergei Skripal and his daughter left Russian officials puzzled that the President is not delivering more favorable policies.

Trump has repeatedly called for warmer relations with Moscow, but the Kremlin is neglecting to factor in the considerable role that Congress and others play in US policy-making, a Western intelligence official said.

Putin spokesperson Dmitry Peskov’s comments last week reflected the deflated Russian hopes for improved ties with Washington or at least less punitive US policies.

“President Putin said in Helsinki that Russia still has hopes for the creation of a constructive relationship with Washington…We are sorry that often we are not met with cooperation on this account,” Peskov said Aug. 9 in a regular press call with reporters.

Peskov’s comments contrasted sharply with the evaluation Russian Foreign Minister Sergei Lavrov offered immediately after the summit, when he said that the talks had been “better than super.”

Trump’s performance in Helsinki sparked unusually public criticism, even from within his own party.

The administration’s decision to impose the sanctions followed a July 26 letter from GOP Congressman Ed Royce, the Chairman of the House Committee on Foreign Affairs, urging the White House to comply with a law requiring the US to levy sanctions against countries that violate the 1991 Chemical and Biological Weapons and Warfare Elimination Act.

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