White House publishes report on trade that contradicts Trump statements

Donald Trump's views on trade have taken a battering in a newly released report that was not only published by his own White House, but presented under his own signature.

The self-rebuke includes some of his talking points about Canada.

The president regularly bemoans a trade deficit with the northern neighbour. Once again Monday, he was complaining about Canadian trade, saying: "We lose a lot with Canada. People don't know it. Canada's very smooth. They have you believe that it's wonderful. And it is, for them. Not wonderful for us."

Far less smooth is the consistency of U.S. messaging.

A far more positive story about trade appears in the newly released 2018 White House "Economic Report of the President" it's an annual document prepared by the president's team, with Trump himself signing the introductory foreword.

The document smashes at a few of the president's favoured themes.

One involves the supposed trade deficit with Canada. While Trump keeps talking about it, and insisting it exists, the document he signed states the opposite that Canada is among the few countries in the world with whom the U.S. runs a surplus.

The document states this at least three times.

For example, it says, "All countries show a [U.S.] services surplus offsetting a goods deficit, with the U.S. running a net bilateral surplus only with Canada and the United Kingdom."

And again: "The United States ran a trade surplus of $2.6 billion with Canada on a balance-of-payments basis."

And once again: "The United States has free trade agreements ... with a number of countries some of which represent net trade surpluses for the United States [Canada and Singapore], and some of which represent deficits [Mexico and South Korea]."

NAFTA talks

7 years ago

Duration 7:51

The panel on growing trade tensions between Canada and the U.S.

There's more.

The report also contradicts the president by stating that trade has helped the U.S. economy grow; that economies are shifting away from manufacturing; that foreign trade is increasingly important to the modern economy; that America has a good record of success in international dispute panels at the WTO; and that you can't rework trade agreements to fix an import-export deficit.

"Trade and economic growth are strongly and positively correlated," the White House report says.

The report does concede that trade deals create winners and losers in a country. States along the border have been the biggest winners in NAFTA, it says. Its general conclusion, however, is that trade creates jobs and wealth; it cites a study that every percentage point increase in trade-to-GDP ratio raises per capita income by between 0.5 and 2 per cent.

"[This] is a stunning rebuke of ... the president and his trade team," Scott Lincicome of the pro-market Cato Institute tweeted after the report was released last week.

The 563-page document was produced by Trump's Council of Economic Advisers. He appointed the council.

Key decisions loom

Meanwhile, there are reports in U.S. media that Trump is looking to promote trade hawk Peter Navarro to a more prominent position in the White House.

Do these kinds of facts even matter to Trump?

That could soon become clearer as he faces major decisions in the next few weeks. One involves whether to continue NAFTA negotiations beyond the spring; another involves whether to impose global steel and aluminum tariffs and whether any tariffs should apply to Canada, the U.S.'s No. 1 supplier.

Affected Canadians are watching to see whether he'll heed his own findings.

"We're all guessing the moves of a non-conventional actor," said Flavio Volpe of Canada's auto-parts manufacturers' association, which has a stake in both the NAFTA and steel decisions.

"None of us believe that, if they do the calculus, they'll see that [punishing Canada] is in their best interest. But of course we're all modelling in the fact that logic isn't always the overlord with this administration."

He likened Trump's modus operandi to that from his former career, as a real-estate developer in the cut-throat New York market. He said the president may have internalized the life lesson that, when there's stress over the fate of a project, contractors and suppliers can be squeezed for better terms.

"Maybe we just have a New York real-estate developer in the White House," he said.

That's similar to a theory from Edward Alden of the U.S. Council on Foreign Relations. He writes that Trump sees chaos as his ally, because if there's uncertainty over trade, companies are likelier to build new projects in the U.S.

He shared that view in a piece for Politico titled, "The Real Game Trump Is Playing on NAFTA: He isn't negotiating. He's stalling for time."

Some economic analysts have even tried to put a price tag on this uncertainty. According to the Bank of Canada, and Scotiabank, a lack of clarity over NAFTA into 2019 could trim foreign investment in Canada and cost it 0.2 per cent of GDP through next year.