SpotlightMay2016

By Barry Cox T his election year the world’s economic leaders are looking at the Unites States and the effects that the Presidential Election outcome will have on Free Trade. As the election campaigns of both the Democratic and Republican parties take an America first anti-trade direction. Democratic nomination leader, Hillary Clinton, recently opposed the Trans-Pacific Partnership however she has been less outspoken than Republican nomination hopeful Donald Trump who has been an advocate for tariffs and all out trade wars to make American Great again. Many economists will say that Free Trade is very complicated and that the benefits of Free Trade have often been overstated. Simply put “Free Trade” is the unrestricted purchase and sale of goods either raw material or finished products and services between countries without the imposition of constraints such as tariffs, duties or quota. Most economists believe that Free Trade is a win-win proposition because it enables nations to focus on their core competitive advantag- es, thereby maximizing economic output and fostering income growth for their citizens. If you look at the theoretical case for Free Trade based on the writings on Adam Smith, he argues that the division of labour countries leads to specialization, greater efficiency, and higher aggre- gate production. However as we are seeing from the front runners of the Democratic and Republican parties , from the point of view of a single country there may be practical advantages to impose trade restriction, particularly if the country is the main buyer or seller of a commodity. In practice, however, the protection of local industries may prove advanta- geous only to a small minority of the population, and it could be disad- vantageous to the rest. Many economists will say that Free Trade is very complicated and that the benefits of Free Trade have often been overstated. However the basic case for Free Trade is very much alive and well, and the economic record of the world’s richest economies, which includes the United States, have proven Free Trade makes economies more productive by forcing producers to innovate, specialize and compete. There are exceptions to the argument that openness promotes growth, most of these arguments are concerning the need to shelter small indus- tries in developing economies. More openness in trade involves more winners and losers, and it is very true that gains for the overall economy aren’t much comfort to the people who lose their jobs because of cheap imports or exports for that matter. However, the same could be said of workers who lose their jobs because of automation but we do not see either candidate looking to ban or oppose technology because it creates losers as well as winners.

Research confirms that the short-term losses from the removal or reduc- tion of restrictions or barriers on the free exchange of goods between nations are far less than the benefits it gives the economy as a whole over time. Looking at the Democratic proposal, the United States would not extend an open hand to the Trans-Pacific Partnership or other such agreements, but they would keep current agreement between trading nations. However, looking at the Trump proposal for an outright trade war would be disastrous for the Unites States and the global economy as a whole. The Unites States imposing high tariffs and the retaliation from other countries would have a huge impact and cause disruptions in the short term, for both suppliers and workers. We all do not need to become economist, but we need to become more aware of the facts associated with trade and the impact that it has on the economy as you get ready to cast your ballot in November, that letting the Trans-Pacific Partnership fail or declaring an all out trade war is not going to solve the American economy, opening boarders for North American goods and services will.

By Katie Davis U nited States crude oil production is up in the first quarter of 2016, compared to production rates for the same time period 2014. When comparing production rates to the same period in 2015, production rates are down about 4.0 percent or 370,000 barrels a day. The United State’s monthly crude oil production continues to decline as a result of lower crude prices, which have declined more than 70% since the summer of 2014. Most of the decline in oil production has occurred in states where a large portion of output comes from tight oil formations, including North Dakota, Texas, and New Mexico. Oil production requiring hydraulic fracturing or horizontal well tech- nology used in the production of shale gas, accounted for most of the increase in U.S. oil production during the past five years, and it is now making up most of the decline in output.

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SPOTLIGHT ON BUSINESS • MAY 2016

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