Latest NAFTA Talks End In Disappointment As Attendees Question Lack Of U.S. Engagement

President Trump has threatened a quick termination of NAFTA a countless number of times, with the latest coming just last weekend via twitter:

We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada.Both being very difficult,may have to terminate?

— Donald J. Trump (@realDonaldTrump) August 27, 2017

Of course, like with most Trump deals, it"s often very difficult to differentiate between bombastic rhetoric utilized for establishing negotiating power and actual desired results.  According to Bloomberg, so far the speed of U.S. negotiations, led by Trade Representative Robert Lighthizer, have failed to live up to the President"s rhetoric leaving many to question whether a "deal" is the desired outcome for this administration.

The latest Nafta talks are nearing conclusion without a major breakthrough or agreements on even the least-contentious topics, officials familiar with the negotiations say, fueling doubts among observers that a deal can be reached this year.

U.S. Trade Representative Robert Lighthizer is scheduled to speak publicly alongside Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland Tuesday to conclude the second round of talks toward a new North American Free Trade Agreement. Their appearance will cap a five-day session in Mexico City.

While negotiators have made some progress, they have yet to agree on any major contentious issue and are far from a deal on individual Nafta chapters, the officials said, asking not to be identified discussing private matters. On some topics, discussion has been verbal with no specific text proposals submitted, they said.

The talks came after U.S. President Donald Trump threatened outright withdrawal from the agreement. While slow progress is normal in most trade negotiations, the nations have been seeking an unusually quick timeline for Nafta, and officials expressed doubt a deal could be reached by the target date of December. That sentiment is shared by many observers and stakeholders who say the U.S. has been slow in detailing its actual demands.

Meanwhile, folks from all sides attending negotiating sessions in Mexico City have been surprised by the lack of U.S. engagement with one trade strategist from Canada predicting that the earliest date for a possible deal would be February or March 2018.

David Wiens, a farmer and vice president of the Dairy Farmers of Canada, said he’s been surprised by the lack of written and firm policy proposals put forward by the U.S. government. That makes him believe it’s "a bit unrealistic" to get a deal by December.

"What we’re hearing on the ground here is the Americans have still not posted all the texts for the different chapters," Wiens said in an interview in Mexico City. "If there’s a strategy behind all of that, I’m certainly not recognizing it.”

"They can’t possibly finish. The Americans haven’t started negotiating yet," said Peter Clark, a trade strategist and former Canadian official. Jerry Dias, a Canadian labor leader, said he’d "be shocked if it gets done before Christmas."

Clark said the earliest possible date for a deal is February or March, and even then it would likely be an agreement-in-principle that wouldn’t be finalized until after Mexican and U.S. elections. "It’s not really a negotiation. What you have is a president who says he’s been robbed for years," Clark said. "He wants to break a contract without any penalty."

Finally, the most critical component of the NAFTA negotiations (or at least the component that gets all the media attention), auto manufacturing, apparently hasn"t even been touched yet. 

One key issue without a firm policy proposal is what threshold the U.S. is seeking for the so-called rules of origin on the auto sector -- the share of a vehicle that must be sourced within Nafta countries to receive the pact’s benefits. The current level is 62.5 percent and Dias said U.S. Secretary of Commerce Wilbur Ross wants a "significantly" higher figure.

The auto threshold is "the heart of the American objective," said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Canada. "Negotiators will be very careful before pegging a rate that would drive assessments of success or failure.

The outlook isn’t entirely gloomy. One official described a two-track process -- a political one dominated by Trump’s threats, and a more constructive and technocratic track with negotiators plodding forward in search of agreement.

So what say you?  Is this all a clever charade from a White House that has no real interest in negotiating and would rather withdraw from NAFTA altogether, or is it all just another sign of a woefully unprepared, chaotic administration?

California Has 11 Counties With More Registered Voters Than Voting-Age Citizens

The Election Integrity Project California provides a list of 11 California counties that have more registered voters than voting-age citizens.

In addition, Los Angeles County officials informed the project that “the number of registered voters now stands at a number that is a whopping 144% of the total number of resident citizens of voting age.”

The Election Integrity Project California, Inc. has joined Judicial Watch, Inc., a non-partisan organization in Washington, D.C., in sending a National Voter Registration Act (“NVRA”) Section 8 notice of violation letter to California Secretary of State, Alex Padilla.

Dear Secretary Padilla:

From public records obtained on the Election Assistance Commission (“EAC”) 2016 Election Administration Voting Survey (“EAVS”), and through verbal accounts from various county agencies, eleven (11) counties in California have more total registered voters than citizen voting age population (CVAP) calculated by the U.S. Census Bureau’s 2011-2015 American Community Survey. This is strong circumstantial evidence that California municipalities are not conducting reasonable voter registration list maintenance as mandated under the NVRA.

This letter serves as statutory notice that Election Integrity Project California, Inc., a registered non-profit corporation in California, and Judicial Watch, Inc., will bring a lawsuit against you and, if appropriate, against the counties named in this letter, if you do not take specific actions to correct these violations of Section 8 within 90 days.

The following information explains how we determined that your state and the counties named are in violation of NVRA Section 8 and the remedial steps that must be taken to comply with the law.

1. Eleven California Counties Have More Total Registered Voters Than Citizen Voting Age Population

Based on our review of 2016 EAC EAVS report, the 2011-2015 U.S. Census Bureau’s American Community Survey, and the most recent California total active and total inactive voter registration records, California is failing to comply with the voter registration list maintenance requirements of Section 8 of the NVRA. For example, a comparison of the 2011-2015 U.S. Census Bureau’s American Community Survey, and the most recent California active and inactive voter registration records shows there were more total registered voters than there were adults over the age of 18 living in each of the following eleven (11) counties: Imperial (102%), Lassen (102%), Los Angeles (112%), Monterey (104%), San Diego (138%), San Francisco (114%), San Mateo (111%), Santa Cruz (109%), Solano (111%), Stanislaus (102%), and Yolo (110%). Our own research shows that the situation in these counties is, if anything, worse than the foregoing data suggest. For example, we contacted Los Angeles County directly this past June. At that time, county officials informed us that the total number of registered voters now stands at a number that is a whopping 144% of the total number of resident citizens of voting age.

2. The NVRA Requires You to Undertake Reasonable Efforts to Maintain Accurate Lists of Eligible Registered Voters

3. Failure to Comply with NVRA Subjects You to Lawsuits and Financial Costs

In passing the NVRA, Congress authorized a private right of action to enforce the provisions of the NVRA, including Section 8. Accordingly, private persons may bring a lawsuit under the NVRA if the violations identified herein are not corrected within 90 days of receipt of this letter.

4. Avoiding Litigation

We hope you will promptly initiate efforts to comply with Section 8 so that no lawsuit will be necessary. We ask you and, to the extent that they wish to respond separately, each county identified in this letter, to please respond to this letter in writing no later than 30 days from today informing us of the compliance steps you are taking. Specifically, we ask you to: (1) conduct or implement a systematic, uniform, nondiscriminatory program to remove from the list of eligible voters the names of persons who have become ineligible to vote by reason of a change in residence; and (2) conduct or implement additional routine measures to remove from the list of eligible voters the names of persons who have become ineligible to vote by reason of death, change in residence, or a disqualifying criminal conviction, and to remove noncitizens who have registered to vote unlawfully.

5. Production of Records

Finally, pursuant to your obligations under the NVRA,15 your office and, to the extent that they keep records separately from your office, each county named in this letter, should make available to us all pertinent records concerning “the implementation of programs and activities conducted for the purpose of ensuring the accuracy and currency” of California’s official eligible voter lists during the past 2 years. Please include these records with your response to this letter.

I hope that the concerns identified in this letter can be resolved amicably. However, if we believe you do not intend to correct the above-identified problems, a federal lawsuit seeking declaratory and injunctive relief against you may be necessary. We look forward to receiving your prompt response.

Sincerely,
JUDICIAL WATCH, INC.
s/ Robert D. Popper
Robert D. Popper
Attorney, Judicial Watch, Inc.

Trump Talks "Trumponomics" With The Economist

President Trump sat down with The Economist last week to talk trade, immigration, taxes, and health care and the transcript is chock-full of "Trumpisms" that should not go unnoticed.  Here are just a few of our favorite exchanges:

On NAFTA, apparently "big" is not an appropriate adjective to describe the renegotiation that will take place..."massive" and/or "huge" are far better descriptors:

It sounds like you’re imagining a pretty big renegotiation of NAFTA. What would a fair NAFTA look like?

Big isn’t a good enough word. Massive.

Huge?

It’s got to be. It’s got to be.

What would it look like? What would a fair NAFTA look like?

No, it’s gotta be. Otherwise we"re terminating NAFTA.

Some people think this is a negotiating tactic—that you say very dramatic things but actually you would settle for some very small changes. Is that right?

 No, it’s not, really not a negotiation. It’s really not. No, will I settle for less than I go in with? Yes, I mean who wouldn’t? Nobody, you know, I always use the word flexibility, I have flexibility. [Goes off the record.] [Our] relationship with China is long. Of course by China standards, it’s very short [laughter], you know when I’m with [Xi Jinping], because he’s great, when I’m with him, he’s a great guy. He was telling me, you know they go back 8,000 years, we have 1776 is like modern history. They consider 1776 like yesterday and they, you know, go back a long time. They talk about the different wars, it was very interesting. We got along great. So I told them, I said, “We have a problem and we’re going to solve that problem.” But he wants to help us solve that problem.

On the discussion of the new tax plan we discover that Trump coined the phrase "priming the pump."

Another part of your overall plan, the tax reform plan. Is it OK if that tax plan increases the deficit? Ronald Reagan’s tax reform didn’t.

 Well, it actually did. But, but it’s called priming the pump. You know, if you don’t do that, you’re never going to bring your taxes down. Now, if we get the health-care [bill through Congress], this is why, you know a lot of people said, “Why isn’t he going with taxes first, that’s his wheelhouse?” Well, hey look, I convinced many people over the last two weeks, believe me, many Congressmen, to go with it. And they’re great people, but one of the great things about getting health care is that we will be saving, I mean anywhere from $400bn to $900bn.

But beyond that it’s OK if the tax plan increases the deficit?

 It is OK, because it won’t increase it for long. You may have two years where you’ll…you understand the expression “prime the pump”?

Yes.

 We have to prime the pump.

Priming the pump?

 Yeah, have you heard it?

Yes.

 Have you heard that expression used before? Because I haven’t heard it. I mean, I just…I came up with it a couple of days ago and I thought it was good. It’s what you have to do.

It’s…

Yeah, what you have to do is you have to put something in before you can get something out.

Meanwhile, CNN will be even more eager to track down Trump"s taxes after he seemingly admitted to taking deductions for "birds flying across America."

But the biggest winners from this tax cut, right now, look as though they will be the very wealthiest Americans.

Well, I don’t believe that. Because they’re losing all of their deductions, I can tell you.

But something like eliminating the estate tax.

I get more deductions, I mean I can tell you this, I get more deductions, they have deductions for birds flying across America, they have deductions for everything. There are more deductions…now you’re going to get an interest deduction, and a charitable deduction. But we’re not going to have all this nonsense that they have right now that complicates things and makes it…you know when we put out that one page, I said, we should really put out a, you know, a big thing, and then I looked at the one page, honestly it’s pretty well covered. Hard to believe.

On the merits of a VAT Tax:

Would you consider a VAT for the United States?

Well the concept of VAT I really like. But let me give you the bad news. I don’t think it can be sold in this country because we’re used to an income tax, we’re used to a…people are used to this tax, whether they like it or don"t like, they’re used to this tax. I fully understand because I have a lot of property in the UK. And it’s, sort of, not a bad tax. And every time I pay it, they end up sending it back to me. In fact, my accountant is always saying…

That’s a good tax.

 No, it’s really not so bad. Like, I own Turnberry in Scotland. And every time I pay they say, “Yes sir, you pay it now but you get it back next year.” I said, “What kind of tax is this, I like this tax.” But the VAT is…I like it, I like it a lot, in a lot of ways. I don’t mean because of, you know, getting it back, you don’t get all of it back, but you get a lot of it back. But I like a VAT. I don’t think it can be sold in this country, I think it’s too much of a shock to this system. I can tell you if we had a VAT it would make dealing with Mexico very much easier. Because it could neutralise. And I really mean that. Part of the problem with NAFTA, the day they signed it, it was a defective deal. Because Mexico has almost a 17% VAT tax and it’s very much of a hidden tax, people don’t see it. So, but these guys, instead of renegotiating the following week…many years ago, how old is that? 35?

On Healthcare, we"ll never know what brand/model of car was used to describe cheap inurance plans but we did learn that Trump is friends with key executives at the major insurers..."you know, the head people."

One of the things that was so different about your campaign message compared to other Republicans was, you said things like “I want everyone to be covered”.

We’re not going to let people die on the streets.

Look, Obamacare was a disaster. Under Obamacare, you get your doctor; that was a lie. You get your plan; that was a lie. With us, you get your doctor. You get your plan. With us you’ll get hundreds and hundreds of plans. You know, one of the insurance companies, one of the big ones came to see me yesterday. They’re so anxious to start going crazy and you know it’s going to be like life insurance. People that buy life insurance they’re inundated with carriers. All different plans. That’s what this is going to be like. And I said to them, “What do you think the good plans are going to look like?” He said, “Mr President, we’re going to have so many plans. We’re going to have the low version, the high version”, he used the word Cadillac. I won’t tell you what car he used for the low version because I don’t want you to write it because they happen to be friends of mine, you know, the head people. [Goes off the record.]

On Immigration:

Do you want to curb legal immigration?

Oh sure, you know, I want to stop illegal immigration.

And what about legal immigration? Do you want to cut the number of immigrants?

Oh legal, no, no, no. I want people to come into the country legally. No, legally? No. I want people to come in legally. But I want people to come in on merit. I want to go to a merit-based system. Actually two countries that have very strong systems are Australia and Canada. And I like those systems very much, they’re very strong, they’re very good, I like them very much. We’re going to a much more merit-based system. But I absolutely want talented people coming in, I want people that are going to love our country coming in, I want people that are going to contribute to our country coming in. We want a provision at the right time, we want people that are coming in and will commit to not getting…not receiving any form of subsidy to live in our country for at least a five-year period.

On releasing his tax returns, Trump says that he may release them after he"s out of office because he"s "very proud of them actually.  I did a good job."

Mr President, can I just try you on a deal-making question? If you do need Democratic support for your tax plan, your ideal tax plan, and the price of that the Democrats say is for you to release your tax returns, would you do that?

 I don’t know. That’s a very interesting question. I doubt it. I doubt it. Because they’re not going to…nobody cares about my tax return except for the reporters. Oh, at some point I’ll release them. Maybe I’ll release them after I’m finished because I’m very proud of them actually. I did a good job.

Mexico Prepares Plan To Ditch U.S. Grain Imports As NAFTA Showdown Looms

America"s Midwest farmers can"t seem to catch a break.  First, an epic collapse of grain prices over the last couple of years have threatened to wipe out family farmers (see "Midwest Farm Bubble Continues Collapse As Farm Incomes Expected To Crash In 2017") and now, thanks to the pending NAFTA showdown threatened by President Trump, Mexico, the single largest importer of U.S.-grown corn, has announced plans to find alternative grain sources in South America.  Per Bloomberg:

The Consejo Coordinador Empresarial, one of the nation’s top business chambers, is examining countries such as Brazil and Argentina to add new sources for soy, corn and wheat, according to Juan Pablo Castanon, the group’s president. Exports from those countries could help Mexico adjust to the difficulties that a Nafta renegotiation might present, he said.

“The renegotiation might bring increased costs to imports, and our own exports might be hurt, so we need to find new markets,” he said in a phone interview, adding that the group’s efforts are still in the initial stages. The chamber, established in 1976, represents the country’s main agricultural, industrial and financial industry organizations, among others.

"We’d like to keep the trade deal as it is, but right now we have to look for alternative producers and Brazil and Argentina could work,”
Castanon said.

Of course, any move by Mexican businesses to import raw materials from other countries could hit U.S. farmers hard. Mexico is the largest buyer of U.S.-produced corn, spending $2.5 billion in the 2015-2016 season, ahead of Japan’s $1.8 billion, according to the U.S. Grains Council. Moreover, Mexico has spent $800 million on U.S. corn so far in the current season. 

Of course, grain imports aren"t the only raw materials for which Mexico is actively looking for alternative sources as Sigma Alimentos SA, Mexico"s meat-packing conglomerate, is also looking to Brazil and Chile as alternative supply sources.

The push is not limited to grains, Castanon said. Other imports such as meat are also being considered. “An economy as important as Mexico’s needs to have secure supply sources on many fronts,” he said.

Sigma Alimentos SA, the meat-packaging unit of Mexican conglomerate Alfa SAB, is looking into countries such as Brazil and Chile as new sources of raw materials, Chief Financial Officer Eugenio Caballero said on a call with investors last week.

Switching suppliers isn’t as easy as flipping a switch. Mexico depends heavily on rail for imports from the U.S. and Canada, which wouldn’t work for goods from South America. But Mexico’s ports could handle imports from the south, and the benefits would outweigh the costs, Castanon said.

“We need to open new doors,” he said. “As the trade talks progress, we’ll see how we need to make use of them.”

So where does that leave the American farmer? Well, not in a great spot given the already dire position they"re in.  For those who missed it, below are some stats from the USDA detailing the financial condition of the American farmer.

* * *

Real farm incomes in 2017 are expected to sink below 2010 levels which represents a 36% decline from the recent peak and a 14% decline since 2015.

Meanwhile farm debt continues to rise at an astonishing rate...

While farmer leverage has spiked to the highest level since at least 1960.

And of course, lower incomes means less money to spend on shiny new John Deere tractors with equipment capex expected to decline 35% compared to 2015.

And finally, farmer returns have crashed to the lowest levels ever.  We"re not sure about you but a 2.1% ROIC seems a "little low" even in our current rigged interest rate environment.  So, there"s only a couple of ways to fix that problem...either commodity prices have to recover quickly or farmland prices need to come down substantially.  Which do you think will happen first?