Macron Trade Deal Bust?

Macron is trying to eek out a new trade relationship with India claiming that the exodus of the UK means France will be the winner of the EU. But apparently he forgot to ask Merkel, because behind the UK at $8.6 billion, Germany ranks second at $7.2 billion in 2016 for the EU.   In addition, the UK provides a huge surplus of trade to India which I imagine they will not want to put at risk.   By contrast, China represents their biggest deficit at $51.6 billion.   The largest export items from China to India include: electronic equipment, machinery, furniture, and apparel.  

Problem? Is France even competitive?

India has been ramping up its nuclear program recently, including a push to build 10 new reactors with its inked partner – Russia. Macron is beeming after a handshake to expedite the construction of one nuclear facility in Jaitpur, which is situated on a seismic zone… Oops!  Villagers are not too happy about being forced to hand over their land to the Indian government for this project especially after the catastrophic meltdown at the Japanese facility in 2011.

France has also asked India to support them militarily given India currently has the largest military manpower in the world, and France is more than happy to continue to provide more fighter jets to counter the threat from China in the Indian Ocean. At the center of the India/China dispute is an area that borders Bhouton, India and China, Doklam. China and Bhouton each claim the area belongs to them and historically, like everything else, it is complicated and unclear/muddy. India claims they are acting on behalf of Bhouton in fighting China. And Bhouton recently declared they no longer were giving India the right to negotiate on their behalf.

But India isn’t quite willing to let it go.

Doklam is a notable trade route that was exploited by the British when they occupied parts of India in the 19th century.

France is gearing itself up for a trade war, but can it compete with China? Easy answer – No.   Instead, what they are doing is ramping up tensions between the two with a military antagonist.

January, Macron was in China wooing president Jinping with promises of ramping up trade between the two and putting on the table French wine, cheese, meats, and the Airbus for which sales have been less than robust.

Economists have conjectured that Macron’s China visit was about deriding Trump and the US as benign and lost trading partners for which he, Macron, was ready, willing and able to fill. But Macron was always a big fan of Xi Jinping, in fact last August, he was adamantly anti-China trade due to the significant deficit France incurred.

The EU trade deficit with China was $200 billion last year. The power that China wields in trade is the weapon of choice.   In 2016, China’s military spending was roughly $146 billion.   Despite increases in spending since 1980, the budget as a percentage of GNP has declined sharply to a mere 1% or about 1/3 of the US although China’s has significantly larger active personnel.

While the US has plundered its funds for the purpose of warring other countries, China has behaved liked a tortoise slowly enriching itself via trade.

If Macron was serious before, or serious now, it is unknown.   Given the derision between the EU and the US, the EU and Russia, and the EU and China, they are left to pick.   And for now, the pickings seem to be slim.

As for the US: The fastest growing import is pharmaceuticals. The main suppliers include: Ireland, India, Germany and France.   But the top $$$ import is electronic equipment from: China, Mexico, Japan, and South Korea leading the market. If our trading ‘allies’ really wanted to inch out China, they would be offering discounts to curb those deficits.   If the US really wanted to hit China, they would put tariffs on Electronic Equipment and Machinery.

FYI:   The value of Mexico’s imports of electronic equipment and machinery to the US is roughly half of that of China – yet Mexico remains rife in poverty…

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