Articles in Category: Public Policy

U.S. Customs and Border Protection said recently that it plans to start awarding contracts by mid-April for President Donald Trump’s proposed border wall with Mexico, signalling that he is aggressively pursuing plans to erect “a great wall” along the 2,000-mile border.

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The agency said it will request bids on or around March 6 and that companies would have to submit “concept papers” to design and build prototypes by March 10, according to FedBizOpps.gov, a procurement website for federal contractors. The field of candidates will be narrowed by March 20, and finalists must submit offers with their proposed costs by March 24.

Can I Get a Good Deal on a Wall?

The president told the Conservative Political Action Conference on Friday that construction will start “very soon” and is “way, way, way ahead of schedule.”

Homeland Security Secretary John Kelly has sought employees’ opinions during border tours of California, Arizona and Texas but it’s still unclear how Congress would provide funding, how much it would cost and when, exactly, construction could start.

The Government Accountability Office estimated it would cost on average $6.5 million a mile for a fence to keep out people who try to enter on foot and $1.8 million a mile for vehicle barriers. There are currently 354 miles of pedestrian fencing and 300 miles of vehicle barriers, much of it built during President George W. Bush’s second term.

U.S.-Mexico border wall in Arizona.

A section of an existing US-Mexico metal border wall in Arizona. Source: Adobe Stock/Yukon Charlie.

Republican leaders in Congress have said Trump’s wall would cost between $12 billion and $15 billion. Trump has suggested $12 billion. An internal Homeland Security report prepared for Kelly estimated the cost of extending the wall along the entire U.S.—Mexico border at about $21 billion. Read more

Businessman Wilbur Ross was approved by the U.S. Senate yesterday to become Secretary of Commerce by a vote of 72-27, with 20 Democrats and Sen. Angus King (I-Maine), joining 51 Republicans to vote “aye.” Sen. Johnny Isakson, R-Ga., did not vote due to his ongoing recovery from back surgery.

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The Senate also voted 67-31 to move forward on the nomination of Rep. Ryan Zinke, (R-Mont.), to lead the Interior Department. A final vote on Zinke’s confirmation is expected Wednesday.

Thomas J. Gibson, president and CEO of the American Iron and Steel Institute, reacted to the confirmation.

“Wilbur Ross’ clear focus on the challenges that the steel industry is facing, and his intent to use all of the tools at his disposal to ensure a level playing field, is great news for the domestic steel industry,” Gibson said. “He has keen knowledge about the global overcapacity in steel — fueled by foreign government subsidies and other trade-distorting policies and repeated surges in unfairly traded imports. His experience as a businessman involved with a number of manufacturing industries facing similar unfair import competition gives him the first-hand knowledge of the critical issues impacting steel and other industries. He will be an exceptional Secretary of Commerce and we look forward to working with him.”

A glut of idled river barges is clogging Mississippi River shorelines from St. Louis to New Orleans is leaving U.S. barge companies that haul grain, coal, steel and other bulk goods counting their losses.

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Even with record-large exports of corn and soybeans, typically a boon for shippers that haul grain to Gulf Coast export terminals, the collapse of coal shipments to the lowest levels in decades has left the dry bulk barge fleet chasing too little cargo.

In pursuit of rising grain volumes since 2014, many shippers expanded their fleets too quickly.

Barge lease rates paid to companies like Archer Daniels Midland Co.’s American River Transportation Company, privately held Ingram Barge and a handful of smaller operators are at 1-1/2-month lows and more than 30 percent below the five-year average for February.

Trump Proposes $54 Billion Defense Spending Increase

President Trump will propose a federal budget that dramatically increases defense-related spending by $54 billion while cutting other federal agencies by the same amount, according to an administration official.

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The proposal represents a massive increase in federal spending related to national security, while other priorities, especially foreign aid, will see significant reductions. How quickly that increase will turn into downstream metals purchases for defense contractors remains to be seen.

Flanked by some of the nation’s top manufacturing executives, President Donald Trump signed an executive order today directing federal agencies to each create task forces to identify burdensome regulations ready that could be removed, promising the end of “an impossible situation” for U.S. companies and new economic growth.

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The manufacturing CEOs also told Trump that while many of them have jobs that need to be filled, it’s still far too difficult for them to find skilled labor to fill those jobs.

ThyssenKrupp Sells Brazilian Venture, Ends Americas Investment

Thyssenkrupp AG has struck a deal to sell money-losing Brazilian steel mill CSA Cia Siderúrgica do Atlántico SA to Ternium SA for $1.3 billion (1.26 billion euros), ending a foray into the Americas that led to years of massive losses. Including debt, the deal gives CSA, the largest foreign investment project ever in Brazil, an enterprise value of $1.59 billion (15 billion euros).

Reuters reported that U.S. stock index futures rose to record intraday highs on Tuesday as oil prices surged and investors assessed earnings from top U.S. retailers.

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The theory is share prices are being driven higher by a strong oil price and retailers who are reporting better than expected store sales. Wal-Mart Stores, Inc., Macy’s, and Home Depot sales are all up on robust consumer demand. If stock prices were supported on consumer confidence alone, we could see an argument for this bull run in share prices to continue.

Stocks are up

Stock prices continue to rise thanks to strong retail sales and oil prices. Source Adobe Stock/Tiagozr.

There is plenty of optimism around. Donald Trump’s much-vaunted infrastructure projects are expected to create significant demand and have an inflationary impact on the economy… when they eventually see the light of day. 2018 At the earliest is our expectation since few are shovel-ready and all will have to get past Congress first. Meanwhile, though, the economy is adding jobs at a steady rate and unemployment is low.

Oil Supply

However, if Reuters is right and shares are being driven higher in part due to the oil price, we have a few concerns. The oil price was driven higher by the Organization of Petroleum Exporting Countries‘ production cap agreement last year, an agreement to which both major OPEC producers and 11 non-OPEC countries like Russia signed up to in an effort to reduce excess production and bring the market into balance by the summer. Read more

President Donald Trump’s administration is mulling changes to how the U.S. calculates trade deficits. A change could be made that would show more movements of goods between free trade agreement countries, the Wall Street Journal reported recently citing people involved in the discussions.

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The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged, the sources told The Wall Street Journal. These would not be traditional transshipments, generally done to disguise a country of origin, but rather shipments that are manifested to include the country of origin but simply move goods through a trade agreement country.

Economists say that approach would cause trade deficit numbers to go up because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports.

Trump has been highly critical of trade deals including the North American Free Trade Agreement (NAFTA) with Mexico and Canada. By using a metric that widens the trade deficit, it could give him political leverage to make sweeping changes, the newspaper reported.

If the government adopted the new method, the deficit with Mexico would be nearly twice as high.

The effect of such a change would be particularly stark on data involving countries that have free trade deals with the U.S., this person said—and in some cases the new methodology could even change a trade surplus into a trade deficit.

Trump trade officials said the idea is part of an early discussion and that they are examining various options. It is unclear whether the administration would adopt any new approach for measuring trade as part of official government data, or just use the higher deficit calculation to make the case for new trade deals.

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“We’re not even close to a decision on that yet,” Payne Griffin, the deputy chief of staff at the office of the U.S. Trade Representative told the Journal. “We had a meeting with the Commerce Department, and we said, ‘Would it be possible to collect those other statistics?’”

The Journal reported that career government employees at the USTR’s office complied with the request to prepare data using the new methodology but also noted their objections.

One of the major gripes about environmental legislation is that while the West creates ever stricter laws and ever lower emissions targets, many parts of the world completely flout agreements or do not even sign up to them in the first place.

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The steel industries of Europe and the U.S. frequently complain that they must meet tough emission targets that their competitors in China, India and elsewhere can avoid either because their governments have not signed up to such restrictions, or because they simply are not enforced.

The True Cost of Air Pollution

Well, finally after years of complaints it appears the tide is turning but tragically it has come about due to an appalling loss of life that is only just being recognized. Air pollution alone causes 6.5 million early deaths a year the Guardian newspaper reports. That is double the number of people lost to HIV/AIDS, tuberculosis and malaria combined, and four times the number killed on the world’s roads. In Africa, air pollution kills three times more people than malnutrition. Read more

Leading Republican lawmakers said over the weekend proposals for a new Trump-administration-backed infrastructure bill could be introduced as early as the coming weeks.

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Senate Majority Leader Mitch McConnell (R. Ky.) told reporters he expects to receive “some kind of recommendation on an infrastructure bill, a subject that we frequently handle on a bipartisan basis,” but gave no details or timing.

He has previously voiced concern over adding to budget deficits with a new injection of federal funds for road, bridge and other construction projects like the ones President Barack Obama secured from Congress in 2009, especially after a major highway funding law was enacted about a year ago.

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During the campaign, Trump said he would push for a $1 trillion infrastructure program to rebuild roads, bridges, airports and other public works projects. He said he wanted action during the first 100 days of his administration, which now seems unlikely.

This week President Donald Trump began to deliver on his campaign promises to deregulate industry and unshackle American manufacturing, using the Congressional Review Act, a 1996 law that empowers Congress to review, by means of an expedited legislative process, new federal regulations issued by government agencies and, by passage of a joint resolution, to overrule the regulation.

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First up, Congress passed a law under the CRA that rolled back an Obama administration rule that would have required oil, gas and mineral extraction companies to disclose payments made to governments. The Securities and Exchange Commission rule never went into effect and exploration companies and industry organizations such as the American Petroleum Institute, said it put natural resource companies at a competitive disadvantage to foreign firms by disclosing too much of their contract terms.

Iron ore mine

Deregulation via the CRA will help minerals mining and exploration. Source: Adobe Stock/nikitos77.

Metals producers and other companies dependent on minerals to make their products generally supported the repeal. Another potent input for the creation of metals is coal and Trump followed up the CRA action by signing a bill that quashed the Office of Surface Mining’s Stream Protection Rule, a regulation to protect waterways from coal mining waste that officials finalized in December. Regulators spent most of Obama’s administration eight years writing the Stream Protection Rule and it was effectively wiped away with the stroke of Trump’s pen thanks to the CRA.

The House has passed several CRA resolutions, and the Senate has so far sent three of them to President Trump so far, but there are at least 10 CRA bills still moving through the House and Senate. Until now, only one CRA resolution had ever been passed and signed into law: the Occupational Health and Safety Administration’s workplace ergonomics rules, in 2001.

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If Trump and the republican Congress continue to use the CRA to roll back rules, they could potently erase much of the regulation that business organizations have said hamstrung them for the last eight years.

Using the CRA to roll back regulations would certainly make it easier for Trump to deliver on his promises of smarter, better regulations for industries such as manufacturing and mining. Using it also helps the Congress keep up a commitment from an early Trump executive order that it must repeal two regulations for every new one. We could see a slew of deregulation actions to allow Congress to “bank” new regulations if it needs to pass a law to, perhaps, create a new definition of what a countervailable subsidy is for companies to petition the Commerce Department to allow it to place duties on foreign imports.

Donald Trump’s November victory ignited the steepest stock market rally from election day to inauguration for a first-term president since John F. Kennedy won the White House in 1960.

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The S&P 500 index, a broad measure of the performance of large U.S. companies, climbed 6% since election day. Wall Street has not posted such a strong run from a president’s first-term election win in more than half a century, when the S&P 500 climbed more than 8% after JFK beat then vice-president Richard Nixon.

Stock market performance since election of a new US president. Source: Financial Times.

Over the same time frame, only the advance following Bill Clinton’s second election stands with JFK in topping the Trump run. Additionally, Wednesday’s fifth-straight record-high close for each of the major U.S. equity indexes matches a streak last seen in January 1992. The Philadelphia Federal Reserve Bank even said its manufacturing index soared in February to a 33-year high, in another indication of improving business sentiment in the wake of the Republican election sweep. Read more