 Thank you very much. It's an honor to be here this afternoon. I'm going to speak from the podium I find that I tend to be more energetic if I if I'm standing than if I'm sitting What I'm going to do is talk about Trump administration international Economic policy, and I think the value added that I hope to deliver is some discussion of the specifics of process protection That's underway, and then I will make an argument about why the next couple of years may be particularly Dangerous due to the interaction of Trump administration macro and trade policy But first I want to make a really simple point which it is an explicitly Protectionist policy last night. I went back and reread his inaugural address, and it contains the following passage We must protect our borders from the ravages of other countries making our products stealing our companies and destroying our jobs Protection will lead to great prosperity and strength now That statement is a continuation of campaign themes There was a focus on trade deficits including bilateral deficits And then there were two other themes that provide from a Trump standpoint both an explanation for the trade deficit and a location for the Solutions one was the issue of currency manipulation. The other was so-called disastrous trade agreements There has been continuity post inauguration He has undertaken some executive actions that have tightened up government procurement made it harder to get visas to come to the United States And there has been an aggressive use of contingent or process protection, which I'll go into detail about in a moment Finally as we've heard from other speakers There has been the withdrawal from the TPP and the renegotiations under threat of abrogation of Chorus and NAFTA Okay, what about that new protection the United States like other countries have laws on anti-dumping and countervailing duties But the Trump administration has been distinguished by two characteristics One is the use of rather obscure parts of US trade law including the global safeguards Which doesn't even require injury to domestic industry and the use of section 232 national security protection Moreover the second characteristic is the Trump administration has been unusually prone to self-initiate cases and that matters because historically if the government self initiates the case rather than waiting for a Domestic firm to complain there is the higher likelihood of protection actually being implied So if you simply take the cases from the first hundred days of the Trump administration and assume and this is an assumption That protection is actually applied as you can see in the upper panel the share of US imports under protection doubles And you see in the lower panel it breaks down that by country South Korea would be the worst affected The problem for a country like South Korea is while some of these policies are aimed at China South Korea produces products such as solar panels and steel and washing machines that get caught up South Korea is essentially collateral damage The single biggest change in protection would be Canada because of the perennial software lumber case And as somebody mentioned yesterday the real problem with this is that given the United States prominence in the system the likelihood that there will be emulation by other countries The Trump administration as we've heard is also scrapping trade agreements. We are renegotiating NAFTA Dick Cooper pointed out yesterday that some of that is a constructive agenda updating But what dick didn't mention were the bad ideas that we heard some about this morning a five-year sunset provision Which basically undercuts the idea of having a trade agreement because it means that companies cannot invest with any certainty About the rules of the gamer be Titan rules of origin particularly in automobiles The rules of origin that the United States is proposing on automobiles are designed to disrupt the existing supply chains The North American auto market is highly integrated if these rules go through it will mean real Inefficiency is introduced into that North American market The long-term effect will be the movement of production from North America into China And as we heard earlier this morning these sort of strange arguments about trade balances if the If the renegotiation fails and NAFTA is abrogated the snapback for Canada is to the US Canada FDA And you can imagine the US and Canada basically working out a new deal that modernizes that agreement But for Mexico this the threat is much more existential there would be real impact in terms of production in Mexico and Strangely from a Trump standpoint the likelihood would be a depreciation of the peso and an increase in the bilateral trade imbalance not a reduction The Korea free trade agreement was slated for abrogation Fortunately Kim Jong-un stepped in and with the sixth nuclear test took that off the agenda but it's been simply pushed to the back burner and There is still the possibility of abrogating chorus now in Anticipation of the election last year I Did some modeling along with some colleagues at the Peterson Institute to look at what the impact would be in the United States modeling trade wars with China and Mexico and as and what you can see from That map is that the the effects are Significant and they are they are not uniform across the states Capital goods industries would be the worst hit both because of decline in domestic investments associated with the trade war as well as a reduction of exports of those goods But what's really interesting is there are large employment losses and non-tradables and because of the pattern of hiring in those sectors What we find is that the the most of the US casualties in a trade war would be among the most vulnerable people in Society that the effects of a trade war in the United States would be regressive Washington poor Washington is the worst affected state But we also looked at some scenarios that looked at asymmetrical forms of retaliation Things like China stopping buying aircraft or having an embargo on soy beans or instructing state-owned enterprises Not to buy us business services We've also looked at what might happen in some cases if chorus were abrogated That would include the loss of preferences in the beef market to countries like Australia, Canada, New Zealand Which we expect would mean the elimination of us beef Exports and at least in the short run as well as also loss of business services to EU competitors The case of aircraft aircraft production is highly localized certain geographical areas are hit hard in the case of business Services the areas that are hit under either of these actions Basically constitute a map of the high-tech urban areas of the United States But from a political economy standpoint possibly the most interesting part is The two agricultural cases you can see on the map There is a patch of green that runs from Mississippi through Arkansas, Tennessee and into Missouri That's the impact of a soybean embargo by China the loss the reason it's very interesting is twofold First of all if say you're in Seattle and you lose your job You're losing your job, which is not good But you're losing it in the context of a large urban labor market with public transportation If you lose your job in one of those contiguous rural counties You are in real trouble and the job losses in direct plus indirect in some of these counties one county was as high as 25% There were about a dozen counties would where it exceeded 10% Likewise in the beef case you can see those yellow dots. They are in these sort of plain states the reason why this is interesting is that those areas are represented by Republicans and If the if the Trump administration is to be constrained politically it is likely to become through Agricultural interests in the United States The real threat though is the interaction of the macro policy and the trade policy We the United States for a variety of reasons is likely to adopt Expansionary fiscal policy that's going to lead to a growth spurt widening budget and trade deficits appreciating exchange rate and then you face the prospect of the Trump administration reaching for Protection trying to square the circle with that increasing trade deficit and what we could get is a very nasty version of the first Reagan Administration that an administration that in the infamous words of then Secretary of Treasury James Baker Imposed more protection than any US presidential administration since Herbert Hoover This is a period of time well known for voluntary export restraints the Current US TR. Mr. Ambassador Lighthizer was actually one of the negotiators And is well versed with this kind of action There is one huge difference though in the context of the Cold War and normally I have to say most of you Don't remember that but in the context of Cold War actually this audience you do remember it You are all senior officials at the time In the context of the Cold War we were the ultimate United States was the ultimate a political and guarantor of Japan and However grudgingly at the end of the day the Japanese were going to go along with American demands in the trade policy area Needless to say the relationship between the United States and China today Could not be more different. So just to recapitulate Well, I just lost it This is a new policy. There is a real there. This is a break with the past It is explicitly protectionist it is in the works So some of these decisions for legal reasons have not yet been made But they are in train and the conflict between trade and macro policies are going to make it worse To the detriment of the United States and all of its trade partners. Thank you