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The NAFTA Report That Could Do More Damage Than Mueller

With all the coverage of Special Counsel Robert Mueller’s investigaiton and still-confidential report, President Donald Trump’s political future does not appear to be closely tied to the Russia investigation. Without ground-shaking conclusions that completely reframed his presidency for the Republican Party and is leadership, there’s never been much chance that the report could lead to him being removed from office.

But there’s another forthcoming report that really could do serious damage to the president, even if there’s been almost no coverage of it so far. It’s a report from the International Trade Commission on the future effects of Trump renegotiated version of NAFTA, which the president calls the USMCA

As the Toronto Star’s Daniel Dale reported, the ITC report is set to come out on April 19. And few expect it to show much of an upside for the United States or Trump.

Dale wrote:

At best, experts say, the ITC report expected by April 19 is likely to show a very small positive impact.

‘“He’s been touting this as moving from the worst trade agreement ever to the biggest, best agreement, and there is no way the results of the USITC can be spun to say that the USMCA is anything other than a small change from the status quo,” said Jennifer Hillman, a Georgetown Law professor and a former senior official with the U.S. trade representative’s office.

“The debate in Congress is whether that small change is still worth doing

A negative or mediocre conclusion from the ITC could make it harder to convince skeptical Democrats that it is worth taking the political risk of voting for a top Trump priority. Such a conclusion could give members “cover” if they are already predisposed to vote no, said Robert Fisher, a U.S. negotiator for the original NAFTA and now managing director of Hills and Co.

If this is right, it could deal a significant blow to Trump’s support and become a drag on him in the run-up to the 2016 election.

It may seem a distant memory now, but trade was a major theme of Trump’s 2016 campaign. He insisted that the country was getting ripped off in its trade deals — none of which were worse than NAFTA, in his view. And this wasn’t a mere throw-away line at rallies. His central message was that American leaders had been stupid and reckless in agreeing to these deals, and that he was the only brilliant dealmaker who could storm into office and fix the problem.

How much this message really helped lead Trump to victory in 2016 is up for debate, but he clearly thought it was important, and it may have been key to his winning the crucial midwestern swing states that gave him an electoral college majority.

But if the pending report shows that Trump’s attempt to renegotiate NAFTA was a dud, he could likewise pay for it in 2020. The deal, already facing headwinds in the House of Representatives, will likely never be approved by Congress if the report is negative. Were the report to show the deal would be a resounding win for the United States and Congress rejected it anyway, Trump might be able to turn this to his advantaged. But if Democrats can rightly say that the most comprehensive report suggests the deal would be a loser for the United States, Trump’s support could take a hit where he can least afford to fall behind.

Dale noted that some observers are critical of the methodology the USITC is expected to use in crafting the report, arguing that it doesn’t necessarily account for all the agreement’s benefits. But these details may not matter much if Trump’s main goal is looking like a winner.

One sign that Trump’s allies are nervous about the issue is that supporters of the deal are already downplaying the report.

“It’s just a report,” Rick Dearborn, executive director of the Pass USMCA Coalition, told Dale.

Why Canadians — Not Americans — Rule The Cannabis Industry

President Trump routinely waves his fist at alleged unfair trade practices, including at the hands of our good neighbor Canada. But what about playing fields that are uneven because the U.S. government makes them so? Witness the cannabis industry. It’s enjoying explosive growth worldwide, but Canadians are running away with the profits because Washington has shackled their American competitors.

It’s not that Americans are unacquainted with cannabis in all its forms. Cannabis is a family of flowering plants that includes both marijuana, which produces a high, and hemp, which does not. Most states have relaxed their marijuana laws to various extents. Ten states and the District of Columbia have made pot fully legal.

Meanwhile, nonintoxicating cannabis products — cannabidiol, or CBD, oil in particular — are flying off the shelves. Green Growth Brands of Columbus, Ohio, is about to open CBD stores in family-friendly malls.

Whether CBD extracted from hemp actually delivers relief from depression, insomnia, pain and acne has not been established. These products remain largely unregulated, so consumers may not know exactly what they’re ingesting or rubbing on their backs.

But to see who’s prospering most, look north. Canada last year totally legalized marijuana. Canadians have found gold in pot and its non-toxicant relatives.

Eight cannabis companies are currently listed on Toronto’s main exchange. Tilray Inc., the largest maker of medical marijuana, based near Vancouver, just bought Manitoba Harvest, the biggest manufacturer of hemp foods, for about $315 million.

Not only do differing state laws hamper U.S. producers but so does the enduring federal ban on marijuana. As one can imagine, this complicates Americans’ ability to build up a nationwide, not to mention international, business.

For starters, it’s illegal to ship marijuana between states. Hemp-derived CBD is OK — but Tilray plans to open processing plants in the U.S. because it’s illegal to move CBD over the border with Canada. American marijuana companies can’t deduct wages or other business costs from their taxes. The Hoban Law Group, a Denver firm specializing in the cannabis industry, says this results in some U.S. competitors paying effective tax rates of 85 percent.

As a result of these restrictions, Americans don’t have a competitive infrastructure of investment banks and law firms able to handle marijuana- or hemp-related deals, not to mention supply chains. That’s why Martha Stewart has linked up with a Canadian company to develop CBD products.

Coca-Cola is said to have explored putting CBD in drinks. They would be non-psychoactive and marketed as healthful. Stories circulate that it has talked to Aurora Cannabis as a possible Canadian partner.

Other U.S. giants, such as Altria (tobacco), have shown interest in the business. Constellation Brands (beer, wine and liquor) last year added $4 billion to its investments in the Canadian cannabis company Canopy Growth.

For decades, farmers in North Dakota looked over the border into Manitoba to see waving fields of hemp, a profitable crop they were not allowed to grow. The U.S. banned its farming not because hemp is any kind of drug but because it is a biological cousin of marijuana. Hemp still grows wild among the roadside weeds of the farm belt.

Hemp is used for making paper, oils and textiles. Car manufacturers put it in car seats for insulation. George Washington grew hemp. Oddly, while U.S. farmers were barred from growing the plant, American manufacturers remained free to import hemp fibers, oil and seeds from other countries.

This bit of insanity ended in December, when a farm bill passed by Congress and signed by Trump let U.S. farmers again produce hemp.

But the crazy quilt of American laws governing cannabis remains a hindrance to fully participating in a hot market. Canadians obviously don’t mind.

What Canada Got Right In Legalizing Cannabis

Reprinted with permission from Creators.

 

It turns out that when you legalize marijuana, a lot of people show up to buy it. That development seemed to surprise cannabis controllers in Canada, where shortages were reported almost immediately after legal recreational sales began last week.

In several other respects, however, Canada is handling the transition from prohibition to regulation better than the United States. Canadians seem to have learned a few things from American mistakes, and we in turn can learn from their successes.

The most significant difference between the approaches taken by the two countries is that Canada has legalized marijuana at the national level. It is only the second country in the world (after Uruguay) to do so.

In the United States, by contrast, marijuana is still prohibited by federal law. As a result, marijuana merchants in the eight states that license them operate under a legal cloud, committing federal felonies every day. Aside from exposing cannabusinesses to the risk of prosecution and forfeiture, the federal ban complicates financing, leasing, contracting, insurance, banking and income taxes.

There is an easy fix for this problem: Congress can show its respect for the 10th Amendment by repealing the federal ban as it pertains to conduct that is permitted under state law. Even former New Jersey Gov. Chris Christie, who promised to crack down on state-legal marijuana when he ran for the 2016 Republican presidential nomination, recently conceded that “states have the right to do what they want” with cannabis.

Another important advantage of the Canadian approach is modest marijuana taxes, which help displace the black market. The national government is imposing an excise tax of 10 percent or $1 per gram, whichever is greater, and giving the provinces 75 percent of the revenue.

That’s in addition to standard sales taxes, which range from 5 to 15 percent. Still, the effective tax rates are substantially lower than in jurisdictions such as California and Washington, where steep taxes have made it hard for licensed merchants to compete with illegal dealers. An industry analyst recently told The New York Times that heavy taxes and burdensome regulation in California make legal marijuana about 77 percent more expensive than marijuana sold by unlicensed dealers.

High purchase ages, like high taxes, help sustain the black market. In the U.S., all nine states that have legalized recreational use have set the minimum age for purchase or possession at 21, corresponding to the drinking age. The upshot is that most college-age adults, 40 percent of whom use marijuana, cannot do so legally.

Canada also used the rule for alcohol as a benchmark, but it has a lower drinking age. The national minimum for both alcohol and marijuana is 18, and most provinces have added a year to that cutoff.

In both Canada and the United States, local governments generally have the authority to ban marijuana businesses within their borders. But Canada gives consumers a reliable and discreet way around local bans by letting them buy marijuana online and have it delivered by mail throughout the country. In the U.S., most states with legal pot do not allow direct deliveries to consumers, and the continuing federal ban makes sending marijuana by mail, UPS or FedEx a risky proposition.

The Canadian government not only has decided to stop treating cannabis consumers as criminals. It also plans to help cannabis consumers who continue to suffer from that label by eliminating fees and waiting periods for sealing conviction records related to possession of 30 grams or less of marijuana, which is now legal.

The plan is far from perfect, but it goes further than the policies of most U.S. states with legal pot, and it invites a serious discussion of a key moral issue raised by the repeal of marijuana prohibition: When a government decides to stop punishing people for peaceful activities that violate no one’s rights, what does it owe to the victims of that oppressive policy?

Jacob Sullum is a senior editor at Reason magazine. Follow him on Twitter: @jacobsullum. To find out more about Jacob Sullum and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

 

 

Danziger: Swamp Thing

Jeff Danziger lives in New York City. He is represented by CWS Syndicate and the Washington Post Writers Group. He is the recipient of the Herblock Prize and the Thomas Nast (Landau) Prize. He served in the US Army in Vietnam and was awarded the Bronze Star and the Air Medal. He has published eleven books of cartoons and one novel. Visit him at DanzigerCartoons.com.