Trump’s State of the Union: Infrastructure and Trade | Global Trade Magazine
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  January 31st, 2018 | Written by

Trump’s State of the Union: Infrastructure and Trade

Proposes $1.5 Trillion Infrastructure Scheme

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  • Experts believe US infrastructure requires at least a $2-trillion capital infusion.
  • Some are pushing for the federal government to raise its gasoline tax to fund highway improvements.
  • Trump wants fair, reciprocal trade deals.
  • The Census Bureau found that the US trade deficit has widened on Trump’s watch

Trade and infrastructure were front and center in President Donald Trump’s State of the Union address last night. The question is whether the president, and Congress, will move the country in the right direction on these issues.

Trump called on Congress “to produce a bill that generates at least $1.5 trillion for the new infrastructure investment that our country so desperately needs. Every federal dollar should be leveraged by partnering with state and local governments, and, where appropriate, tapping into private sector investment, to permanently fix the infrastructure deficit.”

The $1.5-trillion figure is new. One-trillion dollars was the figure most heard up until not for infrastructure. Many experts believe the nation’s infrastructure requires at least a $2-trillion capital infusion to remedy its ills.

The word “generate” is an interesting one, because it doesn’t mean the federal government would actually be spending the dollars at issue. Instead, what the president has in mind is for the federal government to spend an additional $200 billion to $350 billion on infrastructure over the next ten years. Those funds would be used to leverage state and local dollars and private investment. Relying on public-private partnerships would likely mean greater reliance on fees and like tolls, to fund infrastructure. Some states and localities might have to raise taxes to pay for infrastructure. Many have already raised their gas taxes. Some are pushing for the federal government to raise its gasoline tax.

Trump urged Congress in include in any infrastructure bill a scheme to “streamline the permitting and approval process.” Coincidentally, the Government Accountability Office, a congressional watchdog agency released a study on the same day as the president’s speech showing that actions taken before the Trump era were already accelerating transportation projects, thanks to 30 “project delivery provisions” in transportation bills passed in 2005, 2012 and 2015.

On trade, Trump said “America has also finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs and our wealth…The era of economic surrender is totally over. From now on, we expect trading relationships to be fair. And very importantly, reciprocal.”

Here Trump is repeating his old saw about trade deficits, a measure which most economists say is not an accurate measure of the success of trade. The US insistence on lowering trade deficits with Mexico and Canada is a big issue that may be derailing the NAFTA revision talks. Anyway, the Census Bureau found that the US trade deficit has widened on Trump’s watch, increasing 12 percent as of November 2017.

“We will work to fix bad trade deals and negotiate new ones,” the president added. “And they’ll be good ones. But they’ll be fair.”

Trump withdrew the US from the Trans-Pacific Partnership in one of his first acts as president. The TPP was designed to solidify the US position in the Asia-Pacific region and to counterbalance China’s rise in the area. The TPP is continuing without the United States and none of the eleven remaining countries has expressed interest in negotiating a bilateral deal with the US. The results of US engagement with China on trade have thus far produced meager results.

The United States under Trump has retreated before China in Asia, just as it retreated in Europe before Russia, leaving China to be the one most likely to be writing the rules of trade and governance in the Asia-Pacific, instead of the United States.

A few key words were missing from Trump’s State of the Union speech. Allies. Europe. Leadership. Those concerns and values are apparently absent from the Trump presidency and from the current state of the union.

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