(November 16-30, 2016)

USA

US President elect Donald Trump completed one of the greatest upsets in American political history when he vaulted above the minimum 270 Electoral College vote needed to become president. As a stunned world comes to terms with the US election results, attention is getting increasingly focused on how the Trump presidency is likely to pan out on various issues.

A Report by Gary Shapiro for Fox News spells out why Trump may actually be good for the American economy. According to him, in January 2017 the USA will have a Republican Congress and a Republican President, who will naturally cooperate to pass laws that will free up capital for businesses enabling them to hire and create jobs. This along with the election of a pro-business Democratic lawmaker, Senator Chuck Schumer of New York, as Senate minority leader, is likely to see cooperation on legislation that helps businesses invest in growing and hiring. By lowering corporate taxes, reforming patent, securities and class-action laws; and reducing regulatory burdens, businesses will have more money to invest in growth and job creation.

There are also indications that Congress and the Trump administration will cooperate to invest in infrastructure. They could agree on a plan to repatriate more than $2 trillion parked overseas by U.S. companies who are reluctant to bring the money home and pay the current 35 percent U.S. corporate tax rate, the highest rate among any developed country. While campaigning Trump had promised to reduce this to 15 per cent. The lower taxes paid on this reclaimed money could go directly to infrastructure or through an infrastructure bank.

During his campaign, Trump said he would reverse President Obama’s executive orders and rules hurting job creation. By simply repealing the Department of Labor’s actions narrowing the independent-contractor definition, restricting intern hiring and mandating overtime for those making under $47,500, Trump hopes to free businesses, especially startups, to create jobs.

In keeping with his election rhetoric, many economists fear Trump will block imports, skilled immigrants and foreign investment. That is not likely to happen. He cares too much about being successful, and he will rely on visible data points to define his success. As a candidate, he cited polls frequently in his campaign appearances. As president, Trump may still follow popularity polls, but he may be looking to monthly gross domestic product and job growth numbers to further define his success. Such an approach was reflected in his acceptance speech on the early morning of November 9 that even his critics found surprisingly “gracious and unifying”.

Russia

Prospects for US –Russia Relations

Trump’s presidency, which begins Jan. 20, 2017, offers interesting possibilities for U.S.-Russian relations. The rapport between Trump and Russian President Vladimir Putin has been well documented. On Nov. 9, Putin was among the first of the world’s leaders to offer his congratulations to Trump. But will a gesture of goodwill lead to substantive change in the U.S.-Russian partnership? While Russian media would like Trump to explore various options to foster a more sympathetic approach towards Russia, there is no way to know right now if Trump will or can follow through on any of these ideas once he assumes office.

Some of the suggestions for Trump that have appeared in various Russian media sources are:-

• Doing away with the sanctions President Barack Obama handed down in response to Russia’s involvement in 2014 in Ukraine is one.
• Demanding that NATO nations pay for more of the costs associated with the organization would be a second option Trump could employ. Within hours of Trump’s victory, NATO’s secretary general urged him to not forget the longstanding relationship between the U.S. and Western Europe in maintaining peace. Trump could add further stress to the relationship – to Russia’s advantage – if he limited the role of the U.S. military in the region.
• Staying out of the way as Russia continued its aerial assault on Syria’s rebels would be another way of demonstrating that a President Trump would deal with Russia in sharply different ways than Obama.
• Urge the U.S. Congress to restore funding for Title VIII, a program that allows U.S. scholars to engage in research about Russia and gain Russian language proficiency. Funding levels were cut three years ago. Along the same lines, he could push for increased academic, athletic and cultural exchanges between the two nations.

It must be remembered that President Obama initiated the famous “reset” button that Hillary Clinton carried to Moscow during her first visit as U.S. Secretary of State. But that proved ineffective largely due a lack of trust amongst the leadership in both countries. Therefore it remains to be seen how much Trump can break with Obama’s plans. Ceding too much strategic space to Russia in Europe may not be prudent for America and Western European leaders, perhaps more than any other, will be watching closely.

UK and BREXIT:

Dismayed by the noisy and vocal forces that are pushing Theresa May towards a hard Brexit, the EU institutions expect the UK to face a significant drop in cross-Channel trade and investment. For the time being, there is a surprising degree of unity among the 27 governments, the European Commission and the Council of Ministers. All agree that there must be no ‘pre-negotiations’ with the British, until Article 50 is invoked. They also agree that the ‘four freedoms’ are indivisible: if the UK restricts free movement of labour, it cannot expect to enjoy free movement of capital, goods and services.

If anything, the stance of the 27 has hardened in the last two months, for several reasons. First, the tough line on the EU that Theresa May took at the Tory party conference – supplemented by even tougher ministerial pronouncements – was closely observed in European capitals. Second, the aggressive British press reaction to the High Court ruling that triggering Article 50 requires Parliamentary involvement, and the government’s slowness to defend the judiciary’s independence, shocked some governments. And third, when Donald Trump won the US presidency, European leaders expected Britain to react more positively than most; but Britain considered Foreign Secretary Boris Johnson’s gushing praise for the president-elect tasteless and over-the-top.

These events have contributed to an erosion of the good will that EU leaders feel towards the UK. They reckon that UK politics is being driven by emotion rather than reason and that there is not much they can do to prevent a hard Brexit. European leaders know that a hard Brexit would be somewhat injurious to their own economy, but they feel the British would suffer much more. Germans and the French think that if Britain was allowed ‘to have its cake and eat it’, by restricting free movement but staying in the single market, it would send a wrong signal to others in the EU to perhaps move out. There is another worry. Some European leaders foresee a serious risk of the Article 50 talks breaking down and of Britain therefore pursuing a very hard, WTO-rules-only, exit with very serious implications for European economy, especially when the time comes for the EU to negotiate the EU – UK Free Trade Agreement at a later date.