America = Free Trade, Let’s Lead

The United States is not doing enough to promote free trade. Lately we have been an initiator of trade barriers. That has been true over the last two years. Reduction and elimination of trade barriers around the world should be our goal.

Barriers to trade

Imposing barriers on billions of dollars’ worth of imports creates new trade restrictions. It reduces the volume of trade and imposes taxes on Americans. None of these things are good for business. World Trade Organization member countries have reached historic highs in tariffs.

The last two years new trade restrictions totaled $588.3 billion and $339.5 billion, respectively. For the previous two periods, new trade restrictions totaled about $100 billion. The latest figures present a worrisome and unpredictable trade climate. The current trade climate is harming the overall health of world trade.

The effects

The message of the WTO report is very serious. These actions have real economic effects. Alarm bells are already sounding. Nations need to resolve tensions negatively affecting trade around the world. There very well could be political consequences for significant economic slow down.

WTO nations in the last year imposed 38 new restrictions. For 2018, the number of new restrictive measures imposed outpaced the number eliminated. This is progress… in the wrong direction. There may be unfair agreements in place. One would like to think agreements seen as unequitable could be adjusted without tariff imposition as the attention getter.

Who done it

The primary culprits according to the report are the U.S. and China, G-20 countries. They should know better. They are the best educated. Their economies are most inter-related. The continued tensions among and between them are damaging to each individually and to global trade in general.

The U.S. itself contributed greatly to the increase in restrictions on global trade.

According to the Council of Economic Advisers, “Tariffs implemented in 2018 raised the U.S. average applied tariff rate by 1.1 percentage points, from 1.5 percent in January 2018 to 2.6 by November 2018.”

The 2019 Economic Report of the President says the administration is aiming at “zero tariffs, zero non-tariff barriers, and zero subsidies” in trade between nations. We seem to be falling well short of the goal.

Walking the walk

If the goal is free trade, the strategy to achieve that goal should not be to add more restrictions. Slower trade growth this year is expected. It is the result of the increase in restrictions. Expectations for trade expansion are currently at the weakest levels since early 2010.

Trade growth is anticipated to slow to 3.7% this year, from 3.9% growth in 2018. The slowdown should serve as a signal. Fighting trade wars with tariffs is not a strategy beneficial for anyone. The U.S should consider its position carefully with regard to use of this tactic.

Conclusion

The U.S. administration needs to resolve the situations causing the implementation of tariffs. It should focus on expanding free trade. This is done through new free trade agreements with key partners. Making a point is fine. Cutting off one’s nose to spite one’s own face is a different thing all together.