It is certainly desirable to reduce all tariffs to zero, but that’s probably not feasible multilaterally—within the WTO—anytime soon. However, U.S. bilateral free trade agreements with China and the EU, in which the United States asks for zero tariffs, are possible. Whether this administration has the interest or wherewithal to pursue that course is unclear. After all, President Trump withdrew the United States from the Trans‐Pacific Partnership during his first week in office. Under the TPP, 88 percent of tariffs in 12 countries would have gone to zero immediately, with nearly all going to zero over a period of 16 years.
Ross then goes on to defend certain U.S. trade remedy actions—duties imposed under the U.S. antidumping and countervailing duty laws to redress “unfair” trade—as “measures necessary to ensure a level playing field.” Ross laments the fact that U.S. trade remedy measures are often characterized as protectionism, when in fact—he argues—those laws are consistent with WTO rules.
Secretary Ross is right. Although antidumping and countervailing duty measures are forms of protectionism, their application by member governments is not considered protectionist under WTO rules. In fact, they are specifically authorized by the WTO, as a means to redress injurious dumping and injurious subsidization. However, those domestic laws and their administration must comport with provisions in various WTO agreements. When they don’t comport—because, perhaps, the U.S. Commerce Department has been too aggressive in its assumptions, too partial in its calculation methods, or too capricious in its adjustments—governments representing the foreign exporters can challenge the United States at the WTO and, unless the issue is resolved in the consultations stage, the DSB will issue a ruling.
On 38 occasions since 1995, the WTO DSB has found aspects of U.S. trade remedy law administration to be “out of conformity” with U.S. WTO obligations. That’s another way of saying that the protectionism accorded U.S. industries under the trade remedy laws is in fact protectionist by WTO standards at least some of the time.
Secretary Ross then turns his attention to China’s and Europe’s “formidable non‐tariff trade barriers against imports.” He alludes to onerous certification standards, sanitary and phyto‐sanitary measures (e.g., food safety regulations), non‐science based prohibitions against genetically modified goods, local production requirements, and forced technology transfer. He also mentions low‐cost loans, energy subsidies, and other forms of support bestowed upon China’s and Europe’s exporters by their respective governments.
Certainly, government subsidization and behind the border rules and regulations can have protectionist intentions or consequences, and where there are agreed upon rules to heed, the WTO provides a reliable forum for addressing these issues—and resolving most. But there are a couple of important points Secretary Ross should bear in mind about protectionism.
First, the U.S. government is not an angel; it’s part of the problem. In the United States, there are “Buy American” rules that restrict most government procurement spending to U.S. suppliers, ensuring that taxpayers get the smallest bang for their buck; heavily protected services industries, such as transportation and shipping, that drive up the cost of everything; apparently interminable farm subsidies; quotas and high tariffs on imported sugar; high tariffs on basic consumer products, such as clothing and footwear; energy export restrictions; the market‐distorting cronyism of the Export‐Import bank; trade remedies actions that violate WTO rules and strangle downstream U.S. industries and tax consumers; regulatory protectionism masquerading as public health and safety precautions; rules of origin and local content requirements that limit trade’s benefits; restrictions on foreign investment, and more.
Second, if the Trump administration intends to ramp up enforcement to tackle what it sees as foreign protectionism, it had better do it by the book. Don’t act unilaterally, as judge, jury, and executioner. Mind the rules of the WTO, which provides a legitimate path for challenging and resolving issues, such as those mentioned above. The minute the U.S. government goes rogue by implementing trade restrictions without following WTO protocols, the United States will be the violator, the protectionist. And acting unilaterally, such as by conducting a Section 301 investigation and them imposing measures in response to Chinese forced technology transfer policies, for example, will set a terrible example, invite immediate Chinese retaliation, and encourage all members to abandon their WTO commitments.
The global economy remains rife with protectionism. The worst way to address it is by being a protectionist.