I often have conservations with people about protectionism. One common complaint I hear is that America is a free trader that plays by the rules, whereas foreign countries are protectionist and don’t play by the rules. In fact, the exact opposite is more nearly true.
In a recent post, I pointed out that the US has the highest tariff rates in the entire world among developed nations. But what about “the rules”, don’t we at least play by the rules? Here’s The Economist:
In 2017, rejecting the idea that rules-based dispute settlement serves American interests, it began blocking appointments to the WTO’s appellate body. If the government thought another country was undermining its interests, it would decide unilaterally on suitable punishment. France received tariff threats after proposing to tax American tech giants
And it’s not just the Trump administration:
The Biden administration is chummier towards allies. But on China and the WTO, it is not much different from its predecessor. Enforcement of rules through the WTO does not seem to be part of its plan, so it continues to block appointments to the appellate body. Based on a narrow view of self-interest, this may seem to make sense, as it has no big offensive disputes to win, and faces defensive ones it might lose. (One example is China’s complaint about America’s tariffs, which the Trump administration sent into legal limbo by appealing against it last October.) There is a perception that European-minded lawyers in Geneva read more into rules than America wishes, and have been too eager to constrain its use of defensive trade remedies. “It’s not going to be a quick fix,” comments a USTR official.
Not only do we not play by the rules, we try to pressure other countries to join us in flouting the rules:
Elsewhere in the world, many see America and China brawling outside the WTO’s rule-based system, and braying to allies to join in support. . . . Moon Chung-in, a senior adviser to South Korea’s president, says American pressure on South Korean companies to move away from China would be an “outright violation of WTO norms and principles”.
The US no longer cares about WTO norms and principles, indeed we’ve sabotaged the WTO:
Many would prefer America to repair the WTO’s dispute-settlement system. Mr Moon says the WTO is “one of the greatest inventions of the human race, but we are destroying it.” Some 121 WTO members, including China, make monthly appeals to America to restore appointments to the appellate body. Damien O’Connor, New Zealand’s trade minister, calls this the only way to ensure fairness, and warns of a return to a lawlessness “that allowed the big countries to simply dominate and often destroy opportunities for others.”
Unfortunately, things are likely to get worse before they get better:
It also implies an inward turn. The “Buy America” laws that the Biden administration hopes to strengthen will further reduce foreign access to a massive public-procurement market.
So why do Americans have such a mistaken view of our role in the international trade regime? Why do so many Americans believe that we are the good guys, trading with a bunch of devious, rules-breaking protectionist foreign countries?
I blame nationalism, an ideology that advocates teaching people a sugarcoated and often false version of their country’s history. We need fewer nationalists and more patriots—more people who understand that telling the truth, even painful truths, is the best way to correct bad policies and move forward.
READER COMMENTS
Mark Z
Oct 24 2021 at 8:53pm
I’m not sure why patiotism is a good thing here (or almst anywhere), since by your definition of the word, I’m not sure why a patriot wouldn’t still support policies that benefit his country even at the expense of others, like eschewing international trade laws they expect others to follow. I think we – and everyone – may need fewer of both.
MikeP
Oct 24 2021 at 9:22pm
Excellent post.
I blame nationalism, an ideology that advocates teaching people a sugarcoated and often false version of their country’s history.
Nationalism is morally indistinguishable from racism. The only difference is that the irrelevant condition of the target individuals is where they were born or where they reside instead of the interpretation of their ethnicity currently en vogue.
Nonetheless, the promulgation of sugarcoated history is more an effect of nationalism than a cause. Even if history were perfectly portrayed, so long as people are willing to use force to favor their nation’s individuals over other nations’ individuals, the bad policies will prevail.
Scott Sumner
Oct 24 2021 at 10:51pm
It’s not even where they were born. Hungarian nationalists don’t consider Roma citizens of Hungary to be Hungarian. White nationalists ignore the welfare of non-whites. Chinese nationalists favor the Han Chinese. Indian nationalists favor Hindus.
Thomas Lee Hutcheson
Oct 24 2021 at 10:45pm
But a true US nationalist would want a strong independent WTO and lower tariff rates.
Matthias
Oct 25 2021 at 4:18am
I can see that what you define as nationalism is bad. But how does it follow that patriotism is good?
I can understand people who want the best for themselves or their family or their town. Or even all of humanity. But why care about a nation state?
Eg the people in Yukon probably have more in common with the people in Alaska, than with the people in Toronto.
robc
Oct 25 2021 at 9:25am
Why I agree with your premise, I question your examples. Why should the WTO be the “rule maker”? The first example fails entirely, as taxing Tech Giants differently would be rule breaking, so while I may not prefer the tariff approach to dealing with it, that seems to be an attempt to punish the rule breaker (France). Although, to steal from Don Boudreaux, it is attempting to punish them by shooting yourself in the foot.
MarkW
Oct 25 2021 at 5:48pm
Wait — you were complaining about polarization and now you’re complaining about one of the few areas (protectionism) where Democrats and Republicans are in agreement? I guess there’s just no pleasing some folks!
(Sorry, couldn’t resist)
Sven
Oct 26 2021 at 10:10am
Very good perspective.
I would like to make some useful contribution.
I think maybe the most important criterion of civilisation is living together with others in a cohesion. With others who are different than you. And in a civilised country or world in general, this is possible with rules. We create rules and try to enforce them on the people who break them. Nationalists, in this respect, are the people who do not like the others different than themselves both within country and at international level. And they try to break law and rules to favor themselves and oppress the others. I think in international level we have made substantial improvement with global institutions. However, they do not work in optimal level with fair and firm rules.
In this respect, when it comes to WTO it tries to enforce rules on the countries who break them. However, WTO is not that powerful to implement them. And by design WTO rules do not maintain an equilibrium position in international trade. Therefore, there are countries with lasting trade deficits and vice versa. Thus, ambiguity both in rules and the implementation of rules give excuse and opportunity to nationalists to exploit them.
Therefore, we must construct a firm structure that do not give opportunity to individual governments to exploit them. First we must create a fairer international trade mechanism and simultaneously we must empower WTO.
Scott Sumner
Oct 26 2021 at 11:48am
Everyone: This post is not about the merits of the WTO. It’s about blindness.
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