In the Saturday night debate, Republican candidate Donald Trump
again threatened a 35 percent tariff on goods produced in Mexico by an American
company that has relocated to Mexico. No opposing candidate pointed out that
such a retaliatory tariff would violate the rules of the World Trade
Organization (WTO) of which the United States is a member in good standing. (It
would also be in violation of the NAFTA agreement).
WTO is the international organization that sets the rules of
the game in international trade that its members have agreed to follow. It has
worked to reduce trade barriers among countries and has contributed to the rise
of international trade across the globe.
For years, the United States opposed admitting Russia into
the WTO because of its indifference to the rule of law. The United States
earlier lobbied for China’s admission on the grounds that membership would make
it a stable party of the world economic community.
If a President Trump carried through on his threats to
impose confiscatory tariffs (the average WTO tariff rate is below
five percent), the United States would be in clear violation of WTO rules
and would be subject to penalties. If a Trump administration ignored the WTO
penalties, it would become a renegade member, no better than Putin’s Russia.
Retaliatory tariffs carry with them a strong populist
message, but they are anathema to free trade and globalization. It is a shame
they hold such appeal. Economists, who rarely agree on anything, are united in
their support
for free trade and globalization. Although populists claim the contrary,
trade expansion is a clear net win-win – the gains of the winners exceeds the
losses of the losers. The problem is that those who lose are more vocal and
visible than those who gain. We require a chief executive with a broad
perspective, something that candidate Trump lacks.
