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Unilateral trade actions won’t help the US

As per WTO rules, these cannot be imposed selectively on one nation or other

Gulf News

Better trade deals, slapping import tariffs... all to make America great again. President Donald Trump continues to say a lot. But given the contractual obligations of the US as a member to the World Trade Organisation, the question arises whether he can deliver.

Multilateral free trade is closely linked to international trade policies, for the latter sets the institutional framework for such exchanges.

Guaranteed, long-term access to crucial natural resources and the availability of a business-friendly economic infrastructure reduces the dependency of a country on imports but increases its dependence on exports.

Countries whose economic strength allows for a high degree of openness have the advantage of being able to exploit international trade as the engine of wealth, rendering economic development within their country or customs union borders.

But excessive openness of an economy coupled with a low, stagnating or declining level of economic development weakens ailing companies and industries. It results in fierce foreign competition, which, in most cases, ends up in a high deficit of the foreign trade balance for the country.

The concept of multilateral free trade has to be understood as a rule-based model where trade between countries can move unhindered. It is free of government imposed trade-prohibitive import tariffs or quotas. The result is a fair and equitable market access, free from market distorting subsidies and competition impeding dumping practices.

Where such regulations existed, they have been removed on the basis of reciprocity, or become actionable via price-rebalancing counter measures.

Governments nowadays recognise the value of thinking global, easy access to foreign markets for their industries, and creating opportunities to seek investment funds. This encourages domestic businesses and industries to look for viable commercial opportunities beyond their own borders.

That said, it would be a mistake to reason that competitively priced products in a home market will be equally successful on a foreign one, for both visible and opaque factors related to cross-border trade.

Customs regulations and procedures between countries can be very complex, extremely slow and notoriously trade restrictive. Moreover, accomplishing improved access to international markets via simplified and faster border procedures is one thing.

Ensuring that intellectual and industrial property is adequately protected or guaranteeing government-imposed monopolies are effectively dismantled is another.

The rules and agreements of the WTO call for multilateral free trade being conducted on a non-discriminatory and reciprocal basis, with the lowering of import tariffs as a key objective.

The rule of most-favoured-nation treatment guarantees that advantages, favours, privileges and immunities given to one are also unconditionally accorded to others. It means if country A reduces its import tariff of 45 per cent on cars from country B with 25 per cent, then — provided they are WTO members — all other countries exporting cars to country A can immediately demand exactly the same.

Thus, WTO members are required to have their requests-and-offers written into scheduled tariff concessions, which (by general rule) are only allowed to be adjusted downwards by tariff reduction negotiations.

Naturally, WTO rules provide general exceptions, for example the (temporary) suspension of the application of the most-favoured-nation clause in the event of emergency or safeguard action.

Unilaterally and pointedly slapping import tariffs will certainly be another matter, for this involves many US trading partners, most of them committed WTO members.

The writer is a trade policy analyst based in Brussels.

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