1 week Ago
So, I need a new car. My problem is my addiction to a certain high-reliability vehicle built entirely outside the U.S.
President Trump recently announced that my dream car will be subject to a 25% tariff. This tariff will be in addition to the current U.S.
auto tariff of 2.5%. This is just the latest in a series of proposed Trump tariffs on a wide variety of goods, some formally imposed and some merely threatened (and some, for now, “paused”).
David P. Cluchey was a tenured professor of law at the University of Maine School of Law for almost 40 years and taught international trade law for many years. He lives in Freeport.
How did we handle the question of tariffs before the advent of the Trumpian tariff wars? The U.S. was a charter member of a system that supported bilateral and multilateral tariff negotiations among countries, first under the auspices of the General Agreement on Tariffs and Trade (GATT) and, after 1995, under the oversight of the World Trade Organization (WTO).
The GATT/WTO system dates to the period immediately after World War II. The Bretton Woods initiative led to the creation of the World Bank, the International Monetary Fund and the General Agreement on Tariffs and Trade. Each of these agreements/organizations, like the United Nations, were intended to bring some systemization and global order to the resolution of disputes among nations in important areas of politics and economics, including tariffs, that had often been the source of great contentiousness among nations.
The idea that trade disputes could play a role in the breakdown in world order was not a new one. One merely had to examine the role of the U.S.
Smoot-Hawley Tariff of 1930 and our trade disputes with Japan in the leadup to the Second World War to see the truth of that proposition. The heart of the GATT approach was a focus on the elimination of obstacles to trade, anticipating that the promotion of trade would improve every country’s welfare and reduce rancor among nations, or at least channel the anger about trade disputes to a settlement process overseen by unbiased judges. The trade negotiating process sought to deal with a variety of obstacles, e.
g., quotas, unreasonable standards, excessive fees and others, by replacing those obstacles with tariffs and, over time, gradually negotiating those tariffs lower in bilateral and multilateral tariff negotiating rounds. The GATT/WTO trade regulatory process was remarkably successful in lowering global tariffs, reducing average tariffs among developed countries on industrial goods from about 40% in 1947 to less than 4% by the 2000s.
Unfortunately, the GATT/WTO system has been less successful in the 21st century. For example, it has been unable to reconcile the interests of developed countries and undeveloped countries around trade in agricultural products, despite over 20 years of effort. And there have been other failures of the system, particularly in appellate review of trade dispute decisions.
The GATT/WTO system is still around, but it has become increasingly irrelevant as nations take unilateral action and trade disputes dominate the headlines. Unfortunately, this descent into rancor and chaos around trade seems to be largely driven by the United States. Perhaps we might take a moment and consider again why the nations of the world came together in 1947 to sign the General Agreement on Tariffs and Trade.
The statesmen and women of Bretton Woods were seeking, above all, to avoid another disastrous world war. With the negotiation of the GATT, they undertook to promote order and negotiation as the approach to overseeing the global trading system. In some parts of our government, we appear to have lost an appreciation for these values.
A great deal of work will be required to reestablish trust and get us back to the negotiating approach of the Bretton Woods system. If you doubt the underlying importance of this work, listen again to our own president’s veiled and not so veiled threats to use force along with economic pressure to get what he wants, be it to acquire Greenland or the Panama Canal, or to achieve his other objectives. It is time to end the threats and bullying tactics we now see daily and return to the negotiating table as the primary approach to conducting our trading relationships.
Who knows, that just might get me into a new car. We believe it’s important to offer commenting on certain stories as a benefit to our readers. At its best, our comments sections can be a productive platform for readers to engage with our journalism, offer thoughts on coverage and issues, and drive conversation in a respectful, solutions-based way.
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