{"id":99055,"date":"2018-06-22T08:52:48","date_gmt":"2018-06-22T14:52:48","guid":{"rendered":"https:\/\/dh.durangoherald.com\/tj\/samuelson-consequences-of-unraveling-trade-rules-unclear\/"},"modified":"2018-06-22T08:52:48","modified_gmt":"2018-06-22T14:52:48","slug":"samuelson-consequences-of-unraveling-trade-rules-unclear","status":"publish","type":"post","link":"https:\/\/dh.durangoherald.com\/tj\/samuelson-consequences-of-unraveling-trade-rules-unclear\/","title":{"rendered":"Samuelson: Consequences of unraveling trade rules unclear"},"content":{"rendered":"
\"Robert
Robert Samuelson, The Washington Post<\/span>du1-i-syn<\/span><\/figcaption><\/figure>\n

Almost certainly, historians will judge favorably the postwar expansion of trade (it has never been completely \u201cfree\u201d but has been liberalized substantially by removing many tariffs and quotas). It helped lift hundreds of millions of people from abject poverty and cemented the Cold War alliance of democratic societies against communism. Now, however, two problems cloud its future.<\/p>\n

First, global economic growth has slowed considerably, while inequality has increased. International trade and investment \u2013 aka \u201cglobalization\u201d \u2013 are now blamed (often unfairly) for these setbacks.<\/p>\n

Second, China has burst onto the global economy, rising from a backward country four decades ago to the world\u2019s second largest economy. But its ascendancy, aside from challenging the United States (still No. 1), has been controversial, because China practices mercantilism: government policies intended to give its companies an advantage on global markets.<\/p>\n

President Trump portrays these policies \u2013 subsidies, trade preferences and the illicit acquisition of foreign technologies \u2013 as monstrously unfair to U.S. workers and firms. Unless China overhauls its economy to make competition more even-handed, Trump vows to do the job himself by imposing stiff tariffs on Chinese exports to the United States (in effect: taxes on China\u2019s U.S.-bound exports).<\/p>\n

That\u2019s where we are now. Trade negotiations between the two countries have broken down, and Trump has announced 25 percent tariffs on a long list of Chinese exports, from soybeans to semiconductors to plastics. When fully phased in, the affected exports would total about $50 billion. The Chinese said they would retaliate with similar tariffs on the same amount of U.S. exports.<\/p>\n

Trump responded by asking the U.S. trade representative to prepare a further list of $200 billion of Chinese exports to be hit with 10 percent tariffs. If China retaliated, Trump threatened to add another $200 billion of Chinese exports.<\/p>\n

Nothing like this has happened since World War II. If this isn\u2019t a \u201ctrade war,\u201d what is it?<\/p>\n

Whether it portends an end to the postwar trading system is unclear. Many economists are skeptical. They also doubt the trade war will plunge the U.S. economy into recession. The direct effect of the tariffs, which will raise prices, inspire retaliation and dampen some production, is \u201ctiny,\u201d says Nariman Behravesh, chief economist for IHS Markit, a consulting firm.<\/p>\n

Do some simple arithmetic, he says. A 25 percent tariff (tax) on $50 billion of Chinese exports totals $12.5 billion; another 10 percent on $200 billion of exports is $20 billion. Together, that\u2019s $32.5 billion, not much in a $20 trillion U.S. economy.<\/p>\n

Economist Mark Zandi of Moody\u2019s Analytics agrees but warns that imposing tariffs on most Chinese exports (around $500 billion in 2017) could cause a recession. So could some of Trump\u2019s other trade proposals. These include, a 25 percent tariff on car imports and a repudiation of the North American Free Trade Agreement with Mexico and Canada. The car tariffs alone could cost as many as 550,000 jobs, Zandi says.<\/p>\n

There is a real dilemma: China\u2019s mercantilist policies are bad, but so are Trump\u2019s proposed remedies.<\/p>\n

The view that the present trade war won\u2019t become more destructive assumes that China and the United States will find a middle ground that allows both to declare victory. But this is hardly guaranteed.<\/p>\n

\u201cEven though it\u2019s an authoritarian country, public opinion [in China] matters,\u201d says economist David Dollar of the Brookings Institution. China\u2019s leaders can\u2019t be seen as capitulating to Trump. Trump probably feels the same way toward China.<\/p>\n

The defining characteristics of the postwar trading system have been reductions in trade barriers and the adoption of jointly-agreed upon rules, now enforced through the World Trade Organization, about what\u2019s fair trade and what isn\u2019t. The United States played the leading role in this global project, though there has long been frustration with the rules\u2019 complexity and their slow-motion operation.<\/p>\n

\u201cThe United States seems to be giving up on the WTO rules, which we helped create. Other countries may do the same,\u201d says economist Douglas Irwin of Dartmouth College and author of Clashing Over Commerce: A History of U.S. Trade Policy.<\/p>\n

This would signal an unraveling of the postwar trading system and its replacement by a hodgepodge of bilateral and regional trading agreements \u2013 many already exist \u2013 with what consequences no one knows. The history of warfare is a long string of miscalculations by combatants on all sides. The same may also be true of trade wars.<\/p>\n

Robert Samuelson is a columnist for The Washington Post. \u00a9 2018 The Washington Post Writers Group<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Samuelson, The Washington Postdu1-i-syn Almost certainly, historians will judge favorably the postwar expansion of trade (it has never been completely \u201cfree\u201d but has been liberalized substantially by removing many tariffs and quotas). It helped lift hundreds of millions of people from abject poverty and cemented the Cold War alliance of democratic societies against communism. […]<\/p>\n","protected":false},"author":1,"featured_media":99056,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5758,6174],"tags":[125],"naviga_topic":[],"class_list":["post-99055","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-columnists","category-robert-samuelson","tag-newsletter-opinion"],"acf":[],"author_name":"dh_admin","_links":{"self":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/99055","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/comments?post=99055"}],"version-history":[{"count":0,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/99055\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media\/99056"}],"wp:attachment":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media?parent=99055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/categories?post=99055"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/tags?post=99055"},{"taxonomy":"naviga_topic","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/naviga_topic?post=99055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}