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jeffrey.stark
Feb 11

The Reciprocal Trade Act and the WTO

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Edited: Feb 11

 

“Letting Trump Impose Tit-for-Tat Tariffs Would be Disatrous: The Reciprocal Trade Act could blow up the free-trade system,” Bloomberg News

In this Bloomberg News article written by Ramesh Ponnuru, the author discusses the Reciprocal Trade Act and how it would wreak havoc on the system of free-trade due to the dangerous precedent it could set. Currently, there is a bill in Congress which would allow President Trump the ability to raise thousands of different tariffs but would not let him lower them. The author discusses how many supporters of the bill often cite the example of how the EU charges a ten percent tariff on imported American cars, but the U.S. charges only a 2.5 percent tariff on imported European cars. He highlights how this ignores the fact that the U.S. charges a twenty-five percent tariff on imported European trucks, whereas the EU has a ten percent tariff. The idea of the act is that President Trump could raise a tariff like the one on cars from 2.5 percent to ten percent. However, this action is considered a retaliatory tariff, which is against the rules set out by the WTO; ignoring the rules of the organization could erode its authority (Ponnuru).

The World Trade Organization or WTO, is the international political system that regulates national trade policies. The organization is based on two core principles, the first being market liberalism, and the second being nondiscrimination. Market liberalism espouses the idea that free trade is best for the international system, as discussed in class. Tariffs are an obstacle to free trade, which is typically beneficial for the parties involved. Nondiscrimination in the context of trade essentially makes sure that all WTO members possess equal opportunities to trade with other members. If a country like the U.S. imposes a tariff on one of its trading partners, the tariff must be applied to all other trading partners, except in the context of free-trade agreements. If the U.S. ignores the rules of the WTO, it would severely undermine the system and potentially lead to a loss of authority and legitimacy for the organization on the world stage.

This article may be found at: https://www.bloomberg.com/opinion/articles/2019-02-11/don-t-give-trump-reciprocal-tariff-power.

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