Economic Daily News: Beware stumbling blocks on path to free trade

2017/08/06 22:08:26 fontsize-small fontsize-default fontsize-big
CNA file photo

CNA file photo

U.S. Commerce Secretary Wilbur Ross recently wrote an article titled "Free-Trade is a Two-Way Street," in the Wall Street Journal, in defense of the Trump administration's ideas and policies on trade.

In the article, Ross detailed a litany of tariff and non-tariff trade barriers imposed on American products by the U.S.' major trade partners, including China and the European Union.

Ross cited as an example the fact that the U.S. tariff on imported cars is 2.5 percent, compared with the EU's 10 percent and China's 25 percent.

In terms of non-tariff barriers, he listed all sorts of complicated and opaque import registration and verification procedures, as well as unscientific hygiene regulations, as being responsible for the unfair treatment of US enterprises.

Ross attributed the massive trade deficits the U.S. has with its trading partners -- US$347 billion with China and US$146.8 billion with the EU in 2016 -- to what he characterized as being unfair trade practices by trade partners, rather than a result of the U.S.'s declining competitiveness.

Although such claims may seem quite reasonable, it is worth noting that it was the United States that pioneered such so-called unfair trade measures in the last century.

In his book "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism," prominent South Korean economist Chang Ha-joon (張夏準) detailed how the U.S. was the world's most protectionist country in terms of trade from the late 19th century to the 1920s.

From 1865 to the end of World War I, U.S. tariffs on imports were 40-50 percent, the highest in the world, according to Chang, who says that the U.S. did not embrace free trade until after World War II when it found itself benefiting from such trade patterns.

It follows from this argument that the U.S. should not blame trade partners such as China, for adopting protectionist measures that mirror its own earlier behavior. However, massive trade deficits have taken a toll on the U.S. economy.

Theoretically, the U.S. can negotiate with exporters dependent on its massive import markets for the removal of unfair trade barriers. However, it is much tougher to remove non-tariff trade obstacles, given that they are mostly related to "domestic factors" that involve political issues.

As a result, although the U.S. could benefit from seeking to establish a "level playing field in free trade" with its trade partners, it could also be plunged into trade disputes with them.

If we look at Taiwan, then although its trade surplus with the U.S. was cut to US$13.3 billion in 2016, the country could still face U.S. demands for the removal of non-tariff barriers in sectors related to intellectual property rights, pork and beef imports, as well as pharmaceutical products and devices.

The U.S. could also demand that Taiwan allow its currency to appreciate much faster, noting that Taiwan's current account surplus is currently the second highest in the world at 14 percent of gross domestic product.

How will Taiwan respond to these challenges? Have all government departments seen what lies ahead and planned their responses? (Editorial abstract -- Aug. 6, 2017)

(By Elizabeth Hsu)

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