Because the US is getting tough on trade

Do you remember when the trade wars of Donald Trump Was it front page news?

By now, worries about Trump’s tariff policy seem almost bizarre:

Who cares if a rebel is also a protectionist?

But some of the tariffs imposed by Trump are still in effect, and on Friday the World Trade Organizationwhich should enforce the rules of world trade, stated that the official justification for these tariffs – necessary to protect the national security of the United States – was illegitimate.

And the Biden administration, in turn, told the WTO — in surprisingly strong language — to take a walk.

This is something very important, much more than Trump’s tariff whims.

The Biden administration has gotten extraordinarily tough on trade, in a way that makes sense given the state of the world, but it also makes me very nervous.

Trump may have huffed, but Biden is changing silently the fundamental foundations of the world economic order.

Since 1948, trade between market economies has been governed by the General Agreement on Tariffs and Trade (GATT), which establishes some basic rules for tariffs and trade. In 1994, GATT was integrated into WTO rules.

The GATT/WTO system does not impose any specific level of tariffs.

However, prohibits countries from imposing new tariffs or other restrictions on international trade – effectively blocking the results of previous trade agreements – unless certain specified conditions.

One such condition, established in Article XXI, says that a nation may take such measures “as it deems necessary for the protection of its essential safety“.

If it sounds open, that’s because it is.

And Trump clearly abused the privilege, arguing that we needed tariffs on steel and aluminum to protect us from the looming threat of… imports from Canada.

It turns out that Canada’s tariffs on metals are gone, as are most similar tariffs in Europe (although the deal falls short of full free trade).

But tariffs on China remain in place.

And most importantly, the Biden administration has said the WTO has no jurisdiction in the matter:

It is up to the United States to determine whether its trade measures are necessary for national security and an international organization he has no right question this decision.

What?

According to the right, Biden and company are globalists, soft on China and unwilling to defend the United States.

Why were they so tough?

Part of the answer is that US policymakers are more aware than ever of the threats autocratic regimes can pose to the world’s democracies.

The Russian invasion of Ukraine showed that dictators sometimes resort to military force even when it doesn’t make rational sense, and the attempt to do so Vladimir Putin punishing Europe by cutting off the flow of natural gas highlights the risk of economic blackmail.

China it’s not Russia, but it’s also an autocracy (and seems to get more, not less, autocratic over time).

And the Biden administration is trying to limit China’s ability to do harm, with particular attention to semiconductorswhich play such a central role in the modern world.

On the one hand, the US now subsidizes domestic semiconductor manufacturing, aiming to reduce reliance on China among other suppliers.

And what is even more drastic, the United States has imposed new targeted rules restrict access from China to advanced semiconductor technology, that is, we are deliberately trying to limit China’s technological capabilities.

It’s pretty draconian; You understand why I’m a little nervous.

The fact is, it’s easy to imagine China appealing to the WTO, arguing that these actions violate the rules of international trade.

But the United States has indicated this in advance he does not carewhich considers such policies to be outside the jurisdiction of the WTO.

But wait, there’s more.

The Biden administration’s biggest political achievement to date is the enactment of the Inflation Reduction Actwhich despite the name is mainly about the fight against climate change.

It does this mainly by subsidizing the clean energywhich one is right.

But the subsidies have a strong nationalist aspect:

For example, tax credits for electric cars are limited to vehicles assembled in North America.

Almost certainly, this economic nationalism – which allows climate activists to name all the jobs created by green energy subsidies – was essential in getting the bill passed.

But does it violate trade rules?

I’m not sure how the Biden administration will defend the policy if challenged, but it could be argued that protecting the environment is a national security issue.

This could also be the defense being offered for a proposed deal between the US and Europe to impose “weather-based tariffs” on Chinese steel.

But if the United States, which essentially created the postwar trading system, is willing to bend the rules to pursue its strategic goals,

Isn’t there a risk that protectionism will grow all over the world?

You are right.

However, I believe the Biden administration is doing the right thing.

GATT is important, but no more than protecting democracy and saving the planet.

c.2022 The New York Times Society