President Trump often criticizes the way other countries keep taking advantage of the United States. And he’s right. There is an inherent unfairness in how other countries trade with America. For decades, the U.S. has generously imposed low tariffs on imports. But in response, other countries continue to levy hefty tariffs on U.S. goods.
Op-ed by Michael Stumo originally appeared on January 29, 2019 in the Daily Caller
Last year, the president tweeted: “If we charge a country ZERO to sell their goods, and they charge us 25, 50 or even 100 percent to sell ours, it is UNFAIR and can no longer be tolerated. That is not Free or Fair Trade, it is Stupid Trade!”
It’s blunt talk. But the data bears this out. Japan’s import tariffs on rice are 778 percent, 70 times higher than U.S. rice tariffs. The European Union charges 10 percent tariffs on car imports — four times higher than U.S. tariffs — plus a value added tax of up to 20 percent.
World Trade Organization (WTO) data shows that every major country in the world charges higher tariffs on American-made goods than we do in return. China imposes tariffs three times higher than average U.S. tariffs. India’s tariffs are four times higher than ours.
How did the U.S. fall into such a lopsided position? After World War II, the United States enthusiastically led the way in reducing tariffs. The presumption was that other nations would follow America’s noble lead. And the U.S. would benefit from an influx of cheap consumer goods.
But that’s not what happened. America has racked up non-stop trade deficits since 1976. And other countries have seen no real reason to reduce their tariffs. As a result, millions of U.S. manufacturing jobs have been lost to high-tariff countries.
The WTO system has formalized this trade disadvantage. The U.S. happily signed onto a “Most Favored Nations” system that bars Washington from matching tariffs on countries that penalize our exports. And so, the United States still doggedly maintains the low-tariff policies championed by the Clinton and Bush II administrations—even as other countries maintain their tariffs walls.
It’s not just tariffs, though. America’s trading partners have become particularly skilled in the use of non-tariff barriers, too. Japan, for example, applies no tariffs on U.S. autos. It’s a clever PR tactic, but a closer inspection shows that American-made cars still can’t penetrate their market. The American Automotive Policy Council explains that requirements such as lengthy car inspections and prohibitions on certain car dealerships continually prevent foreign companies from gaining a large market share. In fact, foreign cars comprise only 3.9 percent of Japan’s auto market. It’s not just autos, however. Japan also applies 38.5 percent tariffs on U.S. beef, while the United States levies almost no tariffs on any imported beef.
This is what constitutes the predatory scene of global trade in the 21st Century. Countries simply take what they can get from the US, and offer little in return.
The truth is, other countries don’t respond unless leverage is applied. And years of polite diplomatic engagement have clearly failed. The only real lever would be to present them with a potential loss of access to the U.S. consumer market.
Members of Congress are starting to grasp this. A group led by Rep. Sean Duffy (R-Wis.) introduced legislation that would allow the president to increase tariffs on items from countries that persist in maintaining a tariff imbalance. The goal of their “U.S. Reciprocal Trade Act” would be to “pressure other nations to lower their tariffs and stop taking advantage of America.” Essentially, the bill could provide the leverage needed to coerce other countries to finally lower their tariff barriers — and actually achieve the open trade that previous presidents have championed.
The Reciprocal Trade Act deserves strong consideration. Every president should have the opportunity to possess leverage that can lower other countries’ trade barriers. And since trade is a long game, this would aid not just President Trump but those who follow him. It’s past time for the United States to respond when other countries profess adherence to free trade but actively prevent U.S. products from entering their market. Gaining leverage to reduce their trade barriers is a key first step.
Michael Stumo is CEO of the Coalition for a Prosperous America, a non-profit organization representing the interests of 4.1 million households through its agricultural, manufacturing, and labor members. CPA is non-partisan and advocates for trade policies that deliver prosperity and security for America’s farms, factories and workers.
