John Maynard Keynes of the United Kingdom, Henry Morgenthau of the U.S. and the other top Allied officials who gathered in the small New Hampshire town of Bretton Woods in 1994 were fully appreciative of the fact that international commercial disorder was a major cause of World War II and were in agreement that an end had to be put to mercantilist and other unfair commercial practices if another world war was to be avoided.
In addition to the Bretton Woods twins—the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank)—they agreed to establish, for the governance of the postwar marketplace for goods and services, an institution named the General Agreement on Tariffs’ and Trade (GATT). The assembled officials could not agree on the name of the new commerce-governing institution, so as a compromise, they named it after the founding agreement. After two start-up meetings, the first in Annecy, France and the second in Torquay, U.K., GATT set up its headquarters in Geneva.
For a long time, the United Nations’ commerce-governing arm functioned without the participation of two of the world’s largest trading countries—Russia (now known as the Russian Federation) and China (now known as the People’s Republic of China)—because of the Cold War and the change of regime in Beijing. The two economic giants applied for membership in the World Trade Organization (WTO), which was established in the late 1990s to replace GATT. The applications were approved despite the opposition of some major GATT members.
The mission set for GATT by its founders was to establish a world trading system that would be devoid of the mercantilist and unfair-competition market policies of the past and would involve minimal resort to quotas, tariffs, non-tariff barriers (NTBs) and other trade-restricting instruments. GATT’s complaint, review and adjudication mechanisms afford all members—big states as well as small ones—the opportunity to have their trade complaints heard and adjudicated fairly.
The WTO stepped smoothly into the shoes of GATT and has maintained GATT’s operational approaches and procedures.
I believe it is fair to say that GATT and its successor have fulfilled their mission and succeeded in bringing into being during the last seven decades a rational, rules-based and fair world trading system. Given their mandate, GATT and WTO were the natural leaders of the movement toward globalization —a world trading environment based on complementation, cooperation and mutuality —and the perceptible worldwide trend toward tariff reduction and removal.
In recent days, however, this felicitous situation has been disrupted by trade-related measures taken by the administration of newly re-elected U.S. President Donald Trump. By strokes of his pen, Mr. Trump has (1) slapped tariffs of 25 percent on Canada, Mexico and China, respectively, (2) in the process virtually destroyed the U.S. free trade agreement with its two North American neighbors and (3) scheduled the levying of reciprocal tariffs on US exports by all other countries.
Tariffs invariably trigger retaliatory action, and retaliation invariably leads to full-blown trade wars. Trade wars appear to have started between the US and Canada and between the US and China. Mexico is poised to announce its set of retaliatory tariffs.
Despite words of criticism and caution – a leading international business newspaper has called his tariffs “the dumbest tariffs ever levied” – Donald Trump appears bent on going through with his tariff program. The tariff, the U.S. President has said, will force the targeted countries to relocate their manufacturing facilities to the U.S. and will produce revenues that “will make America rich.”
This is pure mercantilist language. It is the exact opposite of globalist talk. With his tariff program, Trump and his administration have moved the world’s largest economy from the bright and promising world of the 21st century to the dark and retrogressive world of the 18th century.
(llagasjessa@yahoo.com)
