frankel105_5m3photosGettyImages_tradeshippingcontainer 5m3photos/Getty Images

The Case for Old-Fashioned Tariff Cuts

Had governments stood still on trade policy over the last three years, the world would be a lot better off than it is now. Today, policymakers could do worse than return to the post-World War II formula of negotiating the reciprocal elimination of tariffs.

WASHINGTON, DC – The “bicycle theory” used to be a metaphor for international trade policy. Just as standing still on a bicycle is not an option – one must keep moving forward or else fall over – so it was said that trade negotiators must engage in successive rounds of liberalization. Otherwise, global openness would gradually succumb to protectionist interests.

I don’t know whether the theory was right. In fact, had governments stood still on trade policy over the last three years, the world would be a lot better off than it is now. Trade is faltering – global volumes are down a remarkable 1.1% over the last 12 months – as inept bikers collide chaotically with one another.

Once competent riders are again in charge, they could do worse than return to the post-World War II formula of negotiating the reciprocal elimination of tariffs. The suggestion sounds old-fashioned. After all, another familiar truism is that “shallow integration” – removing obvious trade barriers such as tariffs and quotas – is largely complete, and that further progress now requires “deep integration,” or mutually agreed rules for regulating the business environment. But that agenda, despite its potential merits, now appears too ambitious. 

https://prosyn.org/Bq7JDjv