One of the main arguments I’ve seen against “free trade” as it currently exists is that some countries (US) subsidize some industries (farmers), so that other (developing) countries cannot compete in those industries, and they suffer economically. Wouldn’t it make sense for a country to put tarriffs on all goods that were made with subsidies from foreign governments, in order to level out the playing field (and make a few bucks in the process)? In effect, the government that gives subsidies would then be subsidizing the government with the tarriff, so it seems like an effective way to keep other countries from distorting the market with subsidies. Do many countries do this? If not, why not?
But tariffs also distort the market and hamper free trade. Taxing imported products more than domestic products is the opposite of leveling the playing field. The WTO restricts increases in tariffs, especially on agricultural products, which are all bound. Countries don’t increase tariffs on agriculture because it would be illegal.
Here is information from the WTO on the agreements on agriculture. (Take it with a grain of salt - it’s basically pro-WTO propaganda.)
Just to clarify - I’m not recommending general tarriffs, just tarriffs against specific goods from specific countries that subsidize those goods. For instance, if America is trying to sell wheat to Australia that is artificially inexpensive because of American subsidies to wheat farmers, then Australia should put a tarriff on American wheat that precisely cancels out the artificial lowering of the price. If this is possible, then American wheat will sell in Australia at its true market price, and the American government will in effect be subsidizing the Australian government. The market’s happy, the Australian government’s happy, and only the American government suffers. In the long wrong, America will probably stop the subsidies, since they’re going to foreign governments. So the tarriff is purifying the market.
So why don’t more countries do what Australia did in this made-up situation? If it’s illegal, why doesn’t international law allow this? Is this ever done?
If another country wants to subsidize a product so that it can sell it to you cheaper, why on Earth would you want to prevent that?
I say let’s go all the way - just talk them into making things for us for free.
I didn’t understand the specifics of your proposal. Actually, your proposal would be even more questionable than the one I responded to, as it would also violate the most-favored nation principle, which says that you’re not allowed to treat products differently because of where they come from. The tariffs would penalize the United States for its subsidies, but the subsidies are legal under the WTO agreements, so Australia can’t do anything.
The way you describe things is similar to the general way things work in the real world. A typical scenario is that country X raises tariffs on a particular product from country Y, claiming that Y provides illegal subsidies to the relevant industry. Then country Y brings a case before the WTO challenging the tariffs. Then the WTO Panel decides whether the actions of country Y amount to a subsidy (there are many subtle ways of providing subsidies) and if the subsidy is illegal. The complaint that you bring up is that too many subsidies are allowed in agricultural products and that these rules benefit developed countries to the detriment of developing countries, because developed countries are the ones that heavily subsidize agriculture. The political reality is that wealthier countries have a lot more pull in trade negotiations so they’ve rigged the rules to benefit themselves.
The rationale is that tariffs are barriers to trade, and barriers to trade are bad because free trade is good. Countries are not going to agree to get rid of their tariffs completely, so there are gradual reductions and limits on increases. Subsidies are also bad (so the thinking goes), but may be justified in some cases.
Yes, that would be good for consumers, but the U.S. government is looking out for the U.S. farming industry. Poorer countries are much more concerned with selling their products than with buying ours. The subsidies in developed countries make it impossible for their products to compete in our markets.
So the answer should be to get rid of our subsidies, and encourage other countries to subsidize their industries heavily. Then we can buy the cheap goods and essentially they are subsidizing us.
I don’t buy the job protection argument, other than in cases of national security. Farmers don’t have a god-given right to a farm, if they can’t make it pay for itself. And in any event, about 90% of all farm subsidies go to huge corporations like ADM, not to family farmers.
I think trade is one of the most misunderstood parts of foreign policy.
Cough cough…Canadian softwood & US tariffs … cough
Actually, I was thinking of the softwood lumber case when I wrote my general hypo. What about it? It’s not directly relevant to the issue the OP brought up. Agricultural subsidies are a special issue because the subsidies in developed countries are so high and the agreements haven’t been fully worked out. Developed countries have been stalling on making in changes to the current state of things.
Can we remember we’re in GQ? I hate it when a thread I’m on gets closed our moved. Let’s try to talk about what the trade rules are without discussing our opinions. I believe there was recently a thread on subsidies for farmers in another forum.
Just to clarify - I’m not recommending general tarriffs, just tarriffs against specific goods from specific countries that subsidize those goods.
Canadian softwood is a specific good from a specific country that has specific tariffs placed on it because one country feels the other unfairly subsidizes it’s forestry industry… a real case happening now with results we can see - sounds relevant to me… farming was just an example brought up, same with developed vs non-developed countries.
One can look into this issue to see what the results of such tariffs and subsidies are.
The term you are looking for is dumping duties which can be applied where goods are being sold for below the “nominal value”. These levies are recognised under GATT/WTO and are usually applied at a punitive level.
The term you are looking for is dumping duties which can be applied where goods are being sold for below the “nominal value”. These levies are recognised under GATT/WTO and are usually applied at a punitive level.
my apologies to the hamsters
Another example is the steel tarriff that was instituted recently by the US, because Asian countries are subsidizing their steel production. Bush has taken a lot of heat from the conservative side of his political base for this, and rightly so - conservatives generally like free trade, and he’s supposed to be their president. If I can buy steel at below-market prices, who the hell is W to keep me from it? But he was extending an olive branch to the labor unions. My guess is that the labor unions won’t care when it comes reelction time, and his conservative voters will remember. I will.
The problem with tarriffs is they get abused.
Using the specific example of Cdn Softwood, the US is imposing fees of approx. 27% on all canadian softwood lumber, while raw logs can enter the US without a tarriff.
The net effect is that jobs are being lost in Canada, and being gained in the US.
In addition, the tarriffs being paid by Canadian lumber companies are going straight into the coffers of their US counterparts. In effect, it’s a direct attack on a foreign industry that has historically been more successful at producing lower-cost lumber than the US.
The end result is US citizens paying more for lumber.