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US-China trade conflicts threaten the WTO

Robert Hornats, June 25, 2019, https://www.atlanticcouncil.org/blogs/new-atlanticist/how-the-us-china-trade-war-could-impact-us-eu-negotiations-and-the-wto, How the US-China Trade War Could Impact US-EU Negotiations and the WTO

The state of the WTO, in particular, presents very serious concerns. This is the world’s central trading organization. In an all-out and prolonged US-China trade war, with spiraling tariffs, proliferating export restrictions, and tighter curbs on investment, serious questions will arise as to whether various US and Chinese measures comply with WTO rules. There will likely be efforts to politicize the WTO. Both the United States and China will press the WTO to take its position and penalize the other for its actions and will twist arms of other members to support its positions. This would produce deep fissures in an already deeply troubled and weak institution. An all-out US-China trade war could rip the WTO apart, raising concerns about a recurrence of the trade disorder of the 1920s.

EU-China BRI ties support global multilateralism and protect the WTO

Beatrice Rios, May 9, 2019, https://www.euractiv.com/section/eu-china/news/china-defends-rejigged-belt-and-road-initiative-against-eu-criticism/, China defends rejigged ‘Belt and Road’ initiative against EU criticism

Without explicitly referring to the United States, Chinese officials also positioned the BRI as a way of supporting multilateralism and fighting protectionism. “As we are dealing with the challenges of unilateralism and protectionism, the ‘Belt and Road’ initiative provides a good space for exchange,” said Zhai Dongsheng, Head of the Belt and Road Construction Promotion Center. “With a shared commitment to multilateralism, EU and China need to strengthen cooperation on global governance. China and the EU must jointly reject unilateralism and protectionism and preserve the WTO,” Chinese ambassador Zhang Ming told the audience. Ming argued for more cooperation in science and innovation, the circular economy, e-commerce, and also on rules and standards. “The EU is a front runner in regulation and there are many useful things China could learn from EU friends,” Ming said. “Together we will be both better off and make of the world a better place.”

Independently the WTO’s credibility dispute settlement mechanism is critical to preventing rampant protectionism and overall WTO credibility

Lawrence, 2007 (Robert – Albert L. Williams Professor of International Trade and Investment at the Harvard Kennedy School of Government, The United States and the WTO Dispute Settlement System, p. 5-6)

But this “safety valve” argument is shortsighted. The use of antidumping suits is a game that more than one nation can play: In the absence of the WTO’s dispute settlement tribunals, U.S. trading partners would obstruct U.S. exports by resorting to their own “fair-trade” measures, and U.S. resentment of the trading system would be heightened. Enforceable rules offer the best hope of forestalling a tit-for-tat use of protective barriers that would further contribute to the deterioration of support for trade. In sum, and contrary to what many policymakers suppose, vigorous dispute settlement tribunals make the revival of the Doha Round more likely. The importance of enforceable multilateral rules is evident from the era in which they were absent. The lack of agreed-upon enforcement procedures under the original treaty of the postwar trading system—the General Agreement on Tariffs and Trade (GATT)—engendered considerable U.S. frustration. There were innumerable bilateral conflicts with the European Union over its Common Agricultural Policy (CAP) and with Japan over its closed market. These were extremely difficult to resolve. In response, the United States implemented laws such as Section 301 of the Trade Act of 1974 and the Super 301 provisions of the Omnibus Trade and Competitiveness Act of 1988. These provisions sought to remove “unreasonable and unjustifiable” barriers to U.S. exports by threatening unilateral trade sanctions.3 While these measures met with mixed results, they did help convince other countries of the merits of establishing a more effective system at the WTO, which was created to succeed GATT in 1995.4 The WTO provides more benefits to the United States than GATT did. Its provisions cover more issues that are of interest to the United States: The WTO includes rules on standards and technical barriers to trade; it protects intellectual property; it covers agriculture and services. But the biggest advantage of the WTO is that it includes a mechanism to enforce these rules: the dispute settlement system. This has reduced the need for the United States to resort to unilateral retaliatory measures, limiting an important source of tension between the United States and its partners and so generating a significant foreign-policy dividend. Indeed, it is striking that since the advent of the dispute settlement system, the United States has generally abided by its agreement not to impose unilateral trade sanctions against WTO members without WTO authorization.5 Naturally, the system has not been able to solve all the disputes that have arisen. But it has at least been able to contain the effects of these disputes. By authorizing retaliation but limiting its size, the WTO helps to prevent conflicts in which both parties and the trade system as a whole could be severely damaged. The shift from bilateral to multilateral enforcement helps secure the legitimacy of the trading system and reduces the political costs associated with bilateral dispute settlement. It helps the United States itself keep protectionist impulses at bay. It is also particularly useful for dealing with disputes with America’s largest trading partners, such as the European Union, Japan, China, India, and Brazil, with which the United States has not signed free trade agreements. And yet, despite these considerable strengths, support for the WTO and its dispute settlement system remains fragile. This report describes how that system operates, considers the arguments of its critics, and finally provides some recommendations for improvement.

Trade protectionism causes nuclear war

Panzner, 2008 Michael, faculty at the New York Institute of Finance, 25-year veteran of the global stock, bond, and currency markets who has worked in New York and London for HSBC, Soros Funds, ABN Amro, Dresdner Bank, and JPMorgan Chase, “Financial Armageddon: Protect Your Future from Economic Collapse,” p. 136-138)

Continuing calls for curbs on the flow of finance and trade will inspire the United States and other nations to spew forth protectionist legislation like the notorious Smoot-Hawley bill. Introduced at the start of the Great Depression, it triggered a series of tit-for-tat economic responses, which many commentators believe helped turn a serious economic downturn into a prolonged and devastating global disaster. But if history is any guide, those lessons will have been long forgotten during the next collapse. Eventually, fed by a mood of desperation and growing public anger, restrictions on trade, finance, investment, and immigration will almost certainly intensify Authorities and ordinary citizens will likely scrutinize the cross-border movement of Americans and outsiders alike, and lawmakers may even call for a general crackdown on nonessential travel. Meanwhile, many nations will make transporting or sending funds to other countries exceedingly difficult. As desperate officials try to limit the fallout from decades of ill-conceived, corrupt, and reckless policies, they will introduce controls on foreign exchange. Foreign individuals and companies seeking to acquire certain American infrastructure assets, or trying to buy property and other assets on the cheap thanks to a rapidly depreciating dollar, will be stymied by limits on investment by noncitizens. Those efforts will cause spasms to ripple across economies and markets, disrupting global payment, settlement, and clearing mechanisms. All of this will, of course, continue to undermine business confidence and consumer spending. In a world of lockouts and lockdowns, any link that transmits systemic financial pressures across markets through arbitrage or portfolio-based risk management, or that allows diseases to be easily spread from one country to the next by tourists and wildlife, or that otherwise facilitates unwelcome exchanges of any kind will be viewed with suspicion and dealt with accordingly. The rise in isolationism and protectionism will bring about ever more heated arguments and dangerous confrontations over shared sources of oil, gas, and other key commodities as well as factors of production that must, out of necessity, be acquired from less-than-friendly nations. Whether involving raw materials used in strategic industries or basic necessities such as food, water, and energy, efforts to secure adequate supplies will take increasing precedence in a world where demand seems constantly out of kilter with supply. Disputes over the misuse, overuse, and pollution of the environment and natural resources will become more commonplace. Around the world, such tensions will give rise to fullscale military encounters, often with minimal provocation. In some instances, economic conditions will serve as a convenient pretext for conflicts that stem from cultural and religious differences. Alternatively, nations may look to divert attention away from domestic problems by channeling frustration and populist sentiment toward other countries and cultures. Enabled by cheap technology and the waning threat of American retribution, terrorist groups will likely boost the frequency and scale of their horrifying attacks, bringing the threat of random violence to a whole new level. Turbulent conditions will encourage aggressive saber rattling and interdictions by rogue nations running amok. Age-old clashes will also take on a new, more heated sense of urgency. China will likely assume an increasingly belligerent posture toward Taiwan, while Iran may embark on overt colonization of its neighbors in the Mideast. Israel, for its part, may look to draw a dwindling list of allies from around the world into a growing number of conflicts. Some observers, like John Mearsheimer, a political scientist at the University of Chicago, have even speculated that an “intense confrontation” between the United States and China is “inevitable” at some point. More than a few disputes will turn out to be almost wholly ideological. Growing cultural and religious differences will be transformed from wars of words to battles soaked in blood. Long-simmering resentments could also degenerate quickly, spurring the basest of human instincts and triggering genocidal acts. Terrorists employing biological or nuclear weapons will vie with conventional forces using jets, cruise missiles, and bunker-busting bombs to cause widespread destruction. Many will interpret stepped-up conf icts between Muslims and Western societies as the beginnings of a new world war.