DI LEO: FREE TRADE, FAIR TRADE, AND THE QUESTION OF THE YEAR

Illinois Review | 6/22/2018 | Staff
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By John F. Di Leo -

International trade has always been in the news. Business reporters talk about a trade deficit, politicians wail about jobs being exported overseas, and every so often, the government signs a new free trade agreement or trade promotion agreement (they are different things) with one or two or a hundred faraway countries.

Trade - Policy - Forefront - News - Cycle

But despite all this, international trade policy has not been at the forefront of the news cycle in a generation; not since the US-Canada Free Trade Agreement was voided 25 years ago, to be replaced by NAFTA, a three-party FTA between Canada, the United States, and Mexico.

Thanks to the election of Donald Trump, and his dogged determination that this country change its approach to trade, the issue is back at the water cooler again, and we can assume it will remain there throughout his presidency.

Course - Approaches - Trade - Tariff - Barriers

There are of course many different approaches to international trade. Should we set high tariff barriers to reduce imports, or set low tariffs to offer the broadest cost-effective options to our people? Should import duties be a significant source of revenue for the national government, or an accounting error?

The USA began with an intention that the federal government’s primary sources of funding would be import duties and the sale of land as the nation expanded westward. These approaches were abandoned long ago as our federal government instituted corporate and person income taxes, Social Security and Medicare, and went from selling government land to nationalizing private property. Most other countries, too, today rely far more on VATs, GSTs, income taxes, and other taxes than on duties.

Duties - Importance - Place - World - USA

But duties, while minimized in importance, remain in place, all over the world. The USA gradually started a process of reducing our average import duty rates in the 1970s, and today we have among the...
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