EDITORIAL A game that could be deadly
NOWADAYS, everybody who is somebody talks about tariffs. The word comes from somebody in the United States, somebody in China or somebody in Europe. The word simply implies some sort of customs duty imposed on imports. However, when politicians start using it as an intimidating weapon or tool of vengeance, it gets complicated and, well, homely.
When one nation attempts to commence using tariffs as a protectionist tool against mounting imports, it should remember that there is GATT and its offspring, the WTO. The General Agreement on Tariffs and Trade, or GATT, was the brainchild of the United Nations, and its noble intention was to promote international trade by taking away or at least reducing trade barriers. After a series of agreements in the major cities around the world, GATT created the World Trade Organization (WTO) in 1995.
The average tariff levels for the major GATT participants were about 22 percent in 1947, when the agreement was signed, but were 5pc after the Uruguay Round in 1999. That is to say that GATT and its successor WTO have significantly reduced tariffs.
That has led to a peaceful and normal way of trading goods across the globe, until some “brilliant” minds start thinking of putting back barriers to trade again.
Examples of resorting to tariffs again are everywhere. Threatening to put high tariffs on steel and aluminium by one country led another country to retaliate in a similar or more drastic manner. Some international gurus in business said it may lead us to trade wars. A trade war between the United States and China may have chaotic consequences in faraway lands such as United Kingdom and Germany.
Smaller countries with much smaller GDPS might be shivering, not just because they are tiny compared to those giants, but because trillions of dollars in their markets may disappear in a matter of weeks. That may have a fatal impact on their economies.
No one with sane and normally functioning minds would start this potentially dangerous and deadly game with obviously negative consequences. Some say that world politics is a cruel game being played by insane individuals. Well, it could very well be a game of thoughtful and fair compromises when stakeholders are not acting insane.
The whole world is watching what kind of decisions Donald Trump and Xi Jinping will be making in the coming days and hoping that their thoughts are focussed less on greed and more on wisdom.