The general principle on which both U.S. trade policy and the WTO are based is non-discrimination among countries. We may set tariffs higher to protect certain industries, but the tariffs will generally be the same for all countries.
If we want to protect our widget-makers from foreign competition with a 10 percent tariff, it will apply equally to Japanese and European widgets. We don’t compound the folly of raising widget prices by encouraging the importation of Japanese widgets over European widgets, or vice versa. And we encourage other countries to follow the same principle.
The great exception to this rule is free-trade agreements, in which two or more countries agree to put lower-than-usual tariffs on one another’s products. Non-discrimination, with a limited trade-liberalizing exception, has enabled large reductions in tariffs over the decades.
Economists generally believe these reductions have increased American and global living standards substantially. But non-discrimination does not lead to reciprocal tariffs. It leads to the U.S. charging a 2.5 percent tariff on cars from the EU and from China, rather than matching each trading partner’s rate.
If the bill were passed and a president used this new authority a lot, we would break the World Trade Organization’s rules and lose many cases there. We could abide by the rulings, in which case we would be right back where we were before; or we could ignore those rulings and let the organization lose authority, or even exit the organization.
That prospect may sound good if you are confident that, as Trump sometimes says, the last several decades of American trade policy have been a complete disaster. If, on the other hand, you believe that our practice and pursuit of free trade have sometimes been flawed but have contributed a great deal to American prosperity, you won’t want to risk blowing up the system, especially over short-sighted grievances.
Ramesh Ponnuru is a Bloomberg Opinion columnist. He is a senior editor at National Review, visiting fellow at the American Enterprise Institute and contributor to CBS News.