Friday, April 9, 2010

World Tariff Wars -


World Tariff Wars -


President Obama launched his National Export Initiative last month. Objective: Double exports in five years. Sounds good. Too bad some of our trading partners missed the memo.

Brazil, in the same week, announced a plan to impose new tariffs on 102 U.S. products. On some items, the tariffs will go as high as 100%. In all, it will affect about $1 billion a year in U.S. exports. Brazil also announced it's considering sanctions against U.S. intellectual property, including compulsory licensing in pharmaceuticals, music, chemicals and software.

Before screaming for a first strike on Brazil, bear in mind that what it did is an approved action under World Trade Organization rules. Brazil won the right to retaliate against U.S. exports because U.S. subsidies to cotton growers contravene the rules of the multilateral trading system. Because we are in "non-compliance," they get to engage in "retaliation." On Monday Brazil gave the U.S. a reprieve until April 22 on the new tariff implementation in the hopes that a negotiated compromise might be reached. If not, we will have an old fashioned trade war on our hands.

The destructive clash with Brazil is not an isolated case. WTO-approved retaliation to counteract U.S. trade violations is spreading. More than $3.4 billion of U.S. exports now face punishing retaliation tariffs.

It is possible that Brazil will back down, but the damage to U.S. leadership on free trade cannot be underestimated. The common thread linking these threats to U.S. export growth is America's current antitrade compulsions, typified by Congress's refusal to ratify free trade agreements with Colombia, Panama and South Korea. If Mr. Obama really wants to open new export markets, he doesn't need to slap the word "export" on new bureaucracies. He needs to honor U.S. commitments and explain the dangers of a creeping global protectionism.




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