 So you know I like to follow this, the writer Scott Linsicum, he writes a lot about economic policy issue, not theoretical but economic policy issue. I think he's excellent. I don't remember if I've ever actually disagreed with him on an economic policy question. Anyway, he wrote an essay this week, which I thought was really good about global trade, the global trading system. I thought it was a good opportunity to talk about global trade. I know, I know it's not sexy. I know nobody really seems to care, but it's crucial. If you value the quality and standard of living that you have, the quality and standard of living that you have is a consequence of a particular trading regime. It is a consequence of a particular approach to trade. And if we are going to maintain our quality of life and standard of living, we'd better have the right approach to trade. So I think it's important to talk about trade. We've talked about it in the past, but it's always good to talk again. Scott Lin C. Kong, Rob has spelled it out for you. L-I-N-C-I-O-M-E. He writes at the dispatch, he writes at the dispatch for capitalist, capitalist T.O., instead of T.A., he also is a senior something or other at the Cato Institute and does a lot of work through the Cato Institute. He is I think also a lawyer by trading, training but exceptional work and excellent essays and excellent writing on economic issues. Again, I don't think his primary is theoretical economics. This is about policy, policy prescriptions, policy suggestions, policy of how to solve issues. And this particular article, December 14th, is titled, Donald Trump Staggering. No, I'm misreading. Donald, Wonder Freeman says, Jordan actually knows about economics. It's like he doesn't know anything about anything else, but economics, he kind of knows. You should pay attention, not on other things, but economics, that you should pay attention to. Thank you, Wonder Freeman, for the confidence. I appreciate it. So the article is called, Donald Trump Staggered the Global Trading System. Joe Biden might finish it off. And it's an excellent piece, both giving a good history of international trade in the 20th and 21st century, which I found valuable and I will convey to you and hopefully you find valuable. And then the kind of dent in that system and the way in which that system was dented, the way in which that system was undermined by the Trump administration and then the way in which Joe Biden is basically doubled up on the Trump administration. Basically the conclusion is that there is no difference between Trump and Biden on trade. Both were terrible, both were awful. It looks like Biden is trying to take it to the next level, building on the evil that Trump created to go even further, even further bad in terms of restrictions. So that's where we are, you know, Biden getting to be worse than Trump on trade, which is saying a lot because Trump was about the worst president on trade that we have had since World War II. So I wanna go back a little bit in talking about trade. And let me just do this. One of the issues we hear a lot about trade is how rigged it is, how bad it is, how multinational this stuff is bad, how it's all guided by conspiracies and problems. So I wanna go a little bit about the history because there's so much conspiracy theory around the whole idea of multinational trade and trade among many nations and about these trade agreements like the WTO, which I think people are convinced is some kind of major conspiracy like the World Economic Forum and the conspiring to take over the world and we should all be opposed to it. So I wanna do a little bit of trade history, bear with me, I think this is interesting. Hopefully you will find it interesting too. So trade, trade overall, global trade was very high, the highest it's ever been in human history during the 19th century. It was basically the first era of real globalization. It was an era where the British Empire basically secured the shipping lanes, engaged in diplomacy to secure low tariffs. Sometimes that diplomacy required using cannons, gunboat diplomacy, it was often referred to, in which the British Empire basically secured the ability to trade with Britain, ability of countries to trade with one another pretty freely. I don't think it intervened too much in the domestic tariffs, I don't think it intervened too much in domestic subsidies and all the rest of it. But if a Brit wanted to buy the stuff from whatever country it was, the British Navy would make sure that that stuff would get there and that they could buy it. And after I think it was the corn acts of the mid 19th century, tariffs in the UK were basically very, very low and it flourished through trade. Arguably that system started coming to an end before World War I. One could argue that both World War I and World War II were impacted significantly by the beginnings of restrictions in trade. Certain countries feeling like they were excluded from global trade. Certainly World War II has a lot to do with the Great Depression, which to some extent at least was triggered by the collapse of global trade, partially a result of smooth holly, which was passed in the United States by the Hoover administration in I think 1931 and resulted basically in spiraling downwards of the economy in the US and in the rest of the world. We fought two wars that were basically shaped by nationalism, by protectionism, by anti-trade, anti and as a consequence, strong nationalistic, separatist sentiments. Coming out of World War II, the focus of the United States in terms of its foreign policy was very much geared towards expanding trade. I think the people, economists at the end of, and indeed economists almost to this day, but certainly economists at the end of the World War II realized that if we were gonna rebuild the world, if the world was gonna rebuild itself, one of the crucial elements to that were going to be the free movement, free not meaning zero cost, but the free movement of goods across continents, across countries, across borders. And the first recognition of this was a treaty signed in 1947 called the General Agreement on Tariffs and Trade, G-A-T-T. The agreement did two main things. And again, this is out of Scott Linsicum's article, which I think is very good and worth reading. It created a baseline set of multilateral, i.e. global rules for member countries to voluntarily follow. And second, it established an impartial process for resolving government to government disputes related to those rules. So it set out rules for trade. It set out rules for government and how to deal with trade tariffs, subsidies, benefits, but it also set up rules for how to arbitrate disputes between countries when they engaged in that trade. Ultimately, G-A-T-T was very successful in increasing trade. Countries agreed to reduce the non-tariffs restrictions on trade, basically to zero, and concentrate just on tariffs. So one limitation on trade. And then they generally over time agreed to reduce tariffs significantly over time. And they indeed did. Tariffs came down. We'll talk about that in a minute. Tariffs are the easiest trade barrier to deal with because it's straightforward. It's monetary. It's visible. You can hide it and you could then negotiate to lower it. You can negotiate to make it down versus other restrictions on trade, like subsidies and outright bans and other ways in which you favor domestic industries over the importation of other materials are much more difficult to identify and to negotiate and to deal with. There was a lot of success in incrementally capping these tariffs and lowering them. And there was a lot of success in stopping member countries, people who signed on to the GATT to favor certain goods from certain countries over goods from other countries because of other kind of relationships. They got rid of most favored nation statuses. And of course there was the elimination of favoring domestic industry over what could be imported. So kind of the national interest, national treatment, the idea of nationalism. And over time, tariffs went down, predictability and transparency increased and non-discrimination increased and trade flourished. And if you add to that the invention, if you will, of the container, ship and containers, trade exploded. It increased significantly. And at the same time, interestingly enough, and not surprising, I think at all, global conflict decreased. That is wars decreased, trade increased, trade went to the wolf, roof and wall decreased. If you look at tariffs, if you look at pre-World War I tariffs, sorry, pre-World War II, tariffs peaked on average. This is weighted tariffs on imports. In the United States, in the 1930s, tariffs peaked at about 60%, just under 60%. So every good you imported was taxed at 60%. They then declined during the late 1930s and into the 1940s. They basically collapsed after World War II, dropping to levels below 20%. This is U.S. tariffs. And then by the time we reach the Trump administration and they have gone down to below 5% on average. So the tax that you pay on imported goods has gone as close to zero as we've probably ever had in the United States. And that has been true. It's been super low since the mid 1970s. And I think a big reason why the United States, in spite of everything, has done fairly well over this period in spite of the regulations, in spite of the controls, in spite of government spending, in spite of the taxes, tariffs have increased our well-being in the United States, have decreased the cost of our goods. We haven't seen as much inflation because of the prices going down, because we could import them at cheaper prices across the board. And the government stopped taxing that so that I think this has had a profound, massive impact on the quality and standard of living in the United States over the last 40, 50 years. Really, since World War II, I think it's played a huge role. But tariffs were already low once GATT was instituted and have just gone down with the World Trade Organization and everything else. Now, GATT was flawed, it turns out, in significant ways. Rules didn't cover important growing, important trading areas like investments, finance really, and services. It had big loopholes for certain non-tariff barriers. And it had no real dispute resolution mechanisms, appeal mechanisms, dispute resolution mechanisms. So it was incomplete, countries were not too happy with it, lots of loopholes, lots of cheating, lots of getting around it. And when two countries disagreed, there was no real mechanism to actually resolve the dispute. The World Trade Organization, which came together and came online in 1995, was an attempt to resolve this. In other words, it was an attempt to bring about greater free trade. Trade is free when tariffs are low, trade is free when goods move from one country to another without barriers, barriers to entry, bans, restrictions, and without overt favoritism towards domestic industries or towards particular countries, industries over others. Trade is free when you as a consumer get to choose what you want to buy, where you want to buy it without being penalized for those choices, without being penalized because you want to buy something made in Mexico versus something made in the United States. Where basically where something is made does not influence, well, it's not a barrier to you buying it, unless you choose it to be, unless you make the decision, you don't want to buy stuff in Mexico, which you are free to do. The World Trade Organization, by lowering barriers, by lowering barriers, by lowering barriers, by lowering tariffs has increased free trade. Has it made free trade completely free? No, of course not. But it has made trade free-er than it was, free-er than it would be without the WTO? Yes, significantly so. And you can see that in the chart of tariffs. You can also see that in a chart of global trade. And you can see the impact of the WTO as had on that as treaties like NAFTA and the Pacific PPE, whatever it was called, and everything else. So the World Trade Organization replaced GATT in 1995. And again, it's not perfect. Perfect would be zero tariffs. Perfect would be no barriers to trade other than real, real. Real with a capital R, national security concerns. But what the WTO did is it improved the dispute settlement. And it brought on many more nations and expanded the scope of free trade to services, finance, banking, investments, and a bunch of other things. So basically much more coverage, much more uniform coverage. It created an appellate body where you can appeal the rules if the WTO ruled against you. By the way, I think this essay is motivated by the fact that the WTO just ruled against the United States. It ruled against the United States basically saying that the Trump steel tariffs were illegitimate, were outside of the legitimate structure of a treaty the United States signed with the WTO. I think everybody knew that, including Trump. Trump didn't care. I don't think Biden cares either because Biden's not doing away with this, but we'll get to that in a minute. If you didn't comply after you lost appeal that allowed other countries to penalize you in return. There were all kinds of other penalties that could be exercised against you through the WTO mechanisms. So what is the WTO? It's just a set of rules to obitrate disputes, to generally move the world in the direction of greater trade. And I know I'm getting trouble with this because there are people out there, many people out there, maybe some on this chat, maybe not on the chat, that are convinced that WTO is a negation of American sovereignty. It's a treaty. You can walk away from a treaty if you want, but it's a treaty. It's a treaty you sign for your own self-interest, otherwise you shouldn't sign it. It's a treaty that, yes, gives up some authority ultimately on rulemaking, that's what treaties do. There's no meaning to a treaty. If you can still do whatever the hell you want, then why are you signing a treaty? So in a sense, it does limit you, but it limits you, hopefully, in a good way. That's the whole purpose of this kind of treaty. It limits you to an agreement that increases freedom. And fundamentally, that's what the WTO has done and what the WTO tries to do. The arbitration, the rules, the enforcement, all driven by the members themselves, they're all part of the treaty. You could leave whenever you want. And the WTO, to a large extent, is just an independent arbiter of the rules which everybody has agreed upon. So it's not perfect. Again, perfection would be lower tariff to zero and screw the rest of the world, but nobody's gonna do that. No politician has the balls to do that. Nobody will ever do that. WTO is a cover for politicians to lower tariffs under the guise of multilateralism. We're lowering tariff, so is everybody else. We're lowering trade barriers, but so very everybody else. And that's how they can get away with it politically. It's not a cure-all because at the end of the day, all the other members have to agree to this lowering of tariffs, lowering of trade restrictions. And they don't always. Not on every industry, not on everything. Since 1995, until today, they have been massive benefits from trade. Again, massive economies that have generated huge efficiencies. The world is better, and I think ultimately safer and more secure as a result of this trade. We have, for the most part, limited the amount of self-defeating, protectionism, and trade wars, and tariffs, and all kinds of side deals, and agreements, and cheating, and all that stuff. For the most part, that has been eliminated. And it's been remarkably successful. You know, at the end of World War II, shortly after World War II, right, when GATT was first instituted, average tariffs of all participating countries, all the participating countries in the original GATT, was 22%. In 2018, the world's tariffs, the tariffs that applied in the world, on average, were 9%. 9%. That's not a bad tax rate. It's lower than most countries' VAT, it's lower than most countries' sales taxes, it's lower than many state sales taxes. It's still too high, in my view. Zero is ideal. But 9% is pretty good. It's much lower than 22, and it has increased trade dramatically. Trade volumes have grown by 4% annually since 1995. And, again, that's hugely beneficial to everybody around us. I mean, it really takes an ignorant person, like Donald Trump, to believe that trade is a bad thing. That somehow, because we send dollars to China and get Chinese goods, we are losing somehow, when we clearly benefit more by giving up dollars and getting stuff than the other way around. All right, WTO has also been pretty good at holding countries accountable for violating the terms, violating their commitments. And when the United States has been challenged in this, it has won 85% of its cases. 85% of the cases where the United States was challenging WTO over certain actions it is engaged in, it has won 85%. This is not an organization that is hostile to the United States. And when a country loses, even China, when a country loses this arbitration at the WTO, it turns out that almost all of them comply. They comply voluntarily. Before any kind of sanctions or for other parties intercede, they apply. Now today, there are 164 participating member governments in the WTO. It's a pretty global phenomenon. So when we say 9%, that's pretty global. And many of those countries, almost all those countries have eliminated their protectionist measures and have agreed to accept the WTO authorized retaliation when they refuse to do that. So it's not a perfect system. Again, perfection is free, zero. It should be its alternatives. And that was all running pretty smoothly, pretty well. I mean, there were complaints, but pretty smoothly, pretty well, until Donald Trump became president. And when Trump became president, the problem wasn't that he objected to particularly issues around the WTO. I don't know, disputes took too long to resolve, certain rules needed updating. It was hard to get consensus among 100 plus members and on and on. That wasn't really his problem. Those are real problems in the WTO, but it wasn't what bugged him. What bugged him was trade. What bugged Trump was the fact that the US was running trade imbalances, that it was giving up more dollar, it was importing more goods than it was exporting. What bugged Trump was the very existence of a multinational agreement. What bugged him and his base is this idea that there are these multinational organizations that conspire against us, that we give up sovereignty. So for example, what Trump did was not just raise tariffs and disrupt trade. What the Trump administration actively did was subvert the World Trade Organization. And they did this by one big mean and then by the way in which they dealt with trade. They blocked the seeding of a WTO appellate body. They blocked the ability of the WTO to actually arbitrate disputes. And they pledged that they would not allow this WTO appellate body to come together until the organization undertook, quote, major reforms. Major reforms that they never submitted, they never asked for, that is the United States, the Trump administration never actually came and said, these are the things that we have to do and then we will approve this change. Never did that. So basically the WTO dispute settlement system doesn't function properly anymore. It's broken. And it can't function until the United States agrees to have this new appellate body be able to do its job. And the United States refuses to do so, so it refused under Trump. So that's one. The second big issue that the Trump administration was primarily the tariffs that imposed on steel and aluminum, which were obviously bogus. They were done in the name of national security, but that was obviously BS. And once in a while, Trump admitted that it had nothing to do with national security. It was just, he wanted the tariffs. He wanted to protect American jobs supposedly. He wanted to protect the steel industry. But everybody knew, including the defense department, including the Pentagon, which said that we only need about 3% of US production for the defense department. We didn't need to stop importation of steel, particularly tariffs on steel from allies, tariffs on steel from our friends. That's not exactly a national security issue. And yet Trump made it, and by doing so completely undermine the rules of the WTO, and that's what the WTO just ruled that there's no national security threat and the Trump administration was completely out of line in placing the steel and aluminum tariffs. And of course, from my perspective, it's just harmful to the US economy. Just a disaster for the US economy. Now he used that, he was threatening to do auto tariffs on automobiles from Europe for national security reasons, which is even more bizarre than steel and aluminum for national security. I mean, Trump was anti-trade, he hated trade. He believed that everything we consume in America should be made in America, which is, Mokinselist, Adam Smith debunked that 250 years ago. It is primitive and just horrific. Just economic ignorance at a level that is hard to imagine. He was anti-trade. And Trump implemented anti-trade policies wherever he could, to whatever extent he could, give it his limited power without congressional approval. And given the fact that the United States is a member of the WTO, is a signe on the WTO. So what this did was both inflict significant damage in the WTO system. And this idea that you could just invoke national security for anything, to anything, to get a, you know, was such a blatant disregard for the rules of the WTO, from the most important member in the WTO, the member that got the whole thing running, the member that facilitated global trade, the member whose military, whose Navy, guarantees trade around the world, opens, guarantees the open shipping lanes around the world, and provides secure, is just a massive hit against freedom, and liberty, and wealth creation in the United States of America. So this is what Trump did. And most of what he did was against China. And, you know, it was bad, it was bad. And the WTO, but the WTO has continued to limp along and continue to survive, and tariffs are still pretty low, and trade is still, you know, massive, and in spite of all the supply chain challenges, supply chain challenges that we've experienced over the last few years, trade continues to grow, and continues to explode, and continues to be significant. But once Trump was out of office, I think many of us expected that much of this antagonism to trade, much of the antagonism to the wars of the WTO would disappear. But the reality is that all Biden has done is double up on Trump's irrationality. All Biden has done is double down on Trump's antagonism towards trade. So Trump has made things, Biden has made things worse. The tariffs on steel and aluminum continue. The appellate body that's supposed to be established and to help smooth out WTO dealing with international trade is being held up now by the Biden administration. And we now have more and more and more appeals of unfavorable panel decisions, and it's appeals into what they call into the void. There's nobody there, because the Biden administration, like the Trump administration, would not approve the process and the people to actually deal with the appeals. And then the Biden administration, in terms of this is just, it's absurd and ridiculous just like it was under Trump. There's no difference. I mean, in the sense, Trump and Biden exactly the same thing. And in addition, Biden has doubled up, doubled down. On Trump's metal tariffs, on his tariffs on steel and aluminum, which all remain in force, even against friendly countries, not against China, but against friendly countries. And he has continued this completely absurd, ridiculous national security defense, which undermines real national security issues and has now caused other countries to use the same kind of excuse to raise barriers to trade. So what is happening today is the Biden administration and before it, the Trump administration are undermining the ability of countries to trade in the world economy. They're placing tariffs and restrictions, and there's no way to challenge them because the WTO is broken, and WTO is broken for only one reason, and that is the United States broke it and refuses to fix it. And that's under Trump, and now it's under Biden. So yes, last Friday, WTO ruled that the United States, steel and aluminum tariffs clearly violate various rules regarding tariffs and discrimination, and that the U.S. invocation of national security is bogus. And the Biden administration has basically said, right, we don't care. To quote the Biden administration, quote, we strongly, the administration strongly rejects the flawed interpretation of conclusions. The Biden administration has held the clear and unequivocal position for over 70 years that issues of national security cannot be reviewed in WTO disputes. WTO has no authority to second guess the ability of the WTO members to respond to a wide range of threats of security. This is completely false. U.S. will not cede decision-making over its essential security WTO panels. Sounds like Trump, no, it's Biden. The United States does not intend to remove section 232 of the disputes. In other words, Trump doctrine, alive and well, guiding America, there's no difference between these two, statist presidents. And indeed, if this continues, we are likely to see the WTO frameworks starting to collapse. And the consequence of this is gonna be disproportionately bad for the United States. Because the reality is that most, almost all of the rest of the world, almost all the rest of the world, just like pretty much every economist, even the leftist ones, all recognize the value of trade. The rest of the world is gonna continue trading with one another. There are regional treaties that are only growing right now in the world. And the rest of the world might even you continue to use the WTO, but ignore the United States. Globalization, as I said on a show last week, the kind of show that Ben Shapiro would never do, globalization is not going away. Globalization is here to stay. The benefits of it, the value to human life is too great for it to disappear. And I think particularly the poor countries in the world, but also most of the rich countries in the world, realize that, understand that, know that. So you now have a variety of different free trade agreements around the Pacific and different formulations of it happening all the time. You have free trade agreement, obviously within Europe, the massive free trade agreement, which is the EU. You have free trade agreement now, a free trade agreement among, what is it, 46, something like that, African countries representing both the Western coast and Eastern coast of Africa and Southern coast of Africa. That is only gonna grow and it's only gonna intensify and these trade routes are just gonna increase. What the United States is losing here is its leadership with regard to free trade. What the United States is losing here, it's the more high ground with regard to free trade. And what the United States is risking is to be cut out from the trade the rest of the world is engaged in and isolate itself. And I think that will have devastating consequences to a quality of life, to a standard of living, to ability to create wealth. Now ultimately, to ability to export to other countries, they're not gonna sit quietly as we discriminate against their goods. I mean, mercantilism has consequences. Mercantilism results in poverty. It is no guarantee that the United States stay the richest country in the world. It is no guarantee that the United States is the most powerful economy in the world. That depends on policy, that depends on choices. And the issue of trade is crucial to those policies and choices. If the United States wants to maintain its quality of life and standard of living, if the United States wants to maintain its leadership, then what the US needs is more trade, not less. What it needs is fewer tariffs, not more. What it needs is less excuses than it has today. I mean, I think that there's a case to be made for the banning of exporting sophisticated chips and chip technology to China on national security grounds. There is zero reason to raise tariffs on lumber from Canada, on milk from Canada, milk from Canada, dairy products from Canada, on steel and aluminum from everywhere, from food from anywhere. And of course, you'd get the same thing. You know, you could say the same thing about the rest of the world. The rest of the world needs to do is embrace more trade. Now, trade, as I mentioned last time, guided by a more sense regarding who you want to trade with as individuals, who we want to trade with. Do we want to trade with Russia? Do we want to trade with China? Do we want to trade with authoritarian regimes? Do we want to trade with our enemies? But the move that America has made against trade, the last time it made that move, the last time we had an administration like Trump, like Biden, who was anti-trade, was the Hoover administration in 1930s followed by the FDR administration. Those were the last anti-trade administrations the United States had had. And those were the two administrations that governed over Great Depression. It's not an accident. A war on trade is a war against prosperity in the United States. So, I don't know who's gonna come after Biden, but one really important question to ask him, one really important measure to evaluate them in terms of their suitability to be president is their attitude towards trade. Thank you for listening or watching the Iran book show. If you'd like to support the show, we make it as easy as possible for you to trade with me. 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