Growth Commission responds to Trump initiative on how to tackle unfair trade practices undertaken by overseas trading partners
The Growth Commission – the respected body of international economists identifying policies that will raise living standards and increase prosperity – has suggested how tackling unfair trade practices in other countries can do just that.
The Memorandum on America First Trade Policy issued by President Trump on 20 January directed executive departments and agencies to issue reports by 1 April on actions the new administration could take to address specific international trade problems. This has been supplemented by the executive order on reciprocal tariffs.
The Growth Commission’s economic modelling shows that burdensome regulations, trade restrictions and weak property rights – so-called Anti-Competitive Market Distortions (ACMDs) – can damage GDP per capita.
The Commission argues that if the new administration takes targeted action on unfair trade practices and reciprocal tariffs, this could lead to a reduction in ACMDs across the board and stronger GDP per capita growth both in the U.S. economy and abroad.
The ACMDs that the Trump administration could tackle include situations where another country:
- charges higher tariffs than the U.S. does, making it less open to trade than the United States;
- distorts its market with burdensome regulatory barriers or unfair subsidies that disadvantage U.S. goods and services; and
- does not protect property rights, including intellectual property rights.
These have been particularly pervasive in China and existing trade remedies such as anti-dumping and countervailing duty law are simply not designed to deal with systemic distortions on the scale of those seen in China.
Tackling these ACMDs is essential because they have an undeniable impact on trade by damaging competition and thus lowering GDP per capita in the home market as well as export and global markets. Left to proliferate, they threaten the ability of U.S. producers to be successful around the world.
The U.S. should work to reduce or eliminate ACMDs in foreign markets as suggested in our memo to the President-elect.
The U.S. should also include an ACMD chapter in its trade agreements building on the competition and state-owned enterprises chapters in the United States-Mexico-Canada Agreement, for example. Other countries with which the U.S. has trade deals should be required to adopt similar approaches to China as the U.S. does.
Shanker Singham, Chairman of the Growth Commission, said:
“There is an emerging Trump Trade Doctrine which recognises that trade policy must now take into consideration not only border measures and tariffs, but also conditions of domestic competition, regulatory barriers and property rights protection which have an adverse impact on U.S. firms.
“We have made proposals which aim to take away any trade advantage currently enjoyed by foreign firms as a result of Anti-Competitive Market Distortions and other unfair trade practices, instead giving an incentive for their promoters to lower their use.
“If President Trump takes the kind of approach we recommend and the net result is that other countries eliminate their ACMDs by being more open to trade, lowering anti-competitive regulation and properly protecting property rights in all its forms, this would create a win-win situation: higher GDP per capita growth for both the U.S. and its trading partners and increased foreign market access for U.S. companies.”
Fellow Commissioner Christine McDaniel added:
“Anti-competitive market distortions limit healthy competition and economic growth. Competitive domestic markets, competitive international markets and strong property rights are important for GDP per capita growth in advanced industrialised economies and developing economies.”
