All this is happening in today's world, not in North Korea, Cuba and Venezuela, but in the United States, Europe and Britain. What happened? And where did the principles of free trade, market forces, and the invisible hand preached by the famous Scottish economist Adam Smith go? Where is the WTO's position in this Western protectionism, which has become "respectable", as the Financial Times put it?
America's era of protectionism began with President Donald Trump's 2017 inauguration, who promoted the "America First" principle during his 2016 election campaign and took practical steps in this direction during his tenure, when he imposed tariffs and restrictions on Chinese exports to the United States and U.S. exports of advanced technology to China.
This coincided with Britain's Conservative campaign to leave the European Union, which took place when a small majority of British voters, (4%), voted to leave the Union in a referendum in 2016, followed by an actual Brexit in early 2021. These campaigns have led to similar protectionist policies in Europe, because protectionism is inherently regressive: when a country imposes measures to protect the national product, its trading partners will resort to similar punitive measures, to deny it the benefit of free trade.
Tariffs do not necessarily bring additional revenues to the state treasury, because the revenues derived from them withhold other revenues that may exceed them in size and permanence, such as those resulting from the contraction of exports due to protectionist measures. Such lost revenues could have been achieved through the development of exports and the encouragement of competition to improve national production, and this applies mainly to industrialized countries, which can achieve superiority by developing better industries than importers.
Tariffs, or protectionist measures in general, alone cannot encourage national products or rebalance the trade balance, which is imbalanced by the superiority of imports over exports. It is true that it benefits the national product by enhancing its share of the local market, due to the high prices of foreign products in comparison, but the lack of competition does not encourage development, innovation, improving production and reducing prices.
All that tariffs and other protectionist measures do is deprive consumers of the freedom to choose the best among similar products, and push local producers to laziness and neglect and not to seek innovation and development of production, or reduce prices due to the absence of competitors.
The truth is that protectionist measures, in addition to curbing development and curtailing innovation, cause prices and inflation to rise, and that the price is paid for by consumers whose freedoms are encroached upon by the state in countries that claim to sanctify freedom and free choices for man, by restricting them to local products, even if they are poor or high-priced.
A study reported by The Economist magazine estimates that every job created by the tariffs imposed by President Trump on imported iron costs iron consumers $ 650,<>, which means that the tariffs are not paid by foreigners, as some imagine, but by domestic consumers!
The United States, which fought isolationism, communism and Marxism for a century, is now regressive and embraces, in fact, not officially, Marxist principles, believing that added value is created by labor, while capitalist theory holds that capital generates added value.
Former U.S. President George W. Bush (43) said in 2001, "We will trade freely with China, and time is on our side." Time has been in China's favor, which pushed America to embrace protectionism and impose tariffs on its exports. Bush had hoped that the economic opening to China would lead to a change in its political system, so that it would move closer to the capitalist Western system, but what happened was that China developed economically while increasingly adhering to its communist system, and even the partial political openness that occurred under the former president, is Jintao, such as limiting the presidential term to two terms, has now changed, and the two-term period has been abolished and the state intervenes in the economy, and is more centralized than before.
President Joe Biden maintained the restrictions imposed by his predecessor on dealing with China, and even added to them that he provided government subsidies worth two hundred billion dollars to encourage national production, especially in the field of producing batteries for electric cars, which China dominates its manufacture, and the extraction and processing of rare earths, which is also currently monopolized by China.
US tariffs on Chinese cars have now reached 27.5%, according to the Financial Times, this percentage is very high, but it may rise further in the future. Presidential candidate Donald Trump, whose electoral chances are constantly increasing according to a number of opinion polls, despite the ninety-one lawsuits filed against him in US courts, plans to impose an additional 10% on imports from all countries of the world, which means that China and the countries affected by these tariffs will respond in kind. Such a tariff would cost the American taxpayer two thousand dollars a year, according to The Economist, and would no doubt anger America's European allies and others because it would include everyone.
If Trump wins, which is no longer unlikely, he will bring about a confusing change for all countries of the world, and it is likely that he will be able to implement everything he believes in, especially since the Democratic majority in the Senate does not exceed one seat. Observers believe that Russia will be the first beneficiary, because he will make a deal with it on Ukraine, as he promised to stop the war within 24 hours! America's European allies will find themselves at the mercy of Russia, especially since they are not yet prepared to rely on themselves for defense issues, and they increased their military spending after the Russian invasion of Ukraine.
Europeans are also considering imposing tariffs on Chinese electric vehicles (BYD), with a directive to investigate the possibility of the Chinese auto industry receiving a state subsidy. If the Europeans resort to raising tariffs on Chinese cars, China will respond in kind, and the Chinese have reacted angrily to the European investigation, calling it "blatant protectionism"!
The European tariff on Chinese exports is currently 10%, which is reasonable, if compared to its American counterpart, but if it rises, and this is likely, if Europeans confirm that China is indeed subsidizing the manufacture of electric cars, it will confuse the trade relationship between China and the European Union, and negatively affect European exports to China, which are already declining.
The right-wing tide in Europe, especially in Germany, France and Italy, is rising, and there is popular pressure to impose tariffs on the import of Chinese electric cars because they are starting to affect the European car market, which employs 6 percent of the EU's workforce, according to the European Commission.
But Europeans need Chinese electric cars because they are environmentally friendly and part of the global trend to reduce pollution and tackle climate change. Chinese exports to the United States also contributed to reducing the inflation rate and benefited consumers, but, according to the Financial Times, they contributed to reducing industrial production in America and increasing the gap between rich and poor, and this disparity contributed to the emergence of the right-wing Trump phenomenon, according to the newspaper.
In other words, China's admission to the World Trade Organization in 2001, which boosted its strength and economic growth, was aimed at promoting opportunities for openness and democracy in China, but the opposite has happened, democracy in America is now in danger, and there has been a sharp disagreement over the election results, as President Trump insisted, and still insists, that the Democratic Party "stole the victory", and this is happening for the first time in modern American history.
The IMF believes that Chinese and U.S. tariffs, which began in 2018, have not only reduced overall global trade, but only trade between America and China, while goods and commodities have found their way to other countries. The tariff war has not prevented African Union (AU), ASEAN member states, and members of the Comprehensive Progressive Agreement for Trans-Pacific Partnership (CPATPP) from concluding regional or multilateral trade agreements.
The escalating protectionist measures are caused by fear of China, which has used its vast wealth to arm, expand its economic and political influence, threaten Taiwan, support Russia, North Korea and Iran, conduct military exercises near US forces in the South China Sea, and seek countries in Asia and the Middle East to ally with.
The U.S. and Western opening to China has had the opposite results. But it is not true that the world is backward, after all these achievements of globalization and global trade, because of an American political mistake. The West's fear of China is justified, especially with its growing military power, but it is not right or feasible to deal with it through measures that contradict the basic principles that Westerners have been working with for many decades and have contributed to their progress, namely openness, competition, innovation and trade, which are regulated by the regulations of the World Trade Organization.