A report, commissioned by the International Chamber of Commerce (ICC), provides global policymakers with an evidence-based overview of the far-reaching economic and social consequences of trade tariffs. The report outlines 10 possible effects of a return to the destructive tariff increases of the 1930s. The consequences, illustrated by two case studies, range from an increase in poverty to worse health outcomes.
Namely, the report states that almost all tariffs benefit a narrow group at the expense of a broad one. They also have unanticipated effects beyond their original focus areas, and take more time to repeal than to implement.
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Commenting on the report, ICC Secretary General John W.H. Denton AO, said that it highlights the counterproductive nature of addressing social and economic problems through tariffs. It also stresses the need for movement on reforming trade governance. To achieve this, business needs to prepare the ground to enable policymakers to move without risk.
In order for policymakers to consider before levying tariffs, ICC suggests the following recommendations:
- To prevent further tariff increases, policymakers must first be honest about the negative effects that trade liberalisation has had on certain groups, not least to shed light on the inadequacy of tariff hikes as a solution to these groups’ ills;
- Policymakers should insist on a deliberative process and data-driven societal impact assessments for all major proposed tariff increases. Such assessments would shift the burden of proof onto those advocating tariffs and provide insight into their wider effects;
- Policymakers should address their grievances with more effective tools. To tackle China’s unfair treatment of foreign investment, policymakers should use multilateral forums and leverage China’s clear desire to retain a rules-based trading system;
- Policymakers can promote more flexible trade agreements that do not pursue free trade at all costs and instead allow countries some bandwidth to pursue other societal goals, such as environmental protections.
Moreover it notes that governments can increase their low expenditure on training programmes for groups that lose out from free trade.
The report was launched in Davos, during the World Economic Forum’s Annual Meeting 2019 as part of discussions taking place in the Global Dialogue on Trade.
See more information in the PDF below
