A long standing difference of opinion on rules governing international trade has focused on supporting free versus fair trade with the developed world arguing in favour of free, backed by a number of economic theories, while the developing world has supported fair trade narrowly defined as bilateral matching of exports and imports that may necessitate tariff and/or non-tariff barriers (NTBs) to ensure that the balance of payments do not require periodic support through external borrowing from multilaterals/bilaterals.
President Donald Trump changed that paradigm and insisted on both fair and free trade for America as part of his America First policy – free specific to individual countries/trading blocs with which the US suffered a huge deficit. The result: exchanging barbs with the leadership of the offending countries and/or trade war with major trading partners, notably China and the European Union with occasional mention of India during Trump’s four-year tenure.
The affected countries employed three arguments to challenge Trump’s charges/sanctions. Firstly, that sanctions/tariffs would penalize American consumers who would pay higher prices for the same products. True but this would also hurt their own economies because their sales to the US were a significant portion of their total exports.
Secondly, Congressional Research Service (CRS) in a paper titled US Trade Concepts, Performance and Policy: Frequently asked questions 2016 noted that “economic theory states that trade occurs because it is mutually enriching…it has a positive economic effect like that caused by technological change, whereby economic efficiency is increased, allowing greater output from the same amount of scarce productive resources
. By allowing each participant to specialize in producing what it is relatively more efficient at and trading for what it is relatively less efficient at, trade can increase economic well-being above what would be possible without trade.” The developing countries argue that because of low technology available to them, partly due to the rules governing intellectual property rights, they are unable to compete with developed countries that in turn accounts for large unsustainable current account deficits compelling them to borrow and/or undertake austerity measures that are politically extremely challenging. – Anjum Ibrahim