US commerce secretary Wilbur Ross recently rejected claims the United States was becoming more protectionist as “rubbish”. He also said of his country: “We are the least protectionist of the major [economic] areas”.
The US government is currently reviewing some trading partners’ trade practices. It wishes to launch bilateral trade negotiations with specific countries or groups of countries – notably the EU – with which it believes its trade is imbalanced. After having turned on Japan as part of its rejection of the then twelve-country Transpacific Partnership in January, the United States wants a bilateral deal with Japan, and Japan is not keen.
The current trade policy climate is overshadowing the International Monetary Fund and World Bank Spring meetings in Washington this week.
One of the key arguments made by the White House is that US trade deficits are due to the partners’ protectionism and that the trade ‘deal’ they have in place with the abovementioned partners is a bad and imbalanced one.
Anyone with a little bit of trade economics training knows that trade deficits or surpluses, especially specific bilateral ones, are not related to a country’s trade openness and not – per se – an economic problem for a country. They can reflect macroeconomic imbalances however – but that’s another matter. Let’s have a look at proper trade protectionism data. Are the countries singled out by Ross and his friends in the US administration more protectionist than the United States?
We selected nine countries, eight of which which the US has singled out for bilateral ‘negotiation’ in recent months with the aim to reduce their bilateral trade deficit. Britain was included in the data for comparison, as the UK’s trade balance is negative, like the US’.
What is clear from the data: apart from China, which stands out as a much more protectionist country than all the rest selected in the sample, the US does not compare that well in terms of trade openness to other OECD countries with comparable income levels.
US tariffs are lower on average than European tariffs – the US has singled out Germany and Europe more generally. But the difference is not that large. The US finds other countries – including Japan – doing much better on tariffs. The OECD’s services data show that the US does not fare better than the other fellow OECD members (China is not in the OECD) in the organisation’s services trade restrictiveness measures. China is also a much poorer country than the US and the sample of countries chosen here. Poor countries tend to be more protectionist than rich countries. Poorer Mexico and NAFT member is also less open than the US – but not in all areas, the data show.
General US trade friendliness, as measured by the free market Canadian think tank the Fraser Institute and the Switzerland-based World Economic Forum, is by far not the best among the richer countries in this sample.
The data selected and compiled in the tables above are the following:
- The Fraser Institute’s 2016 Economic Freedom of the World Index – the data selected the country’s score here are the countries’ scores in the category ‘freedom to trade internationally’;
- The OECD’s Services Trade Restrictiveness Index. The data shown are the number of sectors – out of 22 – in which the OECD country listed more trade restrictions than the OECD group average;
- The World Economic Forum’s 2016 Global Enabling Trade Report. Here we took the countries’ ranks in the Switzerland-based think tanks’ index;
- The World Trade Organization’s individual members’ tariff profiles;
The rank given to the countries in the tables are the least trade restrictive at the top and the most trade restrictive at the bottom. Look out for the United States flag. It is never at the top.