Most Favored Nation?

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It’s a trading status that traditionally rewards mutually beneficial relationships with a bonus consisting of the best trading terms, the fewest trade barriers or import quotas – if any. Endowing each other with these benefits was the key reason that the World Trade Organization was founded. 

If you look at the map (right), you’ll see that the members are represented by the color green, the blue states are members which are part of the EU, yellow are observer states and the few red dots (places like North Korea, Palestine, Turkmenistan, etc.) are not members.
Why is there a WTO again? Oh yes, everybody treats everybody else equally and it’s a brave new world. Except that’s complete hogwash. 

The WTO is a paper tiger, and I’m being very kind. More realistically, it’s a Potemkin Village.
What would be the consequences for US tariffs if the United States withdrew from the WTO during President Trump’s second term? The president has the legal authority to pull the United States out of the organization without congressional approval.
On the orders of the president, the administration drafted a bill—entitled the United States Fair and Reciprocal Tariff Act—that would do away with the most-favored nation (MFN) clause, which requires the United States to treat all WTO members equally in terms of the import duties applied to their goods. Such a step would allow the president to increase tariff rates, even rates “bound” (fixed) in previous trade negotiating rounds. Given that the president withdrew the United States from the Trans-Pacific Partnership (TPP) and from the North American Free Trade Agreement (NAFTA),  now replaced by the US, Mexico and Canada Trade Agreement (USMCA), the WTO may be the next domino to fall. 

Context and Precedent: Congress last set rates of import duty in the Tariff Act of 1930, in what is commonly known as the Smoot-Hawley tariff. But from that point on, the president has, through executive order, reduced import duties—first as a result of reciprocal trade agreements reached in 1930s, then through the lower tariffs negotiated at the first General Agreement on Tariffs and Trade (GATT) meeting in 1947 as well as subsequent multilateral rounds – etc. So, in a nutshell, Congress ceded that power to the president.

The World Trade Organization became a weaponized trade tool utilized by China and Old Europe, most notably, to cheat the United States. President Trump changed that in fundamental ways with bi-lateral or smaller multi-lateral trade deals (such as USMCA). Essentially, whatever value the World Trade Organization may have had is now passed. It’s time for the US to officially remove itself, and let the rest of the world do whatever it would like. I think that you’ll see this happen after President Trump’s re-election in 2020.

19 thoughts on “Most Favored Nation?

  1. The term 'Fair trade' has become Orwellian now: nothing about current fair trade practices comes anywhere near what was meant by it long ago. Fair AND RECIPROCAL trade, let's go with that, the way Trump states it.

    In reality, the word 'fair' has lost it's meaning. When my 5 year old daughter comes home and says that she was treated 'unfairly' by classmates, it means she didn't get things to go her way.

    Fair doesn't mean anything anymore.

  2. The WTO has one, singular use – it's fun to rub peoples' faces in, when they violate the terms they designed to defraud the US so badly that even their own cronies agree with us. Like the Airbus case.

    Other than that, worthless.
    -Kle.

  3. I'm probably among the majority of citizens who give little, if any, thought to international trade.

    Back in the day in a college class, I remember the professor claiming trade was a carrot/stick to be used to promote peace. At the time I remember asking if that was like paying protection money to the Mafia. She found my question offensive. I still think it was a valid question.

  4. Indeed. What is the difference between the Mafia and the IRS?

    The interest rate.

    And, upon reflection, you will always get a consistent answer from the Mafia. The IRS, not so much.

  5. From a globalist's point of view, controlling every nation on the planet's trade, allowing nations such as China (pulling a name out of the air) to cheat with reckless abandon, can be profitable.

  6. Fair simply means, "it works for me". Which has nothing to do with what the word originally meant.

    Nothing is free, fair or forever. So bilateral trade with enforcement teeth is the way to go. If either party is unhappy, they simply pack their bags.

  7. The Mexican drug cartels charge less interest than the banks. They don't shark loans the way that the Italian (and other) mafia groups do. From what I've heard, they also listen to complaints fairly, unlike the IRS.

    I'm not advocating for Mexican drug cartels, but based on all accounts they are better landlords than the IRS is.

  8. "Legalized Mafia" nails it…and with RHT447's adder, "The interest rate.", it all makes sense now. Shows they are nothing more than thieves who make their own thievery laws. How convenient for them.

  9. Whining about it won't change a thing. If voting in all elections does not change the situation, then stronger measures are called for. I once read that Thomas Jefferson was said to have stated that a revolution is needed every 200 years to prevent tyranny. We are well past the " sell by " date on our present government. The current President is, by the accounts which I read, doing a strong job of working to remake the Federal government into less of a domestic enemy. If he can continue to make headway in this Sisyphean task, the necessity of another revolution may be pushed back. The donkeys are making a strong argument for revolution. It would be a dying shame if we were to have to shoot them.

    Thanks for the post.
    Paul L. Quandt

  10. Perhaps all it takes is a few honest (or even relatively honest) people in charge to fix the situation. I'm sure that if we had twenty years of Trump, there are a lot of things could be set right, despite the deep state. But that won't happen.

  11. Voting worked to put President Trump into office.

    But usually it's a choice between a bad candidate and a worse candidate.

    I have undertaken a number of criminal political corruption investigations that usually resulted in adjudication and conviction. Sometimes not because there wasn't proof beyond reasonable doubt. A young investigator had a case and asked me to help him. At the outset, I asked him what the difference was between a Republican and a Democrat. He knew the question had to be rhetorical and it was. I then asked him what the difference was between a white rat and a black rat was. He said, 'just the hair color'. I told him that was the difference between a Republican and a Democrat. They're all essentially rats.

    President Trump wasn't really either, and that set him apart. It's why the rats hate him.

  12. PS – which brings to mind the story that lab researchers have turned to using politicians for studies instead of rats. Why, you ask? (you did ask, right?)

    1. There are more politicians running around than rats.

    2 You don't get attached to politicians the way that you might to rats.

    3. There are some things that rats just won't do.

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