A Zero-Tariff G7 Area? Yes, Please!

From FEE.org (June 13):

In yet another stunning turn of events at the current G7 meeting in Canada, Donald Trump has argued for a tariff-free G7 area. This would mean zero tariffs and no subsidies. Regardless of whether Trump's suggestion is to be taken seriously, the reactions speak for themselves.

This Is Not the First Time Trump Has Suggested This

Larry Kudlow, national economic adviser to the President, had indicated to the press that he had a “lengthy discussion” about the idea of creating a tariff-free G7.

Reduce those barriers. In fact go to zero, zero tariffs, zero no-tariff barriers, zero subsidies, and along the way we are going to have to clean up the international trading system about which there was virtual consensus of agreement.

"Ultimately that's what you want, you want tariff free, no barriers, and you want no subsidies because you have some countries subsidizing industries and that's not fair," Trump said. "So you go tariff free, you go barrier free, you go subsidy free, that's the way you learned at the Wharton School of Finance."

After Trump's introduction of new tariffs on both steel and aluminum, the idea that the President would suddenly favor dropping tariffs altogether seems odd. However, it appears that the tariffs aren't really a means of getting the American steel and aluminum industry back on its feet, as mercantilists would lead you to believe, but a means of retaliation. For Trump, America's trading partners have been treating it unfairly, which is why he is obligated to respond to the trade-threat. He is, quite frankly, not entirely wrong about that.

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The (Absence of) Reactions

Sir Simon Fraser, former permanent secretary at Britain’s Foreign Office, called Trump's trade suggestion "false" and "bizarre": "It amounts to a total G7 free trade bloc for goods,” he said. “This would create massive distortions of world trade. I doubt US officials or US industry and agriculture lobbies support it.”

Sir Simon Fraser is certainly right that some agricultural lobbies would not support it, but Donald Trump was also arguably elected to oppose the swamp of lobbyists and special interests that continue to swarm Washington, D.C.

As for the G7 leaders present, most seemed to have been taken aback by the suggestion, and even after a handful of hours, the responses were still timid. The self-proclaimed voices for free trade have suddenly become mute after someone suggested genuine free trade. Could it be that they are afraid of their own agricultural lobbies at home?

Free Trade Is More than Ideology

The European Union and other G7 partners need to improve their capacity for making a consistent case for free trade. The argument for free trade is all too often made in an ideological fashion, requiring us to stand for “openness” to the world. Instead, we should focus on the economically self-evident benefits of global trade. [read more]

I like the no-tariff idea for the G7. It’s a win-win. It’s too bad the G7 doesn’t. Then again they are playing politics.