Financial History Issue 133 (Spring 2020) | Page 16

Non-tariff barriers are like tariffs in dis- guise. They are regulations and rules that politicians put in place that make it harder for other countries to sell their goods. Generally, they go largely unnoticed, but that doesn’t mean that they aren’t a prob- lem. The UK-based Institute for Govern- ment says, “It is non-tariff barriers that are the real impediment to international trade today.” There are two key areas of such trade impediments that the world needs to worry about. First are plant and animal health regulations. Such edicts may be reasonable at face value. Who wouldn’t want safe food to eat and humane treat- ment of animals? However, the prob- lem is that different countries frequently have vastly different ideas as to what is the right thing to do. For instance, recent discussions between the United Kingdom and the United States show dif- ferences in food safety and animal welfare. While America’s poultry businesses rinse chicken carcasses in chlorinated water, Britain is unhappy with such practices. Deciding which position is correct may depend entirely on where you sit, making similar disagreements a knotty problem for negotiators. The second set of non-tariff barriers listed in the UN report are requirements for labeling, manufacturing and coun- try content. These requirements generally place a burden of increased paperwork and bureaucracy on companies. Effec- tively, the fact that there is no explicit cost doesn’t mean there isn’t an addi- tional financial weight imposed on foreign goods. In some, but not all cases, compa- nies may get so buried in paperwork that the costs all but preclude doing business in a given country. The UN report says that while such non-tariff measures were relatively lim- ited in Asia two decades ago, they have increased steadily in the intervening years. That period also coincided with falling tariff levels in the region. Or, put another way, one trade barrier is at least partially getting replaced by the other. Perhaps the most worrying thing for trade is a rise in inward-looking politi- cal populism. At its worst, that threatens to reverse globalization, writes Professor Harold James in the Annual Review of Financial Economics. Such movements in the United States, United Kingdom and other places have become increasingly influential in their efforts to undo free trade as we have come to know it. James sees an eerie parallel with the efforts to deglobalize that took place just before WWI, when countries routinely used as a method “of compensating losers” from trade. That is, of course, something we saw over the past couple of years in the United States. James writes, “Globalization depends on a complex system of regulating cross- border flows and on embedding domes- tic rules in an international order.” But these political populists now want to cast aside those rules as irrelevant and instead offer a dream that life would be better with lower levels of trade and with fewer “international entanglements.” Hence, we get promises of higher trade barriers. To the extent that voters buy into such nar- ratives, then globalization and trade as we know it may slow or even reverse. That’s something to worry about.  14    FINANCIAL HISTORY  |  Spring 2020  | www.MoAF.org Simon Constable is a fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise. He is the co-author of the best-selling book, The Wall Street Journal Guide to the 50 Economic Indicators that Really Matter. He contributes a regular column to the Wall Street Jour- nal and writes regularly for other leading publications. Sources Fouquin, Michel and Jules Hugot. “Two Cen- turies of Bilateral Trade and Gravity Data: 1827–2014.” CEPII Working Paper 2016- 14, May 2016. CEPII, using “Tariff Rate, Applied, Weighted Mean, All Products (%).” Data, World Bank, January 2020. James, Harold. “Deglobalization: The Rise of Disembedded Unilateralism.” Annual Review of Financial Economics. 2018. Institute for Government. “What is a Non- tariff Barrier?” Levi Strauss & Co. “Levi’s 501 Jean Global Pro- duction Footprint.” 2015. Moss, Trefor. “Coronavirus Epidemic Further Dents China’s Auto Market.” Wall Street Journal. February 13, 2020. Smith, Adam. The Wealth of Nations. 1776 Tariff data prepared by Steve Hanke using information from World Bank and IMF. United Nations. “Asia-Pacific Trade and Investment Report 2019: Navigating Non- tariff Measures towards Sustainable Devel- opment.”