Is Strict Reciprocity Required for Fair Trade?
34 Pages Posted: 23 Aug 2018 Last revised: 27 Aug 2018
The Administration of Donald J. Trump has repeatedly claimed that reciprocity is required for “fair” trade. While this concept is not new in U.S. political discourse, the Trump Administration’s insistence that strict or absolute reciprocity is required goes beyond any claims by previous U.S. administrations. By strict reciprocity, the United States means that all trade volumes and terms and conditions of trade must be mirror images of each other. As the United States has a trade deficit with all of its largest trading partners, the Trump Administration claims that this is evidence of unfairness in trade harming the United States. In addition, since countries like China have tariff rates (25%) for a particular import, such as automobiles, that are significantly higher than U.S. tariff rates (2.5%) for imported automobiles, this is also evidence of unfair trade that adds to the U.S. trade deficit. Based on this lack of strict reciprocity, the U.S. claims that trade with many of its partners is unfair and has imposed punitive trade sanctions to correct the imbalance.
This article demonstrates that not only is strict reciprocity impossible to achieve in practice, but it is based on a critical misunderstanding of elementary economic concepts, reviewed in this article. Since the Trump Administration has not proven its case that the lack of strict reciprocity is evidence of unfair trade, the United States must either find an alternative justification or withdraw the sanctions.
Keywords: Reciprocity, International Trade Law, International Law, International Economics, World Trade Organization, China
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