The impact of US trade policy

The increase in US import tariffs has already prompted other countries to raise their own. This could lead to a trade war that wouldn't benefit anyone, writes Dr Koos Coetzee.

- Dr Koos Coetzee

President Donald Trump recently announced higher US tariffs on imports from various countries. Contrary to normal international practice, the US based the new proposed import tariffs on a simple comparison of imports and exports of specific products between the US and other countries.

Import tariff policy is one part of the agricultural trade environment and should be regarded in conjunction with other trade-distorting measures.

THREE PILLARS OF INTERNATIONAL TRADE

Agricultural trade was regarded as a special case and it was only included in multinational trade negotiations in the Uruguay Round of World Trade Organization (WTO) negotiations, and the Agreement on Agriculture (AOA) was entered into in 1995.

The AOA is based on three pillars, namely market access, domestic support, and export subsidies.

MARKET ACCESS

In the market access pillar, maximum tariff rates, the so-called bound rates, were set. Most countries, including South Africa, fixed the bound rates at very high levels of near 100%. In South Africa, import tariffs were calculated on a comparison between international and local prices.