By Choi Sung-jin
Recently, the International Monetary Fund (IMF) has cited increasingly higher nontariff barriers as one of the main causes of dwindling global trade.
Nontariff traded barriers restrict imports of goods and services through mechanisms other than the simple imposition of tariffs, which may take the form of import quotas, subsidies, customs delays and rules of origin.
Why are major countries, including the United States, setting up their nontariff barriers higher now than ever before?
Hong Chun-ok, a researcher at Kiwoom Investment and Securities, said in her report Friday, "The rise of trade protectionism and high nontariff barriers in the U.S. is due to their finding that expansion of trade is exerting negative influence on its economic growth by, for instance, eroding into Americans' jobs, rather than benefitting it."
According to the World Bank's analysis of the relationship between the average trade liberalization and per capita gross domestic product from 2005-2015, a 10-percentage point increase in trade liberalization has led to a 5.6-percent growth in per capita GDP. This becomes possible because international trade allows people to buy goods, the production of which are not specialized in their own country, at low prices through foreign trade, in what experts call "product diversity benefit."
The increase of trade has incurred costs that are burdensome to national economies, however.
According to Professor David Autor of the Massachusetts Institute of Technology, the United States has benefitted from exchanging diverse products with other advanced countries that have similar industrial structures to America's _ until China jumped into international trade in earnest. As the U.S. trade with China has grown bigger, American manufacturing has suffered a big setback because it is unable to compete with labor-intensive Chinese manufacturing.
"Because of expanded trade with China, employment in the U.S. Midwest and Southeast sharply fell, losing between 980,000 and 2 million jobs," Professor Autor said. "Also a number of people lost their jobs because of industrial restructuring."
Based on all these analyses, Hong concluded that despite clear benefits from international trade, Americans have begun to feel the negative costs they have to pay for increased trade.
"Because it takes a long period of time and complicated procedures to change industrial structure, retrain and reemploy workers, the U.S. seems to approach the issue from simple logic that the current no-holds-barred trade system is problematic," Hong said.
Recently, the International Monetary Fund (IMF) has cited increasingly higher nontariff barriers as one of the main causes of dwindling global trade.
Nontariff traded barriers restrict imports of goods and services through mechanisms other than the simple imposition of tariffs, which may take the form of import quotas, subsidies, customs delays and rules of origin.
Why are major countries, including the United States, setting up their nontariff barriers higher now than ever before?
Hong Chun-ok, a researcher at Kiwoom Investment and Securities, said in her report Friday, "The rise of trade protectionism and high nontariff barriers in the U.S. is due to their finding that expansion of trade is exerting negative influence on its economic growth by, for instance, eroding into Americans' jobs, rather than benefitting it."
According to the World Bank's analysis of the relationship between the average trade liberalization and per capita gross domestic product from 2005-2015, a 10-percentage point increase in trade liberalization has led to a 5.6-percent growth in per capita GDP. This becomes possible because international trade allows people to buy goods, the production of which are not specialized in their own country, at low prices through foreign trade, in what experts call "product diversity benefit."
The increase of trade has incurred costs that are burdensome to national economies, however.
According to Professor David Autor of the Massachusetts Institute of Technology, the United States has benefitted from exchanging diverse products with other advanced countries that have similar industrial structures to America's _ until China jumped into international trade in earnest. As the U.S. trade with China has grown bigger, American manufacturing has suffered a big setback because it is unable to compete with labor-intensive Chinese manufacturing.
"Because of expanded trade with China, employment in the U.S. Midwest and Southeast sharply fell, losing between 980,000 and 2 million jobs," Professor Autor said. "Also a number of people lost their jobs because of industrial restructuring."
Based on all these analyses, Hong concluded that despite clear benefits from international trade, Americans have begun to feel the negative costs they have to pay for increased trade.
"Because it takes a long period of time and complicated procedures to change industrial structure, retrain and reemploy workers, the U.S. seems to approach the issue from simple logic that the current no-holds-barred trade system is problematic," Hong said.
