The WTO must develop common language and require all governments to abide by common rules.
Adam Smith began his inquiry into the Wealth of Nations with the simple analogy of a pin factory with 10 workers under a single roof. If the men worked as individuals, each man making the entire pin by his own effort, the factory might produce 10 pins a day.
Through division of labor in which each worker uses a single skill, a pin factory with no more than 10 employees could produce 20 pounds of pins in a single workday and supply a larger market in Scotland, perhaps extending even as far away as London.
From that simple analogy, things became more complicated — for almost 500 pages.
And so it is with all systems of tariffs, quotas, certificates of origin, trade agreements and WTO rules today.
While Adam Smith wrote about 10 men working under a single roof, China has entire communities that specialize in producing single products for sale throughout the world. Containerized shipping has made this feasible. The auto industry now relies on common parts made in specialized factories around the world. Global supply chains are a fact of life in business today. To think otherwise is to bury your head in sand.
In lieu of local taxes, the government of the Bahamas obtains a large portion of its revenue from tariffs on imported goods. Collection at the docks and airports is simple and the public enjoys its freedom from taxes, not aware that tariffs are really just another way of taxing consumption. Numerous other countries employ the same form of taxation. So did the United States for many years after gaining independence.
• Every nation has politically powerful interest groups seeking protection from foreign competitors.
• Most countries use subsidies in one form or another to encourage development of new industries.
• Many wealthy nations assist developing nations in ways that do not conform to mercantile thinking.
Just as Adam Smith recognized the need for Britain to maintain the ability to build its own naval vessels, the WTO allows nations to protect industries essential to defense. Trump uses this loophole frequently.
WTO rules and regulations go on and on for much more than 500 pages.
The WTO must develop a common language to describe issues such as those listed above and have authority to require all governments to abide by common rules. Until that happens, mercantile trade wars will persist.
David A. Howard is the editor emeritus of American Shipper.
Commentary: Global pin factories
