Sharing a panel at an economic forum at the Organization for Economic Corporation and Development last week, U.S. Commerce Secretary Wilbur Ross and his European counterparts provided a striking contrast in their views on multilateralism.
"The sky has not fallen on the U.S. and it won't," said Ross, brushing off the concerns raised by the EU trade ministers about the adverse impact trade tariffs would have on global economies. Less than 24 hours after Ross' blunt comments in Paris, the United States announced steep tariffs on steel and aluminum from their largest trading partners — Mexico, Canada and the European Union. All three of them immediately announced their intentions to retaliate with their own tariffs against American products. "Trade War" was headlined in breaking news and the global stock markets predictably took a hit.
If indeed this trade conflict is escalated to a trade war, no country will emerge a winner. Today, international imports and exports account for a third of the total global GDP, doubling from two decades ago. Any downward pressure on trading activity will have dire implications for the world economy. But rather than paint a gloomy picture of a world with less trade, let's look at the benefits of enhanced trade integration. In a hypothetical scenario in which tariffs in each sector are reduced to the lowest level applied across Group of 20 economies, global trade would expand by an additional 3 percent over the medium term, based on estimates from the OECD studies.