Can you convince a Lubbock, Texas cotton farmer (or his Congressman) to forgo his (maybe $150,000) cotton subsidy? Probably not. After all, these U.S. government payments let him profitably compete in world markets.
Correspondingly, would China say yes to a tariff free supply chain for the iPhone? Doubtful. After all, multinationals are providing a steady government revenue stream.
So, instead of trying to get the US to eliminate payments to US farmers or to ask China to agree to lower tariffs, Plan B has been proposed. The new focus involves a basic trade infrastructure that includes road building in developing nations and sanitary standards.
The Economic Lesson
As Professor Timothy Taylor tells us, the World Trade Organization (previously known as GATT), has been immensely successful in lowering trade barriers. Since 1948, through 8 rounds of trade talks, they gradually achieved their goals.
Now though, the Doha Round of talks has met resistance. Scheduled to conclude no later than January 1, 2005 and still continuing, the Doha goal of reducing agricultural tariffs and subsidies has been unsuccessful.
What to do when you no longer have “low hanging fruit?” Look for different trees.
An Economic Question: With “encourage comparative advantage and world trade” located at one side of a scale and “protect home industry” as the other end, what do you prefer?