Speaking of unilateral tariffs, like the kind proposed by Ian Fletcher as mentioned in the last post, writing in the NY Times last September Alan Tonelson and Kevin Kearns had this to say:
America needs more sweeping and proactive tariffs on foreign goods and services that compete directly with existing and start-up domestic producers. Opponents insist that significant tariffs would increase international trade tensions. Experience, however, suggests otherwise.
In 1971, President Richard Nixon set unilateral tariffs against Japan, Germany and other countries that refused to let their currencies rise in value. Far from setting off a trade war, the tariffs persuaded other countries to help rebalance the world economy cooperatively. There’s no reason the same thing couldn’t happen today.
Could the same thing happen today? As with Fletcher's 30% "strategic" tariff, it is hard to imagine it under today's world trading system.
But just out of curiosity, I looked up what happened back then. Here's how the U.S. announced the measure at the GATT:
I have been instructed to inform you that effective 16 August 1971 the United States will impose generally a 10 per cent surcharge on all dutiable imports not subject to United States quantitative limitations. This temporary measure is designed to stem the rate of increase in imports in view of the critical United States balance-of-payments situation. This step is being taken in co-ordination with other measures which should bring long-range improvement in the United States balance of payments. …
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Imports bearing the surcharge, that is, dutiable items not also subject to mandatory quantitative restrictions, represent, about 50 per cent of the value of total imports. With total imports running at a rate of over $45 billion per year, annual revenues are estimated at $2.1 billions.
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The General Agreement on Tariffs and Trade allows members to protect their trade positions when faced with severe balance-of-payments difficulties. The United States is prepared to confer on this temporary measure with other members of the GATT at their convenience.
The Working Party Report on this surcharge included a number of statements by interested parties:
From the IMF:
Persistent balance of payments pressures have brought the reserve assets of the United States to a low level and its reserve liabilities to a very high level. These pressures have been particularly strong in 1970 and 1971. Therefore, in the absence of other appropriate action and in the present circumstances, the import surcharge can be regarded as being within the bounds of what is necessary to stop a serious deterioration in the United States balance of payments position. However, a corrective adjustment in the pattern of exchange rates would be a preferred means for achieving a better balance in international payments. The Fund will remain in close consultation with the authorities of the United States and the other members with a view to the prompt achievement of viable structure of exchange rates on the basis of parities established and maintained in accordance with the Articles of Agreement. The import surcharge, can be justified as a means of improving the U.S. balance of payments only until it is possible to supplant it by effective action in the exchange rate field.
From various other countries:
9. Other members of the working Party, while recognizing the seriousness of the balance of payments situation, could not endorse these views and drew attention to the full findings of the IMF. They considered that the trade balance had only a relatively minor place in the United States balance of payments especially having regard to other elements such as the net outflow of capital and net inflow of earnings connected with direct private investments by United States enterprises abroad. For example, movements of capital funds of multinational corporations had played an important role in the recent deterioration of the United States balance of payments. The overall disequilibrium had in recent years been of an order of magnitude totally out of proportion to the size of the fluctuations in the trade balance. Moreover, in the case of the United States balance of payments, income from direct investments abroad and income from trade were closely linked because of substitution of exports by the establishment of manufacturing facilities abroad. Net income on that account had shown a considerable and constant growth in the 1960's. For all those reasons, these members considered that measures restricting imports were not an appropriate means to correct the United States balance-of-payments disequilibrium.
10. In the view of these members the most important and immediate cause of the present balance-of-payments deficit in the United States had been the massive outflow of short--term capital, which reflected a loss of confidence in the stability of the United States economy. While this capital movement was speculative it would not have reached the dimensions it had, were it not for the persistent inflationary trend and price instability in the United States. It had also been indicated that the difficulties in the trade balance of the United States to a large extent resulted from factors on which the imposition of the surcharge would have no influence. The evolution of the trade balance was but a manifestation of the root causes, and the remedy should be found in the adoption of policies other than the limitation of imports. Surcharge action was counterproductive in relation to the objective of fostering price stability and increasing export and industrial competitiveness, apart from being damaging to the interest of other contracting parties and undermining the world trading system.
11. Some members questioned the appropriateness of regarding a sizable United States trade balance as a natural, essential feature in the world trade structure. The idea that the United States should have a constant trade surplus was untenable.
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13. Reference was made to the announcement of 15 August by the United States President linking removal of the surcharge to exchange rate adjustments, and to the IMF view that a corrective adjustment in the pattern of exchange rates would be a preferred means for achieving a better balance in international payments. In the view of a number of members the maintenance of the surcharge would make it more difficult to achieve full adjustment of currencies and this was a further argument for its early removal.
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39. The Working Party took note of the findings of the IMF and recognized that the United States had found itself in a serious balance-of-payments situation which required urgent action. While noting the contrary views of the United states, the other members of the Working Party considered that the surcharge, as a trade restrictive measure, was inappropriate given the nature of the United States balance-of-payments situation and the undue burden of adjustment placed upon the import account with consequent serious effects on the trade of other contracting parties.
And here's more from the U.S.:
41. The United States, taking into account the findings of the IMF, considered itself entitled under Article XII to apply quantitative restrictions to safeguard its external financial position and balance of payments but had chosen instead to apply surcharges, which were less damaging to world trade. It noted that while a number of other contracting parties had taken similar action there was no uniform precedent in the GATT for dealing with situations of this kind. The other members of the Working Party concentrated their attention on the measures which the United states had actually adopted in this respect, and noted that the surcharge, to the extent that it raised the incidence of customs charges beyond the maximum rates bound under Article II was not compatible with the provisions of the General Agreement.
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My Government considers that there is ample precedent in the GATT for applying temporary import surcharges where there is evident need to safeguard a country's external financial position and its balance of payments. There have been at least eleven cases in which contracting parties have imposed surcharges on imports to safeguard their balance-of-payments positions. The countries concerned were Canada, Ceylon, Chile, France, India, Israel, Nicaragua, Peru, the United Kingdom, Uruguay, and Yugoslavia. The surcharges applied in the last decade by the two developed countries - Canada and the United Kingdom - which used them for balance-of-payments reasons were similar in their impact to that which the United States is now applying. In 1962 Canada imposed surcharges of 5, 10, and 15 per cent ad valorem on almost 50 per cent of its imports. In 1964, the United Kingdom imposed a 15 per cent ad valorem surcharge on something over a quarter of its trade. A review of the record of the GATT consultations in these two cases reveals that both countries favoured import surcharges over quantitative restrictions because they were easier to administer and were deemed less restrictive of trade than quantitative restrictions would have been.
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In sum, the import surcharge is a temporary measure; it was adopted with great reluctance. It will obviously create certain difficulties for other contractor parties. But it was instituted as an essential part of a broad and integrated attack on problems in the domestic and international economic areas. And, in the view of my Government, it is an action less disruptive and restrictive of trade than quantitative restrictions would have been.
