The United Nations Conference on Trade and Development (UNCTAD) releases a monthly report on global trade. In their March update, they focused on tariffs and revealed that while global trade reached a record high of $33 trillion last year, the future remains uncertain due to mounting tensions, protectionist policies, and trade disputes.
Luz Maria de la Mora, Director of the International Trade Division at UNCTAD, is responsible for the Global Trade Update. She was previously part of the Mexican negotiating team for the North American Free Trade Agreement (NAFTA) in 1992, which is still a controversial topic today.
In an interview with UN News, de la Mora explains that tariffs themselves are not the issue, but rather the uncertainty caused by major economic players disregarding established international trade rules.
Tariffs have been a part of the international trading system for nearly 80 years, starting with the General Agreement on Tariffs and Trade (GATT) in 1948 and later replaced by the World Trade Organization (WTO) in 1995. These organizations established a set of rules that provided certainty for producers, investors, and exporters by ensuring that tariffs would not change on a yearly basis.
While tariffs are widely used, they are imposed according to negotiated rules within the WTO or regional organizations.
UN News asked de la Mora why developing countries tend to have higher levels of protection through tariffs. She explains that it can be used as a tool to develop certain industries, but it also leads to higher production costs and can deter competition. Additionally, governments may use tariffs as a source of revenue, but this ultimately results in higher costs for consumers.
De la Mora was heavily involved in the negotiation of NAFTA, which was the first free trade agreement between developing and developed countries and eliminated tariffs between the United States, Canada, and Mexico. This agreement transformed Mexico’s economy, attracting more investment and creating jobs in the manufacturing sector. However, there were also sectors and companies that suffered as a result. De la Mora emphasizes the importance of trade policies being accompanied by measures to support those who may be negatively impacted.
She also points out that the increasing number of tariffs and measures imposed by major trade players outside of the established WTO rules is creating uncertainty and unease among the private sector. This could potentially lead to a slowdown in investment, trade, economic growth, and job creation.
De la Mora warns that developing countries would be the most affected by a slowdown in the global economy, as 95 of them heavily depend on their exports. This highlights the importance of a functioning international trading system that offers certainty and stability for these countries. Therefore, she stresses the need for continued multilateralism in trade.