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tariffs Archive

Thursday

7

January 2016

0

COMMENTS

Why Just Stop With Tariffs on China?

Written by , Posted in Economics & the Economy, Free Markets

Noted scholar and respected intellectual Donald Trump has unveiled another part of his plan to “make America great again:”

Donald J. Trump said he would favor a 45 percent tariff on Chinese exports to the United States, proposing the idea during a wide-ranging meeting with members of the editorial board of The New York Times.

…“I would tax China on products coming in,” Mr. Trump said. “I would do a tariff, yes — and they do it to us.”

Mr. Trump added that he’s “a free trader,” but that “it’s got to be reasonably fair.”

“I would do a tax. and the tax, let me tell you what the tax should be … the tax should be 45 percent,” Mr. Trump said.

Now, I know I’m just a simpleton, but something strikes me as off about this plan. Perhaps The Donald can help a poor confused sap make sense of all this.

Presuming he believes this tariff on goods coming in from China will benefit Americans, why does he not propose similar measures on goods from other countries?

But why stop there. If a tariff on goods coming into the U.S. is good for those within the U.S., then so too must a tariff on goods coming into a state be good for those within that state. Should Florida, then, tax goods made in Texas at 45%, or better yet, do so for goods made in any state other than Florida?

It seems to me that Donald Trump believes taxing goods when they cross borders makes us better off, so I’m having a hard time understanding why he isn’t compassionate enough to want to improve our lot even more by implementing that policy across the board. I mean, it’s all well and good to “make America great again,” but why not make it SUPER DUPER great? Hmm?

Wednesday

5

December 2012

0

COMMENTS

An Unconvincing Case for Protectionism

Written by , Posted in Economics & the Economy, Free Markets

A few weeks ago, Rep. Tom Rooney took to the Daily Caller to make “a conservative case for sugar tariffs.” He failed in my view, but he did succeed in proving my recent point that bringing home the bacon and handing out political “gifts” is a bipartisan disorder.

Rep.  Rooney makes the following arguments, as I understand it:

1) All countries use protectionist and interventionist policies in the sugar market – therefore we must too.
2) Brazil has captured a lot of the market and will drive out US producers with low prices if they don’t receive government assistance.
3) Jobs will be lost and prices will rise if that assistance isn’t provided.

He goes on to say that government assistance shouldn’t be too high, nor should it involve dictating business practices. That’s not enough; it shouldn’t exist at all. I agree with Milton Friedman’s view that even unilateral free trade is a better option than meeting subsidies with subsidies and tariffs with tariffs. If Brazil wants to “plow another $1 trillion into its sugar market over the next few decades,” we should let them. It’s money straight from their taxpayers pockets and into the hands of US consumers. It harms them, not us. As for the 142,000 US jobs supposedly on the line, it’s not either/or. The choice is not between subsidizing US sugar or seeing those people forced into unemployment. Their labor can be used elsewhere, and when combined with lower sugar prices than we would have otherwise seen if not for Brazilian subsidies, the net result is greater production for us. We get cheap sugar and we get whatever else those 142,000 people are able to produce. The only real loser in this equation is the Brazilian taxpayer.

Sure, the decline of US sugar producers would be disruptive to the people whose jobs were lost, but I think the social safety net (more like hammock these days) is more than big enough to handle it. And disruptions happen in all markets in a competitive system. Whether or not its because another firm has developed a more efficient business model or because of foreign subsidies doesn’t really make any difference, so long as it’s not our taxpayer doing the subsidizing. The real issue is that bad government policy has so encumbered the market that absorption of displaced workers is difficult, but more taxpayer handouts are not the solution to that problem.

Rooney repeatedly warns of a Brazilian led OPEC for sugar, presumably to explain his seemingly contradictory (amazingly, I find myself in agreement with Think Progress of all places) concern that Brazilian control over the market will mean both lower prices (to drive out American producers) and higher prices (to hurt US consumers), but OPEC strikes me as a bad comparison. An oil cartel can be effective (somewhat) at manipulating prices because oil production is necessarily concentrated in places where oil can be found, and the major national producers are few. If you have no oil deposits, it doesn’t matter how high and enticing prices get, you can’t join the market. It’s true that sugar cane cannot grow just anywhere, but the barriers to entry are not near so significant as oil. Non-Brazilian producers can simply increase production to offset any attempts by Brazil to artificially raise prices. In other words, even if US producers dwindle because Brazil is able to charge below-market prices thanks to subsidies, any later attempt to raise prices and charge above-market rates after capturing a dominant position would result in the return of US producers, or other new entrants to the market.

There is also a national defense issue with regard to oil that doesn’t exist for sugar. Interruption in the supply of sugar does not pose the same concerns as interruptions in the supply of oil.

What I think it comes down to is whether we adopt the protectionist view that within all arbitrarily designated political borders there must be complete self-sufficiency, or we instead allow ourselves to be blessed by the productive advantages brought about by global trade. Free trade is best, to be sure, but if the only available choices are between letting others foolishly distort their markets or joining them and doing the same to ours, I think it’s an easy decision which path to follow.

Sunday

13

September 2009

2

COMMENTS

Obama Launches Trade War

Written by , Posted in Free Markets, Labor Unions

The first shots in a trade war – guaranteed to produce heavy economic casualties right here at home – have been fired by Barack Obama.  In order to secure a Pyrrhic victory for narrow union interests, President Obama has sent unarmed and ill-prepared consumers to the front lines.

Obama has slapped Chinese tire imports with a three-year tariff – at rates of 35 percent the first year, 30 percent the second and 25 percent the third. The justification for this action is a law passed in 2000, as part of the negotiations to Chinese admittance into WTO, that says the U.S. can impose tariffs if “a surge in Chinese imports damages a U.S. industry.”

A surge? Are Chinese tires storming the beaches of Florida?

Basically, some union official decided that China was selling too many tires and came whining about it to the U.S. government. All of a sudden it’s protectionism time.

Unfortunately, protectionism doesn’t actually do any protecting.  It doesn’t protect consumers who will have fewer choices at higher prices.  It doesn’t protect tire importers who will also pay higher prices which, when they necessarily pass them on to consumers, will cost them business.

It doesn’t even help the particular domestic industry ostensibly being protected.  Without competitive pressures, industry will grow in an inefficient and wasteful manner.  Numerous countries, particular in Latin America, have tried to develop economically by protecting domestic industries.  It has never worked.  You can no more protect an industry through tariffs than you can protect a child by locking him in a closet for twenty years.

Update: Daniel Ikenson at freetrade.org offer a much more detailed analysis.

Wednesday

8

July 2009

0

COMMENTS

A Regulation We Could Actually Use

Written by , Posted in Economics & the Economy, The Nanny State & A Regulated Society

James Gibney of the Atlantic proposes making the actual cost of food apparent to the consumer by requiring labels indicating whether a product has either received government subsidy or benefited from anti-competitive tariffs.

Americans pay much more than they should for their food. Thanks to a thicket of subsidies and tariffs that support American farmers and tilt the growing field against cheaper foreign producers, we get ripped off twice: first as taxpayers who ante up for roughly $25 billion in agricultural subsidies each year ($4 billion for milk alone in 2006); then as consumers who pay higher prices at the checkout counter because we can’t take advantage of low-price imports.

…So, how can we get more Americans to look up from their feedbags and demand that Congress restore some sense to the marketplace? I recommend a little truth-in-packaging. Just as food manufacturers now list their products’ ingredients and nutritional value, they should also disclose their “free-market” value.

To wit, every product whose ingredients benefit from a subsidy should include the following language on the label:

“This product has been subsidized by the U.S. government at taxpayer expense. For more information, please visit usda.gov.”

And every product that benefits from tariff protection should have the following language on the label:

“This product is protected from foreign competition by U.S. import tariffs. Its price is higher as a result. For more information, please visit usitc.gov.”

Now there’s a regulation that makes sense.  That, unfortunately, also means it will never happen.

I must take issue with one thing Gibney says, though.  He says “subsidies and tariffs were originally intended to help protect small farmers–a purpose they’ve largely outlived.”  The idea that they have “outlived” their purpose implies they once served any purpose beyond vote buying. This is a fiction.

Other than that minor quibble it’s an excellent post. I’d like to take the idea a step further and apply it to all products receiving government assistance. A good way to solve the problem of concentrated interests versus diffused costs would be to make people actually see the consequences of the bad policy coming out of Washington. Knowing their food has been made a little bit more expensive is one thing, but seeing that same little bit added to the hundreds of products they use every day would make them realize that it adds up mighty high.  But like I said, this will never happen. Forgive me for dreaming.

Hat tip: Cato@Liberty