"The cause of free trade has always
been about the common man. It is about the right of average people to
trade with whomever they want. Protectionism, in contrast, is another way
for powerful people to extract money from our pockets and reward their
political friends with legal favors. In other words, it’s a
rip-off."
Protectionism is a
Rip-Off
Jeffrey Tucker
November 27, 2012
Winter is upon us, and that means digging out of our closets a whole
variety of different kinds of shoes. There are insulated hiking boots,
trail shoes, specialized hunting boots, waterproof shoes, and
more.
Ah, the wonderful varieties provided for us by the marketplace!
Thank goodness government never did to shoes what it has done to
education and health care. If it had, prices would be going up, instead
of down, and we’d probably have only a handful of models for all
seasons.
Only government-approved shoe stores would exist. And there would
probably be no such things as specialty outdoor shoes, which now account
for 30% of the retail sales of outdoor equipment in general (which itself
is a $646 billion industry).
Yet an interesting thing happened just following the election. The Obama
administration, without warning, announced that it opposes prolonging a
suspension of tariff walls on the materials that go into making these
specialty products. To put it plainly, there is going to be a new tax on
imports on your shoes. And it begins on Jan. 1, 2013.
(If you want to know more about the legal mechanism being overridden
here, look up “miscellaneous tariff bill”; it is a slight window of
freedom in an otherwise closed system.)
This puts many importers and foreign producers in a terrible bind.
They’ve already made their business plans and purchases based on the
assumption that the lower tariff rates will apply. Industry experts are
predicting price hikes of an immediate 38% on outdoor shoes. It will hurt
sellers, manufacturers, and especially consumers.
Why would the Obama administration do this? I have no inside knowledge.
But if this action fits most such actions, it comes down to a political
payoff for some industrial competitor somewhere. It has nothing to do
with saving jobs. It is saving some friends of the government at the
expense of everyone else. Another possibility is that this action helps
give more work and power to the U.S. Customs agency and its public-sector
union.
Maybe you have noticed: There is no national controversy about this. It
is left to institutions like the Outdoor Industry Association to
plead with their members to write, call, petition, beg, or do
whatever is necessary to save themselves from the tax. After all, that’s
what a tariff is. This tax hurts the many and benefits the few.
In effect, business is back to begging to do business. Does it work?
Sometimes it does, provided the affected industries grease the right
palms. Often, it doesn’t work. So people will show up at their favorite
store in mid-January and be appalled at the suddenly soaring prices of
outdoor shoes. Will they curse the Obama administration? Nope. Most
people are completely unaware of just how protectionist U.S. trade policy
truly is and how it affects millions of products. Instead, they will
blame the retailer for gouging or the manufacturer for being greedy. The
private sector will again be blamed for the actions of
government.
I’m particularly intrigued by these kinds of actions because they suggest
the real way that government undertakes its dirty work. Mostly, it is out
of public view. It consists of petty bureaucrats working with various
industry groups to rig the system in favor of whoever has the political
power and muscle to pull it off. The public debates and the elections
have very little at all to do with it. In fact, there is no debate about
most of what government does.
It’s not so much that it takes place in secret. Most all information is
publicly available. The problem is that no one but the most affected have
the incentive to watch what is happening in any particular sector on a
day-by-day basis. That’s why, if you really want to know what government
is doing to business, you have to ask an industry expert. Only they get
the communique. Only they have a strong incentive to act.
People think of protectionist policy as a benefit to domestic businesses.
This is not true. This is a clear case in which most of the harm of the
protectionist policy is done to American business. The reason is that
economic production takes place over many stages of production, and these
are ever more spread throughout the world. A tax on imports ends up
affecting domestic manufacturers and sellers, imposing artificially high
costs of doing business.
To be sure, there are remaining forms of protectionism that are a clear
sop to American industry. To my astonishment, The New York Times
ran an Op-Ed about one just the other day. Maybe you have noticed this,
but foreign airlines are not allowed to serve domestic routes in the U.S.
They can land in U.S. airports, but they have to head out with passengers
destined for foreign countries.
As a result, U.S. air carriers do not face the level of competition they
would otherwise. I noticed this only recently when I took a flight on
Turkish Airlines. The plane was beautiful, the chairs comfortable, the
service fantastic, and everything worked. I was amazed because this is a
government-owned airline. Generally, it was vastly better than what we
American consumers have come to expect from American companies.
Well, Turkish airlines serves a highly competitive market throughout
Europe and the rest of the world. The U.S. is actually unusual in this
respect. Only American companies are allowed to serve American domestic
routes. The result is a lessening of price competition and reduced
service. This serves to powerful interest groups: the air carriers
themselves and the labor unions that work for them.
If you think about it, this is an egregious regulation, one that would
never exist in a situation of free enterprise and free trade. And the
hypocrisy is overwhelming. In the land of the free, the home of all
things bright and beautiful, we have draconian laws that keep foreign
suppliers out, like some kind of mercantilist medieval fiefdom. What
possible harm could come from letting British Airways take me from
Atlanta to Chicago?
The cause of free trade has always been about the common man. It is about
the right of average people to trade with whomever they want.
Protectionism, in contrast, is another way for powerful people to extract
money from our pockets and reward their political friends with legal
favors. In other words, it’s a rip-off.
You and I might be reminded of this in the dead of winter 2013, when that
pair of hiking boots we had our eyes on suddenly soars in price and,
instead of buying, we decide to stay home in our slippers and contemplate
the fate of liberty in our time.
http://lfb.org/today/protectionism-is-a-rip-off/
--
Thanks for being part of "PoliticalForum" at Google Groups.
For options & help see http://groups.google.com/group/PoliticalForum
* Visit our other community at http://www.PoliticalForum.com/
* It's active and moderated. Register and vote in our polls.
* Read the latest breaking news, and more.
