In talking about trade, many politicians rely on the Big Lie — the simple assertion that America is the most open market in the world, and, therefore, that any criticisms of our existing trade policies for being protectionist are absurd. But sifting through the details of trade policy can provide insight — and entertainment. One of the best ways to defeat protectionists is to show the dirty little details of how protectionist systems operate.
For instance, agricultural import quotas permit each American citizen to consume the equivalent of only one teaspoon of foreign ice cream per year, two foreign peanuts per year, one pound of imported cheese per year, and one teaspoon of imported butter. The U.S. International Trade Commission examined the impact of these quotas on consumers a few years ago and concluded that the peanut import quota had the equivalent impact of a tariff of up to 90 percent while the cheese import quota had the same impact of tariffs as high as 170 percent. Yet, because few Americans know or understand the existence of dairy import quotas, there is little or no public protest against a 170 percent tax on one of the most nutritious foods Americans can eat.
The U.S. also has import quotas on beef from Australia and Argentina, on butter from Europe, and on cotton from Egypt. No matter how tight the quotas, some farm groups are never satisfied: the Clinton administration recently proposed imposing tariffs of over 100 percent on peanut butter imports from Canada as a means to protect high American peanut prices.
Congress is imposing over 8,000 different taxes on imports via the tariff code. While the average American tariff is now around five percent, some tariffs are in the stratosphere. Low-priced watches are hit with an average tariff of 151.2 percent. Tobacco stems must pay a 458.3 percent tariff. Tariffs on some low-priced shoe imports are 67 percent.
The U.S. Tariff Code looks like it was written to encourage the poor to raise their standard of living. If someone buys an imported plastic school satchel, he pays a 20 percent duty. But if he buys a school satchel made of fancy leather, he pays only a 4.7 percent duty. Footwear with outer soles of rubber or plastic, valued at not over $3 a pair, is tariffed at 48 percent; but if it is valued over $12, the tariff is only 20 percent. Soda lime drinking glasses valued at less than 30 cents carry a 38 percent tariff; if valued over $5, the tariff is only 7.2 percent.
Mink furs are duty free. And with the money a mother saves on her mink, maybe she can afford a polyester sweater for her baby — which carries a 34.6 percent tariff. Lobster is duty free; with the savings, struggling parents may be able to afford infant food preparations, which carry a 17.2 percent tariff. Orange juice carries a 40 percent tariff, but Perrier water pays only 0.8 percent.
Orange juice is cheaper in Canada than in the U.S. largely because the Canadians do not have any orange growers — and thus have no tariff on orange juice imports. The tariff on the highest quality brandy is 1.2 percent — while the tariff on the cheapest, rot-gut, brown-paper-bag-quality brandy is 41 percent. Worst of all, the tariff on cheap cigars is three times higher than the tariff on expensive cigars.
The U.S. Tariff Code looks like a variable value-added tax that was concocted in a lunatic asylum. The tariff on brooms is 42.3 percent, thereby safeguarding dust and dirt; the tariff on flashlights is 25 percent, thereby encouraging people to break their noses in the dark; the tariff on cheap scissors is 23.6 percent, thereby encouraging taxpayers to shred their IRS tax forms with their bare hands instead of cutting them neatly into little squares.
One of the favorite examples of the new protectionists of an industry that needs more protection is the textile industry. Textiles have already been heavily protected for over 200 years, and are today our oldest infant industry. The U.S. imposes import quotas on over three thousand different textile and apparel products, including tampons, typing ribbons, tarps, twine, towels, tapestries, and ties. Mexico in 1989 was allowed to ship the U.S. only 35,292 bras per year — not even enough to cup the neighboring city of Brownsville, Texas. U.S. textile trade policy is based on the sage insight that clothes are among the most dangerous objects that a nation can import — thus justifying stricter import controls on socks, nightgowns, and hankies than on pistols, rifles, and deadly chemicals.
Importers have been hammered by constant changes in the rules on classifying textile imports. Customs Service officials worked overtime in late 1989 to protect America against foreign shoestrings. Customs prohibited the import of a shipment of 30,000 tennis shoes from Indonesia because the shoe boxes contained an extra pair of shoelaces. One Customs official decided the extra laces were a clothing product that required a separate quota license for importing, and his decision set a precedent for the entire Customs Service. None of the tennis shoe importers were thinking of the extra laces as anything but part of the tennis shoe, and thus they were caught in their tracks without quotas for shoestrings. (Some new tennis shoes have eyelets for more than one set of laces.) Customs proceeded to establish intricate rules for shoelace imports. In a judicious ruling, the U.S. government announced that an extra pair of shoelaces would be permitted in a box of tennis shoes as long as the extra shoelaces were laced into the shoes and were color-coordinated with the shoes. But Customs warned importers: “We note that where multiple pairs of laces of like colors and/or designs are imported. . . a presumption is raised” that the shoelaces are not actually part of the shoe. [Italics in the original.]
The 1989 Economic Report of the President concluded that tariffs and quota restrictions produce an average effective tariff charge of over 50 percent for apparel imports. Textile trade restrictions hit poor families far harder than rich families. According to a Consumer Expenditure Survey by the Bureau of Labor Statistics, households with the lowest 20 percent of incomes spend almost four times the percentage of their income on clothing as do households in the highest 20 percent. The U.S. Association of Importers of Textile and Apparel estimates that textile and apparel protection costs the poor 8.8 percent of their disposable income.
It is difficult to underestimate the fanaticism of the U.S. textile protectionists. In May of last year, President Clinton announced that the United States was sending U.S. troops to Macedonia to safeguard it from the Serbians. But, a few weeks later, while Macedonia was struggling with a flood of refugees from Bosnia and threats of invasion, the U.S. Commerce Department launched a preemptive attack on a trickle of Macedonian clothes exports. The U.S. Commerce Department slashed the amount of wool suits that Macedonia could ship to the U.S. by over 70 percent — permitting only 80,000 per year. A Commerce Department spokesman told me that the quotas were in response to “rampantly rising imports” from Macedonia — but Macedonia was only supplying three percent of the wool suits bought in American. Perhaps the Clinton administration is planning to post U.S. army troops in Macedonia to serve as advance inspectors for the U.S. Customs Service — to keep a closer count on Macedonian exports.
Unfortunately, the Macedonia decision exemplifies the protectionist tendencies of the Clinton administration. The U.S. has imposed new textile import quotas on over fifteen nations since Clinton took office. One of the most surprising new quotas is the early 1994 quota imposed on silk clothing from China. No U.S. company manufactures silk clothing — we do not have any silkworms in this country, and there is no hope that an industry will be established here anytime in the next couple centuries. But a few officials in Washington feared that imports of high-quality silk blouses might be hurting the sale of low-quality polyester blouses made in the U.S.
Every trade barrier undermines the productivity of capital and labor throughout the economy. A 1979 Treasury Department study estimated that trade barriers routinely cost American consumers eight to ten times as much as they benefit American producers. A 1984 Federal Trade Commission study estimated that tariffs cost the American economy $81.00 for every $1.00 of adjustment costs saved. Restrictions on clothing and textile imports cost consumers $1.00 for each 1 cent of increased earnings of American textile and clothing workers. According to the Institute for International Economics, trade barriers are costing American consumers $70 billion a year — equal to over $1,000 per family.
Fair trade consists largely of the U.S. government devising new ways to protect American consumers against the scourge of low prices. The U.S. government does not penalize foreign companies for charging high prices — only for charging low prices. Imported clothing that is priced lower than U.S. clothing is automatically assumed to threaten to disrupt the U.S. market. Fair trade aims not to safeguard competition but to enrich American competitors. The most common foreign “unfair trade practice” is producing a better product at a lower price. In a nation with hundreds of federal, state, and local consumer protection agencies, consumers are explicitly denied a role in most trade proceedings of the U.S. International Trade Commission and Commerce Department.
U.S. trade policy has been an unending war against abundance. Do we really need tens of thousands of government bureaucrats working to reduce the living standard and buying power of American citizens? Do we need federal employees counting each arriving handkerchief from the Third World, carefully weighing each keg of incoming cheese, and counting the numbers of shoestrings in each box of imported tennis shoes? There was nothing mentioned in the preamble of the U.S. Constitution about forming “a more perfect Union” in order to prevent Americans from eating foreign ice cream.
The time has come to deregulate our national borders — to end the medieval pursuit of a “just price” for imports — and to cease allowing government officials to have economic life-and-death power over American businesses. It should not be a federal crime to charge low prices to American consumers.