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Posts Tagged ‘protectionists’

Tariffs Are Taxes on Americans—But Protectionists Pretend Otherwise

Posted by M. C. on April 22, 2024

Taxes benefit the regime while impoverishing the rest of us. To favor “free trade” is to favor lowering taxes on Americans and depriving the regime of funds. To favor protectionism, whether it be for some foreign-policy crusade, or to “create jobs” is to simply be in favor of raising taxes and handing over more Americans’ wealth to the state.

https://mises.org/mises-wire/tariffs-are-taxes-americans-protectionists-pretend-otherwise

tax

04/18/2024 • Mises Wire •Ryan McMaken

During the 2016 and 2020 campaigns, Trump’s opponents in the Democratic party (and elsewhere) often pointed out that Trump’s protectionism hobbles private markets and the economy overall. Yet, the allegedly anti-protectionist Biden administration has done virtually nothing to end Trump’s protectionists policies put in place from 2017 to 2020. The motivation is unclear, but it is possible that the Biden administration realized that protectionism is a useful political tool. These policies offer a way of punishing opponents, rewarding allies, and pandering to voters. 

Now that it’s election season, the pandering side of the equation is in full swing. Biden this week called for “sharply higher U.S. tariffs on Chinese metal products.” Appropriately, Biden included this new spate of protectionism in what Reuters calls “a package of policies aimed at pleasing steelworkers in the swing state of Pennsylvania.” 

Biden’s pandering will likely bear some fruit, politically speaking. Protectionism remains popular. But, as Henry Hazlitt put it, voter support for raising tariffs is “the result of looking only at the immediate effects of a single tariff rate on one group of producers, and forgetting the long-run effects both on consumers as a whole and on all other producers.” Those who are incapable or unwilling to examine policies beyond their most short-term effects are easy targets for protectionist rhetoric.

The reason there are so many negative effects, of course, is that tariffs are nothing more or less than taxes and they produce the same effects as any other type of tax: when Country A imposes tariffs, Country A’s government is enriched while both producers and consumers living in Country A must endure higher prices and a less productive economy. 

Even those voters who imagine themselves as opposed to taxes and “big government” often embrace tariffs—apparently fooled by the misconception that tariffs aren’t taxes or that they are only paid by foreigners. Many conservatives and protectionist “libertarians” create a wide variety of ornate theories with big words designed to distract from the fact that American tariffs are taxes on Americans. Ultimately, however, these people are simply pushing for tax increases. 

It’s Not that Complicated: Tariffs Are Taxes 

A tariff is a tax that is collected when a good crosses an international border. In the United States, as with any country that imposes tariffs, any good that is subject to tariff can only enter the country when the extra tax is paid upon entry. (This tax is in addition to any other taxes that must be paid down the line, such as sales taxes.) As with any similar transactional tax (e.g., sales taxes) the result is higher prices and fewer choices for consumers. It must also be noted that the “consumer” of imported goods need not be the retail consumer or end consumer. A great many imported goods are intermediate goods that are used in the creation and production of other goods produced and sold within the United States. That is, tariffs are often taxes on materials used by American entrepreneurs and business owners to produce American goods. 

Raising taxes (i.e., tariffs) raises costs for all these American producers and consumers. Yes, it is true that Americans do not suffer the full consequences of taxes on foreign goods. As with a sales tax, a tariff imposes some costs on the seller by raising prices and thus reducing total sales. But it is simply wrong to portray tariffs are taxes primarily on foreigners, since, as Murray Rothbard notes, “Tariffs injure the consumers within the ‘protected’ area, who are prevented from purchasing from more efficient competitors at a lower price. 

Yet, protectionists have long been in the business trying to explain that tariffs are not actually taxes on Americans at all. Or, as Rothbard puts it: 

Tariffs have inspired a profusion of economic speculation and argument. The arguments for tariffs have one thing in common: they all attempt to prove that the consumers of the protected area are not exploited by the tariff. These attempts are all in vain.

Old habits die hard, however. Even among readers of mises.org, one finds plenty of readers involved in the quest to convince others that raising taxes is a good thing. One such claim is that since other countries impose high import taxes on their own citizens, the US government must do the same. Consider this response to a recent mises.org article on trade. The reader states: “Baloney. Horse manure. ‘Free trade’ is a meaningless slogan. The issue of trade is much more complex than slogans. You can’t have free trade with Japan and China, which uses massive protectionist policies to help its own workers and industries. The wages are not comparable!!!”

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Baby Formula: Thank Protectionists and the FDA for the Shortage

Posted by M. C. on May 16, 2022

Within this voucher programs, funds are funneled to select corporations through programs that grant a formula company “the exclusive right to have its formula provided to WIC participants in the State.” In practice, this means the largest companies with the most lobbyists are able to dominate the subsidized portion of the market. Since the subsidized portion of the market is so huge, that usually means those companies dominate the market overall. This makes it harder for newcomers to break into the market and offer any real competition. This means the marketplace becomes reliant on a small number of large firms. 

Protectionism is fundamentally about using violence against Americans who try to bring goods to market in ways that the protectionists don’t like.

https://mises.org/wire/baby-formula-thank-protectionists-and-fda-shortage

Ryan McMaken

For parents who rely on baby formula—whether by choice or due to medical necessity—the nationwide baby formula shortage has become increasingly difficult to ignore. According to the Wall Street Journal, Walgreens, Target, CVS, and Kroger have all begun rationing supplies of formula.

Covid lockdowns, combined with a product recall by formula manufacturer Abbott Nutrition has created a very real shortage in a product that is key for proper nutrition in many children.

With the shortage has come the usual half-baked bromides about “evil corporations” and how baby formula companies are supposedly not regulated enough. Throw in a few references to “late-stage capitalism” and you’ll get a good taste of the usual “blame capitalism” narrative that accompanies every bout of shortages or rising prices.

Formula Is Heavily Regulated and Subsidized

In reality, federal government intervention in the formula market is rampant. Thanks to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), formula companies are heavily subsidized by voucher programs which mean that the US government is “provid[ing] more than half of the formula that is used in the US.“

Within this voucher programs, funds are funneled to select corporations through programs that grant a formula company “the exclusive right to have its formula provided to WIC participants in the State.” In practice, this means the largest companies with the most lobbyists are able to dominate the subsidized portion of the market. Since the subsidized portion of the market is so huge, that usually means those companies dominate the market overall. This makes it harder for newcomers to break into the market and offer any real competition. This means the marketplace becomes reliant on a small number of large firms. 

[Read More: “Why Are the Feds Subsidizing Baby Formula Companies?” by Ryan McMaken]

The anticompetitive nature of federal WIC policy is just one aspect of how little the formula market has to do with anything we might call “the free market.”

Protectionism Prevents Access to Foreign Formula

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Down With Fraudulent ‘Fair’ Trade | The Libertarian Institute

Posted by M. C. on October 22, 2021

Government cannot make trade more fair by making it less free. It should not be a federal crime to charge low prices to American consumers. The time has come to end the medieval pursuit of a “just price” for imports and to cease allowing government officials to cease boundless economic power over American consumers and business. Unfortunately, fair trade demagoguery will continue as long as politicians are greedy, lobbyists are generous, and journalists are clueless.

https://libertarianinstitute.org/articles/down-with-fraudulent-fair-trade/

by Jim Bovard

The Biden administration is embracing the same flawed “fair trade” mantra that previous administrations used to sanctify protectionist policies. Biden’s team has “largely dispensed with the idea of free trade as a goal in and of itself,” the New York Times reported.U.S. Trade Representative Katherine Tai recently touted the Biden administration’s plans to “shape the rules for fair trade in the 21st century.” What could possibly go wrong from such a lofty aspiration?

Thirty years ago, my book The Fair Trade Fraudwas published by St. Martin’s Press. That book was translated into Japanese and Korean, and adapted as a textbook at the University of Chicago, Duke University, American University, University of Texas, and many other colleges. That book exposed fair trade as one of the great intellectual frauds of modern times. It is also a moral delusion that could lead to endless conflicts and an economic catastrophe.

When politicians call for fair trade with foreigners, they use a concept of fairness diametrically opposed to the word’s normal usage. In exchanges between individuals – in contract law – the test of fairness is the voluntary consent of each party to the bargain: “the free will which constitutes fair exchanges,” as Sen. John Taylor wrote in 1822. When politicians speak of unfair trade, they do not mean that buyers and sellers did not voluntarily agree, but that federal officials disapprove of bargains American citizens made. Fair trade means government intervention to direct, control, or restrict trade.

Fair trade often consists of some politician or bureaucrat picking a number out of thin air and forcibly imposing it on foreign businesses and American consumers. Fair trade meant that Jamaica was allowed to sell the U.S. only 970 gallons of ice cream a year, that Mexico could sell Americans only 35,292 bras a year, and that Poland could ship us only 51,752 pounds of barbed wire. Fair trade meant permitting each American citizen to consume the equivalent of only one teaspoon of foreign ice cream per year, two foreign peanuts per year, and one pound of imported cheese per year.

American protectionists have always found moral pretexts to denounce “unfair” imports. In the 1820s, protectionists proclaimed that trade between England and America could not be fair because England was advanced and America was comparatively backward. In the 1870s, protectionists announced that trade between the U.S. and Latin America could not be fair because the U.S. was comparatively rich while Latin American countries were poor. In the 1880s, protectionists warned that trade could not be fair if the interest rate among the trading nations differed by more than two percent. In 1922, Congress effectively defined “unfair competition” as any foreign cost of production advantage that existed for any reason on any product.

Since then, the U.S. definitions of unfair trade have proliferated almost as fast as the number of D.C. trade lawyers. In the 1980s and early 1990s, the U.S. government penalized foreign farmers for not paying wages to their wives and children, foreign governments for not coercing foreign companies to buy more American products, and foreign companies for relying on part-time labor, making charitable donations, and failing to charge American customers the highest prices in the world. Federal law currently assumes that foreign competition that prevents American companies from raising their prices unfairly injures them.

The most common foreign “unfair trade practice” is selling a better product at a lower price. Xenophobia is the foundation of U.S. antidumping law. The U.S. Commerce Department sees low-priced imported goods as Trojan Horses, insidiously undermining the American economy. The U.S. government has imposed more dumping penalties against low-priced imports than has any other government in the world.

The dumping law forces foreign companies to run a nearly endless gauntlet of American bureaucrats. Antidumping laws make it a crime for a company to sell the same product for two different prices in two different markets 15,000 miles apart. Dumping did not become a top trade issue until the 20th century, perhaps because our ancestors had not studied enough economics to become paranoid about minor price variations.

“Fair trade” is increasingly a rallying cry of both conservatives and liberals who apparently believe that there is some hidden wisdom buried in the basement of federal agencies. But it is impossible to overstate the folly of some protectionist regimes. In 1816, Congress imposed high tariffs on sugar imports in part to prop up the value of slaves in Louisiana. Sugar producers have been “protected” almost ever since. The sugar program relies on import quotas and other interventions to drive U.S. sugar prices to double or more of the world price, costing consumers $4 billion a year. Since 1997, Washington’s sugar policy has zapped more than 120,000 U.S. jobs in food manufacturing. More than 10 jobs have been lost in manufacturing for every remaining sugar grower in the U.S. American sugar growers will never become competitive unless there is far more global warming than even Swedish teen celebrity Greta Thunberg predicts.

Fair trade dictates intentionally sacrifice some industries to other industries. A 1984 Federal Trade Commission study estimated that steel import quotas cost the U.S. economy $25 for each additional dollar of profit of American steel producers. Restrictions on steel crankshafts imports in 1987 hurt diesel truck engine manufacturers, restrictions on ball bearings imports in 1989 clobbered scores of American industries, and restrictions on computer flat panel displays devastated computer makers in 1991. More recently, Trump’s steel and aluminum tariffs, along with the foreign retaliation they sparked, destroyed an estimated 300,000 jobs. But the Biden team is perpetuating Trump’s tariffs (which were widely denounced when they were first imposed).

American politicians profiteer on allegations of foreign unfairness. For American trade policy, need is the basis of right, and political campaign contributions are the measure of need. The more foreign unfair practices that politicians claim to discover, the more power they seize over what Americans are allowed to eat, drink, drive, and wear. Each new definition of unfair trade becomes a pretext to further restrict the freedom of American citizens.

The myth of fair trade is that politicians and bureaucrats are fairer than markets—that government coercion and restriction can create a fairer result than voluntary agreement—and that prosperity is best achieved by arbitrary political manipulation, rather than allowing each individual and company to pursue his own interest.

If a foreign nation blockades our ports, it is an act of war. But if American politicians blockade our ports, it is supposedly public service. Protectionism pretends that government can enrich citizens by selectively raising the prices of politically favored items. Protectionists champion the Washington version of Adam Smith’s Invisible Hand: Americans automatically benefit from any trade restriction which politicians are bribed to impose.

As soon as a politician or federal bureaucrat accuses foreigners of unfair trade, then any subsequent trade restriction is supposedly self-evidently justified. Protectionists profiteer because most of the Washington press corps is simply “stenographers with amnesia.” Reporters base their trade stories on government press releases and rarely probe beneath the surface of the latest edict. Few journalists take the time to sift through the details of foreign perfidy to recognize how often U.S. government accusations fail the laugh test.

Trade allows consumers everywhere a chance to benefit from increases in productivity anywhere. As Emerson observed, “If a talent is anywhere born into the world, the community of nations is enriched.” Trade binds humanity together in laboring for mutual benefits. The expansion of trade between the end of World War II and the 1980s produced the greatest era of prosperity in world history.

Government cannot make trade more fair by making it less free. It should not be a federal crime to charge low prices to American consumers. The time has come to end the medieval pursuit of a “just price” for imports and to cease allowing government officials to cease boundless economic power over American consumers and business. Unfortunately, fair trade demagoguery will continue as long as politicians are greedy, lobbyists are generous, and journalists are clueless.

This article was originally featured at the American Institute for Economic Research

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200th Anniversary of a Great American Demolition of Tyranny – The Future of Freedom Foundation

Posted by M. C. on April 7, 2021

 Taylor recognized how tariffs corrupted the entire political system: “Laws for creating exclusive privileges and monopolies corrupt governments, interests, and individuals; and substitute patronage, adulation and favor, for industry, as the road to wealth.” 

https://www.fff.org/explore-freedom/article/200th-anniversary-of-a-great-american-demolition-of-tyranny/

by James Bovard

This is the 200th anniversary of the publication of one of the best American books on trade policy by one of the most thoughtful and least appreciated political analysts of the Founding Fathers era.Taylor was contemptuous of Washington long before it was cool.
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I ran into John Taylor of Caroline when I was roaming the shelves of the Library of Congress in 1987. A few weeks earlier, I had written a piece that the Wall Street Journal headlined, “U.S. Fair Trade Laws Are Anything But,” in which I pounded the Commerce Department for almost always finding imports guilty of selling at “less than fair value” on the basis of nonsense pulled out of their bureaucratic ears. I scoffed that U.S. “trade laws perpetually inflate domestic prices in order to protect consumers against the one-in-a-million possibility that a foreign company could corner the market — and raise prices.” Bruce Smart, the undersecretary of commerce for international trade, sent an angry response to the Journal: “Mr. Bovard displays an alarming ignorance of our trade laws.” I sought to allay officialdom’s alarms by becoming better informed.

I slipped into the Library of Congress alcoves, found the shelves with publications on trade policy from America’s first decades, and fetched out an armload of musty petitions to Congress from the early 1800s. Citizen committees from Boston to Virginia denounced rising tariffs as a betrayal of the Constitution, denying that the federal government had any right to forcibly sacrifice some groups for others’ profit. I also found Tyranny Unmasked, a not-quite-tattered 1822 book. The author, John Taylor (1753–1824), had been an Army officer under George Washington during the Revolutionary War and later served in the U.S. Senate, representing Virginia. I photocopied the entire book and devoured it page by page. (Tyranny Unmasked was reprinted by the Liberty Fund in 1992.)

Taylor’s book beautifully showed how politicians could not strangle trade without also destroying freedom. It was a revelation to see how protectionists had used the same arguments in the early 1800s that they propagated in the 1980s. Taylor provided some of the most insightful quotes for my 1991 book, The Fair Trade Fraud (St. Martin’s Press). In exchanges between individuals — in contract law — the test of fairness is the voluntary consent of each party to the bargain — “the free will which constitutes fair exchanges,” as Taylor wrote. But when politicians call for “fair trade” with foreigners, they routinely use a concept of fairness that is diametrically opposed to the words’ normal usage. When politicians speak of unfair trade, they do not mean that buyers and sellers do not voluntarily agree, but that U.S. government officials disapprove of the bargains American citizens choose to make.

John Taylor

Tyranny Unmasked was an angry retort to an 1821 report by the congressional Committee on Manufactures, which asserted that “commerce is exporting, not importing” and “the excess of exports over imports is the rate of profit.” This same gem of logic popped up in President Donald Trump’s ragings against imports, thereby proving that some fallacies are eternal.

Taylor skewered protectionists with piercing sarcasm: “How could it happen that exchanges of property with foreigners should ruin us, but that transfers of property [by means of tariffs] to capitalists should do us no harm?” Taylor recognized how tariffs corrupted the entire political system: “Laws for creating exclusive privileges and monopolies corrupt governments, interests, and individuals; and substitute patronage, adulation and favor, for industry, as the road to wealth.” Taylor appealed to the values of 1776 to seek to block the skullduggery of his time: “We fought in the revolutionary war against exclusive privileges and oppressive monopolies.” And Taylor also had the record on his side: “In the history of the world, there is no instance of a political economy bottomed upon exclusive privileges, having made any compensation for the deprivation it inflicts.”

Tyranny Unmasked rebutted the statist delusions that were bubbling up in the District of Columbia even before the birth of Ronald Reagan. Taylor scoffed at the notion of any natural or inherent harmony of interests between rulers and the ruled: “Governments able to do so, uniformly sacrifice the national interest to their own.” Taylor derided the congressional report for asserting “that an overflowing treasury indicates national prosperity.” Taylor points out that “this is the chorus of all the songs uttered by those who receive such overflowings.” Perhaps he saw how tariffs and other business subsidies would turn Washington into a swamp of lobbyists and shameless hustlers. Taylor jibed, “What painter has drawn Liberty as a mogul almost suffocated with money and jewels; or with an overflowing Treasury in her lap, and scattering money and exclusive privileges with her hands?”

Fallacies of protectionism

Protectionists in the early 1800s were calling for higher tariffs as retaliation against European barriers against American imports. Taylor noted, “All monopolies and exclusive privileges [for protecting domestic manufacturers] have succeeded by using the same argument. It is invariably condensed in the single word ‘reciprocity’…. It would be exactly the case of a pacific war, in which the nations should make laws that neither should attack the other, but that each should shed at home a reciprocal portion of its own blood.”

Taylor heartily flogged that recipe for prosperity:

We have long been engaged in what is called a war of reciprocity. Blow begets blow, and wound follows wound, and commerce is gasping in the battle…. We have not gained a single victory in a twenty years’ war of restrictions against restriction, and the harder we strike the enemy, the more severely the blow recoils upon ourselves.

Taylor recognized that the best way to fight foreign unfair trade practices is to maximize American productivity. He declared, “The most efficacious mode of defeating foreign restrictions to which we can resort, would be to establish a really free commerce, which would enlist the merchants of all nations to evade and counteract them.”

Taylor’s warnings went unheeded. In 1828, Congress passed the “Tariff of Abominations” — a crushing, heavy tariff that explicitly sacrificed one part of the country to another part — and set the South on fire. Northern manufacturers got almost all the benefits of protection, while Southern farmers were forced to pay higher prices for comparatively inferior American products and lost their cotton export markets because of foreign retaliation against the United States.

In 1832, Congress upped the tariff still higher. South Carolina declared the new tariff unconstitutional and thereby null, sparking a national crisis. In early 1861, after seven southern states seceded (in part to preserve the odious institution of slavery), congressional Republicans rushed to enact a prohibitive tariff bill even before Lincoln took office. A New York Times editorial on February 14, 1861, warned that boosting the tariffs as high as 216 percent could drive the border states out of the Union: “One of the strongest arguments the [seceded states] could address to [border states] would be furnished by a highly protective tariff on the part of our Government, toward which they cherish the deepest aversion.” The Times condemned the bill as a “disastrous measure” that “alienates extensive sections of the country we seek to retain” and will “deal a deadly blow … at the measures now
in progress to heal our political differences.” But Republicans were determined to effectively blockade American ports to foreign goods, and more states seceded after the onerous tariff law was passed.

The great expansion

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This post was written by: James Bovard

James Bovard is a policy adviser to The Future of Freedom Foundation. He is a USA Today columnist and has written for The New York Times, The Wall Street Journal, The Washington Post, New Republic, Reader’s Digest, Playboy, American Spectator, Investors Business Daily, and many other publications. He is the author of Freedom Frauds: Hard Lessons in American Liberty (2017, published by FFF); Public Policy Hooligan (2012); Attention Deficit Democracy (2006); The Bush Betrayal (2004); Terrorism and Tyranny (2003); Feeling Your Pain (2000); Freedom in Chains (1999); Shakedown (1995); Lost Rights (1994); The Fair Trade Fraud (1991); and The Farm Fiasco (1989). He was the 1995 co-recipient of the Thomas Szasz Award for Civil Liberties work, awarded by the Center for Independent Thought, and the recipient of the 1996 Freedom Fund Award from the Firearms Civil Rights Defense Fund of the National Rifle Association. His book Lost Rights received the Mencken Award as Book of the Year from the Free Press Association. His Terrorism and Tyranny won Laissez Faire Book’s Lysander Spooner award for the Best Book on Liberty in 2003. Read his blog. Send him email.

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The Most Ridiculous Argument Ever – LewRockwell

Posted by M. C. on September 26, 2018

It is in fact protectionists who are Marxists.

https://www.lewrockwell.com/2018/09/laurence-m-vance/the-most-ridiculous-argument-ever-against-free-trade/

By 

In the age of Trump’s protectionism, economic nationalism, and ignorance and incoherence on trade, some conservatives have begun to go beyond legitimate criticisms of government-managed trade agreements and the World Trade Organization (WTO) and attack free trade itself.

The most ridiculous of their arguments against free trade is a classic guilt by association argument: Karl Marx believed in free trade. This is the most ridiculous argument ever against free trade.

Marx said he favored free trade because “it breaks up old nationalities and carries antagonism of proletariat and bourgeoisie to the uttermost point.” But “certainly it would be unfair to tar the bulk of free-traders with Marxism.” Then why do it? Did Marx favor free trade because he was a capitalist? Did Marx favor free trade because he was a libertarian? Did Marx favor free trade because he believed in the free market? Did Marx favor free trade because he was a disciple of Adam Smith and David Ricardo? Did Marx favor free trade because he believed in free enterprise? Did Marx favor free trade because he believed in freedom? Did Marx favor free trade because he was opposed to government intervention in the economy? Did Marx favor free trade because he believed in the benefits of competition?

Of course not… Read the rest of this entry »

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