America’s troubling plunge into protectionism
The descent of American capitalism into a racket is being greased by professed capitalists in government, in collaboration with professed capitalists in what is called, with decreasing accuracy, the private sector. This is occurring under the auspices of Republicans, and while many Democrats are arguing, with some accuracy but more incoherence, this: The government has become a servant of grasping private interests — and should be much bigger and more interventionist.
Protectionism — laws and administrative rulings by which government determines the prices and quantities of imported goods and services — is government regulation. So, it is probable that the current administration, which lists deregulation as among its glistening achievements, is producing a substantial net increase in economic regulation.
The American Action Forum, a center-right advocacy group, says the Trump administration’s deregulatory efforts have saved Americans $1.3 billion this year. That, however, is only about one-ninth of the sum ($12 billion) of taxpayer dollars flowing to a small portion of taxpayers (those who are engaged in agriculture, less than 2 percent of the population) as recompense for injuries the government has done to them, and to all consumers, by protectionist policies that have provoked retaliatory tariffs against U.S. agricultural products.
Most Americans would not recognize a soybean if it were presented to them on a silver salver, but they are invested, in several senses, in agriculture policy. American farmers have picked a bad time to produce a harvest of good news. Because pork, soybean and corn yields are up, the Agriculture Department says farm income is expected to decline 13 percent this year, a trend exacerbated by retaliatory tariffs imposed by China and Mexico, and not nearly mitigated by U.S. government payments.
Recently, The Washington Post’s Damian Paletta reported how the Dixon Ticonderoga pencil company has gamed “U.S. trade law to reap government benefits and protection as it also moved almost all pencil production to Mexico and China.” Dixon has received almost $5 million and has sought even more government funds under a program to aid domestic manufacturers hurt by foreigners’ abusive trade practices. And Dixon has got the government to impose a 114.9 percent duty on Chinese pencil makers, more than doubling the cost of some competitors’ products. Dixon is, however, not clearly a domestic manufacturer. It does have a distribution center in Macon, Ga., but there it manufactures few if any of the 500 million pencils it makes worldwide. The company would not give Paletta details about its U.S. production or access to its Georgia facility, mysteriously citing “the sensitivity of it.” The Macon Economic Development Commission says the facility has only 17 employees. Paletta reports that photographs of the facility, “posted by employees on Facebook, offer only a limited view of its operations, showing a number of cardboard boxes marked ‘Made in China.’ ” The U.S. Commerce Department says Dixon qualifies as a domestic manufacturer by producing almost 1,500 boxes of golf pencils.
“China,” says the president strangely, “is now paying us billions of dollars in tariffs.” Tariffs are taxes collected at the border and paid in one way or another by various residents of the importing nation. Bloomberg Businessweek notes that Coca-cola blamed metals tariffs for its decision to raise product prices. Home Depot is “allowing its suppliers to fully pass along their tariff-related cost increases,” partly because such is the bargaining power of Home Depot (like Walmart’s and Amazon’s) when dealing with its suppliers, whose profit margins are already thin. So, Home Depot (and its shareholders) will sacrifice profits to the extent that the company does not pass on to consumers the tariff-related costs. The billions China is supposedly paying “in tariffs” are figments of the president’s remarkable misunderstanding of the protectionism that is the centerpiece of his agenda.
As a slew of Democrats contemplate presidential campaigns, most of them agree that the government should be much more interventionist in economic matters, where it is, they evidently believe, deft, disinterested and intelligent. They cannot be paying attention to the current administration’s multiplying demonstrations that the government is none of those things when protectionism plunges it deeply into the allocation of wealth and opportunity.
It is hilarious, but helpful, that the president thinks, or at any rate says, that the mild modernizing revisions of NAFTA have transformed what he previously called the “worst trade deal ever made” into “the biggest trade deal in the United States’ history.” So, about one thing he is sort of right: Trade wars are easy to win — if you sufficiently define victory down.