Amer­ica’s dis­turb­ing plunge into pro­tec­tion­ism

Sunday Star - - OPINION -

WASH­ING­TON — 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, Ge­or­gia, 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 last week’s 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.

Ge­orge Will’s email ad­dress georgewill@wash­ is

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