Friday, March 3, 2017

Quote of the Day - Tariffs

I run libertarian without being a Libertarian.  This on tariffs seems exactly right, and so gets the QoTD:
A friend sent a link to a leaked, recorded conversation between Trump and Wilbur Ross, his nominee for Commerce Secretary. There is nothing particularly troubling in the conversation. Trump is talking like Trump. He is the same person in public and in private, which is nice.
I responded:
Sounds good to me.  A tariff is a consumption tax collected at the port of entry.  The American founders expected to fund the operations of the national government with revenue from a tariff, and it worked.  He is also right that the Japanese and other countries use safety regulations as non-tariff import barriers.  There is nothing bad on here at all.  
He wrote back saying that that a tariff is not a pure consumption tax because the producer may end up eating some of the tax. 
I responded:
If the producer eats some or all of the tariff, Trump does not care and most of his voters don’t either.  Foreigners don’t vote here — not counting 11 million illegal aliens.  
Bottom line, a moderate tariff was in the past and could be again a substantial revenue source.  Charging an entrance fee to participate in the massive American market is not a terrible idea.  America boomed in the past during high tariff periods.  We cut tariffs to the bone after World War II as a way to encourage foreign economies to get going again and to tie them to the USA.  It was a specifically security driven move, and we recognized that it would hurt producers in the USA.  I see no reason we need to do anything like that now.  
I had the following comments in the course of the conversation which may be of interest:
I am generally a free trader.  I don’t like the government telling me or anybody what they can buy or who they can buy from.  However, the shrillness of the opposition to Trump on this is over the top.  It is not some violation of sacred American principle to impose a tax on imports as opposed to taxing other activities. Moreover, it is not the end of the world that we are using trade policy to protect industries or workers facing foreign competition, when we have a massive industry in Washington which exists to use the regulatory machinery to protect everyone who can afford a lobbyist.  This is just the unprotected demanding some of the same protection for a change.  They have gotten clobbered and that could not go on forever without out some demand that someone else bear the burden of facing the hurricane of creative destruction for a while.  Further, our so-called trading partners especially China do cheat and do use subsidized trade to try to destroy whole sectors of the US economy, including to obtain military advantages. 
Hey libertarians!  You like President Trump?  Fighting tariffs gets you more President Trump.


Glen Filthie said...

Sellers hardly ever 'eat' taxes and tariffs. They almost always pass them on - and rightfully so. Trump has waged trade wars with rivals before and the turdies in this one looming - have a lot more to lose than America does.

How can you have free trade with China when they employ slave labour?

Richard said...

Philosophically, I am for free trade too. However we don't have it. What we have is giant, incomprehensible trade treaties written by rent-seeking corporate/government globalists. These people and their organizations do not have the interests of the US or any other country as a priority. Not saying they should-they have their own interests- but the governments in the US and elsewhere should have the interests of their citizens in mind. Trump's moves to jettison the big treaties and go to bi-lateral deals is a necessary corrective.

SiGraybeard said...

Like Richard said, what we have now is not free trade, anymore than what we have now is a free market system.

There are ways to work a tariff into the mix without it being an actual thing labelled "tariff". Add the cost of mandatory EPA inspections, mandatory OSHA regulations, mandatory department of labor regulations and all the crap that US companies have to deal with. Unless the country in question is shown to be complying with the same requirements US companies do, either reduce requirements on our companies or raise the cost of entry. We could send the entire EPA to China or wherever to inspect, and then lose record of their passports while they're over there.

The TPP was a bad, dangerous treaty, in that it gave powers to an extra-governmental board that were more powers than the countries have. It's selecting a new government for the region that's entirely unelected bureaucrats. Can't really call it "one world government", but it sure is a government above all the sovereign countries that sign TPP.