Thursday, November 19, 2009

Protectionism's Unreported Victims

Journalists love to write about the downtrodden victims of import competition, and who can blame them?  Such stories provide the type of fear-mongering, guilt-inducement and myth-reinforcement that American readers eat up!  (Or something.)  Well, regardless of the reasons, the interwebs are chock-full of stories of unemployed textile workers, closed paper mills, scared telemarketers and other general domestic mayhem caused by the omnipotent bogeyman that is "Globalization." The media just can't seem to get enough.

Cato's Dan Griswold does a fantastic job debunking the myth that imports cause a majority of American unemployment here and in his great new book Mad About Trade.  But what Dan doesn't mention in his blog entry is the other, totally unreported side of this coin: the very real victims of American protectionism.  About a month ago, I discussed how US tariffs regressively punished - through higher prices - American consumers of basic necessities like food, clothing and shelter.  Well, as the following examples from the last few weeks make clear, there are many other ways that protectionism can harm American businesses, workers and families:
  • Reuters reports that the US operations of GPX International Tire have filed for Chapter 11 bankruptcy because of 44% antidumping duties on Chinnese imports of off-road tires.  The duties - different from those imposed by President Obama under Section 421 of US trade law - have jeopardized about 100 jobs at GPX's US facilities in Malden, Massachusetts.
  • The AP reports that "Brazil has released a preliminary list of U.S. goods that could be hit with tariffs in response to a World Trade Organization ruling on illegal American cotton subsidies." According to the report, Brazil will hit American fruit farmers, juice producers and pharmaceutical companies with $295 million in annual sanctions as a result of the United States' failure to eliminate the protectionist subsidies to well-connected cotton growers.  The final list is expected to be submitted to the WTO by Nov. 30. Then the targeted American businesses will start paying $295 million in new taxes per year.
  • Canada's Financial Post reports that the Stimulus* Bill's Buy American provisions are causing pipe fittings in California to be ripped from the ground for the second time in six months because they were stamped "Made in Canada."  The move has cost Cambridge Brass Inc., a Canadian brass fittings manufacturer, more than $1.5 million and has caused it to fire 63 workers since Buy American was introduced last spring.  Similar pain is being felt all over Canada, but for those of you who care only about American jobs, the Financial Post story highlights that US input manufacturers also are suffering from Buy American because many of the materials that the Canadian firms use to manufacture their products come from places like Texas.  Even Cambridge Brass is owned by AY-MacDonald, a US company with headquarters in Michigan.  And of course, the Canadians are threatening to retaliate against other US exporters, as rumors of a US-Canada settlement have faded.
  • DelmarvaNow informs us that Chinese tariffs on US chicken exports - retaliation for the President's decision to impose prohibitive tariffs on Chinese tires at the request of the United Steelworkers - could seriously hurt small American chicken farmers in tiny towns like Delmar, Maryland that depend on chicken farming. In the piece, chicken grower Betty J. Hastings, a 25-year veteran of the business, describes the situation as "scary."
  • MySanAntonio reports that Dallas-based Mary Kay cosmetics is paying $450,000 per month in Mexican tariffs imposed on US cosmetics exports (among others) as direct retaliation under NAFTA for a congressional ban on Mexican trucks from US roads.  (The ban - imposed under the 2009 Omnibus Appropriations Act - was a direct sop to the Teamsters union.)  MySanAntoinio also reports that the ban not only has resulted in tariffs on US exports ($2.4 billion total per year), but also has prevented Mexico's Estafeta - the "FedEx of Mexico” - from delivering letters and packages to US recipients. The result: Estafeta has refused to set up US operations (and hire US workers) until the spat is resolved, and US recipients of those letters/packages pay higher delivery prices.
So there you have it: layoffs, bankruptcies, hidden taxes, frightened old ladies, destroyed property, international intrigue, and congressional payoffs to crony interest groups - all the makings of high political drama!  Yet protectionism stories like these just don't seem to pique the interest of most "mainstream" media outlets, and instead, we readers are treated to trite, MadLib-esque reports of downtrodden mill-worker X and increased import Y from country Z.

No wonder the newspapers are going bankrupt.

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