Tuesday, May 24, 2011

Documenting the Typically Unseen Victims of US Protectionism

One of the reasons that anti-trade policies prevail in spite of the ample economic and moral arguments against them is that the benefits of protectionism are concentrated and seen, while the costs are diffuse and unseen.  For example, when our politicians are mulling the imposition of tariffs on steel, it's easy for them to identify the few US steelmakers and workers who will benefit by a large amount, while it's harder to predict the many, many American steel consumers (and, in many cases, their workers) who are harmed in smaller-yet-equally-real sums.

This classic public choice dilemma has confounded free trade advocates for decades, and it's why surveys like the one recently conducted by the Coalition for GSP are so important for not only the debate about renewing the Generalized System of Preferences program, but also educating American citizens and policymakers about the very real harms that anti-trade policies inflict on American families and businesses.

As you'll recall, GSP and the similar Andean Trade Preferences Act (ATPA) expired at the beginning of the year due to a classic case of congressional ineptitude and backroom dealing.  Once the program expired, GSP-eligible imports from developing countries that used to enter the USA duty-free immediately became subject to tariffs.  Thus, American importers and consumers were immediately hit with a new tax - totaling hundreds of millions of dollars so far - on the products that they need to survive in this rough economic climate.

In the survey, the Coalition asked two simple questions of these unfortunate American importers/consumers:
1. How much in new tariffs has your business paid in 2011 because of GSP expiration?

2. What percentage of your business comes from products imported under GSP?
If you're like me, the answers will disgust you.  Here's a sample:
  • The timing couldn’t be worse with a weak dollar and inflationary prices on raw materials. My company was just starting to experience growth out of this recession when these three factors hit it hard all at once and crippled us.
  • This inaction is causing 2 problems. We have paid out over $18,000 in additional duties, making what should have been a slightly profitable year into a losing one and forcing us to cut plans to expand. Also the uncertainty of whether or not this will be signed again makes decision-making even more difficult.
  • We need GSP renewal. We are losing sales as our products are too expensive & we will have to cut jobs in our office.” 
  • I was set to hire at least one employee and possibly two at the beginning of the year which I scrapped after paying about $12,000 in customs that used to be covered under GSP eligibility.
  • "For very small companies like ours, the loss of GSP and ATPA simultaneously has wrought havoc on our finances. We have paid over $61,000 in duty since Jan. 1, 2011 for frozen food imports. These costs cannot be passed along to our customers, who are large food manufacturing companies with long term contracts. With the problems of availability of credit for small businesses having taken its toll, the increase in the cost of health care premiums for employees, and now the loss of GSP/ATPA, for the first time ever we have had to lay off an employee and cut back on benefits."
Some of our elected officials like to talk about trade policy in terms of accepting "economic reality."   Well, you can get any more real than this, can you?  Sheesh.

The RenewGSPToday website has more horror stories of protectionism's "unseen victims," and I highly recommend that you share them far and wide.  It's about time that the other side of the story was told.

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