Wednesday Quick Hits

Just a few links tonight for your reading pleasure:

• Forbes rates the 10 worst cars of 2010, and you'll never guess what's all over the list. (Oh wait, yes you will.). "The real secret, McElroy adds, is that almost every hybrid on the market today is a flop: 'I guarantee you every single automaker is losing money on every single hybrid they build, with the exception of the Prius.'  Hybrids are losing money because consumers just aren't buying them. In the 12 years since hybrid vehicles have been on the American market, and with seven mainline brands selling more than 20 hybrid options--everything from the Lexus HS250h sedan to the Cadillac Escalade Hybrid SUV--hybrids still make up just over 2% of the market. And half of that belongs to the Prius."  The SmartCar is also in the top 10.  And once again, we shockingly find that there's money in making cars that people, you know, actually want.  Will Washington ever learn? 

• Defunct, WTO-illegal law is still paying out millions to its chosen benefactors.  (Zombie protectionism continues to roam the earth.)

• AEI's Phil Levy tells us everything we wanted to know about the KORUS but were afraid to ask.  A great rundown of most of the big issues surrounding the FTA (and I'm not just saying that because I was cited).

• In India, higher inflation and input costs spell trouble for domestic manufacturers.  Is this what American firms (many of whom rely on imported inputs) have to look forward to in the wake of QE2?  Awesome!  

• US farm exports set to break records in 2011, and the WSJ wonders if we're witnessing the next asset bubble in the booming US farmland market.  These are two very important things to consider as our politicians debate whether to extend our massive, trade-distorting agriculture subsidies in the next Farm Bill.

That's all for tonight, folks.

Friday Quick Hits

The weekend's calling, so let's get right to it:

• Someone in the administration actually knows that imports exist and aren't evil.  I've given this administration a lot of flak for its blinkered, mercantilist approach to US trade policy (and deservedly so, I might add).  But I've recently discovered evidence that at least one person working in the administration seems to get it.  The US Department of Commerce released a new study this week touting the value of  - big shock - exports to the US economy.  But buried deep in the report are actually two explicit references to the important role that imports play in the future health and prosperity of the US economy (and US manufacturing in particular).  Crazy, I know!  First, there's this on page 4: "The most important contribution of exports (and imports) to the U.S. economy is its role in increasing the industrial efficiency and standard of living of the United States."  And if that weren't exciting enough, check this out on page 8: "The growth in the ratio for goods exports was boosted by the productivity gains posted within the manufacturing sector and by the expanding—and important—role played by imports in manufactured goods."  Nice, huh?  Now, for a normal, economically-literate US administration, these two small references would not be a very big deal.  But for this White House - one whose 2010 Trade Agenda included not a single word about import benefits in almost 20 pages of text - this is a very exciting discovery.  (Now I know how Jane Goodall felt!)  So to Mr. John Tschetter (the report's author), I'd like to deliver my sincerest kudos.  I really hope that this little bit of publicity doesn't get you fired.

• Benevolent USDA agrees to screw American consumers a smidge less.  Russ Roberts over at Cafe Hayek directs our attention to little-noticed news that the USDA will increase US quotas on imported sugar by about 300,000 tons (24%) this year.  Roberts is less-than-thrilled, and rightfully so: "What [the import-quota system] actually does is enrich a handful of families at the expense of the rest of us. It is a very ugly piece of public policy."  He goes on to point out that "the world price of sugar is about 17 cents a pound. Here in the US, we pay almost 31 cents, almost double."  I've noted previously how awful US sugar policy is, and I have little to add to Roberts' astute analysis, except for this one final thought: I love how USDA is trying to spin a small increase in sugar quotas as a "good thing" for US consumers.  Yes, it's better than the current quota amount, but saying it's "good" is like saying that punching me in the groin only 3 times is "good," because you had originally planned to punch me 5 times.  Gee, thanks, USDA.

• Zombie protectionism continues to roam the earth.  Europe announced Thursday that it would resume retaliatory tariffs against the United States' use of the "Byrd Amendment."  The EU tariffs on 19 American exports will be set at 15% and will total about $96 million.  Ouch.  The EU first imposed the duties in April 2005 pursuant to the WTO's ruling that the United States’ distribution of antidumping and countervailing duties to domestic firms (instead of the US Treasury) under the Byrd Amendment (aka the Continued Dumping and Subsidy Offset Act or "CDSOA") violated WTO rules.  As I've noted previously, even though the WTO first ruled against the Byrd Amendment in 2001, and even though the US eliminated the program years ago, the duties are still being (illegally) disbursed;  Thus, countries like the EU and Japan continue to retaliate against American exporters.  The new EU sanctions will apply as of May 1, 2010.  There's been no word yet from the White House as to how exactly this boondoggle helps the President advance his new National Export Initiative (because it doesn't).

• Zeroing violates WTO rules and US law.  Speaking of US non-compliance with global trade rules, Simon Lester over at the International Economic Law and Policy blog reports on a NAFTA panel ruling that the controversial US practice of zeroing, which the WTO repeatedly found inconsistent with global trade rules, also violates US law.  I can't wait to hear how protectionist congressmen and the AFL-CIO spin this one.  Oh, who am I kidding, I know exactly how they'll spin it - by declaring the entire NAFTA panel process illegitimate, of course! 

Have a good weekend, everybody.

Zombie Protectionism

After being ruled illegal by the WTO in 2001, the highly controversial Continued Dumping and Subsidy Offset Act (aka "the Byrd Amendment") was officially repealed in 2006. The Act diverted duties collected under US antidumping and countervailing duty (CVD) laws from the US Treasury to the domestic firms that petitioned for the relief, and was secretly stashed in a 2000 appropriations bill during conference committee. From its inception, the CDSOA was highly controversial - seen by our trading partners as encouraging AD/CVD cases and unfairly benefiting domestic firms at the expense of their international competition (the ones paying the duties). This opposition led to the WTO complaint and the eventual repeal in 2006 after lots of WTO-sanctioned retaliation by US trading partners, but the act's provisions didn't die immediately. Instead, they applied to all imports that entered the US before October 1, 2007.

Amazingly, however, the Byrd Amendment still isn't dead. Its corpse roams the earth because duties on those pre-10/2007 imports - caught up in administrative litigation and so forth - are still being collected and then distributed to US companies. And we're not talking chump change here, either. For example, Furniture Today reports that "La-Z-Boy has received $3 million from the U.S. government in antidumping duties and will report the income on its fiscal third quarter statement, the company said in a filing with the Securities and Exchange Commission.... This year's payment is sharply lower than the $8.1 million La-Z-Boy reported receiving a year ago and the $7.1 million it got the year before that."

So that's over $18 million in "illegal" Byrd money since the law providing the loot was repealed! Who says protectionism doesn't pay?

Unfortunately, it's not just La-Z Boy swimming in that dirty Byrd cash. For this year alone, US Customs has authorized (PDF) the disbursement of around $100 million worth of collected AD/CVD duties on a wide range of imported products. That's down a lot from previous years, but I'm quite sure there will be many millions more next year, even though the CDSOA was "repealed" years ago. Meanwhile, the Japanese are still retaliating against US exports - authorized to do so by the WTO - to the tune of another several million dollars. Fantastic.

Fortunately, the Byrd Amendment will eventually die - related litigation will end, and the final Byrd monies will be collected and distributed. Unfortunately, we're obviously not there yet and won't be anytime soon.

Protectionism is one tough mother.....