Words are not deeds. Unfortunately, a look at the (Reagan) record leads to the question: With free traders like this, who needs protectionists?
Consider that the administration has done the following:
-- Forced Japan to accept restraints on auto exports. The agreement set total Japanese auto exports at 1.68 million vehicles in 1981-82, 8 percent below 1980 exports. Two years later the level was permitted to rise to 1.85 million.(33) Clifford Winston of the Brookings Institution found that the import limits have actually cost jobs in the U.S. auto industry by making it possible for the sheltered American automakers to raise prices and limit production. In 1984, Winston writes in Blind Intersection? Policy and the Automobile Industry, 32,000 jobs were lost, U.S. production fell by 300,000 units, and profits for U.S. firms increased $8.9 billion. The quotas have also made the Japanese firms potentially more formidable rivals because they have begun building assembly plants in the United States.(34) They also shifted production to larger cars, introducing to American firms competition they did not have before the quotas were created. In 1984, it was estimated that higher prices for domestic and imported cars cost consumers $2.2 billion a year.(35) At the height of the dollar's exchange rate with the yen in 1984-85, the quotas were costing American consumers the equivalent of $11 billion a year.(36)
-- Tightened up considerably the quotas on imported sugar. Imports fell from an annual average of 4.85 million tons in 1979-81 to an annual average of 2.86 million tons in 1982-86. Not only did this continued practice force Americans to spend more than other consumers for sugar, but it created hardships for Latin American countries and the Philippines, which depend on sugar exports for economic development. The quota program undermined President Reagan's Caribbean Basin Initiative and intensified the international debt crisis.(37)
-- Negotiated to increase restrictiveness of the Multifiber Arrangement and extended restrictions to previously unrestricted textiles. The administration unilaterally changed the rule of origin in order to restrict textile and apparel imports further and imposed a special ceiling on textiles from the People's Republic of China.(38) Finally, it pressured Hong Kong, Taiwan, and South Korea, the largest exporters of textiles and apparel to the United States, into highly restrictive bilateral agreements. All told, textile and apparel restrictions cost Americans more than $20 billion a year.(39) The Reagan administration has stated several times that textile and apparel imports should grow no faster than the domestic market.(40)
-- Required 18 countries--including Brazil, Spain, South Korea, Japan, Mexico, South Africa, Finland, and Australia, as well as the European Community--to accept "voluntary restraint agreements" to reduce steel imports, guaranteeing domestic producers a share of the American market. When 3 countries not included in the 18--Canada, Sweden, and Taiwan-- increased steel exports to the United States, the administration demanded talks to check the increase. The administration also imposed tariffs and quotas on specialty steel. These policies, with their resulting shortages, have severely squeezed American steel-using firms, making them less competitive in world markets and eliminating more than 52,000 jobs.(41)
-- Imposed a five-year duty, beginning at 45 percent, on Japanese motorcycles for the benefit of Harley Davidson, which admitted that superior Japanese management was the cause of its problems.(42)
-- Raised tariffs on Canadian lumber and cedar shingles. -- Forced the Japanese into an agreement to control the price of computer memory-chip exports and increase Japanese purchases of American-made chips. When the agreement was allegedly broken, the administration imposed a 100 percent tariff on $300 million worth of electronics goods. This episode teaches a classic lesson in how protectionism comes back to haunt a country's producers. The quotas established as a result of the agreement have created a severe shortage of memory chips and higher prices for American computer makers, putting them at a disadvantage with foreign competitors. Only two American firms are still making these chips, accounting for a small percentage of the world market.(43)
-- Removed Third World countries from the duty-free import program for developing nations on several occasions. -- Pressed Japan to force its automakers to buy more American-made parts.(44)
-- Demanded that Taiwan, West Germany, Japan, and Switzerland restrain their exports of machine tools, with some market shares rolled back to 1981 levels. Other countries were warned not to increase their shares of the U.S. market.
-- Accused the Japanese of dumping roller bearings, because the price did not rise to cover a fall in the value of the yen. The U.S. Customs Service was ordered to collect duties equal to the so-called dumping margins.(45)
-- Accused the Japanese of dumping forklift trucks and color picture tubes.(46) -- Failed to ask Congress to end the ban on the export of Alaskan oil and of timber cut from federal lands, a measure that could substantially increase U.S. exports to Japan.
-- Redefined "dumping" in order "to make it easier to bring charges of unfair trade practices against certain competitors."(47)
-- Beefed up the Export-Import Bank, an institution dedicated to promoting the exports of a handful of large companies at the expense of everyone else.(48)
-- Extended quotas on imported clothespins.
This was argued for back in the 1970’s when Japan was accused of dumping steel in US markets “below cost”. The arguments were from the United Steel Workers, not the US steel companies. At stake: about 25,000 steel worker jobs. The average guy on the street was for the tariff because they don’t understand its impact. First, everything that uses steel immediately becomes more expensive. Your new car might cost $100 more now. Same for many appliances and other products...all steel products get more expensive. Second, it’s a windfall for the gov’t since they get the tariff revenues. They didn’t do anything to earn it; it does nothing to produce more steel, but those clowns in DC will spend it to get reelected (e.g., free cell phones for deadbeats. Really? That’s the best you can do for us?) Finally, since Japan and China both have a capital stock that is newer that US steel producers, they can produce at a lower cost. (We bombed Japan’s capital stock into the Stone Age in WWII and China was not an economic power at that time.) Tariffs lessen the incentive to be more efficient. If it’s true that foreign steel companies are selling at a loss, buy all we can from them and eventually drive them out of business.
In sum, all tariffs do it subsidize union workers who already make more than you do, provide a windfall gain for the gov’t to spend more of your money on stupid projects, and raise the price of everything that uses steel. It’s a stupid policy.
