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Neo-Protectionist-in-Chief. Dangerous Bush trade policies.
NRO ^ | December 05, 2003, 9:24 a.m. | Deroy Murdock

Posted on 12/05/2003 11:40:58 AM PST by .cnI redruM

Do Defense Secretary Donald Rumsfeld and Secretary of State Colin Powell, on the one hand, speak with Commerce chief Don Evans and President Bush's political guru, Karl Rove, on the other? If so, they should have lunch.

Rumsfeld and Powell ought to explain to Evans and Rove how Bush's reelection-driven trade policies too often jeopardize U.S. national security. To satisfy parochial domestic interests, Bush's neo-protectionism creates headaches for American soldiers and diplomats abroad. This counterproductive shortsightedness cannot stop soon enough.

Consider America's ongoing efforts to pacify North Korea. China, an at least nominally Communist country contiguous with Pyongyang, surely is Washington's best bet to keep the unpredictable Kim Jong Il from going, literally, ballistic. Indeed, America, China, Japan, Russia, and South Korea hope to meet with North Korea as soon as mid-December to encourage the Stalinist state to abandon its thermonuclear dreams. Given Kim's habit of sharing strategic technology with Iran, Libya and Syria, few things are scarier than this dictator, with an atomic chip on his shoulder, furnishing glow-in-the-dark gifts to anti-American states and groups.

So, rather than keep China cool, calm, and cooperative, the White House on November 18 dropped a cup of wonton soup in Beijing's lap. Washington's fresh import quotas on Chinese brassieres and nightgowns suddenly created tensions between the two capitols. Three days later, a Chinese trade delegation canceled plans to visit the U.S. and sign orders for American agricultural goods.

This flap could not be more ill-timed. With Asia at the crossroads between peace and rearmament, President Bush chose to wrestle with the Chinese over intimate apparel.

Not far from China, Pakistani President Pervez Musharraf has shared airspace, intelligence, and military facilities with U.S. forces. Pakistan has captured some 500 al Qaeda members and cracked down on the Muslim-extremist madrassas that too often turn little boys into walking explosives. Yet despite Islamabad's valiance in the war on terror, America still imposes tariffs of up to 16 percent on Pakistani textiles and quotas that also limit the supply of such items as pillowcases and dishrags manufactured there.

While such recklessness might secure the 23 electoral votes of the textile-rich Carolinas, Bush and Rove should consider the much higher vote tally possible if an especially-motivated Pakistan pointed U.S. special forces to the precise cave where Osama bin Laden sips his tea.

Conversely, the president and his Svengali should forecast the votes they might lose if a tariff-weary Pakistan snoozed while bin Laden successfully supervised, say, the dirty-bombing of Chicago's Loop.

Meanwhile, America's Canadian and Mexican frontiers remain vulnerable to the next Mohamed Atta. U.S. harbors also could receive hostile visitors or ships wired to detonate on entry. So guess where the Department of Homeland Security (DHS) is dedicating its scarce resources.

As Cato Institute trade-policy analyst Dan Ikenson explains, under a $9.5 million program, the U.S. Customs Service (now part of DHS) assigns agents to the Textile Production Verification Team (TPVT). They travel the world inspecting textile factories and corporate "books and records in order to verify the country of origin or the eligibility for a trade preference" for various garments. Imagine that a Chinese sweater maker ran into a filled U.S. import quota, then transported those goods to Hanoi, relabeled them as Vietnamese and shipped them to Seattle from there. The ever-vigilant TPVT would unravel that scheme.

Through last June, TPVT members visited plants in Botswana, the Dominican Republic, Honduras, Lesotho, Madagascar, and Swaziland. In 2002, those officials toured 553 factories in 12 countries, according to the Commerce Department's October 2003 "Second Report to the Congressional Textile Caucus." Read it on the website of the Office of Textile and Apparel. Don't miss OTEXA's logo: The planet Earth skewered by a threaded needle.

"U.S. Customs and Border Protection reviewed Africa Growth and Opportunity Act (AGOA) claims for knit apparel," the study states, referring to a U.S.-African free-trade agreement, "when they discovered many Swaziland and Botswana manufacturers were using pre-knit collars and cuffs from outside the region for making AGOA claims."

Here's an idea: Terminate the TPVT program and reassign its personnel. TPVT's $9.5 million budget generously could finance 95 inspectors at $100,000 each. Half could watch international airport arrival lounges for suspicious-looking aliens. The other half could use radiation-detection gear to examine inbound cargo freighters.

Finally, Andres Mejia sees cocaine and bombs as unintended consequences of U.S. trade barriers.

"Restrictions on access of agricultural goods to the United States, added to internal subsidies to U.S. farmers, have caused many small farmers in Colombia and similar countries to go bankrupt," says Mejia, director of the free-market Development and Liberty Institute in Bogota and a participant in last month's hemispheric trade talks in Miami. "In the case of Colombia, this promotes drug traffic and violence," he says, seated beside Biscayne Bay.

Stymied by such things as U.S. orange juice tariffs and sugar price supports, Colombian farmers turn instead to coca, poppy, and heroin production. One need not be a DEA agent to see how this frustrates U.S. antidrug efforts.

Elsewhere, Mejia says, the barrier-propelled "impoverishment of certain rural, distant areas is fueling violence, too, since young kids with no other alternatives go to the guerrillas or the paramilitaries," such as the FARC rebels, officially identified as terrorists by the State Department. FARC is believed responsible for bombs that killed at least 55 civilians this year alone.

"If we could export more fruits to the U.S.," Mejia tells me, "that certainly would convince more people to stop growing coca and to stop joining violent groups."

For now, Mejia consider the FARC guerrillas "declared enemies of the United States. They hate the United States. They hate Americans, and if they had the chance, I have no doubt they would attack the United States."

Steering America from George W. Bush's neo-protectionism back to the path of free trade would avoid these potentially deadly situations. The president's steel-tariff retreat on Thursday is a big step in the right direction. The perpendicular tracks on which U.S. trade and security policy operate should be made parallel, lest a truly nasty train wreck lie around the bend.


TOPICS: Business/Economy; Editorial; Foreign Affairs
KEYWORDS: deroymurdock; nationalsecurity; tariffs; trade
Protectionism doesn't make anyone safer. It's also a terrible piece of electoral pork.
1 posted on 12/05/2003 11:40:58 AM PST by .cnI redruM
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To: .cnI redruM
When goods don't cross borders, soldiers will.
--Frederic Bastiat
2 posted on 12/05/2003 11:45:55 AM PST by luckydevi
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To: .cnI redruM
As Cato Institute trade-policy analyst Dan Ikenson explains, under a $9.5 million program, the U.S. Customs Service (now part of DHS) assigns agents to the Textile Production Verification Team (TPVT). They travel the world inspecting textile factories and corporate "books and records in order to verify the country of origin or the eligibility for a trade preference" for various garments. Imagine that a Chinese sweater maker ran into a filled U.S. import quota, then transported those goods to Hanoi, relabeled them as Vietnamese and shipped them to Seattle from there. The ever-vigilant TPVT would unravel that scheme.

It would be a lot simpler to just collect tariffs at the border, but instead we get the big gov't non-solution, which gives dems and repubs more stuff to waste time debating on.

3 posted on 12/05/2003 1:03:05 PM PST by sixmil
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To: .cnI redruM
Rumsfeld and Powell ought to explain to Evans and Rove how Bush's reelection-driven trade policies too often jeopardize U.S. national security. To satisfy parochial domestic interests, Bush's neo-protectionism creates headaches for American soldiers and diplomats abroad. This counterproductive shortsightedness cannot stop soon enough.

If Bush is a protectionist, then we'll have to invent a new superlative for the founding fathers.

4 posted on 12/05/2003 1:03:49 PM PST by sixmil
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To: sixmil
That's one reason our tariff policy costs our economy more money than it brings in. I could probably be persuaded to tolerate a 5% tariff on any item that got brought in if the revenue were used for something useful. For example, you put it in a fund and pull out money to recompense people that spend six weeks in a hospital after eating tainted green onions.

That way, people would know ahead of time, what the market price would remain near when they planned hiring and manufacturing. Price stability would significantly lower US unemployment.
5 posted on 12/05/2003 1:07:12 PM PST by .cnI redruM ( l = w + w. Two wrongs equal a left.)
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To: sixmil
One thing that drove the protectionism of The Founding Fathers was the structural inability to collect the income tax. Our first few presidents couldn't accurately take a census or find where people lived with enough precision to know how much revenue an income tax would generate. They had to devise a tax structure they could reliably work under. Tariffs and sales taxes were that structure.

Also, lower income tax payers were disenfranchised until Andrew Jackson was President. This is important to point out because tariffs and sales taxes have the end result of raising prices on end items. This means these taxes are regressive, hitting the poor much harder than they hit the rich. That works a lot better for a political career if the poor can't vote to throw you out for doing that sort of thing.
6 posted on 12/05/2003 1:12:18 PM PST by .cnI redruM ( l = w + w. Two wrongs equal a left.)
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To: .cnI redruM
One thing that drove the protectionism of The Founding Fathers was the structural inability to collect the income tax. Our first few presidents couldn't accurately take a census or find where people lived with enough precision to know how much revenue an income tax would generate. They had to devise a tax structure they could reliably work under. Tariffs and sales taxes were that structure.

Structural inability? Direct taxes (without apportionment) were specifically banned in the constitution. The census existed to determine representation in the legislature, certainly this would have been good enough for collecting taxes had they actually been interested in doing so. It sounds like you are equating sales taxes with excise taxes. If I didn't know better, I would think you just made that all up, but perhaps you could post a link.

Also, lower income tax payers were disenfranchised until Andrew Jackson was President. This is important to point out because tariffs and sales taxes have the end result of raising prices on end items. This means these taxes are regressive, hitting the poor much harder than they hit the rich. That works a lot better for a political career if the poor can't vote to throw you out for doing that sort of thing.

I have paid plenty of sales taxes, but never once a tariff. I suppose you could also argue that credit card fees are regressive and raise prices, but not many people would take you seriously. In the post 9/11 world, everything coming across the border has to be inspected, and a small duty to pay for this is in no way unreasonable, yet free traders would have us believe that our freedom is being stolen from us while government makes up the difference by forcing us to share our banking records and pay taxes up to 4 times a year, while spending us further and further into debt. I look at the big picture and nothing I hear from the free traders makes any sense, even as they move the goal posts further and further back.

7 posted on 12/05/2003 1:58:44 PM PST by sixmil
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To: sixmil
I have paid plenty of sales taxes, but never once a tariff

Yes you have. It's simply built in as a higher price. Sure, you didn't get a reciept handed to you that said "tariff fee $2.98" on it but the effect is still the exact same thing, meaning you paid more to cover the taxes.

8 posted on 12/05/2003 6:28:58 PM PST by GOPcapitalist
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To: GOPcapitalist
Yes you have. It's simply built in as a higher price. Sure, you didn't get a reciept handed to you that said "tariff fee $2.98" on it but the effect is still the exact same thing, meaning you paid more to cover the taxes.

It's not the same. If I decide I don't want to pay tariffs, I just buy American. Same with excise taxes. Sales taxes are unavoidable. The only way I can limit sales taxes is to buy less, which is bad for the economy. Same with income taxes. I either come up with a bunch of phoney deductions or just make less money.

The money I save on tariffs, assuming they are not eaten by the importer, are repaid by supporting unemployed workers that need to be retrained for jobs that will soon be exported. I don't see where you end up ahead unless your goal is to have everything run through the big government filter.

9 posted on 12/06/2003 12:17:27 AM PST by sixmil (Where have all the conservatives gone?)
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To: sixmil
It's not the same. If I decide I don't want to pay tariffs, I just buy American.

It is indeed the same for two reasons: (1) Goods in the modern economy are extremely complex with almost all featuring components of some sort that were imported and thus paid a tariff, and (2) even if you buy a purely american good, you are still hit with a higher price that would not exist for either the american or foreign good without the tariff since both would have to sell at the world price.

The money I save on tariffs, assuming they are not eaten by the importer, are repaid by supporting unemployed workers that need to be retrained for jobs that will soon be exported.

No. Only some of it is repaid. Due to the geometry of price curves it is mathematically certain that the ammount that gets repaid to those workers will be significantly less than the ammount withdrawn from the economy by the tariff itself. Besides, a person who has to depend on the government to keep his job for him and send consumers his way by forcing prices up is little better than the welfare bum who does the same by collecting a government check. Both of their livlihoods are obtained by redistributionary government programs.

10 posted on 12/06/2003 9:23:28 AM PST by GOPcapitalist
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