What a fun "strange bedfellows" thread this will be!
What a fun "strange bedfellows" thread this will be!
Oh, man! I'm outta here!.......Well, maybe I'll read it first.What a fun "strange bedfellows" thread this will be!
Politics determines if 'cheap foreign imports' are good or bad
D.J. TICE
Editorial Writer
Several times in recent months, Washington politicians have moved boldly to defend American industries — notably steel and lumber — against competition from "cheap foreign imports." The imports in question are made unfairly cheap, it's said, by subsidies and market manipulations from foreign governments.
The Bush administration, backed by Democrats and Republicans in Congress, has hiked tariffs to protect American workers and businesses — even though one result, economists agree, will be higher prices for American consumers of cars, homes and a thousand other things.
There's not much to say in defense of such protectionist gifts for special interests. But what's even more embarrassing is the way many politicians' distaste for "cheap foreign imports" passes away like an attack of indigestion when the subject turns to prescription drugs. The U.S. Senate is trying to pass a bill that would allow American-made pharmaceuticals to be "reimported" from Canada, where they sell for lower prices.
Now if there were ever a case of "unfair" foreign competition, this would be it. American drug firms sell drugs cheaply in Canada and other countries mainly because those countries enforce strict price controls. The firms sell drugs into those countries anyway because any sale is better than nothing if the price is higher than the actual cost of making and delivering the pills.
Still, the drug companies have to recoup the underlying cost of developing these drugs someplace. Because of overseas price controls, they have to recover those costs mostly in America's free market. That's why prices here are so much higher.
This is understandably frustrating, particularly for senior citizens who too often lack prescription drug insurance. Many seniors need help getting coverage — though not all do. This is the least poor age group in America. While some elderly really must choose between medicine and meals, others choose between medicine and another week in Maui.
In any case, "reimportation" is a potentially costly way to help seniors. It would mean that American politicians are, in the case of drugs, welcoming competition from imported products that have been made cheap entirely by the heavy-handed interference of foreign governments.
If, as the politicians claim, that sort of "below cost" competition threatens to devastate the American steel and lumber industries, and undermine American self-sufficiency in those essential commodities, isn't it likely to harm America's prescription drug industry, too?
One of these policies on "cheap foreign imports" must be wrong. Both may be wrong.
One important difference in the two situations is that the industries government is protecting — especially steel — are old-line businesses in which America is no longer especially innovative. But pharmaceuticals are a high technology product of the future in which America is the world's undisputed leader.
What's more, in the case of drugs, the only things we're really importing are price controls (admittedly something of a Canadian specialty); the drugs involved are the result of homegrown American ingenuity. In the case of steel, if our leaders weren't protecting us, we could "import" the ingenuity of foreign steel makers.
The benefit of trade is that it allows us to access the distinctive skills of other countries. Why should we use trade policy instead to impose other countries' bad economic policies on ourselves?
It's possible reimportation, if enacted, will never actually occur. Because of safety concerns, the Clinton administration refused to implement a reimportation law passed several years ago, and the Bush administration may do the same.
Nonetheless, many in Congress, not least Minnesota Sen. Paul Wellstone, seem determined to find some way of controlling drug prices or otherwise reducing drug company profits, perhaps by shortening patent life on new drugs. However it's done, shrinking the rewards for discovering new drugs will have a predictable economic effect of discouraging industry investment in those discoveries.
It's possible we'd be better off legislating lower prices on the drugs we already have, and "paying" for those lower prices by seeing industry invent fewer new drugs. In health care generally, there may come a point where it no longer makes sense to keep developing ever more sophisticated treatments we can't afford. But this would be a difficult policy choice, worthy of careful debate. It seems more likely that policy is being driven today by political calculations.
Few Americans buy steel or lumber directly, but only as materials in cars, houses and other products. So higher steel or lumber prices caused by trade barriers are well hidden. Politicians can get away with picking consumers' pockets to enrich protected interests and enjoy the resulting political rewards.
By contrast, consumers, especially seniors, are well aware of the cost of drugs. What they won't see will be the life-saving and life-enhancing drugs that may never be invented if price controls take effect.
That's why encouraging "cheap foreign imports" of drugs is as good for an American politician's health as fighting "cheap foreign imports" of steel.
Write Tice at dtice@pioneerpress.com or at the Pioneer Press, 345 Cedar St., St. Paul, MN 55101.
And yes, protectionism is making a comeback. Always does, in big enough bear markets.