Americans have a well-developed sense of fairness. However, when it comes to “trade” with other nations we feel like we always get the short end on the stick. The Transpacific Trade Pact (TPP) is the current focus of the “tariffs-to-protect-American-workers” debate. Donald Trump is among the “nail-’em-with-high-tariffs crowd.” In fairness to Mr. Trump, he assures us he can negotiate a “better deal.” While I believe he likely can, he still proposes tariffs. I, for one, am a free-trader and I believe with good reason.
Let’s look at the last effort to “save” American jobs with a tariff.
[Source: The seen and unseen, by Walter E. Williams]
During the Bush administration the opinion was that unfair business practices by Japan and others were leading to losses of jobs for American steelworkers. This led to the imposition of 8 to 30 percent tariffs in 2002 on several types of imported steel. They were levied in an effort to protect the ailing U.S. steel industry. It was estimated that the tariffs saved the jobs of 1,700 or so steelworkers. That sounds pretty good. Clearer beneficiaries of the steel tariffs were steel industry executives and stockholders – not so “pretty good.”
However, the tariffs caused the domestic price for some steel products, such as hot-rolled steel, to rise by as much as 40 percent. The key principle that must always be reckoned with is that the government cannot give to someone – steelworkers – without taking from someone else. Whenever there is a benefit of doing something, there is a guaranteed cost.
[From the Williams article] A study by the Peterson Institute for International Economics, predicted that saving those 1,700 jobs in the steel industry would cost American consumers $800,000 per job, in the form of higher prices. That’s just the monetary side of the picture. According to a study commissioned by the Consuming Industries Trade Action Coalition, steel-using industries — such as the U.S. auto industry, its suppliers, heavy construction equipment manufacturers and others — were harmed by higher steel prices. It is estimated that the steel tariffs caused at least 4,500 job losses in no fewer than 16 states, with over 19,000 jobs lost in California, 16,000 in Texas and about 10,000 each in Ohio, Michigan and Illinois. In other words, industries that use steel were forced to pay higher prices, causing them to have to raise prices on what they produced. As a result, they became less competitive in both domestic and international markets and thus had to lay off workers.
Politicians can easily tout the benefits of tariffs, because the downside occurs later and more gradually – hidden from the eye of the voter. Politicians, for the most part, do not care what devastation is left in their wake. The beneficiaries know for whom to cast their ballots and to whom to give campaign contributions. Most often, the victims do not know whom to blame for their calamity.
Republicans have been for free trade. What has changed?