New Paper: Antitrust Regulation is #NeverNeeded

My colleague Jessica Melugin and I, along with our former colleague Patrick Hedger, have a new paper out today, “Repeal #NeverNeeded Antitrust Laws that Hinder COVID-19 Response: Smokestack-Era Laws Favor Established Interests and Do Not Encourage Competition.” The tech companies that regulators are targeting have made a difficult pandemic easier to endure. Antitrust lawsuits would not help the COVID-19 response. Since the real cost of antitrust policy is its chilling effect on new innovations, ramping up antitrust enforcement would leave the country less resilient against the next crisis.

Amazon has made it easy for people to get no-contact deliveries of household supplies and groceries—and spurred competitive responses from Walmart, Target, and other retailers. Facebook makes it easy for people to stay in touch while staying socially distant. Google makes it easy to find information about the virus and stay up to date. As the paper concludes:

Antitrust investigations at the federal and state level should be suspended during the COVID-19 crisis and, ideally, abandoned permanently. The unintended consequences of market distortion and chilled innovation are the last thing consumers and businesses need right now—or ever. This is no time for politicians and government lawyers to promote their own careers through the posturing of antitrust enforcement. Consumer benefit and business resiliency must be preserved and antitrust enforcement must not be prioritized or expanded.

Read the whole thing here. For more on antitrust, see Wayne Crews’s and my paper “The Case against Antitrust Law” and CEI’s dedicated antitrust site, antitrust.cei.org.

This Week in Ridiculous Regulations

Scientists may have found potential chemical evidence of life on Venus—phosphine gas, which in Venusian conditions may well have been produced by anaerobic (non-oxygen-using) microbes. No life forms have been directly observed, and phosphine is also present in the atmospheres of lifeless Jupiter and Saturn, but that is still a pretty big deal. In more earthly realms, regulatory agencies issued new regulations ranging from watermelon promotion to natural gas emissions.

On to the data:

  • Last week, 99 new final regulations were published in the Federal Register, after 31 the previous week.
  • That’s the equivalent of a new regulation every one hour and 42 minutes.
  • Federal agencies have issued 2,328 final regulations in 2020. At that pace, there will be 3,198 new final regulations. Last year’s total was 2,964 regulations.
  • There were 55 proposed regulations in the Federal Register last week, for a total of 1,568 on the year. At that pace, there will be 2,154 new proposed regulations in 2020. Last year’s total was 2,146 proposed regulations.
  • Last week, agencies published 449 notices, for a total of 16,089 in 2020. At that pace, there will be 22,100 new notices this year. Last year’s total was 21,804.
  • Last week, 3,012 new pages were added to the Federal Register, after 1,112 pages the previous week.
  • The 2020 Federal Register totals 59,172 pages. It is on pace for 81,280 pages. The 2019 total was 70,938 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Four such rules have been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations ranges from net savings of between $1.19 billion and $4.19 billion. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 54 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 462 new rules affect small businesses; 20 of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

Trade News: China Tariffs Violate WTO Rules, Aluminum Tariffs Dropped, No Trade Deal with EU

Usually policy-related news slows down near elections; nobody wants to rock the boat. This has not been the case with trade policy. Three important stories have emerged in the last day or so.

First, the World Trade Organization (WTO) ruled that President Trump’s China tariffs violate the WTO’s Most-Favored Nation (MFN) rules. Those rules state that all countries with MFN status cannot be charged different tariff rates for the same goods. They must all be charged the same rate—and that rate has to be the lowest a country charges any country for a given good.

China has MFN status. So, under WTO rules, the U.S. cannot charge China higher tariffs than it does other countries for MFN-eligible goods. This is exactly what Trump has done with hundreds of billions of dollars’ worth of Chinese goods.

While this is a big headline, it likely means little in terms of policy changes. China retaliated in kind, and roughly in proportion to Trump’s increase, so the WTO will likely consider the matter settled, and thus will not endorse further action against the United States. And as my colleague Iain Murray has pointed out, Trump, ironically, is unable to appeal the decision because he has essentially dismantled the WTO’s dispute resolution system.

It is ultimately up to Congress to right President Trump’s wrongs on trade policy. And the administration needs to get through its head that tariffs are not going to convince Beijing to enact needed reforms on economic policy, human rights, and political repression. The data are in, and the tariff approach does not work. A better approach will use consistent, long-term multilateral diplomatic pressure.

In the short term, the China tariffs should be rescinded anyway, regardless of what the WTO says. Taxing needed goods is terrible policy during a pandemic and a recession.

Second, President Trump had announced in August that he would reinstate national security tariffs against Canadian aluminum—about a month after the United States-Mexico-Canada Agreement (USMCA) came into effect. Canada announced it would retaliate, as countries nearly always do when tariffs are raised against them. On Tuesday, Canadian officials were set to announce what the retaliations would be. Hours before the press conference was to begin, the U.S. announced it would drop the tariffs.

This is more damage control than an actual positive policy change—tariffs are not going down, they are merely not going up. But backing off represents at least a tacit admission that more tariffs will not help the economy during a pandemic and a recession. Even if tariffs would help the aluminum industry itself, which is a questionable assumption, higher prices would hurt aluminum-using industries ranging from autos to beer to construction, as well as consumers.

Third, the European Union apparently will not negotiate a trade deal with the U.S. anytime soon—even if Biden wins the 2020 election. At a conference, EU trade official Sabine Weyand said Europe would rather work with the U.S. on shared problems, such as China policy, in the WTO, where they can also build coalitions with other allies. Europe would also rather settle other issues in piecemeal fashion, such as the ongoing dispute over Airbus and Boeing subsidies, and various Trump tariffs.

An EU trade agreement is one of the “big three” that were expected to completed in the next few years, along with China and the Brexited UK. President Trump has been mulling further tariffs against European goods for some time. Hopefully this news does not spur him to raise tariffs in hopes of forcing the EU to the negotiating table. If the USMCA is any precedent, such an agreement would be filled with trade-unrelated provisions for labor, environment, regulation, intellectual property, and whatever else rent-seekers can cook up. It would also, as with the USMCA, likely do more to manage trade than to free it.

Since Democratic candidate Joe Biden’s trade protectionism is uncomfortably similar to Trump’s, it is just as well that there will likely be no U.S.-EU trade agreement anytime soon. This will give both sides time to fully digest the lessons of the Trump administration’s failed protectionist experiment, and to pursue smaller policies such as regulatory mutual recognition, and at least some lowering of tariffs and other trade barriers.

Trump Administration Backs Down on Tariffs on Canada Aluminum, But Long-Term Problems Unfixed

This is a press release originally posted at cei.org.

In another high stakes trade matter today, the Trump administration decided to back down from plans to impose tariffs on Canadian aluminum. Just before Canadian Prime Minister Justin Trudeau was set to announce retaliatory tariffs against the United States, U.S. Trade Representative Robert Lighthizer announced the U.S. would drop the tariffs. CEI Senior Fellow Ryan Young praised Lighthizer’s decision:

“United States Trade Representative Robert Lighthizer did the right thing by dropping the planned reinstatement of aluminum tariffs against Canada. The tariffs violated the spirit, if not the letter, of the just-enacted USMCA trade agreement. The agreement and its predecessor exist in large part to avoid the sort of brinksmanship between allies we just witnessed.

“The administration may finally be learning that other countries retaliate against tariffs. Just in case the lesson has not yet sunk in, Congress should pass legislation taking back the tariff-making powers it granted to the President under Section 232 of the Trade Expansion Act of 1962. Taxing power properly belongs with Congress, and this administration has proven it will not use its power responsibly.​”

WTO Rules Against Trump’s China Tariffs, but the Problem Remains the Tariffs Themselves

This is a press release orginally posted at cei.org.

The World Trade Organization ruled today that President Trump violated global trade rules by unilaterally imposing tariffs on over $350 billion worth of Chinese goods. CEI Senior Fellow Ryan Young says, while the WTO decision is not a surprise, the bigger problem remains the economic and personal toll of the tariffs themselves.

“It is no surprise the WTO found that President Trump’s China tariffs violate its rules. Ironically, the President cannot appeal this decision because he continued the Obama-era policy of crippling the WTO’s Appellate Board. 

“The China tariffs are still bad policy. The purpose of the tariffs was to force the Chinese government to reform its illiberal policies ranging from trade barriers to technology theft to its human rights record. Not a single reform has been credibly made.

“In the short term, the Trump tariffs are raising prices and limiting access to important goods during a pandemic and a recession. There are even tariffs on needed personal protective equipment such as face masks. There is no justification for such measures.

“In the long term, President Trump’s blatant disregard of a rules-based trading system means countries like China will be less likely to follow the rules themselves. His policies are contrary to the national interest and harm the pandemic response. President Trump should rescind the tariffs regardless of what the WTO says.”

In the News: Antitrust and Amazon

Over at Digital Commerce 360, Don Davis has a thorough writeup about the potential antitrust case against Amazon. He also quotes me a few times. Read the whole thing here.

This Week in Ridiculous Regulations

It was a four-day work week due to Labor Day. There were massive fires along the West coast, and Congress declined to pass a $500 billion spending bill because it was thought to be too small. Regulatory agencies issued new regulations ranging from domestic hemp production to Pyongyang flyovers.

On to the data:

  • Last week, 31 new final regulations were published in the Federal Register, after 69 the previous week.
  • That’s the equivalent of a new regulation every five hours and 25 minutes.
  • Federal agencies have issued 2,229 final regulations in 2020. At that pace, there will be 3,148 new final regulations. Last year’s total was 2,964 regulations.
  • There were 30 proposed regulations in the Federal Register last week, for a total of 1,513 on the year. At that pace, there will be 2,137 new proposed regulations in 2020. Last year’s total was 2,146 proposed regulations.
  • Last week, agencies published 336 notices, for a total of 15,640 in 2020. At that pace, there will be 22,090 new notices this year. Last year’s total was 21,804.
  • Last week, 1,112 new pages were added to the Federal Register, after 1,713 pages the previous week.
  • The 2020 Federal Register totals 56,470 pages. It is on pace for 79,760 pages. The 2019 total was 70,938 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Three such rules have been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations ranges from net savings of between $1.38 billion and $4.19 billion. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 50 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 447 new rules affect small businesses; 19 of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

New Paper Out Today: Terrible Tech 2.0

My colleagues Jessica Melugin, Wayne Crews, Iain Murray, Patrick Hedger, John Berlau, and I have a new paper out today, Terrible Tech 2.0: The Most Burdensome, Anti-Consumer Technology Policy Proposals in Washington. We examine 25 of the worst tech-related bills and policies to come out of Washington in the last two years.

The full paper is here.

A press release summarizing the main findings is here.

My quote from the press release:

“Technology has been an essential part of the COVID-19 response,” said senior fellow Ryan Young. “New technologies have made a difficult lockdown easier by enabling contactless grocery deliveries, remote work and school, telemedicine, kept friends and family connected, and even provided some levity with streaming media like Tiger King. The tech regulations we examine in our paper would hurt the COVID-19 response. They would lock in existing technologies and block new ones, make it harder for people to find work, give established big companies an unfair advantage over startups, censor political speech, and put politics over people—not to mention their health.”

This Week in Ridiculous Regulations

As Labor Day marked the unofficial end of summer, the unemployment rate went back down to 8.4 percent, and Attorney General Barr announced that the Justice Department will likely file an antitrust lawsuit against Google by the end of the month. Regulatory agencies issued new regulations ranging from relaxed DNA tolerance to semipostal stamps.

On to the data:

  • Last week, 69 new final regulations were published in the Federal Register, after 68 the previous week.
  • That’s the equivalent of a new regulation every two hours and 26 minutes.
  • Federal agencies have issued 2,198 final regulations in 2020. At that pace, there will be 3,176 new final regulations. Last year’s total was 2,964 regulations.
  • There were 39 proposed regulations in the Federal Register last week, for a total of 1,483 on the year. At that pace, there will be 2,143 new proposed regulations in 2020. Last year’s total was 2,146 proposed regulations.
  • Last week, agencies published 474 notices, for a total of 15,304 in 2020. At that pace, there will be 22,116 new notices this year. Last year’s total was 21,804.
  • Last week, 1,713 new pages were added to the Federal Register, after 1,618 pages the previous week.
  • The 2020 Federal Register totals 55,323 pages. It is on pace for 79,947 pages. The 2019 total was 70,938 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Three such rules have been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations ranges from net savings of between $1.38 billion and $4.19 billion. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 49 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 439 new rules affect small businesses; 18 of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them significant.

Highlights from last week’s new regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

Retro Review: William H. McNeill – Plagues and Peoples (1976)

William McNeill was one of the 20th century’s leading big-picture world historians. Interconnectedness is a major running theme of his work. This reviewer, whose work focuses quite a bit on trade policy, has found McNeill’s approach to history quite useful.

McNeill was a student of Arnold Toynbee, who instead emphasized separation and conflict as key drivers of world history. In a way, McNeill spent his career disagreeing with his teacher, thus living out the dreams of countless frustrated students.

Plagues and Peoples applies McNeill’s interconnectedness emphasis to disease as an engine of world history. This is of obvious interest in the wake of COVID-19. What can we learn from how other societies have dealt with plagues? What were mistakes we can avoid? What things worked that we can adapt to our own time?

McNeill’s book begins in prehistory and goes all the way up to modern times. In a later edition’s preface, McNeill briefly analyzes the AIDS epidemic, although in this reviewer’s opinion, that part has not aged well.

The rest of the book mostly has. That said, its focus on disease means that McNeill, at least in Plagues and Peoples, gives short shrift to other historical factors This is a forgivable sin; books have only so much space, and McNeill gives them plenty of attention in other works such, as his mistitled The Rise of the West: A History of the Human Community (1963), which spends more time out of the West than in it. But it is up to the reader to remember that history is nearly always multicausal.

As population grew after the agricultural revolution, long-separated peoples gradually came into contact with each other. Each group had suffered from its own local diseases. These depended on climate, geography, livestock, and agricultural choices. Tropical diseases rarely adapt well to cold climates, and vice versa.

An early obstacle to animal domestication was disease transmission between species. Over time, humans built up immune tolerances to their animal companions’ diseases. But different regions had different domesticated species, and hence different immunities. This caused outbreaks when people with different domesticated animals made first contact. Rice farmers, who spend much of their time wading through standing water, face a very different disease mix than farmers of grains or legumes, who deal with land-based diseases transmitted from insects, pests, and animal feces.

When different cultures first came into contact, there were often terrible outbreaks at their borders—this happened throughout Eurasia as agriculture and cities spread across the continent. If people near borders continued to interact, they built up mutual immunities to each other’s diseases, and could then benefit from trade, specialization, and cultural exchange.

But if there were long breaks in contact for whatever reason, the immunization process might have to start all over again. And sometimes people might decide it wasn’t worth the bother. These types of local disease-related decisions could impact generations of economic well-being, as well as decisions of war and peace.

This same process happened on a much larger scale after Columbus. It was also far more intense. The wild versions of the Americas’ domesticated animals, such as llamas and alpacas, did not live densely together enough to sustain highly infectious diseases. That means they didn’t pass them along to humans during domestication. So not only were Amerindian civilizations capable of greater density with fewer diseases than was possible in Europe, people in the Americas also had far fewer antibodies. This is one reason why contact with Europeans and their animals hit so hard.

Some diseases also require a minimum population density to survive. This includes diseases where the sufferer gains lifelong immunity after illness, such as chicken pox. Such diseases need constant access to fresh hosts who have not yet developed immunity. Often the only places with enough density and fresh hosts are cities. Cities, it turns out, were a major development for more than just humans.

At the macro level, high disease rates in cities played a major role in millennia of urban-rural interactions. There were fewer diseases out in the country, so population growth there was often rapid. In cities, deaths usually outpaced births until modern times—and modern sanitation. Cities depended on rural migration to maintain population—at precisely the same time as rural population growth was too high to bear. So rural-to-urban migration balanced out both environments.

This delicate equilibrium was often upset by wars, famines, and other non-disease factors. But this equilibrating tendency was the norm for most of history, and disease rates played a major role in the rate of urbanization until the last century or so.

This had special importance in post-classical Europe. Feudal ties bound rural peasants to nobles and kings. But the rise of cities, who often answered to no king, offered refuge to peasants, who continued to migrate away from kings into cities. A custom evolved whereby an escaped serf who was able to live in a city for a year and a day without being captured was legally emancipated. This is where the phrase “city air makes one free” came from, as well as city names such as Freiburg (“free town”). Disease rates, which kept cities constantly in need of fresh migrants, played an important role in this cultural and political dynamic.

Moreover, these power struggles, with disease always operating in the background, prevented kings from becoming too strong. These checks and balances eventually led to city- and democracy-based modernity as we know it today.

One of the most interesting concepts in Plagues and Peoples is McNeill’s comparison of microparasites and macroparasites. Viral and bacterial pathogens are microparasites. Some of their behavioral tendencies repeat themselves at a macro level in humans. An example of this is in McNeill’s theory of government.

McNeill’s theory of the origins of the state is similar Mancur Olson’s stationary bandit theory, but with a disease-centered twist. McNeill observes that diseases that are too lethal don’t survive for very long. They kill their host so quickly that they cannot spread. This is why Ebola breakouts, though terrifying, tend not to spread very far. At the macroparasite level, a bandit who completely destroys an agricultural settlement feeds himself for a day. But after that, like Ebola, he might have a hard time finding food.

More “successful” diseases such as colds, flus, or malaria make their hosts ill enough to exhibit contagion-spreading behaviors such as coughing, sneezing, or diarrhea. But they don’t kill them. Or at least, death does not come quickly enough to stop the pathogen’s spread. In the microparasite world, a milder human bandit also does much better for himself. He takes enough to feed himself, but not enough to starve his “hosts.”

The concept of immunity also plays a role. If the bandit “immunizes” his hosts against competing bandits, they gain security. The bandit not only gains a steady food source, but his immunized villagers may actually be happy to have him around; a chronic but mild illness is preferable to sudden death.

Analogous to biological natural selection, destructive roving bandits eventually gave way to milder stationary bandits, who gradually took on the trappings and functions of proper governments. And in social evolution, change need not mean death. A simple change in strategy is enough for a roving bandit to change into a stationary bandit. From this selection process, the earliest states emerged. One needn’t take the disease analogy too literally for it to shed useful light on an important process in human history. James C. Scott’s book Against the Grain: A Deep History of the Earliest States has much to offer readers interested in pursuing this direction further.

McNeill then applies this framework throughout world history. Confucianism arose in China as a successful macroparasitic adaptation to “keep exactions imposed upon the peasantry within traditional and, under most circumstances, tolerable limits.” (p. 101) The Confucian examination system limited the number of government officials, and imposed cultural, ethical, and institutional restraints on their behavior. The Confucian system kept Leviathan properly shackled, as Daron Acemoglu and James A. Robinson might argue (see my review of their recent book The Narrow Corridor: States, Societies, and the Fate of Liberty).

This dynamic, McNeill theorizes, might explain why the earliest known governments in Egypt and Mesopotamia were highly despotic, even compared to later absolute monarchies.

The 14th century bubonic plague pandemic known as the Black Death happened as it did in large part due to interconnectedness. As always in history, there were many factors. The plague bacillus tended to be stable only in rodent communities in remote areas. The rise of the Mongols and their fast-moving horses not only displaced many of these rodent communities, but their swift-moving horses—and enticing grains and other foods—drove rodents across the Eurasian continent. Independently, “Improvements in ship design occurring in the 13th century made year-round sailing normal for the first time,” which “offered securer and more far-ranging vehicles for rats.” (pp. 176-177). These multiple engines of interconnectedness made plague vectors spread faster and farther than they otherwise would have.

The plague response also has a potential lesson for today’s policy makers. On p. 195, McNeill observes:

In contrast to the rigidities of the church, city governments, especially in Italy, responded rather quickly to the challenges presented by devastating disease. Magistrates learned how to cope at the practical level, organizing burials, safeguarding food deliveries, hiring doctors, and establishing other regulations for public and private behavior in time of plague.

The Church was a very different creature than today’s federal or national governments, but the larger principle stands: smaller, closer governments tend to be more responsive than larger, distant ones. People today expect more of Washington than it could possibly deliver during the time of COVID-19. Effective responses will instead tend to come at the individual, local, and state levels.