The ITA’s antidumping duty on pressure-sensitive plastic tape from Italy was set to expire soon. Unfortunately, ending the levy would “likely to lead to continuation or recurrence of dumping,” so it’s here to stay.
Domestic tape producers must be pleased. Consumers, not so much.
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Posted in Economics, International, Regulation of the Day, Trade
Sometimes (but not always), when a foreign producer sells goods to U.S. consumers cheaply, the U.S. government takes action to put a stop to it. Trade economists call this antidumping policy. This usually means putting tariffs on cheap goods to raise their prices. These tariffs protect consumers because competitive pricing is anti-competitive.
And no, I don’t get that logic either.
Regardless, the International Trade Agency announced this week that it is updating its antidumping rules for the following foreign products:
Certain Pasta from Italy, Certain Hot-Rolled Carbon Steel Flat Products from Thailand, Fresh and Chilled Atlantic Salmon from Norway, Purified Carboxymethylcellulose from Mexico, Stainless Steel Sheet and Strip in Coils from Taiwan, Welded ASTM A–312 Stainless Steel Pipe from the Republic of Korea, Narrow Woven Ribbons with Woven Selvedge from the People’s Republic of China and Taiwan, Stainless Steel Sheet and Strip in Coils from Japan, Carbazole Violet Pigment 23 from the People’s Republic of China, Stainless Steel Sheet and Strip in Coils from Mexico, and finally, Polyethylene Terephthalate Film, Sheet, and Strip from India.
More to come, I’m sure.
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Posted in Economics, Regulation of the Day, Trade
The great economist Joseph Schumpeter wrote that “[F]ree trade is the cement that holds together the idea of peace.”*
His logic is sound. To put it bluntly, killing the customer is bad for business. And money talks. Commerce gives people who may hate each other a powerful incentive to get along; greed can be a force for good.
*Thomas K. McCraw, Prophet of Innovation: Joseph Schumpeter and Creative Destruction, (Cambridge, MA: Harvard University Press, 2007), p. 110.
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Posted in Economics, Great Thinkers, Trade
The twelfth in an occasional series that shines a bit of light on the regulatory state.
Today’s Regulation of the Day comes to us from the International Trade Administration ($420 million 2009 budget, 1,433 employees).
The ITA has been upset for some time that a Thai shrimp exporter is selling shrimp cheaply; hungry consumers have had no complaints.
Using sophisticated formulae, the Department of Commerce has determined that the minimum allowable profit margin for shrimp exporters is 1.88 percent. Anything less than that constitutes “dumping,” which is selling goods on the cheap in order to harm your competitors. Anti-dumping regulations are in place to make sure that companies don’t save their customers too much money.
This kerfuffle is a perfect example of how regulators view prices and profits. If you charge more than your competitors, then you are abusing your market power. If you charge the same as everyone else, that is evidence of collusion. If, like our Thai friends, you charge low prices, then you are unfairly undercutting the competition.
Whatever you charge, and whatever your profit margin, there is a rationale for regulating you.
Read more on pages 31,911-31-912 of the 2009 Federal Register.
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Posted in Economics, International, regulation, Regulation of the Day, Trade
While I was away in Wisconsin, The American Spectator Online ran a column I wrote about buying local. The astute reader will hear echoes of I, Pencil.
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Posted in Economics, Publications, Trade
The stalled U.S.-Colombia free trade agreement has become a campaign issue in Florida’s 25th District, which is home to a substantial Colombian-American population. Rep. Mario Diaz-Balart is using his support of the agreement as a club with which to beat his challenger.
That challenger, Joe Garcia, doth protest. He says he is “for fair trade and getting it done in a way that protects American jobs and American commerce.” That’s another way of saying that he thinks consumers are paying too little for goods and services.
Trade cannot be fair unless it is free. For more on how the U.S.-Colombia free trade agreement promotes both fairness and freedom, see this study that Fran Smith and I co-authored in July.
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Posted in Economics, Elections, Political Animals, Trade
If goods do not cross borders, then soldiers will.
It’s an old saying. Maybe even a cliche. But there is some truth to it. What wonderful news, then, that India and Pakistan have re-opened a trade route through the Kashmir region.
Soldiers have been crossing that border for 60 years. Replacing those soldiers with spices, apples, and other, ahem, non-fatal goods will have two positive effects. First, those goods will become cheaper and more abundant in India and Pakistan.
Second, the new trade route will help to strengthen the blossoming but still fragile peace; killing the customer is bad for business. Indians and Pakistani in and around Kashmir are developing a financial incentive to get along.
Expanding international trade is not just good economics. It is good foreign policy. Congress and our next president, whoever he is, would do well to heed that lesson.
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Posted in Economics, International, Trade
Disagreements over farm subsidies have caused the current round of WTO negotiations to collapse. Developing countries are upset that subsidized farmers from rich countries are hard to compete against in the world market.
India’s proposed solution is to trigger a raise in their own farm subsidies if imports rise above a certain level. Other countries found this unacceptable, hence the current impasse.
Rather than fret about unfair competition, developing countries could just sit back and welcome imports from subsidized farmers. Consider it a gift from U.S. and EU taxpayers.
Or better yet, all nations rich and poor could drop their market-distorting subsidies altogether. In the long run, the way to freer trade — and fuller stomachs — is fewer subsidies, not more. All that’s in the way is political inertia.
Unfortunately, in politics as well as in physics, inertia always wins.
The U.S. government transfers about $17 billion from taxpayers to farmers in an average year. Every man, woman, and child in the country gives more than $50 to a group smaller than 2% of the population. The average farming household will make $89,434 this year, well above the national average. Farmers hardly seem to need the help.
Farm subsidies have failed to lower food prices, cause overproduction of some crops, and underproduction of others. They are also the main reason the Doha Round of trade negotiations is at a standstill.
Rich subsidized farmers have largely shut out Third World farmers from the world market. Understandably, developing countries resent this. Many of them are refusing further action on Doha until the agricultural playing field becomes more level.
Enter U.S. Trade Representative Susan Schwab. To get Doha back on track, she is offering to cut U.S. farm subsidies by about 12 percent if other countries reciprocate. Schwab’s proposal is modest, but it is a start.
A better proposal would be to abolish the subsidies outright, even if the U.S. does it unilaterally. Schwab is basically saying, “OK, we’ll stop shooting ourselves in the foot. But only if you do, too.” Why not just stop shooting ourselves, period, no matter what other countries do?
The trouble is Congress. Farm subsidies are sure-fire vote-getters. The incentives just aren’t there for Congress to do the right thing, no matter how hard Schwab pushes them. And ultimately, it is Congress that has power over farm subsidies, not the U.S. Trade Representative. Meanwhile, Doha languishes.
While I was away on vacation, a short study I co-authored with Fran Smith was published. It makes the case that Congress should quit obfuscating and pass the U.S.-Colombia Free Trade Agreement.
Human Events mentions the study favorably.
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Posted in Economics, Publications, Trade
Inertia Wins! 