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Boeing Pushes 100 Percent Tariffs on Airbus

Boeing, fresh off a victory in restoring the Export-Import Bank’s full lending authority, is floating the idea of a 100 percent tariff on Airbus aircraft and parts. Airbus is Boeing’s largest competitor. There are four factors in play here. The first three are public relations, the opportunity costs of cronyism, and how best to pursue a level playing field in the global economy. The fourth is the likely retaliation such a move would spark.

From a PR standpoint, Boeing wants to move public attention away from its safety issues with the Boeing 737 MAX aircraft. Most of the press Boeing gets for Ex-Im and Airbus tariffs will be negative, and the company knows this. It would still likely prefer that people be upset about those than about its safety problems, which are an existential threat to more than just airline passengers.

To that point, Boeing arguing for an Airbus tariff right now is almost perfect news cycle timing. The China trade dispute and NAFTA/USMCA are hot stories. Just today, President Trump announced a six-month delay on a possible European auto tariff, which will both keep that story alive for a while and give Boeing time to fold an Airbus tariff into a possible action.

Boeing also has a Baptists-and-bootleggers story at the ready. The World Trade Organization ruled, correctly, that Airbus received unfair government subsidies when it launched its A350 and A380 aircraft. Under WTO rules, the U.S. is entitled to retaliate. But just because it can, doesn’t mean it should. An Airbus tariff is highly unlikely to spur needed reform.

This ties into the opportunity costs of cronyism. Boeing puts significant resources into lobbying for Export-Import Bank support, Airbus tariffs, and other preferential policies. All of those resources are not being used to address the 737 MAX safety issues. This might improve a decimal point somewhere in a quarterly earnings report in the short term. But Boeing’s misplaced priorities could cause long-term harm to both aviation safety and Boeing’s own competitiveness. Competing in Washington is not the same thing as competing in the marketplace. Boeing’s investors should be upset at the company’s behavior.

Companies that engage in heavy rent-seeking are less profitable than more market-oriented companies. Even in Boeing’s case, the most profitable years in company history happened when Ex-Im was unable to offer its usual financing.

Which brings up the third point: It is not enough to have a level playing field. That level must be raised, not lowered. Boeing is right that Airbus’ massive government subsidies are unfair. But the way to address the problem is not to copy Europe’s policy mistakes. Don’t sink down to their level, raise them up to ours—though, admittedly, our own level of cronyism has much room for improvement. But reformers must start somewhere.

If anything, Boeing might have an interest in further tying up Airbus in webs of subsidies and favorable regulations—though I would strongly disagree with this strategy. Government protection tends to cause sclerosis in its beneficiaries, and Boeing should be pleased at the long-term implications of Airbus’ comfort. I am not a fan of this zero-sum thinking, but Boeing might be. Even from their self-interested perspective, an Airbus tariff is a bad idea.

Finally, as I pointed out yesterday, tariffs are nearly always met with retaliation, not cooperation. The European Union almost certainly will not change its tune on Airbus subsidies in response to a U.S. tariff—especially in a global market with many non-U.S. customers. Europe will harden its stance, likely at Boeing’s expense.

Given how tense global trade relations currently are, even if Boeing is just blowing PR smoke, this is a bad time to do it. Better for the company to refocus on making safe, innovative products than spending its resources on a political game with no winners.

See also relevant CEI scholarship on trade, the Ex-Im Bank, and the ethics of rent-seeking.

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William Bernstein – The Birth of Plenty: How the Prosperity of the Modern World was Created

William Bernstein – The Birth of Plenty: How the Prosperity of the Modern World was Created

Last year I read Bernstein’s history of trade, A Splendid Exchange, and enjoyed it immensely. This book has a broader focus—the rise of modern global prosperity. Bernstein is an excellent popular writer, and should be read more widely. He doesn’t go into the same depth as other scholars on the subject such as Julian Simon, Deirdre McCloskey, Joel Mokyr, Stephen Davies, Nathan Rosenberg, Henri Pirenne, and others. But his genial delivery and general ethos of openness and dynamism coupled with a coherent historical narrative make for an excellent read.

Bernstein’s background is in finance, and books from that genre are usually charitably described as snake oil. Rare exceptions include non-sensationalist buy-and-hold advocates such as Burton Malkiel of A Random Walk Down Wall Street fame. While I’ve not read Bernstein’s financial advice books and likely never will, he is an excellent historian. I hope he writes more in that vein.

Henri Pirenne – Medieval Cities: Their Origins and the Revival of Trade

Henri Pirenne – Medieval Cities: Their Origins and the Revival of Trade

Of Pirenne’s three best-known books, also including Mohammed and Charlemagne and Economic and Social History of Medieval Europe, this one, from 1925, is probably the strongest on its analysis of institutions and how they changed over time. The Pirenne Thesis is essentially that economic isolation caused the downfall of Roman civilization. Not barbarians, or Christianity, or decadence, as many other historians argue. It was a combination of economics and closed cultural attitudes among Europe’s Mediterranean neighbors. Centuries later, a gradual return to economic and cultural openness led to the high medieval ages, and eventually the Renaissance. Pirenne’s line of thought can easily be extended to the Enlightenment, the Industrial Revolution, the Information Age, and today’s debates over trade and immigration, where Pirenne has most influenced this writer.

This book focuses on the rise of the city. Cities require a lot of support, and do not emerge fully formed out of a vacuum. They have numerous economic and cultural preconditions. One of the major ones was shaking off feudal shackles. This was a long, gradual process with many degrees. It was a spectrum, not an on/off switch. City residents were often former serfs; remember the famous saying, “city air makes one fee.” This was a legal concept, not just an attitude. An escaped serf who lived a year and a day without being captured was legally freed.

City residents answered to neither king nor lord, at least during the period Pirenne studies in this book. But there was more to the story of cities than a simple rejection of feudal authority. City workers did not grow their own food. They relied on specialized work and trade with outside farmers to put food on the table. This was not possible without requisite population density, infrastructure, and a cultural openness to commerce and technology.

Most societies are neophobic; city life required almost a neophilia. Once this happened to a small degree, a virtuous circle emerged. Improved productivity made people more prosperous and more accepting of bourgeois social norms. This further reinforced the process, and so on. This mishmash of factors, with arrows of causality pointing every which way, are why people began to live in cities rather than farms and villages, eventually paving the way for modernity.

China Retaliates to U.S. Tariff Increase

A story in Canada’s The Globe and Mail (unfortunately behind a subscription paywall), quotes me on the latest tariff increases in the U.S.-China trade war:

Ryan Young, a senior fellow at the free-market think tank, Competitive Enterprise Institute, said Mr. Trump’s negotiating strategy has “backfired badly” and he will have to change course to reach a resolution. Mr. Young said Congress should try to take away Mr. Trump’s authority to impose levies.
Mr. Young said better options for dealing with China’s behaviour would be suing Beijing through the World Trade Organization and joining the Trans-Pacific Partnership, a Pacific Rim trade pact meant to contain China’s influence.
“The President has the order wrong – he says ‘ready, fire, aim,’” Mr. Young said. “Trump can’t be trusted with tariff authority.”

This Week in Ridiculous Regulations

Facebook co-founder Chris Hughes called for breaking up the company; CEI’s Iain Murray and Kent Lassman explain why that’s a bad idea. CEI also released the 2019 edition of “Ten Thousand Commandments.” On Friday, President Trump enacted a new 25 percent tariff on $200 billion of Chinese goods. Meanwhile, rulemaking agencies issued new regulations ranging from tariff applications to habitat descriptions.

On to the data:

  • Last week, 58 new final regulations were published in the Federal Register, after 53 the previous week.
  • That’s the equivalent of a new regulation every two hours and 54 minutes.
  • Federal agencies have issued 925 final regulations in 2019. At that pace, there will be 2,542 new final regulations. Last year’s total was 3,367 regulations.
  • Last week, agencies published 434 notices, for a total of 7,618 in 2019. At that pace, there will be 20,929 new notices this year. Last year’s total was 22,205.
  • Last week, 1,081 new pages were added to the Federal Register, after 1,746 pages the previous week.
  • The 2019 Federal Register totals 20,764 pages. It is on pace for 57,044 pages. The 2018 total was 68,082 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. One such rule has been published this year. Six such rules were published in 2018.
  • The running compliance cost tally for 2019’s economically significant regulations currently ranges from $139.1 million to $175.8 million. The 2018 total ranges from $220.1 million to $2.54 billion, depending on discount rates and other assumptions.
  • Agencies have published 27 final rules meeting the broader definition of “significant” so far this year. 2018’s total was 108 significant final rules.
  • So far in 2019, 167 new rules affect small businesses; 11 of them are classified as significant. 2018’s totals were 660 rules affecting small businesses, with 29 of them significant.

Highlights from last week’s new final regulations:

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

Matt Ridley – Genome: The Autobiography of a Species in 23 Chapters

Matt Ridley – Genome: The Autobiography of a Species in 23 Chapters

This is an older book, from 1999, and some parts are dated now. It is still excellent. The book has 23 chapters, one for each pair of chromosomes in the human genome. Ironically, this organizational conceit gives Ridley the freedom to take a more scattershot approach. He tells about genes found in each chromosome that affect certain traits. Since our genes were designed without a designer, chromosomes don’t have individual themes, and genes controlling certain traits can be found in multiple chromosomes.

Ridley does what he can with what the material provides him, but this randomness actually makes some of his evolutionary arguments stronger, a fact he takes full advantage of. He also goes on frequent tangents about how a given chromosome’s traits might be useful or not, how they have impacted human history, how they connect various species and common ancestors, how mutations work, and many other concepts in evolutionary biology.

Re-Prioritizing Regulatory Reform

The 2019 edition of Wayne Crews’ Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State is out now. It contains basic data on the regulatory state that is harder to find than it should be: how many regulations agencies issue, how much they cost, and what is coming up next. Wayne also has several reform ideas, from a regulatory budget akin to the government’s sending budget, to improved disclosure and cost accounting standards, to more congressional involvement in the rulemaking process.

If you prefer a shorter version, Wayne and I have a piece at National Review sharing the main findings and making the case for re-prioritizing regulatory reform:

President Trump, who made regulatory reform a priority early in his term, claims to have reduced federal regulatory burdens by $23 billion in fiscal year 2018. That’s the good news. The bad news is that he has hinted at declaring premature victory and given indications of abandoning the issue altogether.

Congress should also be on board:

Congress has shown interest in executive-branch transparency in matters concerning Trump himself. It should extend that interest to regulatory agencies over which President Trump wields power.

Read the whole piece here. The new 2019 edition of Ten Thousand Commandments is here, and a summarizing press release is here.