During the first six months of the Carter administration, the Federal government has been working overtime to grant favors to special interest groups (businesses and labor unions) at the expense of American consumers and overseas workers. Some cases in point:
• In April the U.S. Customs Court ordered a 15 percent countervailing duty on imports of electronic products from Japan, in response to a suit brought by Zenith Corp. If upheld by higher courts, this ruling would cost consumers some $330 million per year just on color TV sets.
• The International Trade Commission (ITC), a U.S. government agency, recommended that tariffs on Japanese color TVs be quintupled—from 5 to 25 percent. The Carter administration instead negotiated a "voluntary" agreement by which the Japanese government will cut back exports to the United States from the present 3 million to only 1.75 million per year for the next three years. The president of Zenith predicts price increases of 15-20 percent within a year.
• The ITC also recommended that all shoe imports above the 1974 level be taxed at 40 percent instead of 10 percent, costing consumers some $200-300 million per year. Instead, Carter negotiated an agreement with the governments of the two largest producing nations, Taiwan and South Korea, which cuts back exports from 200 million to 150 million annually for the next four years. The impact in higher prices and reduced choice has not yet been revealed.
• Further, the ITC recommended reducing the sugar import quota from 7 million to 4.4 million tons per year. Carter, instead, authorized subsidies of up to 2¢/1b. to domestic producers (which won't affect the price, just your tax bill).
• Shipbuilders and shipping unions are lobbying hard for "cargo preference" legislation to require 30 percent of imported oil to be shipped in U.S. tankers—a move Business Week says would increase energy costs by a billion dollars per year. (Many new—subsidized—tankers would have to be built, and U.S. crew costs are the world's highest.)
• Textile firms are pressing for renewal of the Multi-Fiber Agreement which authorizes bilateral pacts to limit textile imports. Their key demand is a reduction in the allowable annual growth of imports from the present 6 percent to 2.6 percent (the rate of growth of domestic sales.)
• Steel producers, who have already won a quota on specialty steel imports, have filed suit to have a 30 percent countervailing duty imposed on steel imports from Common Market countries.
• And not to be outdone, the auto companies and the UAW fought for quotas limiting auto imports to 1976 levels as a condition of eligibility of imported cars for fuel-economy rebates—a clear response to the fact that 1977 auto import sales are 72 percent higher than those of 1976.
This list is but a sampling of the activity going on in Washington. Thirty separate pleas for protection from imports are pending before the ITC—a sad commentary on the extent of "free enterprise" remaining in America. What is urgently needed is a mobilization of public opinion against this type of special pleading for State intervention, on both practical and moral grounds.
In practical terms, first of all there is the immediate cost to consumers of import restrictions. If the protectionists have their way, Americans will pay billions of dollars more for products they prefer—or be forced to choose less satisfying American goods. It's no accident that names like Audi, Honda, Sony, and Panasonic are valued by Americans—these firms produce high quality products at reasonable prices, some of which have no American equivalent. Few Americans would willingly pay higher prices for shoes, blouses, televisions, cars, sugar, or gasoline—even if it meant saving a few thousand jobs in an obsolescing industry.
Second is the harm done to the American economy by protecting inefficient industries. American companies, for the most part, can no longer compete in producing ships, shoes, or low-priced clothing. It would be far better in the long run, even for workers in those industries, if the capital and labor being wasted there were shifted into more productive uses. Any economist worth his salt can demonstrate that total wealth increases when goods are produced by the most efficient suppliers.
Third, the course the government is following is leading straight toward a trade war that will harm everybody. The Customs Court ruling in the Zenith case is a clearcut violation of the General Agreement on Trade and Tariffs (GATT)—the basic law governing international trade. Since the practice of rebating indirect taxes to exporters—the key issue in the case—is nearly universal, if the court's ruling is upheld, it will be an invitation to practically every U.S. industry to apply for countervailing duties on imports that compete with its products. The result could easily be a repetition of the trade wars of the 1930's that prolonged the depression and helped lead to World War II. GATT and Common Market officials have already stated as much.
But beyond these issues is the moral case. Suppose we took an American county populated with factories, workers, and consumers and drew a line down the middle. We then ruled that those on one side of the line may not sell products to those on the other side—or may only do so if they pay a high tax; we do this, of course, only to protect the jobs of those on the other side. Most people would consider such an action absurd and unjust.
Why, then, if the same thing is carried out across an arbitrary line called a national border is it any less unjust? What is it that makes the workers and companies on the other side of the line any less entitled to carry out their business without forcible intervention? The only difference is that they are foreigners. "Why should those Japanese or Koreans or Brazilians have jobs making shoes or TVs when our people are out of work?" Americans say. But what kind of antihuman nonsense is this? Have we learned nothing after two world wars and endless campaigns for brotherhood? If the word "Jews" were to be substituted for "Koreans" in the above question, most people would recoil in horror. In that case, we know how evil it is to deal in ethnic categories instead of human beings.
At its base, then, protectionism boils down to jingoism—the irrational belief that people of one's own nationality are in some way better than others and deserve superior legal standing. It is somehow OK for the State to restrict their sales or to tax their products because, after all, they're only foreigners.
But free trade is color-blind, race-blind, nation-blind. It rewards results, performance, excellence—not ancestry. If free trade is to avoid being swallowed up by resurgent protectionism, the moral evil of jingoism must be identified and thoroughly repudiated.
This article originally appeared in print under the headline "The New Jingoism".
Start your day with Reason. Get a daily brief of the most important stories and trends every weekday morning when you subscribe to Reason Roundup.